11

Revenues, Transparency and Pro-Revenues, Transparency and Pro-poor Spendingpoor Spending

Sudan Consortium Meeting In Sudan Consortium Meeting In Paris 9-10 March 2006Paris 9-10 March 2006

March 2006March 2006

Republic of the SudanRepublic of the Sudan

22

Section One: Economic Performance Section One: Economic Performance up to 2005up to 2005

1. Economic1. Economic GrowthGrowth An average GDP Growth rate of 7% was An average GDP Growth rate of 7% was

achieved during the period 2000-2005 achieved during the period 2000-2005 Output structure is lead by agriculture Output structure is lead by agriculture but but

with lower growth rates of average 4% a with lower growth rates of average 4% a year.year.

Average outputAverage output growth was lead by growth was lead by petroleum (115%), construction (7.4%), petroleum (115%), construction (7.4%), electricity (5.6%), and manufacturing electricity (5.6%), and manufacturing (9.8%).(9.8%).

GDP growth rate is expected to couch about GDP growth rate is expected to couch about 10% in year 2006.10% in year 2006.

33

2. Fiscal Policy: 2. Fiscal Policy: Prudent fiscal policy consistent with the IMF staff Prudent fiscal policy consistent with the IMF staff

monitored Program since 1997 continued.monitored Program since 1997 continued. A Cash Management Unit (CMU) has been established A Cash Management Unit (CMU) has been established

since 2003, and strengthened with skills.since 2003, and strengthened with skills. A cash plan is drawn for every fiscal yearA cash plan is drawn for every fiscal year A large and Medium tax payer unit has been established A large and Medium tax payer unit has been established

and is now fully operational .and is now fully operational . Tax exemptions has been confined to the legislations.Tax exemptions has been confined to the legislations. The Cabinet is in the process of issuing a decree to abolish The Cabinet is in the process of issuing a decree to abolish

the renewal of expired previous tax exemptions.the renewal of expired previous tax exemptions. Increased non – oil sector revenues in 2004 & 2005.Increased non – oil sector revenues in 2004 & 2005. A High level Policy Formulation and Monitoring A High level Policy Formulation and Monitoring

Committee for tightening foreign borrowing policy was Committee for tightening foreign borrowing policy was established & is now operational.established & is now operational.

44

Public sector expenditure structure has improved with wages and Public sector expenditure structure has improved with wages and salaries percentage contribution to total expenditure decreased from salaries percentage contribution to total expenditure decreased from 38.3% in 1996 to 21% in 2005.38.3% in 1996 to 21% in 2005.

Resources for development were increased from 4.4% of GDP in Resources for development were increased from 4.4% of GDP in 2003 to 6.3% in 2005 and 8% of GDP expected in 2006.2003 to 6.3% in 2005 and 8% of GDP expected in 2006.

Central Government spending on social services delivery increased Central Government spending on social services delivery increased from 0.8% of GDP in 2001 to 2.6% in 2005 and 3% is expected to from 0.8% of GDP in 2001 to 2.6% in 2005 and 3% is expected to 2006.2006.

Augmenting poverty reduction funding to 5% of GDP in 2006.Augmenting poverty reduction funding to 5% of GDP in 2006. Increasing transfers to the States from 3.7% of total expenditure in Increasing transfers to the States from 3.7% of total expenditure in

1996 to 6.3% in 2004 , 34% in 2005 and 38% budgeted in 2006.1996 to 6.3% in 2004 , 34% in 2005 and 38% budgeted in 2006. Creating more jobs to reduce unemployment rates from 19% to Creating more jobs to reduce unemployment rates from 19% to

12% in 2006.12% in 2006. Reduction of epidemic and contagious diseases in 2006 vide,Reduction of epidemic and contagious diseases in 2006 vide,

- Malaria to 60%.- Malaria to 60%.- HIV/AIDS control 80%.- HIV/AIDS control 80%.- TB to less than 1%.- TB to less than 1%.- Balharesia to less than 10%- Balharesia to less than 10%

55

Improving nutritional status, maternal & Improving nutritional status, maternal & child health care child health care

Increasing vaccination coverage.Increasing vaccination coverage. Increasing potable water supply coverage.Increasing potable water supply coverage. Increasing access to primary health care to Increasing access to primary health care to

80%.80%. Increasing health insurance coverage to 35%.Increasing health insurance coverage to 35%. Increasing the rate of enrollment in primary Increasing the rate of enrollment in primary

education to 80%.education to 80%. Targeting 2.5 million families through Targeting 2.5 million families through

financing productive means within a tune of financing productive means within a tune of SD 4.5 billion.SD 4.5 billion.

