Sudan economic crisis: Finance minister returns from Washington with support pledges

Sudan’s Minister of Finance Jibril Ibrahim confirmed that the World Bank has promised to provide humanitarian support to Sudan. The minister acknowledged “the impact of the 2021 coup d’état on cooperation with international institutions” and said that “it is not easy to lift the freeze” at a press conference in Khartoum on Wednesday.

The press conference was held for the minister to explain the results of his visit to Washington D.C. and meetings with the World Bank and the International Monetary Fund (IMF) during their Annual Meeting. Ibrahim said that the Sudanese delegation was able “to circumvent the decision to suspend aid and obtain promises” from various sides.

He confirmed that Sudan is allowed to benefit from World Bank support for food, climate change mitigation, and emergencies.

The October 25 military coup last year moved international donors to suspend financial aid, which saw Sudan lose $4.4 bn in support and contributed to the country's current funding crisis and economic despair.

The Minister of Finance stated that the visit achieved great gains, including the resumption of communication with the World Bank and the IMF, an agreement on two new technical missions, and the resumption of technical support and training.

The transfer of the presidency of the Special Development Committee for Africa (Group I) to Sudan was also highlighted by Ibrahim as an example of closer international cooperation.

Dependency

Ibrahim stressed the necessity of dealing with international financial institutions, but at the same also the importance of not depending too much on foreign resources time.

The Minister of Finance said that he had told the World Bank and IMF that he fears Sudan’s economy would continue to deteriorate if the money supply would be too tightly controlled in order to reduce the exchange and inflation rates.

More and more factories and companies are closing or facing bankruptcy and people are losing their jobs in the absence of financial support.

Economic problems

The Sudan Transparency and Policy Tracker described the economic performance during the first half of the current fiscal year as “miserable” in the wake of the October 25 military coup.

In a report published on Tuesday, the observatory expected more deterioration and harsh economic conditions in the last quarter and next year if the military rule continues.

The report pointed out that all the economic achievements that occurred after the fall of the former regime were lost due to the coup, as many donors stopped funding immediately and froze payments; Sudan’s debt relief progress was suspended and so were its economic reform program and international community aid.

Tax collection is below average as well due to uncertainty in the business environment, economic slowdown, and recession, the report explains.

Sudan needs to develop a new economic recovery plan, reduce opportunities for corruption, and establish civil control over the economy, the Sudan Transparency and Policy concluded, and the international community should play a role in restoring macroeconomic stability in Sudan.

The Minister of Finance repudiated any further tax increases but also confirmed that the ministry had implemented an agreement between the Employers Union and the Council of Ministers dating from 2019 to raise the tax on business profits in the industrial sector by 10-15 per cent and in the services sector by 20-30 per cent.

Sudan has recently witnessed protests against exorbitant tax increases. Jibril Ibrahim called for expanding the ‘taxes umbrella’ [span of taxes] at the time and considered it “the most effective and successful way to increase tax revenues and combat tax evasion”.

The Sudanese government is not receiving any external support for its annual budget for the second year in a row, so it must rely on its own resources to complete the 2023 budget.

However, many economic experts in the region are not convinced that increasing taxes is a good way to support Sudan’s economy. They warn that it will further increase the economic hardships of many Sudanese. 

Tax increases will eventually impact the consumer and will lead to a weakening of purchasing power and reluctance to consume, economic analyst Hafiz Ismail told Radio Dabanga.

The Famine Early Warning System Network (FEWS NET) the government’s raised taxes on agricultural products, port fees, industry, and trade formed a further constraint on Sudan’s household purchasing power.

Protest

In Washington itself, there was a call to protest in the Sudanese community in Washington DC and nearby areas to welcome the Minister of Finance "their own way". They hold the "junta minister" and Sudanese authorities responsible for the violence against pro-democracy protesters that killed over 100, predominantly youth.