Wednesday 30 November 2022

Sudan: neoliberal orthodoxy is no friend of democratisation

The revolutionary events of 2018/2019 in Sudan brought an end to the long rule of former president Bashir, in power since 1989. A coalition of political parties and professional associations under the title of the Forces of Freedom and Change (FFC) found itself at the helm of a broad, mostly urban, protest movement that drew its militant energy from two main streams, informal labour force and radical students or young graduates. Under the pressure of the protest movement former president Bashir’s generals decided to cast him away and assumed power in April 2019. The rule of the junta began with concessions towards the protest movement in the form of a negotiated power sharing arrangement with the FFC that ushered in a ‘transitional period’. What was supposed to be a three years and a half transition towards electoral democracy effectively came to an end in October 2021 when the generals organised a coup dislodging their FFC partners from government. 
The generals had crafted an alliance with former insurgents primarily from Sudan’s westernmost region Darfur that allowed them to reorder the political scene. The insurgents had come late to the revolutionary table through a financially hefty peace agreement with the transitional government signed in August 2020. With the 25 October 2021 coup the government of Sudan collapsed into the country’s armed formations. Army generals, security chiefs, militiamen and former rebels shared power and resources through an effective constitution of guns. The Maoist dictum “political power flows out of the barrel of a gun” ruled supreme. Standing between the assortment of men with guns and the realisation of hegemony are decentralised formations of protestors who continue a deadly struggle in what has become a routine of demonstrations and killings. 
The tenacity and heroism of the Sudanese protest movement has drawn admiration from many quarters. Rihanna tweeted in support of the Sudanese revolution and Western politicians readily shared in the iconography of protests. What the western donors were not ready to do though was to bail out one of Africa’s most troubled countries into democracy. The revolution could not pay for itself. Sudan’s first transitional finance minister, Ibrahim Elbadawi, put the price tag at 60 billion US dollars (Sudan’s foreign debts burden), a conservative estimate at best. “Sudan’s economy has fallen into a 60 billion US dollars deep pit”, he told the press in June 2020 (1). The prescriptions offered by Sudan’s creditors, the international financial system and the many well-wishers in the power centres of the Western world were a one size fits all rerun of dogmas reiterated in almost theological certainty: government austerity, privatisation of public goods, abolition of fuel and food subsidies, liberalisation of external trade and a floating currency exchange rate. Sudan’s transitional government bowed to all these imperatives. The quid pro quo was the very promise of democratisation down the road, but neoliberal reforms were a no starter for a liberal democracy. 
Judged by these axioms, the achievers were former president Bashir and his sequence of finance ministers. In the early 1990s Sudan’s rulers embarked on a grand reworking of the economy along neoliberal lines by choice to much acclaim from the International Monetary Fund (IMF) (2) despite Sudan’s ineligibility status as a consequence of debt arrears since January 1986 (3). “The Government of Sudan has adopted a radical and far-reaching program of economic reforms aimed at freeing up the economy, bringing down inflation, and creating a climate conducive to the revitalization of the private sector. This has included the dismantling of all controls on prices, investment and trade; the elimination of virtually all budgetary subsidies – implicit and explicit; the lifting of most restrictions on external transactions; the adoption of a unified floating exchange rate; and the launching of a wide-ranging program of privatization”(4)
The measures that Bashir’s regime managed to push through by authoritarian means are what his predecessor in office, Sadiq Al Mahdi, could not muster, shackled as he was by the imperatives of a parliamentary system. Sudan’s previous dictator Jaafar Nimayri had saddled the country with foreign debt estimated at 13 billion US dollars in late 1986 with 300 million US dollars in arrears on its debt to the IMF and 100 million in arrears to the Arab Monetary Fund. Total debt services were estimated at 930 million US dollars a year (5). The pit at the time was 13 billion US dollars deep to use Elbadawi’s allegory. The Sudanese had defeated Jaafar Nimayri’s dictatorship in the 1985 intifada, a similar show of civic resourcefulness and energy as the 2019 uprising and managed to complete a brief transition to a parliamentary system. Elections were held in 1986 and Sadiq Al Mahdi, chief of the Umma Party which commanded the largest parliamentary bloc, was named prime minister. Meanwhile, the war that had started in 1983 raged on in southern Sudan. John Garang, leader of the insurgent Sudan People’s Liberation Army (SPLA), shunned the transitional period overseen by the army generals of the ‘Transitional Military Council’ as a perpetuation of Nimayri’s regime in different uniform (6), not wholly without reason (7). 