Augmenting the special fund for poverty and Augmenting the special fund for poverty and pauparism through additional fund raising.pauparism through additional fund raising.

66

3. Foreign Sector:3. Foreign Sector: A 3-year programme of import/ tariff A 3-year programme of import/ tariff

reform has been formulated and reform has been formulated and commenced implementation. commenced implementation.

The country has submitted the final The country has submitted the final documents for accession to WTO documents for accession to WTO including the offer on goods and including the offer on goods and services and a legal plan of action. services and a legal plan of action.

International reserves have been International reserves have been increased to 4.8 months of imports by increased to 4.8 months of imports by the end of 2005.the end of 2005.

Current account deficit recorded 10% Current account deficit recorded 10% largely financed by the FDI flows.largely financed by the FDI flows.

77

4. Financial Sector4. Financial Sector Medium-term Financial Programmes (1999-Medium-term Financial Programmes (1999-

2002 and 2002-2005) implementation results 2002 and 2002-2005) implementation results viz;viz;

Strict enforcement of the Bazel rules and Strict enforcement of the Bazel rules and requirements.requirements.

The introduction of innovative Islamic The introduction of innovative Islamic financial instruments. financial instruments.

The establishment of Monetary Operation Unit The establishment of Monetary Operation Unit (MOU) in the Central Bank with a full (MOU) in the Central Bank with a full mandate to manage monetary policy. mandate to manage monetary policy.

Raising commercial banks capital adequacy Raising commercial banks capital adequacy ratios above the threshold of Bazle minimum ratios above the threshold of Bazle minimum requirement. requirement.

Reducing non-performing loans (NPL) to 9% Reducing non-performing loans (NPL) to 9% target.target.

88

Streamlining broad money targeting with Streamlining broad money targeting with GDP growth and inflation rates.GDP growth and inflation rates.

Reserving oil excess proceeds in Oil Reserving oil excess proceeds in Oil Revenue Stabilization Account (ORSA)and Revenue Stabilization Account (ORSA)and using oil revenue adjuster in 2006.using oil revenue adjuster in 2006.

Exchange rate, maintained as managed Exchange rate, maintained as managed float has been substantially relaxed. float has been substantially relaxed.

All laws, regulation and arrangements All laws, regulation and arrangements related to restructuring of the Central Bank, related to restructuring of the Central Bank, the new currency deign & all related the new currency deign & all related preparatory work done , the appointment of preparatory work done , the appointment of board of directors has been implemented.board of directors has been implemented.

99

The budget for the year 2006 is prepared within the The budget for the year 2006 is prepared within the context of the following references:context of the following references:

The comprehensive peace agreement (CPA) The comprehensive peace agreement (CPA) with specific emphasis on the wealth sharing with specific emphasis on the wealth sharing Agreement & modalities.Agreement & modalities.

JAM Matrix.JAM Matrix.

The provisions of the Transitional Constitution. The provisions of the Transitional Constitution.

The mid-term economic program (2004-2008).The mid-term economic program (2004-2008).

Section Two: The 2006 BudgetBudget References

1010

The 2006 Budget Features and classification

• Resources are categorized into;Resources are categorized into;

a. national revenues.a. national revenues.

b. financing.b. financing.

c. oil revenue stabilization account.c. oil revenue stabilization account.

• The classification of exp. into three sections.The classification of exp. into three sections.

- section (1): National expenditures.- section (1): National expenditures.

- section (2): Southern Sudan transfers.- section (2): Southern Sudan transfers.

- section (3): Northern states transfers.- section (3): Northern states transfers.

• Each section is classified into;Each section is classified into;

- Recurrent expenditures.- Recurrent expenditures.

- Development expenditure. - Development expenditure.

• Thus ensuring more transparency and accountabilityThus ensuring more transparency and accountability

1111

Main Objectives of 2006 Budget

• Maintaining sound economic management and Maintaining sound economic management and prudent macro policies targeting low inflation prudent macro policies targeting low inflation rate of one digit, a low budget deficit of 1% (on rate of one digit, a low budget deficit of 1% (on cash basis) and improved BOP and positive cash basis) and improved BOP and positive economic growth rates . economic growth rates .

• Pursuing progress in achieving Millennium Pursuing progress in achieving Millennium Development Goals.Development Goals.

• Attaining Poverty reduction and more Attaining Poverty reduction and more equitable resource allocation and transfers to equitable resource allocation and transfers to states. states.

1212

Restoring peace and National Unity.Restoring peace and National Unity. Meeting the substantial financial obligation arising out of Meeting the substantial financial obligation arising out of

the implementation of the CPA.the implementation of the CPA. Addressing infrastructure bottlenecks and basic social Addressing infrastructure bottlenecks and basic social

services.services. Tackling unemployment problems.Tackling unemployment problems. Building strategic food reserve.Building strategic food reserve. Honoring critical external debt servicing. Honoring critical external debt servicing. Addressing security problems and the rule of law..Addressing security problems and the rule of law.. Upgrading weak infrastructure particularly in the rural Upgrading weak infrastructure particularly in the rural

areas. areas. Solicit financing current account deficit.Solicit financing current account deficit. Safeguarding FDI flows & foreign exchange accrued to Safeguarding FDI flows & foreign exchange accrued to

petroleum exports which constitute around 50% of capital petroleum exports which constitute around 50% of capital formation.formation.

Challenges Confronting the 2006 Budget

1313

Increasing Fiscal efforts through:Increasing Fiscal efforts through: Rationalizing exemptions.Rationalizing exemptions. Gradual removal of oil subsidies.Gradual removal of oil subsidies. Enhancing tax coverage and tax collection.Enhancing tax coverage and tax collection.

Ensuring monetary stabilityEnsuring monetary stability..

Con. Challenges Confronting the 2006

Budget

1414

itemitem 2006 budget est.2006 budget est.SD BillionSD Billion

2005 budget est.2005 budget est.SD BillionSD Billion

ChangeChange%%

Total ResourcesTotal Resources 2055.22055.2 1441.01441.0 43%43%

Gross National Revenue Gross National Revenue 1709.41709.4 1275.01275.0 34%34%

a-Tax Revenuesa-Tax Revenues Direct TaxDirect Tax Indirect TaxIndirect Tax VATVAT

676.0676.0

105.0105.0

334.5334.5

236.5236.5

467.4467.4

95.095.0

278.6278.6

93.893.8

45%45%

11%11%

20%20%

152%152%

b-Non-Tax Revenuesb-Non-Tax Revenues

--Departmental feesDepartmental fees

-National Revenues-National Revenues

1033.41033.4

2525

1008.41008.4

807.6807.6

18.618.6

789.0789.0

28%28%

34%34%

28%28%

Loans & GrantsLoans & Grants 167.8167.8 95.095.0 77%77%

Domestic ResourcesDomestic Resources 178.0178.0 71.071.0 151%151%

Resources & Allocations by chapter in 2006 budget

1515

2006 National Budgetitemitem 2006 budget 2006 budget

est.est.SD BillionSD Billion

2005 budget 2005 budget est.est.

SD BillionSD Billion

ChangeChange%%

Current Expenditure Current Expenditure 1578.41578.4 1139.61139.6 39%39%

Section one: National Gov. ExpendituresSection one: National Gov. Expenditures

- - Chapter one: Wages & SalariesChapter one: Wages & Salaries

- Chapter Two: Recurrent- Chapter Two: Recurrent

922.8922.8

418.4418.4

504.4504.4

679.6679.6

301.0301.0

378.6378.6

36%36%

39%39%

104%104%

Section Two: GoSS Expenditures:Section Two: GoSS Expenditures:

- - Transfers of GoSS sharesTransfers of GoSS shares

- Transfers to oil Productive Southern States- Transfers to oil Productive Southern States

319.4319.4

306.9306.9

12.512.5

274.2274.2

263.7263.7

10.510.5

16%16%

16%16%

19%19%

Section Three: Northern States Expenditures:Section Three: Northern States Expenditures:

- - Recurrent Transfers.Recurrent Transfers.

