Uprising in Sudan: What we know now (October 9, 2013) (Part One) Economic Realities: the engine of discontent

Eric Reeves, 9 October 2013              •

[Continuing previous assessments:

October 5:                 

http://www.sudantribune.com/spip.php?article48331 (Sudan Tribune)

October 1:                 

 http://www.sudanreeves.org/?p=4347

September 28:          

http://www.sudanreeves.org/?p=4337

September 26:          

 http://www.sudanreeves.org/?p=4334 ] (Sudan Tribune)

October 9 overview:

Demonstrations in Khartoum, Omdurman, and elsewhere in Sudan have become smaller in size and more easily controlled by the overwhelming and brutal use of force on the part of various national security forces.  “Shoot to kill” orders were given early on, according to assessments of the evidence by Amnesty International and Human Rights Watch. Amnesty and others report that a large percentage of those killed were shot in the head or chest—or even the back, while fleeing.  There are many reports of snipers firing from elevated positions, creating a sense that one might be a victim at any moment.  This extending scope of the killings brings more and more families—from across social, ethnic, and economic boundaries—into the larger family of those who have lost someone.  This is especially true given the characteristically extended families in Khartoum and its environs.  The number of aggrieved grows daily, and anger mounts relentlessly.  Nothing will change this except an end to the violence, tyranny, and greed that define the current regime.

But what is most important to note is that the demonstrations continue, the outrage grows, and Sudan’s economic implosion is accelerating.  This is not a reprise of the demonstrations of summer 2012, sparked by the same causes but ending when the National Islamic Front/National Congress Party regime reversed itself on the critical issue of lifting fuel subsidies.  That, however, was a decision that merely deferred confronting the vast economic and fiscal catastrophe that now is squarely before those who have ruled Sudan so rapaciously and destructively for 24 years.  These are men who live lives of unreal luxury, who have vastly enriched themselves and their political/business cronies—even as they have impoverished millions and ensured that discrimination against the marginalized people of the peripheries denies them any of the benefits of oil wealth—wealth that has now been almost totally dissipated. 

Notably, Associated Press reports from Khartoum (October 6, 2013): “U.S. diplomatic cables revealed by Wikileaks, the anti-secrecy website, said al-Bashir has stashed $9 billion in London banks.”  Does the British government believe the U.S. government, at least as represented by diplomatic cables whose veracity has nowhere been challenged?  Does it not have its own resources for determining the authenticity of this U.S. claim?  And if it is verified, what are the Prime Minister and Parliament prepared to do about the fact that this can only be a gargantuan pool of blood money, extracted at tremendous cost from the people of Sudan, and now gathering interest in London banks?

In July 2012 people were already seething, but saw the reversal on fuel subsidies as a sign that they could make their voices count.  They could not.  This time the regime has no choice, at least from a ruthlessly self-interested economic perspective: the lifting of subsidies will stand, no matter what violence this decision occasions.  There is some apparent dissention within the NIF/NCP ranks, but these dissenting party members (including some committed Islamists) are primarily men who calculate that their survival depends on not angering the masses who suffer most from exploding inflation, lack of consumer goods, extremely high unemployment—and now a near doubling of fuel prices and the cost of cooking oil.  They appear to have no understanding of the inflationary forces already at work, and the wrenching effects on poor and modest-income families.  Even in the far reaches of Darfur, the consequences of increases in fuel prices—already long in evidence—will be explosive, as trucking food becomes prohibitively expensive on certain routes.

For removing the fuel subsidies, with its immediate and powerful inflationary effect, has been only part of an effort to close a massive budgetary gap of US$2.4 billion (Wall Street Journal, October 7, 2013); and even with a potential infusion of US$1 billion from Qatar, the printing presses will have to be turned on to close the gap fully. (Sudan Tribune reported [October 2, 2013] that economist “Khalid Elnour earlier this year [said] that out of the $2 billion promised by [Qatar for 2012] only $500 million was actually disbursed.”)  Claims of sudden deposits of Forex seem designed mainly to make the currency “black market” fearful and more cautious in setting exchange rates; but the truth will out, and such claims will only create greater doubt in the minds of potential creditors.  Ironically (or not), the state-controlled Sudan Vision recently published an interview with the man who heads the only currency printing company in Sudan; he blithely assured the interviewer: “The company is qualified for expanding its printing, publishing, and distribution activity for all its products inside Sudan…” (October 8, 2013).

He will soon be tested on that boast.

