* Rising prices hit shoppers and vendors
* Inflation makes economic crisis worse
By Ulf Laessing
KHARTOUM, May 12 Sitting behind shelves full of
canned tuna, chocolate bars, coffee powder and cookies,
Abdul-Qader Nasser struggles to remember when business was as
bad as now.
His usually busy small shop in Khartoum's central food
market is almost deserted as the devalued local currency is
driving up prices and deterring many of his customers.
"Fewer people come these days to buy because prices are
rising and rising," he said. "Every time I buy supplies from
traders I have to pay more and then charge more."
Two months before the oil-rich south of Sudan will become
independent after a referendum in January promised under a 2005
peace deal, a surge in food prices is adding to the hardships
faced by Sudanese already weary from years of conflict, violence
and U.S. sanctions.
Sudan has escaped the mass protests that have swept the Arab
world, but inflation hitting 16.5 percent in April is
compounding an economic crisis in the north of the country where
80 percent of the population live. With north and south relying
on imports, a foreign currency scarcity is biting.
"Despite rising inflation I haven't had a salary increase
for eight years," said Sulaiman Mahmoud, who as a university
lecturer makes about 1,300 Sudanese pounds ($485) a month.
"Inflation is a big problem."
Youth groups have staged sporadic small protests quickly
ended by security forces but analysts say social pressures are
building up in the countdown to July 9 when the south becomes
independent and the north loses 75 percent of oil production.
"Rising food prices are certainly a risk to state
stability," said Aly Verjee at the Rift Valley Institute.
He said the situation was still manageable but "the real
test will come later this year when the state treasury has to
deal with a sharp reduction in oil revenues while still trying
to maintain stable macroeconomic indicators".
LOSS OF OIL
Analysts expect both sides to eventually agree on sharing
oil revenues because only Khartoum has refineries and a port to
sell the southern oil. But the north will take a hit in any
"Independence will have an immediate impact on North Sudan's
fiscal and external revenues," the International Monetary Fund
said in April, adding that oil revenue loss could widen a fiscal
deficit by 3 percentage points of GDP.
"Capital inflows... could decline in the short term,
contributing to the emergence of a financing gap that could
reach 3-4 percent of GDP in 2012," The IMF said.
The government blames inflation and other economic woes
largely on U.S. sanctions, in place since 1997 after Washington
accused Khartoum of sponsoring terrorism, which make access for
Sudan to many markets difficult.
Opposition activists and also some analysts blame it on
overspending, mismanagement and failure to build up non-oil
industries and agricultural capacities.
"Much was spent on the wrong projects, on corruption," said
a youth activist who was involved in recent small protests.
"People realise it will get worse after the separation when
the oil revenues will go down," he said, asking not to be named
for fear of reprisals.
Inflation has jumped from 9.8 percent in November, when the
central bank effectively devalued the pound to erase the need
for a black market and pump liquidity in the financial system.
Bankers say the dollar flow has improved a bit because the
government has benefited from high oil prices but many traders
still struggle to foot the import bill and even local products
have become more expensive.
"Maize has gone up in the past three months," said vendor
Hassan, pointing to a pile of locally made maize.
"You need agricultural products like fertilizers from abroad
to produce it so the dollar problem has an impact," he said, the
same reason vendor Nasser cites for a price spike for sugar.
A meat vendor just up the narrow way, sandwiched by small
shops selling everything from lemons to cookies, agreed: "A kilo
of lamb sold for eight pounds three months ago. Now it costs ten
pounds," he said.
The central bank said this week annual inflation eased to
16.5 percent in April from 17.1 percent in March. Food prices
rose by 18.8 percent, a tick down from 20.4 percent in March but
many Sudanese see no improvement.
"My husband and I both have state jobs but we spend much on
food," said a woman who gave her name as Aiysha as she shopped
in the market. "We spend every day 25 to 30 pounds ($10 to $11)
on food only. It's very difficult."
(additional reporting by Khalid Abdelaziz)
(Editing by Giles Elgood)