IMF says agreement with Juba offers “window of opportunity” for Khartoum
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July 17, 2013 (WASHINGTON) – The International Monetary Fund (IMF)
today issued a statement expressing optimism that a recent deal
between Khartoum and Juba on oil will help cushion the effects of a
severe economic downturn that Sudan is experiencing.
JPEG - 30.5 kb
IMF headquarters in Washington, D.C (AP)
The two neighbors inked an implementation matrix that included a
timetable on resuming oil exports of South Sudan oil through Sudan’s
pipelines that were suspended for more than a year over disagreements
on transit fees assessed.
The accord is expected to breathe new life into the beleaguered
economies of the two countries which were heavily dependent on oil
remittances to pay for imports of basic commodities.
Sudan says it expects to receive $2 billion a year in fees from
exporting Juba’s oil.
“[T]he March 2013 agreement with South Sudan on oil and security
matters is offering a window of opportunity for bold policy reforms to
address the post-secession challenges and bring about a much-needed
turnaround,” said the IMF following the return of a mission led by
Edward Gemayel from a visit to Khartoum during July 2-16.
The IMF said Sudan’s three-year program to deal with effects of losing
the oil-rich south led to mixed results.
“Despite an initial package of corrective measures adopted in June
2012, economic developments remains mixed. While inflation has shown
recent signs of moderation, and fiscal performance in the first half
of 2013 exceeded budget projections, further action is needed to
safeguard macroeconomic stability and support the needed recovery”.
Following the independence of South Sudan in July 2011, Khartoum was
forced to introduce a contractionary budget that saw the partial
lifting of fuel and food subsidies which triggered rare but small
demonstrations across the country.
Sudan also imposed restrictions on sale of foreign currency and
imports to preserve the already low levels of Forex held by the
central bank.
Later the government also moved to effectively devalue the currency
which came under enormous pressures as a result of a big shortage in
foreign currencies.
Last month the Sudanese finance minister said the results of the
tripartite economic program has been modest given continued
deterioration in several major economic indicators including budget
deficit, high food prices, growing gap between official and black
market exchange rates and the declining rates of economic growth.
The government is now planning to further cut fuel subsidies but a
final decision has not been made yet given fear of its impact on
living conditions for the population and the domino effect it will
create on prices of almost all goods and services.
But the IMF urged Khartoum to exercise discipline in executing its
economic plans despite painful effects.
“The expeditious implementation of corrective macroeconomic policies
to raise non-oil revenue, streamlining expenditure while protecting
the most vulnerable, unifying the exchange rates and markets, and
enhancing the monetary policy framework, would help create the
conditions for stronger medium-term growth and poverty alleviation,”
the IMF stressed.
“Furthermore, the mission underscores the importance for the 2014
budget to continue the required fiscal consolidation path” it added.
The statement said that the IMF’s Executive Board will consider the
report of the mission next September.
The World Economic Outlook (WEO) released by the IMF last April also
showed Sudan’s economy shrinking by -4.4% last year compared to a
previous estimate of -11.1%.
In 2013, Sudan is expected to achieve a 1.2% growth which is higher
than the -0.6% projected by the IMF last year. Next year’s GDP is also
forecasted to stand at 2.6% which is slightly better than the 2.1%
predicted in the IMF last assessment of Sudan’s economy.
(ST)
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