Sudan faces test of popular discontent over fuel prices

KHARTOUM Wed Jun 13, 2012 9:30am EDT

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KHARTOUM (Reuters) - Sudan, after avoiding the "Arab Spring" protests which swept through the Middle East, is about to face its first real test of popular discontent as it prepares to remove fuel subsidies.

With Sudan already suffering from a severe economic crisis since losing much of its oil production - the lifeline of the economy - when South Sudan became independent in July, ordinary people say that they can't cope with further price rises.

"We only buy what we need to, nothing else because of inflation," said Zakaniya, a woman in her 60s who was afraid to give her full name. "I just can't imagine prices going up again."

"How are we supposed to live if fuel prices rise? I think that people will go to the streets to object to such prices we cannot pay," said Mashair, a female government employee.

Small protests in the past have always been quickly dispersed by security agents. But even supporters of the government say removing fuel subsidies could stoke unrest.

Eltayeb Mustafa, a relative of President Omar Hassan al-Bashir and head of al-Intibaha newspaper, wrote last week in an editorial that the decision was to "play with fire".

The central bank introduced a plan to end the subsidies in December but ran into resistance in parliament - a surprise given that the assembly is controlled by Bashir's National Congress Party (NCP).

But faced with a budget deficit of $2.4 billion, Bashir's government says it has no alternative but to end fuel subsidies which a government official said will save $2 billion annually.

With inflation already hitting 30 percent in May, the removal of subsidies - which Sudanese newspapers say will push up fuel prices by at least 30 to 40 percent - will feed into transport costs. That in turn will raise the price of food.

"Lifting fuel subsidies is a catastrophe," said Mashair, the government employee.

"I think senior officials don't know about the life of ordinary people," said 43-year old high school teacher Mohamed el-Obeid. "They drive around in government cars and get everything paid by the government."

OPPOSITION SENSES A CHANCE

The opposition has so far failed to capitalize on the economic crisis but now senses a chance. In 1985, protests against hyper-inflation toppled President Jaafar Nimeiri in just 10 days.

"The plan (to lift fuel subsidies) is a declaration of war against citizens," said Farouk Abu Issa, head of the opposition umbrella National Consensus Forces. "Our plan is regime change," he said on Tuesday.

The government says the opposition, which is run by ex-rulers in their 70s, are unable to stage large protests.

The International Monetary Fund (IMF) urged Sudan two weeks ago to launch an emergency program to overcome the "daunting challenges" facing its economy.

"I think the statement was quite diplomatic given the huge problems Sudan is facing," a Western diplomat in Khartoum said. "The fact that they tackle the fuel subsidies despite the risks shows how bad the situation is."

Sudan has not published a detailed budget for 2012 but diplomats say the cabinet has very little room for man oeuvre.

The central bank effectively devalued its currency last month to attract more remittances from Sudanese living abroad, but bankers say the measure will take time.

Much of the budget is estimated to go into the security services and army, which is stretched fighting insurgencies in three regions and border skirmishes with South Sudan.

Sudan is counting on gold exports to replace oil. It said on Monday it had made $603 million in gold exports this year but diplomats are skeptical as output is hard to verify.

Even then it would be small compared to $5 billion in oil revenues in 2010.

And for ordinary people, it provides no comfort in meeting their immediate needs.

"Fuel prices increases are a big problem," said food trader Seif el-Din, 28, standing in his small shop. "It will be more expensive to run the shop. Transport costs will go up. We don't know what we will do."

(Writing by Ulf Laessing; Editing by Myra MacDonald)

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