Press Release No. 14/599

Press Release: IMF Staff Completes Third Review for Sudan’s Staff Monitored Program

December 22, 2014

An International Monetary Fund (IMF) team led by Mr. Edward Gemayel visited Khartoum from December 8-17 to conduct the third review for Sudan’s Staff-Monitored Program (SMP)¹.

Mr. Lodewyk Erasmus, the IMF’s Resident Representative in Sudan, issued the following statement in Khartoum at the conclusion of the mission:

“Economic developments at the end of September were broadly in line with the program’s objectives. Strong efforts by the authorities to keep the budget expenditures in line with the program targets and to strengthen revenue collections reduced the overall budget deficit to 0.8 percent of GDP compared with 1.7 percent of GDP and twelve-month growth in reserve money also slowed to 9.9 percent from 15.9 percent during the same period in 2013. As a result, year-on-year inflation declined from a peak of 46.8 percent in July to 25.6 percent at the end of November, and the current account deficit for the first nine months of the year narrowed to 4.3 percent of GDP compared with 6.2 percent over the same period of 2013. The gap between the official and curb market exchange rates declined from 65 percent in August 2014 to 49 percent by mid-December, largely reflecting the appreciation of the curb market exchange rate, but also a 3 percent devaluation of the official exchange rate of the Central Bank of Sudan.

“Performance under the authorities’ reform program is broadly satisfactory. All end-September quantitative targets were met except for minor deviations on the net domestic assets of the Central Bank and reserve money growth reflecting additional credit to the agricultural sector. Based on preliminary information, progress was made on implementation of key policy reforms, including the adoption of a restructuring plan for Omdurman Bank, strengthening the risk-based audit capacity of the tax department, and reducing value added tax (VAT) exemptions. Continued efforts are needed to advance implementation of the medium term fiscal framework to improve budget planning and execution.

“The outlook for 2015 is favorable, but is subject to significant risks. A very good harvest is expected to strengthen economic growth and reduce inflation. The recent decline in international oil prices is likely to have a positive impact on the budget. However, the outlook is clouded by the breakdown in relations with correspondent banks following an action earlier in the year against a major international bank for violating the United States’. financial sanctions against Sudan. This breakdown is already having an adverse impact on trade and financial transactions.

“The mission welcomes the authorities’ commitment to maintaining the momentum of policies and reforms in 2015 and in the medium-term, which will be important to achieve their objectives of re-establishing macroeconomic stability and addressing developmental challenges. In this regard, the mission calls upon the authorities toallow greater exchange rage flexibility; continue fiscal consolidation with a view to increase social spending and allocate more resources to the productive sectors; implement monetary policy that is consistent with lower inflation; and implement the structural reforms necessary to improve the business environment.

“Resolving Sudan’s unsustainable debt burden is critical to address the financing constraint that was exacerbated by the loss of oil resources following the secession of South Sudan in 2011. Hence, the mission reiterated that securing broad support from all of Sudan’s external creditors for comprehensive debt relief is key to addressing this issue. It stressed the importance of engaging with these creditors, including under the framework of the Joint Approach with South Sudan and the African Union High Level Implementation Panel.

“During the visit, the team met with Vice President Hassabo Mohamed Abdurahman, Minister of Finance and National Economy Badr Eldein Mahmoud Abbas, Governor of the Central Bank of Sudan Abdelrahman Hassan, and other senior government and central bank officials. The mission also met with members of the diplomatic and donor community, and private sector representatives. The mission would like to thank the authorities for their hospitality, cooperation, and the open and constructive discussions.”

¹ An SMP is an informal agreement between country authorities and Fund staff to monitor the implementation of the authorities’ economic program. SMPs do not entail financial assistance or endorsement by the IMF Executive Board.