IMF Staff Completes 2019 Article IV Mission to Sudan

IMF News, December 23, 2019

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A team from the International Monetary Fund (IMF) led by Daniel Kanda visited Khartoum from December 4 to December 17 to hold discussions on the 2019 Article IV Consultation with Sudan.
End-of-Mission press releases convey preliminary findings after a visit; the views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.
Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF's Executive Board for discussion and decision.
Mr. Kanda issued a statement at the conclusion of the visit, including: “Discussions between the IMF team and the authorities in Sudan focused on policies and reforms to re-establish macroeconomic stability and support stronger broad-based economic growth. – IMF’s Kanda”

Economic activity contracted by an estimated 2.3 percent in 2018.
GDP is projected to contract by 2.5 percent in 2019.
Inflation increased to 60 percent in November 2019.
The fiscal deficit rose from 7.9 percent in 2018 to 9.3 percent of GDP in 2019.
The currency is overvalued, competitiveness is weak, and the parallel exchange rate continues to depreciate rapidly.
Humanitarian situation: “dire with large numbers of internally displaced people and refugees.”
Limited access to external financing continues to constrain the economy; large arrears block financing from international donors.

Economic conditions in Sudan remain challenging on the back of persistent fiscal deficits, high inflation, and low access to financing.
The economy is shrinking, fiscal and external imbalances are large, inflation is high, and competitiveness is weak.
The fiscal position has deteriorated because of ballooning fuel subsidies and weak revenue mobilization.
The economic outlook remains bleak absent policy adjustment and comprehensive reforms.
Sudan is in debt distress and is eligible for debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative.
U.S. sanctions on trade and financial flows were revoked in October 2017, but Sudan remains on the state sponsors of terrorism list (SSTL), which blocks progress toward HIPC debt relief and the clearance of debt arrears.
The large external debt and arrears hinder access to external financing and weigh heavily on development.
The authorities have made strong progress in developing a comprehensive reform package and initiated dialogue with the public.

Bold and comprehensive reforms are needed to stabilize the economy and strengthen growth.
Key policy reforms recommended:
- Liberalization of the exchange rate.
- Revenue mobilization.
- Gradually phasing out fuel subsidies.
Structural reforms should focus on:
- Anti-corruption measures.
- Improving governance.
- Improving the business environment to sustain macroeconomic stability and boost inclusive growth.
Social protection and communication:
- “An expanded front-loaded social safety net will be key to help mitigate the impact of potentially difficult reforms on the vulnerable sectors of society.”
- “A substantial increase in social transfers will be needed to mitigate the impact of adjustment on vulnerable groups.”
- Reforms should be carefully sequenced, preceded and accompanied by an extensive information and communication campaign that reaches a broad cross section of society and explains the rationale for reform, the cost of the status quo, potential adverse effects and mitigating measures.

The team welcomed the authorities’ engagement with international partners to secure comprehensive support for debt relief and the delisting from SSTL, which would pave the way for foreign investment and financing for growth and poverty reduction.
The team also welcomed Sudan’s efforts to strengthen cooperation with the IMF on policies and payments.

Discussions with the authorities will continue.
The team will prepare a staff report for IMF Executive Board discussion of the Article IV consultation in February 2020.

IMF Staff Completes 2019 Article IV Mission to Sudan — Press Release No. 19/489