Why the printing presses will roll:

[1]       Khartoum and the IMF:  Under present circumstances, there is no way in which the regime can borrow more money: despite pressure from the International Monetary Fund (IMF), the regime’s spending increased 18 percent last fiscal year.  As a percentage of Gross Domestic Product (GDP), Khartoum’s huge external debt—previously estimated in most recent calculations at US$42 billion—has increased significantly and now stands at US$46 billion, vindicating at least one IMF prediction.  And not only is there no way the regime can service such debt—let alone repay it—even the callous IMF will not be able to provide a bailout.  Despite the disgracefully tepid international response to the brutal, murderous crackdown in Sudan, the powerful countries of the Paris Club, even those that have been suggested as supporters of debt relief for Sudan (the UK, Germany, Italy), will now be unlikely to accede to any plan while the uprising continues and innocent civilians are murdered on “shoot to kill” orders from the regime’s security apparatus.  The Obama administration, which has been  so consistently feckless in responding to Khartoum’s ongoing atrocity crimes, should be pressured to announce preemptively that it will strenuously oppose debt relief for the regime.

To be sure, the IMF has made surprising gestures in accommodating Khartoum, indeed has shown an astonishing willingness to accept as accurate Khartoum’s own representation of the Sudanese economy and regime spending figures. This has been true for over a decade.  For example, as oil revenues came on line in August 1999, the regime engaged in a massive arms acquisition campaign (actually a continuation of previous arms acquisitions—mainly from China—made on the basis of anticipated oil revenues).  The IMF at the time claimed to be monitoring the Sudanese economy, and yet what we saw in the elaborate reviews hardly suggest a rigorous scrutiny.

Thus the June 2002 IMF report (“Sudan: Final Review Under the Medium-Term Staff-Monitored Program and the 2002 Program,” June 4, 2002) is little more than a very lengthy whitewashing of the unpleasant fact that military purchases were skyrocketing.  The IMF made virtually no mention of military expenditures by Khartoum. Instead, it speaks (in a single unhighlighted paragraph, buried on page 30) of Khartoum’s “assuring the [IMF] mission that the envisaged cuts in military spending are feasible in light of the on-going peace efforts.”  What the IMF did not contemplate, even hypothetically, were military realities and “needs” growing out of the continuing armed violence for which Khartoum would be responsible over the next decade—in the South and Abyei, in Darfur, and in South Kordofan and Blue Nile. 

To have taken at face value Khartoum’s “pledge” to reduce military spending, given the regime’s history, was both spectacularly and culpably naive on the part of the IMF.  Certainly the “pledge” given by Khartoum’s brutal men did not halt the massive and profligate acquisition of military aircraft—including advanced fighter jets, helicopter gunships, and transport aircraft—artillery, armored personnel carriers, and vast quantities of small arms.  Expenditures on domestic arms production also increased dramatically. Two of the main suppliers of military equipment to Khartoum, Russia and China, sit as Permanent Members on the UN Security Council, and have made clear that they will not pressure the regime to scale back military purchases—or even respect the arms embargo on Darfur imposed by the Security Council in March 2005.

There are even more troubling features in the IMF report of June 2002: whereas the November 2000 report from the IMF at least had tables, with actual figures, figures that clearly indicated a doubling of acknowledged military expenditures dating from the time oil began to be exported, the June 2002 report—despite a great many more tables and graphs—doesn’t speak of, or delineate, military expenditures in a single instance—not one!  This clearly represented the censoring of key data and was an indication that the IMF had decided it was just not interested in a truthful reckoning, but only in providing a financial context within which repayment might be accelerated. In fact, at the time of the 2002 IMF report, Sudan’s external debt was approximately US$23 billion; today it is twice that. So much for IMF monitoring.  Certainly we must look with very considerable skepticism at the results of more recent IMF “monitoring.”  Even so, the IMF recently offered one sobering figure, reflecting a host of related economic problems: “According to IMF projections, Sudan’s external debt as percentage of GDP increased to 87.6% from 82.2% in 2012″ (Sudan Tribune, October 8, 2013).  The economy can’t survive without the debt relief that is supposed to come with adherence to the prescribed austerity measures; but debt relief won’t come—we must hope—if hundreds of civilians continue to be murdered, maimed, imprisoned, and tortured, and if wars of attrition against civilians persist on Sudan’s periphery.

The regime-controlled Sudan News Agency (SUNA) reported several days ago that Finance Minister Ali Mahmoud had left for Washington to participate in the meetings of the World Bank and the International Monetary Fund (meetings scheduled to begin on October 7). SUNA also indicated that Mahmoud was accompanied by Undersecretary Yousif Abdullah Hussein, as well as senior officials of Sudan’s Central Bank.  The message to these emissaries of brutality, racism, and genocidal destruction should be clear: there will be no discussion of debt relief as long as the regime is murdering its own people throughout the country.  Whether in Khartoum and its environs, Port Sudan, Wad Medani, Atbara, Darfur, South Kordofan and Blue Nile, the killing must end and unfettered relief must be allowed to all areas in great humanitarian need.  These should be non-negotiable conditions, outlined in the bluntest fashion.  Those who care about the people of Sudan, and have advocated on their behalf, should work to ensure that the current regime sees none of the benefits of debt relief, no matter what promises it makes under acute economic duress.

