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Sudan: Staff Report for the 2016 Article IV Consultation

Author(s):
International Monetary Fund. Middle East and Central Asia Dept.
Published Date:
October 2016
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Backgound and Context

1. Sudan is a low-income fragile country facing significant domestic and international constraints and large macroeconomic imbalances. Decades of internal conflicts and U.S. sanctions have undermined economic stability and growth. While the start of oil production in 1999 triggered rapid growth that tripled per capita income within a decade, Sudan lost the bulk of its oil exports and related budget revenues following the secession of South Sudan in 2011. Gradual policy adjustment supported by financial assistance from Gulf countries restored some degree of economic stability and helped prevent a drop in real incomes. Looking forward, strong policies, normalization of relations with creditor countries, the lifting of sanctions, and debt relief are needed to achieve macroeconomic stability and unleash Sudan’s potential.

Real GDP Per Capita and Oil Production

(in SDG and barrels per day)

Sources: Sudanese authorities; and IMF staff calculations.

2. Economic stabilization efforts have borne some fruit. Since 2012, the authorities have launched reforms to adjust to the loss of oil revenues. Measures included exchange rate adjustments, subsidy reductions, fuel price hikes, and tax increases. Tax collections and public financial management were strengthened, and social spending was increased to mitigate the impact of the adjustment on the poor. The reforms, supported by a Staff-Monitored Program (SMP) in 2014, helped reduce the fiscal deficit, slow money growth, ease inflation, and support growth. The authorities’ recent five-year reform plan for 2015–19 continues in the same direction.

Inflation and Growth

(In percent)

Source: Sudanese authorities; and IMF staff estimates.

3. However, large imbalances persist and growth remains below potential. Five years after the secession of South Sudan, adjustment to the loss of oil revenues is work in progress. Low tax revenues (Box 1) constrain growth-enhancing public infrastructure and social spending. Monetization of the budget deficit and large quasi-fiscal activities (QFAs) put sizable pressure on liquidity creation. The virtually fixed official exchange rate contributes to foreign exchange distortions and shortages, and low import tax collections. Actions against violations of U.S. sanctions since mid-2014 contributed to the withdrawal of correspondent bank relations (CBRs), which hampers foreign trade and investment and weighs heavily on growth. Absence of debt relief limits access to official external financing.

Revenues, Expenditures and Fiscal Balance

(in percent of GDP)

Source: Sudanese authorities

Box 1.Tax Revenue Mobilization

Sudan’s tax revenues are among the lowest in low- and lower-middle income countries (LLMICs). Tax revenues represented only 6.3 percent of GDP compared to 12 percent of GDP on average in fragile LLMICs in 1995–2015 (figure). With little improvement over the period, this gap has been increasing.

Selected Countries. Tax Revenues

(In percent of GDP)

Source: WEO (IMF) and IMF staff calculations.

Tax collections have yet to adjust to the loss of oil revenues following the secession of South Sudan. Oil revenues, which averaged 8 percent of GDP in 1995–2011, financed the bulk of government expenditure and made it unnecessary to raise tax collections. After the secession, oil revenues (including transit fees and transfers from South Sudan) dropped to 2.2 percent of GDP in 2012–15, and are expected to drop further to less than 1 percent of GDP in 2016 on account of low global oil prices. At the same time, despite efforts to strengthen tax administration, tax revenues increased only marginally in percent of GDP in 2015 due to low imports and an overvalued official exchange rate. This limited the available fiscal space and constrained progrowth investment and poverty-reducing social spending.

Sudan’s tax revenue is lower than expected at its income level. In general, tax revenues are positively correlated with GDP per capita. In particular, a non-oil producing country with a median income per capita of $1,520 (at PPP exchange rates) should raise tax revenues equivalent to 12.2 percent of GDP on average. In contrast, Sudan with an income of $3,920 collected only 6.2 percent of GDP in 2015—comparable to much poorer countries such as Afghanistan and the Central African Republic.

Selected Countries. Tax Revenues and GDP per Capita 1/

(In percent of GDP and U.S. dollars)

1/ The GDP per capita at PPP (current U.S. dollars). Data for year 2015 or latest available. Red dots are oil-exporter countries.

Source: WEO (IMF), WDI (WB).

Sudan’s tax collection efficiency is relatively low. VAT efficiency—measured by the revenue collected in percent of GDP divided by the standard tax rate—is only 0.19 per percentage point, placing Sudan below the 25th percentile of the distribution and well below the median of 0.37. While at 17 percent its VAT rate is similar to its peers (in the range of 15–18 percent), the low efficiency suggests large tax exemptions and/or weaknesses in tax administration.

Furthermore, Sudan has one of the lowest direct tax revenues among LLMICs, collecting only 0.6 percent of GDP. This is explained by low personal and corporate income tax rates, high exemptions and tax holidays, and low compliance due to weak administration.

There is significant scope to raise tax revenues in Sudan. Out of 36 African LLMICs, Sudan ranked 34th in terms of tax effort, with a tax revenue gap of 6.1 percent of GDP (Torres, 2016).1/ The study estimated the tax gap for 135 countries, controlling for country characteristics such as GNI per capita, imports, oil and gas exports, demographics, and political participation. The results suggest that Sudan should be able to increase its tax ratio by 6 percent of GDP, especially by raising tax collections on income and goods & services by 2.3 percent and 2.8 percent of GDP, respectively.

Selected African Countries. Tax gaps in LICs and LMICs

(in percent of GDP)

Source: Revenue and Expenditure Gaps: A Cross-Country Analysis. Torres (2015).IMF WP Forthcoming.

1/ Torres, Jose, “Revenue and Expenditure Gaps: A Cross-Country Analysis,” 2016 (Forthcoming), IMF.

4. Domestic and international efforts to resolve internal conflicts and address the difficult humanitarian situation are underway. The U.N. counts 3.1 million internally-displaced persons and about 360,000 refugees (many from South Sudan), and provides humanitarian support to some 5.4 million people (15 percent of the population). Armed conflicts have been endemic in some areas of Darfur, South Kordofan, and Blue Nile states, and a 21,000-strong UN-African Union (AU) peacekeeping force has been stationed in Darfur since 2007. The government launched a national dialogue in 2015, but the process was boycotted by key opposition parties and armed rebel groups. In early 2016, a roadmap for peace was launched under the auspices of the AU with support from the international community, but has yet to be agreed by all parties. In May, the government held a referendum on the permanent administrative status of Darfur and in June declared a unilateral cessation of hostilities in South Kordofan and Blue Nile.

5. Implementation of the recommendations of the last Article IV has been mixed (Box 2). Current spending was contained, including through initial steps to reduce fuel subsidies. However, the limited response thus far to ongoing tax administration reforms has delayed fiscal consolidation and constrained monetary control. Importantly, no progress was made towards greater exchange rate flexibility.

Box 2.Response to the 2014 Article IV Consultation Key Recommendations

Exchange rate: greater exchange rate flexibility

• No progress. The CBOS adjusted the official exchange rate by only 2 percent in July 2015 while the gap with the parallel market rate widened to 122 percent in mid-June 2016. International reserves declined.

Fiscal policy: fiscal consolidation through revenue mobilization and restrain of current spending, including a gradual phase-out of fuel subsidies

• Limited progress. While current spending was contained, the drop in oil revenues and slow progress in increasing non-oil revenues led to a widening deficit.

Monetary policy: tighter monetary policy

• Limited progress. Inflation declined from 25.7 percent at end-2014 to 14.3 percent in June 2016, partly on account of lower food prices. At the same time, reserve money growth was higher than expected due to central bank financing of the government and agriculture.

Structural policy: improve the business climate and invest in human and physical capital

• Limited progress. In the absence of relevant reforms, Sudan’s ranking in the 2016 World Bank Doing Business Survey dropped one position to 159th among 189 countries. Low domestic revenues constrained social spending and public investment.

Recent Economic Developments

6. In 2015 and the first quarter of 2016, good harvests boosted economic growth and reduced inflation. However, weak commodity export prices and expansionary policies widened external imbalances, which remain an important stability risk.

  • Non-oil real GDP grew by 5.8 percent in 2015 (up from 2.7 percent in 2014), driven by agriculture and services, while oil-GDP contracted by 10 percent.
  • The declining trend in inflation started to reverse in recent months. Inflation slowed to 12.6 percent in December 2015 (from 26 percent at end-2014) owing largely to lower food prices, but picked up to 14.3 percent in June 2016 as nonfood inflation remained high at about 20 percent.
  • The fiscal deficit widened by 0.5 percent of GDP in 2015 to 1.9 percent, as fuel subsidies remained high due to high import financing costs reflecting Sudan-specific risks, while oil revenues (including transfers from South Sudan) declined in line with international prices.1 Ongoing tax administration reforms raised tax collections slightly. In 2016, in response to continued shortfalls in oil revenues, the authorities tightened expenditure, especially capital, to contain the first quarter deficit to 0.5 percent of GDP.
  • Net domestic assets of the Central Bank of Sudan (CBOS) expanded by 38 percent in 2015 largely owing to lending to the government (temporary advances and letters of guarantee) and quasi-fiscal activities (QFAs) related to losses on gold purchases and support to agriculture.2 Total lending to government and QFAs reached 3.8 percent of GDP in 2015, up from 1.8 percent in 2014 (Box 3). However, the growth of net domestic assets slowed to 27 percent annually in May 2016 thanks to restrained government borrowing.
  • The external position—structurally weakened by the loss of oil revenues following South Sudan’s secession—was hit by a negative terms-of-trade shock in 2015, compounded by expansionary policies. The current account deficit (on a cash basis) widened to 5.9 percent of GDP (from 4.8 percent of GDP in 2014), largely owing to lower prices for Sudan’s commoditybased exports (mainly livestock, gold, oil, and sesame) and high oil import-financing costs. Nonoil imports also increased significantly. In the first quarter of 2016, the trade deficit widened to 1.1 percent of GDP (from 0.7 percent in the same period of last year) on account of weak commodity exports.
  • International reserves dropped by about $460 million in 2015 and remained low at $1.2 billion (1.4 months of imports) as of May 2016. The CBOS intervened in the foreign exchange market and financed strategic imports such as fuel and wheat. These interventions were made possible by financial inflows from Gulf countries, estimated at $2.1 billion between May 2015 and January 2016.
  • Following two large devaluations in 2012–13, the official exchange rate remained virtually unchanged over the past year and a half. As a result, the official rate appreciated significantly in real terms due to high inflation differentials.3 In contrast, the parallel exchange rate depreciated by 36 percent between end-2014 and end-June 2016, which increased the parallel market premium to 125 percent (from 46 percent).4 Overall, staff estimates that the exchange rate is overvalued by about 50 percent in real terms (Annex I).

Consumer Price Index

(In percent, year over year)

Source: Sudanese authorities

Monetary Aggregates

(In percent, year over year)

Source: Sudanese authorities

CBOS Financing of the Budget and QFAs(in percent of GDP)
201320142015May

2016
Total CBOS financing2.81.83.80.5
CBOS financing of the budget1.80.52.90.4
Net claims on government1.2−0.21.1−0.1
Deposits0.0−0.10.1−0.3
Advances0.8−0.11.20.1
Government securities0.50.0−0.20.0
Other financing0.60.71.80.5
Letters of guarantee0.20.21.20.5
Wheat subsidies0.40.50.50.1
QFAs and other1.01.30.90.1
Losses on gold purchases0.60.70.40.2
Loans to agricultural sector0.30.40.4−0.1
Unpaid returns on government securities0.20.20.10.0
Memorandum item
Budget deficit2.31.41.9
Sources: Sudanese authorities and IMF staff estimates.
Sources: Sudanese authorities and IMF staff estimates.

Exports, Imports and the Trade Balance

(In billions of U.S. dollars)

Source: Sudanese authorities.

Terms of Trade, and Export and Import Prices

(2000=100)

Sources: Sudanese authorities; and IMF staff estimates.

Exchange Rates

(In SDG per US dollar and percent)

Source: Central Bank of Sudan.

Nominal and Real Effective Exchange Rates

(January 2011 - April 2016)

Source: INS (IMF), and IMF staff calculations.

7. The overall performance of the banking system, which operates under Islamic finance principles, has improved. Financial stability indicators improved in the past few years with increasing capital adequacy ratios (CAR), declining nonperforming loans, and steady profits. The net open foreign-exchange position of the banking system, at -3 percent of capital, remained within regulatory limits, and the five largest banks had a positive net open position of 7 percent in March 2016. However, equity injections into weak banks have resulted in CBOS and government fully or partially owning 15 of the 37 banks, and their restructuring has been lagging. In October 2015, following significant strengthening of its framework for Anti-Money Laundering and Combatting the Financing of Terrorism (AML/CFT), Sudan was removed from the Financial Action Task Force’s “gray list” of countries subject to monitoring.

Capital Adequacy Ratio

in percent

Source: Central Bank of Sudan.

