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IMF Completes the Eighth and Final Review Under the Extended Fund Facility (EFF) for Seychelles

Posted by African Press International on December 22, 2013


VICTORIA, Mahe, December 20, 2013/African Press Organization (APO)/ On December 19, 2013, the Executive Board of the International Monetary Fund(IMF) completed the eighth and final review under the Extended Fund Facility (EFF)1 for Seychelles. The Executive Board’s decision was taken on a lapse-of-time basis.2 The completion of the review enables a disbursement of SDR 3.3 million (about US$5.1 million), which will bring total disbursements under the arrangement to SDR 26.4 million (about US$ 40.7 million).

The EFF was approved in December 2009 for an amount of SDR 19.8 million (see Press Release No. 09/472) and was extended by one year in 2012, with an augmentation of access of SDR 6.6 million (about US$10.0 million).

Strong policies have fostered economic growth, brightening Seychelles’ near-term outlook. A robust rise in tourism earnings in 2013 supported growth, as well as a reduction in the current account deficit as a share of GDP. The exchange rate strengthened slightly, at the same time as the central bank accumulated more international reserves than expected. Inflation decelerated below 5 percent, and the government is on track to achieve its 5 percent of GDP primary surplus target, as a shortfall in tax revenue and grants has been offset by lower-than-anticipated capital expenditure. All performance criteria under the EFF for end-June 2013 were met, as were the third quarter indicative targets. The measures in the structural benchmarks were also all completed, although there were short delays compared to initial plans for technical reasons.

The authorities’ macroeconomic policy framework for 2014 provides a solid basis to continue to reinforce external and fiscal sustainability. The authorities remain on track with their objective to reduce public debt below 50 percent of GDP by 2018, while increasing allocations to address social needs. Monetary policy will continue to aim to stabilize inflation at low levels and to accumulate international reserves, and the authorities and staff agreed on the need to strengthen the monetary policy framework to improve the transmission mechanism. Structural reforms aim to extend improvements in financial discipline to the broader public sector, including through rebalancing utility prices to reduce implicit subsidies and through better oversight of parastatals, which staff stressed was key to avoiding potential future losses and ensuring better focus on their core mandates. Financial sector reforms seek to increase access to credit.

With the completion of this review, the EFF arrangement comes to an end. The program’s key objective of placing the economy firmly on the path to external and fiscal sustainability has been achieved, based on the successful implementation of the debt restructuring, robust fiscal consolidation, and the resumption of growth. Public debt has been brought down from 124 percent of GDP at end-2009 to an estimated 71 percent at the end of 2013, reflecting an average primary surplus of over 6 percent of GDP and growth of 3½ percent. Inflation has fallen below 5 percent. External reserves, a vital buffer for such an open economy, have improved from just over 2 months of imports at the start of the program to over 3½ months at the end of 2013.

While substantial progress has been achieved under the current Extended Fund Facility (EFF), the economy faces continuing vulnerabilities from still high debt levels, low reserve coverage, and an unfinished reform process. The authorities indicated their intention to request a successor arrangement with the IMF to consolidate and extend the progress made during this EFF. Discussions on a possible successor arrangement will continue early next year.

1 The Extended Fund Facility under the Extended Arrangement is an instrument of the IMF designed for countries facing serious medium-term balance of payments problems because of structural weaknesses that require time to address. Assistance under the extended facility features longer program engagement—to help countries implement medium-term structural reforms—and a longer repayment period. (See http://www.imf.org/external/np/exr/facts/eff.htm). Details on Seychelles’ arrangement are available at http://www.imf.org/seychelles

2 The Executive Board takes decisions under its lapse-of-time procedure when the Board agrees that a proposal can be considered without convening formal discussions.

SOURCE

International Monetary Fund (IMF)

 

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Yesterday the Dutch government decided to offer debt relief to Sudan

Posted by African Press International on December 7, 2013

5 December 2013:

 

Yesterday the Dutch government decided to offer debt relief to Sudan, an extraordinarily misguided action, the more so since Sudan was the only country favored by such relief.  The decision is bad for many reasons, but most conspicuously because of the encouragement it gives the present regime in Khartoum to believe that other nations and institutions will offer similar relief; indeed, according to some observers this was the thinking on the part of some in the Dutch parliament.  The amount to be forgiven is relatively small— €150 million or about $US200 million—given the massive debt that has accrued largely under the National Islamic Front/National Congress Party (NIF/NCP) regime: some $45 billion, according to the IMF.  Debt was only a fraction of this before the military coup that brought the NIF/NCP to power in 1989.  And despite gross mismanagement of the economy, the regime now believes there is hope it will be given a lifeline by which to survive current civil unrest in the country.

Let’s be clear: There is simply no country in the world less deserving of debt relief than Sudan—not one.  Coincidentally, two days earlier, Transparency International released the results of its Global Corruption Perceptions Index for 2013.  Sudan ranked at 174 out of 177 countries surveyed, with only Afghanistan, North Korea and Somalia faring worse in the Index.  Moreover, Sudan’s score actually declined this past year; there is absolutely no sign of improvement.  This is important because many of the reasons for Sudan’s external indebtedness derive from corruption, which takes various forms: the vast system of cronyism that provides political support to the regime; the illegal appropriation and sale of valuable farmland to foreign companies; the impunity afforded to the security services in extortion and asset-stripping of humanitarian organizations and “non-Arab” Sudanese; and the monumental graft that has defined the regime for more than two decades—all of these have compelled unneeded or misdirected borrowing…. [ English original continued at http://wp.me/p45rOG-19R]

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IMF Mission to Tanzania

Posted by African Press International on November 6, 2013

DAR ES SALAAM, Tanzania, November 6, 2013/African Press Organization (APO)/ – A mission from the International Monetary Fund, led by Paolo Mauro, visited Dar es Salaam from October 23 to November 5, 2013; it conducted the biennial Article IV discussions, assessed performance under the Standby Credit Facility (SCF), and began discussions on a possible new Policy Support Instrument (PSI) program.1 The mission met with Hon. Dr. William Mgimwa, Minister of Finance, Professor Benno Ndulu, Governor of the Bank of Tanzania, and other senior government officials. The discussions also drew from inputs received during brainstorming meetings on medium-term economic policy priorities held in August with the government, the central bank, parliamentarians, the private sector and civil society, and development partners.