The economic realities that prevail in Sudan cannot be bludgeoned into submission, cannot be wished or censored away—and this will make life increasingly miserable for average Sudanese, and particularly the impoverished Sudanese that make up such a large percentage of the total population.  This uprising has not ended, despite the regime’s almost complete censorship of all news about the uprising or the lifting of the fuel subsidies.  At the same time, there is no credible plan for the regime to make up the 50 percent of its income that previously came from oil fields now in South Sudan—nor will Juba, given past experience, ever trust any agreement made with the regime over oil transit fees.  Oil from South Sudan will flow south or west as quickly as transport allows.

[2]       Unemployment in Sudan is running at about 30 percent, perhaps higher; under-employment is not readily calculable, but it is clear that a great many well-educated Sudanese cannot find jobs commensurate with there training and education.  It is hardly surprising that a recent poll found that an astonishing 54 percent of the people of Sudan wish to leave their country.  The regime recently lamented the exodus from Sudan of tens of thousands of trained physicians—and this was even before the bloody crackdown that kept all doctors in Khartoum at the grim work trying to save the many hundreds of civilians who had been wounded, and before for the Doctors’ Syndicate of Khartoum spoke courageously about what had been seen in the hospitals and morgues, altogether indicating that more than 210 people had been killed as of September 29.  That number has risen substantially in the past ten days.  As of October 2, Amnesty International had reported the arrest of “at last 800 people”; the number continues to grow and is now well over 1,000.  The poor and unemployed are disproportionately represented in these figures, although the primary targets were activists, human rights advocates, and potential leaders of the uprising.

Nor is there any prospect for increasing employment, either in the petroleum sector, the gold sector (on which Khartoum had foolishly counted as a major source of foreign exchange currency), or in agriculture.  Indeed, the single most irresponsible feature of NIF/NCP management of the economy is to have allowed the agricultural sector to wither almost entirely.  The once promising Gezira Scheme—begun by the British in the 1920s for cotton but converted at independence (1956) to food production as well—was an essential part of the economy.  Today it barely exists.  The land has been ravaged and equipment, mills, and rail tracks have been sold.  

Indeed, a great deal of the land itself has been sold to foreign interests, mainly Arab and Asian countries trying to establish their own food security.  Sudan in turn is obliged to import most of the food its people need, and contributes virtually nothing to the food needs of those suffering in extreme conditions in Darfur, eastern Sudan, and other areas of the north.  It is hardly surprising that a medical director in Port Sudan recently reported that 30 percent of Sudanese children in eastern Sudan are badly malnourished. The figure is the same or higher for war zones in Sudan (Reuters, January 18, 2013).

The demographics of Sudan are very much like those of Egypt and other Arab Spring countries, with a high percentage of the population under 30 years of age, and disproportionately unemployed.  These young people are the same ones who have seen their friends and families gunned down with a savagery they will not forget.  Whatever the spark that set the uprising ablaze, that flame cannot now be extinguished—certainly not by the roughly $20 in “compensation” that the regime has offered to 500,000 of the poorest families affected in the Khartoum region.

[3]       Inflation.  We have no reliable figures for inflation in Sudan, but I have yet to speak with an economist who follows the Sudanese economy and thinks that the rate is under 50 percent—and many believe with me that the rate is well above 50 percent.  And this was before the huge spike in costs caused by the removal of fuel subsidies.  The IMF uses an inflation figure of 32 percent for Sudan, but relies far too heavily on Khartoum’s self-reporting of economic data.  Moreover, the IMF admits, if circumspectly, that the printing presses have already started to roll: inflation will remain high, “reflecting the monetization of the budget deficit, as well as the continued depreciation of the Sudanese pound”—i.e., the regime will simply print money to cover a substantial deficit, driven in large part by a weak Sudanese Pound, that cannot be covered in any other way.

Inflation is a daily reality, not a once a week or once a month infliction of pain.  Every day, laborers, the poor, the modestly well off, and those clinging to economic survival by a thread—all confront the challenge of finding enough food and essentials for living.  Everything continues—relentlessly—to become more expensive.  One of the best measures here comes not from the IMF but the currency “black markets,” where last week the Sudanese Pound traded at an all-time low—8.2 – 8.4 Sudanese Pounds to the dollar. As Reuters had reported at the very beginning of the uprising (Khartoum, September 22):

The Sudanese pound hit an all-time low on the key black market on Saturday [September 21]  as people sought to shift their savings into hard currency in anticipation of higher inflation.

The same psychology continues to be at work.  At the beginning of 2013, the exchange rate of 4.5 Sudanese Pounds to the dollar seemed painful and was already putting a serious, indeed dangerous crimp in Sudan’s ability to import.  The economy as measured by GDP was declining rapidly, and there was exceedingly little foreign exchange currency (Forex) with which to buy vital imports, including food as well as parts, replacement equipment, even gasoline.  At one point a bakery had to shut down for lack of credit abroad with which to purchase much needed replacement equipment.  The situation has now become critically unstable: the Pound is in free-fall, and there are no limits to either devaluation of the Sudanese currency or inflation.