16 - Economy
 DECLINING INCOME

The dramatic fall in income from exports and expatriate remittances since the NIF's 1989 coup d'etat more than wipes out the amount Sudan will earn from its oil.

Sudan's exports - mainly cotton and gum arabic - declined from an average $450m in the 1980s to $53m in 1993-94, and its foreign debt stands at some 20 billion dollars. The country depends heavily on remittances from its nationals abroad, but these remittances fell from $500m in 1989 to $60m in 1994. Foreign aid has dwindled from about $800m a decade ago to about $10m in 1998.

The government is "unable to provide the minimum limits for survival for the Sudanese" because spending on the war costs half of the national budget - estimated at $1.9 billion - according to President Bashir himself. "This puts even ministers and government officials below the poverty line," he said in February 1999.

Sudan is still paying back the loans for a pipeline it built in the 1970s to carry petroleum products from the refinery at Port Sudan to Khartoum.

It imports up to 40,000 additional barrels of refined oil products daily - worth $400m a year - to meet domestic needs. This represents more than 25% of the country's total imports.

Three (originally) foreign companies - Agip, Mobil and Shell - and the local firm, Nile Petroleum, handle distribution and marketing of imported petroleum products.

 Debts

With a gross national product of some $7.9 billion, Sudan owed the International Monetary Fund (IMF) some $1.57 billion on 30 April 1999, and was the biggest single IMF debtor in terms of arrears.

A debt repayment programme between Sudan and the IMF involves payments of some $60 million a year, a minuscule proportion of its actual debt.

Sudan was very nearly turfed out of the IMF in 1998 because of its persistent arrears, but the fund lifted the threat after Sudan promised to start paying back. Sudan would have been the first country to be expelled from the IMF, and has had no voting rights within it since 1993. Malaysia, one of its partners in the oil project, is said to have advanced the money.

Although Sudan will not be able to clear or even reduce its debts to the IMF with the $60m annual payments, the Fund hopes to keep it on track so that at least the arrears do not increase. It hopes that its economic situation will eventually improve. On 29 August 1999, the IMF "upgraded" Sudan's borrower status - from "non-compliance" to "compliance". This was a "green light" in the eyes of international lenders - a signal that they could start lending again.

 "Agriculture, not oil"

Senior economist Mohamed Hashim Awad has dismissed the government's faith in petroleum saving the economy, saying the country's wealth rests in its agriculture and that the government should develop that sector.

"The real source of wealth in Sudan and the only one which will never dry up is agriculture," Awad said. "The policies adopted by the government such as fixing prices before harvests and the high interest rate on loans to farmers are not helping to strengthen this sector."

He said private Sudanese funds abroad are almost equal to the country's external debt. "Sudanese private capital abroad, estimated at 20 billion dollars, could rapidly help the economy but for political or economic reasons owners of these funds are not transfering them back into the country."

(Mohamed Hashim Awad is a University of Khartoum economist and former commerce minister under Nimeiri)

 Oil Revenue

The Sudanese government has signed up for a share of the cost of the pipeline development, and will have to pay that back from its share of the oil production over the coming years. But it will still have a sizeable income amounting to about a third of the oil revenues, with a raft of different agreements bringing income from royalties and taxes on the other pipeline users.

Oil prices in 1999 rose from $9 a barrel to just over $20, and by September 1999 Sudan's crude was being sold at a discount rate of about $18 (FOB). Pumping up to 150,000 barrels a day, the pipeline will earn nearly one billion dollars a year, or about $750,000 after costs. From this the Sudan government will make some $200-$400 million a year.

If the pipeline capacity is successfully expanded to 250,000 b/d by the end of the year 2000, the National Islamic Front government will earn about $300m - $500m a year.

This is about the same as the regime's current spending on oil imports, or - more importantly - on the civil war. not including what it costs to maintain its extensive security apparatus in the north. It is certain to raise the level of spending on these two priorities for its own survival, before anything else.

 Mobilisation

The claim that domestic oil needs for transport and energy generation will be met, thanks to locally-refined petrol, should be looked at with extreme scepticism. Oil imports will still be necessary, the queues of cars at the petrol stations are unlikely to shorten, and the electricity power cuts will not stop being a regular feature of urban life in Sudan.