Mr. Mauro released the following statement at the end of the mission:

“The economy has continued to perform well, growing by 7 percent in the first half of 2013. The economic outlook is promising, with growth projected to continue at a similar pace for the full year. Overall inflation fell to 6.1 percent in September with core inflation (excluding food and fuel prices) at 5.8 percent. In light of broadly benign developments in domestic food prices and with a continued prudent monetary policy stance, inflation is projected to decline to the authorities’ medium term target of 5 percent by mid-2014. The current account deficit declined somewhat, but remained large, at 13½ percent of GDP in July 2012 – June 2013.

“Fiscal pressures emerged during the last fiscal year (2012/13, July to June). Net domestic financing of the government was in excess of targets agreed under the government’s IMF-supported program, by about 1 percent of GDP. For the current fiscal year (July 2013 – June 2014), tax revenues are likely to fall short of initial projections. This is likely to require sizable adjustments to the budget in the upcoming mid-year review to align expenditure plans with the available resources. The government has reaffirmed its commitment to the agreed fiscal deficit target of 5 percent of GDP. To sustain economic growth and to stem fiscal pressures during the current and next fiscal year, priorities include mobilizing additional revenues by reducing and simplifying tax exemptions and bringing the power sector to financial sustainability.

“Key medium-term policy challenges include fostering continued strong growth through productive infrastructure investment, while preserving priority social spending, and maintaining debt sustainability; enhancing the institutional framework to ensure that possible future revenues from newly discovered natural gas deposits benefit all citizens; and improving the business climate.

“Discussions will continue in the coming weeks; the next IMF Executive Board meeting on Tanzania is tentatively planned in early 2014.

“The mission wishes to thank the authorities for their warm hospitality and for the constructive and open dialogue on policy issues.”

1 The SCF supports LICs that have reached broadly sustainable macroeconomic positions, but may experience episodic, short-term financing and adjustment needs, including those caused by shocks. The SCF supports countries’ economic programs aimed at restoring a stable and sustainable macroeconomic position consistent with strong and durable growth and poverty reduction. It also provides policy support and can help catalyze foreign aid. (See http://www.imf.org/external/np/exr/facts/scf.htm.) The PSI is an instrument of the IMF designed for countries that do not need balance of payments financial support. The PSI helps countries design effective economic programs that, once approved by the IMF’s Executive Board, signal to donors, multilateral development banks, and markets the Fund’s endorsement of a member’s policies (see http://www.imf.org/external/np/exr/facts/psi.htm). Details on Tanzania’s current SCF are available athttp://www.imf.org/tanzania

 

SOURCE

International Monetary Fund (IMF)

 

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Donors react: Government corruption killing development in Malawi

Posted by African Press International on October 30, 2013

LILONGWE, – Extensive looting of public funds by government officials in Malawi has dangerously undermined the country’s public health sector, with hundreds of public health workers striking in recent weeks to protest late payments of their September salaries.

The delays were the result of a financial scandal involving government officials who exploited loopholes in a government payment system to make fraudulent deposits into the accounts of companies that did not have government contracts. Up to 20 billion kwacha (US$5.3 million) was siphoned from public funds, according to the Financial Intelligence Unit, a government organ.

The health worker strike, which started in early October, crippled operations at public hospitals, which are also experiencing depleted budgets for essential medical equipment and drugs.

“My three-year-old daughter had a fever, and I went to our district hospital to seek medical attention, but I came back without any. I found the staff at the hospital just lying around,” said Laurine Mwangupili of Karonga District, in Malawi’s Northern Region. “They told us that they could not attend to patients because they had not been paid their salaries.”

A health worker at the hospital, who did not wish to be named, said all the facility’s technical staff – including nurses, clinical officers and medical assistants – participated in the strike.

Workers at the country’s two largest referral hospitals – Kamuzu Central Hospital in Lilongwe and Queen Elizabeth Central Hospital in Blantyre – and at Dedza and Salima district hospitals also went on strike after the salary delays. They said they would be willing to strike again if this month’s salaries are delayed.

Striking workers who IRIN spoke to said that they had been threatened with eviction from their homes because they could not pay their rent. Some teachers also experienced delays in their September salaries as a result of the scandal.

“Crippled” because of corruption

Martha Kwataine, executive director of the NGO Malawi Health Equity Network, raised the alarm over the effect of corruption on the already underfunded health sector earlier this year.

“We have been saying that the health sector in this country is being crippled because of corruption,” Kwataine told IRIN. “As a country, we cannot retain specialist medical personnel because we lose our money this way. As a result, we keep sending patients to countries like Tanzania to receive specialized treatment” for diseases like cancer.

She added that the issue of corruption went beyond the late payment of salaries, and that it was exacerbating shortages of essential medical supplies, including drugs, which are “currently lacking in a number of hospitals.”

The Medical Doctors Union of Malawi also protested the looting in a statement, noting: “It is disheartening and utterly frustrating that while government is struggling to ensure constant availability of essential medicines and supplies in public hospitals, largely due to inadequate funds, some individuals within the same public service are finding it so easy to access the same inadequate funds for their own personal benefits.”

