IMF国际货币组织全球-Sudan_2019-Article-IV-Consultation_78页_1mb

Sudan 2019 Article IV Consultation Summary

Core Content

The 2019 Article IV consultation with Sudan by the International Monetary Fund (IMF) focused on assessing the country's economic developments, challenges, and the need for structural reforms to address macroeconomic imbalances and promote sustainable growth. The consultation took place between December 4-17, 2019, and the final report was circulated on February 5, 2020. The IMF emphasized the importance of policy reforms, particularly in exchange rate liberalization, fiscal consolidation, and governance improvements.

Main Views and Key Issues

Economic Context and Challenges

• Regime Change and Opportunity: The removal of President Al-Bashir and the establishment of a transitional government in August 2019 created an opportunity for fundamental reforms to address macroeconomic imbalances and support inclusive growth.
• Economic Decline: Sudan's economy shrank by 2.5% in 2019, following a 2.25% contraction in 2018. This reflects weak competitiveness, a poor business environment, and social unrest.
• Fiscal Deficit: The fiscal deficit rose to 10.8% of GDP in 2019, driven by high energy subsidies and weak revenue mobilization. The deficit is primarily financed through monetization, leading to a vicious cycle of inflation, exchange rate depreciation, and deficit expansion.
• Inflation and Exchange Rate Distortions: Inflation reached 60% in November 2019, and the exchange rate system is highly distorted, with multiple currency practices (MCPs) and a significantly overvalued real effective exchange rate (REER).
• Debt Distress: Sudan remains in debt distress with public and external debt ratios at 211.7% and 198.2% of GDP, respectively, in 2019. The country is eligible for debt relief under the HIPC Initiative but faces obstacles due to its listing as a state sponsor of terrorism (SSTL) by the U.S.
• Humanitarian Crisis: The humanitarian situation is dire, with large numbers of internally displaced people and refugees, exacerbated by fuel shortages and disrupted electricity and food supplies.

Policy Recommendations

• Exchange Rate Liberalization: A unified and market-clearing exchange rate is essential to reduce external imbalances, boost competitiveness, and improve fiscal revenues. The current exchange rate system, which includes multiple rates, needs to be reformed to eliminate distortions.
• Fiscal Consolidation: Fiscal reforms are critical to address deficit monetization and reduce inflation. Energy subsidies should be phased out gradually, and public support for reforms should be built through an expanded social safety net (SSN) and increased spending on vulnerable groups.
• Central Bank Independence: The central bank should enhance its independence and monetary policy framework to curb inflation and strengthen financial sector stability. This includes improving anti-money laundering (AML)/counter-terrorism financing (CTF) supervision and ensuring transparency.
• Structural Reforms: Anti-corruption measures and governance improvements are necessary to create a conducive environment for investment and growth. The business environment must be strengthened to support competitiveness and attract foreign investment.
• Social and Communication Campaigns: An extensive information and communication campaign (ICC) is needed to build public support for painful reforms, particularly those related to energy subsidies and exchange rate adjustments.
• Donor Assistance: Substantial donor support is required to ensure an orderly and gradual adjustment. While some pledges have been made, firm commitments remain limited.

Key Information

• GDP Contraction: Sudan's GDP contracted by 2.5% in 2019, with a 2.25% contraction in 2018.
• Fiscal Deficit: The fiscal deficit increased to 10.8% of GDP in 2019, driven by energy subsidies and weak revenue collection.
• Inflation: Inflation rose to 60% in November 2019, with a period average of 51.3%.
• Exchange Rate: The parallel market exchange rate depreciated from SDG 27/US$ at the end of 2017 to SDG 85/US$ in December 2019. The REER is overvalued by 36%.
• Debt Levels: Public debt was 211.7% of GDP in 2019, and external debt was 198.2% of GDP.
• Reserves: Sudan's international reserves were $1.4 billion in October 2019, covering only 2 months of imports, far below the IMF's recommended 6–8 months.
• Fuel Subsidies: Total fuel subsidies increased by 7.5 percentage points to 11.75% of GDP in 2018–2019 due to rising oil prices, exchange rate depreciation, and increased fuel consumption.
• Banking Sector: The banking system is fragile, with several banks undercapitalized. Twelve banks had capital adequacy ratios below the 12% regulatory minimum as of October 2019.
• Debt Relief: Sudan is eligible for HIPC debt relief but is blocked due to its SSTL status. The authorities have requested a Staff Monitored Program (SMP) to support reform implementation.

Conclusion

The IMF Executive Board concluded that without comprehensive policy reforms, Sudan's economic outlook remains alarming. The country must address its macroeconomic imbalances, improve governance, and enhance competitiveness to achieve sustainable growth. The implementation of reforms, supported by donor assistance and a strong social safety net, is crucial to ensure public support and avoid a disorderly adjustment.