Sudan finance minister discusses high inflation rate, flour crisis

The Minister of Finance revealed an inflation rate in Sudan of 34 percent in the first half of 2017. He said that the current flour crisis in some Sudanese states can only be resolved by lifting the government's subsidies entirely on wheat, and freeing the commodity. 

Speaking in the parliament on Monday, Finance Minister Dr Mohamed Osman El Rikabi complained that the bread crisis in some states is a result from its flour's exploitation for other uses and the problem of smuggling flour to neighbouring countries.

“The problem will only be resolved by lifting the subsidies completely and distributing it to its beneficiaries.” The minister stressed not to impose any increase in the flour prices, even not with the fluctuation of the all-time low exchange rate of the Sudanese pound to the US Dollar.

The price of a sack of flour in the bakeries does not exceed SDG150 ($22.40), he said, but the price varies from state to state because of transportation fees.

Inflation

Regarding the inflation rate in Sudan in the first half of 2017, it has risen to 34.1 percent compared to 13.3 percent in the same period last year. The minister attributed the increase in the inflation rate to the economic measures implemented in November 2016.

“The implementation of the budget this year has faced some challenges,” El Rikabi said, “Such as security unrest in South Sudan, political and security instability in neighbouring countries, and the poor government investments in national revenues.”

On 31 October, President Omar Al Bashir’s directed the Ministry of Finance and the Central Bank of Sudan to intervene and control the exchange rates, and reduce inflation rates. The directives came after the US Dollar was trading at more than SDG 22 on the Khartoum parallel market.
El Rikabi denied having intentions to float the exchange rate of the Sudanese pound against the exchange rate of foreign currencies. A floating exchange rate is a monetary regime where the currency price is set by the forex market based on supply and demand compared with other currencies. This is in contrast to a fixed exchange rate, in which the government entirely or predominantly determines the rate.

He said that the Ministry of Finance will implement a package of measures to help increase the value of the Sudanese pound, and limit its current collapse against other currencies.

Several economists, including former Finance Minister Abdelrahim Hamdi, have recently called on the government to give up the system of managed floating exchange rate and allow the market mechanisms to set the price of the pound.