- Development Transfers- Development Transfers..

336.2336.2

62.662.6

273.6273.6

185.8185.8

55.555.5

130.3130.3

81%81%

13%13%

110%110%

Development Expenditure Development Expenditure 506.8506.8 311.4311.4 63%63%

Total Expenditure Total Expenditure 2085.22085.2 1451.01451.0 44%44%

1616

Section Three: Pro-poor Spending:Section Three: Pro-poor Spending: Updating the IPRSP & finalizing the PRSP by Updating the IPRSP & finalizing the PRSP by

July 2006.July 2006. Incorporating the PRSP targets in 2007 budget.Incorporating the PRSP targets in 2007 budget. Ensuring equitable resources allocation through Ensuring equitable resources allocation through

decentralization policies .decentralization policies . Facilitate financing of pro-poor programs and Facilitate financing of pro-poor programs and

activities.activities. The pro-poor expenditure in 2006 represent about The pro-poor expenditure in 2006 represent about

SDD 333.0 billion (16% from total exp. and 5% of SDD 333.0 billion (16% from total exp. and 5% of GDP Compared to 13.7% of total exp. 3.5% of GDP Compared to 13.7% of total exp. 3.5% of GDP in 2005)GDP in 2005)

Enabling concentration of basic social services as Enabling concentration of basic social services as by constitution these services are the domain of by constitution these services are the domain of the States. the States.

1717

Con. Pro-poor Spending:Con. Pro-poor Spending:

Directing the banking sector to increase pro-poor Directing the banking sector to increase pro-poor funding through assigning 10% loanable funds of funding through assigning 10% loanable funds of the commercial Banks for pro poor activities.the commercial Banks for pro poor activities.

Confining the financing of Saving and Development Confining the financing of Saving and Development Bank to solely for pro-poor activates. Bank to solely for pro-poor activates.

Utilizing Zakat resources to instigate social Utilizing Zakat resources to instigate social development programs as poverty social safety development programs as poverty social safety nets.nets.

Avail employment opportunities to 20000 higher Avail employment opportunities to 20000 higher education graduate in public administration education graduate in public administration (mainly education, health, agriculture and (mainly education, health, agriculture and veterinary sectors).veterinary sectors).

Supporting 120 thousands higher education Supporting 120 thousands higher education students through the student support fund.students through the student support fund.

1818

Section Four: Transparency issues:Section Four: Transparency issues:

1.1. Process of Budget Preparation:Process of Budget Preparation: Consultation with civil society organization, Consultation with civil society organization,

Academicians, Research institutions, Private sector, Academicians, Research institutions, Private sector, Gov. units, States and the GoSS.Gov. units, States and the GoSS.

Initial Consultation with the International Initial Consultation with the International Monetary Fund in Budget Framework and Monetary Fund in Budget Framework and estimated figures.estimated figures.

Consultations at the cabinet of Ministers level Consultations at the cabinet of Ministers level (Ministerial Committees).(Ministerial Committees).

Discussion and consultation in the Parliament Sub-Discussion and consultation in the Parliament Sub-committees .committees .

Allocation of Revenues between the Centre , States Allocation of Revenues between the Centre , States and Southern Government in conformity of the and Southern Government in conformity of the CPA modalities.CPA modalities.

1919

Con. Transparency issues:Con. Transparency issues: Distribution of Central Government Revenue shares.Distribution of Central Government Revenue shares. Regular reporting to the Cabinet and Parliament.Regular reporting to the Cabinet and Parliament. Annual reporting from the Auditor General to the Annual reporting from the Auditor General to the

Cabinet and Parliament of budget Execution Cabinet and Parliament of budget Execution (monitoring).(monitoring).

Budget reform through the introduction of GFS with Budget reform through the introduction of GFS with technical assistance from IMF.technical assistance from IMF.