In September, IRIN witnessed patients at Nkhata Bay District Hospital being served a thin porridge instead of the usual meals of ‘nsima’ (a thick maize-meal porridge) or rice. Hospital authorities said the change was a result of poor funding to the facility, which had worsened since August.

Donors react

The impacts of the high-level fraud, which local media are calling “Cashgate”, are likely to be felt for months to come as international donors, who make up 40 percent of Malawi’s national budget and are particularly important to the health sector, threaten to pull out of the country.

Norway has already suspended its aid, while Germany has urged the government to track down those responsible, and the European Union (EU) has threatened to withhold $39 million of aid in December unless the corruption allegations are dealt with. The International Monetary Fund (IMF) announced on Monday that it is withholding $20 million in extended credit facility to Malawi until December.

Since Malawi’s Anti- Corruption Bureau uncovered the scam in early September, the government has shut down the payment system used to carry out the fraud, and 10 government officials have been arrested on charges of money laundering. On 10 October, President Joyce Banda dissolved her entire cabinet. Most of her 32-member cabinet was reappointed, with the exception of the ministers of finance, justice, and industry and trade.

History of corruption

Corruption has been a chronic problem in Malawi, with each of the country’s previous presidents pledging to root it out only to be connected to corruption after leaving office.

The first president elected in multiparty polls in 1994, Bakili Muluzi, is currently answering charges of diverting 1.7 billion kwacha ($4.5 million) of donor money into his own pocket. His successor, Bingu wa Mutharika, has been posthumously accused of building a 61 billion kwacha ($163 million) estate during the eight years he ruled the country. Most of that money is suspected to have been looted from state coffers, as he declared just 136 million kwacha ($363,000) in assets when he assumed office in 2004.

Under Mutharika, Malawi also had an uneasy relationship with its donors. In 2011, the UK froze its aid to the country after a diplomatic spat.

Since assuming office in April 2012, Banda has worked hard to mend relations with donors, but these gains may now have been lost.

sm/ks/rz source http://www.irinnews.org

 

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The Collapsing Sudanese Economy

Posted by African Press International on May 30, 2013

[This essay was written in early January 2013; little has changed in the macroeconomic picture for either Sudan or South Sudan.  Recent mutual threats of an oil stoppage would of course dramatically increase the economic crisis depicted here, and which is already threatening of peace in a range of ways.  Inflation continues its relentless rise in Sudan, despite “official figures” suggesting otherwise.  The connection between fighting in Jebel Amer (North Darfur) and the Khartoum regime’s desperate need of foreign exchange currency has become steadily clearer–May 28, 2013]

December 2012 commentary on the purported “coup attempt” in Khartoum provided little in the way of consensus about how serious the “coup” was or precisely who was truly involved or how far planning had moved to an actual attempt. The timing may have been governed by President al-Bashir’s health and an inevitable diminishing of power (he has throat cancer, according to multiple sources); what the stance of the military is or will be on the occasion of a transition is unclear.  Official comments from officials in Khartoum were contradictory and showed no commitment to provide an honest account.  What can’t be doubted is that the events, insofar as we can discern them, reveal growing domestic unhappiness with the current regime, which after 23 years in power has still failed to bring peace or broadening prosperity to Sudan.  The public discontent of last June and July may now be coming to fruition.

But to date political commentary has generally failed to provide a comprehensive account of how current struggles in Khartoum take place in the context of an economy that is in free-fall.  There is some acknowledgement of distress over high prices, shortages, and lack of employment; but there has been relatively little in the way of fuller and more probing assessment of  how far advanced the economic collapse is—or what the consequences of such a collapse will be in shaping Sudan’s political future.  But any analysis of current political machinations and maneuvering will be meaningless without an understanding of how a series of critical choices—military and economic—have been forced on the regime as a whole.  These choices are inevitably interrelated, and how they are made will define the future of greater Sudan.

Discussion of Khartoum’s political elite often relies on a traditional division of the National Islamic Front/National Congress Party into “moderates and “hardliners”; this is better cast, in my view, as a distinction between variously pragmatic elements within the regime who cohere in their views to a greater or lesser degree, depending on international pressures. The analytic task at hand is to capture how current economic circumstances will govern the survivalist political instincts that are common to all these ruthless men.  The advantage of a focus on “pragmatism” is that it highlights how “unpragmatic” so many recent actions and decisions have been in the economic sphere, and how these decisions actually increase the threat to regime survival.  These brutal men may control the press, the news media, the security forces and the army—at present.  But the impending maelstrom of economic disarray will bring to bear pressures that many in the regime and the military clearly have not anticipated or do not fully understand.

An overview of factors precipitating the collapse of the Sudanese economy would include the following.

[1]  A recent assessment found that Sudan is the fourth most corrupt country in the world (only Afghanistan, North Korea, and Somalia rank lower); corruption eats at the heart of economic growth, derails rational capital expenditures, and breeds resentment.  It has long been endemic in Sudan, and its current ranking reflects that fact.

[2]  The IMF’s most recent assessment has found that Sudan’s is the worst-performing economy in the world.  This in itself is simply extraordinary for a country with so many natural resources, including vast tracts of arable land.

[3]  The best barometer of the extent of economic collapse is the revised figure for negative growth (contraction) of the economy: the April 2012 prediction from the IMF was -7.3 percent for 2012; most recently the figure stands at -11.2 percent, a depression by some measures, strongly suggesting a continuing downward spiral.

