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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. 1. 1. 1.

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Presentation Transcript
slide1

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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National Context

  • Sources of Fragility:
  • 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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2.1 Sudan economy to grow at 4% in 2009, which is above SSA average & other developing countries, except East Asia

GDP growth, percent

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Source: World Bank, DEC Prospects Group.

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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

Source: World Bank, DEC Prospects Group.

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Public Budgetary Impact:

deteriorated GoNU’s Overall fiscal picture

2.4 Deteriorated GoNU’s Overall Fiscal Picture

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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

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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

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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.

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southern sudan and global crisis

3. GOSS

Southern Sudan and Global Crisis

Fiscal impact especially strong in Southern Sudan

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%

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Implications for Oil Revenue Transfers from GoNU to GOSS

3.2

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Source: Ministry of Finance & National Economy

* Monthly transfers figures don’t include arrears and withdrawals from ORSA

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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.
medium term measures
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.