Ensuring regular auditing of all petroleum enterprises. Ensuring regular auditing of all petroleum enterprises. Avail the information on the revenue sharing through Avail the information on the revenue sharing through

the media.the media. Reconciliation of revenue figures with the Government Reconciliation of revenue figures with the Government

of the South (net transfers US $ 768.0 Million)..of the South (net transfers US $ 768.0 Million).. The on-going work on Public Expenditure Review The on-going work on Public Expenditure Review

(PER).(PER).

2020

Section Five: Future visionSection Five: Future vision ( 2006 – 2010) ( 2006 – 2010)

1. GNU Commitments: 1. GNU Commitments: Implementing the CPA and honors the obligations Implementing the CPA and honors the obligations

arising out of JAM. arising out of JAM. Resolving the situation in Darfur and in the East.Resolving the situation in Darfur and in the East. Maintain macroeconomic stability.Maintain macroeconomic stability. Sharpening structural reforms through inter alia, Sharpening structural reforms through inter alia,

removing supply bottlenecks and improving removing supply bottlenecks and improving transparency in fiscal and oil sector operations.transparency in fiscal and oil sector operations.

Creating the conditions for successful decentralization, Creating the conditions for successful decentralization, address regional disparities especially in services address regional disparities especially in services delivery and poverty reduction.delivery and poverty reduction.

2121

Con. Future visionCon. Future vision

2. Challenges:2. Challenges: The huge and rising debt burden ( US $ 26.7 billion) The huge and rising debt burden ( US $ 26.7 billion)

preventing Sudan from concessional loan and preventing Sudan from concessional loan and impeding development process.impeding development process.

Reformation of business environment conducive to Reformation of business environment conducive to empowering the private sector including removal of empowering the private sector including removal of monopolies. monopolies.

Upgrading human and institutional capacity, Upgrading human and institutional capacity, especially at the state levels.especially at the state levels.

Mobilization of massive resources to address the Mobilization of massive resources to address the widespread poverty, low income levels, widespread poverty, low income levels, unemployment and other required resources to meet unemployment and other required resources to meet the high expectations of peace dividends.the high expectations of peace dividends.

Issues arising from Post-conflict era.Issues arising from Post-conflict era. Meager inflow of foreign resources.Meager inflow of foreign resources. Wide spread of Unemployment.Wide spread of Unemployment.

2222

Con. Future visionCon. Future vision

3. Financial Gap in 2006 Budget:3. Financial Gap in 2006 Budget: During the preparation of 2006 budget, a During the preparation of 2006 budget, a

host of important development programs host of important development programs were been postponed to minimize the huge were been postponed to minimize the huge fiscal gap.fiscal gap.

2323

4. Requirements from the International 4. Requirements from the International Community: Community:

Provide grants to foster development and Provide grants to foster development and eliminate our dependence on nonconcessional eliminate our dependence on nonconcessional loans.loans.

A quick move to resolve Sudan’s foreign debt to A quick move to resolve Sudan’s foreign debt to allow Sudan to benefit from global initiatives and allow Sudan to benefit from global initiatives and have access to concessional development loans.have access to concessional development loans.

Provide strong component of technical assistance Provide strong component of technical assistance from development partners.from development partners.

Support the development programs to help Support the development programs to help realizing the MDGs.realizing the MDGs.