8. Enforcement actions against violations of U.S. sanctions contributed to the withdrawal of CBRs and complicated bank operations. This resulted in high import financing costs and rising difficulties in international transactions, including remittances, which may result in greater reliance on cash transactions and associated AML/CFT risks (Box 3).

Box 3.Withdrawal of Correspondent Bank Relations

Enforcement actions against international banks in mid-2014 for violating U.S. sanctions contributed to a substantial withdrawal of foreign CBRs of Sudanese banks. In June 2014, BNP Paribas pleaded guilty to violating U.S. sanctions against Sudan and other countries, and was ordered to pay $8.9 billion in forfeitures and fines. In 2015, Commerzbank and Deutsche Bank also faced fines for violating U.S. sanctions. Among other factors, this contributed to a substantial withdrawal of CBRs of Sudanese banks. Foreign and local entities based in Sudan reported difficulties and delays in processing foreign exchange transfers to and from Sudan. The central bank and commercial banks reported a significant reduction in the number of foreign correspondents (one large bank reported having only 15 correspondent banks in 2016 compared to 55 a year ago) or an almost complete cut-off from international transactions. According to a recent report by the Committee on Payments and Market Infrastructure, Sudan lost almost half of its CBRs between 2012 and 2015, representing a 15 percent drop in volume. Banks had to pay higher fees and post full cash collateral; the CBOS authorized “nil value” imports financed offshore; and one bank reported plans to open branches abroad to carry out international transactions.

Available data suggest a slowdown in trade since the withdrawal of foreign CBRs. Import financing (e.g., through letters of credit) by both the CBOS and commercial banks slowed in 2015. Difficulties in repatriating export proceeds reportedly weakened exports. Transfer payments, including remittances were adversely affected. Embassies and international organizations reported being affected by correspondent banks’ reluctance or outright refusal to process foreign exchange transactions, despite being exempt from sanctions. Payments to the IMF were also received with long delays. Banks and the authorities expressed concern that a shift to cash transactions would jeopardize hard-won progress on the implementation of the AML/CFT framework.

CBOS Letters of Credit and Commercial Banks’ Import Financing

(2012=100)

Sources: Central Bank of Sudan.

A persistent breakdown of CBRs would weigh on economic and social outcomes. Constraints on financing imports and repatriating export proceeds may reduce trade and foreign investment. Shortage of imported goods, including foodstuffs and energy, would increase inflation and depress consumption. Difficulties in processing international transactions will lead to continued shortages of foreign exchange, which will put pressure on the exchange rate. Constraints on transferring remittances may impact the most vulnerable. These adverse developments would contribute to further dampening economic growth, and ultimately worsen social outcomes and poverty.

Outlook and Risks

9. Low commodity export prices, economic sanctions, and lack of policy buffers, will continue to jeopardize macroeconomic stability and constrain growth, requiring continued external assistance.

  • Staff expects growth to slow to about 3 percent in 2016 as crop production returns to normal levels after good harvests last year. Inflation could increase owing to the lagged effects of the parallel exchange rate depreciation and wearing out of the positive impact of good harvests on food prices. Despite a recovery of gold exports along with the improved outlook for world prices, the current account deficit is expected to remain high and international reserves low in the absence of progress towards greater exchange rate flexibility and sufficient fiscal and monetary policy adjustment, even if the external financial support anticipated by the authorities materializes.
  • In 2017 and beyond, staff expects growth to remain at 3.5 percent and largely reliant on agriculture—with attendant spillovers to other sectors—as low domestic savings, sanctions, and limited access to external financing weigh on investment. The overvalued official exchange rate and foreign exchange restrictions will also weigh on trade and economic activity despite anticipated foreign direct investment (FDI) in agriculture. Inflation will likely remain elevated as insufficient fiscal consolidation continues to weaken monetary control. The external position will remain weak, with a financing gap of $1.3–1.9 billion per year that will need to be covered by foreign aid, allowing international reserves to hover around $1 billion (1 month of imports).

10. The outlook is subject to significant downside risks. The large and persistent external financing gaps over the medium term, if unfilled, could lead to disorderly adjustment, depressed economic activity, and rapid inflation. Mitigating these risks while maintaining the fixed exchange rate regime will require significant fiscal and monetary adjustment. Other downside risks include lower oil receipts from South Sudan; reduced FDI and remittances from the Gulf; and continued withdrawal of CBRs. Progress with the national dialogue and the roadmap for peace is an upside risk.

Policy Discussions

11. Policy discussions focused on the urgent need to achieve macroeconomic stability, raise inclusive growth, and reduce poverty. Staff emphasized that current policies—maintaining the fixed exchange regime without significant fiscal and monetary policy adjustment—are unsustainable and are raising the likelihood of disorderly adjustment. In this regard, staff called for decisive policy actions and reforms:

  • Greater flexibility of the official exchange rate, with a view to liberalizing the foreign exchange market and reducing external imbalances.
  • Continued fiscal consolidation focused on mobilizing domestic revenues, with a view to generating fiscal space for investment in infrastructure, education, and health, while reducing the budget deficit and its monetization.
  • Tighter monetary policy, including by limiting quasi-fiscal activities of the central bank.
  • Strengthened social safety nets to mitigate the cost of adjustment on vulnerable groups.
  • Improved business environment to support private sector growth.
  • Continued engagement with international partners to progress toward debt relief and the lifting of sanctions.

A. External Stability and the Exchange Rate

12. Exchange rate flexibility would support fiscal and monetary policies to reduce external imbalances. Macroeconomic stability will require tight fiscal and monetary policy, but will remain elusive without greater flexibility of the official exchange rate, with a view to significantly reducing the parallel market premium. Moreover, widening (or eliminating) the band for the commercial bank rate would help liberalize the foreign exchange market for banks. These reforms will help strengthen competitiveness, increase FDI, and promote inclusive growth. Efficient operation of a more flexible foreign exchange regime would require developing an interbank market and strengthening reserve management, including by establishing rule- and market-based interventions.

13. Staff presented an illustrative scenario with adjustment of the official exchange rate accompanied by a tighter policy mix. In this scenario, growth would likely be slower and inflation higher in the short term due to the impact of devaluation on imports, prices, and customs receipts. However, macroeconomic performance would improve over the medium term as the elimination of foreign exchange distortions would improve competitiveness and encourage FDI. In staff’s view, the inflationary effects of official exchange rate devaluation would be manageable, as most prices already reflect the parallel rate. The revenue gains from the devaluation may be significant, as imports would be valued at a higher exchange rate, increasing the import tax base.

14. Measures to mitigate the impact of exchange rate adjustments on the poor are critical for the success of reforms. Staff proposed maintaining temporarily the subsidy regime for fuel and wheat to allay concerns over the social impact of greater exchange rate flexibility. The higher subsidy costs could be covered by the revenue gains from the devaluation. The CBOS should use all available instruments to forestall second-round effects of exchange rate adjustment on inflation.

Authorities’ views

15. The authorities shared staff’s assessment regarding the need to reduce external imbalances, but prefer a more incremental approach than proposed by staff’s illustrative scenario. They considered large exchange rate adjustments destabilizing—both economically and socially—and premature without sufficient foreign exchange reserves to prevent overshooting. In their view, a flexible exchange regime is a long-term objective. They expressed concern about the inflationary impact of exchange rate adjustment, its effectiveness given price-inelastic commodity-based exports, and the risk of the social unrest that followed the September 2013 devaluation. Their reform strategy, as per the Five-Year Program, is to gradually allow the private sector to use the parallel foreign exchange market to import key commodities, and to gradually adjust the official rate and diversify exports in the medium term. In the meantime, the authorities anticipated continued foreign aid from Gulf countries to cover financing gaps.

B. Fiscal Consolidation and Revenue Mobilization

16. The 2016 budget poses risks despite ongoing efforts to strengthen tax administration and treasury management. Given lower oil revenues and transfers from South Sudan, the targeted deficit of 1.7 percent of GDP will be difficult to achieve. Full spending of budget appropriations would bring it close to 3 percent of GDP, implying sizable recourse to CBOS financing.

17. In the short term, fiscal consolidation is needed to curb monetization of the deficit and contribute to the external adjustment. Limiting the 2016 deficit to 1.9 percent of GDP would be consistent with manageable domestic financing. This would require, like last year and in the first quarter of 2016, containing spending on current goods and services, and prioritizing capital spending. In response to exchange rate adjustment, current subsidies could be maintained in the short term to mitigate the impact on the most vulnerable, offset by the corresponding revenue gains. Mobilizing additional non-oil revenues—especially by expanding tax bases—will also be important. While current tax administration reforms will help, they would need to be accompanied by tax policy measures.

18. In the medium term, domestic revenue mobilization will be critical to generate fiscal space for investment and social spending. Despite recent improvements, tax revenues remain low by international standards. Measures to raise revenues would include further rationalizing exemptions, ceasing to grant new tax holidays and phasing out existing ones, introducing a presumptive tax for small businesses, reforming gold taxation, increasing personal and business income tax rates and their progressivity, and continuing to strengthen customs and tax administration. Adjusting the customs exchange rate in tandem with adjustments in the official rate would boost tax collections, while gradually phasing out fuel subsidies would create space for targeted pro-growth and pro-poor social spending. Over time, targeting a gradual reduction in the nonoil primary balance would lower dependence on uncertain oil revenues.

19. Continued efforts are needed to strengthen public financial management. Recent progress to introduce a treasury single account (TSA) should be sustained by (i) strengthening budget formulation and planning, with emphasis on revenue projections and the recently established macro-fiscal unit; (ii) improving the preparation of the medium-term fiscal framework and incorporating it into budget planning; (iii) expanding the coverage of the TSA; and (iv) deploying an integrated financial management system.

Authorities’ Views

20. The authorities acknowledged the challenges posed by low tax revenues for fiscal management. In the short term, they plan to achieve their policy targets by cutting spending to offset revenue shortfalls. Faced with sizable development needs and insufficient external financing, the authorities will rely on domestic financing to cover deficits. To raise revenue, they increased last year the income tax rate (from 15 percent to 30 percent) on cigarette producers and recently introduced royalties on gold production. In line with their Five-Year Program, they plan to expand tax bases—including by reducing exemptions and introducing electronic collection of VAT and other taxes—rather than increase tax rates. They believe that increasing the effective tariff and VAT rates on imports by adjusting the official exchange rate would not increase customs revenues significantly because of high import-price elasticity.

21. The authorities plan to improve the quality of spending and continue to enhance PFM. They will continue to liberalize fuel prices to reduce subsidies. At the same time, they will provide more resources to social programs and productive sectors, including agriculture and infrastructure. Also, the authorities are strengthening the TSA and expanding it to include all government ministries and departments. They also introduced electronic payment systems for salaries and are strengthening internal and external audit.

C. Monetary Policy and Financial Stability

22. Monetary policy should be tightened and instruments to manage liquidity be further developed. Monetary policy is burdened by the government’s large financing needs and by QFAs that lead to sizable liquidity injections. These, and a shortage of liquidity management instruments, undermine the central bank’s ability to control reserve money. In response, the CBOS should continue to adhere to existing limits on advances to government, curtail QFAs by limiting gold purchases to levels consistent with reserve money and international reserve targets, discontinue financing of agriculture, and develop Sharia-compliant securities. To enhance transparency, the CBOS should report all lending to government (including payments of letters of guarantees and wheat subsidies) and QFAs as credit to government.

23. Building on progress to date, the CBOS should continue to upgrade its capacity to supervise and mitigate financial stability risks. Priority areas include: (i) modernizing the framework to deal with weak banks, including by limiting access to “lender of last resort” support to solvent banks, expanding the range of resolution regimes, and empowering CBOS to initiate resolution processes; (ii) divesting CBOS’ equity in commercial banks; (iii) strengthening CBOS’ capacity for financial stability analysis; and (iv) continuing to enforce limits on net foreign exchange positions to mitigate risks stemming from foreign currency mismatches. Moreover, the CBOS should continue to strengthen risk-based AML/CFT supervision.

Authorities’ views

24. The authorities remain committed to their monetary targets. Reserve money growth slowed in the first quarter of 2016 on account of lower QFAs. Moreover, the monetary policy framework was strengthened by the launch of the Liquidity Management Fund in 2014, which reduced CBOS liquidity support for commercial banks. The CBOS will continue to buy gold as an important source of foreign exchange and to reduce smuggling.

25. The authorities noted that despite the strains caused by sanctions and the withdrawal of CBRs, the health of the banking sector has improved—banks are liquid, return on assets is high, and NPL ratios have declined. The banking sector’s net open foreign exchange position is at manageable levels, in line with regulatory limits. The authorities were committed to strengthening the AML/CFT framework, but regretted that sanctions were undermining its effectiveness by encouraging a shift to cash-based and informal transactions.

D. Inclusive Growth

26. Improving the business environment will be key to support the private sector and strengthen economic growth. Sudan is at the bottom twentieth percentile of the 2016 Doing Business rankings. Weaknesses include access to credit, international trade, and investor protection. Addressing these issues by streamlining regulations and liberalizing trade and foreign exchange markets would, together with macroeconomic stability, encourage greater private sector investment and job creation. Furthermore, better public infrastructure (including water and electricity provision) and improved human capital would support private sector development, strengthen growth, and help address the persistently high unemployment rate—at 22 percent in 2015, with higher rates for the youth and women (see Annex II on challenges of inclusive growth and policy options).

