In the absence of a budget, how will Sudan’s economic conditions become after Hamdok’s resignation?

Khartoum For the second time, the transitional government in Sudan is facing the dilemma of authorizing the budget for the new fiscal year, after political developments cast a heavy shadow on the situation, especially with the internationally backed Prime Minister Abdullah Hamdok’s announcement of his resignation from his position.

Because of the actions of the army chief, Abdel Fattah al-Burhan, on October 25, in which he turned against the civilian partners:

  • Countries and international financial institutions have stopped millions of dollars in aid intended to support the civil authority
  • It also hampered Sudan’s eligibility for $50 billion in debt relief under the IMF’s Enhanced Heavily Indebted Poor Countries (HIPC) initiative.
  • In addition to the suspension of 17 development projects that would have been financed by the World Bank, which further deteriorates services

This aid did not return despite the political agreement signed between Al-Burhan and Hamdok on November 21, as a result of which tensions rose in the street, and the gap between the political forces widened, which hastened the departure of Hamdok from his position, which, according to observers, portends a further economic decline. , especially after the Sudanese people were surprised at the beginning of the new year by an increase of nearly 600% in the electricity tariff.

Hamdok singled out the economic situation and his efforts to address the situation with an oath in his long resignation letter, saying, “We presented many packages of structural treatments in the economy, and we entered into the debt relief initiative for the heavily indebted poor countries, and it was hoped that 90% of Sudan’s debts, which exceeded $60 billion, were forgiven when reaching Completion point.” He also spoke before that about his government’s facing huge challenges, the most important of which are distorting the national economy, stifling international isolation, corruption and debts that exceeded $60 billion.

Additional negative effects

Hamdok’s resignation is expected to have additional negative effects on the economic scene in Sudan in light of the suspension of international aid, which is confirmed by economist Wael Fahmy to Al Jazeera Net that the situation returned to before last November 21, when donors stopped their support for Sudan due to the coup, which is still Standing despite the departure of Hamdok.

According to a statement by Sudanese Finance Minister Jibril Ibrahim in mid-December, the United States, due to Al-Burhan’s measures, cut $700 million in emergency aid, while $500 million in direct budget support was not expected in late November from development agencies. Also, another $150 million was not obtained from the so-called International Monetary Fund’s Special Drawing Rights, which are used to bolster official reserves.

own resources

And it seemed that the loss of hope in international aid prompted the government to think of other ways to save the new year’s budget, as the spokesman for the Sudanese Ministry of Finance, Ahmed Al-Sharif, tells Al Jazeera Net that the budget will depend on self-resources and elicit real resources that do not impose any burdens on citizens, with diversification of revenue sources and raising Efficient use of resources and enabling the private sector to contribute to moving production sectors and reviving the national economy and its recovery from the repercussions of the Corona pandemic.

The budget focuses – as Al-Sharif says – on:

  • People’s pension and provision of basic services and goods while strengthening the social protection umbrella
  • Support for health, education and water
  • Rationalization of government spending
  • Promote financial sustainability and principles of transparency

Al-Sharif added that the budget is a reflection of the government’s economic policies and economic reform programs, which were previously implemented in coordination with the International Monetary Fund.

On the other hand, economists question the government’s ability to cover the budget deficit from domestic resources. They also assert that the army commander’s actions did not have an actual impact on the budget, which should not be linked primarily to any external financing.

Khaled Al-Tijani, an expert in economic affairs, says that the 2022 budget is currently facing an obstacle related to the institutions that grant it legitimacy in the absence of the government and the Legislative Council, despite the Minister of Finance continuing in his position, but he cannot complete a budget alone, and the international aid that is circulated in large numbers was not It had no effect on the two previous budgets of the transitional government and did not contribute to reducing the deficit.

Ongoing crisis

In his speech to Al-Jazeera Net, Al-Tijani does not see a high impact of the proof measures on the economy and the budget, given that the elements of the transitional government, both civil and military, did not agree throughout their differences except to proceed with harsh economic measures that have a difficult impact on the citizen, and that the latter was not present at all in the government’s policies.

The specialist in economic affairs, Mutasim Al-Aqraa, goes in the same direction, stressing that the Sudanese economy was not healthy before October 25, but then slipped.

Al-Aqra’ told Al-Jazeera Net that “the performance of the economy was no less bleak since September 2019 until October 25, 2021, and the coup did not change anything significant or the level of foreign aid that did not originally exist before the coup at any level affecting the overall indicators.”

He points out that after Al-Burhan’s procedures, the economy remained in the same path set by the policies adopted by the government since its first day, and they are still being implemented.

Al-Aqraa believes that the most important features of the upcoming 2022 budget and policies will appear in large increases that affect the prices of bread, medicine, electricity and many other basic commodities. for 10 years in favor of Darfur.

He adds that the 2022 budget will be applied in a different and complex political framework, so it is difficult to predict its course and repercussions due to the shifting sands of Sudanese politics.

Wael Fahmy expects that the next three months will witness turmoil in the markets and an increase in prices in the absence of the government (Al-Jazeera)

ambiguous future

In turn, the expert in economic affairs, Nazik Shamm, believes that the resignation of the Prime Minister came amid extremely complicated circumstances that the country is experiencing at the political and economic levels, and it appears as a nail in the coffin of the Sudanese economy burdened with crises.

In her speech to Al-Jazeera Net, it is difficult to predict the future of the situation in the absence of an executive government that issues decisions and directives coinciding with the beginning of a new year. It was usual to start with new budget estimates that carry directions for the economy within a year, and in the absence of the budget, the decisions regulating the entire economic process are absent.

On the external level, Shammam says that Hamdok’s absence represents a stumbling block in the resumption of international support, in which the man made an appreciable effort, which appeared in his contribution to removing the name of Sudan from the list of countries sponsoring terrorism and integrating the Sudanese economy into the global economy and his efforts to exempt the external debt, which culminated in his joining the Heavily Indebted Countries (HIPC) initiative last June.

Despite the army’s possession of productive economic resources and institutions, its effective contribution to alleviating the cost of living remains limited, with those regimes focusing on exporting their products and what they hold abroad.

She notes that Hamdok’s relations with international regimes prompted the Sudanese army chief to agree with him and return him to the scene on November 21, in an attempt to persuade the international community to resume support operations, but in the absence of the latter, the scene of restoring support again will remain complicated until other developments emerge.

Market turmoil

Wael Fahmy believes that the next three months will witness turmoil in the markets and an increase in prices in light of the absence of the government and the significant rise in electricity tariffs, which will push factories and companies to reconsider the cost of the product.

Fahmy believes that Hamdok’s resignation and the absence of the government create a very complex and turbulent situation, and that the continuous flows will not be sustainable, as they are mainly related to the external position regarding internal developments.

Nazik Shammam goes in the same direction by saying that the markets will witness more price chaos in the absence of supervisory authorities and leaving the rope to the west. The absence of a government for more than two months has pushed merchants to price according to their moods and whims, and the resignation of the head of the government will add more chaos and foggy situation.

Although the army in control of the Authority possesses productive economic resources and institutions, its effective contribution to alleviating the impact of high prices remains limited, with those regimes focusing on exporting their products and what they hold abroad.

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