AFRICAN DEVELOPMENT BANK GROUP

SUDAN

COUNTRY BRIEF 2014-2016 AND COUNTRY PORTFOLIO PERFORMANCE REVIEW

EARC/SDFO

September 2014

TABLE OF CONTENTS

Abbreviations and Acronyms ........................................................................................................................ i Currency equivalents, Fiscal year and Measures ......................................................................................... iii Executive Summary ..................................................................................................................................... iv

1. Introduction ...................................................................................................................................... 1 2 Country Context And Prospects ....................................................................................................... 2 2.1 Political Developments .................................................................................................................... 2 2.2 Economic Context ........................................................................................................................... 3 2.3 Fragility Analysis ............................................................................................................................ 4 2.4 Social Sector Developments and Cross-Cutting Issues ................................................................... 5 3. Strategic Options .............................................................................................................................. 7 3.1 Country Strategic Framework ......................................................................................................... 7 3.2 Donor Coordination, Harmonization and Bank Positioning............................................................ 7 3.3 Challenges and Opportunities ........................................................................................................... 8 4. Implementation And Results Of The Country Brief 2012-2014 ...................................................... 9 4.1 Resource Allocation for the Period 2012-2014 ............................................................................... 9 4.2 End of Period Implementation Status, Achievement of Objectives and Results ............................. 9 5. Country Portfolio Performance Review ......................................................................................... 11 5.1 Bank Group Portfolio ..................................................................................................................... 11 5.2 Portfolio Monitoring and Evaluation ............................................................................................. 11 5.3 The Bank Group and other Stakeholders’ Performance ................................................................ 12 5. 4 Results of Survey on Portfolio Quality.......................................................................................... 12 5.5 Country Portfolio Improvement Plan ............................................................................................ 13 6. Strategy For The Period 2014-2016 ............................................................................................... 13 6.1 Experiences and Lessons Learnt at the End of the Programming Period (2012-2014) .................. 13 6.2 Rationale and Strategic Selectivity ............................................................................................... 14 6.3 Bank Indicative Assistance Program ............................................................................................. 15 6.4 Financing Options ......................................................................................................................... 16 6.5 Monitoring and Evaluation (M and E) .......................................................................................... 16 6.6 Risks and Mitigation Measures ..................................................................................................... 17 6.7 Requirements for Accessing Pillar 1 Resources and the PBA Allocation under ADF-13 ............ 17 7 Conclusions And Recommendations .............................................................................................. 19 7.1 Conclusion ..................................................................................................................................... 19 7.2 Recommendation ........................................................................................................................... 19

ANNEXES

Annex 1: Status of the cooperation agreement, the joint approach, internal conflict and mdgs ................... I Annex 2: Summary of fragility assessment on sudan ................................................................................. IV Annex 3: End of period achievements of country brief 2012-2014 ........................................................... VI Annex 4: The status of the bank group’s ongoing operations ................................................................... VII Annex 5: Cb/CPPR methodology, consultation and results ..................................................................... VIII Annex 6: Country portfolio improvement plan ......................................................................................... XII Annex 7: Pipeline of projects .................................................................................................................. XIV Annex 8: Results based activity framework 2014-2016 ............................................................................ XV Annex 9: Selected macroeconomic indicators ........................................................................................ XVII Annex 10: Eligibility for FSF supplemental support funding ............................................................... XVIII

i

ABBREVIATIONS AND ACRONYMS

ACDRS Arrears Clearance and Debt Relief Strategy

ADF African Development Fund

AfDB African Development Bank

ALSF African Legal Support Facility

AU African Union

AUHIP African Union High Level Implementation Panel.

AUPSC African Union Peace and Security Council

AWF African Water Facility

BCISD Building Capacity for Inclusive Service Delivery

BWIs Bretton Woods Institutions

CAR Commitment at Risk

CB Country Brief

CBOS Central Bank of Sudan

CBS Central Bureau of Statistics

CBSDES Capacity Building Support for Development of Skills

CBSES Capacity Building Support in the Education Sector

CC Climate Change

CEDMRM Capacity Enhancement for Debt Management and Resource Mobilization

CGBV Combating Gender based Violence

COMESA Common Market for Eastern and Southern Africa

CPA Comprehensive Peace Agreement

CPIA Country Policy and Institutional Assessment

CPIP Country Portfolio Improvement Plan

CPPR Country Portfolio Performance Review

DDPD Doha Document for Peace in Darfur

DeMPA Debt Management Performance Assessment

DRSLP Drought Resilience and Sustainable Livelihoods Program

DSA Debt Sustainability Analysis

ESPA East Sudan Peace Agreement

ESW Economic and Sector Work

FDI Foreign Direct Investment

FGM Female Genital Mutilation

FSF Fragile States Facility

GDP Gross Domestic Product

GFS Government Financial Statistics

GNI Gross National Income

GoS Government of Sudan

GoSS Government of South Sudan

FS Foreign Suppliers

HIPC Highly Indebted Poor Countries Initiative

ICBPRGG Institutional Capacity Building for Poverty Reduction and Good Governance

IDPs Internally Displaced People

IFAD International Fund for Agricultural Development

IFIs International Financial Institutions

IGAD Intergovernmental Authority on Development

IMF International Monetary Fund

IPFAS International Public Financial Accountability Standards

ii

I-PRSP Interim Poverty Reduction Strategy Paper

JA Joint Approach

JSAN Joint Staff Advisory Note

MBC Mamoun Beheiry Center

MDGs Millennium Development Goals

MDRI Multilateral Debt Relief Initiative

MMR Maternal Mortality Rate

NBHS National Baseline Household Survey

NDP National Development Plan

NPC Non Paris Club

NTCF Nigerian Technical Cooperation Fund

PAR Projects at Risk

PBA Performance Based Allocation

PC Paris Club

PD Paris Declaration

PDAC Policy Dialogue Support to Arrears Clearance and Debt Relief

PFEM Public Finance and Economic Management

PFM Public Financial Management

PIUs Project Implementation Units

PPs Problem Projects

PPPs Potentially Problematic Projects

PRSP Poverty Reduction Strategy Paper

QPR Quarterly Progress Report

RECs Regional Economic Communities

RISP Regional Integration Strategy Paper

RO Regional Operations

SDFO Sudan Field Office

SPLM-N Sudan People’s Liberation Movement-North

SRF Special Relief Fund

TA Technical Assistance

TCB-PFEM Technical Capacity Building for Public Finance and Macroeconomic

Management Project

TOC Tripartite Outreach Committee

TYS Ten Year Strategy

TWG Technical Working Group (on Sudan’s Debt)

UA Units of Account

UNAMID UN-AU Mission in Darfur

UNDP United Nations Development Program

UNISFA United Nations Interim Security Forces for Abyei

UNOPS United Nations Office for Project Services

UNSC United Nations Security Council

USAID United Nations Agency for International Development

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CURRENCY EQUIVALENTS, FISCAL YEAR AND MEASURES

As of June, 2014

Fiscal Year

1 January – 31 December 2014

Weights and Measures

1 ton = 2204 Pounds (lbs)

1 kilogram (kg) = 2.204 lbs

1 meter (m) = 3.28 feet (ft)

1 millimeter (mm) = 0.03937 inch (”)

1 kilometer (km) = 0.62 mile

1 hectare (ha) = 2.47 acres

UA 1 SDR 1

UA 1 USD.1.530

UA 1 EUR 1.12

UA 1 SDG 8.81368

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EXECUTIVE SUMMARY

1. The objectives of this Country Brief (CB) 2014-2016 are to update the Boards of Directors on

recent developments in Sudan and to provide a framework for the Bank’s programming and

operational activities over the next three years. The CB also contains a review of the Bank’s current

activities in Sudan and challenges, opportunities and resource requirements for the proposed

programming period. This Brief slightly overlaps with the CB 2012-2014 to reflect the fragile and

rapidly changing situation in the Sudan, which requires a flexible and tailored response. In addition,

the country has made significant progress and the Bank has delivered nearly all the key milestones of

the CB 2012-2014 (Annex 3). An adjustment is therefore necessary to enable the Bank to adapt and

continue to be relevant, while making a case for the country’s exceptional eligibility to access

additional resources under ADF 13.

