OREANDA-NEWS. A team from the International Monetary Fund (IMF) led by Eric Mottu visited Khartoum from May 21–June 2 to hold discussions on the 2016 Article IV Consultation with Sudan. At the conclusion of the mission, Mr. Mottu issued the following statement:

“Sudan has made remarkable progress toward macroeconomic stability and growth following the shock of the secession five years ago, amidst a difficult environment. Policy adjustments helped to contain the fiscal deficit, slow money growth, reduce inflation, and support growth. Institutional reforms strengthened tax collections and public financial management, and social spending increased to mitigate the social impact of the adjustment. The Sudanese authorities launched a five-year reform plan for growth and poverty reduction. In 2015, good harvests boosted growth to close to 5 percent, and inflation was contained at 12.8 percent in April 2016.

“Despite these efforts, growth prospects are constrained by sanctions and continued large macroeconomic imbalances. The breakdown of correspondent bank relations due to de-risking associated with economic and financial sanctions weighed on trade, investment, and growth. At the same time, the budget deficit widened to 1.9 percent of GDP in 2015 owing to shortfalls in oil revenue. Low commodity prices, increased central bank financing of government operations, and limited exchange rate flexibility increased the external current account deficit to about 6 percent of GDP and reduced the already low foreign exchange reserves. The parallel exchange rate continued to depreciate and the premium widened as the official rate remained virtually fixed. As a result, the outlook is mixed and macroeconomic stability rests on continued large external financing.

“The team encouraged the authorities to accelerate policy consolidation and reforms to restore macroeconomic stability and promote inclusive growth. It discussed options to achieve greater exchange rate flexibility to help reduce the external trade deficit; increase fiscal revenue to create space for growth-enhancing public infrastructure and social spending, while reducing the fiscal deficit; tighten monetary policy to ensure low inflation; strengthen social safety nets to support the most vulnerable; and accelerate structural reforms to improve the business environment and encourage private investment and job creation.

“Sudan is in debt distress and is eligible for debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative. The large external debt and arrears hinder access to external financing and weigh heavily on development. The team encouraged the authorities to continue to engage with international partners to secure comprehensive support for debt relief and the lifting of sanctions, which would pave the way for foreign investment and financing for growth and poverty reduction. The team welcomed Sudan’s efforts to strengthen cooperation with the IMF on policies and payments.

“The IMF staff team had constructive discussions with the Sudanese authorities on economic developments and policies over the past two weeks, and wishes to thank the authorities for their warm hospitality and cooperation.”