27. Staff welcomed plans to launch the preparation of the 2016–20 Poverty Reduction Strategy (PRS). Social safety nets should be expanded and their targeting improved, especially the cash transfer program which currently supports about 500,000 households (20 percent of the poor). Furthermore, strengthening other social programs, including education and health services, is essential to improve social outcomes, expand opportunities, and raise productivity.

Authorities’ views

28. The authorities regretted that sanctions and the withdrawal of CBRs raised formidable obstacles for the business environment and poverty reduction efforts. Despite these obstacles, the authorities’ evaluation of the interim poverty reduction strategy (2012–14), completed recently with World Bank assistance, confirmed that pro-poor spending had increased. The authorities have also launched:

  • Initiatives to improve the business environment, including the automation of tax collection to reduce transactions costs and information campaigns to seek inputs from investors on reforms to encourage investment. The authorities also established a high-level committee to review land laws and regulations to facilitate investment They are encouraging the expansion of bank branches and the development of microfinance, and are strengthening the credit registry of the CBOS to improve access to credit.
  • The preparation of a full PRS incorporating specific policy measures, through a consultative process involving domestic stakeholders and external partners. A household survey, to be completed this year, will document Sudan’s poverty profile. In the meantime, the authorities expanded education and health services to the poor, and plan to expand the coverage of the cash transfer program to 600,000 households in 2017, while strengthening its management and targeting, with World Bank support.

E. External Debt

29. The debt sustainability analysis (DSA) confirms that Sudan continues to be in debt distress. Both public and external debt ratios remain high, and most of the external debt is in arrears. Debt ratios would be higher with GDP valued at the parallel exchange rate (Table 3). Consistent with the results of past DSAs, Sudan’s external debt is assessed to be unsustainable. All external debt indicators breach their indicative thresholds under the baseline scenario, and many of them stay above the thresholds throughout the time horizon of the analysis. It is therefore critical for Sudan to follow sound economic policies, including a prudent borrowing strategy that minimizes non-concessional borrowing and relies instead on grants and concessional financing, and to continue garnering support for debt relief.

30. Sudan is eligible for debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative, but has yet to meet all the requirements. Debt relief hinges on normalizing relations with international creditors, including the Fund (Box 4). The authorities should continue to reach out to creditors to garner support for debt relief and avoid selective servicing of bilateral debt. Staff advised the authorities to extend, together with South Sudan, the “zero option” to avoid a complex and protracted apportionment of external debt.5

31. Staff encouraged the authorities to continue to strengthen cooperation with the Fund on policies and payments. 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. Staff encouraged the authorities to continue to make payments that are at least sufficient to cover Sudan’s obligations falling due, make payments regularly, and increase them in line with improvement in Sudan’s payment capacity.

Authorities’ views

32. The authorities reiterated their commitment to reaching out to international creditors, making quarterly payments to the Fund totaling $10 million per year, and cooperating with the Fund on policies. They were disappointed by lack of progress toward debt relief and noted that the absence of resolution complicated the extension of the “zero option,” which they consider a sovereign decision.

Box 4.Path to Debt Relief

Sudan is eligible for debt relief under the HIPC initiative, but has not yet met all the qualifications. Importantly, it still needs to obtain assurances from bilateral official and commercial creditors that they are willing to consider providing debt relief. As of now, Sudan meets the following conditions for the HIPC initiative:

• Sudan faces an unsustainable debt burden that cannot be addressed through traditional debt relief mechanisms; and

• It has developed an Interim Poverty Reduction Strategy (I-PRSP) document. Sudan’s I-PRSP was assessed by the staffs of the IMF and the World Bank and was discussed by both Boards in September 2013. Sudan is currently developing a full PRSP.

To reach the Decision Point, Sudan would still need to undertake the following:

• Obtain assurances of support for HIPC debt relief from a large majority of creditors representing at least 70 percent of HIPC-eligible debt;

• Establish with the IMF an adequate track record of strong policy performance in the period leading up to the Decision Point, under an SMP judged by the Executive Board to meet the policy standards associated with upper-credit tranche arrangements; and

• Clear its arrears with the IMF, and have a fully financed plan and a timetable to clear arrears with the World Bank and the African Development Bank to restore its eligibility to borrow from these sources.

The resources required for the IMF’s participation in the HIPC Initiative have not yet been identified. As the costs to the IMF for providing debt relief to Sudan were not included in the original costing estimates for the HIPC initiative, additional financing will need to be secured when Sudan is ready to clear its arrears and embark on the HIPC initiative.

F. Statistical Issues

33. Although data provision is broadly adequate for surveillance, there are major shortcomings due to capacity constraints, especially in national accounts and balance of payments statistics. The last published national accounts date from 2010. Absence of FDI survey data impairs compilation of the balance of payments. More resources should be devoted to statistics and data collection.

Authorities’ views

34. The authorities agreed with the need to strengthen economic statistics. They are working to upgrade national account statistics and are seeking support to conduct FDI surveys.

Article VIII

35. Sudan continues to maintain exchange restrictions and multiple currency practices (MCPs) which are subject to Fund jurisdiction under Article VIII. These measures include an exchange rate regime with multiple effective exchange rates and a policy of rationing foreign exchange and allocating it to certain sectors (Box 5). Staff urged the authorities, in line with previous recommendations, to eliminate the restrictions and MCPs. Although these measures were adopted, initially on a temporary basis, for balance of payments reasons and are non-discriminatory, they have persisted, are delaying the external adjustment, and hamper foreign investment.

Authorities’ views

36. The authorities indicated that they were unable to remove all exchange restrictions and MCPs because of continued pressures on the balance of payments following the secession of South Sudan, external sanctions, and the need to finance strategic imports of food, fuel, and medicine. Nevertheless, while not committing to a timetable for their removal, they remain committed to gradually removing exchange restrictions and MCPs as conditions improve.

Box 5:Exchange Rate System

Sudan maintains the following exchange restrictions and multiple currency practices subject to Fund jurisdiction under Article VIII, Sections 2 and 3:

• An exchange restriction arising from the government’s limitations on the availability of foreign exchange and the allocation of foreign exchange to certain priority items;

• A multiple currency practice and exchange restriction arising from the establishment of an official exchange rate (the CBOS rate) for use in all government exchange transactions which in practice differs by more than 2 percent from the rate used by commercial banks;

• A multiple currency practice and exchange restriction arising from large spreads between the CBOS rate and the parallel market exchange rate due to the CBOS’ limitation on the availability of foreign exchange which channels current international transactions to the parallel market; and

• A multiple currency practice and exchange restriction arising from the imposition by the government of a cash margin requirement for most imports.

Staff Appraisal

37. Sudan has made notable progress toward macroeconomic stability and growth following the shock of South Sudan’s secession five years ago. Over the past years, policy measures—including exchange rate adjustments, subsidy reform, and improved social safety nets—helped to contain the fiscal deficit, slow money growth, reduce inflation, and support economic recovery. Institutional reforms strengthened tax collections and public financial management, and social spending increased. Last year, the authorities started implementing a five-year reform plan for growth and poverty reduction, and good harvests boosted growth to close to 5 percent.

38. Despite these efforts, however, large macroeconomic imbalances continue to constrain growth prospects, along with internal conflicts and U.S. sanctions. The external imbalances triggered by the loss of three-quarters of Sudan’s oil exports have yet to be resolved. Domestic and international efforts to end internal conflicts have yet to bear fruit, and the humanitarian situation remains difficult. Sanctions and the withdrawal of CBRs weigh on trade, investment, and growth. Absence of progress toward debt relief limits access to official external financing.

39. External imbalances widened in 2015–16 due to low commodity export prices, expansionary policies, and insufficient exchange rate adjustment. The terms-of-trade shock widened the current account deficit to 6 percent of GDP in 2015, while the already low foreign exchange reserves dropped to 1½ month of imports despite external financial support. The parallel exchange rate continued to depreciate and the premium soared to 125 percent as the official rate remained virtually fixed. The budget deficit widened to 1.9 percent of GDP owing to shortfalls in oil revenue. Inflation, which had been contained last year, rose to 14.3 percent in June 2016.

40. The outlook is subject to significant downside risks. Low commodity export prices, absence of policy buffers, economic sanctions, the withdrawal of CBRs, and a weak business environment will continue to constrain economic activity. Consequently, growth is expected to remain modest in 2016 and beyond. The fiscal framework faces risks due to low tax revenues and uncertain oil revenues. Large external financing gaps are likely to persist, heightening risks of disorderly adjustment in case of shortfalls in external financing. Hence, macroeconomic stability and growth rest on determined and early policy adjustment and mobilization of external aid.

41. Policy consolidation and reforms should be accelerated to achieve macroeconomic stability, address vulnerabilities, and promote inclusive growth. Policies should include greater exchange rate flexibility to help reduce the external trade deficit; increasing fiscal revenue to create space for growth-enhancing public infrastructure and social spending, while reducing the fiscal deficit and tightening monetary policy to contribute to the adjustment and ensure low inflation; enhancing the resilience of the financial sector; strengthening social safety nets to protect the most vulnerable; and accelerating structural reforms to improve the business environment and encourage private investment and job creation.

42. Exchange rate flexibility is needed to reduce external imbalances. Macroeconomic stability will require tight fiscal and monetary policy, but will remain elusive without large upfront exchange rate adjustment, followed by greater flexibility with a view to significantly reducing the parallel market premium. Restoring exchange rate competitiveness and removing foreign exchange distortions will help ensure external stability, diversify the export base, and foster FDI.

43. Fiscal consolidation in the short term would contribute to the external adjustment and help reduce inflation. Containing spending on goods and services and prioritizing capital spending, while protecting social spending, will be needed. At the same, accelerating ongoing revenue administration reforms will help.

44. Over the medium term, domestic revenue mobilization will be critical to generate fiscal space for investment and social spending, and achieve pro-growth fiscal consolidation. Determined implementation of revenue-enhancing measures—such as reducing tax exemptions and increasing the relatively low personal and corporate tax rates—is needed to complement ongoing tax administration reforms and raise Sudan’s low tax revenues, create fiscal space, and reduce the deficit. While fuel subsidies could be maintained in the short term to mitigate the impact of greater exchange rate flexibility, they should be phased out in the medium term to make space for targeted pro-poor spending. Continuing to strengthen PFM, in particular budget planning and the newly introduced treasury single account, would help rationalize policy formulation and execution.

45. Monetary policy should be tightened to keep inflation in check. This will require that the authorities continue to adhere to limits on central bank advances to government, limit QFAs and gold purchases to levels consistent with monetary targets, and develop Sharia-compliant liquidity management instruments. Greater transparency in reporting government financing and QFAs is also needed.

46. The central bank should continue to strengthen its capacity to mitigate financial stability risks. Priority areas include modernizing the framework to deal with weak banks, divesting CBOS’ remaining interests in commercial banks, strengthening CBOS’ capacity for financial stability analysis, and implementing corrective measures to mitigate risks stemming from foreign currency mismatches. Moreover, following the welcome removal of Sudan from the FATF’s “gray list”, strengthening the AML/CFT framework and its implementation should continue.

47. Structural policies should focus on fostering sustained and inclusive growth. Reforms to improve the business environment for the private sector, financial inclusion, and the quality of spending to support human capital will be key to raise growth prospects. Expanding social safety nets and improving their targeting will be critical to reduce poverty. In this context, the full Poverty Reduction Strategy under preparation should provide a coherent framework to tackle Sudan’s development challenges. More resources should be devoted to statistics.

48. Exchange restrictions and multiple currency practices should be removed. These measures do not address the underlying external imbalances and hamper foreign investment. The authorities’ commitment to remove restrictions over time as conditions improve is welcome, and staff urges the authorities to articulate a firm timetable for their removal. The authorities are not requesting approval for the exchange restrictions and MCPs, and no approval is recommended.

49. Sudan should continue to strengthen cooperation with the Fund on policies and payments. 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. Staff welcomes the authorities’ payments to the Fund and strongly encourages them to make payments that are at least sufficient to cover Sudan’s obligations falling due, make payments regularly, and increase them in line with improvement in Sudan’s payment capacity.

50. Garnering international support for debt relief is critical for Sudan’s economic development. Sudan remains in debt distress and is eligible for debt relief under the HIPC Initiative. The large external debt and arrears hinder access to external financing and weigh heavily on development prospects. The authorities should continue to engage with international partners to secure comprehensive support for debt relief and the lifting of sanctions, which would pave the way for foreign investment and financing for growth and poverty reduction. They should minimize non-concessional borrowing and avoid selective servicing of bilateral debt, and rely instead on grants and concessional financing. Extending the “zero option” agreement with South Sudan before it expires in October 2016 would be advisable to avoid a complex and protracted apportionment of external debt between the two countries.

