IMF: Sudan must float currency to boost growth, investment

CAIRO: The International Monetary Fund (IMF) has urged Sudan to float its currency to boost growth and investment, a measure the government has opposed even after the United States lifted 20 years of sanctions in October. The government would need to accompany a market-determined exchange rate with other tough reforms such as expanding the country’s tax base if Khartoum hopes to benefit from sanctions relief, the IMF said in a report published on Monday.

The Sudanese pound has weakened against the dollar since Washington lifted sanctions encouraging traders to step up imports, putting pressure on scarce hard currency. It hit an all-time low of 27 pounds against the dollar on the black market in November but strengthened to 23 pounds per dollar after a raft of emergency measures that included capping currency transfers and cracking down on currency traders.

The IMF said the end of sanctions was an opportunity for Sudan to strengthen its economic outlook but it required a currency float. “Fiscal policy should be tightened to eliminate the monetization of deficits, thus helping to reduce inflation and buttress macroeconomic stability,” it said. It projected GDP growth of 3.25 percent for 2017, down from 3.5 percent in 2016.

The weakened pound has contributed to surging inflation, which reached 33.08 percent year-on-year in October, according to the Central Statistics Office.

The central bank has held the official exchange rate at 6.7 pounds to the dollar but currency is largely unavailable at that price. “The tax base should be broadened, energy and wheat subsidies phased out and replaced by increased cash transfers to the poor, and capital investment increased,” the IMF said. The importdependent country has suffered both from the sanctions and from the secession of South Sudan in 2011, when it lost three-quarters of its oil output, its main source of foreign currency.—Reuters