[4]  The most current (October) estimate of Sudan’s rate of inflation is 45.3 percent, up from 41.6 percent in September, 22.5 percent in March, and 15 percent in June 2011.  In fact, this figure is already dated by the weeks intervening between data collection and present prices—and certainly understates the rate of inflation for essential commodities such as food and fuel.  The official year-on-year inflation rate for food is 48.6 percent; The Economist notes (December 1, 2012) that “the price of fool, Sudan’s traditional bean breakfast, has risen from $0.33 to $1.16.,” over 300 percent.  The inflation rate for fuel is just as high as that for food generally, with ripple effects throughout the economy.

Moreover, Yousif el-Mahdi, a Khartoum-based economist, estimated in September (2012) that the real overall inflation rate was closer to 65 percent—this when the official rate was still 42 percent.  He is far from alone in believing that in the past, the actual inflation rate has been consistently understated; but when the bad news comes fully home, it will inevitably make those holding Sudanese pounds even less trusting of the currency. [Based on a number of reports and assessments, my own current estimate (May 2013) is roughly 75 percent annually–ER]

In fact, Sudan is rapidly approaching the point at which hyper-inflation will govern economic calculations and transactions, sending the pound into free-fall as desperate bank depositors and others with cash holdings in pounds  convert to a hard currency or valuable commodities (gold, silver, even food) at almost any exchange rate.  Once hyper-inflation sets in, it is almost impossible to reverse expectations of yet more hyper-inflation, particularly if there are no resources with which to back the currency under assault.  The cash economy in Sudan will grind to a halt.  Here it seems appropriate to recall that former President Jaafer Nimieri was brought down rapidly in 1985 amidst protests generated largely by hyper-inflation.

It should also be borne in mind that Khartoum has leveraged its oil resources as much as possible, and owns only a very small percentage of the two oil development consortia operating in Sudan and South Sudan (in the form of Sudapet’s 5 percent stake, which has been challenged by Juba).  Sales of additional concession blocks have generated little income, and nothing has been held in reserve.

Gold exports have been much in Sudan news, but the quantities being talked about by the regime—and thus the hard currency purportedly to be received—have been greeted with considerable skepticism.  Reports seem to come exclusively from the regime-controlled news media in Khartoum, and have an air of desperation about them.  In any event, increased gold production alone cannot begin to reverse current trends in the near- or medium-term.

[5]  The cutting of fuel subsidies from the budget—demanded by the IMF as a condition for debt relief—has been largely abandoned in the wake of Arab Spring-like demonstrations last summer; these expensive subsidies will again represent an enormous part of the non-military/security budget, even as the expense receives no honest reckoning in public comments by the regime.  Yet budgetary realities have become ever more grim, as the Sudan Tribune notes (December 7, 2012):

“The Sudanese government tabled its draft 2013 budget before parliament this week which projects 25.2 billion Sudanese pounds (SDG) in revenues and 35.0 billion SDG in expenses leaving a deficit of 10 billion SDG ($1.5 billion) which equals 3.4% of the country’s Gross Domestic Product. The deficit will be financed up to 87% (7.6 billion SDG) from domestic sources including 2 billion SDG from the central bank.

But the central bank has no real money, only what it prints in the way of Sudanese pounds that are rapidly declining in value.  As of December 2, 2012, $1.00 bought 6.5 pounds—a record low, and a further 3 percent decline from the previous week (the black market rate was about 5 pounds to the dollar early in the year, suggesting a decline of approximately 30 percent).  The official exchange rate is approximately 4.4 pounds to the dollar.

And while the IMF continues to insist that Sudan should cut fuel subsidies further—beyond what was cut in June—the Fund acknowledges that to do so will incur public anger and more instability of the sort seen last June, July, and August.

[6]  The reason for the continuing decline in the value of the pound is a lack of foreign exchange reserves, the direct consequence of having no oil export income.  As a result, imports purchased with Sudanese pounds are not simply more expensive—in some case prohibitively so—but harder to obtain at all, given the lack of available foreign exchange currency. Food imports are hit particularly hard, as are businesses that depend on imported parts or services.  Sudan imports some 400,000 tons of sugar annually (it is a key source of calories for many in the north); these imports will only grow more expensive, pushing the inflation rate for this particular commodity well above 50 percent.

Efforts to secure US$4 billion in foreign exchange deposits from rich Arab countries have largely failed, with the exception of Qatar, despite various claims by regime officials that large hard currency deposits have been made into the Central Bank of Sudan.  While providing temporary relief from “black market” speculation against the Sudanese pound, the long-term effect of such dishonest claims about foreign currency infusions is to diminish further the regime’s credibility about all matters financial and economic.

[7]  The oil sector as a percentage of GDP has declined precipitously following Southern secession.  Oil now provides only 20 – 25 percent of revenues going to the regime; and beyond this massive loss in revenues, the oil sector now accounts for only 3 – 5 percent of gross domestic product (GDP), down from about 15 percent, according to the IMF.

Oil production is also being consistently overstated by Khartoum in order to suggest that more foreign exchange will be received than is the case.  The “Medium-Term Oil Market Report 2012” by the International Energy Agency (IEA) puts current production in Sudan at 70,000 barrels per day, rising to 90,000 bpd in 2014 and dropping back to 60,000 in 2017.  And yet long-time Sudanese oil minister and NIF/NCP stalwart Awad al-Jaz claims that Sudan is currently producing 120,000 bpd, which may rise to 150,000 bpd by the end of 2012.  Gross misrepresentation of data is nothing new for the regime, but such transparently motivated manipulation of key figures is a sign of just how desperate the economic crisis is, and how urgently Khartoum feels the need to be perceived as having or receiving more hard currency than is credible.

Notably, in its April 2012 semi-annual World Economic Outlook, the IMF changed the classification of Sudan: from an oil exporter to an oil importer, making nonsense of al-Jaz’s claim.

