Which Way The Economy Will Take?
15 March, 2020
The Information Committee of the Economic Conference at a meeting
The scene has been already set this month for crucial decisions regarding the country’s economy. And the question is which route that decision will take. But in essence it is not a mere technical decision centered around the professional discussions on the merits and defects of that decision. In effect it is politics.
Earlier this month the International Monetary Fund (IMF) concluded its article 4 consultations regarding the country’s economy and did not mince its words in pin-pointing to the cure that it proposes for the ailing body.
“Reflecting weak competitiveness, the poor business environment, and social turmoil, GDP is estimated to have contracted by 2½ percent in 2019. Moreover, the fiscal deficit rose by almost three percentage points to 10.8 percent of GDP in 2019, reflecting ballooning energy subsidies and weak revenue mobilization. With limited external financing, the fiscal deficit has primarily been financed by monetization, fueling a vicious cycle of inflation, exchange rate depreciation, and deficit expansion,” the report said.
It added that Inflation rose to 60 percent towards the end of last year, that external position is weak, with the current account deficit standing at 7.8 percent of GDP in 2019 and foreign reserves can cover only two months of imports. Moreover, public and external debt ratios remain high and unsustainable standing at 211.7 percent of GDP and 198.2 percent of GDP, respectively by the end of last year.
With such bleak picture, the report was frank in forecasting that the GDP growth would likely remain negative in foreseeable future.
To remedy such situation the IMF team resorted to its conventional prescription that includes the gradual liberalizing the exchange rate, which they termed “critical” to handle the distortions in the economy, overhauling the banking system, improve tax collection and revenue administration, phasing out subsidies over medium term and engage into a sustained information and communication exercise to expand the safety net, which could be financed by creditors so as to build up support for reforms.
Though the Minister of Finance Dr. Ibrahim Elbadawi is in support of this program even before this report, but such route is opposed by the Forces of Freedom and Change (FFC), who provide the political support for the government. And accordingly the 2020 budget was, in effect, shelved with the hope a national economic conference will iron out the differences.
The general conference slated to take place later this month will be preceded by sectoral conferences to deal with various aspects in detail, then put their recommendations before the general conference.
However, there are two points ought to be made here. It is not the first time that a general conference to deal with economic issues is being held. Following the popular uprising of 1985 a similar conference was convened under the chairmanship of the former Vice Chancellor of University of Khartoum Dr. Omar Mohamed Osman, but it did not produce much in terms of specific remedies. Given the political dimension it opts for generalities so as to get as much approvals as possible. When the country is in dire economic situation, it needs to take the tough decisions and forge ahead in the painful reform path.
And that leads to the second point the tough decisions required include bitter bills like phasing out subsidies and floating exchange rate are hot potatoes to handle by any political force.
The forthcoming economic conference is not expected to deviate from that norm. After all it is a coalition of forces that have been united to oppose the defunct Ingaz regime, but have very little common on the specifics of new policies.
The only area that could bring the two visions together is the issue of having a safety net that can help in swallowing the bitter reform bills.
With the economic and other crises engulfing the world and adding more complications to an already complicated situation in terms of providing aid and outside help, the option remains is to resort to domestic solutions.
However, any solution be it home grown or with the help from outside needs a political will. Sudan is not a poor country. It is lack of vision, determination and practical implementable programs that led to the current situation. If the forthcoming conference finds the courage to act on these issues it will put the country on the right path to go forward.
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