Home | News    Friday 9 November 2012

Sudan says IMF recommendations on subsidies not binding

separation
increase
decrease
separation
separation

November 8, 2012 (WASHINGTON) – The Sudanese government on Thursday pushed back against recommendations made by the International Monetary Fund (IMF) on subsidies saying it is not binding to Khartoum.

JPEG - 15.7 kb
The IMF headquarters is seen in Washington. File Photo: AP

In its annual report on Sudan released this week the IMF commended the government for rolling out the austerity package last summer which included partial removal of subsidies on sugar and petroleum products.

The move was made to curb the widening budget deficit which resulted from losing oil as the main economic lifeline in the wake of South Sudan independence in July 2011. The south contained the bulk of the oil reserves that helped fuel the economic boom in Sudan over the last decade.

But despite the belt-tightening and unpopular measures undertaken by Khartoum, which also included reducing government ministries on state and federal level, Sudanese officials warned that more is needed to lift the country’s ailing finances.

The IMF seemed to share the same assessment saying that it wants Sudan to enhance tax policy and revenue administration "by reducing tax exemptions and improving tax compliance". It also urged the East African nation " to pursue the phasing-out of subsidies and develop a well targeted safety net system. It also recommends imposing a profit tax on gold producers as the sector develops".

However the Sudanese state minister of finance Abdel-Rahman Dirar downplayed the advise which raised concern among the general public on the possibility of seeing further increases in prices.

Dirar noted in statements carried by the government sponsored Sudanese Media Center (SMC) that Khartoum already slashed subsidies in June.

Analysts say that Sudan has limited options in addressing the current economic crisis due to U.S. comprehensive sanctions imposed since 1997, its inability to borrow from international funds because of more than $40 billion in debt and reluctance of oil-rich Arab states to inject desperately needed cash into the government coffers.

Critics say that Khartoum has forfeited an opportunity to use the oil wealth to develop other sectors of the economy such as agriculture and manufacturing. Sudan appears keen however on focusing on new exploration efforts to increase oil production which currently stands at around 120,000 barrels per day (bpd).

IMF also warned that Sudan’s oil production will likely drop which casts doubt over projections made by oil minister Awad Al-Jaz this year that the country will reach 180,000 barrels bpd in the first quarter of 2013.

"[O]wing to waning mature fields (higher quality Nile blend) and other technical production problems, 2012 production is expected to sharply decline by 60 percent to 117 to 120 thousand barrels per day (bpd)," said the IMF report.

"Enhanced recovery in existing fields and further exploration will likely help production to increase again starting in 2013, with a peak expected in 2020 at near 240 thousand bpd, before a gradual decline to about 144 thousand bpd begins in 2030".

But the IMF carried good news for Sudan as it forecasted an annual increase of 3% in gold production through 2020 before declining at same rate after 2026. It noted that Sudan’s gold exports tripled since 2009.

In a response attached to the report Sudanese authorities expressed reluctance on implementing some of the recommendations particularly related to widening tax base.

"My authorities recognize that gold and agricultural sectors are potential sources of raising tax revenue. However, at the moment, they fear that imposing taxes may result in smuggling of gold, and consequently loss of foreign reserves, as the sector is presently dominated by small artisans. In addition, imposing agricultural tax is not considered appropriate as it would mean taxing the poor who derive their livelihood from agriculture".

Sudan also stressed that it is committed to a "flexible exchange rate regime "but prefer a gradual and comprehensive approach to avoid escalating inflation".

The central bank devalued the pound last July by almost halving its value to try bridge a gap to the black market rate, which has become the benchmark for companies. It currently stands around 6 pounds for the dollar in the black market.

The IMF said the devaluation helped ease pressure on Sudan’s foreign exchange reserves which stood at about $1.3 billion which covers a little under two months of imports.

As the currency remained weak, annual inflation hit 45.3 percent in October compared to September, which is more than double the level of a year earlier.

The IMF underscored the gravity of challenges faced by the Sudanese economy.

"The economic situation is expected to continue to be difficult during the next 18 months (2012–13), clouded by the impact of South Sudan’s secession and tight financing constraints" the IMF said.

The world financial body also warned that increased military tensions along the borders with South Sudan could lead to increase military spending thus hurting the budget.

