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Sudan to end fuel, food subsidies by 2019: minister

By Khalid Abdelaziz

By Khalid Abdelaziz

KHARTOUM (Reuters) - Sudan plans to end all subsidies on food and fuel by 2019 and forecasts the lifting of U.S. sanctions will earn its hard currency-starved economy $4 billion per year in remittances, Minister of State for Finance Magdi Hassan Yasin said on Monday.

In the final days of Barack Obama's presidency, Washington announced plans to lift a 20-year-old trade embargo, unfreeze assets and remove financial sanctions in response to Khartoum's cooperation in fighting Islamic State and other groups.

The sanctions relief will come in six months if Sudan takes further steps to improve its human rights record and takes steps to resolve military conflicts, including in Darfur.

Even so, Sudanese officials are already looking beyond the sanctions regime.

"The lifting of American sanctions is a turning point for the Sudanese economy," Yasin, a junior minister, said in an interview.

The path may not be smooth. On Saturday, Sudan's foreign ministry called President Donald Trump's temporary travel ban on citizens from seven countries, including Sudan, "very unfortunate".

If there is no extension, the three-month restriction on Sudanese citizens entering the United States would be over by the time the trade embargo and financial sanctions are removed.

Even so, it is unclear if the tougher immigration rules promised by Trump might impact on trade relations between the two countries.

END OF SUBSIDIES

Sudan's economy has struggled since South Sudan seceded in 2011, taking with it three-quarters of the country's oil output and much of Khartoum's foreign currency and government revenue.

Sudan in November cut fuel and electricity subsidies and announced import restrictions to save scarce foreign currency. Yasin said the government targets scrapping these subsidies entirely by 2019.

"Distortions will be removed from the economy with the total cancellation of consumption subsidies," Yasin said. "That includes for fuel, electricity, and imported wheat."

Yasin said the government was considering legislation allowing foreign companies to invest in electricity infrastructure and production for the first time. Huge swathes of rural Sudan have never been connected to the national grid.

"Sudan only produces 34 percent of its electricity needs, so the door will be open for investment in this field, especially after U.S. sanctions are lifted," he said.

Khartoum has already said it will review its monetary and exchange rate policies once the U.S. sanctions are lifted to lure new foreign investment.

The potential for increased trade and investment flows is already reflecting in the real economy, with the Sudanese pound strengthening to 16 per dollar from 19 before the sanctions announcement.

The pound trades at 6.8 per dollar in the official banking system. The minister said a stronger pound would tame inflation, which hit an annual rate of 30.47 percent in December.

"We expect inflation to start declining beginning this July and for the value of the pound to continue rising with the inflow of remittances from Sudanese abroad and foreign investments," said Yasin.

(Writing by Eric Knecht; Editing by Ahmed Aboulenein and Richard Lough)

 

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