Fuel Price Increase as Part of Economic Reform ✍️ Professor: Fikri Kabbashi, Al-Amin Al-Arabi
The economic situation is always treated within the framework of the integration of financial and monetary policies, all considered as a whole, and partial treatments do not lead to positive results. I will focus on three points, the first of which is the concept of support, the second is the exchange rate and the third is inflation. This is due in my opinion to an organic integration between them, and this can be explained as follows:
First: The concept of support: There are two types of support, one of which is direct support, which directly pays cash (like the Thammarat program) to targets, which are often represented by low-income people… and its objective is to bridge the gap between income and expenditure for the weakest in Sudanese society… The second type of support is represented by indirect support. This involves supporting strategic products such as wheat, sugar and cooking gas, as in the neighboring country of Egypt, for example, so that their prices remain at a minimum income level… but in my opinion, the support envisaged is represented by the difference between the exchange rate on the parallel market and the price determined by the Central Bank by adopting a policy of floating prices. Flexible and managed exchange rate… We therefore observe a direct relationship between the exchange rate and fuel prices.
Second: The exchange rate is represented by the value of the Sudanese pound relative to the currencies of other countries… rise or fall… Despite all the efforts to increase the exchange rate relative to other currencies, I will summarize the most important mechanisms for increasing the price for you briefly in three points:
1. Increase exports at a higher rate than imports.
2. Income from foreign national investments (if any) as well as remittances from immigrants and expatriates.
3. Grants, subsidies and loans from friendly countries and international financial institutions… and this is what the transitional government has been counting on for more than two years…
Third: Inflation: Inflation is defined as the successive increase in prices. Its types are many and varied, but I distinguish three types:
1. Demand inflation or monetary inflation, which is the expansion of monetary issuance, leading to an excessive amount of money in circulation without being accompanied by an expansion in the production of goods and services within the economic sector of society.
2. Cost inflation: which results in an increase in royalties on locally produced goods and services… as well as an increase in wages without being accompanied by an increase in production.
3. Structural inflation… is represented by the expansion of the public sector at the expense of the private sector… or the entry of the public sector into unequal competition with the private sector… or monopolistic competition through specific institutions and houses the private sector which monopolizes the import and export of strategic goods, the simplest example being wheat and gold…
In conclusion, if there is a treatment, it must be integrated, and what I mentioned is considered as part of a whole… and it depends on the space available… but certainly, given the magnitude of the issue, more space must be devoted to it, whether at the civil level or at the official level, if there is really a will and seriousness in seeking reforms.
Prof. Dr. Fikri Kabbashi, Al-Amin Al-Arabi.
