IMF Executive Board Concludes 2016 Article IV Consultation with Sudan
IMF News, October 4, 2016
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- Published: October 4, 2016
Overview
- Date of press release: October 4, 2016.
- On September 7, 2016, the Executive Board of the IMF concluded the Article IV consultation with Sudan.
- Sudan characterized as a low-income fragile country facing significant domestic and international constraints and large macroeconomic imbalances.
- Key structural constraints: loss of three-quarters of oil exports following South Sudan’s secession, weak policies, internal conflicts, U.S. sanctions, withdrawal of correspondent banking relationships, and absence of progress toward debt relief.
- Humanitarian situation described as difficult.
Recent macroeconomic developments
- Recovery and stabilization since 2011 secession: policy adjustments helped contain the fiscal deficit, slow money growth, reduce inflation, support economic recovery; institutional reforms strengthened tax collections and public financial management; social spending increased.
- Growth and production:
- Good harvests boosted growth to close to 5 percent in 2015.
- Oil sector contraction and non-oil dynamics described as binding constraints on growth prospects.
- External imbalances and reserves:
- Terms-of-trade shock widened the current account deficit to 6 percent of GDP in 2015.
- Foreign exchange reserves dropped to 1½ month of imports despite external financial support.
- Parallel exchange rate continued to depreciate; parallel market premium soared to 165 percent as official rate remained virtually fixed.
- Fiscal and price developments:
- Budget deficit widened to 1.9 percent of GDP owing to shortfalls in oil revenue.
- Inflation: 12.6 percent at end-2015 (from 25.7 percent a year before), rising to 16.5 percent in July 2016.
- IMF arrears and payments:
- Sudan remains in debt distress and eligible for debt relief under the HIPC Initiative.
- Sudan’s arrears to the Fund declined to about SDR 969 million at end-June 2016 following payments of $10 million each in 2014 and 2015, and $5 million in the first half of 2016.
- Authorities intend to engage with international partners to secure debt relief and lifting of sanctions and are committed to strengthening cooperation with the IMF on policies and payments.
Outlook and risks
- Growth projection and risks:
- Growth expected to remain modest at 3–3½ percent in 2016 and beyond.
- Downside risks: low commodity export prices, absence of policy buffers, economic sanctions, withdrawal of foreign correspondent banking relationships, weak business environment, internal conflicts.
- Fiscal and external financing risks:
- Fiscal framework faces risks due to low tax revenues and uncertain oil revenues.
- Large external financing gaps are likely to persist.
- Debt relief and financing:
- Large external debt and arrears hinder access to external financing and weigh on development prospects.
- Garnering international support for debt relief seen as critical to pave the way for foreign investment and financing for growth and poverty reduction.
Executive Board Assessment — Policy recommendations and priorities
- Fiscal policy:
- Importance of continued fiscal consolidation.
- Encourage containing spending on goods and services while protecting social spending and prioritizing capital spending.
- Accelerate ongoing revenue administration reforms.
- Stronger domestic revenue mobilization deemed essential given low tax revenues.
- Monetary policy and financial sector:
- Call for tightening monetary policy to keep inflation in check.
- Adhere to limits on central bank advances to the government and limit quasi‑fiscal activities to levels consistent with monetary targets.
- Develop liquidity management instruments and strengthen central bank capacity to mitigate financial stability risks.
- Welcome Sudan’s removal from the Financial Action Task Force’s “gray list”; call for continued strengthening of the AML/CFT framework.
- Exchange rate and external sector:
- Emphasized need to adjust the exchange rate and move toward greater flexibility to improve competitiveness and reduce the parallel market premium.
- Encourage preparing a timetable for removal of foreign exchange restrictions and multiple currency practices as soon as possible.
- Structural reforms and social policy:
- Advance structural policies to foster sustained and inclusive growth: improve business environment, financial inclusion, quality of spending to support human capital.
- Expand social safety nets and improve targeting to reduce poverty; note initial preparations of a Poverty Reduction Strategy.
- Debt relief and external relations:
- Recognized importance of garnering international support for comprehensive debt relief.
