Excerpts relevant to Sudan from the AfDB African Economic Outlook 2019 Report

Excerpts relevant to Sudan from the AfDB African Economic Outlook 2019 Report

Acknowledgment

This work is wholly attributed to the African Development Bank and they are the copy right owner of the material.

Africa’s debt is rising, but there is no systemic risk of a debt crisis

By the end of 2017, the gross government debt- to-GDP ratio reached 53 percent in Africa, but with significant heterogeneity across countries. Of 52 countries with data, 16 countries—among them Algeria, Botswana, Burkina Faso, and Mali —have a debt-to-GDP ratio below 40 percent; while 6 countries—Cabo Verde, Congo, Egypt, Eritrea, Mozambique, and Sudan—have a debt- to-GDP ratio above 100 percent. The traditional approach to estimating debt sustainability classi- fies 16 countries in Africa at high risk of debt dis- tress or in debt distress. Debt situations in some countries have thus become untenable, requir- ing urgent actions whose range and modalities depend on the precise diagnosis of the source of debt distress. Even so, while debt vulnerabili- ties have increased in some African countries, the continent as a whole is not exposed to a systemic risk of debt crisis.

The AfDB report recommendations on regional integration strategies and policies

For coastal economies—Algeria, Angola, Benin, Cabo Verde, Cameroon, Comoros, Congo, Democratic Republic
of Congo, Côte d’Ivoire, Djibouti, Egypt, Equatorial Guinea, Eritrea, Gabon, Gambia, Ghana, Guinea-Bissau, Kenya, Liberia, Libya, Madagascar, Mauritania, Mauritius, Morocco, Mozambique, Namibia, Nigeria, São Tomé and Príncipe, Senegal, Sierra Leone, Somalia, South Africa, Sudan, Tanzania, Togo, and Tunisia.

  • Expand port facilities, including storage and customs administration, and increase the efficiency of handling vessel traffic and loading and unloading containers. The cost of African port facilities is estimated to be 40 percent above the global norm, and they have long container dwell times, delays in vessel traffic clearance, lengthy documentation processing, and low containers per crane hour (except South Africa). Ultimately, over 70 percent of delays in cargo delivery come from extra time in ports.
  • Increase the speed and reliability of rail and road networks by reducing congestion and delays at checkpoints, and diver- sions of trucks and rolling stock for maintenance.
  • Push for improving conventions and instruments beyond the stalled multilateral negotiations to facilitate transit trade.

Sudan Macroeconomic performance

Real GDP growth was an estimated 4.1% in 2018, up slightly from 3.3% in 2017. On the supply side, mining (growth of 6.3%), agriculture (3.7%), and manufactur- ing (1.5%) were the main contributors to growth. On the demand side, private consumption was the main contributor to growth, while the current account defi- cit, an estimated 2.4% of GDP in 2018, detracted from growth. High inflation and the phasing out of energy subsidies stymied growth. Although unemployment rose to 18% as a result of rapid exchange rate depre- ciation and persistent inflation, poverty and inequality declined between 2010 and 2015. But limited data impair analysis of how the declines affected structural transformation.

Sudan is in debt distress, with external debt an estimated 62% of GDP in 2018. Lifting of US sanc- tions is expected to normalize relations with creditors and speed negotiations of debt relief under the Heav- ily Indebted Poor Country Debt Relief Initiative. Inflation soared to an estimated 43% in 2018, driven by a sharp devaluation of the Sudanese pound and fiscal deficit monetization. Foreign currency scarcity and an over- valued official exchange rate triggered a parallel market emergency.

Tailwinds and headwinds

Real GDP growth is projected to be 3.6% in 2019 and 3.8% in 2020, benefiting from a strong commitment to ongoing macroeconomic policy and structural reforms, including removing tax exemptions, reducing public spending, rationalizing imports while providing incen- tives to boost exports, a rebound in manufacturing, and high private consumption. Addressing debt distress will also be crucial for realizing the projected economic out- look. The peace agreement signed in September 2018 to end the civil war in South Sudan has encouraged the

governments of Sudan and South Sudan to open four border crossings to facilitate the flow of humanitarian and commercial traffic and double oil output produc- tion. Downside risks include the continued civil con- flicts and insecurity in the Blue Nile, Darfur, and South Kordofan states.

Key challenges include institutional and human capacity weaknesses, high youth unemployment, a high external debt burden, and climate change. Sudan remains a typical transitional state faced with institutional and human resource capacity deficiencies. More than 130,000 young people a year enter the labor market, but only 30,000 positions are available, posing a serious challenge for the country. External debt stock—which increased from $18 billion in 1995 to $53.6 billion in 2016 and to $56 billion in 2018—is unsustainable and thus constrains the country’s economic recovery prospects. And Sudan continues to experience prolonged serious environmental degradation caused by low rainfall, over- cutting of trees, overcultivation, and overgrazing.

Key opportunities include huge unexploited agricul- tural potential, an improved national policy environment, and private sector potential. About 63% of Sudan’s land area is agricultural land, which is suitable for a wide variety of crop cultivation and animal husbandry. The government’s recent economic reforms, coupled with the opportunities arising from the lifting of US sanctions and the improved national policy environment, could create a conducive atmosphere for alignment with both the Sustainable Development Goals and the African Development Bank’s High 5s. Sudan also holds huge private investment opportunities in large-scale irrigated agriculture, dairy farming and animal husbandry, forest enterprises involving gum Arabic, and the leather supply chain for regional and global export, with the poten- tial to increase national income and foreign exchange earnings by promoting exports of manufactured and semi-manufactured goods.

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