This paper was first submitted to the International Political Economy class at the University of Alabama.
An Analysis of Current Socioeconomic and Political Conditions
The nation of Sudan has experienced steep inflation over the past several years under the Bashir regime, recently reaching severe levels of 52.4% at peak in 2018 following entrenched budgetary crises.1 In assessing the scope and factors influencing Sudan’s fiscal troubles, the researcher adopted a political economic framework whereby conditions in Sudan were analyzed through the “use of the formal and technical tools of modern economic analysis to look at the importance of politics for economics”.2 Under this framework, the present study seeks to analyze inflationary conditions in Sudan by addressing the following research question:
How is the current inflation crisis in Sudan characterized by both socioeconomic and political factors and influenced by private, state, and international actors?
Evidence suggests that the ineffectiveness of the government in diversifying the Sudanese economy following the rise of oil exports crippled its development abilities upon the secession of South Sudan in 2011, when approximately 75% of oil reserves were claimed and lost to the economy of the north.3 This coupled with longstanding international sanctions on Khartoum, prolonged war and conflict, and low foreign currency reserves have resulted in the implementation of harsh austerity measures by the Sudanese government and contributed to economic hardship for the Sudanese people as well as political instability in the nation. International financial institutions have simultaneously advanced agendas of economic liberalization, in which privatization is favored without significant consideration to the fragile state of political and legal institutions, and crony capitalism has readily overtaken in many sectors. Finally, rampant inequality and un/underemployment are at significant rates with the prosperity of the largely young populace remaining a major concern for the future of Sudanese economic and political development.
Political Economic Conditions
In understanding the state of the current inflation crisis in Sudan, it is important to note the influence of contemporary political and socioeconomic history in the country. Sudan gained independence from British condominium rule in 1956 by means of popular revolt.4 At this time the economy was largely agrarian, with agriculture occupying a majority 61% of GDP.5 By 1958, the civil government elected that year was ousted in a military coup d’état by General Ibrahim Abboud.6 Following, the famous October Revolution of 1964 saw a popular revolt by citizens succeed in placing a stable parliamentary democracy in power for five years until the exercise of another military coup by Jaafar Al-Numeiri in 1969.7 Despite ousting attempts during his rule, his regime lasted until the so-called April Intifada of 1985 when civil unrest caused it to be deposed by a Transitional Military Council and a coalition government was formed with Sadiq Al-Mahdi as prime minister.6
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The current political regime in Sudan took over by means of military overthrow again in 1989, and coup leader Omar Al-Bashir later became the appointed president – still holding this position today. The prominent history of popular uprisings in Sudanese public memory, as well as both folklore and spirit, remains a frantic cause for concern for the authoritarian state. The government has spent heavily on the development and maintenance of an advanced security apparatus in Sudan and has steadily suppressed dissent of political opponents, students, and the media.8 The cyclic tendency of revolt heightens the stakes of the current economic degradation in Sudan, particularly following the nearby Arab Spring uprisings. The regime has consistently taken extreme, violent actions against protesters such as what occurred in 2013 when 210 people were estimated to have been killed following ‘shoot-to-kill’ orders in Khartoum.9
Simultaneously engaging in the longest civil war on the African continent, Sudan since 1955, in the year preceding independence, has had war between factions of the north and south. Having long been governed separately by the British, the South feared disproportionate influence of Northern tribes in the new nation, and war continued (with 10-year cessation) until 2005 when the Comprehensive Peace Agreement was penned.10 Then in 2011, the South Sudanese people voted for secession in a referendum with an overwhelmingly 99%. Sudan experienced significant economic stress with the loss of oil revenue, as the oil in the Southern region represented more than 75% of state foreign exchange earnings and 45% of general government finances.11 Agriculture and livestock industries were long ignored, along with the development of alternative energy sources since the beginning of oil export in 1999.12 Oil exports also accounted for an overwhelming 95% of all government exports, according the World Bank.13 This loss of national revenue drastically reduced economic growth and prompted a delayed focus on economic diversification by the Sudanese government.
