Sudan approves 2012 budget, eyes subsidy cuts

Reuters , Tuesday 20 Dec 2011

Despite commodity subsidies costing the government over $2 billion a year, country's parliament last week rejected a central bank plan to gradually remove fuel subsidies

Sudan is working on a plan to eliminate commodity subsidies that cost the government over $2 billion a year, an official said on Monday after parliament approved the country's budget for 2012.

The African nation has been grappling with a severe economic crisis since South Sudan took with it about three quarters of Sudan's oil output when it seceded in July under a peace deal.

That reduced inflows of foreign currency into Sudan, already stung by U.S. trade sanctions, weakening the Sudanese pound on the black market and driving up the cost of food and other imports.

Sudan's parliament last week rejected a central bank plan to gradually remove fuel subsidies, a sensitive issue in the country where small anti-government protests have been held over prices in recent months.

Parliament's speaker Ahmed Ibrahim al-Tahir said a new plan to remove subsidies on commodities would be prepared following Monday's budget approval.

"From now we are working to prepare a full projection for how to remove subsidies on commodities, which exceed $2 billion," he told reporters, without giving details or a timeframe for their removal.

"If we succeed in that we'll give the economy a dose of strength."

Finance Minister Ali Mahmoud said this month that Sudan aimed to keep its budget deficit next year at roughly 3 percent of gross domestic product, partly by tapping gold and other sources of new income to make up for lost oil revenue.

Sudan's economy has been hit hard by years of conflict, high inflation, corruption and unemployment.

Annual inflation eased to 19.1 percent in November. Fuel is sold at about $60 a barrel in Sudan, while benchmark global oil prices are currently around $100 a barrel.

South Sudan broke away after voting overwhelmingly for independence in a January referendum, the culmination of a 2005 peace agreement that ended decades of civil war between north and south.

Short link: