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IMF Country Report No. 12/298
SUDAN
2012 ARTICLE IV CONSULTATION
November 2012
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2012 Article IV consultation with Sudan, the following documents have been released and are included in this package:
â– Staff Report for the 2012 Article IV consultation, prepared by a staff team of the IMF, following discussions that ended on July 23, 2012, with the officials of Sudan on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on September 7, 2012. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF.
â– Informational Annex prepared by the IMF.
â– Debt Sustainability Analysis prepared by the staffs of the IMF and International Development Association.
â– Public Information Notice (PIN) summarizing the views of the Executive Board as expressed during its September 21, 2012 discussion of the staff report that concluded the Article IV consultation.
â– Statement by the Executive Director for Sudan.
The document listed below has been or will be separately released.
Selected Issues Paper
The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.
Copies of this report are available to the public from
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International Monetary Fund
Washington, D.C.
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SUDAN
STAFF REPORT FOR THE 2012 ARTICLE IV CONSULTATION
September 7, 2012
KEY ISSUES
Context. The secession of South Sudan in July 9, 2011 translated into the loss of a sizeable portion of Sudan’s economic potential and a daunting challenge of adjusting to a permanent external and fiscal shock.
Recent developments. In the aftermath of the South Sudan’s secession, the economic situation deteriorated. Nonoil real GDP growth decelerated, inflation picked up, the overall fiscal balance widened, and the exchange rate depreciated considerably.
Recent economic reforms. The authorities adopted in late June 2012 a reform program centered on fiscal adjustment and exchange rate reform to address the monetary, fiscal, and external imbalances that have resulted from the secession of South Sudan.
Focus of the discussions. The discussions focused on the appropriateness of the recent economic reforms to address Sudan’s economic problems and promote sustainable and inclusive growth.
Outlook. Strong implementation of reforms is key to maintaining macroeconomic stability and improving medium-term economic prospects. There are also downside risks from the unstable security situation, including tensions with South Sudan.
Policy recommendations. Action is needed on four fronts: (1) consolidating public finances; (2) unifying the foreign exchange rates and markets; (3) tightening monetary policy and strengthening the banking system; and (4) further liberalizing the economy and improving the business climate.
Approved By
Adnan Mazarei and Christian Mumssen
Discussions took place in Khartoum during May 13–24, 2012 and July 15–23, 2012. The team consisted of Messrs. Gemayel (head), Abdoun, Dridi (all MCD), Mrs. Flamini (FAD), Marcelino (FIN), and Gerling (SPR). The mission was assisted by Messrs. Jenkins (Resident Representative) and Yasin (local economist). Ms. Ngugi (OED) accompanied the May mission. The team met with Minister of Finance Ali Mahmood Abdulrasool, Minister of Oil Awad AlJaaz, Minister of Mining Kamal Abdelateef, Governor of the Central Bank Mohamed Khair Ahmed Al-Zubair and representatives of the private sector, civil society, and development partners.
Contents
INTRODUCTION
RECENT DEVELOPMENT, OUTLOOK AND RISKS
A. Developments in 2011 and the First Half of 2012
B. Outlook and Risks
POLICY DISCUSSIONS
A. Containing the Deterioration of Economic Conditions
B. Economic Transformation
C. Promoting Competitiveness and Inclusive Growth
DEBT ISSUES
OTHER ISSUES
STAFF APPRAISAL
TABLES
1. Selected Economic Indicators, 2008–13
2. Balance of Payments, 2008–17
3. Government Operations, 2008–17
4. Monetary Survey, 2008–13
5. Summary Accounts of the Monetary Authorities, 2008–13
6. Summary Accounts of the Commercial Banks, 2008–13
7. Medium-Term Macroeconomic Outlook, 2010–17
8. Financial Soundness Indicators for the Banking Sector, 2006–12
9. Millennium Development Goals
10. Payment Indicators, 2007–12
FIGURES
1. Oil Sector Contribution to GDP
2. Oil Production and Revenues
3. Credit to the Government; Inflation and Reserve Money, 2009–12
4. Official and Parallel Exchange Rates 2007–12
5. Selected Economic Indicators, 2005–12
6. Comparison 2010 and 2012 Article IV Staff Reports
7. Selected Political and Social Indicators
8. Selected Economic and Financial Indicators
BOXES
1. Impact of the Secession of South Sudan
2. The Fund’s Role in Sudan Since South Sudan Secession
3. Oil-Revenue Agreement Between Sudan and South Sudan
4. Risk Assessment Matrix
5. Key Measures Adopted in June 2012
6. External Stability Assessment
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SUDAN
STAFF REPORT FOR THE 2012 ARTICLE IV CONSULTATION—INFORMATIONAL ANNEX
September 7, 2012
Prepared By
Middle East and Central Asia Department
(In Consultation with Other Departments)
Contents
ANNEX I. RELATIONS WITH THE FUND
ANNEX II. RELATIONS WITH THE WORLD BANK
ANNEX III. RELATIONS WITH THE AFRICAN DEVELOPMENT BANK
ANNEX IV. STATISTICAL ISSUES
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SUDAN
STAFF REPORT FOR THE 2012 ARTICLE IV CONSULTATION—DEBT SUSTAINABILITYANALYSIS
September 7, 2012
Approved By
Adnan Mazarei and Christian Mumssen (IMF) and Jeffrey D. Lewis (IDA)
Prepared by the staffs of the International Monetary Fund (IMF) and the International Development Association (IDA)
The 2012 debt sustainability analysis (DSA) confirms that Sudan continues to be in debt distress.1 External and domestic debt ratios have continued to worsen owing to further accumulation of new external arrears, increased domestic borrowing and the permanent deterioration of macroeconomic fundamentals after the secession of South Sudan in July 2011. Debt dynamics under the baseline scenario are projected to remain unfavorable—with all debt ratios but one breaching their indicative thresholds even through the long term. It will thus be critical for Sudan to follow sound economic policies consistent with a prudent borrowing strategy, and to garner support for debt relief.
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Public Information Notice (PIN) No. 12/114
FOR IMMEDIATE RELEASE
September 27, 2012
International Monetary Fund
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Washington, D. C. 20431 USA
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Fax 202-623-6772