2. The preparation of the CB entailed the participation of various Bank Departments as well as

extensive consultations with government officials, development partners, civil society, the private

sector and stakeholders of various Bank-financed projects. It was prepared in a context that

significantly evolved from the tense political situation in 2012 when the last CB was approved. The

country has made good progress both on the political and economic fronts. In particular, progress in

macroeconomic performance is noteworthy, driven largely by fiscal policy reforms, gold exports,

rebounding agricultural sector and resumption of South Sudan’s oil exports. Sudan adopted its Interim

Poverty Reduction Strategy Paper (I-PRSP) in December 2012, reconciled its external debt and

implemented bold economic reforms between 2012 and 2013.The country has also started

implementing a new Staff Monitored Program (SMP) negotiated with the IMF in early 2014, which

forms a solid basis for progress on HIPC debt relief. 3. Political progress is most notable in the implementation of the key elements of the 2012

Cooperation Agreement, which has eased political tensions between Sudan and South Sudan and

lessened the economic pressure on both countries. While Sudan’s internal peace and security remain

intractable, new opportunities are emerging for stepping up engagement and donors are beginning to

reengage. As focus areas of the CB 2012-2014, the Bank Group intensified its dialogue, technical

assistance (TA) and capacity building activities especially on arrears clearance and debt relief, and

economic and financial governance. 4. The focus on policy dialogue, TA, capacity building and targeted operations to reduce fragility

are retained as priorities in the new CB 2014-2016, as they will continue to be relevant during this

programming period. The CB 2014-2016 thus focuses on two Pillars: i) Governance and

Accountability; and ii) Skills and Technology, which consolidate these priorities against key

milestones that will continue to enhance the Bank’s visibility and effectiveness. The above priorities

are consistent with the national policy framework (the I-PRSP), the Bank’s Ten-Year Strategy 2013–

2022 and the Bank’s Strategy for Addressing Fragility and Building Resilience in Africa 2014-2019,

which builds on the Busan New Deal for engagement in Fragile States and the recommendations of

the 2014 High Level Panel Report on Fragile States. 5. Sudan’s consistent progress on macroeconomic management and fiscal reforms, and

reasonable political progress especially with regards to the relationship with South Sudan are

noteworthy. Management views this progress as consistent with the milestones required for the

utilization of FSF Pillar I resources under ADF-13, amounting to UA 60 million in line with the

priorities of the Country Brief 2014-2016, and access to 50% of the grant component of the PBA

allocation, amounting to UA 27.99 million over the same period. These resources are thus

programmed in this Country Brief.

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6. The Boards of Directors are hereby invited to approve the Country Brief 2014-2016 for Sudan.

The Boards of Directors are also invited to approve Sudan’s exceptional eligibility for and utilization

of the FSF Pillar I resources under ADF-13 (UA 60 million), and 50% of the grant component of PBA

under ADF-13 (UA 27.99 million) as programmed in this strategy.

1

1. INTRODUCTION

1.1 The objectives of this Country Brief (CB) 2014-2016 are to update the Boards of Directors on

recent developments in Sudan and to provide a framework for the Bank’s programming and

operational activities over the next three years. The brief also reviews the Bank’s current activities in

Sudan, identifies challenges, opportunities and lessons to guide the Bank’s engagement going

forward. This Brief slightly overlaps with the CB 2012-2014 to reflect the fragile and rapidly

changing situation in the Sudan, which requires a flexible and tailored response. In addition, the

country has made significant progress and the Bank has delivered nearly all the key milestones of the

CB 2012-2014 (Annex 3). An adjustment is therefore necessary to enable the Bank to adapt and

continue to be relevant, while making a case for the country’s exceptional eligibility to access

additional resources under ADF 13. 1.2 The preparation of the CB entailed the participation of various Bank Departments as well as

extensive consultations with officials of government ministries and departments, development

partners, civil society, the private sector and stakeholders of various Bank-financed projects1. The last

CB (2012-2014) was approved by the Boards of Directors in 2012 in a context of tense political

confrontations2 between Sudan and South Sudan just a year after secession, following deadlock in

negotiations on outstanding post-secession issues. The priorities for the Bank’s engagement were thus

crafted on creating the conditions for peace and helping the country achieve macroeconomic stability

and resilience. The focus was on policy dialogue, technical assistance and capacity building. Since

Sudan is in arrears, the implementation of the CB 2012-2014 relied heavily on the Fragile States

Facility (FSF) Pillars I and III, and Bilateral and Multilateral Trust Funds. In the same way, the CB

2014-2016 will also put emphasis on financing from these same sources and will therefore, request the

Boards exceptional approval for Sudan to access FSF Pillar I resources and 50% of the PBA to

finance the Bank’s focused interventions in the country. 1.3 The CB 2014-2016 is prepared in a context that has seen remarkable improvement over the

situation in 2012 when the last Brief was approved. Progress in implementing the 2012 Cooperation

Agreement has eased political tensions between the two countries. Border clashes have subsided and

since May 2013, South Sudan’s oil flow resumed through Sudanese pipelines, easing some of the

economic pressure that came with the heightened political tensions. Some advances are also noted in

the Joint Approach (JA)3, especially towards achieving key technical milestones on external debt

relief. The country adopted its Interim Poverty Reduction Strategy Paper (I-PRSP) in December 2012,

implemented bold economic and fiscal policy reforms in both 2012 and 2013, and has commenced

implementation of a new SMP negotiated with the IMF in early 2014. 1.4 While internal peace and security remain as challenges in some parts of the country, new

opportunities are emerging for stepping up engagement with Sudan. The Bank Group has thus

intensified its dialogue and provided technical assistance to the country. An Update to the CB 2012-

2014 was prepared last year4, and nearly all its key outputs have been achieved (see 4.2)

. The CB

2014-2016 will build on these achievements to draw lessons that would help redefine the Bank’s

strategic priorities for the proposed programming period.

1 A CB consultation mission to Sudan was undertaken staff EARC, ORFS and SDFO from 23 February to 4

th March 2014.

2This included the seizure of Sudan’s main oil field (Heglig) by South Sudanese forces in April 2012, militarization on

both sides of the border, claims over Abyei, and conflicts in Southern Kordofan and Blue Nile. 3In the September 2012 Cooperation Agreement, the two countries reiterated their commitment to the principle of the Joint

Approach (JA) to seeking international assistance to address their challenges, including debt, financial assistance to meet

the development needs of both countries, and lifting of all economic sanctions imposed on Sudan. 4ADB/BD/WP/2012/126/Add.1&ADF/BD/WP/2012/88/Add.1).

2

2 COUNTRY CONTEXT AND PROSPECTS

2.1 Political Developments

2.1.1 Sudan’s current political context is still defined by a combination of both internal and external

threats. External threats emanate from the lukewarm relationship with South Sudan, due to the failure

to fully implement the September 2012 Cooperation Agreements. Internal threats relate to Sudan’s

own domestic conflicts (in Darfur, South Kordofan and Blue Nile States) and the demand for more

political reforms. 2.1.2 This situation leads to intermittent periods of active conflicts in some parts of the country.

There are currently two joint United Nations/African Union peace keeping missions in Sudan: one in

Darfur and a second in Abyei5. Intermittent conflicts especially in Darfur, Kordofan and Blue Nile

states as well as Abyei have remained persistent. The conflicts frequently unleash significant

humanitarian effects that have left thousands of people dead and millions displaced. The African

Union High Level Implementation Panel (AUHIP), the UN and the Intergovernmental Authority on

Development (IGAD), among others, are making relentless efforts to permanently resolve these

conflicts. 2.1.3 In relation to South Sudan, the signing of the Cooperation Agreement (CA) in September

2012 and the Matrix of Implementation in March 2013, mediated by the AUHIP, led to substantial

progress on the post-secession issues. The Matrix was comprehensive and covered all contentious

issues, including borders, security, oil, trade, Abyei, the two Protocol Areas (South Kordofan and Blue

Nile) and the economic framework for cooperation between the two countries. Reasonable

implementation progress is noted in many areas, especially on oil whereby Sudan has already received

USD 857 million6 in oil transit fees from South Sudan as at May 2014, under the Transitional

Financial Arrangements (TFA). Even though these developments bode well for peace and stability in

Sudan, the outbreak of rebel war in South Sudan creates new challenges to implementation of key

elements of these agreements7. This poses a real risk to peace and stability in both countries, given

that South Sudan’s conflict has been concentrated in oil-rich states bordering Sudan. So far, Sudan is

reported to have remained neutral in South Sudan’s conflict, which augurs well for continued

improvement in the relationship of the two countries. 2.1.4 With regards to Darfur, the Doha Document for Peace in Darfur (DDPD)

8 continues to serve

as the main framework for attaining peace in the region. The joint efforts of the GoS and donors led to

the Darfur Donor Conference in Doha in April 2013, where about USD 1.04 billion was pledged for

Darfur’s development. However, progress in implementing ensuing programs has been slow due

largely to intermittent conflicts9. In particular, the difficulty of access makes it harder to fully

transition from humanitarian and peacekeeping operations to development operations, which is now a

priority.