Whose mobility will improve? In the economic upheavals since 1989, the incomes of the formerly car-owning urban Sudanese middle class has been decimated, and comparatively few still have vehicles. They can't afford to run them: feeding the family is a bigger priority. Instead there has been a sharp rise in the number of security-related vehicles, now said to make up one in four of the cars on the road.

Opposition sources reported in 1999 that the security service was taking delivery of some five thousand 4WD vehicles and double-cabin pickup trucks: 200 for each of Sudan's 26 provinces. If true, this will represent a sizeable proportion of each state's fuel consumption. (Photo: Security officer in Unity State)

 FINANCE AND THE N.I.F: Controlling the money

The NIF has played a central role in the establishment of Islamic banking in Sudan, beginning under President Nimeiri in the early 1980s. They were not alone: Turabi's brother-in-law, Sadiq al-Mahdi, is named as a shareholder in the founding documents of the Geneva-based Dar al-Mal al-Islami (DMI).

When Sadiq's government was obliged to set up a committee to investigate allegations of corruption and malpractice in the Sudanese Islamic banks, it concluded that they posed a threat to the economy, but Sadiq resisted the pressure to act on its warnings.

The NIF continues to dominate Islamic banking in Sudan, notwithstanding the legal problems and accusations some of these banks have continued to encounter.

Note: Oil prices have risen since this example was published

  Liquidity crisis

In 1995 influential merchants close to the government pushed for a review of the banking system, amid a financial crisis in which several major banks and companies were believed to be at risk. Large trading families have been quietly withdrawing large sums of cash from the banking system while public saving has continued to slow down. Commercial bankers have been calling for greater safeguards for some time, but say their concerns are ignored by the Bank of Sudan, the central bank.

Although the bankruptcy of any major bank was thought to be impossible because of the controlling role of the Bank of Sudan, since 1995 there have been recurrent warnings of a possible banking collapse.

One commercial bank is reported to have been unable to pay back a foreign investor's stake. There is a chronic shortage of hard currency in the country, and when it turned to the government for help, the bank was offered the equivalent in Sudan Airways shares rather than cash. The investor rejected this offer, and the bank was obliged to sell properties in Khartoum and Omdurman after a new share issue failed to raise enough capital to pay him back.

Cash-flow problems were also reported at the Western Sudan Islamic Bank, which dismissed 60 employees. Other banks are said to have held back salaries. The loss of confidence was also affecting the Khartoum Stock Market, which depends heavily on local dealings with banks and insurance companies for its business.

 Corruption

Any individual who gains a politically or economically powerful position is likely to be deluged by appeals for assistance from his/her kin. Those who control appointments are fully aware of this pressure, and will exploit the compromised situation in which such individuals find themselves. Former president Nimeiri was skilled at the "musical chairs" approach to appointing ministers and civil servants, in which the appointees were intimidated by the obviously temporary nature of their positions and pushed towards extracting maximum personal financial advantage in the limited time available. Their corrupt actions compromised them and made them politically malleable.

During the civilian period 1986-1989 the NIF extended its financial scope and began monopolising some areas of trade, such as newsprint, which was more tightly rationed for its opponents than for the burgeoning number of newspapers which supported NIF policies. Its preference for monopoly control has continued in government.

A great many external trade negotiations with Sudan are conducted through individuals. Although Sudan has been considered a relatively uncorrupted country in comparison with many of its neighbours, corruption at this level has now become a significant factor. The NIF has practiced a form of cronyism in its parcelling out of newly-privatised assets, and in granting export/import licences to its supporters while denying them to its foes. Individuals have gained monopoly control over key commodities. Influence takes precedence over efficiency, and accusations of corruption close to the highest levels of leadership have even come from within Islamist circles.

The risk for outside players is that there is no fair and open competition for contracts; everything is subject to political clout. The individual wasta (contact) with whom one deals is critical to success, and his influence may suddenly collapse through loss of political favour…

17 - The companies