51. Staff proposes that the next Article IV consultation take place on the standard 12-month cycle.

Figure 1.Sudan: Selected Economic Indicators

Source: Sudanese authorities; and IMF staff calculations.

Figure 2.Sudan: Fiscal Sector

Source: Sudanese authorities, and IMF Staff estimates.

Figure 3.Sudan: Monetary Sector

Source: Central Bank of Sudan; International Financial Statistics (IMF); and IMF staff calculations.

Figure 4.Sudan: External Sector

Source: Central Bank of Sudan, and IMF Staff calculations.

Table 1.Sudan: Risk Assessment Matrix 1/ Potential Deviations from Baseline
Source of RisksRelative LikelihoodImpact if RealizedPolicy Responses
Global
1. Sharper-than-expected global growth slowdown, including slowdown in China (low/medium likelihood), in other large emerging markets (medium), and structurally weak growth in key advanced (high) and emerging economies (medium)Low to HighMedium

• Lower exports, FDI and deteriorating external balance.

• Rising pressure on the exchange rate and reserves.

• Lower growth.
• Greater exchange rate flexibility would help cushion the shock and prevent reserve losses.

• Declining revenue and lack of fiscal space would likely require pro-cyclical spending cuts.
2. Heightened risk of fragmentation/ state failure in the Middle East, leading to a sharp rise in migrant flows, with negative global spilloversHighMedium to High

• Lower remittances and weaker external balance.

• Lower growth and high inflation.
Strengthen domestic revenue mobilization to increase social safety nets.

• Mobilize international financing to support refugees.
3. Persistently lower energy prices, triggered by supply factors reversing only graduallyHighMedium to High

• Lower export receipts but also lower import bill.

• Lower inflows from Gulf countries would put pressures on reserves.

• Possible renegotiation of the agreement with South Sudan, lowering oil-related revenues.
• Remove fuel subsidies

• Greater exchange rate flexibility to reduce external pressures and improve competitiveness.

• Increase domestic revenue mobilization to reduce reliance on oil-related revenues.
Regional
4. Oil production in South Sudan declines owing to civil conflictsHighHigh

• Rising fiscal and internal imbalances and inflation.
• Greater exchange rate flexibility to encourage nonoil exports and reduce external imbalances.

• Tight monetary policy would control inflation.

• Rationalize spending and increase domestic revenue mobilization.
5. Heightened tensions between Sudan and South SudanLow to MediumLow to Medium

• Rising military spending.

• Higher budget deficit and its monetization.

• Rising inflation.
• Advance economic and political cooperation with the South to lessen tensions

• Provide assistance to South Sudan refugees and encourage international community to intermediate to reduce tensions.

• Rationalize spending and tighten monetary policy.
Country Specific
6. Failure of the ongoing national dialogue and efforts to address internal conflictsMediumMedium to High

• Low growth.

• Low spending on social and public investment programs.
• Protect social safety nets by prioritizing spending while enhancing domestic revenue to create fiscal space.

• Advance policies for inclusive growth.
7. Sustained breakdown in correspondent bank relations, and reduced financial services by global/regional banksHighHigh

• Drop in exports and imports.

• Lower supply and higher cost of imports fueling inflation.

• Foreign exchange shortage.

• Continued reliance on the informal sector.
• Outreach efforts to restore correspondent banking relationships.

• Tighten monetary policy as needed to control inflation.

• Enhanced exchange rate flexibility would reduce shortages.

• Effective implementation of the AML/CFT framework
8. Sudden stop of financial support from Gulf countriesMediumHigh

• Foreign exchange shortage.

• Exchange rate depreciation.

• Drop in imports.
• Greater exchange rate flexibility.

• Tighten monetary and fiscal policies.

• Implement structural reforms.

• Improve social safety nets.

The Risk Assessment Matrix (RAM) shows events that could materially alter the baseline path (the scenario most likely to materialize in the view of IMF staff). The relative likelihood is the staff’s subjective assessment of the risks surrounding the baseline (“low” is meant to indicate a probability below 10 percent, “medium” a probability between 10 and 30 percent, and “high” a probability between 30 and 50 percent). The RAM reflects staff views on the source of risks and overall level of concern as of the time of discussions with the authorities. Non-mutually exclusive risks may interact and materialize jointly. “Short term” and “medium term” are meant to indicate that the risk could materialize within 1 year and 3 years, respectively.

The Risk Assessment Matrix (RAM) shows events that could materially alter the baseline path (the scenario most likely to materialize in the view of IMF staff). The relative likelihood is the staff’s subjective assessment of the risks surrounding the baseline (“low” is meant to indicate a probability below 10 percent, “medium” a probability between 10 and 30 percent, and “high” a probability between 30 and 50 percent). The RAM reflects staff views on the source of risks and overall level of concern as of the time of discussions with the authorities. Non-mutually exclusive risks may interact and materialize jointly. “Short term” and “medium term” are meant to indicate that the risk could materialize within 1 year and 3 years, respectively.

Table 2.Sudan: Selected Economic Indicators, 2012–17
201220132014201520162017
Proj.
Output and prices(Annual change in percent)
Real GDP (factor cost)−2.25.31.64.93.03.5
Oil−59.057.8−13.2−10.0−7.60.4
Non-oil4.62.82.75.83.63.6
Real GDP (market prices)−3.45.21.64.93.13.5
Consumer prices (end of period)44.441.925.712.616.513.7
Consumer prices (period average)35.436.536.916.913.516.1
Central government(In percent of GDP)
Revenue and grants9.911.012.011.09.89.6
Of which: Nonoil revenues6.98.39.09.08.68.2
Of which: Oil revenues2.62.02.41.70.81.1
Expenditure13.313.313.412.911.911.7
Current11.712.212.311.710.710.5
Capital1.61.11.11.21.21.2
Overall balance−3.3−2.3−1.4−1.9−2.1−2.2
Primary balance−2.2−1.8−0.5−1.1−1.3−1.5
Non-oil primary balance−5.1−4.0−3.0−2.8−2.1−2.7
Public debt94.272.373.872.963.357.1
Monetary sector(Annual changes in percent)
Broad money40.313.017.019.825.522.8
Reserve money46.720.316.021.626.022.0
Credit to the economy34.123.217.620.823.218.7
Balance of payments(In percent of GDP, unless otherwise indicated)
Exports of goods (in US$, annual percent change)−53.7−4.4−9.0−28.813.59.8
Imports of goods (in US$, annual percent change)2.62.3−7.03.2−2.87.5
Merchandise trade balance−5.4−5.9−5.2−6.4−4.8−4.3
Current account balance−9.3−8.7−7.0−7.9−5.9−5.0
Current account balance (cash basis)−6.7−6.2−4.8−5.9−4.2−3.6
Overall balance (cash basis)0.9−0.50.00.7−0.7−1.0
Financing gap (in billions of US$)0.51.3
External debt68.968.765.861.455.949.5
External debt (in billions of US$)43.245.046.850.052.655.6
Gross international reserves (in billions of US$)1.71.61.51.00.80.9
In months of next year’s imports of G&S1.91.91.71.21.01.0
Exchange rate (official SDG/US$, period average)3.64.85.76.0
Sources: Central Bank of Sudan and Ministry of Finance and Economic Planning; and IMF staff estimates and projections.
Sources: Central Bank of Sudan and Ministry of Finance and Economic Planning; and IMF staff estimates and projections.
Table 3.Sudan: Medium-Term Macroeconomic Outlook, 2013–21
201320142015201620172018201920202021
Proj.
Output and prices(Annual change in percent)
Real GDP (at factor cost)5.31.64.93.03.53.53.53.53.5
Oil57.8−13.2−10.0−7.60.41.61.61.71.3
Non-oil2.82.75.83.63.63.63.63.63.6
Consumer prices (end of period)41.925.712.616.513.711.712.213.214.2
Consumer prices (period average)36.536.916.913.516.112.711.912.713.7
GDP deflator31.829.514.612.415.111.711.111.611.6
Investment and savings(In percent of GDP)
Gross national income104.6103.5102.9102.5102.2101.9101.7101.5100.9
Gross domestic expenditure106.5105.3105.9104.3103.6103.4103.1102.9103.3
Final consumption86.988.388.887.787.487.587.186.885.8
Gross capital formation19.617.017.116.616.215.916.016.116.3
Gross Savings11.010.09.210.611.211.311.912.312.6
Central government operations
Revenue and grants11.012.011.09.89.69.49.08.78.3
Revenue10.411.410.79.49.39.28.88.58.1
Nonoil revenues8.39.09.08.68.28.07.77.57.2
Oil revenues 1/2.02.41.70.81.11.21.11.00.9
Taxes6.46.16.25.95.75.75.65.55.3
Expenditure13.313.412.911.911.711.711.711.611.5
Current12.212.311.710.710.510.510.510.410.3
Wages4.83.93.83.93.94.04.04.04.1
Subsidies2.52.62.51.51.31.21.21.11.0
Transfers3.23.02.62.62.72.72.72.72.6
Capital1.11.11.21.21.21.21.21.21.2
Overall balance−2.3−1.4−1.9−2.1−2.2−2.3−2.7−3.0−3.3
Primary balance−1.8−0.5−1.1−1.3−1.5−1.7−2.0−2.3−2.6
Non-oil primary balance−4.0−3.0−2.8−2.1−2.7−2.9−3.1−3.3−3.5
Public debt72.373.872.963.357.153.149.946.944.6
Monetary sector(Annual change in percent, unless otherwise indicated)
Broad money13.017.019.825.522.818.418.719.820.1
Reserve money20.316.021.626.022.018.618.119.020.0
Credit to the economy23.217.620.823.218.717.016.115.015.6
Broad money (percent of GDP)21.318.319.020.421.021.522.223.024.1
Net claims on government (percent of GDP)6.75.36.06.26.46.77.38.09.1
Credit to the economy (percent of GDP)12.311.111.111.711.711.811.911.911.9
External sector(In percent of GDP, unless otherwise indicated)
Exports of goods (in US$, annual percent change)−4.4−9.0−28.813.59.85.65.75.86.7
Imports of goods (in US$, annual percent change)2.3−7.03.2−2.87.57.55.05.66.3
Merchandise trade balance−5.9−5.2−6.4−4.8−4.3−4.0−3.7−3.3−3.1
Current account balance (cash basis)−6.2−4.8−5.9−4.2−3.6−3.4−3.0−2.9−2.8
Financing gap0.00.00.00.51.11.10.90.91.0
External debt service (in percent of exports of G&S)
Commitment basis43.043.451.246.641.839.838.237.337.4
Cash basis2.72.06.03.13.33.73.84.04.4
External debt68.765.861.455.949.545.241.437.834.8
External debt 2/104.2101.399.5120.7117.2115.7113.4109.8106.1
External debt (in billions of US$)45.046.850.052.655.658.761.865.268.9
Gross international reserves (in billions of US$)1.61.51.00.80.91.01.11.11.1
In months of next year’s imports of G&S1.91.71.21.01.01.01.01.00.9
Memorandum items:
Nominal GDP (in billions of SDG)311.6407.8491.3573.6683.8790.9909.71,050.31,207.2
Nominal GDP (in billions of US$)65.571.181.494.1112.2129.8149.3172.4198.2
Exchange rate (official SDG/US$, period average)4.765.746.03
Exchange rate (parallel rate SDG/US$, period average)7.218.839.78
NEER (2007=100, percent change, period average)−26.7−16.1−3.8
REER (2007=100, percent change, period average)−1.911.617.4
Sources: Central Bank of Sudan and Ministry of Finance and Economic Planning; and IMF staff estimates and projections.

Oil sales, oil transit fees, and Transitional Financial Arrangement.

GDP estimated at the parallel exchange rate.

Sources: Central Bank of Sudan and Ministry of Finance and Economic Planning; and IMF staff estimates and projections.

Oil sales, oil transit fees, and Transitional Financial Arrangement.

GDP estimated at the parallel exchange rate.

