KHARTOUM (Reuters) - As Samir Gasim reels off the problems facing his Khartoum confectionery and packaging factories, already running well below capacity, the power cuts and generators kick in.

Samir Gasim is seen inside his office in his confectionary and cardboard packaging factory during a Reuters interview on the outskirts of Khartoum, Sudan January 27, 2019. REUTERS/Patrick Werr

Now he fears the plants may close entirely due to a sudden, eightfold hike in industrial diesel prices imposed by a government desperately short of foreign currency and facing the biggest popular protests since President Omar al-Bashir came to power 30 years ago.

“We are in favor of eliminating subsidies, but gradually, over five years. Not overnight,” said Gasim, seated in his spartan factory office. “Otherwise it will be a disaster.”

Sudan’s worsening economic crisis has caused fuel, cash and bread shortages that in turn set off a wave of unrest that has surged across the country over the past two months.

The economic slide has also alienated the professional classes, who blame Bashir and the ruling National Congress Party for their troubles, according to businessmen, activists and academics. That has undermined Bashir’s authority and encouraged a protest movement that has persisted despite a security crackdown in which dozens have died.

The Sudanese Professionals’ Association (SPA), which has posted calls for protests on social media and organized strikes, draws in doctors, teachers and lawyers and others complaining of decades of economic mismanagement and isolation.

Founded in 2015, it was planning to submit a request to parliament to raise the base level from which monthly public sector salaries are calculated of 650 Sudanese pounds - now worth just $13.60 at the official exchange rate - on Dec. 25, six days after protests began to escalate.

“We decided to raise the ceiling of our demands from the improvement of wages and the working environment and the right to form professional unions, to demanding the end of the regime,” said Mohamed Yousef, an SPA spokesman and economics professor at Khartoum University.

“There was a big response to us because there is an economic crisis and failure of government, and fuel, bread and liquidity crises.”

INFILTRATORS

Officials have blamed the unrest on unnamed infiltrators and on Sudan’s international isolation, saying they are taking steps to address the economic turmoil. Bankers say U.S. sanctions, though reduced, have choked the economy.

Bashir, subject of an arrest warrant from the International Criminal Court (ICC) for alleged war crimes in Darfur and hoping for a financial lifeline from the International Monetary Fund, has tried to be measured in his response to burnish his international image, diplomats say. He has tempered warnings to protesters with expressions of sympathy for their plight.

But protests in Khartoum and other cities have continued almost daily, with demonstrators calling for an end to what they see as Bashir’s kleptocratic and incompetent rule. Popular chants include “Down, that’s it!” and “Peaceful, peaceful against the thieves”.

In a country where more than half the population of 42 million are under the age of 19, many of the protesters are young men and women struggling to find jobs that could pay them a living wage. Unemployment rose from 12 percent in 2011 to around 20 percent in recent years, with youth unemployment at more than 27 percent, according to IMF and World Bank estimates.

Businessmen say an unskilled factory worker in Khartoum earns from 1,000 to 1,500 pounds ($18 to $27) a month and a skilled worker may make double that, barely enough for a family to survive.

Some families in the capital have pulled their children out of school over the last year or are serving them fewer and less nutritious meals, making them more susceptible to disease, according to a government presentation to social workers last month in Khartoum.

The economic crisis has hit salaried staff, young people and the unemployed particularly hard. Families have had to sell scarce belongings and crime has risen, the presentation said.

Since the protests began the government has been spending even more money on largely imported, subsidized products including bread and fuel. But it has all but run out of the foreign currency it needs to pay for them, causing widespread shortages.

DEBTS

Sudan already has foreign debts of more than $50 billion, and has been struggling to attract new external financing. By the end of 2018, inflation was running at more than 70 percent. It then dipped to 43 percent, according to official figures, though one U.S.-based economist put it at nearly double that. [nL5N2064VK]

Authorities will likely continue to expand the money supply, exacerbating inflation, bankers and economists say.

It was a short-lived attempt to increase the price of bread to ease a shortage that sparked the current unrest. Raising the price of diesel for industry but not other consumers will cause yet more problems, warned Abbas Ali Elsayed, Secretary General of the Sudanese Chambers of Industry.

“This will lead to lots of corruption. People will start selling to factories on the black market. It will affect the competitiveness of factories,” he said.

Higher diesel prices will spread rapidly through the economy as the cost of running farm machinery, transport and industry surges, analysts say. They also risk crushing Sudan’s struggling manufacturers.

Factory owner Gasim had been investing to add chocolate bars and potato chips to the foodstuffs already produced in one of his plants. Diesel shortages, power failures and falling demand from consumers who can’t afford his products mean he has slashed output and shed workers instead.

Late last month, his suppliers told him the government had increased the diesel price for industry to 222 Sudanese pounds per imperial gallon from 28 pounds.

“We will have to close the factory completely if the price doesn’t go back down,” he said.

The 240 people he employs at the factory and a nearby cardboard packaging plant, and more than 100 seasonal staff, could be out of work.

Some older Sudanese remember different times before Bashir came to power in a coup in 1989.

Sudan’s major cities had 65 cinemas, many privately run, before Islamist governments under Bashir with a “hostile” attitude to the arts shut them all down, says film director Suleiman Ahmed Ibrahim.

“This is a part of modern life that young people in Sudan have lost, and could be one of the reasons they complain about the political system,” he said.

At universities, quality has fallen and many academics have gone overseas, while an emphasis on Islamic education has led to “the neglect of mathematics, science and arts”, said Ali Mohamed Othman, a 69-year-old professor at the Sudan University of Science and Technology.

University staff, like other members of the middle class, used to be able to get by on part of their salary. Now it only lasts a few days every month.