## Public Information Notice: IMF Executive Board Concludes 2012 Article IV Consultation with Sudan

_IMF News, September 27, 2012_

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## Bibliographic details
- Published: September 27, 2012

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### 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.*

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## References

- [Sudan and the IMF](http://www.imf.org/external/country/SDN/index.htm)
- [Public Information Notices](https://www.imf.org/en/news/searchnews)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2015/09/28/04/53/pn12114_