Sudan moves to end fuel subsidies to plug budget gap

Sudan's ruling party will push forward a plan to scrap fuel subsidies to help overcome an economic crisis and plug a ballooning budget gap after the country lost much of its oil wealth to South Sudan, state media said on Thursday.

The move may be highly unpopular, but the African country is struggling financially after losing three quarters of its oil production when South Sudan became independent last July under a 2005 peace deal that ended a decades-long civil war.

Oil used to be the main source of Sudan's exports and state revenue as well as a major source of dollars.

Sudan has avoided an "Arab spring" uprising, but social pressures are increasing, with annual inflation hitting almost 29 per cent in April.

Sudan has not said how much it spends on fuel subsidies, but the central bank said last year that fuel was being sold at $60 a barrel compared with market prices of more than $100.

The government has planned to lift subsidies before, but it is a sensitive issue and parliament rejected a central bank plan to scrap subsidies in December.

The International Monetary Fund (IMF) urged Sudan this week to take emergency measures to overcome "daunting" challenges. Finance Minister Ali Mahmoud said in May that Sudan needed to plug a gap in public finances that came to $2.4 billion after the secession.

At a meeting chaired by President Omar Hassan al-Bashir, the ruling National Congress Party (NCP) decided to include "a proposal to lift subsidies on fuel in a package of economic measures" to help bridge the gap, state news agency SUNA said.

The proposal will be presented to lawmakers and the cabinet, it added. The NCP dominates Sudan's parliament and key ministries.

Sudan had hoped to make up for part of its lost oil revenue by charging fees to landlocked South Sudan, which depends on Sudan's pipelines, export terminal and other facilities.

But South Sudan shut down its entire output of 350,000 barrels a day in January to stop Khartoum from seizing some oil to make up for what the latter called unpaid fees. Talks have yielded little visible progress since then.

In September, Sudan's central bank governor asked fellow Arab countries to deposit $4 billion with the bank and commercial lenders. Central bank officials have been touring Gulf and other Arab countries to ask for financial assistance.