Political change in Sudan provides a new opportunity to boost growth, IMF says
The lender stresses the need for liberalisation of exchange rate and phasing out fuel subsidies
Political changes in Sudan have brought an opportunity for policymakers to implement critical reforms that will help boost its battered economy, the International Monetary Fund said.
The North African country is trying to shake off the impact of months of political uncertainty and violence that resulted in the removal of its long-serving President Omar Al Bashir in April,
Sudan will have to address major macroeconomic imbalances and create the conditions for sustained inclusive growth, the Washington-based lender said yesterday, after concluding Article IV consultations with Khartoum.
An IMF mission led by Daniel Kanda, which held talks with Sudanese authorities from December 4 to 17, discussed policies including liberalisation of the exchange rate, revenue mobilisation and, gradually, phasing out fuel subsidies.
“Reforms [however] should be carefully sequenced, preceded and accompanied by an extensive information and communication campaign that reaches a broad cross section of society and explains the rationale for reform, the cost of the status quo, potential adverse effects and mitigating measures,” Mr Kanda said.
The IMF highlighted a number of challenges facing the country’s economy and its new government, including persistent fiscal deficits, a high inflation rate and low access to financing. In 2018, Sudan’s economic activity contracted by an estimated 2.3 per cent, and its gross domestic product is projected to contract by 2.5 per cent in 2019, according to the IMF. Inflation surged to 60 per cent in November, and the parallel exchange rate continues to depreciate rapidly.
Sudan’s fiscal position has deteriorated on the back of ballooning fuel subsidies and weak revenue mobilisation. The fiscal deficit climbed to 9.3 per cent of GDP this year from 7.9 per cent in 2018, the IMF said.
The country’s deepening debt crisis makes it eligible for relief under the Heavily Indebted Poor Countries (HIPC) Initiative, according to the IMF. Although US sanctions on trade and financial flows were revoked in October 2017, Sudan remains on the US state sponsors of terrorism list (SSTL), which blocks access to HIPC debt relief.
Massive external loans and arrears also hinder access to external financing and weigh heavily on development, according to the IMF.
“The team welcomes the authorities’ engagement with international partners to secure comprehensive support for debt relief and the delisting from SSTL, which would pave the way for foreign investment and financing for growth and poverty reduction. The team also welcomed Sudan’s efforts to strengthen cooperation with the IMF on policies and payments,” Mr Kanda added.
Updated: December 24, 2019 05:09 PM