Sudan’s GDP is projected to shrink by -11.1% this year and -0.6% in 2013 according to IMF figures.

(ST)

Comments on the Sudan Tribune website must abide by the following rules. Contravention of these rules will lead to the user losing their Sudan Tribune account with immediate effect.

- No inciting violence
- No inappropriate or offensive language
- No racism, tribalism or sectarianism
- No inappropriate or derogatory remarks
- No deviation from the topic of the article
- No advertising, spamming or links
- No incomprehensible comments

Due to the unprecedented amount of racist and offensive language on the site, Sudan Tribune tries to vet all comments on the site.

There is now also a limit of 400 words per comment. If you want to express yourself in more detail than this allows, please e-mail your comment as an article to comment@sudantribune.com

Kind regards,

The Sudan Tribune editorial team.
  • 9 November 2012 07:19, by George Bol

    Why Sudan is crying about oil in the South? Jallaba has been taking our oil from decades,and why South Sudanese don’t cry?
    You jallaba will not satisfy if you never satisfy for the lats decades.I don;t know what will you do while you are a crying baby who gets no satisfaction. More saction will help the other nations because you are a terrize nation who recently invite Iran after you hide nuclear.

    repondre message

    • 9 November 2012 07:32, by zulu

      It has nixed itself with stupid monitary policy that adheres to Islamic banking system while they try to attach themselves to south sudan banking inorder to be salvaged. SS must not accept same baning and monitary system with sudan. sudan’s economy is still taking a dive with 45% inflation last month

      repondre message

    • 9 November 2012 07:33, by zulu

      It has nixed itself with stupid monitary policy that adheres to Islamic banking system while they try to attach themselves to south sudan banking inorder to be salvaged. SS must not accept same baning and monitary system with sudan. sudan’s economy is still taking a dive with 45% inflation last month

      repondre message

  • 10 November 2012 06:00, by Mapuor

    IMF projections are correct.Wars in Dar Fur and Nuba/Blue regions are economic burden to Sudan.Corruption is also problem.The economic future of Sudan is extremely bad.Sudan should address the underlying causes of civil wars and then boost its economy in a modern way.

    repondre message

Comment on this article


 
 

The following ads are provided by Google. SudanTribune has no authority on it.


Sudan Tribune

Promote your Page too

Latest Comments & Analysis


An Alternative National Dialogue: Sudan’s last chance for sustainable peace and Unity 2014-08-30 06:18:14 By Suliman Baldo August 29, 2014 — Last week, with much fanfare and renewed hope on the part of Sudanese citizens, the African Union High Implementation Panel (AUHIP) for Sudan and South Sudan, (...)

A critique of the IGAD protocol for peace in S Sudan 2014-08-30 05:53:03 “A critique of the IGAD protocol on agreed principles on transitional arrangements towards resolution of the crisis in South Sudan” By David de Chand August 29, 2014 - First and foremost of all, (...)

IGAD failure to delivering peace for South Sudan! 2014-08-30 05:43:48 By Jacob Odong August 29, 2014- The East African Inter-Governmental Authority on Development (IGAD) is concluding a plan to allow for what they are calling a unity government for South Sudan. If (...)


MORE








Latest Press Releases


National Dialogue in Sudan: Past experiences and current challenges 2014-08-27 06:18:22 Sudan Democracy First Group (SDFG) Since independence, Sudan has undergone a number of national peace agreements, some of which were observed and honored for short periods, others which were (...)

A new approach to the National Dialogue will stop war and lead to democracy in Sudan 2014-08-22 06:50:30 A New Approach to the National Dialogue in Sudan that will Stop the Wars, Address the Humanitarian Crisis and Lead to Democratic TransformationChatham House, London on Wednesday, August 20, 2014 (...)

Friends and Diaspora of South Sudan urge leaders to choose peace 2014-08-19 20:29:59 FOR IMMEDIATE RELEASE CONTACT: Esther Sprague, Founder & Director, Sudan Unlimited 415.713.2495, esprague11@yahoo.com FRIENDS AND DIASPORA OF SOUTH SUDAN URGE LEADERS TO CHOOSE PEACE UNSC (...)


MORE

Copyright © 2003-2014 SudanTribune - All rights reserved.