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Viewing cable 06KHARTOUM2738, IMF Briefs on Sudan's 2007 Budget

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Reference ID Created Released Classification Origin
06KHARTOUM2738 2006-11-26 14:10 2011-08-30 01:44 UNCLASSIFIED Embassy Khartoum
VZCZCXRO8441
PP RUEHROV
DE RUEHKH #2738/01 3301410
ZNR UUUUU ZZH
P 261410Z NOV 06
FM AMEMBASSY KHARTOUM
TO RUEHC/SECSTATE WASHDC PRIORITY 5361
INFO RUEATRS/DEPARTMENT OF TREASURY WASHDC
RUCNIAD/IGAD COLLECTIVE
UNCLAS SECTION 01 OF 02 KHARTOUM 002738 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958:  N/A 
TAGS: ECON EFIN PGOV IMF SU
SUBJECT:  IMF Briefs on Sudan's 2007 Budget 
 
1.  Summary:  Visiting IMF officials recently briefed the 
international community on Sudan's national budget for 2007. 
Sudan's macroeconomic indicators are sound, with inflation 
stabilizing and growth continuing, although statistics remain 
unreliable.  Further work, however, is needed in the areas of tax 
policy and data transparency.  Fiscal restraint and monitoring 
growth in monetary supply remain important.  The 2007 budget is 
ambitious, and projects a year-on-year inflation rate of 12 percent 
and a real growth rate of 12 percent; the oil sector is expected to 
expand by 60 percent during the year.  The Government of Sudan 
values its economic gains of the past few years, and continues to 
work with the IMF to consolidate this success.  End Summary. 
 
2.  On November 13, IMF Mission Chief for Sudan Enrique Gelbard 
briefed representatives of the international community on Sudan's 
national budget for FY 2007.  Gelbard noted that Sudan had 
participated in a Staff Monitored Program (SMP) for several years; 
the IMF is "cautiously optimistic" that the Government of Sudan is 
committed to macroeconomic stability and fiscal transparency.  His 
main points were as follows: 
 
-- Sudan's macroeconomic indicators were sound since 2000, with 
inflation stabilizing and growth continuing.  Nonetheless, economic 
data remained unreliable, although the Government is committed to 
improving both the quality of statistics available and transparency; 
 
 
-- While inflation remains in single digits, it did increase late in 
2006 due to administered price increases for fuel and transport.  On 
a 12-month basis, the year will end with an inflation rate of 
roughly 13 percent.  There is still room to contain inflation, if 
Sudan tightens fiscal and monetary policy; 
 
-- Sudan would benefit from policy support for its fiscal regime. 
Productivity increases during 2006 were lower than anticipated; 
further action is needed on tax policy.  Although revenues are 
increasing, the rate of increase is slowing, with exemptions eroding 
its base; 
 
-- Indicators take time to respond to policy adjustments; 
nonetheless, Sudan needs to exercise fiscal restraint and monitor 
monetary growth closely; 
 
-- The 2007 draft budget is ambitious; it includes scaling down 
revenue exemptions and rationalizing its taxation system, which is 
more complex than need be at present, with multiple grades.  The IMF 
provided technical assistance in administering tax reforms; the 
government has endorsed these concepts and is implementing them 
gradually. 
 
-- For 2007, the Government projects an average monthly inflation 
rate of 6.8 percent, with an end of period basis being approximately 
12 percent.  Although the Government seeks a lower rate, this will 
require a series of adjustments.  Real growth for 2006 is projected 
to be 11 percent; the rate for 2007 is projected to be 12 percent. 
The oil sector will see a 46 percent expansion in 2007 due to 
increasing production (from 356,000 bpd to 520,000 bpd) and 
estimated high market prices.  The 2006 weighted production was 
356,000 barrels per day; this is projected to increase to 520,000 
for 2007. 
 
-- The Government's spending plans for 2007 are ambitious, 
especially in the area of capital spending.  The IMF notes that the 
Government should avoid incurring a non-oil fiscal deficit. 
 
--------------------------------------------- - 
Gov't Values Gains; is Receptive to IMF Advice 
--------------------------------------------- - 
 
3.  According to Gelbard, the Sudanese government values the 
macroeconomic gains of the past several years, and is receptive to 
the recommendations of the IMF team.  Many in the Government want to 
reform more, although there are political restraints as to how far 
and how fast further reforms can be made. 
 
--------------------------------------------- ---- 
Q and A Session Raises further Budget Information 
--------------------------------------------- ---- 
 
4.  In response to questions posed, Gelbard confirmed that the 2007 
national budget has line items for the East and for Darfur in 
keeping with the Eastern Sudan and Darfur Peace Agreements.  Asked 
about central bank reforms, he noted that the Comprehensive Peace 
Agreement (CPA) called for a central, federal banking facility with 
a Southern branch that was fully related.  He added that Sudan is 
seen as having a single banking system with one currency.  The IMF 
is providing technical assistance to the central bank, including its 
Southern portion.  In response to a question regarding budgetary 
support for pro-poor programs, Gelbard said that decreasing the 
petroleum subsidy was not an anti-poor policy, provided savings were 
used for pro-poor spending, such as on public transport subsidies. 
 
 
KHARTOUM 00002738  002 OF 002 
 
 
 
HUME