Sudan

Financing the Revival of Sudan’s Troubled Transition - Crisis Group Africa Briefing N°157 | 22 June 2020

Format
Analysis
Source
Posted
Originally published
Origin
View original

Attachments

Mounting economic turbulence is rocking Sudan’s delicate political transition. Without urgent donor assistance to provide economic relief to a suffering population, public support for the cabinet’s reform agenda could collapse. Any failure in the civilian-military government could have tragic consequences for Sudan and the region.

What’s new? Sudan’s hybrid civilian-military transitional government is being buffeted by economic headwinds that undermine public confidence in the civilian-led cabinet and risk provoking renewed popular anger. A donor conference scheduled for 25 June has raised hopes that Sudan’s international friends will step up to help.

Why does it matter? Without urgent donor assistance to provide economic relief to a suffering population, public support for the cabinet’s reform agenda could collapse. If popular frustrations at living conditions grow, the ensuing protests could destabilise a civilian-military government that barely hangs together, with possibly disastrous consequences for Sudan and the region.

What should be done? Donors should finance a cash transfer program to offset price rises following the cabinet’s decision to lift fuel subsidies, which have burdened Sudan’s economy and been used for corrupt purposes. The cabinet should introduce new controls to safeguard these funds and begin outreach to build popular support for such changes.

I. Overview

Mounting economic turbulence is rocking Sudan’s delicate political transition. Citizens yearning for an upturn in living conditions, following the popular revolt and military coup that toppled Omar al-Bashir in April 2019, may find their frustrations reignited. The installation of a civilian-military power-sharing government in August raised hopes of a dividend, but today’s civilian cabinet led by Prime Minister Abdalla Hamdok is struggling with a near bankrupt treasury. Meanwhile, his military partners in government retain the balance of real power, clinging to sources of money for which there is no accounting to Sudan’s people. Unless Hamdok finds funds to boost social spending, he could see a resumption of destabilising protests. A 25 June donor conference is an opportunity to mobilise financial support, allowing Hamdok to ease hardships facing Sudan’s most vulnerable and preserve the peace surrounding the cohabitation between the civilian cabinet and the generals. Sudan’s friends should open their purses to keep this transition on track as the country heads toward elections in 2022.

Sudan’s peaceful, diverse and sustained protest movement stirred public imaginations across Africa and beyond with its months-long campaign that precipitated the military’s ouster of the long-ruling strongman Bashir. That said, the transitional government that was formed with Hamdok, an economist, leading a civilian cabinet that shares power with military generals, has yet to provide relief to a population whose frustrations over a tanking economy spurred the protests that began in 2018 and continue sporadically. The state budget is deep in the red, amid crippling shortages of basic commodities, extended power outages and soaring inflation. Many sectors of the economy remain captured by elements of the previous regime and some within the current security forces. Much hoped-for donor assistance has not arrived. Despite progress toward rescission, Sudan’s U.S. State Sponsor of Terrorism designation remains in place. COVID-19 has heaped further restrictions on economic activity.

Hamdok and Finance Minister Ibrahim al-Badawi face a difficult balancing act. They have sought to cut down on wasteful government spending that is bleeding the treasury dry. In so doing, however, they have been careful not to squeeze military expenditures too abruptly, lest they provoke a backlash. Instead, they have begun to reduce the country’s immense subsidy bill covering imported fuel, which lately has drained hundreds of millions of dollars from the treasury every month. A cut in fuel subsidies carries the added benefit of undercutting Bashir-era elites who had positioned themselves as designated importers and thus could take advantage of preferential foreign currency exchange rates available for fuel purchases while overstating the amount they imported, thereby profiting handsomely. Addressing fuel subsidies is thus a crucial step allowing Hamdok to save the treasury from bankruptcy and repair the broken economy.

In taking these steps, however, the prime minister will need donors to step up, notably to help cushion the impact of lifting fuel subsidies, a policy that is already inflicting higher prices on a hungry street that could protest again if frustrations boil over. In turn, his donor partners will look for signs that he has the political support to keep reforms on track. While subsidy cuts were initially resisted by the Forces for Freedom and Change (FFC), the civilian protest movement that swept the prime minister into office, some in the movement are beginning to reassess. Even so, Hamdok will need to do more to shore up support from those in the FFC and public who worry that the subsidy removal will deliver more economic woe.

A donor conference co-hosted by the EU, Germany, the UN and Sudan, and to be held virtually from Berlin on 25 June, affords the country’s partners a significant opportunity to support Hamdok as he keeps the economy afloat and co-pilots the country toward the 2022 elections envisaged by the 2019 agreement between the FFC and the generals. As Crisis Group has previously advocated, Sudan’s Western, Gulf, multilateral and regional partners should contribute funds to a multi-donor trust fund, or another appropriate mechanism, that can support a cash transfer program aimed at assisting the country’s most vulnerable people. Sudan’s donors should not abandon the country at this critical moment. Any further slide in the country’s economic fortunes will hurt the Hamdok administration’s standing with the public, possibly triggering street protests that could imperil stability. As donors ready themselves to boost their support, Hamdok and Badawi should redouble the cabinet’s efforts to convince the Sudanese people, starting with their political base, that their reforms are helping put the country on the right path.