March 11th 2020 (Nyamilepedia) – The International Monetary Fund called on Sudan to take steps including easing fuel subsidies and liberalizing the exchange rate to rescue the economy, which was mismanaged for years under its former dictator.
“With large imbalances and loose policies, the outlook is alarming without policy reforms,” the IMF said in a statement after its latest Article IV consultation in the North African country. It forecast the economy shrinking a further 1.2% this year after a decline of 2.5% in 2019.
The Washington-based institution cited challenges including a fiscal deficit that rose almost 3 percentage points to 10.8% of gross domestic product last year, annual inflation rates of around 60% and foreign reserves that are only enough for about two months of imports.
“Regime change has created a window of opportunity for fundamental reforms to address major macro imbalances and lay the groundwork for inclusive growth,” the IMF said. Sudan is being ruled by a coalition of civilian technocrats and military figures after its long-term leader, Omar al-Bashir, was overthrown in April after mass protests.
The economy of Africa’s third-largest country has been wracked by crisis for years, hit variously by sclerotic leadership, international sanctions and the loss of most of its oil reserves on South Sudan’s secession in 2011.
Although the U.S. lifted a two-decade-old embargo in 2017, there’s yet to be any significant foreign investment. Persistent bread, fuel and currency shortages sparked the demonstrations in late 2018 that eventually snowballed into a mass movement against Bashir’s oppressive rule.
The IMF described gradual exchange-rate liberalization as “critical for eliminating the distortions that hamper investment and growth,” and also recommended greater independence for the central bank, broadening the tax base and strengthening the administration of revenue.
Fuel subsidies, a contentious issue in Sudan, should be phased out “over the medium term,” the IMF said. It acknowledged Sudan’s continued listing by the U.S. as a state sponsor of terrorism as “one of the obstacles to debt relief” for the country.
The African Development Bank on Tuesday said it had signed an agreement to loan $75 million to DAL Group, one of Sudan’s biggest conglomerates. The financing seeks to improve food security and household incomes in the country, the bank said.