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Presentation made by Lual A. Deng at a High Level Seminar 1: The Financial Crisis
and Fragile StatesThe 2009 ADB Annual Seminars
Dakar, Senegal, 12 May 2009
Sudan: The Challenges of Managing the Impact of Global Financial Crisis on a Post-conflict Economy
Sudan: The Challenges of Managing the Impact of Global Financial Crisis on a Post-conflict Economy
222
Presentation Consists of Four Parts
SUDAN
1. The Context
2. The Impact on national economy
3. Impact on GOSS
4. Policy Response
333
1. National Context
Sources of Fragility:
a) Political – just emerged out of protracted civilWar (1983 – 2005) in the south & continued
conflict in Darfurb) Economic – huge external debt of more than
US$30 billion, which has resulted in large arrears to Paris Club & multilateral institutions
c) Weak institutions of economic governance
5
2.1 Sudan economy to grow at 4% in 2009, which is above SSA average & other developing countries, except East Asia
8.2
11.4
8.4
6.96.2 6.0 5.85.8
8
5.6
4.24.9
5.54.3
2.2
5.4
3.7
-2
2.43.3
-0.6
-3
0
3
6
9
12
All Dev EastAsia
SAR ECA SSA MENA LAC
2007 2008e 2009f
GDP growth, percent
Source: World Bank, DEC Prospects Group.
7
2.3 Weaker public finances likely to cause fiscal deficits to deteriorate sharply more than SSA & developing world, but
less than that of Europe & Central Asia
-1.5-2.1
-2.6 -2.6
-3.8
-5.6-6
-5
-4
-3
-2
-1
0
Middle-East& NorthAfrica
South Asia LatinAmerica &Caribbean
East Asia &Pacific
Sub-Saharan
Africa
Europe &Central Asia
Projected deterioration in fiscal balance, percent of GDP
Source: World Bank, DEC Prospects Group.
8888
Public Budgetary Impact:deteriorated GoNU’s Overall fiscal picture
2.4 Deteriorated GoNU’s Overall Fiscal Picture
9999
2.5a Worsening of Balance of Payments position due to lower foreign exchange inflows, partly explained by Lower Oil
Export Earnings
10101010
2.5b Worsening of Balance of Payments position due to lower foreign exchange inflows, partly explained by declining
FDI and slowing in Remittances
11111111
2.6 a sharp decline (i.e. by 50%) in the foreign exchange reserves from its peak of US$2.0 billion in August 2008 to about U2S$1.0
billion at end-December 2008
March 2009 - reserves are less than 1 month import coverage.
12121212
Southern Sudan and Global Crisis
1.Fiscal impact especially strong in Southern Sudan
2.Implications for oil revenue transfers to GOSS
3. GOSS
13131313
3.1 Fiscal impact especially strong in Southern Sudan, which relies on oil revenues for more than
95%
141414Source: Ministry of Finance & National Economy
Implications for Oil Revenue Transfers from GoNU to GOSS
3.2
* Monthly transfers figures don’t include arrears and withdrawals from ORSA
15
• Short-term Measures
– Increased VAT on telecom, tobacco & alcoholic beverages.– Strengthened customs & tax collection in Southern Sudan by
appointing SPLA officers into national customs and tax administration operating in the south.
– Reduced public expenditure (e.g. expenditure on purchase of goods & services was reduced by 51% during the 1st quarter of 2009).
– Allowed prices to adjust rather than impose quantitative restrictions in goods, money and factor markets (including foreign exchange within a “float-managed” regime).
– Strengthened microfinance policy framework as by way of enhancing local financial intermediation needs of the vulnerable group and rural communities.
– Established a ministerial policy group to monitor the global financial and economic crisis.
Sudan’s Policy Response to the crisis
Medium-Term Measures– Increased capital expenditure (i.e. development) on infrastructure in that
priority is given to upgrading roads, river transport and railway along the major north-south corridor and roads to key agricultural zones.
– Enhancing economic governance at all levels of government in Sudan.– Creating a clear policy framework for transparent and competitive
environment of transport services. – Focusing on agriculture as the engine of growth of Sudan economy and
a vehicle for diversification.– Encouraging broader private sector participation in all sectors of the
economy, e.g. infrastructure construction.
– Working toward strengthening inter-governmental fiscal and regulatory policy coordination between GoSS and GONU as well as with the 25 States of Sudan.
– Simplify state-level taxation system and improve accountability in revenue collection.
– In the process of creating a transparent, predictable, and less binding fiscal and regulatory policies toward the private sector.
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