IMF revises Sudan’s 2013 GDP forecast upwards
October 8, 2013 (WASHINGTON) – The International Monetary Fund (IMF) has upgraded its projections for Sudan’s economic growth in 2013 compared to last April’s figures.
However, the East African nation’s GDP is forecast to slow down to 2.5% in 2014.
The inflation rate for 2013 will remain high at 32.1% before decreasing to 27.4% next year.
This year will be the first that Sudan achieves a positive GDP growth since the secession of the South in July 2011, with the new nation taking 75% of the oil reserves that existed prior to partition.
Oil revenues constituted the majority of Sudan’s exports, national income and source of hard currency.
The IMF said in a separate statement last week that “economic conditions remained weak in the first half of 2013 despite some signs of improvement”.
It noted that “non-oil real GDP growth is projected to slow further to 2.3% in 2013, and to remain below potential at about 3% over the medium term. Inflation would decelerate somewhat, but would remain in double-digit levels, reflecting the monetisation of the budget deficit, as well as the continued depreciation of the Sudanese pound”.
It also warned that despite an initial drop in budget deficit over an oil transit fees agreement with South Sudan, the deficit is expected to widen again in subsequent years.
Fearing an economic collapse, as Sudanese officials termed it, Khartoum cut fuel subsidies late last month which almost doubled prices of gasoline and diesel overnight, triggering some of the worst protests Sudan has seen in recent years.
The Sudanese pound has lost more than half its value, pushing inflation rates to record levels given that the East African nation imports most of its food.
Sudan Forex reserves held by the central bank cover just two months of imports, according to IMF figures. However, Sudanese officials previously said they have enough holdings for five months of imports.
The IMF urged Sudan to strengthen current economic policies, with an urgent focus on addressing fiscal imbalances and tax reforms.
“While most of the adjustment effort will need to focus on reducing expenditures by reducing transfers to states, and gradually phasing out subsidies, tax revenues will also need to be increased, in part through streamlining tax exemptions and rationalising tax incentives”, the statement read in part.
“Monetary policy should be geared towards combating inflation; a key requirement in this regard is formulation a clear mandate for the central bank to facilitate its operational independence. Immediate unification of the exchange rates and greater exchange rate flexibility is crucial to facilitate the required external adjustment and to safeguard and rebuild official exchange reserves”, the statement adds.
The IMF also urged Sudan to work with South Sudan on the issue of debt that existed under the pre-secession Sudan and which has currently been inherited by Khartoum.
“In light of Sudan’s large stock of overdue external debt obligations, the government should work closely with South Sudan, as part of the recently signed comprehensive agreement, on reaching out to creditors to elicit their support for comprehensive debt relief, given the approaching deadline of the ‘zero option’ for debt apportionment”, the statement said.
Both Sudan and South Sudan have agreed to work jointly on seeking debt relief from international creditors. Should these efforts prove unsuccessful, the ex-foes will need to sit down again to decide on how to split the debt.
According to IMF projections, Sudan’s external debt as a percentage of GDP increased to 87.6% up from 82.2% in 2012.
(ST)