Public Information Notice: IMF Executive Board Concludes 2012 Article IV Consultation with Sudan
IMF News, September 27, 2012
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- Published: September 27, 2012
Background
- PIN No. 12/114: On September 21, 2012, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Sudan.
- Secession of South Sudan on July 9, 2011 led to:
- Loss of a sizeable portion of Sudan’s economic potential.
- A permanent fiscal and external shock necessitating adjustment.
Economic developments and key indicators (2011–mid‑2012)
- 2011 macroeconomic outcomes:
- Nonoil real GDP growth decelerated to 3.4 percent.
- Overall real GDP growth: 3.4 percent in 2011 (table shows Real GDP (at factor costs) as -3.3 for 2011 when accounting post-secession; see table notes).
- Inflation picked up at about 18.5 percent.
- Overall fiscal deficit of 1.3 percent of GDP in 2011, despite low execution rate of the investment budget.
- Deficit mostly financed by the banking system → reserve money grew at 28 percent.
- Credit to the economy grew about 8 percent.
- External sector in 2011:
- Exports declined by an estimated 13 percent due to drop in oil exports in the second half of 2011, partially offset by increased gold exports.
- Imports declined by an estimated 7.5 percent.
- Current account deficit of ½ percent of GDP.
- Authorities introduced administrative restrictions to stabilize the currency and slow reserve draw-down; these were unsuccessful in preventing depreciation in the curb market.
- First half of 2012:
- Fiscal deterioration: revenue under-performed by some 30 percent; spending execution rate of 95 percent.
- Reserve money and broad money both grew by 24 percent (much higher than H1 2011).
- By end-July 2012, 12-month inflation exceeded 40 percent.
- Premium on the US dollar exceeded 100 percent by end-June 2012 in the curb market.
Policy response and reform measures (June 2012 package)
- Adopted measures in June 2012:
- Step devaluation of the official exchange rate: 66 percent.
- Increase in taxes.
- Bold reduction in energy subsidies.
- Cuts in non-priority spending.
- Expansion of social safety nets.
- IMF view on measures:
- These are positive steps toward restoring macroeconomic stability and addressing macroeconomic imbalances.
- Fiscal sustainability and enhanced growth potential require determined continuation of reform momentum.
- Recommended structural reforms to address underlying challenges:
- (i) Comprehensive civil service reform.
- (ii) Banking sector restructuring.
- (iii) Ambitious privatization program.
- (iv) Improving governance.
Executive Board assessment and policy recommendations
- General assessment:
- Directors noted daunting policy challenges to restore macroeconomic stability and growth prospects after secession.
- Commended authorities’ commitment to prudent policies and welcomed the comprehensive reform program.
- Emphasized need for determined implementation supported by adequate resource mobilization domestically and externally.
- Fiscal policy recommendations:
- Fiscal adjustment grounded on a sound medium-term framework is central to stabilization.
- Welcome measures to enhance revenue collection and rationalize expenditure.
- Recommended actions:
- Phase-out remaining fuel subsidies in parallel with strengthening the social safety net.
- Greater public sector wage restraint.
- Better public expenditure management.
- Widen the tax base, improve tax administration, and streamline taxation of extractive industries.
- Reforms of state finances to put overall fiscal position on sounder footing.
- Monetary and exchange-rate policy recommendations:
- Merit in further monetary tightening given high inflation and exchange rate pressures.
- Encourage the central bank to refrain from deficit monetization.
- Step up reforms to enhance effectiveness of monetary policy:
- Switch to a reserve money anchor.
- Improve coordination between monetary and fiscal authorities.
- Greater independence for the Bank of Sudan.
- Develop the interbank market and auction central bank securities to promote intermediation and absorb excess bank liquidity.
- Invite authorities to discontinue central bank gold-trading operations, unify the official foreign exchange rates, and pursue greater exchange rate flexibility.
- Structural and financial sector recommendations:
- Welcome Interim Poverty Reduction and Growth Strategy; stress reforms to improve business climate and boost private-sector-led growth.
