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Cablegate: Sudan: An Economist Shares His Pessimistic Outlook

VZCZCXRO5849
PP RUEHROV
DE RUEHKH #0544 0951128
ZNR UUUUU ZZH
P 051128Z APR 07
FM AMEMBASSY KHARTOUM
TO RUEHC/SECSTATE WASHDC PRIORITY 6749
INFO RUCNIAD/IGAD COLLECTIVE

UNCLAS KHARTOUM 000544

SIPDIS

SENSITIVE
SIPDIS

DEPARTMENT FOR AF/SPG
PLEASE PASS TO USAID FOR AFR

E.O. 12958: N/A
TAGS: EAID ECON EPET PGOV PREL SU
SUBJECT: SUDAN: AN ECONOMIST SHARES HIS PESSIMISTIC OUTLOOK

REF: A) KHARTOUM 0194 B) KHARTOUM 0211 C) KHARTOUM 0248

1. (SBU) The economic advisor to the Khartoum stock
exchange expressed pessimism on the outlook for the Sudanese
economy for the near term. He predicts "turmoil" because of
the pressures on the budget. He described how the ruling NCP
is skimming off money in preparation for elections, and
alleged that some government officials are moving money and
family out of the country. End Summary.

Government Deficit a Growing Problem
------------------------------------

2. (SBU) On April 3, Econoff met with the Economic Advisor to
the Khartoum Stock Exchange, Professor Ali Abdullah Ali to
discuss the general economic outlook. Dr. Ali, who is a
supporter of the opposition DUP was critical of the
governments current economic policies. Dr. Ali opened by
noting that economists are often pessimistic, but he is
especially so at the moment. He complained that the
government is running up a growing deficit and attributed
this to 'unmanageable expenditures,' much of it related to
funding the security forces. He said that the government had
tried to borrow USD2 billion from China to help cover the
deficit, but the Chinese had only offered a loan tied to the
purchase of Chinese goods. Ali said that the Governor of the
Central Bank and the President of Petrodar (a major petroleum
operator) are currently in Malaysia seeking a loan.

3. (SBU) Elaborating on the options available to the
government, Ali said that without overseas loans, the
government can borrow locally, (at rates of around 20
percent) or raise taxes. Increasing taxes on sugar and
bread, or cutting the subsidy on gasoline, diesel or cooking
oil would lead to discontent. He predicted that this could
lead to "turmoil." The ruling National Congress Party (NCP)
is preparing for elections, in part by skimming government
salaries. Ali alleged that one member of the NCP, the
President of the telecommunications company Sudatel, receives
a nominal salary of USD50,000 per month, USD40,000 of which
is then transferred to the NCP, possibly to be used in the
upcoming elections.

Economic Benefits are Not Being Shared
--------------------------------------

4. (SBU) Professor Ali said that while the economy is
growing rapidly, the benefits of growth are inequitably
distributed. Members of the NCP and their families have
received a disproportionate advantage and their visible
wealth is apparent to the larger community and is a source of
frustration. Ali claimed that some members of the elite are
getting nervous and cited the case of the governor of
Khartoum State, who Ali said has now moved his family to
Malaysia.

5. (SBU) Turning to Darfur, Ali said that a solution is
urgently needed to allow the economy to stabilize. The
government wants a solution, yet at the same time, the
government resists foreign pressure to bring the crisis to a
close. Ali attributed this to Sudanese stubbornness and a
suspicion of foreign influence by the NCP leadership.
HUME

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