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(Reuters): Sudan says no plans to remove state subsidies after currency devaluation

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Date: Tuesday, 09 October 2018

(Recasts with prime minister’s comments)

KHARTOUM, Oct 9 (Reuters) - Sudan’s Prime Minister Motazz Moussa said on Monday the government had no plans to remove state subsidies on essential items while inflation is up and the currency is fluctuating after a sharp devaluation.

The government last week announced a series of measures to deal with a financial and economic crisis that had driven one of Africa’s largest countries to near bankruptcy.

In a speech to parliament on Monday, Moussa said the country’s foreign debt currently stands at around $56 billion.

“The biggest challenge that is facing us now is to control the pound exchange rate and inflation,” Moussa told parliament.

“It is not possible to talk now about removing subsidies, while inflation is up and the national currency’s price is fluctuating,” he added.

Inflation hit a record 66 percent in August, one of the highest rates in the world.

Moussa said fuel subsidies amount to 20 billion Sudanese pounds ($421 million) or 20 percent of the budget and that the government pays 25 million pounds every day in subsidies to keep the price of bread at one Sudanese pound.

Sudan has been struggling economically after losing three-quarters of its oil output when the south of the country seceded in 2011. The lifting of 20-year-old U.S. sanctions has so far failed to produce a hoped-for boost in foreign investment.

Last week, Khartoum announced a new system under which banks and money changers set a daily exchange rate, part of a package of measures to tackle a foreign exchange shortage and a broader economic crisis.

On Sunday, the bankers and exchange bureaus sharply devalued the currency, weakening the exchange rate to 47.5 Sudanese pounds to the dollar from the previous official rate of around 29 pounds.

Sudan left its daily exchange rate at 47.5 Sudanese pounds to the dollar on Monday, two bankers told Reuters. One dollar cost 48.5 pounds on the black market, unchanged from Sunday.

The devaluation was having little impact on the long queues of people who line up at banks and teller machines to get salaries or withdraw cash.

In a further measure to shore up the country’s finances, the central bank Governor Mohamed Kheir al-Zubeir said the bank would begin selling certificates to the public to raise 3 billion pounds to buy gold from producers at the new price.

The measure is intended to divert locally produced gold that had previously been smuggled abroad back into state channels. The precious metal is the country’s main export.

Zubeir said the certificates could yield as much as an annual 30 percent. (Reporting by Khalid Abdelaziz; Writing by Aidan Lewis and Sami Aboudi; Editing by Patrick Werr and Matthew Mpoke Bigg)

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