2.1.5 On South Kordofan and Blue Nile states, the Government in January 2014 resumed

negotiations with the Sudan People’s Liberation Movement-North (SPLM-N), which demands

comprehensive political dialogue involving all contending parties. The talks are yet to make any

breakthrough as the 6th

Rounds broke up in May 2014 without conclusions10

(also see Annex 1). The

Government has now presented a ‘road-map’ for political reform which bodes well for a democratic

5The mission in Darfur is the United Nations/African Union Hybrid Mission for Darfur (UNAMID), the largest peace

keeping mission in the world. The Abyei mission is the United Nations Interim Security Forces for Abyei (UNISFA). 6 South Sudan has also received USD 3.5 billion in oil proceeds since the resumption of oil flow in 2013.

7The status of implementation of the Cooperation Agreement and the Joint Approach (JA) are presented in Annex 1.

8The DDPD was signed by the Government of Sudan (GoS) and some warring factions in 2011 (others are yet to sign),

mediated by Qatar. Development partners have rallied political and development efforts around the DDPD framework. 9The persistence of conflicts is due to the failure of some rebel groups to sign the DDPD; the frequent break-away of sub-

groups, and armed conflict among local communities for resources. 10

The Government and the SPLM-N disagree on the mechanisms to deliver humanitarian aid; SPLM-N also demands that

the negotiations involve all parties including Darfur rebels, and calls for a transitional government (details in Annex 1).

3

transition. Many see this as a good opportunity for the Government to build the momentum for

comprehensive national peace dialogue, especially in view of the upcoming presidential and

parliamentary elections around mid-2015.

2.2 Economic Context

2.2.1 The political economy of Sudan is currently defined by the impact of the secession of South

Sudan and huge loss of oil revenue as well as the country’s inability to access international finance.

The country is also subject to the largest number of economic sanctions, all of which affect trade,

investment and access to international finance. The dynamics of the Arab Spring have also led to

declining capital flows and remittances from the Arab world.

2.2.2 Grappling with these uncertainties, Sudan’s economy posted weak GDP growth rates of about

2.5% and 1.4% in 2011 and 2012 respectively, down from 10.5% in 2007, and about 7% average for

the five years preceding secession (Figure 1). The country also slipped into fiscal and current accounts

deficits in 2011 and 2012 due to loss of oil revenue.

2.2.3 A modest GDP growth rate of 3.6% is

estimated in 201311

, driven largely by a

rebounding agricultural sector, rising gold

exports12

and tax reforms. The current account

deficit as a percentage of GDP persisted at near

double digit (-9.6%) in both 2012 and 2013. Tax

reform revenue gains and oil transit fees from

South Sudan have significantly improved the

fiscal deficit, from -3.5% of GDP in 2012 to

about -1.7% in 2013, which is projected to turn

into a surplus in 2014. However, monetization of

fiscal deficit and increasing pressure on the

exchange rate mounted pressure on inflation,

which persisted at nearly 36% average for both

2012 and 2013. Analysts project an easing of

inflation pressure in 2014, to average about 21%

largely due to reforms13

, especially prudent

fiscal policies and slowdown in money supply

growth (from 20% in 2013 to 16% in 2014). These reforms are in line with the Staff Monitored

Program (SMP) which was negotiated with the IMF in February 2014 and is now being implemented.

The SMP will strengthen the case for HIPC debt relief, having successfully implemented 13 previous

ones in the last 14 years.

2.2.4 The magnitude of the foreign debt overhang, which is estimated at USD 43.8 billion (80%) as

at December 2013 (of which USD 470 million is owed to the Bank), also continues to weigh heavily

on economic recovery prospects. About 86% of this amount is accumulated arrears. The dynamics of

the debt, as of 31st December 2013 (Figure 2) showed that 38% of the external debt is owed to Non

Paris (NPC) 32% to Paris Club (PC), 14% to International Financial Institutions (IFIs), 12% to

Commercial Bank (CBs) and 4% to Foreign Suppliers (FS).

11

The highest sector contributor to the GDP in 2012 was Services (45%), followed by agriculture including fisheries

(31%), industry (15%) and mining including oil and gas (4%) and others (5%). The dependency on oilhas left agriculture’s

share in GDP declining, from 55.4% in 1960 to 31% in 2012, while those of industry and services have increased. 12

The share of gold in total exports rose close to 70% in 2012, up from about 10% during the pre-secession period. 13

Fiscal reform measures were undertaken in both in 2012 and 2013. Expenditure side measures included: (i) reducing the

size of the government by about 50%; (ii) removal of 50% subsidies on oil products; (iii) reducing government-procured

goods and services; and, (iv) eliminating exchange rate distortions. Revenue side measures included tax reform, tightening

loopholes for corruption, and increasing oil and gold production.

Figure 1: Selected Macroeconomic Indicators 2008-2013

Source: MoFNE and Central Bank of Sudan

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2.2.5 Addressing the debt constraint will largely depend on the success of Sudan and South Sudan in

implementing the Joint Approach (JA). In the context of the JA, the two countries renewed their

commitment in 2012 to approach the international

community to seek assistance in the four key areas

including debt relief14

, which they deem critical for the

co-existence of two viable states. On debt relief, a Zero

Option approach was agreed prior to secession in 2011,

whereby Sudan would take the entire debt burden subject

to joint outreach to creditors (by the two countries), and

provided that a HIPC Decision Point would be reached in

two years from the date of the agreement15

. Failing the

Zero Option, debt apportionment will be the recourse,

which could return the two countries to conflict. Sudan

has made significant progress in meeting the milestones of

the dateless technical roadmap set by the Technical

Working Group (TWG)16

on external debt (details in

Annex 1). Indeed, the Sudanese economy will find it impossible to fully recover in the absence of a

comprehensive debt relief. The challenge now lies in political outreach to get creditors to commit to

HIPC debt relief.

2.3 Fragility Analysis

2.3.1 The fragility assessment identifies four main drivers of fragility: political, economic, social

and environmental (details in Annex 2). The political drivers of fragility in Sudan emanate from

recurrent conflicts in Darfur, in South Kordofan and Blue Nile states, as well as political tensions with

South Sudan. These conflicts have created insecurity and stalled development in the last decades.

Regionally, 85% of Sudan’s neighbours (6 out of 7) are either unstable, at war or in some form of

political turmoil17

. This is a recipe for proliferation of arms and drugs which aggravates and prolongs

conflicts. Conflicts in these countries lead to an influx of refugees across porous borders into Sudan.

The refugees come in with increased demands for social services and disruptions in the lives and

livelihoods of communities, including disease outbreaks and create general instability. This pressure

also aggravates resource based conflicts related to water, land and pastures. The reverse is also true,

evident in the prevalence of Sudanese refugees in countries such as Egypt, Libya and Chad. Thus,

these movements of refugees and internally displaced persons (IDPs) are a root cause of fragility in

the region. Also, Sudan is currently going through a political transition and has started a new

constitutional process, with elections expected in March 2015. The process of transition is critical to

the country’s future peace and stability. 2.3.2 Sudan’s fragile macro-economic environment has detracted from the Government’s capacity to

effectively deliver social services, which directly threatens social cohesion. The situation is largely

driven by the economic and political sanctions, loss of oil revenue and lack of access to concessional

resources. In particular, the lack of hard currency has led to high inflation and spiralling costs of

living, putting pressures on the poor, particularly in urban areas. This is a recipe for social tensions

that can implode and aggravate fragility. Without favourable change in the macroeconomic situation,

especially investments in job creating opportunities to make growth more inclusive, more social crises

could result and deepen fragility.

14

The four key areas of the of the JA are: i) international financial assistance to fill one-third of the financing gap of Sudan

due to loss of oil revenues resulting from the secession; ii) financing to support South Sudan to address its immediate

development challenges; and iii) assistance in the lifting of all economic sanctions imposed on Sudan. 15

The validity of the Zero Option has been extended twice and the last extension expires in September 2014 (last extension

done at signing of Implementation Matrix in 2013). 16

The TWG on Sudan’s external debt comprises the World Bank, the IMF, the AfDB, the AUHIP and major creditors. 17

These include the Central African Republic (CAR), Chad, Egypt, Eritrea, South Sudan and Libya.

Figure. 2 : Creditors’ Share in Sudan’s External Debt,

December 2013

Source: CBOS, External Debt Unit

IFIs 14%

PC 32% NPC

38%

CBs 12%

FS 4%

5

2.3.3 The social drivers of fragility stem from weak governance and lack of accountability, which

increases the divide between centre and periphery, and hence increases fragility. In Sudan, progress in

the delivery of basic services has been slow particularly in peripheral areas. Governance institutions

remain weak, especially those necessary for effective and sound public financial management and the

implementation of sectorial strategies that ensure transparent, efficient and equitable inter-

governmental transfers. The capacity to maintain peace and security and promote rule of law and

effectively manage public resources for service delivery have been weakened by chronic conflict.

