1. 1111 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 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

2. 222 Presentation Consists of Four Parts SUDAN 1. The Context 2. The Impact on national economy 3. Impact on GOSS 4. Policy Response

3. 333 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

4. 2. The Impact on the National Economy

5. 5 2.1 Sudan economy to grow at 4% in 2009, which is above SSA average & other developing countries, except East Asia GDP growth, percent Source: World Bank, DEC Prospects Group.

6. 2.2 Sharp Fall in Oil Prices of Sudan’s two Blends 6

7. 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 Projected deterioration in fiscal balance, percent of GDP Source: World Bank, DEC Prospects Group.

8. 8888 Public Budgetary Impact: deteriorated GoNU’s Overall fiscal picture 2.4 Deteriorated GoNU’s Overall Fiscal Picture

9. 99 9 9 2.5a Worsening of Balance of Payments position due to lower foreign exchange inflows, partly explained by Lower Oil Export Earnings

10. 10 2.5b Worsening of Balance of Payments position due to lower foreign exchange inflows, partly explained by declining FDI and slowing in Remittances

11. 11 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.

12. 12 Southern Sudan and Global Crisis 1.Fiscal impact especially strong in Southern Sudan 2.Implications for oil revenue transfers to GOSS 3. GOSS

13. 13 3.1 Fiscal impact especially strong in Southern Sudan, which relies on oil revenues for more than 95%

14. 14 Source: 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. 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 1 st 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

16. 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.

17. THANK YOU