Country Report Sudan March 2011

Outlook for 2011-12: Policy trends

National economic policy in 2011-12 will remain largely subservient to short-term political needs, although fiscal policy is constrained by the transfer requirements of the various regional peace agreements. The government has announced subsidy cuts as the main thrust of a fiscal austerity package for 2011. It will look to widen the tax base and reduce exemptions in line with IMF recommendations. It aims to diversify the economy away from its dependence on oil, which is forecast to generate 65% of central government revenue in 2011-12-and around 98% of GOSS revenue. Other policy goals include rebuilding international reserves (which have been depleted defending the currency), strengthening the banking system and restoring confidence in public financial management.

Sudan has substantial debt arrears with multilateral and bilateral lenders, and there will be an increased chance of debt relief following the referendum and Darfur talks. The authorities will seek to finance infrastructure projects and the fiscal deficit by borrowing from Gulf Arab countries, China and India, although they have made commitments to the IMF on limiting the amount of new non-concessional debt. International donors provide substantial funds to Sudan, mainly through UN agencies and non-governmental organisations, although the government will continue to restrict the operations of some of these groups.

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