Sadiq Al Mahdi’s government entered into protracted discussions with the IMF and the World Bank, all futile. No agreement was reached on debt rescheduling or the access of new loans. The IMF demanded the standard orthodoxies of devaluation of the currency and the removal of government subsidies on fuel, sugar, bread and other consumer commodities. When Sadiq Al Mahdi embarked hesitantly on some of these measures the result was a wave of strikes and riots, a situation compounded by the civil war in southern Sudan and the floods of 1988 (8). Sadiq Al Mahdi’s government did not last to implement its four years economic austerity plan announced in 1988. The Islamists under Bashir swept in in June 1989. The IMF declared Sudan uncooperative in September 1990 and its voting rights were eventually suspended in August 1993 (9). 
The IMF lifted its declaration of non-cooperation against Sudan in 1999 and restored the country’s voting rights in 2000. Sudan had commenced in 1997 paying its debts to the IMF at the beginning of Sudan’s oil decade and after an excellent record of austerity. “Sudan has established an encouraging track record of economic performance and payments to the IMF under the 1997 and 1998 staff-monitored programs and has laid a solid foundation for continued good performance under the 1999–2001 medium-term staff-monitored program,” stated the IMF Deputy Managing Director Shigemitsu Sugisaki warning further: “However, in view of the structural weaknesses in the Sudanese economy, it is critical that the authorities remain vigilant and keep the program on track, in terms of both macroeconomic and structural policies. Payments to the IMF and other creditors need to be made as committed by Sudan. This would allow the IMF to give consideration to further deescalation of the remedial measures and, eventually, to the possibility of a Rights Accumulation Program” (10). 
Sudan’s compliance with the IMF directives would be complicated by political imperatives. The stability of former president Bashir’s government during the oil decade depended on an unspoken social contract that involved like in Nimayri’s days or in neighbouring Egypt the maintenance of affordable bread and fuel prices (11). The government’s involvement in the fuel and wheat markets was designed as an insurance against political risks in the unwieldy cities. In Sudan’s peripheries war was the primary tool of governance. 
During these honeymoon years Khartoum was in a way capable of keeping the expanding cities (12) under control and maintaining an expensive patronage network thanks to stable rents from oil production of around 450,000 barrels per day (bps). GDP growth reached 10%, inflation dropped to around 8% and the country’s fiscal deficit to around 1.9%. Transfers from the central government to the states multiplied between 2004 and 2007 from a meagre 1.5% to 8% of GDP, approximately 47% of total government expenditure in 2008, reflecting the dividends of the 2005 Comprehensive Peace Agreement (CPA) between the government of Sudan and the SPLA that brought an end to Africa’s longest civil war. 
With each boom comes bust. The demands of Khartoum’s expensive peace agreements and the maintenance of the improving living standards of the urban middle classes eventually led a to a current account deficit of around 4.2 billion US dollars from 2004 to 2008 on the background of a total debt of 33.7 billion US dollars at the time. Sudan’s non-oil exports deteriorated as the currency appreciated and public expenditure multiplied. Sudan’s oil bonanza ended with the secession of South Sudan in 2011. The central government precipitously lost 75% of its foreign exchange earnings and 45% of general government finances. Inflation raced ahead to levels around 40% and the value of the currency was reduced within months by some 60%. 