[8]  The agricultural sector, long neglected by the regime, cannot provide enough food to avoid substantial imports; disabled by cronyism and a lack of commitment  over many years, the agricultural sector is collapsing along with the rest of the economy.  Much of the arable land between the White and Blue Niles has silted and become unusable, even as a once enviable irrigation infrastructure has badly deteriorated.  Large tracts of valuable farm land have been sold or leased to Arab and Asian concerns to provide food for their own domestic consumption.  There is simply no strategic emphasis on self-sufficiency in food, even as Khartoum counts on the UN to provide Sudan with huge quantities of food every year. As Agence France-Presse reported earlier this year (February 27):

“‘The economic situation is deteriorating further and further,’ and the economy is in crisis, says University of Khartoum economist Mohamed Eljack Ahmed. [Of Khartoum’s ‘rescue plan’] economists say the plan seems unworkable in the short term. Ahmed says agricultural infrastructure, once the country’s economic mainstay, has collapsed and neither farmers nor industrialists have an incentive to operate.”

[9]  The NIF/NCP for years has survived in large measure because it controls the security services (often overlapping) and the Sudan Armed Forces (SAF); estimates of what percentage of the national budget is devoted to the security services and the army vary, but range as high as 70 percent, with “over 50 percent” the closest to a consensus figure; this makes finding spending cuts in non-military sectors of the budget extraordinarily difficult.  Moreover, these military and security personnel are now being paid in Sudanese pounds that are rapidly loosing their purchasing power, and this will breed intense resentment, defections, and possibly participation in civilian insurrection.

[10]  Resentment is also felt by those in the vast—and very expensive—patronage system that has provided the regime with political support.  The patronage system has been key to regime survival.  It was built-up during the early take-over of banks and the most lucrative parts of the Sudanese economy following the NIF coup of 1989, and then extended further by the rapid increase of oil revenues that began in 1999.  Now the patronage system is simply unaffordable, and the disgruntled within it can no longer be counted on to provide political support when it is most needed.

[11]  The demographics of the “Arab Spring” are the same in Sudan as they are in the rest of the Arab world, especially in the regions in and around Khartoum: there are a disproportionately large numbers of people under 30 years of age, many educated but with little prospect of employment commensurate with their education, or indeed any form of employment at all.  They are especially vulnerable to economic hardship.

[12]  Massive external debt—estimated by the IMF at US$43.7 billion in 2012—is on track to reach US$45.6 billion in 2013, again according to the IMF.  This represents 83 percent of Sudan’s 2011 GDP.  Such debt—largely in the form of arrears accrued under the present regime—cannot be serviced by the present Sudanese economy, let alone repaid.  It is a crushing burden on the economy, and yet Khartoum shows no sign of adhering to IMF recommendations for obtaining debt relief,  Moreover, the regime’s military actions throughout Sudan should work powerfully against debt relief among the Paris Club creditors who own most of this debt.  Certainly it would be unconscionable to negotiate debt reduction with a regime that devotes so much of its budget to acquiring the means of civilian destruction—in Darfur, in South Kordofan and Blue Nile, and elsewhere.

Nonetheless, Minister of Finance Ali Mahmud Rasul declared in October that there is growing “international acceptance to write off Khartoum’s … external debt.”  The efforts of Western, African, and Arab civil society should be to make debt relief under present circumstances thoroughly unacceptable for politicians in Washington, London, Berlin, and Paris.

Current Minister of Finance Ali Mahmud Rasul also declares, despite these grim realities, that “the 2013 budget shows that we have overcome the secession of South Sudan.”  But former Minister of Finance Abdel Rahim Hamdi—whatever his own role within the regime during the 1990s—felt compelled to speak out about the current extraordinary mismanagement of the economy.  Sudan Tribune reports his broadest assessment: the current regime “is no longer able to manage the economy and lacks solutions to handle the crisis.”  Hamdi noted that “conflicting economic policies [have] led to soaring inflation levels and astronomical increases in prices. Speaking at the Islamic Fiqh Council, Hamdi pointed out that 77 percent of revenues goes to cover salaries and wages as well as federal aid to states.”  He was  also scathing in his assessment of projected revenues, which the regime has consistently oversold in a ploy to keep the psychology of inflation from taking hold (e.g., in celebrating artificially high estimates of gold production, boasting of hard currency transfers from Arab countries that never materialize).  Current Minister of Finance Rasul speaks to none of this.

For those not living in the world of self-serving mendacity from which regime pronouncements about economic development emerge, the truth is conspicuous: the economy is in a complete shambles, and hyper-inflation is relentlessly approaching. The brute economic realities outlined above cannot be talked away or cajoled into more palatable form.  Indeed, if the current budget needs—including a substantial continuation of subsidies for fuel—are not met with real revenues, the regime will be compelled to turn on the printing presses and create an even more precipitous decline toward hyper-inflation.

Why Does Khartoum Pursue Policies so Destructive of the Economy?

Despite the already acute and growing danger of complete economic implosion, the regime persists with immensely expensive and unproductive policies, including war in Darfur, South Kordofan, and Blue Nile, as well as hostile actions along the North/South border, and the supplying of renegade militia groups inside South Sudan.  For a regime that is ruthlessly survivalist, this makes no rational sense: current economic realities are diminishing the chances that the regime will survive.  So why is it persisting in policies and actions that work against a resumption of transit fees for oil originating in South Sudan and passing through the northern pipeline to Port Sudan?  Why is the regime creating a situation in which the generous transit fees that Juba is willing to pay have been forgone?  This seems even more peculiar, given the grasping nature of Khartoum’s greed, revealed earlier this year when Southern engineers discovered a covert tie-in line to main oil pipeline, capable of diverting some 120,000 bpd of Southern crude.  This subterfuge has not been forgotten by the South, and only makes more exigent the question: why has Khartoum put oil transit revenues in jeopardy?

