IMF Executive Board Concludes 2019 Article IV Consultation with Sudan
IMF News, March 10, 2020
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- Published: March 10, 2020
Key findings: macroeconomic situation and recent performance
- Regime change has created a window of opportunity for fundamental reforms to address major macro imbalances and lay the groundwork for inclusive growth, but challenges are daunting: the economy is shrinking, macroeconomic imbalances are large, competitiveness is weak, and the humanitarian situation is dire. Concerns about governance and corruption persist.
- GDP is estimated to have contracted by 2½ percent in 2019.
- Fiscal deficit rose by almost three percentage points to 10.8 percent of GDP in 2019, reflecting ballooning energy subsidies and weak revenue mobilization.
- Inflation rose to 60 percent in November 2019.
- The exchange rate system remains highly distorted with multiple currency practices; the real exchange rate is substantially overvalued and the parallel market exchange rate continues to depreciate strongly.
- Current account deficit stood at 7.8 percent of GDP in 2019.
- Gross international reserves were $1.4 billion in October 2019, equivalent to 2 months of imports.
- Public and external debt ratios remain high and unsustainable, at 211.7 percent of GDP and 198.2 percent of GDP, respectively, in 2019.
- Limited forex for fuel imports has led to rationing, persistent shortages, and disruptions to electricity and food supplies.
- With limited external financing, the fiscal deficit has primarily been financed by monetization, fueling a vicious cycle of inflation, exchange rate depreciation, and deficit expansion.
Outlook and risks
- Absent reforms, weaknesses in competitiveness and the business environment will persist; GDP growth would likely remain negative in the near term with minimal investment and subdued consumption, and bank fragility will rise.
- High inflation, continued exchange rate depreciation, and pervasive shortages will aggravate social tensions.
- The fiscal imbalance would intensify over the medium term, while the current account deficit would remain large, raising risks of disorderly adjustment.
- Downside risks to the outlook would dominate, albeit with large margins of uncertainty.
Executive Board assessment and policy recommendations
- Exchange rate and monetary policy:
- Gradual exchange rate liberalization is critical to eliminate distortions that hamper investment and growth, bolster competitiveness and transparency, eliminate multiple currency practices and associated distortions, reduce rent‑seeking, strengthen central bank independence and boost fiscal revenues.
- The monetary policy framework needs enhancement; the banking system’s ability to sustain shocks needs review and strengthening prior to unification of the exchange rate.
- Upgrade central bank law to boost independence and effectiveness, and curb fiscal dominance.
- Continue to upgrade central bank capacity to supervise and mitigate financial stability risks, including by strengthening banking regulation and supervision and continuing to address AML/CFT deficiencies.
- Fiscal policy and public finances:
- Substantial consolidation is needed to achieve macroeconomic stability and fiscal sustainability.
- Broadening the tax base and strengthening revenue administration are important and would help strengthen governance, transparency and accountability.
- Strengthen public financial management and publish comprehensive fiscal data to improve governance.
- Intensify efforts to mobilize additional domestic revenues to ensure credible fiscal consolidation in 2020.
- Phase out fuel subsidies over the medium term as crucial for durable consolidation.
- Implement strong information and communication efforts and a substantially expanded social safety net that can credibly be financed with donor assistance to build public support for reforms.
- Debt, external relations, and Fund cooperation:
- Directors recognized that Sudan remains in debt distress and is eligible for debt relief under the HIPC Initiative.
- Sudan’s inclusion in the state sponsors of terrorism list (SSTL) by the United States constitutes one of the obstacles to potential debt relief.
- Authorities encouraged to engage with international partners to secure comprehensive support for debt relief, respect the Fund’s preferred creditor status, and avoid selective debt service payments and non‑concessional borrowing.
- Emphasized need to strengthen cooperation with the Fund on policies and payments, including by making regular payments to the Fund at least sufficient to cover obligations falling due, and increasing them as Sudan’s payment capacity improves.
- Directors welcomed the authorities’ interest in a Staff Monitored Program to help build a track record of policy implementation to facilitate debt relief.
Selected economic indicators (as reported)
- Real GDP (market prices): 2017 = 0.7; 2018 = -2.3; 2019 = -2.5 (Est.); 2020 = -1.2 (Proj.)
- Consumer prices (end of period): 2017 = 25.2; 2018 = 72.9; 2019 = 60.2 (Est.); 2020 = 70.2 (Proj.)
- Consumer prices (period average): 2017 = 32.4; 2018 = 63.3; 2019 = 51.3 (Est.); 2020 = 66.4 (Proj.)
- Central government revenue and grants (percent of GDP): 2017 = 7.2; 2018 = 8.9; 2019 = 7.8 (Est.); 2020 = 6.4 (Proj.)
- Tax revenue (percent of GDP): 2017 = 5.5; 2018 = 6.7; 2019 = 5.4 (Est.); 2020 = 4.9 (Proj.)
- Expenditure (percent of GDP): 2017 = 13.7; 2018 = 16.7; 2019 = 18.7 (Est.); 2020 = 21.4 (Proj.)
- Overall balance (percent of GDP): 2017 = -6.5; 2018 = -7.9; 2019 = -10.8 (Est.); 2020 = -15.0 (Proj.)
- Primary balance (percent of GDP): 2017 = -6.0; 2018 = -7.6; 2019 = -10.6 (Est.); 2020 = -14.7 (Proj.)
- Broad money (annual change percent): 2017 = 26.5; 2018 = 21.8; 2019 = 66.8 (Est.); 2020 = 97.2 (Proj.)
- Reserve money (annual change percent): 2017 = 63.8; 2018 = 170.5; 2019 = 76.5 (Est.); 2020 = 122.7 (Proj.)
- Credit to the economy (annual change percent): 2017 = 29.8; 2018 = 21.0; 2019 = 65.8 (Est.); 2020 = 68.2 (Proj.)
- Exports of goods (annual percent change): 2017 = 31.2; 2018 = -13.2; 2019 = -1.6 (Est.); 2020 = -0.9 (Proj.)
- Imports of goods (annual percent change): 2017 = 10.1; 2018 = -10.3; 2019 = -3.3 (Est.)
- Current account balance (cash basis, percent of GDP): 2017 = -7.2; 2018 = -8.7; 2019 = -7.8 (Est.); 2020 = -9.2 (Proj.)
- External debt (percent of GDP): 2017 = 154.5; 2018 = 180.8; 2019 = 198.2 (Est.); 2020 = 204.3 (Proj.)
- External debt (in billions of US$): 2017 = 53.9; 2018 = 55.1; 2019 = 56.3; 2020 = 57.5 (Proj.)
- Gross international reserves (in billions of US$): 2017 = 0.9
- In months of next year's imports of G&S: 2017 = 1.3; 2018 = 1.7; 2019 = 1.5
- Exchange rate (SDG/US$, period average): 2017 = 18.1; 2018 = 38.2; 2019 = 60.5
- Nominal GDP (in Millions of SDGs): 2017 = 830,265; 2018 = 1,370,224; 2019 = 2,033,412; 2020 = 3,355,368
IMF Executive Board Concludes 2019 Article IV Consultation with Sudan (Press Release No. 20/83), March 10, 2020.