Under instructions of the IMF, the government launched a renewed round of austerity measures, this time around it had to shoot its measures through as it were. Public expenditure was reduced significantly and subsidies for fuel, bread and sugar were slashed. The 2011, 2012 and 2013 budgets were crude austerity budgets with significant subsidy reductions and tax hikes (13). Militia fighters from distant Darfur were deployed to crush riots in Khartoum against bread price hikes in September 2013 by sniper fire (14). One item that proved a vexation for the government was the currency exchange rate. To halt inflation, the government reversed its policy of a floating exchange rate and adopted a fixed rate primarily for wheat and fuel imports. The difficult job of managing the clustering of interests involving major wheat and fuel importers resulted in three different government-enforced exchange rates for the US dollar in the run up to the 2018/2019 revolution: an official central bank rate for government transactions, an import customs rate, a fuel import rate and a commercial bank rate intended to attract the remittances of Sudanese abroad. Meanwhile a parallel market rate galloped ahead by a gaping margin. 
In a seminal report from December 2017 the IMF advised the abolition of fuel, electricity and wheat subsidies and the unification of the exchange rate and calculated that the removal of subsidies would result in the tripling of retail prices of fuel products, bread and electricity (15). The IMF predictions were right. The government’s attempt to lift bread subsidies initially in dusty Atbara was the immediate trigger for the uprising that brought Bashir’s rule to its end (16). The diagnoses of the collapse of Bashir’s regime are many and overlapping and involve a focus on the limits of autocracy and internal security rivalries (17), a standard ‘war on terror’ critique of political Islam (18), highlighting of the exhaustion of the transactional options open to the dictator (19) and the political imaginary of a new generation of political activists and agents (20). Bashir’s former foreign affairs minister, leading figure of the former ruling National Congress Party (NCP) and currently acting secretary general of the Islamic Movement, Ali Ahmed Karti, was asked recently about his diagnosis. He did not hesitate long and stated: the government’s decision in January 2018 to devaluate the currency and raise the ‘customs dollar’ (21), i.e. the government’s exchange rate for calculation of import duties, from 9 Sudanese pounds to the US dollar to 18 pounds to the US dollar, compared to a parallel US dollar exchange rate of 35 Sudanese pounds at the time. The immediate result was an abrupt increase in the prices of all imported commodities (22). Another currency devaluation followed in October 2018. 
When Bashir’s regime collapsed Sudan’s foreign debt stood at 56 billion US dollars. The country was running a pernicious negative balance of trade for a decade that peaked at -7.04 billion US dollars in 2011 at the time of the secession of South Sudan and settled at around 4 billion US dollars annually. Sudan’s import bill for the year 2018 amounted to 7.8 billion US dollars (0.75 billion for petroleum product and 0.6 billion for wheat and wheat flour) while its exports for the same year period valued 3.5 billion US dollars (around 25% gold, 20% livestock, 17% sesame) (23). The country was simply bankrupt. 
The transitional government between civilians and military men was established in 2019. The men with guns handed over responsibility of Sudan’s economic woes and the management of threatened livelihoods to the civilian cabinet. The cabinet’s hands were tied. It could neither draw on the commercial interests of the military nor was it in an immediate position to access international loans given Sudan’s unresolved pariah status in international financial institutions. What the cabinet could do however was to further accelerate the pace of austerity and duly abide by the IMF prescriptions in the hope of debt relief and a rescue package down the road.
In June 2020 the government requested a ‘Staff-Monitored Program’ with the IMF. In December 2019 the finance minister, Ibrahim Elbadawi, had announced a plan to gradually reduce fuel subsidies, a condition of debt relief. He said at the time the country needed 5 billion US dollars in budgetary support to avert economic collapse and launch economic reforms (24). In January 2020 he detailed a plan to cut subsidies over a period of 18 months and replace them with direct cash transfers (25). The IMF reiterated its orthodoxies, it instructed floating of the currency, phasing out of fuel subsidies, reduction of government expenditure efficient taxation and independence of the central bank from cabinet imperatives and expansion of a social security net based on cash transfers (26). 