Pressure from the international community mounted, led by the United States sanctions imposed in 1997 by President Bill Clinton, claiming that the regime in Khartoum hosts and supports terrorist groups.14 The sanctions and embargo from the West over the past two decades have disproportionately affected the Sudanese people harshly; hindering the exchange of goods, skills, education, and training and delaying social and technological development. The sanctions were lifted in 2017, but Sudan remains on the infamous US list of state sponsors of terrorism, which complicates its international relations and further stymies foreign investment in the nation.14 In tandem, the regime in Khartoum has suffered from large debts and carried out a prolonged exercise in economic liberalization at the bequeath of the IMF. Foreign direct investment in 2015 accounted for 2.1% of GDP, with most investment coming from Asia – particularly China and the Gulf states, such as Saudi Arabia and Qatar.15
The Present Financial Crisis
Inflation rates peaked at 52.4% in January of 2018, and the Sudanese populace suffered considerably with the rising price of food and goods (Figure 1). The current account balance rests at (-) $5,933.5 million while public debt has climbed to levels above 72%.15 This is characterized by Sudan’s import of substantially more goods, capital, and services than it exports, notably in the food sector where exports fell approximately 45% after the boom of the oil industry.16 World Bank estimates pinned the share of agriculture as 27.5% of GDP in 2016 with the service industry occupying 51.8% of GDP, largely as a facet of the informal market (Figure 2).
Though the Sudanese government has refused to reveal accurate figures, the government’s foreign currency reserves are suspected to be direly low because of oil being the main source for such inflow, followed by remittances from Sudanese workers abroad.17 Interestingly, the government in Khartoum still insists on controlling fixed exchange rates pegged to upper and lower limits. However, black market exchange rates float freely, reflecting the real value of the currency on the market. Under this system, imported goods become more expensive when the currency peg shifts and the currency depreciates, but Sudan has announced it has no intent of liberalizing exchange rates as have nearby neighbors Egypt and Tunisia.18
In response, the Bashir regime has repeatedly imposed austerity measures on the nation, resulting in skyrocketing prices for basic food, fuel, and medicine and erupting in several protests across the country. Minister of State for Finance, Magdi Hassan Yasin, revealed that the government plans to lift all food (including wheat) and fuel subsidies by 2019, triggering additional economic hardship when 50% of the population already live below the poverty line.19 However, it is noted that fuel subsidies in Sudan have been shown to unevenly benefit the uppermost quintile of income earners at over 70% as compared to 30% for the remaining four-fifths of the population.20 The case for reduction of food subsidies is less clear because they benefit income quintiles more proportionately, but many scholars argue that they are ineffective and inefficient policy mechanisms for poverty alleviation.
In total, government spending on social services has critically deteriorated during the three decades of the Bashir regime. Weakened by war, economic sanctions, and severe crony capitalism filling the coffers of the president’s inner circles and supporters, the people of Sudan have had to endure the brunt of this brutal financial crisis. With the current Sudanese annual budget for 2018, only 3% and 1% of budget resources were allocated for education and health, respectively, while the authoritarian regime allocated 14% to the national security and defense sector.21 The decline of social services has shifted the population’s previous relative tolerance to the lack of democratic participation in the governance process, and the nation is reaching a moment of crisis fueled by these economic hardships and lack of employment opportunity.
The present inflationary and political crisis in Sudan has several historical contributing factors, as well as political and socioeconomic factors contributed by private, state, and international actors. Political instability is evidenced in the ebbing and flowing nature of the power structures in Sudan, dating back to colonial independence from British and Egyptian rule under a largely agrarian economy. Indeed, extreme decades of civil war have weakened financial and institutional mechanisms for growth, while the loss of oil revenue from the South in 2011 exposed the weak diversification structure of the underlying Sudanese economy. Throughout the past two decades, sanctions imposed by the West have increasingly impeded ordinary citizens’ prosperity in Sudan, while economic liberalization measures continued to be by pushed by the Sudanese government and the IMF without proper insurance of transparent and effective legal institutions. The resulting inflationary crisis seen today across Sudan is a direct result of government mismanagement and corruption in the derivation of equitable public policy, and as a result, the young majority of Sudan overwhelmingly mull the desire to leave Sudan for better economic opportunity. The rectification of these conditions would require significant capability-building for strong civic institutions, economic investment in education and the underdeveloped agriculture and service sectors, and normalization of international relations with key trade partners.
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