Social fragility also originates from regional disparities and huge inequalities in access to natural

resources, which combine with a potent mix of ideology and ethnicity to threaten internal peace and

security.

2.3.4 Finally, since most of Sudan is arid, competition over natural resources (water, pasture, land

as well as gold) is a driver of fragility at the local level. In particular, the inequality in access to land,

water and pastures is a source of recurrent conflict among crop farmers, pastoralists and agro-

pastoralists. Thus there is a need for strong governance institutions to manage Sudan’s renewable

resources and preserve biodiversity and eco-systems. In particular, the threat of climate change is

likely to put further pressure on fragile eco-systems, and disrupt livelihoods, which depend primarily

on natural resources.

2.4 Social Sector Developments and Cross-Cutting Issues

2.4.1 Poverty: Despite Sudan’s high GDP per capita of about USD 1,400, poverty is deeply

entrenched and largely rural, with wide regional disparities. According to the Bank-financed 2009

National Baseline Household Survey (NBHS), 47% of Sudanese are considered poor, with 26.5% in

urban and 57.6% in rural areas. North Darfur State is reported as the poorest (69.4%). An estimated

20% of the population is in need of humanitarian assistance. Access to finance and social services is

uneven. For example, only 29% of the population is currently covered by the National Health

Insurance Fund. Government and donors are now assessing progress with the implementation of I-

PRSP, which will reveal trends of Government’s social spending. Also, the Bank’s technical

assistance to the preparation of a PRSP entails a replication of the NBHS, which will reveal the

current dynamics of poverty in the “new” Sudan after South Sudan’s secession. This NBHS will

provide both gender and age disaggregated data which will give an updated picture on the poverty

profile of the country. 2.4.2 Inclusive growth: While Sudan achieved high GDP growth during the decade before secession

in 2011, this growth was neither sustainable nor inclusive and hence not sufficient to reduce poverty.

The significant variation of poverty across regions within the country (see para. 2.4.1) also testifies

that growth is not inclusive. Similarly, gender disparity is observed in labour force participation. For

instance, a recent analysis indicates that overall labour force participation rates for men are much

higher than those of females in all age groups, with more than a 50 percentage point gender gap in the

54-59 age group. The 2009 NBHS also revealed that female participation in the workforce is currently

48%, while male participation has reached 73%. Whereas the female workforce participation rate is

low for women in all age groups at 23%, rates fluctuate significantly from one age group to another.

About 29% of women between the ages of 35 and 44 are active in the workforce, whereas those aged

65 or older account for only 14% of participants. The male population between the ages of 35 and 54

has the highest workforce participation, with 96% of this group actively working. This unequal trend

is largely due to structural constraints such as the labour laws and cultural norms, which either lead to

a preference for male employees or discourage employers from hiring women in certain jobs. Thus,

achieving inclusive growth in Sudan would not only require economic diversification to create jobs,

but also deliberate efforts to remove such structural constraints on female labour participation.

6

2.4.3 Youth unemployment: In Sudan, youth unemployment rates have soared to 22% while that for

adults is only 11%18

. These figures are even more alarming for female youth, whose unemployment

rate of 33% is worse than their male peers (19%). Youth unemployment in Sudan is caused by several

factors, notably the country’s overdependence on oil-led growth which did not translate into new job

creation, instead led to a neglect of labour intensive sectors such as agriculture. Finally, even though

the service sector is rapidly emerging, the mismatch between the skills of new graduates and those

demanded by the labour market makes it impossible for them to be readily employed. Thus, the

adaptation of youth education and skills to the current demands of the labour markets is a national

priority. 2.4.4 Climate Change (CC) and Transition to Green Growth: Like other arid African countries,

Sudan suffers from climate change, with impacts observed in the increasing desertification, erratic

rainfall, deforestation and frequent droughts and floods. Climate change has thus exacerbated the

vulnerability of poor rural communities which depend directly on natural resources. While the GoS

fully understands the implications of CC, it does not yet have a coherent policy to address it. Given

the need to increase the adaptive capacities of communities to the vagaries of climate change, which

perfectly aligns with the Bank’s objective of supporting countries to gradually transition to green

growth, there is an urgent need for GoS to develop appropriate policies to form a framework for

support in this important area. 2.4.5 Gender: The GoS adopted a number of policies to empower women, including a National

Policy on Women Empowerment (2007), a National Policy for Girls’ Education (2007), a national

plan for Combating Gender Based Violence (CGBV) and a National strategy to deal with Female

Genital Mutilation (FGM) (2008). However, some challenges remain, such as inadequate female

involvement in peace processes, and more importantly limited availability and access to credit for

commercial empowerment (women’s share of microfinance is 17.9%). To address these challenges,

the Bank will build the government capacity on gender sensitive budgeting through a PFM project, as

an important activity in line with the Bank’s Gender Strategy and the inclusive growth focus of the

Ten Year Strategy (TYS). 2.4.6 The establishment of a Directorate for Girls’ Education, at both the Federal and State Levels

Ministries of Education in 2000, has helped in narrowing the gender gap in basic education. The

proportion of girls and boys enrolled in primary education, for instance, stood at 65.4% and 71.4%,

respectively in 2011 and 2012. At tertiary education level however, there are higher rates of enrolment

and graduation of girls than boys. Similarly, the number of women in public service holding

responsible Government position has also increased significantly. For instance, women now occupy

28% of the seats in parliament, which is very commendable. There is considerable progress towards

achieving the MDG target of gender equality and empowerment in 2015. 2.4.7 Regional Integration: Sudan has a good potential to benefit significantly from regional

integration. The country is endowed with a 500 miles coastline on the red sea, with its strategic port at

Port Sudan while most of its neighbours are landlocked, including Chad and South Sudan. In spite of

this potential and membership of COMESA and the Arab League, the country is yet to have a regional

integration strategy. With the exception of Eritrea, Sudan is the least integrated with its regional

neighbours, in terms of total trade as a proportion of GDP. This is largely due to lack of economic

diversification and the existence of restrictive trade policies. It is therefore critical that Sudan

undertake reforms that will enhance its capacity to benefit from regional integration and trade.

18

African Economic Outlook (AEO), 2012.

7

3. STRATEGIC OPTIONS

3.1 Country Strategic Framework 3.1.1 Sudan’s National Development Plan (NDP) 2012-2016 and the I-PRSP constituted the basis of

the Country Brief (2012-2014) and are still being implemented. The Pillars of the I-PRSP and the key

results areas of the NDP are complementary and mutually reinforcing. Both seek to create the

conditions for peace and security, and reduce unemployment and poverty through enhancing

governance and institutional capacity. The pillars of the NDP (governance, peace and security,

infrastructure, and agriculture and food security) are also consistent with the Bank’s Ten Year

Strategy (TYS) and the Bank’s Strategy for Enhanced Engagement in Fragile Situations. 3.1.2 The Pillars of the I-PRSP and their focus areas are presented in Box 1. An assessment of

progress towards achieving the milestones of the I-PRSP is in progress and will be an input into the

preparation of the full PRSP which has just started. Indications are that the pillars of the PRSP will

remain unchanged given that the country’s development challenges have not changed significantly.

Thus, the I-PRSP will form the basis for the new CB 2014-2016, as its focus areas create opportunities

for Bank’s continued engagement in Sudan for the programming period.

Box 1: Interim Poverty Reduction Strategy Paper, 2012-2014 and National Development Plan, 2012-2016

I-PRSP National Development Plan (NDP)

Pillar 1: Strengthening

Governance and Institutional

Capacity

Key result area 1: Promote sustainable economic development by encouraging a

competitive private sector, supporting key infrastructure & agriculture projects &

building a knowledge-based economy;

Pillar 2: Reintegration of

Internally Displaced Persons

& Refugees

Key result area 2: Sustain peace & stability through continued implementation of the

CPA, Darfur Peace Agreement (DPA) and East Sudan Peace Agreement (ESPA), whilst

safeguarding national sovereignty and security, continuing to build consensus and

reconciliation, and maintaining good relations with the international community based on

mutual interests

Pillar 3: Developing Human

Resources

Key result area 3: Reduce poverty & make progress towards achieving the MDGs by

expanding provision of basic services in health, education, water & sanitation, with a

particular emphasis on quick impact projects for returnees and war affected groups

Pillar 4: Promotion of

Economic Growth and

Employment Creation

Key result area 4: Strengthen public accountability, Good Governance & the Rule of

Law;

Key result area 5: Build capacity of public institutions & civil society at State & Local

levels & strengthen the social fabric of the Nation.