At full capacity—350,000 bpd—these pipeline revenues could do a great deal to close the yawning budget gap that Khartoum faces; and this is on top of Juba’s agreement to assist Khartoum financially during a difficult transition and also to allow the regime to keep the more than $800 million sequestered during the stand-off over transit fees (the amount of oil was peremptorily calculated by Khartoum on the basis of its outrageous $36/barrel fee proposal).  What keeps Khartoum from finalizing the deal on oil transport, thereby creating further doubts in the minds of Southerners that this pipeline will remain a viable means of export?  Why does Khartoum continue to wage a brutal economic war of attrition against South Sudan, which should be its largest and most important trading partner?  The reality of lost oil income is inescapable:

Prior to [the secession of South Sudan], about three-quarters of crude production came from the south and accounted for more than 85 percent of Khartoum’s export earnings, which reached $7.5 billion in the first half of 2011, according to the World Bank.  ‘They’ve lost that (oil) income. It’s gone for good,’ an international economist said, declining to be identified.”

Here again the common distinction between “moderates” and “hardliners” is better understood as referring to differences within a regime that is at various times more and less pragmatic, or at least has very different views of what is “pragmatic.”  Ali Osman Taha, for example, is often cited as a “moderate” because of his central role in the Naivasha peace talks; it is rarely remarked that in February 2004, a year before those talks  would culminate in the signing of the Comprehensive Peace Talks, Taha left Naivasha to “address the Darfur crisis.”  As anyone who followed the course of events through 2004 and into 2005 knows, this was the period marked by the very height of genocidal violence and destruction.  An October 24, 2004 report from the U.S. Congressional Research Service notes:

“In February 2004, First Vice President Ali Osman Taha, the government [of Sudan’s] chief negotiator [in Naivasha], told the mediators that he had to leave the talks to deal with the Darfur problem. In February 2004, the government of Sudan initiated a major military campaign against the Sudan Liberation Army and Justice and Equality Movement and declared victory by the end of the month.  Attacks by government forces and the Janjaweed militia against civilians intensified between February and June 2004, forcing tens of thousands of civilians to flee to neighboring Chad.

As we know now, many tens of thousands of people were also killed by the violence of this period, and the killing continued long after Taha’s intervention, with total  mortality now in the range of 500,000.[22] The number of internally displaced persons would, according to the UN’s Office for the Coordination of Humanitarian Affairs, grow to 2.7 million.  The UN High Commission for Refugees estimates that more than 280,000 Darfuris remain in eastern Chad as refugees.  That Taha the “moderate” played such a central role in the Darfur genocide is far too infrequently acknowledged, suggesting again that within the NIF/NCP “pragmatism” may take many forms.

After much shifting in language and positions, Khartoum would now have the world believe that it will uphold the agreement on oil transport only if Juba agrees to various “security arrangements.”  But of course just what these arrangements are keeps changing, even as Khartoum ignores the most fundamental requirement for security in both Sudan and South Sudan: a fully delineated and authoritatively demarcated border.  This of course should have been achieved in the “interim period” of the Comprehensive Peace Agreement (January 9, 2005 to July 9, 2011).  That it was not is almost entirely the fault of Khartoum, which evidently thought—and still thinks—it can extort borderlands from the South and incorporate them into Sudan.  The military seizure of Abyei (May 2011) was simply the opening salvo.  Military ambitions may in fact extend to seizing more Southern oil fields and arable land.

More recently, Khartoum’s demanded “security arrangements” have come to include Juba’s disarming of the Sudan People’s Liberation Army-North, an utterly preposterous notion—indeed, so preposterous that it must be viewed as a means of stalling negotiations. In this respect it is very similar to Khartoum’s initial proposal of a US$36/barrel transit fee proposal during negotiations on that issue: this was not an opening gambit, not a serious proposal from which compromise could be reached.  It was meant to halt negotiations and indeed resulted in Juba’s decision to shut down oil production altogether.

So, too, the current “security arrangements” proposal is meant to put a hold on negotiations by demanding what the South cannot possibly offer or provide, even as senior officials in Khartoum continue to insist that they will not negotiate with the Sudan People’s Liberation Movement-North, insisting that the “alliance” between Juba and the SPLM/A-N must first be ended.  And yet no evidence of substance is offered to suggest any military alliance.  We may understand why the NIF/NCP wishes the army of South Sudan to disarm northern rebels, primarily in the Nuba: Abdel Aziz al-Hilu’s forces are manhandling SAF troops and militias, chewing up entire battalions and parts of some brigades and in the process acquiring a great deal of ammunition, weaponry, fuel, and other supplies (despite this, Ahmed Haroun—indicted war criminal and governor of South Kordofan—insists that the SAF will achieve victory soon).  But  does anyone living in the real world think that Juba will help to disarm the SPLA-North?  These are former comrades in arms, deeply connected by the years of suffering and fighting together, and by a deep mutual suspicion of Khartoum.  In the absence of any substantial  evidence that Juba is aiding the rebels in the Nuba in a significant way, we must conclude that something else is going on here.

It is important to remember that while the regime has been in power for 24 years, individual members and factions of this regime have relentlessly jockeyed for power, often ruthlessly pursuing their own interests, and have found themselves on occasion in significant ascendancy or decline.  The most recent example appears to be Salah Abdallah “Gosh,” once head of the extremely powerful National Intelligence and Security Services; further back, we have the sharp split between al-Bashir’s cabal and Islamic ideological leader Hassan al-Turabi in the late 1990s.  But ambition within the regime’s central cabal has never, in any quarter, been “moderated” by a desire to do what is best for the people of Sudan.

