Home | News    Wednesday 11 March 2020

IMF urges Sudan to take bitter fiscal pills as the economy keeps shrinking

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March 11, 2020 (WASHINGTON) – The International Monetary Fund (IMF) warned that the Sudanese economy would continue its downward trajectory unless the government undertakes crucial fiscal reforms.

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IMF headquarters in Washington, D.C (AP)

“Fiscal reforms are critical to address deficit monetization, reduce inflation, and support social and development programs,” reads the IMF report on its latest Article IV consultation with the country.

The IMF also called on Khartoum to take on the fuel subsidies and gradually lift them while at the same time increasing spending on the vulnerable sections of the society.

“Total (explicit and implicit) fuel subsidies rose by an estimated 7½ percentage points to 11¾ per cent of GDP over 2018–19 because of higher international oil prices, exchange rate depreciation, and increased fuel consumption”.

The Sudanese government backed away from lifting fuel subsidies in its 2020 budget following the uproar it created after initially including it and said it will put it up for discussion in a national economic conference slated for this month.

The Washington-based international financial body also stressed that the foreign exchange rate system remains “highly distorted” & recommended liberalizing it.

“Directors emphasized that gradual exchange rate liberalization is critical for eliminating the distortions that hamper investment and growth. It would bolster competitiveness and transparency, eliminate multiple currency practices and associated distortions, reduce rent-seeking, strengthen central bank independence and boost fiscal revenues,” the IMF said.

The Sudanese pound has plummeted against the US dollar in the black market, which the IMF says accounts for 80% of all transactions, reaching three digits that it is almost twice the official rate. This is adding to the inflationary woes facing Sudanese consumers.

The East African nation is plagued by long queues in fuel stations & bakeries as shortages mount. Most recently daily electricity outages have become common.

The IMF acknowledged that public tolerance for economic policy reforms sought by the government “has been eroded by economic hardship”.

“[W]hile the government enjoys substantial goodwill the window of opportunity for reforms is likely to be limited”.

The IMF also appeared critical of the underlying economic assumptions of the 2020 budget.

“Revenue projections also appear optimistic, and a large hole in public finances will emerge if they are not realized, requiring additional measures to ensure fiscal consolidation…..optimistic oil revenue projections that would require sharp increases in oil production to materialize.”.

Moreover, the report raised questions about a $2 billion “non-transparent" contribution to the 2020 budget from the security sector owned companies in reference to local defence industrial firms.

“The large receipt from the security sector raises significant questions, including on oversight of the sector, and how much donor financing is really needed given the apparently large stock of wealth in the security sector”.

“Overall, the headline budget deficit is projected to decline to 2¼ per cent of GDP, while including implicit subsidies would raise the deficit to 7¼ per cent of GDP. However, if the expected large receipts fail to materialize the deficit could rise up to 14¾ per cent of GDP”.

As far the major indicators, the IMF projected Sudan GDP to shrink -2.5% in 2019, -1.2% in 2020, -0.6% in 2021 before growing to 0.4% in 2022. Inflation rates will be 51.3%, 66.4%, 74.8% & 80.2% respectively.

Sudan’s foreign reserves are forecasted to be at $1.7 billion in 2019 dropping slightly to $1.5 billion this year. In both cases, the levels are significantly less than the recommended threshold amount needed to cover 3 months of imports.

The IMF also raised the alarm on the fragility of the Sudanese banking sector saying that non-performing loans are underestimated and that many banks remain undercapitalized.

It also noted that hefty US sanctions imposed in 2014 against international banks resulted in a “sharp decline in correspondent banking lines with Sudanese banks”.

The IMF also emphasized that concerns regarding controls in Sudanese banks as it relates to money laundering & terrorism financing coupled with Sudan’s inclusion on the list of states that sponsor terrorism (SST) are also keeping international banks away.

The SST is also a factor that prevents debt relief for Sudan and protracted debt arrears prevent financing by multilateral financial institutions such as the IMF & world bank.

Sudan’s external debt is estimated to be at $57.5 billion in 2020 which the IMF called “unsustainable”.

The IMF urged Sudan to “adopt a prudent debt strategy that minimizes non-concessional borrowing and avoids selective debt servicing of bilateral lenders, to avoid complicating debt relief efforts”.