3.2 Donor Coordination, Harmonization and Bank Positioning 3.2.1 Sudan has made some progress in the implementation of the Paris Declaration (PD) targets,

meeting three out of the ten. The three targets met include the operationalization of a national

development strategy that is linked to a long-term vision, supporting sectorial and sub-national

strategies, with prioritized targets linked to the MDGs and cross-cutting issues as required by the PD.

In spite of this progress, there is a need for an institutionalized aid coordination mechanism as well as

regularizing dialogue among ministries responsible for aid management.

3.2.2 In Sudan, the Department of International Cooperation in the Ministry of Finance and National

Economy is responsible for the coordination of donor support to the country. Currently, this

responsibility does not involve any systematic, regular or formalized meetings between the

Government and donors, nor do donors themselves have such a formal framework for coordinating

among themselves.

3.2.3 Donor coordination meetings are not regular and are often held mainly during Government

policy processes. Indeed, the Bank is at the forefront in catalysing the donors coordination processes,

given its unique relationship with the government as a trusted partner. During major policy processes,

the Bank hosts most of the technical and coordination committee meetings. The Bank also hosts and

co-chairs Quarterly Donor Coordination Meetings, which mostly discuss thematic issues and do not

necessarily focus on coordination. To address this gap, the Bank is driving a process that will lead to

8

the establishment of a formal coordination group. In the interim, the Bank and the World Bank have

led the formation of the PRSP Coordination Group (co-chaired by the two institutions), with monthly

donor coordination meetings taking place alternately in the premises of the two institutions. The co-

chairs are also using this forum as a platform to form a formal coordination mechanism between the

government and donors. A Donor Consultative Forum also exists under the umbrella of UN Country

Team, which brings together key development partners, including the Bank.

3.2.4 In terms of intervention, the World Bank is managing the Multi-donor Trust Fund to the tune

of US. 500 million and is also managing the global education fund to the tune of USD 75 million. The

UNDP is implementing the Darfur Development Strategy with initial support of USD188 million from

the State of Qatar. Similarly, other institutions are also financing different programs including

livestock resilience by IFAD (USD 26 million), agriculture and food security by the EU (USD 11.5

million), and natural resources resilience program by FAO (USD 1.1 million).

3.3 Challenges and Opportunities

Challenges

3.3.1 Sudan is first and foremost confronted with major challenges comprising the following:

Creating sustainable conditions for durable peace and stability in order to transition credibly

from emergency and humanitarian work to recovery and reconstruction and long term

development priorities. This also includes sustaining current peace initiatives and processes to

achieve durable peace.

Creating the conditions for addressing economic and institutional issues, and capacity gaps

(institutional and human capacity). In particular, the country suffers from chronic brain drain,

with severe negative effects on service delivery, especially in the education and health sectors.

Implementing credible reforms to address the macroeconomic imbalances, promote inclusive

growth, and explore new sources of growth through economic diversification (notably

agriculture and industry), and strengthening the private sector.

Improving the Country Policy and Institutional Assessment (CPIA) rating, as the CPIA

overall average rating of Sudan stood at 2.5 in 2013, which is below the cut-off score of 3.2

for fragile states, reflecting the high degree of fragility of Sudan.

Reducing the country’s huge debt overhang, improving capacity gaps (institutional, human

and physical), enhancing food insecurity, and alleviating poverty. Should debt relief fail to

materialize, there is the risk that the country could slide into deeper fragility with much wider

regional implications. The huge debt overhang precludes the country’s access to concessional

borrowing.

3.3.2 These challenges call for an urgent need to intensify credible policy and political dialogue,

backed by adequate analytical work, to help Sudan advance its case at the international level, notably

on debt relief and on the removal of economic sanctions. Addressing the latter issues is pivotal to

helping Sudan resolve internal conflicts and get out of fragility.

Opportunities

3.3.3 The fact that Sudan has made considerable progress to address key challenges creates new

opportunities, which if harnessed, could help the country make progress in getting out of fragility.

These are explored below:

Sudan has about 170 million acres, with only 20% of the cultivated land being farmed using

modern technology. This offers opportunities for diversifying into other sectors such as

agriculture and agro-industries

Achieving most of its technical milestones for debt relief provides a window of opportunity

for the Bank and development partners to walk the extra mile to assist the country step-up its

political outreach to kick-off the HIPC debt relief process.

Making efforts to achieve peace internally, especially with combatant groups and political

9

contenders is another opportunity that should be further built upon to maintain peace, security

and development. .

Progress in macroeconomic management, including the new SMP with the IMF, has endeared

donors to re-engage and scale up assistance to the country. For example, Qatar has provided

an amount of USD 135 million to support Sudan’s rich but underdeveloped archaeological

heritage. The EU is financing a new health services program in East Sudan with Euro 12.8

million. The EU also pledged 60 million Euros for Darfur in2013 and about $81 million for

various projects in 2014. The World Bank has provided a grant of USD 8 million in support of

the implementation of the African Green Belt, targeting 13 of the Sudanese states affected by

the drought, desertification and water shortage. These investments create new opportunities

for complementarity and synergy with the Bank during the implementation of its new Country

Brief 2014-2016.

4. IMPLEMENTATION AND RESULTS OF THE COUNTRY BRIEF 2012-2014

4.1 Resource Allocation for the Period 2012-2014

4.1.1 For the period 2011-2013 under ADF-12, Sudan was allocated UA 71.15 million, comprising

PBA (UA 46.05 million), FSF Pillar I (UA 22.97 million) and FSF Pillar III (UA 2.13 million)19

.

Except for Pillar III resources of the FSF however, all other ADF-12 resources were affected by the

arrears status of Sudan. They could only be used if arrears were cleared or when exceptional access

were requested and approved by the Boards. Given the positive developments in Sudan at that time,

Management requested exceptional access which was approved in 201120

. With this approval,

Management then engaged in strategic operational and non-lending activities to assist the country to

create the conditions for peace, stabilize the economy and build macroeconomic resilience.

4.1.2 The Bank was also able to leverage resources from Bilateral Trust Funds, Special Relief Fund

(SRF) and Multi-Donor Trust Funds such as the African Water Facility (AWF) to supplement the

ADF allocations. This approach made it possible for the Bank to effectively undertake high level

policy dialogue, technical assistance, capacity building and targeted operations that are critical to

addressing the root causes of conflicts and fragility in Sudan. The need for such targeted financing

will remain high until the country clears its arrears and normalizes relations with the Bank.

4.2 End of Period Implementation Status, Achievement of Objectives and Results

4.2.1 The Sudan Country Brief (CB) 2012-2014 focused on two pillars: (i) Policy dialogue; and (ii)

Targeted Analytical work, Technical Assistance (TA) and Capacity Building. The achievements of

the CB at end of the programming period in 2014 are presented in Annex 3, and also summarized

below.

A. Pillar I: Policy Dialogue

4.2.2 Arrears Clearance and Debt Relief – All the key outputs under the dialogue on arrears and

debt relief have been achieved. The I-PRSP was completed in 2012 and the Joint Staff Advisory Note

was approved by the WB and the IMF. The debt scenarios were also established in 2012 and the debt

reconciliation was about 95% completed in early 201321

. Also, all resources programmed under Pillar

III of the FSF for assistance on debt relief have been utilized in two targeted operations namely: i)

Capacity Enhancement for Debt Management and Resource Mobilization (UA 1.05 million); and ii)

19

ADB/BD/WP/2012/126 & ADF/BD/WP/2012/88(cf. page 9, Table 2).This was after apportioning resources between

Sudan and South Sudan following the latter’s secession. Before apportionment, the resources for Sudan.(North Sudan and

South Sudan) consisted of FSF Pillar I (UA40 million) and the 2011 ADF-12 PBA of UA 23.51 million. After the

apportionment, 57% of the resources accrued to Sudan, i.e. UA 36.47 million, of which UA22.97 million was from FSF

Pillar 1. 20

The eligibility of Sudan to Pillar 1 of the FSF was approved by the Board in June 2011 (cf. ADB/BD/WP/2010/179/Add.1 &

ADF/BD/WP/2010/128/Add.1).

21 The remaining 5% of un-reconciled debt is that belonging to creditors such as Iran and Russia who do not respond to the government’s

correspondences. Also, some private firms and credit institutions have been liquidated or amalgamated.