The most notable recent ascendancy is that of key senior military officials in decision-making about war and peace; this too has gone insufficiently remarked, despite very considerable evidence that on a range of issues, military views have prevailed.  The nature of this ascendancy, and the motives behind it, were first emphasized by Sudan researcher Julie Flint in an important account from in August 2011, based on an extraordinary interview with an official in Khartoum.  The official, whose account has been corroborated by other sources, warned that a silent military coup was already well under way in Khartoum before the seizure of Abyei (May 2011). There seems little doubt that if this official’s account is accurate, and there has in fact been a successful military coup from within, then there will be very little room for civilians in the new configuration of power when it comes to issues of war and peace:

“[A] well-informed source close to the National Congress Party reports that Sudan’s two most powerful generals went to [Sudanese President Omar al-] Bashir on May 5, five days after 11 soldiers were killed in an SPLA ambush in Abyei, on South Kordofan’s southwestern border, and demanded powers to act as they sought fit, without reference to the political leadership.”

“They got it,” the source says. “It is the hour of the soldiers—a vengeful, bitter attitude of defending one’s interests no matter what; a punitive and emotional approach that goes beyond calculation of self-interest. The army was the first to accept that Sudan would be partitioned. But they also felt it as a humiliation, primarily because they were withdrawing from territory in which they had not been defeated. They were ready to go along with the politicians as long as the politicians were delivering—but they had come to the conclusion they weren’t. Ambushes in Abyei…interminable talks in Doha keeping Darfur as an open wound….  Lack of agreement on oil revenue….”  “It has gone beyond politics,” says one of Bashir’s closest aides. “It is about dignity.”

How well borne out by subsequent developments is this assessment?

When the senior and quite powerful presidential advisor Nafie Ali Nafie signed on June 28, 2011 a “Framework Agreement” with the Sudan People’s Liberation Movement-North, it seemed for a moment in which war in the Nuba and Blue Nile might be averted.  Three days later President al-Bashir emphatically renounced the breakthrough agreement, declaring after Friday prayers (July 1, 2011) that the “cleansing” of the Nuba Mountains would continue.  This was clearly a declaration made at the behest of the generals, specifically Major General Mahjoub Abdallah Sharfi—head of Military Intelligence—and Lt. Gen. Ismat Abdel Rahman al-Zain— implicated in Darfur atrocity crimes because of his role as SAF director of military operations, he is identified in the “Confidential Annex” to the report by the UN panel of Experts on Darfur (Annex leaked in February 2006).

These men and their military colleagues are the ones whose actions have ensured that Abyei will remain a deeply contentious issue in growing tensions between Sudan and South Sudan; certainly they knew full well the implications of taking military action in Abyei—military action that directly contravened the Abyei Protocol of the Comprehensive Peace Agreement. This action ensures that Abyei will continue to fester and may yet lead to confrontation if—as is likely—both the African Union and the UN Secretariat and Security Council continue to temporize over the AU proposal on the permanent status of Abyei, a proposal subsequently endorsed by the AU Peace and Security Council but rejected by Khartoum.  And as long as Abyei festers, negotiations over other issues are made gratuitously more  difficult, and it becomes ever less likely that sustained oil transit revenues from use of the northern pipeline will resume.  After losing almost a year’s worth of oil revenue, the South will certainly proceed with plans for an alternative export route.  Khartoum’s sequestration of  almost a billion dollars of oil revenues due to the South since independence (July 9, 2011) left Juba feeling deeply uneasy about any viable long-term arrangement with the current regime, despite the decision to allow Khartoum to keep the oil revenues it had illegally sequestered.

From the standpoint of a rational management of the economy, the military decisions made have been consistently disastrous.  This is true whether we are speaking of genocidal destruction (and economic collapse) in Darfur; renewed genocide in the Nuba Mountains, which has prompted a ferociously successful rebel military response; massive civilian destruction and displacement in Blue Nile; the military seizure of Abyei; the extremely ill-considered assaults on forces of the SPLA-South in the Tishwin area of Unity State in March/April of this year; support for renegade militia groups in South Sudan; the growing assertion of unreasonable claims about the North/South border; and the repeated bombings along the border over the past year and a half, including the “Mile 14″ area of Northern Bahr el-Ghazal.  This is an extraordinary catalog of offensive military actions.  And none of them reflects a concern for economic problems that may well bring down the regime.  On the contrary, these decisions represent a bitter, vengeful desire to “get even” with South Sudan for exercising its right to self-determination.  But vengeance will not rescue the failing northern economy, and absent the resumption of oil transport income, the economy will continue in free-fall, with hyper-inflation daily more likely.  Normal corrective measures in economic policy are impossible in the context of current military commitments; corrections that would in any event have been highly challenging in light of the precipitous cut-off of oil revenue are now unavailable.

So long as decisions about war and peace are being made in Khartoum by the generals, without regard for the effects of continuing and renewed fighting on the broader economy, Sudan will remain both brutally violent and ultimately untenable under present governance.

International Response

There is one decision the international community, and Paris Club members in particular, can take, which is not to engage in any discussions of or planning for debt relief for Khartoum until the regime disengages from all military campaigns that target civilians, and ceases military actions so indiscriminate as to ensure widespread civilian destruction such as we have seen most recently in South Kordofan and Blue Nile, previously in Abyei, and for very nearly ten years in Darfur.  The international banking system as well as international financing resources should do nothing that will convince Khartoum it may escape paying a heavy price for its continuing atrocities in these regions.  For its part, the regime continues to speak confidently about its prospects for international debt relief.  It’s hard to know whether this proceeds from expediency—even the artificial prospect of partial debt relief would help the northern economy immensely—or cynicism: the international community has capitulated before Khartoum’s demands, has accepted the validity of its commitment to signed agreements, on so many occasions that the regime may calculate it will prevail yet again.