Table 4a.Sudan: Balance of Payments, 2013–21(In millions of U.S. dollars)
201320142015201620172018201920202021
Q1Proj.Proj
Current account balance−5,668−5,000−6,413−1,165−5,589−5,648−5,980−6,160−6,549−7,190
Current account balance (cash basis)−4,083−3,392−4,823−767−3,998−4,050−4,375−4,548−4,929−5,561
Trade balance−3,832−3,664−5,207−1,010−4,541−4,798−5,231−5,465−5,760−6,101
Oil5387−420−5−254−243−244−217−156−135
Non-oil−4,370−3,671−4,787−1,005−4,288−4,556−4,987−5,248−5,604−5,966
Exports, f.o.b.4,8944,4523,1696693,5973,9504,1694,4074,6634,975
Oil1,8211,358627108502585637695756843
Crude oil1,7191,19457496460535583636692771
Petroleum products1021635312435054596472
Non-oil3,0733,0952,5425613,0953,3653,5323,7123,9064,132
Of which: Gold1,0481,2717261541,1221,2331,3101,3801,4501,537
Imports, f.o.b.−8,726−8,116−8,376−1,679−8,138−8,748−9,400−9,872−10,423−11,075
Oil−1,284−1,350−1,047−113−756−827−881−913−912−977
Non-oil−7,443−6,766−7,329−1,566−7,382−7,921−8,519−8,959−9,511−10,098
Services (net)−456−69421175502787875892779440
Receipts1,5742,0062,1945462,2252,6392,8662,9822,9862,785
Of which: Oil transit fees12334121348207347347347347347
Of which: TFA transfers 1/248438427962553564754753540
Payments−2,030−2,075−1,774−371−1,724−1,853−1,991−2,091−2,207−2,346
Income (net)−2,876−2,391−2,287−532−2,303−2,409−2,423−2,468−2,516−2,563
Receipts93841020−187193349
Non-oil payments−2,636−2,156−2,196−515−2,219−2,260−2,305−2,351−2,403−2,462
Public interest due−1,672−1,668−1,670−418−1,678−1,702−1,730−1,757−1,790−1,830
Of which: cash payments−87−60−80−20−86−104−124−145−170−201
Other payments−964−488−525−97−541−557−575−594−613−632
Oil-related payments−249−273−132−18−104−130−124−136−146−150
Current transfers (net)1,4951,1246602037537727988819481,033
Private930505326108342359377434456478
Official56561933495411413421447492555
Capital and financial account2,1221,5174,3651,2673,1222,6602,8143,0133,2283,437
Capital account31420225049289345399459530609
Financial account (net)1,8091,3154,1151,2182,8322,3152,4152,5542,6982,828
Disbursements344283470118387447474502532564
Amortization−381−406−351−88−309−328−344−338−333−343
Of which: Cash payments−90−68−240−23−93−115−138−135−133−137
Net foreign assets of banks (increase -)228−642230000000
Investors’ net income—cost oil−515−301−136−24−323−478−489−488−488−493
Foreign direct investment and portfolio (net)1,9171,5611,8703632,1302,2042,2822,3612,4442,530
Other capital flows (net)2152422,039849947469493517543570
Public 2/58291,58944750000000
Private158213450402447469493517543570
Errors and omissions1,3671,537−223−528000000
Overall balance−2,180−1,947−2,270−426−2,468−2,988−3,166−3,148−3,322−3,753
Overall balance (cash basis)−304−1−57037−660−1,177−1,354−1,332−1,502−1,918
Financing2,1801,9472,2704261,9631,7101,7641,7601,7541,835
Change in net international reserves (increase -)3061570−26155−101−48−56−660
Gross reserves78150458−26155−101−48−56−660
Short-term foreign liabilities (increase +)228−1501120000000
IMF (net)−6−10−10−3−10−10−10−10−10−10
Exceptional financing (change in arrears)1,8741,9461,7004521,8081,8111,8121,8151,8201,835
Financing gap00005051,2781,4021,3881,5681,918
Memorandum items:
Exports of goods (annual change in percent)−4.4−9.0−28.80.013.59.85.65.75.86.7
Non-oil exports of goods (annual change in percent)−1.20.7−17.90.021.78.75.05.15.25.8
Imports of goods (annual change in percent)2.3−7.03.20.0−2.87.57.55.05.66.3
Crude oil exports (in millions of barrels, annual)15.813.712.43.211.611.612.212.813.514.9
Sudanese crude oil price (US$ per barrel)94.687.346.229.639.646.147.849.751.451.8
Terms of trade (annual change, in percent)−13.9−6.7−15.410.57.31.91.11.12.0
Import prices−3.0−4.3−15.0−3.62.61.01.31.20.8
Export prices−16.5−10.7−28.16.510.22.92.42.42.8
External debt45,02246,78149,97049,06552,62055,58758,69061,82065,17368,904
External debt (percent of GDP)65.565.861.458.055.949.545.241.437.834.8
Arrears to the IMF1,5091,4231,3491,369.51,3411,3351,3301,3271,3211,312
Gross International reserves1,6121,4611,0031,1918489499971,0531,1181,118
In months of next year’s imports of G&S1.91.71.21.41.01.01.01.01.01.0
Nominal GDP65,50771,08181,44494,148112,246129,817149,315172,393198,158
Sources: Central Bank of Sudan; and IMF staff estimates and projections.

TFA: Transitional financial arrangement of September 2012 between Sudan and South Sudan.

Includes deposits at the central bank.

Sources: Central Bank of Sudan; and IMF staff estimates and projections.

TFA: Transitional financial arrangement of September 2012 between Sudan and South Sudan.

Includes deposits at the central bank.

Table 4b.Sudan: Balance of Payments, 2013–21(In percent of GDP)
201320142015201620172018201920202021
Q1Proj.Proj
Current account balance−8.7−7.0−7.9−1.2−5.9−5.0−4.6−4.1−3.8−3.6
Current account balance (cash basis)−6.2−4.8−5.9−0.8−4.2−3.6−3.4−3.0−2.9−2.8
Trade balance−5.9−5.2−6.4−1.1−4.8−4.3−4.0−3.7−3.3−3.1
Oil0.80.0−0.50.0−0.3−0.2−0.2−0.1−0.1−0.1
Non-oil−6.7−5.2−5.9−1.1−4.6−4.1−3.8−3.5−3.3−3.0
Exports, f.o.b.7.56.33.90.73.83.53.23.02.72.5
Oil2.81.90.80.10.50.50.50.50.40.4
Non-oil4.74.43.10.63.33.02.72.52.32.1
Of which: Gold1.61.80.90.21.21.11.00.90.80.8
Imports, f.o.b.−13.3−11.4−10.3−1.8−8.6−7.8−7.2−6.6−6.0−5.6
Oil−2.0−1.9−1.3−0.1−0.8−0.7−0.7−0.6−0.5−0.5
Non-oil−11.4−9.5−9.0−1.7−7.8−7.1−6.6−6.0−5.5−5.1
Services (net)−0.7−0.10.50.20.50.70.70.60.50.2
Of which: Oil transit0.20.50.30.10.20.30.30.20.20.2
Of which: TFA transfers 1/0.40.60.50.10.30.30.40.30.20.0
Income (net)−4.4−3.4−2.8−0.6−2.4−2.1−1.9−1.7−1.5−1.3
Non-oil payments−4.0−3.0−2.7−0.5−2.4−2.0−1.8−1.6−1.4−1.2
Oil-related payments−0.4−0.4−0.20.0−0.1−0.1−0.1−0.1−0.1−0.1
Current transfers (net)2.31.60.80.20.80.70.60.60.50.5
Private1.40.70.40.10.40.30.30.30.30.2
Official0.90.90.40.10.40.40.30.30.30.3
Capital and financial account3.22.15.41.33.32.42.22.01.91.7
Capital account0.50.30.30.10.30.30.3S0.30.3
Disbursements (net)−0.1−0.20.10.00.10.10.10.10.10.1
Net foreign assets of banks (increase -)0.3−0.10.30.00.00.00.00.00.00.0
Investors’ net income—cost oil−0.8−0.4−0.20.0−0.3−0.4−0.4−0.3−0.3−0.2
Foreign direct investment and portfolio (net)2.92.22.30.42.32.01.81.61.41.3
Other capital flows (net)0.30.32.50.91.00.40.40.30.30.3
Overall balance−3.3−2.7−2.8−0.5−2.6−2.7−2.4−2.1−1.9−1.9
Overall balance (cash basis)−0.50.0−0.70.0−0.7−1.0−1.0−0.9−0.9−1.0
Exceptional financing (change in arrears)2.92.72.10.51.91.61.41.21.10.9
Financing gap0.00.00.00.00.51.11.10.90.91.0
Sources: Central Bank of Sudan; and IMF staff estimates and projections.

TFA: Transitional financial arrangement of September 2012 between Sudan and South Sudan.

Sources: Central Bank of Sudan; and IMF staff estimates and projections.

TFA: Transitional financial arrangement of September 2012 between Sudan and South Sudan.

Table 5a.Sudan: Central Government Operations, 2013–21(In billions of Sudanese pounds)
201320142015201620172018201920202021
BudgetEst.BudgetQ1Proj.Proj.
Revenue and grants34.349.061.454.267.512.256.565.574.482.190.999.7
Revenue32.346.559.152.565.011.754.063.872.680.288.897.3
Of which: Nonoil revenue25.936.942.844.352.710.949.656.063.170.478.586.8
Taxes19.924.928.930.535.67.533.839.245.150.957.564.1
Goods and services11.213.916.618.521.64.621.325.129.233.438.142.9
International trade and transactions6.87.99.28.710.42.08.89.911.012.013.314.3
Income, profits, property and others1.83.13.23.33.60.93.74.24.85.56.16.9
Oil revenue6.49.616.38.212.30.84.47.89.59.910.310.6
Oil sales6.45.88.54.25.10.52.64.15.05.45.86.1
Transitional Financial Arrangement0.02.54.12.54.10.21.22.22.92.92.92.9
Oil transit fees0.01.33.81.53.10.10.71.61.61.61.61.6
Other revenue6.112.013.913.817.13.415.816.818.119.421.022.7
Fuel stabilization fees4.310.310.411.112.52.811.111.311.712.112.513.0
Property income1.00.92.11.52.60.22.63.13.64.14.85.5
Administrative fees0.70.81.41.12.00.32.02.42.83.23.74.2
Grants2.02.62.21.72.50.52.51.81.81.92.12.4
Total expenditure41.554.867.263.477.014.868.480.392.5106.5122.2139.3
Expense (current expenditure)38.150.159.857.466.913.461.472.082.995.4109.3124.6
Wages14.915.818.718.522.45.022.427.031.336.141.949.1
Goods and services2.85.76.96.98.71.87.99.511.012.714.616.8
Interest1.53.53.83.64.20.94.24.45.16.57.38.4
Foreign0.40.70.80.81.20.11.21.61.92.22.63.1
Domestic1.12.83.02.83.00.83.02.83.24.34.75.3
Subsidies7.910.510.212.49.21.68.48.89.710.511.111.7
Fuel6.68.07.89.77.71.36.98.89.710.511.111.7
Wheat1.32.62.42.71.50.31.50.00.00.00.00.0
Transfers10.112.116.712.919.13.615.118.121.024.228.031.4
States (current)7.17.68.78.810.12.510.112.214.216.318.920.9
States (capital)2.74.47.83.98.81.14.85.76.67.68.810.1
Other transfers0.20.10.20.10.20.00.20.20.30.30.40.4
Other current0.92.43.53.13.40.53.44.14.75.46.37.2
Of which: Social spending0.62.01.92.02.50.52.53.03.54.04.65.3
Net acquisition of nonfinancial assets (capital exp.)3.34.67.46.010.11.47.08.49.711.112.914.8
Overall balance−7.1−5.8−5.9−9.2−9.6−2.6−11.9−14.8−18.2−24.4−31.3−39.6
Primary balance−5.6−2.2−2.1−5.6−5.4−1.8−7.7−10.4−13.1−17.9−24.0−31.3
Nonoil primary balance 1/−12.0−11.8−18.4−13.8−17.7−3.1−12.2−18.2−22.5−27.8−34.3−41.8
Financing7.13.85.912.09.61.011.914.818.224.431.339.6
Foreign financing1.10.90.5−0.43.00.51.82.02.02.22.42.6
Disbursements2.11.63.91.45.50.82.42.72.93.13.23.4
Principal repayments−1.0−0.7−3.5−1.8−2.6−0.3−0.6−0.7−0.8−0.8−0.8−0.8
Domestic financing6.13.05.412.58.70.510.112.816.122.228.937.0
CBOS 2/4.91.48.0−0.23.93.65.28.311.717.1
Of which: Wheat subsidies1.32.02.70.30.0−1.5−1.5−1.5−1.5−0.3
Commercial banks0.31.22.40.22.23.13.03.33.90.3
Nonbanks−2.52.54.00.65.16.18.010.613.319.6
Change in net domestic arrears3.3−2.1−2.2−2.0−0.80.0−1.20.00.00.00.00.0
Accumulation of arrears3.80.00.00.00.00.00.00.00.00.00.00.0
Repayment of arrears−0.5−2.1−2.2−2.0−0.80.0−1.20.00.00.00.00.0
Discrepancy0.01.90.0−2.90.01.60.00.00.00.00.00.0
Memorandum items:
Fiscal burden of fuel subsidies9.02.7−2.5−1.2−4.8−4.2−2.4−2.0−1.6−1.4−1.3
Budgetary net fuel subsidies 3/2.4−2.3−2.6−1.3−4.8−4.2−2.4−2.0−1.6−1.4−1.3
Crude oil subsidies 4/6.75.00.10.10.00.00.00.00.00.00.0
Public debt225.1300.9358.2363.1390.6420.2453.6492.7538.8
External192.3257.0294.2310.1328.0346.7365.5385.7408.2
Domestic 5/32.943.964.053.062.673.688.1107.0130.6
Sources: Ministry of Finance and Economic Planning; and IMF staff estimates and projections.

