Sudan inflation may reach 17 pct next year: finance minister

Reuters, Thursday 1 Dec 2011

The secession of South Sudan has reduced the Khartoum government's revenues by 30 per cent and weakened the local currency

Sudan finance minister
Sudan's Finance Minister Ali Mahmoud during a news conference in Khartoum this year (Photo: Reuters)

Sudan's inflation rate may rise as high as 17 per cent next year from 15 per cent this year, its finance minister said on Thursday, as the country deals with the effects of the oil-producing south's secession.

The African country's economy, stung by a drop in oil revenues, is still likely to grow by 2 per cent next year, and its budget deficit is expected to stay at its current level of around 3 per cent, Ali Mahmoud told reporters.

South Sudan took about three-quarters of the formerly united country's roughly 500,000 barrels per day of oil output with it when it seceded in July. That slowed foreign currency flows into Sudan, weakening the Sudanese pound and driving up the cost of imports.

Mahmoud said the secession of South Sudan had decreased government revenues by about 30 per cent but that this was expected to ease to around 20 per cent once South Sudan started paying transit fees for exporting its crude through Sudan.

"The budget deficit is 3 per cent, and this is a good rate compared to Britain and a number of countries affected by the global economic crisis," he said.

"Inflation in 2011 has reached 15 per cent on average, and it will not exceed 17 per cent in 2012 on average."

Many countries in east Africa are struggling with high inflation due to rises in food and energy prices and drought in the region, and have not been helped by shifts in global sentiment which have driven up the dollar's value this year.

Mahmoud said Sudan's revenues from gold had reached about $1.5 billion from January to November this year and that it was focusing on ways of making up for the loss of oil revenues, including increasing production of sugar and wheat.

"The challenge that needs work is the external balance, to increase exports," he said.

He said the cabinet had approved the budget for 2012 and that it would now go to parliament.

South Sudan must send its oil north through Sudan to a Red Sea port to export it, but the two countries have not yet agreed on how much the southern nation should pay as a transit fee, complicating economic planning on both sides.

Talks in Addis Ababa to discuss oil and other issues broke down on Wednesday. The transit fee was one of the most contentious points. Khartoum asked for $36 per barrel, while Juba has said it is ready to pay around $0.75 per barrel.

Officials in Khartoum say they plan to take a share of South Sudan's oil to make up for arrears that they claim so far total to more than $900 million since South Sudan seceded.

One oil official said on Wednesday that Khartoum would take about 23 per cent of South Sudan's oil exports.

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