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Sudan: 2013 Article IV Consultation by International Monetary Fund. Middle East and Central Asia Dept.
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KEY ISSUES

Context: The July 2011 secession of South Sudan led to the buildup of large economic imbalances in Sudan. The authorities responded in June 2012 with a comprehensive package of corrective measures, which laid the ground for a much-needed adjustment process. The reform process was expected to continue in 2013, through a second package of measures, which the authorities recently put together, but has yet to be implemented. The March 2013 agreement with South Sudan on oil and security matters is offering an opportunity to continue the adjustment process by implementing bold reforms to address the post-secession challenges.

Outlook and risks: Risks are mainly to the downside and risks include domestic political instability and volatile security conditions, notably tensions at the border with South Sudan. Strong and steady implementation of reforms is crucial for improving macroeconomic stability and enhancing medium-term growth prospects.

Focus of the Article IV discussions: Discussions focused on: (i) near-term policies for restoring macroeconomic stability; and (ii) a medium-term strategy for rebuilding the economy and implementing policies for sustained and inclusive growth, higher employment, and poverty reduction.

Policy recommendations: Action is needed on the following fronts: (i) fiscal adjustment grounded in a sound medium-term framework, including a gradual phase-out of fuel and wheat subsidies, and strengthening of social safety nets thus making way for higher quality spending; (ii) a tighter monetary stance to address high inflation and exchange rate pressures; (iii) unification of the exchange rates and markets together with further exchange rate flexibility; and (iv) further liberalization of the economy and improvement in the business environment in order to boost private sector-led growth.

Staff-Monitored Program: Strong corrective policy measures to address the large economic imbalances and reforming the economy are needed to serve as the basis for a successor staff-monitored program.

Debt relief: Relief is predicated on reaching out to creditors, normalizing relations with international financial institutions, and establishing a track record of cooperation with the IMF on policies and payments.

International Monetary Fund; November 2013
104 pages; ISBN 9781475527131
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Title: Sudan: 2013 Article IV Consultation
Author: International Monetary Fund. Middle East and Central Asia Dept.