The International Monetary Fund has painted a dim picture of Sudan’s economy in its semi-annual World Economic Outlook report released in Tokyo on Monday. The report was immediately rejected by some Sudanese economic experts.
Anayir, a Sudanese economist, blasted the “unfair and inaccurate” IMF report, and insisted that the outlook for Sudan’s economy is promising and seeing growth.
Meanwhile, in an interview with Reuters news agency, Sudan’s International Monetary Fund (IMF) Resident Representative Paul Jenkins welcomed the government’s tough austerity package but said it still needs to improve tax collection to overcome the loss of oil revenues.
In June, the government launched a package of tough austerity measures including scaling back fuel subsidies to close a fiscal gap, sparking short-lived protests.
However, Anayir argued that the international organisation is painting a picture that contradicts realities on the ground. He added that oil companies are selling their shares to Sudan, and that the country is producing 115,000 barrels per a day, whose share of crude oil accounts for 60,000 barrels, while the companies get remaining 55,000 barrels.
The Sudanese economist said that the government of Sudan agreed with these companies to buy its share of oil at the international oil price. He further attributed growth of economy this year to good agricultural season and rain fall, adding that things will get better when recent agreement on mutual trade signed with South Sudan is in place and exporting the south oil via Sudan’s ports resumes.
Anayir hoped that oil production will go up to reach 65,000 barrels per a day and 180,000 barrels by the end of the year. Khartoum recently inaugurated gold refinery to regulate mining in Sudan, a step aimed at tapping mineral resources to boost national economy.
The IMF representative noted in his report that the central bank has also devalued the Sudanese pound, which had been in freefall on the black market since the South’s secession.
“The picture is much, much brighter than it was in June (before the austerity plan was launched),” Paul Jenkins, the IMF’s resident representative in Sudan said while adding: “We are very encouraged by the direction of policies which go a significant way towards resolving the challenges resulting from the loss of oil from South Sudan.”
According to Sudan’s finance minister Ali Mahmoud, 6.5 billion pounds ($1.4 billion) will be required to close the fiscal gap.
Jenkins also claimed that Sudan’s tax yield, the ratio of revenues to gross domestic product (GDP), was only 7%, which is “very low tax revenue yield compared to other countries in the region and other countries with the same development level.”
“Kenya, another low income country, has a yield of 20%… If they moved half where a country like Kenya is they would have fully recovered the loss of tax revenues from South Sudan’s secession.”
Analysts blame corruption and cronyism for lax tax enforcement with authorities often granting tax exemptions for people with the right connections.
Jenkins said scaling back of fuel subsides and other expenditures could bring down inflation, which hit 41.6% in July, to levels seen at the start of the year. In January, annual inflation was 19.3%.
“Contingent on firm implementation what they announced the inflation rate by the end of the year could be where it was at the beginning of the year,” he told in an interview.
Jenkins said the IMF hoped for more steps, although a senior party official has ruled out fully removing fuel subsidies until the end of 2013 to ease social pressures.
“We encourage their continuing reforms. Fuel subsidies are very expensive and benefit mainly wealthy people,” Jenkins said. “Something (like) 60% of the subsidies goes to the richest 40% of people.”
The International Monetary Fund (IMF) last week revised its outlook for Sudan’s economy predicting a worse than expected economic contraction for 2012.