ABU DHABI: Sudan may need as much as $1.5 billion of foreign aid a year and plans to slash government spending by a quarter as it faces budget difficulties due to its recent split into two countries, its finance minister said on Wednesday.
The North has lost 75 percent of the country’s oil production of 500,000 barrels a day after South Sudan gained independence in July, thanks to a 2005 peace deal that ended decades of civil war.
"According to our estimate we need not less than at least $1 billion, 1.3 billion, 1.5 billion a year," Finance Minister Ali Mahmoud of North Sudan told reporters on the sidelines of a meeting of Arab finance ministers in the United Arab Emirates.
"We are still under sanctions from the African Development Bank, the IMF… our efforts are within Arab countries and the others like China, India, Turkey," he said, adding there was no imminent agreement.
Mahmoud also said he wanted to cut budget expenditure by ‘no less than 25 percent’ and that the government was trying to boost hard currency revenue from other sources such as mining.
"We expect some difficulties in the budget, but they are controllable," Mahmoud told Reuters earlier on Wednesday. "If any deficit, it will be limited, not exceeding 3 percent (of GDP)."
Foreign investment in the country has also been limited due to violence, mismanagement and a US embargo in place since 1997, analysts say.
Mahmoud said that economic growth would be limited to about 5 percent in 2011 and that the government planned to push inflation into single digits next year from around 15 percent now.
"We’re expecting 6 percent (economic growth) or a little more for 2012," he said.
The secession has also disrupted the currency market, as people and businesses scrambled to buy dollars, pressuring the Sudanese pound despite the central bank’s pledge to provide banks with more dollars to meet rising hard currency demand.
But Mahmoud said that this will eventually be corrected, as Sudan starts to rely more on locally produced goods rather than imports.
"We are expecting the demand for the dollar will decrease, so this will stabilize the dollar against the Sudanese pound," he said.