2424

Annexes

2525

Basic IndicatorsBasic Indicators

Item/Year 2000 2001 2002 2003 2004 20052006

Projection

Population in Million 31.1 31.9 32.7 33.6 34.4 35.3 36.2

Real GDP Growth Rate 8.3% 6.1% 6.5% 6.0% 7.2% 8.0% 10.0%

Per-capita in US$ 422 410 450 507 583 704 886

Exchange Rate 257.2 258 264 261 257 244 225

General Price Inflation 8.5% 4.9% 8.3% 7.7% 8.5% 8.5% 8.0%

Money Supply Growth Rate 33.0% 25.9% 30.4%

30.3% 30.8% 36.0% 30.0%

2626

General Price InflationGeneral Price Inflation

0

5

10

2000 2001 2002 2003 2004 2005

2727

Exchange RateExchange Rate

240

245

250

255

260

265

270

2000 2001 2002 2003 2004 2005

2828

Real GDP Growth RateReal GDP Growth Rate

0%1%2%3%4%5%6%7%8%9%

2000 2001 2002 2003 2004 2005

2929

GDP Contribution & Annual Growth RateGDP Contribution & Annual Growth Rate

Item 2000 2001 2002 2003 2004 2005

Contribution Agricultural Sector 46.3 45.6 46 45.6 44.5 42.9

Industrial Sector 21.5 22.8 23.2 24.1 25.4 27.4

Service Sector 32.2 31.6 30.8 30.3 30.1 29.7

Total 100% 100 100 100 100 100 100

% Growth Rate            

Agricultural Sector 0.7 4.7 7.4 5.2 4.5 3.9

Industrial Sector 47.1 13.1 8 10.5 12.9 16

Service Sector 1.6 4.2 4.2 3.8 6.6 5.9

Overall Real GDP 8.3 6.4 6.5 6 7.2 7.5

3030

Average GDP Contraption 2000 -Average GDP Contraption 2000 -20052005

Agricultural Sector

45%

Industrial Sector24%

Service Sector31%

3131

Money SupplyMoney Supply

Billion S.D Projection

Item/Year 2000 2001 2002 2003 2004 2005  2006

Money Supply 343 432 563 734 960.4 1306 1698

New Injection 85 89 131 171 226.4 346 392

Growth Rate 33% 25.9% 30.3% 30.4% 30.8% 36.0% 30.0%

Source Bank of Sudan

3232

Inflation & Money Supply Growth RatesInflation & Money Supply Growth Rates

0

2

4

6

8

10

2000 2001 2002 2003 2004 2005

Year

%

Money SupplyGrow th RateGenral Price In f lation

3333

Balance Of PaymentEstimates

 

  2000 2001 2002 2003 3004 2005 2006

Current Account Balance -160 -1074 -2469 -610 -3395 -9986 -8063

Trade Balance 440 -326 -317 -74 191 -2581 -87

Export (FOB)+ 1807 1699 1835 2462 3777 4824 7889

Petroleum 1351 1377 1397 1968 3100 4187 7246

Non Petroleum 456 322 438 494 677 637 643

Imports FOB 1366 2024 2152 2536 3586 7405 7976

Service Account (net) -601 -748 -2152 -536 -3586 -7405 -7976

Capital and Financial Account 303 490 824 1390 1332 2853 3454

Errors & Omissions -454 -80 1130 -1707 1282 5341 2126

Over all Balance 82 -90 199 423 730 1002 1428

               

Source Bank of Sudan

3434

Trade Balance (million US$)Trade Balance (million US$)

Trade Balance (million US$)

0

10002000

30004000

5000

60007000

8000

2000 2001 2002 2003 2004 2005Imports Export (FOB)

3535

Oil & non-Oil Exports (million US$)Oil & non-Oil Exports (million US$)

0

1000

2000

3000

4000

5000

2000 2001 2002 2003 3004 2005Oil Non Oil

3636

Fiscal SectorFiscal SectorBillion S.D estimated

Item 2000 2001 2002 2003 2004 2005 2006

Total Revenue 334 365.2 472.2 715.0 1023.9 1127.0 1788.3

Oil 144 149.7 200.6 399 498.9 547.7 908.4

non oil 190 215.5 271.6 316.0 525.0 579.3 879.9

Current Expenditure 300 342.6 377.1 551 791.8 1072 1483.8

Development Expenditure 52.2 76 140.8 185 312 312.1 920.8

Total Expenditure (L) 345.1 413 509.6 696.1 1036.5 1333 2286.3

Domestic Finance 11.1 48.1 37.7 10 30 207.5 208

Total Foreign (loan) 7.1 5.3 8.3 40 49.9 51.5 88.9

Total Expenditure (L+F) 352.2 418.3 517.9 736.1 1103.8 1384.5 2404.6

Overall Deficit 18.2- 53.1- 45.7- 21.1- 79.9- 257.5- 616.3-

3737

Current Expend. & Total RevenueCurrent Expend. & Total Revenue

0

500

1000

1500

2000

2500

2000 2001 2002 2003 2004 2005

Bill

ion

S.D

Total Revenue Current Expenditure

3838

Oil & Non-Oil RevenueOil & Non-Oil Revenue

0

200

400

600

800

Billion S.D.

2000 2002 2004Oil non oil

3939

Thank You