Exclusive: Sudan needs up to $5 billion in budget support to prevent collapse

Sudanese residents shop in a bazaar in Khartoum

By Khaled Abdelaziz, Ulf Laessing and Michael Georgy

KHARTOUM (Reuters) - Sudan needs up to $5 billion in budget support to avert economic collapse and launch reforms after the ouster of veteran ruler Omar al-Bashir, its finance minister told Reuters.

The country, in crisis since losing most of its oil wealth with South Sudan's secession in 2011, has only enough foreign currency reserves to fund imports for a few weeks, said Ibrahim Elbadawi, part of a transitional government formed in August.

Sudan has had some support for fuel and wheat imports but about 65 percent of its 44 million people live in poverty and it needs up to $2 billion in development funding along with a hoped-for $2 billion from Arab development funds, he said.

Outlining reform plans in detail for the first time, Elbadawi said public salaries would need to be increased and a social support network established to prepare for the painful removal of fuel and food subsidies.

Months of demonstrations over price hikes for fuel and bread and cash shortages triggered the uprising against Bashir, who was toppled in April by the military. Protests have continued since, with people killed in clashes with security forces.

"We have started the process (of reforms)," Elbadawi said in an interview on Thursday. "The people of Sudan deserve to be seen in a radically different prism than the international community used to see Sudan, as a country ruled by a pariah state."

"Now we have a revolution," he said. Asked how much budget support was needed for 2020 he said: "Some estimates say between three to four billion (US dollars), maybe even five billion."

The civilian government Elbadawi is part of has taken over for three years under a power-sharing deal with the military. It has drawn slightly more than half of $3 billion in support for imports of wheat and fuel offered by Saudi Arabia and United Arab Emirates in April, he said.

A "friends of Sudan" donor meeting is planned for December and the government had agreed with the United States it could start engaging with international institutions while still on a list of countries deemed sponsors of terrorism, Elbadawi said.

The designation, which dates from allegations in 1993 that Bashir's Islamist government supported terrorism, makes it technically ineligible for debt relief and financing from the IMF and World Bank. Congress needs to approve a removal.

CURRENCY

The first experts from international institutions had arrived in Khartoum to help with reforms and a delegation of the International Monetary Fund (IMF) would come this month for Chapter IV discussions, Elbadawi said. There was no immediate comment from the IMF, World Bank or U.S. State Department.

Part of a roadmap agreed with the IMF and World Bank was that Sudan did not have to pay back $3 billion in arrears from international institutions.

"We don't need to pay anything. What we need to ... deliver really is policy," he said. Sudan is one of the most indebted countries, owing $60 billion, which needs to be settled separately.

Sudan would start to increase its tax base and overhaul the civil sector, Elbadawi said. Salaries -- eroded by double digit inflation rates -- could be raised as much as 100 percent by April.

In the second half of next year a social support network would be set up to allow the lifting of subsidies by June or later. Some donor funding would be used to collect data to allow cash transfers for the needy.

Sudan also wanted to produce bread based on sorghum, a local cereal, to import less wheat. He said he hoped a spread between official and black market would be ended by June. But this week the local pound dropped to 80 for a dollar on the black market versus the official rate at 45.

He said the 2020 budget would have sustainable development targets for education, health care and social spending, suggesting Sudan might move away from the dominant military spending choking development.

(Writing by Ulf Laessing; editing by Philippa Fletcher)