Primary balance minus oil revenue

In the CBOS balance sheet, wheat subsidy obligations are classified as “other items net”; this explains the difference in net credit to government between the fiscal and monetary tables.

Fuel subsidies minus fuel stabilization fees.

Until 2015, crude oil subsidies, which were not included in the budget, arose from the government’s sales of crude oil to state-owned refineries at a discounted price.

Staff estimates and projections.

Sources: Ministry of Finance and Economic Planning; and IMF staff estimates and projections.

Primary balance minus oil revenue

In the CBOS balance sheet, wheat subsidy obligations are classified as “other items net”; this explains the difference in net credit to government between the fiscal and monetary tables.

Fuel subsidies minus fuel stabilization fees.

Until 2015, crude oil subsidies, which were not included in the budget, arose from the government’s sales of crude oil to state-owned refineries at a discounted price.

Staff estimates and projections.

Table 5b.Sudan: Central Government Operations, 2013–21(In percent of GDP)
201320142015201620172018201920202021
BudgetEst.BudgetQ1Proj.Proj.
Revenue and grants11.012.012.511.011.82.19.89.69.49.08.78.3
Revenue10.411.412.010.711.32.09.49.39.28.88.58.1
Of which: Nonoil revenue8.39.08.79.09.21.98.68.28.07.77.57.2
Taxes6.46.15.96.26.21.35.95.75.75.65.55.3
Goods and services3.63.43.43.83.80.83.73.73.73.73.63.6
International trade and transactions2.21.91.91.81.80.31.51.41.41.31.31.2
Income, profits, property and others0.60.80.60.70.60.20.60.60.60.60.60.6
Oil revenue2.02.43.31.72.10.10.81.11.21.11.00.9
Oil sales2.01.41.70.80.90.10.40.60.60.60.60.5
Transitional Financial Arrangement0.00.60.80.50.70.00.20.30.40.30.30.2
Oil transit fees0.00.30.80.30.50.00.10.20.20.20.10.1
Other revenue1.92.92.82.83.00.62.72.52.32.12.01.9
Fuel stabilization fees1.42.52.12.32.20.51.91.71.51.31.21.1
Property income0.30.20.40.30.50.00.50.50.50.50.50.5
Administrative fees0.20.20.30.20.30.10.30.30.30.30.30.3
Grants0.70.60.50.30.40.10.40.30.20.20.20.2
Total expenditure13.313.413.712.913.42.611.911.711.711.711.611.5
Expense (current expenditure)12.212.312.211.711.72.310.710.510.510.510.410.3
Wages4.83.93.83.83.90.93.93.94.04.04.04.1
Goods and services0.91.41.41.41.50.31.41.41.41.41.41.4
Interest0.50.90.80.70.70.20.70.60.60.70.70.7
Foreign0.10.20.20.20.20.00.20.20.20.20.20.3
Domestic0.40.70.60.60.50.10.50.40.40.50.50.4
Subsidies2.52.62.12.51.60.31.51.31.21.21.11.0
Fuel2.12.01.62.01.30.21.21.31.21.21.11.0
Wheat0.40.60.50.50.30.00.30.00.00.00.00.0
Transfers3.23.03.42.63.30.62.62.72.72.72.72.6
States (current)2.31.91.81.81.80.41.81.81.81.81.81.7
States (capital)0.91.11.60.81.50.20.80.80.80.80.80.8
Other transfers0.10.00.00.00.00.00.00.00.00.00.00.0
Other current0.30.60.70.60.60.10.60.60.60.60.60.6
Of which: Social spending0.20.50.40.40.40.10.40.40.40.40.40.4
Net acquisition of nonfinancial assets (capital exp.)1.11.11.51.21.80.31.21.21.21.21.21.2
Overall balance−2.3−1.4−1.2−1.9−1.7−0.5−2.1−2.2−2.3−2.7−3.0−3.3
Primary balance−1.8−0.5−0.4−1.1−0.9−0.3−1.3−1.5−1.7−2.0−2.3−2.6
Nonoil primary balance 1/−4.0−3.0−3.8−2.8−3.1−0.5−2.1−2.7−2.9−3.1−3.3−3.5
Financing2.30.91.22.51.70.22.12.22.32.73.03.3
Foreign financing0.30.20.1−0.10.50.10.30.30.30.20.20.2
Disbursements0.70.40.80.31.00.10.40.40.40.30.30.3
Principal repayments−0.3−0.2−0.7−0.4−0.4−0.1−0.1−0.1−0.1−0.1−0.1−0.1
Domestic financing1.90.71.12.51.50.11.81.92.02.42.83.1
CBOS 2/1.60.31.60.00.70.50.70.91.11.4
Of which: Wheat subsidies0.40.50.50.00.0−0.2−0.2−0.2−0.10.0
Commercial banks0.10.30.50.00.40.50.40.40.40.0
Nonbanks−0.80.60.80.10.90.91.01.21.31.6
Change in net domestic arrears1.1−0.5−0.4−0.40.0−0.20.00.00.00.00.0
Accumulation of arrears1.20.00.00.00.00.00.00.00.00.00.0
Repayment of arrears−0.2−0.5−0.4−0.40.0−0.20.00.00.00.00.0
Discrepancy0.00.50.0−0.60.00.30.00.00.00.00.00.0
Memorandum items:
Fiscal burden of fuel subsidies2.90.7−0.5−0.2−0.8−0.7−0.4−0.3−0.2−0.1−0.1
Budgetary net fuel subsidies 3/0.8−0.6−0.5−0.3−0.8−0.7−0.4−0.3−0.2−0.1−0.1
Crude oil subsidies 4/2.11.20.00.00.00.00.00.00.00.00.0
Public debt72.373.872.963.357.153.149.946.944.6
External61.763.059.954.148.043.840.236.733.8
Domestic 5/10.510.813.09.29.29.39.710.210.8
Sources: Ministry of Finance and Economic Planning; and IMF staff estimates and projections.

Primary balance minus oil revenue.

In the CBOS balance sheet, wheat subsidy obligations are classified as part of "other items net"; this explains the difference in net credit to government between the fiscal and monetary tables.

Fuel subsidies minus fuel stabilization fees.

Until 2015, crude oil subsidies, which were not included in the budget, arose from the government’s sales of crude oil to state-owned refineries at a discounted price.

Staff estimates and projections.

Sources: Ministry of Finance and Economic Planning; and IMF staff estimates and projections.

Primary balance minus oil revenue.

In the CBOS balance sheet, wheat subsidy obligations are classified as part of "other items net"; this explains the difference in net credit to government between the fiscal and monetary tables.

Fuel subsidies minus fuel stabilization fees.

Until 2015, crude oil subsidies, which were not included in the budget, arose from the government’s sales of crude oil to state-owned refineries at a discounted price.

Staff estimates and projections.

Table 6.Sudan: Monetary Survey, 2013–17(In millions of Sudanese pounds)
20132014201520162017
MayProj.Proj.
Net foreign assets−12,719−12,550−26,600−30,204−32,910−39,142
Central Bank of Sudan−15,418−15,702−28,521−32,408−34,832−41,063
Commercial banks2,7003,1521,9212,2041,9211,921
Net domestic assets79,16490,289119,703134,170149,797182,717
Net domestic credit68,01575,29392,14696,405110,900131,678
Net claims on general government (NCGG)29,56630,07837,51937,11743,62051,818
NCGG excluding IMF20,96721,63029,30428,76435,42743,630
Central Bank of Sudan13,50312,92318,19117,46022,07627,188
Commercial banks7,4648,70711,11311,30413,35116,443
Claims on nongovernment sectors38,44945,21554,62759,28867,28079,860
Public enterprises4,0046,0089,0719,38411,79313,562
Private sector33,03435,92041,60646,02950,21860,205
Other1,4113,2863,9493,8745,2696,094
Other items (net)11,14914,99727,55837,76538,89751,039
Broad money (M2)66,44677,73993,103103,965116,886143,575
Money47,30956,19965,60972,05082,368100,115
Currency in circulation19,17823,34327,49529,53034,63642,263
Demand deposits28,13032,85538,11342,52147,73257,852
Domestic currency16,48719,74225,36329,35532,55940,809
Foreign currency11,64313,11412,75013,16615,17417,043
Quasi-money19,13721,54027,49531,91534,51843,460
Domestic currency15,39419,03824,49729,17331,13139,527
Foreign currency3,7432,5032,9982,7423,3873,933
(Change in percent, end of period)
Broad money13.017.019.833.725.522.8
Money12.618.816.728.225.521.5
Currency in circulation14.521.717.826.526.022.0
Demand deposits11.416.816.029.425.221.2
Quasi-money14.012.627.648.225.525.9
Deposits12.415.121.836.818.723.5
Domestic currency13.021.628.650.927.726.1
Foreign currency11.31.50.81.917.913.0
Net foreign assets−74.71.3−111.9−140.7−23.7−18.9
Net domestic assets19.814.132.648.625.122.0
Net claims on government24.81.724.7−1.116.318.8
Credit to the economy23.217.620.831.123.218.7
Public enterprises26.350.051.056.230.015.0
Private sector22.58.715.828.120.719.9
(In percent)
Broad money to GDP21.318.319.020.020.421.0
Money to broad money71.272.370.569.370.569.7
Currency in circulation to M228.930.029.528.429.629.4
Private sector deposits to M260.462.862.663.059.259.6
Net claims on government to GDP6.75.36.05.56.26.4
Credit to the economy to GDP12.311.111.111.311.711.7
Velocity (GDP/M2, eop)4.75.25.35.14.94.8
Foreign currency deposits to M223.220.116.915.315.914.6
Money multiplier (M2/reserve money eop)1.81.81.81.91.81.8
Sources: Central Bank of Sudan; and IMF staff estimates and projections.
Sources: Central Bank of Sudan; and IMF staff estimates and projections.
Table 7.Sudan: Summary Accounts of the Central Bank, 2013–17(In millions of Sudanese pounds)
20132014201520162017
MayProj.Proj.
Net foreign assets−15,418−15,702−28,521−32,408−34,832−41,063
Foreign assets9,4959,0306,4017,6665,4126,057
Of which: Gross international reserve9,1798,7266,1107,3525,1665,782
Of which: SDR holdings1,0981,0631,0841,0791,0841,084
Foreign liabilities24,91324,73234,92240,07440,24347,121
Of which: Short-term foreign liabilities7,1606,6147,4279,3499,7239,723
Of which: IMF-related liabilities10,1599,9909,7209,8879,6499,600
Net domestic assets51,88958,02579,98586,28799,660120,168
Net domestic credit25,91225,46032,61133,13039,25246,859
Net claims on general government (NCGG)22,10321,37126,40625,81330,26935,375
NCGG excluding IMF13,50312,92318,19117,46022,07627,188
Claims23,10922,79827,38028,34331,35836,519
Of which: IMF on-lent8,5998,4488,2158,3538,1938,188
Deposits1,0061,4269742,5301,0891,143
Claims on public enterprises7928941,1701,2371,4381,938
Claims on banks2,8313,1955,0356,0807,5459,545
Money market instruments18700000
Other items (net)25,97732,56547,37453,15760,40873,309
Reserve money36,47142,32351,46453,87964,82979,105
Currency outside banks19,17823,34327,49529,53034,63642,263
Reserves of commercial banks13,89717,80620,98820,86526,62632,707
Required reserves3,9754,5095,2445,2876,6068,060
Excess reserves9,92213,29715,74415,57820,02024,646
Cash in vault1,2341,7171,8452,5862,3242,836
Excess reserves on deposits8,68711,58013,89912,99217,69621,810
Deposits at CBOS included in broad money3,3951,1752,9813,4843,5674,135
(Change in percent, end of period)
Net foreign assets7.3−1.8−81.6−13.6−22.1−17.9
Foreign assets24.9−4.9−29.119.8−15.511.9
Gross international reserve25.9−4.9−30.020.3−15.511.9
Foreign liabilities2.8−0.741.214.815.217.1
Net domestic assets0.211.837.87.924.620.6
Net domestic credit2.9−1.728.11.620.419.4
Net claims on general government3.5−3.323.6−4.014.616.9
Other items (net)−2.325.445.512.227.521.4
Reserve money20.316.021.611.426.022.0
Memorandum items:
Gross international reserves (in millions of US$)1,6121,4611,0031,207848949
Net international reserves (in millions of US$)355354−216−328−371−270
Sources: Central Bank of Sudan; and IMF staff estimates and projections.
Sources: Central Bank of Sudan; and IMF staff estimates and projections.
Table 8.Sudan: Summary Accounts of the Commercial Banks, 2013–17(In millions of Sudanese pounds)
20132014201520162017
MayProj.Proj.
Net foreign assets2,7003,1521,9212,2041,9211,921
Foreign assets4,6965,1493,8594,2323,8593,859
Foreign liabilities1,9961,9971,9372,0281,9371,937
Net domestic assets42,71753,55266,04672,87980,33899,261
Reserves14,44019,52322,83322,18128,95035,543
Cash in vaults1,2341,7171,8452,5862,3242,836
Required reserves4,0294,5735,3165,3516,7418,276
Other reserves9,09812,60014,65614,24219,88524,431
Net claims on central government7,4648,70711,11311,30413,35116,443
Claims on state & local government9661,9232,0462,1452,1492,256
Claims on non-government sectors36,69142,39851,41055,90565,84277,922
Private sector33,03435,92041,60646,02953,28663,062
Non-financial public enterprises3,2135,1147,9018,14710,11911,976
Non-bank financial institutions4441,3641,9031,7292,4372,884
Other items, net−16,844−18,998−21,357−18,656−29,953−32,903
Deposits43,87253,22162,62770,94978,68397,177
Demand deposits27,53732,49837,19840,72946,73457,719
Domestic currency15,89319,38424,44827,56330,71637,935
Foreign currency11,64313,11412,75013,16616,01919,784
Quasi-money deposits (time & saving)16,33520,72325,43030,22331,94939,458
Domestic currency15,39419,03624,48429,17330,76137,991
Foreign currency9421,6879461,0501,1881,467
Liabilities to CBOS 1/1,5442,8513,1934,1313,5764,005
Memorandum items:
Deposits with commercial banks43,99853,28862,70671,02178,77097,272
Central government1266779728795
Other sectors43,87253,22162,62770,94978,68397,177
State and local government deposits1,7442,0572,4242,7723,0143,722
Public enterprises deposits2,0112,3752,5442,6763,1623,906
Private sector deposits40,11748,79058,32865,50172,50789,549
(In percent)
Credit to deposits85.883.385.481.886.482.5
Reserves to deposits31.633.433.529.433.833.7
Required reserves to deposits9.08.58.47.48.48.3
Excess reserves to deposits22.625.025.121.925.425.4
Cash to deposits2.83.22.93.63.02.9
Claims on government to reserves54.649.353.354.550.550.6
Sources: Central Bank of Sudan; and IMF staff estimates and projections.

