KHARTOUM, Sept 22 (Reuters) - Sudan needs to lift fuel subsidies to remove a risk for the economy and bridge a budget gap, President Omar Hassan al-Bashir said on Sunday, a move that ignited anti-government protests in the past.
Sudan has been struggling with an economic crisis since losing much of its oil reserves - the main source for revenues and dollars needed for imports - when South Sudan became independent in 2011.
The government started lifting some fuel subsidies as part of austerity measures in July 2012, leading to several weeks of protests.
At a news conference lasting more than two hours, Bashir offered a lengthy explanation of why Sudan needed to remove the remaining fuel subsidies as global oil prices were rising and part of the cheap petrol was being smuggled abroad.
“The differences (between the global and the subsidized fuel prices) have become too large,” he said, adding that the government was spending billions of dollars on the subsidies annually.
“The volume of fuel subsidies pose a great risk for the economy,” he said.
Bashir said the government would cushion the impact by increasing salaries of civil servants. “Most (of the saved money) from the fuel subsidies will go to the salary increase, and another part will go to poor families and to support local production,” he said.
He gave no date for the lifting of sanctions, but Second Vice President Haj Adam Youssef said it would happen on Tuesday, pro-government daily al-Intibaha quoted him as saying.
The daily al-Sudani said the government would also liberalize the price of sugar, a key food ingredient.
The government had hoped to stabilize the economy by replacing southern oil revenues by boosting gold exports. But a recent slump in global gold prices has hit hard the treasury, worsening a dollar scarcity.
The lifting of the subsidies is expected to drive up inflation because Sudan depends on food imports that arrive in Port Sudan and are driven for days across the vast African country.
Bashir said the government was spending $400 million annually on wheat imports and another $50 million to support the agricultural sector.
The Sudanese pound hit an all-time low on the key black market on Saturday as people sought to shift their savings into hard currency in anticipation of higher inflation.
Activists have said they plan to stage protests against the lifting of fuel subsidies, but the weak opposition has failed to mobilise masses of protesters. (Reporting by Ulf Laessing and Khalid Abdelaziz; Editing by Stacey Joyce)