The Economist Intelligence Unit, the famous economic intelligence unit, published a report on the situation in Sudan and South Sudan for the month of March, and the two most important paragraphs in this report are on the Democracy Index and on monetary policies.
1-Democracy Index: Sudan
Sudan has dropped two places to rank 149th (out of 167) in The Economist Intelligence Unit’s 2020 Democracy Index. The deterioration relates to the decline in the political participation category, as hopes of political opening have waned since 2019 when a coup took place. Despite hopes of faster progress on democratisation following the long-serving dictator, Omar al-Bashir, in 2019, the political scene in Sudan remains fragmented, with the increasing perception among the citizens that they have little control over their lives. The country’s average score of 2.54 (down from 2.7 in 2019) places it in the category of an authoritarian regime. Sudan continues to rank well behind its neighbours such as Egypt (138th), Gabon (121st) and Ethiopia(123rd), which also have significant democratic shortcomings.
Economist Ahmed ben Omer said:
Commenting on the news: This matter may constitute more damages towards the democratic transition in Sudan without agreeing on a specific political pattern, and it may increase the chances of consolidating democracy in the state. Through a peace agreement that will directly affect societies and provide them with stability to rebuild themselves.
He added: “This peace affects production, and these societies will be able to prosper and facilitate the process of democracy.”
Inflation rose until it reached more than 300%. This matter is a warning to the government to change its current policies and adopt other solutions and agree on a political basis that paves the way for an economic agreement so that the streets do not explode again and security chaos occurs.
The Central Bank of Sudan (CBS) manages monetary policy largely by issuing Islamic financial certificates, setting reserve requirements and manipulating the exchange rate. However, high levels of dollarisation reduce the efficacy of monetary policy. Sustained large fiscal deficits and excessively high inflation will compel CBS to continue to print money in the first half of the forecast period (inviting criticism from the IMF), and foreign reserves will remain under pressure. Increasing foreign aid inflows in the short term, alongside the 580% currency devaluation in February, will help to restore some level of currency stabilisation but will not be sufficient to support a complete economic revival. Tackling inflation will be challenging for the authorities as the government continues to monetise deficits in the near term. We expect the authorities to formulate a macroeconomic stabilisation plan to be implemented over the medium term, to address fundamental macroeconomic issues in line with policy measures recommended by the IMF under the 2020/21 SMP. This is expected to include moderating money supply growth and increasing reserve requirements”.
Commenting on the news, the expert Ben Omer said: Certainly, continuing without reaching an effective monetary policy will lead to the printing of more money without a foreign balance, and this helps to increase inflation and will affect the price level in the consumer goods market. He added: The government must resort to other solutions. To search for a deposit of two billion dollars to meet the demand for the dollar, even if for a temporary period, until a good reading of the economy is available so that the government can draw new policies based on new figures. Commenting on the state’s intervention, the expert said: The state is now in an economic crisis. The government can intervene by imposing taxes and also intervene in the gold monopoly, even if temporarily, by reviewing mining agreements and facilities for random mining and also increasing the capital of government companies to expand the process Production This could save 4 billion dollars in a year and a half if managed well.
About forecasts report, Ahmed bin Omar said: The EIU uses completely different methods of analysis, and it always finds it inaccurate in some figures. For example, inflation expectations in tables are illogical because the government uses the current model based on not mobilizing national resources to increase the value of exports and address the imbalance in the sector. Banking and interest in supporting producers, but insisting on the current use of the economic program will lead to more inflation and also more printing, which will make it difficult to forecast the private sector and outside investors ‘needs.’ He added: Until now, these policies are completely ignorant of the impact of the Corona on small and medium sectors and The effect of these policies, which are reflected in inflation, causing further price increases and in addition to poverty rates. ‘These policies, despite the many reports, need a pause and review of the indicators to change them and target the real change that reflects on the Sudanese citizen.