(ST)

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  • 11 March 09:20, by Fathi

    The IMF has long been a tool of the wealthy and powerful to exploit and mess things up for less developed nations. China ignored the IMF completely and now has the largest economy in the world. The IMF referred to China’s success as a miracle...

    I’m glad the FFC isn’t fooled by the IMF but they should be careful publicly criticizing them

    repondre message

    • 11 March 09:21, by Fathi

      Idk if the IMF releases this report every year during this time, but the timing of this report is suspicious. They basically told donors not to invest in Sudan.

      repondre message

      • 11 March 09:29, by Fathi

        With that being said, I must admit they make points that I agree with. The process of lifting fuel subsidies gradually should’ve started a while ago. We would also benefit from gradually liberalizing the rate.
        Hamdok needs to show that he is in charge and increase investor confidence by cutting security spending. It is ridiculous & we have a ceasefire + working out peace deals. Why is spending up

        repondre message

        • 12 March 08:11, by Langbaar

          Fathi,
          IMF and the World bank ’are the biggest evil juus (so-called israel) scams, they always use to bully other countries’. I am not an economist, but a civil engineer. The only countries around the world the evil juus (so-called israel) have not taken their central banks keys or resources are: South Sudan, Iran, North Korea, Russia federation was almost taken>>>>

          repondre message

          • 12 March 08:20, by Langbaar

            after the so-called cold war, but they fought back with their Vladimir Putin, China of Hong Kong are owned by these vermin. But Shanghai hasn’t been owned chap. Fathi chap, do you know where the US get their money to pay all these wars they fought over countries around the world? It is simply because the US Dollars is used by ever country around to buy anything>>>>

            repondre message

            • 12 March 08:30, by Langbaar

              they want from other countries. And the US always get money through that change of Dollar chap. Do you know why the evil infested island ’refused to give up their pound when they joined the Europe Economic Community (EEU), now the European UN (EU)? Because, they didn’t want the mainland Europe to control them through their Euros>>>>>

              repondre message

              • 12 March 08:38, by Langbaar

                You have now seen, the devil infested island of England is ’extricating herself from the mainland Europe’, and that is why they have ’brexit (the United Kingdom) leaving the European Union (EU)’. Prexit (British leaving the European Union, EU), was even negotiated here over ’South Sudan’, by those vermins>>>

                repondre message

                • 12 March 08:47, by Langbaar

                  Uganda, Kenya, your North Sudan and other so-called former British colonies. But here in South Sudan, the evils have ’step on wrong country feet’ chap. The evils have ’resorted to their usual intrigues’, using their usual *traitors, puppets/stooges and thieves like Mr. Riek Machar, Lam Akol, they have even traitors Mr. Pagan Amuom, Thomas Cirillo,>>>

                  repondre message

                  • 12 March 08:59, by Langbaar

                    Majak Agoot and other bunch of low lives here in South Sudan as their *their Geo-politcal chess game or football*. Mr. Fathi, do you know the reasons why your *negotiations was brought here to South Sudan, by our enemies and lowly informed accepted it?*. It was ’a pure foolishness on our elders’>>>>

                    repondre message

                    • 13 March 06:47, by Fathi

                      Langbaar,

                      Please stop. Your South Sudan was controlled by these colonizers before south sudan even got independence. They even printed your money in Germany and flew it in.

                      repondre message

                      • 13 March 06:59, by Fathi

                        The only countries not controlled are Cuba, North Korea, Iran. It used to be Afghanistan, Iraq, Sudan, Syria, Libya, Cuba, North Korea, Iran.

                        repondre message

                        • 13 March 07:00, by Fathi

                          US dollar is used by every country because it is the world currency reserve since WWll. The bullshit is that the US can always print more dollars and can sanction everyone. The US has had to print more dollars which led to decrease in value. That pisses everyone off and that’s why you see China & Russia hoarding gold.

                          repondre message

                          • 13 March 07:05, by Fathi

                            I think it is mutually beneficial that we both take part in mediating peace deals for our countries. Both of us have the ability to destabilize the other country and have done so in the past. If we both try to achieve peace for each other, we both benefit.

                            repondre message

          • 12 March 18:40, by Angelo Achuil

            @Langbaar, brother,I want to tell you something very important. I have seen yr rants for years against many nations including Israel. God the Almighty said to Abraham, I will bless those who bless you and curse those who curse you. Gen 12:3. You can’t oppose the Jews (not Juus) and get get away with it. Abstain from the rants.

            repondre message

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