10

Technical Capacity Building for the preparation of full PRSP (UA 1.9 million). With the Bank’s

technical assistance, Sudan also prepared its Arrears Clearance and Debt Relief Strategy (ACDRS) in

October 2013. The ACDRS will form the basis for a coordinated arrears clearance plan for the Bank

and BWIs. The Bank also provided training in February 2013 on Debt Sustainability Analysis (DSA)

and Debt Management Performance Assessment (DeMPA). Finally, the Bank through ALSF is also

currently providing legal assistance to address litigation issues relating to the country’s commercial

debt, with a grant of USD 1.0 million approved in March 2014.

4.2.3 Dialogue on Peace Process in Darfur – Under this output, the Bank led the assessment of the

State of Infrastructure in Darfur, together with the World Bank and the UN Office for Project

Services (UNOPS). Other donors took the lead in other sectors and the Darfur Development Strategy

(DDS) was prepared22

. The DDS fed into the Donor Pledging Conference on Darfur in Doha in

2013, where donors pledged a total amount of USD 1.047 billion23

. Consultations on the

implementation of the DDS are now advanced, and Qatar has disbursed the first tranche (USD 188

million) of its USD 500 million pledge. This has now kicked-off the early recovery and foundational

activities in Darfur, which will subsequently pave the way for development work. An economic and

Sector Work (ESW), and in line with its comparative advantage, the Darfur Infrastructure

Development Plan was prepared out of the Darfur infrastructure assessments and shared with the

Board for information in May 2014. The Bank will undertake further analytical work in this area.

4.2.4 Support to the AUHIP Mediation on Sudan-South Sudan Negotiations – Under this objective,

the Bank’s assistance to the AUHIP was instrumental in reaching the comprehensive 9-point

Cooperative Agreement in September 2012 and agreeing on a Matrix of Implementation in early

2013. The two countries are now making progress towards implementing the remaining elements of

the cooperative agreement (details in Annex 1).

4.2.5 Dialogue on Social and Economic Developments – With Bank assistance and that of other

donors, the Government in 2012 finalized its I-PRSP and developed a monitoring and evaluation

framework. The implementation of the I-PRSP is in progress, and the Government is now working

with donors to assess implementation progress. This will form an input into the process of preparing

the full PRSP which has already started, with the support of the Bank and other donors. In this regard,

government agrees to accommodate the technical advice proffered by the IMF and World Bank in

their joint advisory note on the I-PRSP to improve the quality of the full PRSP document.

4.2.6 Dialogue/Technical Assistance on Regional Initiatives – Under this output, dialogue was

conducted on Sudan’s inclusion in the Drought Resilience and Sustainable Livelihoods Program

(DRSLP) in the Horn of Africa. The project was prepared but Sudan was dropped out of Phase I due to

funding constraints. However, Sudan is now included in Phase II of the program and the project was

appraised in May 2014 and is scheduled for Board presentation in September 2014. In addition,

several workshops and seminars were organized in 2012 and 2013, some with specific focus on

regional cooperation, including the Regional Workshop on Food Security in Sudan and Egypt

conducted in November 2013. Also, Sudan and Egypt are exploring the possibility of establishing a

common trade zone.

B. Pillar II: Targeted Analytical Work, TA and Capacity Building

4.2.7 Economic and Sector Work – Under this output, the Bank is carrying out knowledge work and

studies such as Energy Poverty Assessment, Livestock Adaptation to Climate Change, Economic

Diversification Study, Darfur Infrastructure Needs Assessment, and Bilateral Trade Between Sudan

and South Sudan. Some of these studies have formed a framework for rolling out the Bank’s Ten Year

22 Most of the Planning and Steering Committee Meetings of the Doha Conference were hosted in the Bank’s premises in Khartoum, co-chaired by the Bank’s Resident Representative and the Minister for Reconstruction and Development of the Darfur Regional Authority (DRA). 23USD500 million was pledged by the State of Qatar, EUR60 million by Germany, USD1.0 million by Chad, and the rest by the GoS, Arab Charity

Organizations and Muslim NGOs.

11

Série1; Policy

Dialogue; 3%; 3%

Série1; TA & CB;

86%; 86%

Série1; Water &

Sanitation; 8%; 8%

Série1; SRF; 3%;

3%

PolicyDialogue

TA & CB

Water &Sanitation

SRF

Strategy (TYS) in Sudan. The Darfur Infrastructure Study and Sudan-South Sudan Bilateral Trade

Study were complemented and sent to the Board as information note in May 2014. The other studies

have been initiated and are on-going, some of which experienced funding delays from Bilateral Trust

Funds. The Energy Poverty Study, approved in 2012 with USD 340,500 from the South-South

Cooperation Fund, has a large capacity building component that will help Sudan explore

mainstreaming of green growth issues in its policies. The study on adaptation of Livestock Breeds to

Climate Change, approved in 2013 with USD 497,000 from the Korean Technical Cooperation Fund,

will also contribute to the achievement of the twin objectives of inclusive growth and transitioning to

green growth of the TYS. The Economic Diversification Study, approved in 2013 with USD 497,010

from the South-South Cooperation Fund, will generate knowledge that will help Sudan diversify its

economy and make growth more inclusive.

4.2.8 Targeted Project Interventions – The on-going projects at the time of approval of the CB

2012-2014 were: i) Institutional Capacity Building for Poverty Reduction and Good Governance

Project (ICBPRGG), financed with UA 9.62 million24

approved in 2007 from the Governance Trust

Fund, ii) Emergency Relief Assistance to rebuild flooded schools in Khartoum, financed with USD 1.0

million approved in 2011 from the SRF, and iii) Darfur Water Project for Conflict Resolution and

Peace Building, financed with Euro 3.3 million and approved in May 2012 from AWF. The

ICBPRGG Project was completed in March 2014, after a nine-month extension due to delays resulting

from the secession of South Sudan. The Emergency Relief Project was completed in March 2013. The

Darfur Water Project is 40% disbursed and is scheduled to be completed in August 2015. The status of

implementation of these projects is discussed in the Portfolio Review Section and details presented in

Annex 4.

5. COUNTRY PORTFOLIO PERFORMANCE REVIEW

5.1 Bank Group Portfolio

5.1.1 As at February 2014, the Bank’s on-going portfolio in Sudan comprised 11 operations with a

total commitment of UA40.11 million, 97% of which is in Technical Assistance (TA), Capacity

Building (CB) and Knowledge Work. The current distribution of the active portfolio is shown in

Figure 3. Details of status of implementation are given in Annex 4.

5.2 Portfolio Monitoring and Evaluation

5.2.1 The performance of the Bank’s current portfolio of projects was assessed as highly

satisfactory, with a rating of 3.5. The good rating

emerges from enhanced interaction and collaboration

between the SDFO and Project Implementation Units

(PIUs), which intensified in the last two years when

the Bank started scaling up its re-engagement with

Sudan. In particular, the periodic meetings with all

project technical staff in one forum have enabled the

Bank to adopt a proactive approach to addressing all

potential or actual project-related problems, especially

with regards to procurement. This is augmented by

continuous desk supervision and day-to-day

monitoring and follow-up with Government

authorities, stakeholders and beneficiaries involved in

the actual execution of projects. The Bank also

organizes relevant trainings on procurement,

disbursement and other fiduciary issues that often

24

This project was approved under the one-country-two-systems framework, and 70% of the resources was allocated to

South Sudan (then Southern Sudan) and only 30% to Sudan (then Northern Sudan).

Figure 3: Current Distribution of Active Portfolio

Source: AfDB Staff Calculations, March 2014

12

cause project implementation delays.

5.2.2 In 2013, there were no Problematic Projects (PP), no Potentially Problematic Projects (PPP)

and no effectiveness delays in the entire portfolio. The one ageing project identified, the Institutional

Capacity Building Project (ICBPRGG) suffered excessive delays resulting from South Sudan’s

secession and associated capacity gaps. Almost all the projects are on track and are likely to be

completed on schedule. Early implementation delays with the Darfur Water Project due to insecurity

have been addressed, with the UN providing security for PIU staff, contractors and Bank staff. The

portfolio will continue to be closely monitored by SDFO through the follow-up mechanisms: regular

supervision (desk and missions), quarterly progress reports, implementation progress reports, which

are also informed by the outcomes of the periodic meetings with project coordinators and their

technical staff.

5.2.3 Despite the satisfactory performance, there are still capacity gaps relating to project staff, some

of whom are not very conversant with the Bank’s procurement rules and disbursement procedures.

The Bank has made considerable progress in filling these gaps, notably through training and

workshops. Also, the consistent support of SDFO staff through periodic meetings with all project staff

and routine supervisions has improved the situation. This has significantly improved the average

disbursement rate for the 11 on-going projects which stood at 57.31% in February 2014. The portfolio

performance is summarized in Table 1, with details in Annex 4.