Ibrahim Elbadawi’s macroeconomic stabilisation budget faced stiff resistance in home turf. Influential FFC partners threw out his fuel subsidy removal plans in the 2020 budget (27). He did not survive the political backlash and eventually handed in his resignation in July 2020. In his resignation statement he named the Staff-Monitored Programme negotiated with the IMF as one of his successes (28). Sudan was effectively without a working budget in the year 2020 and the economy continued to contract for the third year straight. In August 2020 the Sudanese government signed a set of peace deals with rebel groups including the Darfuri Justice and Equality Movement (JEM) led by Jibril Ibrahim and the Sudan Liberation Movement led by Mini Arko Minawi. A ‘Friends of Sudan’ conference in June 2020 pledged 2 billion US dollars in aid. The IMF approved in September 2020 a 12 months’ Staff-Monitored Programme with the aforementioned austerity measures as a condition for debt relief and the World Bank signed a 400 million US dollars budget to launch the promised cash-transfer scheme dubbed the ‘Sudan Family Support Programme’ (SFSP) (29). At the end of December 2020, the caretaker finance minister Hiba Mohamed declared the removal of all fuel subsidies with immediate effect (30). 
As part of the peace settlement signed in August 2020 the JEM leader, Jibril Ibrahim, assumed the finance portfolio in February 2021 in a new dispensation that reordered the transitional period as a triumvirate between the military-security-militia bloc, the former rebels and the civilian politicians of the FFC. He was not accountable to the FFC politicians and pushed forward the IMF agenda with greater zeal than his predecessor. Sudan’s central bank floated the currency in February 2021 (31) and eliminated the customs exchange rate in June 2021 (32). The consequence was an inflationary blitzkrieg on livelihoods. The annualised inflation rate rose to over 400%, three times as high as Lebanon’s and possibly ten times as Yemen’s. The SFSP, a proposed cash transfer regime of 5 US dollars per person per month, aimed at reaching 80% of the population, an estimated 32 million people, was launched in February 2021 but fell behind schedule. By mid-year only 160,000 households had received payments. The IMF said the Information Technology (IT) floor, staff deficits and inadequate delivery mechanisms were to blame (33). 
The prices of staple grains rose in leaps. By September 2021, sorghum sold in Gedaref, the main sorghum producing state, at more than double the 2 years average while wheat prices increased almost 3 times over compared to the previous year and more than 12 times the 5 years average (34). More people were going hungry as a result. 25% of housesholds were dependent for a quarter to half of their calories needs on food aid (35). As hunger spread the IMF finally declared its satisfaction with the pace of Sudan’s economic reforms. At the end of June 2021, the IMF and the World Bank determined that Sudan had taken the necessary steps to begin receiving debt relief under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative (36). The so called ‘Decision Point’ was reached after the US provided bridge financing, a 1.15 billion US dollars loan, in March 2021 to clear Sudan’s arrears to the World Bank (37). As a condition for its assistance, the US shepherded Khartoum into a regional security architecture under Israeli aegis. Sudan signed the Abraham Accords in January 2021 in return for removal from the US list of state-sponsors of terrorism and the required bridge loan (38). 
In October 2021 the generals announced their coup. General Al Burhan, the coup leader, praised Prime Minister Hamdok and his ministers for achieving the difficult tasks of pushing through the economic reforms that had eluded even Bashir’s security men and brokering Sudan’s new relationship with creditors, donors and the international financial institutions. The reforms had condemned millions of people in the county to misery and importantly challenged the relationship between the civilian leaders of the transitional period and the source of their legitimacy, the protest movement that had elevate them to positions of power in the first place (39). The World Bank suspended in October 2021 all disbursements to Sudan including funding for the SFSP (40). Consequently, the government announced the suspension of the SFSP (41). The IMF said it would continue to monitor developments (42). In March 2022, the World Food Programme said the combined effects of economic crisis, conflict and poor harvests in addition to the war in Ukraine were exacerbating hunger in Sudan and predicted that more than 18 million people would be facing acute hunger by September 2022 (43), more than 40% of the population. Two children, aged seven and five years, were found dead from starvation in June 2022 on a neighbourhood street in Al-Fasher, a major town in northern Darfur (44). The family lived on meagre earnings of the mother who sold skull caps in the marketplace (45). The IMF continues to monitor developments. 

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