- Priorities include economic liberalization and diversification, restructuring or privatization of public enterprises, and civil service and governance reforms.
- Undertake a comprehensive assessment of the banking system to enhance development, efficiency, and resilience.
- Cooperation with the Fund and external finance:
- Directors called on authorities to strengthen cooperation with the Fund on policies and payments and supported continued Fund engagement.
- Encouraged authorities to continue making payments to the Fund, make them on a regular basis, and increase them as payment capacity improves.
- Noted that Sudan’s outstanding arrears constrain access to external financing; encouraged dialogue with creditors and donors to garner support for debt relief.
- A few Directors called for exceptional efforts by the international community, including the Fund, to support Sudan.
Selected Economic Indicators, 2008–13 (key figures from table)
- Real sector (annual changes in percentage):
- Real GDP (at factor costs): 2008: 3.0; 2009: 3.2; 2010: 3.5; 2011: -3.3; 2012 (Prel.): -11.1; 2013 (Proj.): -0.6.
- Oil GDP 1/: 2008: -4.5; 2009: -3.9; 2010: -36.0; 2011: -58.2; 2012: 14.5.
- Nonoil GDP 1/: 2008: 4.8; 2009: 3.3; 2010: 5.1; 2011: 3.4; 2012: -5.1; 2013: -1.4.
- Consumer prices (period average): 2008: 14.3; 2009: 11.2; 2010: 13.1; 2011: 18.3; 2012: 28.6; 2013: 17.0.
- Public finance (in percent of GDP):
- Revenue and Grants: 2008: 24.0; 2009: 16.5; 2010: 19.3; 2011: 18.7; 2012: 12.9; 2013: 14.1.
- Total expenditure: 2008: 24.1; 2009: 20.7; 2010: 19.6; 2011: 20.0; 2012: 16.6; 2013: 17.3.
- Overall balance: 2008: -0.1; 2009: -4.2; 2010: -0.4; 2011: -1.3; 2012: -3.7; 2013: -3.2.
- Nonoil primary balance (in percent of nonoil GDP): 2008: -7.1; 2009: -6.4; 2010: -4.9; 2011: -6.1; 2012: -6.2.
- Balance of payments:
- Current account balance: 2008: -2.0; 2009: -10.0; 2010: -2.1; 2011: -0.5; 2012: -7.4; 2013: -6.5.
- Exports of goods (in US$, annual change in percent): 2008: 30.9; 2009: 57.0; 2010: -12.9; 2011: -55.4; 2012: 9.4.
- Imports of goods (in US$, annual percent change): 2008: 6.6; 2009: 3.6; 2010: 3.1; 2011: -7.5; 2012: -17.6; 2013: -3.6.
- Gross international reserves (in millions of U.S. dollars): 2008: 1,816; 2009: 1,370; 2010: 1,566; 2011: 1,325; 2012: 1,074; 2013: 1,155.
- In months of next year's imports of goods and services: 2008: 2.1; 2009: 1.5; 2010: 1.8; 2011: 1.6.
- Total external debt (percent of GDP): 2008: 60.2; 2009: 66.0; 2010: 60.9; 2011: 64.8; 2012: 84.9; 2013: 96.7.
- Total external debt (in US$ billion): 2008: 32.6; 2009: 34.9; 2010: 39.5; 2011: 41.4; 2012: 43.7; 2013: 45.6.
- Monetary sector:
- Broad money: 2008: 24.9; 2009: 17.7; 2010: 38.4; 2011: 17.4.
- Credit to the economy: 2008: 20.2; 2009: 8.0; 2010: 18.1; 2011: 15.0.
- Exchange rate: SDGs per U.S. dollar
- End of period: 2008: 2.18; 2009: 2.24; 2010: 2.48; 2011: 2.68; 2012: …
- Period average: 2008: 2.09; 2009: 2.30; 2010: 2.31; 2011: 2.67.
Public Information Notice: IMF Executive Board Concludes 2012 Article IV Consultation with Sudan, September 27, 2012.