Table 1: Sudan Portfolio Performance at a Glance (2013)

Indicator 2013

1) Portfolio Performance 3.5

2) Problematic Projects (PP) None

3) Potentially Problematic Project (PPP) None

4) Ratio of Projects at Risk (PAR) 0.0

5) Ratio of Commitment at Risk (CAR) 0.0

6) Number of Ageing Projects 1

7) Disbursement Ratio 0.573

8) Average Size of National Projects UA 3.9m

9) Percentage of Audit Report Submissions 100%

1. Rating Scale from 0 (low) to 4 (high); 2. Projects with IP or DO scores <1.5

3. Projects with IP and DO >1.5 but at least two of the conditions securing <1

4. The PAR rate is calculated by dividing the no. of PAR by the no. of rated projects

5. The CAR rate is calculated by dividing the no. of PAR by the value of rated projects

6. Operations is considered ageing if it is over 8 years for invest. Operations & 5 years for inst. support.

5.3 The Bank Group and other Stakeholders’ Performance

5.3.1 The Bank’s performance was rated satisfactory. Task-managers’ self-assessments showed

that portfolio is healthy. This assessment was also validated against the views of the government and

PIUs, all of which indicate that most of the portfolio is performing satisfactorily due to timely

response to requests and support from the Bank’s country office.

5.3.2 Government and executing agencies’ overall performance is satisfactory. However,

adherence to project implementation plans needs improvement. The quarterly progress reports (QPRs)

for most projects are prepared but with some delay. The Bank will continue to follow up closely on

the delivery of QPRs to ensure timely submission.

5. 4 Results of Survey on Portfolio Quality

5.4.1 The Bank surveyed PIUs on their perception of the Country Portfolio Performance. The issues

in the questionnaire were assigned ratings from satisfactory to unsatisfactory, with a mid-response

being acceptable. The result from the survey is that the portfolio performance for Sudan is healthy,

since on average, 35.3% of the respondents rated it as acceptable, while 21.8% of respondents deemed

it as satisfactory and 6.5% as unsatisfactory while the other 36.4% were undecided.

13

5.4.2 There are also constraints for which action is being taken to ensure they do not hinder Sudan’s

portfolio performance. This includes timeliness of disbursement processing whereby 75% of

respondents rated this as the most challenging. In terms of category, the top-five issues that are

currently being closely monitored and followed-up include: financial management (untimely

processing of disbursement requests), institutional environment (government leadership or

commitment), procurement (delays with process within the Bank), Bank Supervision (frequent task

manager changes) and project management (inadequate skills and experience). Annex 5 provides

details of the survey.

5.5 Country Portfolio Improvement Plan

5.5.1 The 2013 CPIP places emphasis on the importance of the Bank to continue holding periodic

meetings with PIUs to deepen dialogue, sharing of experiences and being proactive in resolving

project implementation challenges. It also calls for a need for continuous training on the Bank’s

procurement and disbursement rules and procedures to familiarize PIU staff with Bank procedures,

and reduce project implementation delays. The CPIP, with details of these recommendations, is

presented in Annex 6.

6. STRATEGY FOR THE PERIOD 2014-2016

6.1 Experiences and Lessons Learnt at the End of the Programming Period (2012-2014)

6.1.1 The review at the end of the programing period (2014-2016) and the country portfolio

performance review have revealed important lessons which will inform the Bank’s engagement as

proposed in the CB 2014-2016. Firstly, the Bank has been innovative and strategic in its interventions

in Sudan, to ensure that it remains relevant in the absence of resources for traditional lending

activities. The engagement was done with leveraging of Bank’s trust funds and other facilities, in

addition to FSF resources. These resources, coupled with selectivity in approach and focus on the

Bank’s comparative advantage, enabled the Bank to remain relevant and effectively engaged even in

the absence of lending operations.

6.1.2 A key lesson here is that visibility is determined not necessarily by volume of resources but by

strategic importance and timeliness of interventions. For instance, the preparation of Sudan’s Arrears

Clearance and Debt Relief Strategy (ACDRS) was financed with USD 50,000, but significantly

enhanced the Bank’s visibility while enabling Sudan to demonstrate ownership and leadership in the

arrears clearance and debt relief process. The National Baseline Household Survey (NBHS), financed

in the context of the institutional capacity building project was the first of its kind to shed light on

Sudan’s poverty dynamics in 30 years. Today, the Bank’s lead role is acknowledged in debt relief and

poverty discussions in Sudan.

6.1.3 The second lesson is related to the need for coordination and innovation in intervening in

conflict-ridden and fragile situations, where cost escalations are common. Project preparation in such

areas has to involve extensive consultations to assess capacities, comparative advantages and costs,

based on practical examples on the ground and not necessarily on market prices. This avoids cost

overruns and complications during implementation. Implementation arrangements should also draw

on lessons and opportunities, given that certain support systems, such as field security in project

implementation, are beyond the Bank’s strengths or mandate.

6.1.4 It is important to underscore the “often hidden” capacity gaps and the need for continuous

meeting with PIUs, coupled with continuous dialogue and training on the Bank’s procurement and

disbursement processes. This type of engagement goes well beyond the mandatory supervision

requirements of sector specialists and CPOs. Finally, high level engagement and support to important

political process may sometimes be desirable, even though these may not be at the centre of the

Bank’s mandate. For instance, the technical support to the AUHIP mediating between Sudan and

14

South Sudan has earned the Bank a lot of visibility and reinforced its role as preferred partner in the

“resolution of African problems by Africans”.

6.2 Rationale and Strategic Selectivity

6.2.1 Sudan still faces most of the challenges that prevailed when the last Country Brief (2012-2014)

was prepared in 2012, which was built on the I-PRSP and the National Development Plan 2012-2016.

The analysis presented in para. 3.3.1 clearly brings out the weaknesses in governance as substantiated

by low CPIA ratings (2.0-2-5), which need to be urgently addressed. Particular areas of attention

relate to inadequate human and institutional capacity, both of which constrain service delivery. The

governance and capacity challenges cut across all the sectors in Sudan, especially in health and

education. The CB 2012-2014 was therefore crafted to respond to these challenges, including creating

the conditions for peace and security, stabilizing the economy, enhancing institutional capacity,

addressing weaknesses in PFM and improving overall governance, which was also aligned to the

Bank’s Medium Term Strategy. Since these issues remain relevant in Sudan today, the Bank will

maintain these priorities in the new CB 2014-2016. Therefore the previous focus on policy dialogue,

technical assistance, capacity building and targeted operations will be maintained, but consolidated

under two Pillars: i) Governance and Accountability; and ii) Skills and Technology. These two

Pillars are complementary and mutually reinforcing, as they both seek to assist Sudan acquire the

human and institutional capacity required to get out of fragility.

6.2.2 The focus areas of these pillars are fully consistent with the Bank’s Ten Year Strategy (2013–

2022), and aligned to the Bank’s Strategy for Engagement in Fragile Situations in Africa 2014-2019,

which builds on the Bussan New Deal for Engagement in Fragile States and the recommendations of

the High Level Panel on Fragile States25

. Among others, all these documents primarily underscore the

building of state capacity through institutional strengthening, and promoting inclusive and equitable

growth, which in the context of Sudan, are important for improving governance and building skills

that are required for addressing the root causes of fragility. As highlighted in Figure 4, the objective of

the proposed Pillars is to assist Sudan in improving its economic and financial governance and build

the capacity of institutions capable of resolving conflicts and thus contributing to peace,

macroeconomic stability, and improved service delivery. Figure 4: Pillars of the Country Brief 2014-2016

25

Some of the recommendations (related to the Bank) include addressing the multidimensional challenge of youth

unemployment; providing direct support for private investment in isolated economies; empowering women as key actors

in peace building and supporting economic aspects of justice and security

Pillars of the Interim Poverty Reduction Strategy Paper

2.

Sk

ills

an

d

Tec

hn

olo

gy

1.

