Abstract
Sudan’s 2006 Article IV Consultation reports that growth has been robust, inflation has been kept at a single-digit level, and important reforms have been undertaken. There has been progress with financial sector reforms and trade liberalization, and the managed floating exchange rate regime has been working well. Despite an increase in oil revenues, the fiscal space of the central government will be constrained because of the transfers required by the peace agreement and decentralization.
1. The following information has become available since the issuance of the staff report on November 7. It does not change the thrust of the staff appraisal.
2. The staff and the authorities discussed the issue of nonconcessional borrowing within the 2006 Staff-Monitored Program (SMP) during the Spring Meetings. The authorities are aware of Paris Club creditors’ concerns about this type of borrowing and indicated that they would approach their other creditors to seek concessional terms with a view to minimizing nonconcessional borrowing in 2006. Furthermore, if the higher-than-projected oil price environment continues, the authorities will also look into the possibility of using additional oil revenues to substitute for the intended borrowing. The authorities also noted that the peace negotiations in Abuja are at an advanced stage, and they hope that Sudan’s creditors will be ready to begin exploring financing options to resolve Sudan’s debt and arrears problems after a peace agreement on Darfur is signed.
3. The staff urged the authorities to find some combination of additional oil revenue and concessional financing in order to minimize nonconcessional borrowing and thus address the concern about this borrowing raised in the staff appraisal (paragraph 49). In this regard, a final assessment of the program’s strength will need to take into account actual developments, including in nonconcessional borrowing.
4. The authorities have given their consent to the publication of the staff report including the letter of intent, the Memorandum of Economic Policies, and the technical Memorandum of Understanding.