Sudan’s economic rot goes beyond U.S. sanctions

Going by his bank statements, Isam Ali isn’t short of money — but in Sudan’s cash-strapped capital that’s exactly what he is.

Several times a week, the 45-year-old accountant lines up at one of the few ATMs in Khartoum still dispensing banknotes, waiting hours to withdraw the daily maximum of 2,000 Sudanese pounds ($42). That sum’s being spread increasingly thinly to feed his family, as inflation in the North African nation hits its highest in two decades, quashing hopes 2017’s lifting of U.S. sanctions could spur an economic revival.

The reality: three devaluations for the Sudanese pound this year, the central bank rushing to print more money and a government that can only promise further austerity as President Umar al-Bashir periodically hires and fires his ministers.

Sudanese banknotes displayed at a foreign currency brokerage office in Khartoum on October 7, 2018.ASHRAF SHAZLY/AFP/Getty Images

“Things are going from bad to worse and the government is changing the cabinet only to buy time,” said Ali. A father of two, he’s feeling the trickle-down from a dearth of foreign investment in Sudan and a chronic lack of liquidity in its banking system.

In a torrid decade for Sudan’s $117.5 billion economy, which included the south seceding in 2011 with three-quarters of the united country’s oil reserves, the past year may have been its worst.

Despite lifting most sanctions, the U.S. still lists Sudan as a state sponsor of terrorism, a designation that officials blame for the lack of significant new investment. Inflation is almost 70 percent, and the pound trades at 47.5 per dollar, plunging from 18 in January. The International Monetary Fund says the economy may contract 2.3 percent this year.

“People lost confidence in the banking system,” says Hamid Eltagani, a Sudanese economics professor at the American University in Cairo. “The economy is becoming more of a rudimentary system of barter-exchange and the government has no instrument to entice cash into the banks.”

While the U.S. sanctions — imposed in 1997 on terrorism allegations — hit Sudanese government agencies that provided essential services, the nation’s elites often found ways to circumvent them, setting up companies that benefited from preferential access to hard currency and contracts.