The difference between commercial banks’ liabilities to CBOS and CBOS’s claims on banks (Table 6) is due to misclassification of government guarantees.

Sources: Central Bank of Sudan; and IMF staff estimates and projections.

The difference between commercial banks’ liabilities to CBOS and CBOS’s claims on banks (Table 6) is due to misclassification of government guarantees.

Table 9.Sudan: Financial Soundness Indicators for the Banking Sector, 2010-16
2010201120122013201420152016Q1
(In percent, unless otherwise indicated)
Capital Adequacy
Regulatory capital to risk-weighted assets10.013.012.016.618.020.221.0
Regulatory Tier I capital to risk-weighted assets8.911.010.514.515.418.718.8
Asset composition and quality
Gross nonperforming loans (NPLs) to gross loans14.412.611.88.47.15.15.1
NPLs net of provisions to gross loans10.47.67.53.82.70.50.7
NPLs net of provisions to capital43.733.336.516.712.83.04.0
Loans provisions to NPLs31.739.833.553.661.090.685.5
Foreign currency loans to total loans13.79.015.711.88.76.05.6
Deposits and investment accounts to total assets63.963.563.462.262.863.464.9
Foreign currency deposits to total deposits22.018.727.031.925.721.419.8
Earnings and Profitability 1/
Return on assets (before tax)3.94.24.43.74.04.01.0
Return on equity (before tax)26.527.836.429.633.737.18.7
Liquidity
CBOS deposits to total assets10.813.117.516.518.318.517.3
Required reserves to total assets3.23.55.55.05.14.94.5
Required reserves to total reserves25.523.928.627.824.824.123.9
Cash in vault to total assets1.92.12.01.92.82.02.0
Liquid assets to total assets35.336.341.739.539.137.435.8
Liquid assets to total short-term liabilities98.293.8102.599.599.398.590.8
Source: Central Bank of Sudan.

Figures for 2016Q1 are not annualized.

Source: Central Bank of Sudan.

Figures for 2016Q1 are not annualized.

Annex I. External Stability Assessment

Overall Assessment

1. Sudan’s external position continues to be weak and vulnerable to shocks. Exchange rate misalignment, U.S. sanctions, withdrawal of CBRs, and high costs of doing business have constrained Sudan’s ability to adjust to the sharp decline in export proceeds following the secession of South Sudan in 2011. As a result, five years on, the external current account deficit remains large and international reserves precariously low. Sudan is also vulnerable to external shocks owing to its narrow and commodity-based exports. Applying the EBA-lite methodology, staff estimates that the real effective exchange rate is overvalued by about 50 percent relative to economic fundamentals. Greater exchange rate flexibility and structural reforms, supported by tighter fiscal and monetary policies, are needed to improve competitiveness and foster private sector investment in the tradable sector. The removal of sanctions, clearance of external arrears, and debt relief will be critical factors to improve durably the external position.

Recent Developments

2. The external current account deficit (on a cash basis) widened to 5.9 percent of GDP in 2015. Exports dropped by 29 percent while imports increased by 3.2 percent. The decline in exports was mainly due to sharp drops in prices of Sudan’s main exports—oil, livestock, sesame seeds, and gold—which declined by 8–47 percent from a year ago.

Exchange Rates

(In SDG per US dollar and percent)

Source: Central Bank of Sudan.

3. The official exchange rate remained virtually fixed in 2015–16. The official rate was adjusted by only 2 percent, while the parallel market exchange rate depreciated by 36 percent since end-2014. As a result, the premium widened to 125 percent at end-June 2016 (from 46 percent at end-2014).

Nominal and Real Effective Exchange Rates

(January 2011 - April 2016)

Source: IMF staff calculations.

Price Competitiveness

4. Based on the official rate, the real effective exchange rate (REER) appreciated by 17 percent between December 2014 and April 2016. The appreciation of the official REER reflected Sudan’s high inflation relative to trading partners and the quasi-fixed official exchange rate in 2015–16. It wiped out the real depreciation that followed the devaluations in June 2012 and September 2013. On the parallel market, the 18 percent REER depreciation between December 2014 and April 2016 still resulted in a cumulative appreciation of 15 percent since end-2012.

5. The real effective exchange rate is overvalued. A number of factors lead to this conclusion: (i) the large current account deficit; (ii) low international reserves; (iii) the widening gap between the official and the parallel market rates; (iv) appreciation of the REER in 2013–15; and (v) the weak external payment capacity as evidenced by the continued accumulation of external arrears.

6. Estimates from the EBA-lite methodology suggest that the real exchange rate is overvalued by about 50 percent relative to economic fundamentals. Based on the Fund’s External Balance Assessment methodology (EBA-lite), the current account norm-the equilibrium current account balance determined by medium-term values of the fiscal balance, relative income level, demographic characteristics, and productivity differentials-is estimated at -2 percent of GDP. Compared to the actual current account balance of -5.9 percent in 2015,1 this implies a current account gap of about 3.9 percent of GDP, which reflects an external position that is substantially weaker than implied by fundamentals. The current account gap together with a low long-term elasticity of the current account to the real exchange rate of -0.077,2 suggests that the real exchange rate is overvalued by about 50 percent.3 These model-based estimates, however, should be interpreted with caution given that Sudan faces a specific set of external constraints, such as U.S. sanctions on trade and financial transactions, which worsen the current account and are not captured by the model.

Non-Price Competitiveness

7. Weak institutions and an unfavorable business environment undermine competitiveness. Sudan ranks at a low 159th among 189 countries in 2016 World Bank Doing Business survey4. Trading across borders, access to credit, and investor protection are rated lowest. In addition to domestic constraints on the business climate, U.S. sanctions and withdrawal of CBRs impose high costs on international trade and finance. The World Bank’s Country Policy and Institutional Assessment 2015 report5 classifies Sudan as a weak performer with an overall score of 2.4, compared to 3.2 for Sub- Saharan African countries. In particular, Sudan scores poorly in public sector management and institutions

Doing Business Report 2016

Source: WB Doing Business Report 2016 and IMF staff calculations.

Reserve Adequacy

8. Gross international reserves have remained low over the past several years, leaving Sudan vulnerable to external shocks. In May 2016, reserves stood at only $1.2 billion (1.4 months of imports) despite an estimated $2.1 billion in foreign deposits at the central bank over the previous 12 months. Given the sizable external imbalances and constraints, there are little prospects of reserves increasing over the medium term under current policies. Hence, reserves are projected to remain at about 1 month of imports, far below the traditionally recommended minimum of 3 months of imports and the 6–8 months suggested by the IMF’s reserve adequacy metric.6

Country and Policy Institutional Assessment 2014 1/
ConceptSudanSub-Saharan Africa countries
Economic Management2.33.3
Monetary & Exchange Rate Policy3.03.5
Fiscal Policy2.53.2
Debt Policy1.53.3
Structural Policies2.73.2
CPIA trade rating2.53.7
Financial Sector2.52.9
Business Regulatory Environment3.03.1
Policies for Social Inclusion and Equity2.53.2
Gender Equality2.53.2
Equity of Public Resource Use2.53.3
Building Human Resources3.03.5
social protection and labor rating2.52.9
Policies & Institutions for Environment2.03.2
Public Sector Management and Institutions2.23.0
Policies & Institutions for Environment2.02.7
Quality of Budgetary & Financial Management2.53.1
Efficiency of Revenue Mobilization3.03.4
Quality of Public Administration2.02.9
Transparency, Accountability & Corruption in1.52.7
Overall CPIA Score2.43.2
Source: CPIA (June 2015). World Bank.

Scale: 1=low to 6=high

Source: CPIA (June 2015). World Bank.

Scale: 1=low to 6=high

Gross International Reserves

(in millions of U.S. dollars and in months of imports)

Source: Sudanese authorities; and IMF staff estimates.

Conclusions

9. Sudan’s external position continues to be weak and vulnerable to shocks. To reduce external imbalances and enhance resilience, the authorities need to: (i) reduce overvaluation and close the gap between the official and parallel market exchange rates through a combination of exchange rate adjustment, gradual removal of restrictions on access to foreign exchange, and fiscal and monetary policies supportive of external adjustment; and (ii) improve the business environment and implement wide-ranging structural reforms and infrastructure investments to improve competitiveness and increase human and physical capital. Continued outreach to garner international support for debt relief under the Heavily Indebted Poor Country Initiative is also critical.

Annex II. Challenges of Inclusive Growth and Policy Options

1. Despite GDP expanding more than seven times since 1960, Sudan’s economic growth has not been inclusive. While growth has averaged 3.9 percent per year since 1960, it has been volatile with a standard deviation of 140 percent. It has also depended mainly on natural resources-agriculture until 1999, oil until 2011, and gold, oil, and agriculture since 2011. While a big leap in real income occurred in the 1990s and 2000s when oil production and prices were rising and some degree of macroeconomic stability was restored—supported by several IMF Staff-Monitored Programs—Sudan entered the post-oil, post-secession period still in a precarious situation. It remains a country with fragile institutions coping with six internal conflicts (according to Polity1), tenuous macroeconomic stability, continued resource dependence, arrears to the foreign lenders despite several Paris Club debt restructurings in the 1970s and 80s, and human development outcomes not much higher than two decades ago. In sum, the growth of income—while an undeniable achievement—has not been inclusive.

GDP Growth and GDP Index

(market prices; in percent)

Source: Sudanese authorities; and World Development Indicators (WB)

2. Several indicators point to Sudan’s quality of growth being low. A new composite measure of the quality of growth ranks Sudan 63rd out of 93 countries in 1990–94 and 86th out of 93 in 2005–11.2 The UN’s Human Development Index (HDI) places Sudan in 167th position among 188 countries rated in 2014. And poverty outcomes have been weak as well: the latest poverty survey in 2009 counted 44 percent of the population as poor, with 20 percent surviving on less than $1.25 a day.

Human Development Index

Percentile Ranking

Source: Human Development Index 2015

Labor Force Participation Rate, Total

(% of population ages 15-64; ILO estimate)

Source: World Development Indicators (WB).

3. Internal conflicts, international isolation, and weak institutions and governance weigh on growth and inclusiveness in Sudan. The UN estimates that there were 3.1 million internally displaced people in Sudan in 2015—the most in Africa—owing to internal conflicts. As a result, the UN maintains a 21,000-strong peacekeeping force since 2007, and provides humanitarian support to 5.4 million people, or 15 percent of the population.3 Continued conflicts have been an important factor in the absence of resolution of Sudan’s external debt and arrears. Moreover, weak institutions have a low capacity to implement complex pro-growth and pro-poor policies—Sudan’s structural policies were assessed at only 2.7 out of 6 points by the World Bank Country Policy and Institutional Assessment (CPIA) in 2014 (2.5 in 2011).4

Battle Related Deaths

(number of people)

Source: World Development Indicators (WB).

4. Limited fiscal resources, poor budget priorities, and macroeconomic imbalances also hamper inclusive growth. Government revenue is low (particularly tax revenue at 6.2 percent of GDP in 2015), thereby limiting resources for social spending and investment in infrastructure critical for private sector growth. And macroeconomic imbalances are high-inflation has averaged 35 percent in the past four years. International reserves are low at about 1–1½ month of imports, and the central bank directs foreign exchange to imports of a limited set of priority goods.

