Plunging oil exports, conflict, batter Sudan's economy

Mon May 7, 2012 2:45pm GMT

By Yara Bayoumy

KHARTOUM (Reuters) - Sudan's dispute with its southern neighbour over oil transit fees has created a $2.4 billion gap in the country's public finances and caused exports to plunge 83 percent, the Sudanese finance minister said on Monday.

It is an economic plight that has already seen ministers giving up pay and public sector workers losing a couple of days' wages to help fund a conflict with South Sudan.

Monday's dismal numbers came as Sudan reported an annual inflation rate of 28.6 percent in April, rising against a backdrop of an economy strangled by high unemployment, a weak currency, U.S. trade sanctions, as well as the oil dispute.

Sudan, where oil accounts for 90 percent of its exports, has been struggling to cope after the conflict with South Sudan flared into border fighting and shut down nearly all oil production in the region.

So weighed down with funding the conflict with South Sudan, Khartoum has even called on its public sector workers to contribute portions of their salaries to support the military in their "Repulsion of the Aggressor" operation.

South Sudan inherited three-quarters of the oil when it gained independence in July. But the pipelines are in Sudan and the two have been unable to agree on how much the South should pay to transport its oil.

After several rounds of failed talks to resolve that dispute as well as conflict over border demarcation and citizenship, fighting along the 1,800 km (1,200 mile) border flared, raising fears full-scale war could break out in one of Africa's most significant oil regions.

Fighting has eased in the last few days, after the U.N. Security Council last week threatened both sides with sanctions unless they resumed talks within two weeks.   Continued...

A Sudanese engineer points at the damage to an oil pipeline in a largely damaged oilfield in Heglig April 23, 2012. REUTERS/Mohamed Nureldin Abdallah
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