VZCZCXRO3469
RR RUEHGI RUEHMA RUEHROV
DE RUEHKH #1835 3580939
ZNR UUUUU ZZH
R 230939Z DEC 08 ZDK
FM AMEMBASSY KHARTOUM
TO RUEHC/SECSTATE WASHDC 2596
INFO RUCNFUR/DARFUR COLLECTIVE

UNCLAS KHARTOUM 001835 
 
DEPT FOR AF/SPG, EEB/IFD/OMA AND EEB/IFD/ODF 
NSC FOR HUDSON AND PITTMAN 
DEPT PLS PASS USAID FOR AFR/SUDAN 
DEPT PLS PASS TREASURY FOR OIA, USED IMF AND USED WORLD BANK 
ADDIS ABABA ALSO FOR USAU 
 
SENSITIVE 
SIPDIS 
 
E.O.12958: N/A 
TAGS: EFIN ECON EAID PREL PGOV SOCI IBRD IMF SU
SUBJECT:  IMF/WORLD BANK ASSIGN NUMBERS TO SUDAN'S ECONOMIC 
CHALLENGES 
 
REF: A. KHARTOUM 1718 
 ¶B. KHARTOUM 1824 
 
¶1.  (SBU) SUMMARY.  The global economic recession will severely 
affect Sudan's economy, with South Sudan feeling a significantly 
greater budget pinch, according to IMF/World Bank analysis.  The 
Bank/Fund calculate that Sudan's current account deficit will more 
than double (from U.S. $3.9 billion to $8.1 billion) in 2009, due to 
both declining oil revenues and falling foreign direct investment 
(FDI) and remittances.  The Government of National Unity (GNU) 
budget deficit will swell from 4.7 billion Sudanese Pounds ($1=appx. 
2.2 SDG) to SDG 8.5 billion (an 81 percent increase) in FY 2009, the 
result of an anticipated 30 percent drop in oil revenues. 
Government of South Sudan (GoSS) revenues likely will decline back 
to FY 2006-2007 levels, roughly half of its FY 2008 windfall.  END 
SUMMARY. 
 
¶2.  (SBU) The Mission has been provided with a World Bank/IMF 
power-point presentation that was delivered to the donor community 
in Juba, outlining the IFIs most recent analysis of Sudan's current 
macroeconomic situation.  (Power point slides emailed to AF/SPG and 
EEB/IFD/OMA.)  The presentation adds quantitative detail to CDA 
Fernandez's recent conversation with World Bank Country Director 
Lawrence Clarke (ref. A). 
 
Global Downturn Hits Sudan's Current Account 
-------------------------------------------- 
¶3.  (SBU) According to the Bank/Fund, the current global economic 
recession will negatively affect both Sudan's balance of payments 
situation, adding to its already unsustainable debt burden, and to 
the GoS's fiscal deficit.  According to Bank/Fund figures, FDI has 
declined 31 percent since 2005 (from USD $3.5 billion to $2.4 
billion in 2008) and is expected to continue falling to $2.0 billion 
in 2009 and 2010.  The IFIs expect FDI to begin to rise thereafter, 
to $3.0 billion in 2012. 
 
¶4.  (SBU) The IFIs calculate that in 2009, Sudan will earn $3.3 
billion less from oil exports than they had estimated in their 
September Debt Sustainability Analysis.  Including both falling 
capital account flows and oil prices, the IFIs now estimate that 
Sudan will face a Balance of Payments gap $4.1 billion greater than 
they forecast only three months ago. 
 
And Pinches the GoS Budget 
-------------------------- 
¶5.  (SBU) Falling world oil prices and stagnant output also are 
having an impact on the GoS budget.  (Budget analyzed in greater 
detail ref. B.)  GoS oil revenues are forecast to fall at least 30 
percent in FY '09, reducing total GoS revenues by 15 percent.  With 
expenditures remaining unchanged from FY '08 at approximately SDG 26 
billion (USD $11.73 billion), the fiscal deficit will balloon to SDG 
6.7 billion or 6.2 percent of GDP, an 81 percent increase from FY 
'08. 
 
While the GoSS Faces Plunging Revenues 
-------------------------------------- 
¶6.  (SBU) While the GNU faces a 15 percent revenue drop, the GoSS 
will see its revenues, derived almost exclusively from oil, plunge 
by approximately 50 percent, from just over USD $3.0 billion in FY 
'08 to a little more than $1.5 billion in FY '09.  In principle, 
this drop should be a difficult, but not disastrous, challenge as 
2009 revenues  will only be returning to their level in 2006 and 
2007, from the abnormally high FY' 08.  With good management, the 
GoSS should be able to weather the storm.  Unfortunately, sound 
budget management has not proven to be the GoSS' strong suit.  In 
both 2007 and 2008, the GoSS significantly overspent in the first 
half of the year and was saved from running major fiscal deficits 
both years only by the late 2007-early 2008 oil-price surge. 
 
Comment 
------- 
¶7. (SBU) These IFI numbers provide some rigor and detail to what was 
already clear in general terms:  Sudan's economy, both North and 
South, will take a significant hit from the global economic 
recession.  Given its arrears to the IFIs, Sudan is unable to access 
concessionary IFI lending or seek restructuring of what already is 
regarded as an unsustainable debt burden.  The growing BoP financing 
gap will only add to the problem.  Sudan is paying the price for its 
growing dependence on oil as its main export.  With Sudan already 
facing multiple challenges in the coming year, the economic crunch 
further limits the GoS's room to maneuver and adds yet another 
variable to an already complex political equation. 
 
ASQUINO