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Sudan: The Challenges of Managing
the Impact of Global Financial Crisis
on a Post-conflict Economy
Presentation made by Lual A. Deng at a
High Level Seminar 1: The Financial Crisis
and Fragile States
The 2009 ADB Annual Seminars
Dakar, Senegal, 12 May 2009
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Presentation Consists of Four Parts
1. The Context
2. The Impact on national economy
SUDAN
3. Impact on GOSS
4. Policy Response
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1. National Context
Sources of Fragility:
a) Political – just emerged out of protracted civil
War (1983 – 2005) in the south & continued
conflict in Darfur
b) 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
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2. The Impact on the National
Economy
2.1 Sudan economy to grow at 4% in 2009, which is above SSA
average & other developing countries, except East Asia
GDP growth, percent
11.4
12
2007
9
8.2
2008e
2009f
8.4
8
6.9
6
5.8
5.4
3.7
3
6.2
5.6
6.0
4.9
4.2
5.8
5.5
4.3
3.3
2.4
2.2
0
-0.6
-2
-3
All Dev
East
Asia
SAR
Source: World Bank, DEC Prospects Group.
ECA
SSA
MENA
LAC
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2.2 Sharp Fall in Oil Prices of Sudan’s two
Blends
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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
Projected deterioration in fiscal balance, percent of GDP
0
-1
-2
-1.5
-2.1
-3
-2.6
-2.6
-4
-3.8
-5
-6
-5.6
Middle-East South Asia
& North
Africa
Latin
America &
Caribbean
Source: World Bank, DEC Prospects Group.
East Asia &
Pacific
SubSaharan
Africa
Europe &
Central Asia
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Public Budgetary Impact:
2.4 Deteriorated GoNU’s Overall Fiscal Picture
deteriorated GoNU’s Overall fiscal picture
25
26
2009 GoNU Expenditure is projected to fall in 2009 budget, driven by
SDG
% of bn
GDP Budgeted 2009 GoNU total revenueBudgeted
likely 24% lower than 2008 actual
23.5
lower allocations to sub-national governments – in particular GOSS, (% of GDP)
levels in real terms
24%
22.4
20
24
8.7
20.4
15
22
3.8
3.6
20
10
14
Revenue
19.4 10.4 Non-Oil
Total
7.4
5.3
1.9
1.4
2.2
1.5
2000
2001
2.7
2.0
2002
4.0
GOSS
4.0
3.2
4.6
5
0
8.5
6.1
18
16
581%
Historical Actuals
14.1
10.7
4.7
2003
5.0
6.1
2004
2005
2.3
7.9
7.6
2006
5.0
2007
2008
4.7
Oil Revenue
N States
2009 budget
12
10
8
15.1
14.1
6
Federal
11.4
12.3
4
2
0
2006
2007
2008
2009 budget
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2.5a Worsening of Balance of Payments position due to lower
foreign exchange inflows, partly explained by Lower Oil
Export Earnings
Million USD $
14000
Sudan's oil export earnings likely to deteriorate to its historical
levels that revealed in 2005 due to destabilization and
fluctuations in oil market, (in million USD $)
12000
10000
8000
6000
4000
2000
0
2005
2006
2007
2008
9
2009 (projections)
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2.5b Worsening of Balance of Payments position due to lower
foreign exchange inflows, partly explained by declining
FDI and slowing in Remittances
FDI and Portfolio Investment, million $
Million US Dollar
4000
3500
3000
2500
2000
1500
1000
500
0
2006
2007
2008
2009 (projection)
10
10
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.
2500
3.0
Net international reserves in million of US
dollars (left scale)
2.5
Net international reserves in month of
next year's imports (right scale)
2000
2.0
1500
1.5
1000
1.0
500
0.5
11
0
0.0
2005
2006
2007
2008
2009 (projection)
3. GOSS
Southern Sudan and Global Crisis
1.Fiscal impact especially strong in Southern
Sudan
2.Implications for oil revenue transfers to GOSS
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3.1 Fiscal impact especially strong in Southern
Sudan, which relies on oil revenues for more than
95%
8000
SDG million
118.7
7000
GOSS total revenue , million SDG
6000
5000
Non-Oil Revenue
4000
3000
245.0
13.3
3.2
6,670.9
0.6
2000
1000
1,869.1
2,732.9
2,964.5
2006
2007
3,413.4 Oil Revenue
0
2005
6000.0
5000.0
2008
2009 budget
SDG million
Source: GOSS 2009 Budget Book
GOSS expenditures, SDG million
4000.0
3000.0
capital
2000.0
Operating
1000.0
Salaries
13
0.0
2006
2007
2008
2009 Budget
3.2
Implications for Oil Revenue
Transfers from GoNU to GOSS
Monthly transfers, million SDG
Quarterly transfers, million SDG
900
2000
799
800
1800
700
1600
600
1400
500
1768
1591
1355
1200
426
973
1000
400
800
300
600
200
92
137
400
296
100
67
200
0
0
Q1 2008
Q2 2008
Q3 2008
Q4 2008
Q1 2009
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Source: Ministry of Finance & National Economy * Monthly transfers figures don’t include arrears and
withdrawals from ORSA
Sudan’s Policy Response to the crisis
• 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.
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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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