Post date: Jan 09, 2011 11:43:48 AM
Uncertainty over the result of south Sudan's referendum on secession has led to fuel and commodity price rises in Sudan's capital Khartoum and fears the expected split will further destabilise Africa's largest country.
KHARTOUM, SUDAN (JANUARY 6, 2011) REUTERS - Fuel and commodity prices have risen in the Sudanese capital where the country's economy is already feeling the pinch of a possible split from the south in the upcoming vote on secession.
The referendum, taking place on Sunday (January 9) is expected to lead to the oil-rich south declaring independence in July, leaving the north dependent on a profit sharing deal for oil resources.
Over 75 percent of Sudan's current oil production of 500,000 barrels a day comes from the south, but output currently passes through a northern pipeline to the sea prompting moves to negotiate a revenue sharing deal.But even before the vote takes place, uncertainty over the future stability of the Sudanese economy has caused the currency to plummet and the price of fuel and other basic commodities to rise.
In response to rising inflation the government this week announced a series of austerity measures including removing subsidies from sugar and petroleum products to increase their revenue.
At a news conference held by the government's finance and energy Ministers in Khartoum on Thursday (January 6), Sudan's Finance Minister Ali Mahmood said the austerity package was a third of the measures required to bring the economy back on track.
But despite the subsidy cuts, Sudan's Minister for Petroleum, Ali Ahmed Osman, told reporters the government has high hopes a deal on oil resource sharing with the south will help boost confidence in the country's economy.
"All the indicators show that the cooperation will continue in administrating the oil process and its monitoring, and against that the north will have its share in south Sudan oil revenues. That share is yet to be agreed on by the joint committees. The cooperation is still continuing in this aspect and because of that expects that the north will have its share in the south Sudan oil," Osman said.
While addressing reporters, Sudan's Central Bank Governor, Dr Sabir Mohammed El-Hassan, said the government would stand-by peace agreements made between the north and south, which would guarantee stability in the months following secession.
"The federal system itself, which was agreed on, leads to dividing the state's structure. Every peace agreement signed by the government has its obligations and commitments to south Sudanese peace agreements and east Sudanese peace agreements," El-Hassan said.
Analysts said years of over spending and oil dependency have caught up with Africa's largest country.
Foreign investment has slowed because of the global financial crisis and Khartoum's soaring import bill caused inflation to rise and foreign exchange shortages.