Sudan sees budget deficit below 3 per cent in 2011

Reuters , Wednesday 7 Sep 2011

After the southern secession, north Sudan expects economic growth to slow and foresees difficulties in balancing its budget

Sudan will face some budget difficulties due to its recent split into two countries, which will also dent growth in the north, its finance minister said on Wednesday.

The North has lost 75 per cent of the country's oil production of 500,000 barrels a day after South Sudan gained independence in July, thanks to a 2005 peace deal that ended decades of civil war.

Ali Mahmoud of North Sudan told Reuters on the sidelines of a meeting of Arab finance ministers in the United Arab Emirates that growth would be about 5 per cent in 2011 rather than 7-8 per cent.

"We're expecting 6 per cent or a little more for 2012," he said.

"We expect some difficulties in the budget, but they are controllable," Mahmoud added. "We expect a decrease in spending this year. If any deficit, it will be limited, not exceeding 3 per cent (of GDP)."

Foreign investment in the country has also been limited due to violence, mismanagement and a U.S. embargo in place since 1997, analysts say.

The secession has also disrupted the currency market, as people and businesses scrambled to buy dollars, pressuring the Sudanese pound despite the central bank's pledge to provide banks with more dollars to meet rising hard currency demand.

But Mahmoud said that this will eventually be corrected, as Sudan starts to rely more on locally produced goods rather than imports.

"We are expecting the demand for the dollar will decrease, so this will stabilise the dollar against the Sudanese pound," Mahmoud said.

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