5. Sudan ranks low in the ease of doing business and good governance. Sudan ranked 159th out of 189 countries in ease of doing business by the World Bank’s 2016 Doing Business survey.5 Trading across borders (184/189), protecting investors (166/198), getting credit (162/198), and resolving insolvency (154/189) are the lowest ranked areas of doing business. The highest ranks are registering property (89/189) and getting electricity (102/189). Governance indicators are poor as well.6 Ranking of government effectiveness has dropped since 1996; the rule of law indicator has improved but still remains around the bottom of the rankings. Corruption is perceived as high: Transparency International ranked Sudan 2nd most corrupt country in 2014.

Governance Indicators 1996-2014
19962000201020132014
Value Rank 1/Value Rank 1/Value Rank 1/Value Rank 1/Value Rank 1/
Voice & Accountability−1.882−1.743−1.72 4−1.783−1.734
Political Stability No-Violence−2.512−2.281−2.66 1−2.203−2.364
Government Effectiveness−1.1212−1.199−1.37 7−1.514−1.614
Regulatory Quality−1.368−1.438−1.33 7−1.476−1.397
Rule of Law−1.635−1.503−1.30 7−1.259−1.1510
Control of Corruption−1.285−0.8024−1.26 6−1.491−1.454

Rank=Percentile rank among all countries (ranges from 0 (lowest) to 100 (highest) rank)

Source: Worldwide Governance Indicators.

Rank=Percentile rank among all countries (ranges from 0 (lowest) to 100 (highest) rank)

Source: Worldwide Governance Indicators.

6. Sudan is a resource-based economy making products of low complexity and sophistication, which constrains growth prospects.7 Complexity is defined here as the diversity and sophistication of productive capabilities embedded in a country’s exports. Cross-country evidence suggests that gains in complexity are strongly associated with higher growth and lower income inequality, i.e. countries with higher complexity products are richer and have better development prospects. As a natural resource producer, Sudan’s complexity has always been low, and was ranked 113th out of 124 countries in 2013.

Economic Complexity Index

(Higher=better)

Source: The Atlas of Economic Complexity (Harvard University).

7. Productivity has been low and volatile. Total factor productivity (TFP) was a major source of growth in the pre-oil period. During the oil boom, however, capital dominated as a source of growth, and productivity has been largely negative in the early 1990s.8 Data gaps do not allow for estimation of recent productivity trends, as data on the capital stock post-secession are missing.

Decomposition of Real GDP Growth

(percent)

Growth of GDP and of Total Final Consumption of Energy

(In percent)

Sources: IMF, OECD.

8. Infrastructure and energy production are limited, and access to electricity, water, and sanitation is subpar. Energy consumption dropped in 2013 (the last year of available data) to the 2006–07 levels, which constrained GDP growth. Investment in electricity production would be needed to support economic growth. Access to electricity lags behind regional comparators and other fragile states, and access to improved water sources has not risen significantly over the past twenty years.

Total Final Energy Consumption

(Index; 2007=100)

Source: International Energy Agency; World Energy Balances

Access to Electricity

(percent of population)

Source: World Development Indicators (WB).

Rural to Urban Access to Improved Water Source

(per 100 urban persons)

Source: World Development Indicators (WB).

9. Sudan’s unemployment rate is persistently high. In 2013 the unemployment rate was estimated by the World Bank at 15.2 percent of the labor force—virtually unchanged from 1991. In 2015, the government reported an unemployment rate of 22 percent, suggesting a significant worsening following the secession of South Sudan.9 Unemployment among women (19.8 percent) was higher than for men (12.7 percent) in 2013. The persistence of high levels of unemployment may be the legacy of an oil-based economy where growth and employment depended on government spending.

10. Youth unemployment is also high and persistent. In 2013, youth unemployment was estimated by the World Bank at 24.5 percentunchanged since 1991. Unemployment among young women was higher (26.5 percent) than for young men (22.1 percent).

Unemployment, Total

(% of total labor force; ILO estimate)

Source: World Development Indicators (WB).

Unemployment, Youth

(% of labor force ages 15–24; ILO estimate)

Source: World Development Indicators (WB).

11. High unemployment is mirrored by low labor participation rates. In 2013, the World Bank estimated the labor participation rate at only 54.5 percent, broadly in line with other Arab countries but lower than the average in LICs (with 76.4 percent for men and less than half for women at 32.6 percent).

Labor Force Participation Rate, Total

(% of population ages 15-64; ILO estimate)

Source: World Development Indicators (WB).

12. Education achievements have been uneven. Literacy rates in Sudan are high—exceeding 70 percent for adults—and above the average for countries with medium HDI; however, enrollment rates are only on par with low HDI countries. The lack of resources constrains the amounts allocated to education, which are lower than average for low HDI countries.

13. Looking forward, supporting inclusive growth will require a multi-pronged package of macroeconomic and structural reforms to tackle these various issues.10 Reforms should focus on empowering the private sector and unlocking entrepreneurship to complement public investment in infrastructure and public services.

  • Macroeconomic and political stability. Macroeconomic and political stability are critical to generate confidence and facilitate long-term planning for private sector saving and investment.
  • Enabling a business friendly environment. Reforms should focus on addressing the weaknesses identified in the Doing Business surveys, to enable domestic entrepreneurs to invest and to attract external interests. The main areas of concern include trading across borders, protecting investors, getting credit, and resolving insolvency. Excessive regulations and corruption, which favor informality and weigh on inclusive growth, should be tackled forcefully.11 Continued outreach to progress towards debt relief and arrears clearance would help the business environment.
  • Increasing female participation in the labor force. Providing opportunities for women to develop their full potential could significantly boost economic growth through increased labor supply.12 Policies should support equal access to education, support working parents, reduce the gender wage gap, and increase mobility and equal opportunity.
  • Developing infrastructure. Development of electricity production and networks, roads, railways, and strengthening regional connectivity to facilitate the flow of factors of production and goods are needed to lower production and transportation costs and improve productivity and market access. Infrastructure expansion would also aid inclusive growth by supporting the largest sector—agriculture—which depends almost wholly on rain water. Expansion and improvement in agricultural irrigation would improve the efficiency and productivity of agriculture and would insulate it from the vagaries of weather.
  • Improving access to finance. Reforms to improve access to finance are urgently needed, as getting credit remains one of the lowest rated Doing Business indicators in Sudan. The authorities are implementing a number of them including expanding microfinance, increasing banking coverage in the countryside, developing agent banking, and strengthening the credit registry to lower costs of credit.
  • Regional integration. Developing and implementing already developed plans to improve the connectivity of the rail and road networks with neighboring countries would improve growth prospects, as Sudan could potentially serve as a gateway to international markets for its landlocked neighbors.
  • Reach out to the diaspora. Encouraging investment by the diaspora would involve reforming the foreign exchange market (to facilitate transfers via official channels) and improving the business environment.
  • Investing in human capital through education would improve growth prospects and the competitiveness of the labor force
1Transfers from South Sudan comprise transit fees for the use of Sudanese oil pipelines and payments under the Transitional Financial Arrangement to compensate Sudan for the loss of oil exports.
2Gold exports have become a significant source of foreign exchange for the official sector. Losses arise because the CBOS purchases gold from domestic producers in local currency at a price that reflects the parallel exchange rate, exports the gold, and sells the foreign exchange proceeds at the more appreciated official rate.
3The CBOS sets two official exchange rates: an “indicative” rate and an “official” rate (within ±4 percent) which applies to public transactions and customs valuation. The difference between the two is currently less than 2 percent. Commercial banks and foreign exchange bureaus are required to set their rates within ±4 percent of the indicative rate, but in practice they trade at top end of the band. Thus, the official rate differs by more than 2 percent from the commercial banks’ rate. Since January 2014, the CBOS devalued the official rate by only 7 percent, of which 2 percent in 2015.
4Staff estimates that the parallel market covers about 50 percent of imports—up from 30 percent in 2013 due to changes in foreign exchange regulations in mid-2014 that allowed exporters to sell their proceeds directly to importers. Based on a weighted exchange rate between the official and the parallel markets, the effective premium is about 63 percent.
5The so-called “zero option” is a 2012 agreement between Sudan and South Sudan whereby Sudan retained all the external liabilities after the secession, provided that the international community gave firm commitments to deliver debt relief within two years. In September 2014, both countries agreed to extend the agreement until October 2016, after which, in the absence of debt relief, Sudan could seek to apportion external debt between the two countries.
1Excluding unpaid interest and penalties on external debt arrears, which are not actual cash flows.
2Trade elasticities, estimated by Tokarick (2010), “A method for calculating export supply and import demand elasticities” (IMF Working Paper WP/10/180), were applied: the export supply elasticity is 0.57 and the import demand elasticity is 1.23. The exchange rate gap is calculated as the ratio between the current account gap and the elasticity of the current account to the REER.
3This compares with a 41 percent overvaluation in the 2014 Article IV consultation (IMF Country Report No. 14/364).
4Doing Business provides an aggregate ranking on the ease of doing business based on indicator sets that measure and benchmark regulations applying to domestic small to medium-size businesses through their life cycle. Economies are ranked from 1 to 189 by the ease-of-doing-business ranking.
5The Country Policy and Institutional Assessment (CPIA) rates countries against a set of 16 criteria grouped in four clusters: (a) economic management; (b) structural policies; (c) policies for social inclusion and equity; and (d) public sector management and institutions. The CPIA measures the extent to which a country’s policy and institutional framework supports sustainable growth and poverty reduction, and consequently the effective use of development assistance. The outcome of the exercise yields both an overall score and specific scores for all sixteen criteria. For each criterion, countries are classified from 1 (very weak performance) to 6 (very strong performance). See: http://go.worldbank.org/7NMQ1P0W10
6International Monetary Fund, 2013, “Assessing Reserve Adequacy—Further Considerations,” IMF Policy Paper, November (Washington: International Monetary Fund). The optimal reserve level is assessed based on the cost of balance of payments crises, the opportunity cost of holding reserves, and the return on reserve assets.
1See: “Polity IV Project: Political Regime Characteristics and Transitions, 1800-2013” available at http://www.systemicpeace.org/polity/polity4.htm.
2Mlachila, Tapsoba, and Tapsoba, 2014, “A Quality of Growth Index for Developing Countries”; IMF Working Paper WP/14/172. The index encompasses both the intrinsic nature and social dimensions of growth, and is computed for over 90 countries for the period 1990–2011. It combines measures of growth performance, variability, and diversification with the main features of human capital: longevity/health and education. In this approach, good quality growth is seen as high, durable, and socially-friendly growth.
3See Rother and others (forthcoming) “The Economic Impact of Conflicts in the Middle East and North Africa Region: Macroeconomic Effects, Policy Implications, and the Role of the IMF.”
4The World Banks’s CPIA rates countries against a set of 16 criteria grouped in four clusters: economic management, structural policies, policies for social inclusion and equity, and public sector management and institutions. The ratings are available at http://data.worldbank.org/data-catalog/CPIA.
5Doing Business indicators are available at: http://www.doingbusiness.org/.
6The Worldwide Governance Indicators (WGI) project reports aggregate and individual governance indicators for 215 economies over the period 1996–2014, for six dimensions of governance: Voice and Accountability, Political Stability and Absence of Violence, Government Effectiveness, Regulatory Quality, Rule of Law, Control of Corruption. Results are available at: http://info.worldbank.org/governance/wgi/index.aspx#home.
7See: Hidalgo and Hausmann, 2009, “The Building Blocks of Economic Complexity,” Harvard University; and http://atlas.cid.harvard.edu/ for on-line resources on complexity. Economic complexity is a “measure of the knowledge in a society that gets translated into the products it makes. The most complex products are sophisticated chemicals and machinery, whereas the world’s least complex products are raw materials or simple agricultural products. The economic complexity of a country is dependent on the complexity of the products it exports. A country is considered ‘complex’ if it exports not only highly complex products, but also a large number of different products.”
8See: Dabla-Norris, Ho, Kochhar, Kyobe, and Tchaidze, 2013, “Anchoring Growth: The Importance of Productivity- Enhancing Reforms in Emerging Market and Developing Economies;” IMF Staff Discussion Note SDN 13/08.
9Alternatively, previous calculations may have underestimated unemployment.
10See Finger and Gressani, 2012, “Toward New Horizons: Arab Economic Transformation Amid Political Transitions,” IMF and International Monetary Fund, 2014, “Regional Economic Outlook: Middle East and Central Asia,” IMF, October, Annex IV.
11See International Monetary Fund, 2016, “Corruption: Costs and Mitigating Strategies;” IMF Staff Discussion Note No. 16/05.
12See Elborgh-Woytek, Newiak, Kochhar et al., 2013, “Women, Work, and the Economy: Macroeconomic Gains from Gender Equity,” IMF Staff Discussion Note SDN 13/10.

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