Front Matter Page

© 2012 International Monetary Fund

November 2012

IMF Country Report No. 12/299

Sudan: Selected Issues Paper

This selected issues paper on Sudan was prepared by a staff team of the International Monetary Fund as background documentation for the periodic consultation with the member country. It is based on the information available at the time it was completed on September 7, 2012. The views expressed in this document are those of the staff team and do not necessarily reflect the views of the government of Sudan or the Executive Board of the IMF.

The policy of publication of staff reports and other documents by the IMF allows for the deletion of market-sensitive information.

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Front Matter Page

SUDAN

SELECTED ISSUES

September 7, 2012

Approved by Middle East and Central Asia Department

Contents

• I. Fiscal Cost and Distributional Impact of Fuel Subsidies

  • A. Introduction

  • B. Market Structure, Pricing Regime, and Fiscal Cost of Fuel Subsidies

  • C. Welfare Impact of Price Subsidy Reform

  • D. Policy Recommendations

• Tables

• I.1. Production Costs, Retail Prices, and Subsidies

• I.2. Distribution of Total Subsidies and Real Income Effect of Eliminating Subsidies

• Figures

• I.1. Fuel Product Consumption, 2012

• I.2. International Comparison of Diesel Prices, 2012

• I.3. Diesel Price and Pass-Through

• I.4. Subsidies, 2011

• I.5. Fuel Subsidy Projections

• I.6. Distribution of Subsidy, 2012

• Boxes

• I.1. Main Uses of Fuel Products in Sudan

• II. Sudan’s Inflation Problem: Some Lessons From the Past 30 Years

  • A. Background

  • B. Main Features of Sudan’s Economy

  • C. Modeling Inflation in Sudan

  • D. The Main Model

  • E. The SDY Sub Model

  • F. The DDY Sub Model

  • G. Discussion of the Results

  • H. Conclusion and Policy Recommendations

• Tables

• II.1. Average Annual Changes of Key Determinants of Tradable Goods Inflation

• II.2. Inflation Model-Elasticities

• Figures

• II.1. GDP by Main Sectors

• II.2. CPI Basket by Main Categories of Goods

• II.3. Inflation Profile, 1997-2011

• II.4. Tradable Goods Inflation, 1997-2011

• II.5. Nontradable Goods Inflation 1997-2011

• II.6. Inflation Developments

• Appendixes

• II. Tables

• Appendix Tables

• II.1. GDP by Main Sectors

• II.2. Oil Sector’s Fiscal and External Predominance

• II.3. CPI Basket by Main Categories

• II.4. Inflation Profile, 1997-2011

• II.5. Inflation in Sudan: Dispersion Parameters

• III. Assessing Sudan’s External Competitiveness

  • A. Background

  • B. External Competitiveness

  • C. Price Competitiveness

  • D. Policy Recommendations and Conclusions

• Tables

• III.1. Trade Shares and Year-on-Year SDG Value Change Against Major Trading Partners’ Currencies

• III.2. Selected Balance of Payments Indicators

• III.3. Doing Business Indicators

• III.4. CPIA Ratings

• III.5. Corruption Perceptions Index

• Figures

• III.1. Key Macroeconomic Developments

• III.2. Trade Volumes and Terms of Trade

• III.3. Cross-Country Comparison of Exports and FDI

• III.4. Export Structure

• III.5. Export Concentration

• III.6. SDG Bilateral Exchange Rates against Major Trading Partners’ Currencies

• III.7. BOP Dynamics

• III.8. SDG/USD Exchange Rates

• III.9. Domestic Price and Exchange

• III.10. SDG/USD Exchange Rates

• III.11. Real Exchange Rate Developments

• III.12. Exchange Rate and Per Capita GDP

• III.13. Internal Terms of Trade Index

• III.14. Annual Stock of Usable Reserve Assets

• III.15. Monthly Stock of Usable Reserve Assets

• III.16. Worldwide Governance Indicators

• III.17. Decomposing Sudan’s CPIA

• Boxes

• III.1. Current Exchange Rate Regime

• Appendixes

• III. Reserve Adequacy Assessment

• IV. Fiscal Decentralization: Trends, Challenges and Perspectives

  • A. Introduction

  • B. Institutional Background

  • C. Measuring Fiscal Decentralization

  • D. Vertical Fiscal Imbalances and Fiscal Performance in Sudan

  • E. Horizontal Imbalances and Distribution of Transfers

  • F. Fiscal Decentralization and Poverty Reduction

  • G. Budget and Fiscal Management in Northern States

  • H. Going Forward: Challenges and Policy Options

• Tables

• IV.1. Sources of State Revenue

• Figures

• IV.1. Selected Fiscal Indicators by Government Level

• IV.2. Central Government Execution for Selected Fiscal Indicators, 2010

• IV.3. Fiscal Decentralization and VFI

• IV.4. Central Transfers to Northern States

• IV.5. Per Capita Central Transfers by State

• IV.6. Discrepancy in Transfers Reported by States and Central Government

• V. Growth and Employment in Sudan

  • A. Introduction

  • B. Growth Performance

  • C. Main Sources of Growth: A Growth Accounting Exercise

  • D. The Growth-Employment Nexus

  • E. Medium-Term Unemployment Scenarios

  • F. Conclusion and Policy Recommendations

• Tables

• V.1. Determinants of Growth, 1980-2011

• Figures

• V.1. Real GDP Growth 1969-2010

• V.2. CPI Inflation, 1964-2010

• V.3. Sector Contribution to GDP

• V.4. Non-Oil GDP Per Capita 1970-2010

• V.5. Human Development Indicators in Sudan

• V.6. Unemployment and Growth, 1981

• V.7. Labor Force: Size, Gender, Composition and Participation Rate, 2011

• V.8. Unemployment Rate Projections

• Boxes

• V.1. Why Is Youth Unemployment High in Sudan