Sudan urged to Embrace Economic Reforms

The International Monetary Fund (IMF) warned that the Sudanese economy would continue its downward unless the government undertakes crucial tax reforms.

“Fiscal reforms are critical to address deficit monetization, reduce inflation, and support social and development programs,” reads the IMF report on its latest Article IV consultation with the country.

The IMF also called on Khartoum to take on the fuel subsidies and gradually lift them while at the same time increasing spending on the vulnerable sections of the society.

“Total (explicit and implicit) fuel subsidies rose by an estimated 7½ percentage points to 11¾ percent of GDP over 2018–19 because of higher international oil prices, exchange rate depreciation, and increased fuel consumption”.

The Sudanese government backed away from lifting fuel subsidies in its 2020 budget following the uproar it created after initially including it and said it will put it up for discussion in a national economic conference slated for this month.

The Washington-based international financial body also stressed that the foreign exchange rate system remains “highly distorted” & recommended liberalizing it.

“Directors emphasized that gradual exchange rate liberalization is critical for eliminating the distortions that hamper investment and growth. It would bolster competitiveness and transparency, eliminate multiple currency practices and associated distortions, reduce rent-seeking, strengthen central bank independence and boost fiscal revenues,” the IMF said.

The Sudanese pound has plummeted against the US dollar in the black market, which the IMF says accounts for 80% of all transactions, reaching three digits that it is almost twice the official rate. This is adding to the inflationary woes facing Sudanese consumers.

The East African nation is plagued by long queues in fuel stations & bakeries as shortages mount. Most recently daily electricity outages have become common.