- Call to minimize non‑concessional borrowing and avoid selective servicing of bilateral debt.
- Encourage extension of the “zero option” agreement with South Sudan before it expires in October 2016 and strengthening joint outreach for debt relief by the two countries.
- Cooperation with the IMF:
- Encourage authorities to continue to strengthen cooperation with the Fund on policies and payments.
- Advise making regular payments to the Fund at least sufficient to cover Sudan’s obligations falling due and to increase them in line with improvement in Sudan’s payment capacity.
Key economic indicators (2012–17)
- Output and prices (Annual change in percent)
- Real GDP (factor cost): 2012: -2.2; 2013: 5.3; 2014: 1.6; 2015: 4.9; 2016: 3.0; 2017 (Proj.): 3.5
- Oil: 2012: -59.0; 2013: 57.8; 2014: -13.2; 2015: -10.0; 2016: -7.6; 2017 (Proj.): 0.4
- Non-oil: 2012: 4.6; 2013: 2.8; 2014: 2.7; 2015: 5.8; 2016: 3.6
- Consumer prices (end of period): 2012: 44.4; 2013: 41.9; 2014: 25.7; 2015: 12.6; 2016: 16.5; 2017 (Proj.): 13.7
- Consumer prices (period average): 2012: 35.4; 2013: 36.5; 2014: 36.9; 2015: 16.9; 2016: 13.5; 2017 (Proj.): 16.1
- Central government finances (In percent of GDP)
- Revenue and grants: 2012: 9.9; 2013: 11.0; 2014: 12.0; 2015: 9.8; 2016: 9.6; 2017 (Proj.): (not listed)
- Of which: Nonoil revenues: 2012: 6.9; 2013: 8.3; 2014: 9.0; 2015: 8.6; 2016: 8.2
- Of which: Oil revenues: 2012: 2.6; 2013: 2.0; 2014: 2.4; 2015: 1.7; 2016: 0.8; 2017 (Proj.): 1.1
- Expenditure: 2012: 13.3; 2013: 13.4; 2014: 12.9; 2015: 11.9; 2016: 11.7
- Overall balance: 2012: -3.3; 2013: -2.3; 2014: -1.4; 2015: -1.9; 2016: -2.1
- Primary balance: 2012: -1.8; 2013: -0.5; 2014: -1.1; 2015: -1.3; 2016: -1.5
- Monetary sector (Annual changes in percent)
- Broad money: 2012: 40.3; 2013: 13.0; 2014: 17.0; 2015: 19.8; 2016: 25.5; 2017 (Proj.): 22.8
- Credit to the economy: 2012: 34.1; 2013: 23.2; 2014: 17.6; 2015: 20.8; 2016: 18.7
- Balance of payments (In percent of GDP, unless otherwise indicated)
- Exports of goods (in US$, annual percent change): 2012: -53.7; 2013: -4.4; 2014: -9.0; 2015: -28.8
- Imports of goods (in US$, annual percent change): 2012: 2.3; 2013: -7.0; 2014: 3.2; 2015: -2.8; 2016: 7.5
- Current account balance (cash basis): 2012: -6.7; 2013: -6.2; 2014: -4.8; 2015: -5.9; 2016: -4.2; 2017 (Proj.): -3.6
- External debt and reserves
- External debt (percent of GDP): 2012: 68.9; 2013: 68.7; 2014: 65.8; 2015: 61.4; 2016: 55.9; 2017 (Proj.): 49.5
- External debt (in billions of US$): 2012: 43.2; 2013: 45.0; 2014: 46.8; 2015: 50.0; 2016: 52.6; 2017 (Proj.): 55.6
- Gross international reserves (in billions of US$): 2012: 1.5; 2013: 1.0; 2014: 0.9
- In months of next year's imports of G&S: 2012: 1.9; 2013: 1.2
- Exchange rate (official SDG/US$, period average): 2012: 4.8; 2013: 5.7; 2014: 6.0; 2015: …
IMF Press Release No. 16/444 — IMF Communications Department, October 4, 2016.