This must not happen.  The international community has failed greater Sudan for too many years now, has accommodated a murderous, finally genocidal regime in Khartoum since June 1989, and now is a moment for moral clarity and principled decision: will the world fund this regime?  Will it accept massive atrocity crimes in Sudan in the interest of something other than the well-being of the Sudanese people themselves?

Civil society in those countries most significantly represented in the Paris Club are obligated by these circumstances to lobby their governments to state publicly that the unqualified priority in Sudan policy is ending civilian destruction throughout greater Sudan. Unequivocal evidence that this “priority” obtains in national policies must be demanded; despite the excessive caution that typically governs the imposition of multilateral sanctions, such are what vast numbers of people from greater Sudan wish, as do many well-informed friends of the region.

It is a simple “ask”: no debt relief for a regime that continues to commit atrocity crimes against civilians on a wide scale.  This debt was accrued in large measure by profligate military expenditures on weapons that are even now being deployed against hundreds of thousands of noncombatant civilians.  Yet as simple and apparently reasonable as such an “ask” is, there are very good historical reasons to believe that it will be refused; rather, some factitious “occasion” will be found to provide Khartoum with a financial life-line—a decision defined by its expediency, not its moral intelligibility.  There could be no more irresponsible use of international economic and financial resources.

– Scott Ross served as lead editor for this article

*Eric Reeves is a professor at Smith College in Northampton, Massachusetts. 

 

 

End

 

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IMF recommends land reforms

Posted by African Press International on November 11, 2012

Cattle grazing on Swazi Nation Land

JOHANNESBURG, – Land reform has been recommended by the International Monetary Fund (IMF) as part of the solution to deepening economic decline in Swaziland, a country where more than two-thirds of the population lives in poverty.
Following a two-week visit by a delegation, the IMF announced, in a 7 November statement, that one of the key challenges facing Swaziland – in addition to high unemployment, rising inequality and the world’s highest HIV/AIDS prevalence – is “improving access to modern financing by an appropriate land tenure reform.”
Dimpho Motsamai, a researcher from the Africa Conflict Prevention Program at the Pretoria-based think tank Institute for Security Studies (ISS), told IRIN, “It is refreshing land [in Swaziland] is being highlighted as part of the solution to poverty” by international institutions.
Swazi Nation Land Swaziland has dual system of land ownership, in which some people have title deeds while the majority live on Swazi Nation Land (SNL). SNL is often referred to as communal land, although communal land practices apply only to non-arable and livestock pastures. Land used for crop production is individually held and allocated by chiefs, who also act as arbiters in land disputes.

SNL is held in trust by King Mswati III, sub-Sahara’s last absolute monarch, forming the bedrock of his power base. The king imposes his authority through a chieftain system in rural areas, which comprise about 60 percent of the country’s land mass.
Those residing on SNL have no title deeds and can be evicted by the chiefs without recourse. Without title deeds, subsistence farmers have no collateral to raise the funds needed to undertake basic improvements, such as irrigation systems, that would increase their yields. As a result, many farming practices are rudimentary, and many people are vulnerable to food insecurity.
Mandla Mduli, a trade unionist and member of the Swaziland Solidarity Network, an umbrella organization of pro-democracy groups, told IRIN, “Land reform as recommended by the IMF will not be done because the system keeps the royal family in power. Seventy percent of Swazis live on these lands that are, in effect, owned by the royal family and run by chiefs appointed by the king. Anyone who joins a [opposition] political party is exiled [from SNL].”
Declining maize production
The preliminary results of the World Food Programme’s (WFP) vulnerability assessment estimated that this year’s harvest of the staple maize was 76,000 tons – over 8,000 tons lower than the previous season.
“About 116,000 people, or 11 percent of the population, will experience food shortages in the lean season before the next harvest in May 2013,” the assessment said.
Swaziland’s maize production has been declining since 2000; previously the country produced about 100,000 tons of maize annually. WFP attributed the slump to “erratic weather, high fuel and input costs, the devastating impact of HIV and AIDS, and a decline in the use of improved agricultural practices and inputs.”
A national land policy was drafted in 2000, outlining a national development strategy for land and rural development, but the policy was never implemented. An agricultural academic at the University of Swaziland, who declined to be identified, told IRIN, “The policy was never adopted, as it would have taken power [over land matters] away from the chiefs, and the chiefs enjoy their power.”
The academic said there is “absolute disorder when it comes to land” in Swaziland. There is widespread corruption, SNL is being sold off without any official documentation by chiefs and “people pretending to be chiefs”, and land allocation is used as an instrument of political patronage.
Problem worsening
A 2010 report published by the University of the Western Cape’s Institute for Poverty, Land and Agrarian Studies(PLAAS) said, “Swazi citizens are increasingly losing their hold over the land as the population increases and the demand for land intensifies. The continuance of poor land administration in the face of the continuing challenges of population growth has already had massively harmful social and economic consequences, which will only worsen until the nettle of land reform is grasped.”

''It’s land reform of land owned by one guy essentially''

ISS researcher Motsamai said land reform is “very controversial” within the country, as it is not a question of land redistribution “from colonizer to colonized,” but of taking power from the “entitlement of a royal household”.
“It’s [proposed] land reform of land owned by one guy essentially,” she said.
As those living on SNL cannot afford to purchase or lease the land, one consideration could be to nationalize it, but in that scenario, the state would take ownership of the land when the “king is the state,” she said.

 
go/rz

source http://www.irinnews.org

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