Gov

ern

an

ce

&

Acc

ou

nta

bil

ity

Pillars Instruments Outcomes

Strengthening

Governance &

Institutional

Capacity

Developing

Human

Resourcese

curity

Economic

Growth &

Employment

Creation

i. Policy Dialogue

ii. Technical Assistance

& Capacity Building

iii. Analytical Work

Na

tio

nal

Level

Peace and

Stability

Macroeconomic

Stability &

Resilience

Improved

Service

Delivery

Re-

integration

of IDPs

15

6.2.3 Pillar I: Governance and Accountability: Under this Pillar, the Bank will continue to focus

on: i) institutional capacity building to improve financial and economic governance and

accountability; and ii) technical assistance to policy processes. Key activities will include: capacity

building in public financial management to key institutions; capacity building for microfinance

institutions; technical assistance to support full PRSP preparation; technical assistance on debt

management and domestic resource mobilization; technical assistance support to the post-secession

negotiations between Sudan and South Sudan; and legal support and advisory services for arrears

clearance and debt management, especially on litigation issues (see Figure 4). The main outputs and

results of this pillar include: i) HIPC/MDRI decision point reached; ii) national baseline poverty

survey conducted, iii) full PRSP prepared; iv) I-PRSP implementation supported; v) progress in

implementation of DDPD made; vi) macroeconomic policy planning and implementation improved;

and vii) accountability in the use of public resources enhanced (see details in Annex 8).

6.2.4 Pillar II: Skills and Technology: Under this Pillar, the Bank will provide technical assistance

and capacity building to improve skills and technology, especially in areas that will address the root

causes of fragility. This will be accompanied by analytical work that cuts across the two pillars,

including economic diversification, adaptation of livestock breeds to climate change and energy

poverty study. The Bank will also explore the possibility of using the private sector window to

improve skills and technology in support of economic diversification. The main outputs and results

under this pillar include: i) skills and technology gaps filled; ii) comprehensive safety net packages

developed and implemented; iii) capacity of teachers’ training institutions built; and iv) quality of

education improved. (Annex 8).

6.2.5 Cross-cutting Issues: Under each of the Pillars, the Bank will also undertake interventions of

cross-cutting nature, especially in the areas of food security, gender mainstreaming and climate

change. On food security, the Bank will give priority to addressing the recurrent regional problem of

droughts and associated catastrophes. In this context, Sudan will be assisted to get on board phase II

of the Bank’s assistance program which seeks to build drought resilience in the Horn of Africa. In

addition, the Bank will explore the possibility of financing agricultural value chain interventions,

exploring opportunities from the private sector. The Bank will also give priority to gender

empowerment, with emphasis on enhancing access to services and greater representation and

participation in decision making.

6.2.6 With these on-going and planned interventions, the Country Brief 2014-2016 will achieve key

outcomes that will significantly contribute to peace and security, macroeconomic stability and

resilience, and improve social service delivery. These outcomes are critical for reducing fragility, and

will thus go a long way to position Sudan on an inclusive growth path. The effective implementation

of this CB will help Sudan make progress in gradually moving to green growth, through involvement

in the drought resilience program, building capacity to improve natural resources governance, and

exploring private sector opportunities in agriculture, renewable energy and other green programs.

Also, the on-going analytical work on the economic diversification, undertaken using inclusive growth

approach, would be an important guide to the government in its strive to achieve broad-based growth

for poverty reduction. Since most of the interventions will be undertaken at the sector level, the

strategy will place emphasis on strengthening sector coordination in implementing the planned

interventions, with the Field Office facilitating collaboration among sector specialists.

6.3 Bank Indicative Assistance Program

6.3.1 The Bank’s planned operations for the programming period (2014-2016) include the following

(details in Annex 7):

i) Capacity Building Support for Skills Development in Education Sector (CBSDES), to be

financed with UA 15 million from FSF Pillar 1;

ii) Building Capacity for Inclusive Service Delivery (BCISD) Project in the Health Sector,

financed with about UA 28 million from 50% of the PBA allocation;

16

iii) Drought Resilience and Sustainable Livelihoods (DRSLP)Project in the Horn of Africa, to be

financed with UA 10 million from FSF Pillar 1, and leveraging additional resources from the

Regional Envelope;

iv) Kenana Red Sea Sugar Refinery Project, under discussion with OPSM (amount to be

specified);

iv) Darfur Gender Empowerment Project, and others, targeting Bilateral Trust Funds; and

v) Institutional Capacity Building (Mining Sector, Social Welfare and Microfinance), pipeline

projects earmarking Pillar III of the FSF.

6.3.2 Early discussions are also on-going for Sudan to tap into the private sector window for projects

that have a potential to advance the inclusive growth and contribute to private-sector investments that

enhance green growth. The CBSDES and the BCISD are pipeline projects that are still at early stages

of preparation, but are expected to seek exceptional access to utilise ADF-13 resources of the FSF.

The BCISD is to be financed with UA 9.21 million, and will also seek exceptional Board approval to

utilize 50% of Sudan’s PBA allocation for 2014.

6.4 Financing Options

6.4.1 Sudan’s allocation of ADF-13 resources for the period 2014–2016 amounts to UA 115.99

million, consisting of UA 60 million from FSF Pillar 1 and UA 55.99 million from the PBA

allocation, total access to which are conditional upon arrears clearance. However, the ADF rules

provide for Board approval of exceptional access to 50% of PBA and Pillar 1 resources in the absence

of arrears clearance for countries that have shown a firm commitment to regularise their debts. Given

its current non-accrual status, Sudan can only seek exceptional eligibility for 50% of the PBA and FSF

Pillar 1 resources amounting to UA 27.99 million and UA 60 million respectively (see Table 2). Given

the progress made by Sudan towards debt regularization, the extremely fragile country and regional

situations and the urgent needs to address these challenges, Management is requesting the Boards of

Directors to consider granting Sudan exceptional access to both Pillar 1 of the FSF and 50% of the

PBA. Recognizing that regional stability is a public good, the approved Deputies report of ADF-13

also provides for the use of FSF Pillar 1 to leverage Regional envelope to finance critical regional

operations. The Bank’s Strategy for Enhanced Engagement in Fragile Situations has therefore created

flexibility to use Pillar I resources to support targeted operations that can address regional fragility.

This support is very critical to Sudan, given that about 90% of its neighbours experience some form of

fragility, including Sudan itself.

6.4.2 In addition, Sudan can also tap into other resources not affected by the arrears situation, in

particular the African Water Facility (AWF), the Emergency Relief Fund (SRF), and Bilateral Trust

Funds, as well as resources of the private sector window within the framework of the existing policy

guidelines. The implementation of this strategy will also tap into these resources.

Table 2: ADF-13 Resources (UA million)*

Year PBA (a) 50% PBA (b) FSF (c) TOTAL (b+c)

2014 18.43 9.215 20 29.215

2015 18.774 9.387 20 29.387

2016 18.774 9.387 20 29.387

TOTAL 55.978 27.989 60 87.989

* Subject to exceptional eligibility approval by the Boards.

6.5 Monitoring and Evaluation (M and E)

6.5.1 The program articulated in this CB is results-oriented. The Result-based Activity Framework

(Annex 8) will be the main monitoring tool. Given the rapidly evolving political, economic and social

context of Sudan, close monitoring and evaluation, updates and reviews will be given a priority, and a

mid-term review report prepared for the Board. In addition, the Government, with donor assistance,

developed a monitoring and evaluation system to track progress in poverty reduction and the MDGs,

17

which will also be used to monitor progress of the CB 2014-2016.

6.5.2 The Bank’s reporting requirements entail monitoring portfolio performance. Both the Central

Bank of Sudan (CBoS) and the Central Bureau of Statistics (CBS) regularly publish26

financial and

macroeconomic data, which is important for monitoring the CB. These publications can be used

periodically to monitor the progress made in the attainment of targets set in the CB. At the project

level, quarterly progress reports will be submitted on time and routine supervision missions carried

out. Project implementation modalities will also ensure the active participation of stakeholders in

implementation and monitoring. The Norwegian Government is collaborating with the Bank in

building the capacity of the CBS in data management focusing on M and E.

6.6 Risks and Mitigation Measures

6.6.1 The main risks confronting Sudan is the tense political situation and low political predictability

arising from internal and external threats to peace and security. This insecurity poses a risk to the

physical implementation of projects once approved. The second is macroeconomic instability resulting

from South Sudan’s secession and declining development assistance. In addition, the government’s

inability to secure debt relief poses a risk to macroeconomic management, while undermining poverty

reduction efforts and the attainment of the MDGs.

6.6.2 To mitigate these risks, strong institutional arrangements have been made with UNAMID to

provide security and logistical support to Bank staff, project implementation staff and contractors

working on Bank-financed projects in the field. So far, the conflicts have not directly affected Bank-

funded projects and the GoS’ collaboration and UNAMID support have helped the Bank implement

projects on the ground. Secondly, Sudan’s commitment to economic reforms in the context of the new

SMP with the IMF is an important step towards mitigating macroeconomic risks. Sudan’s progress in

fulfilling technical conditions for debt relief is an impetus that the government should sustain towards

debt relief. Indeed, the full and proactive re-engagement of the international community will go a long

way in mitigating these risks.

6.7 Requirements for Accessing Pillar 1 Resources and the PBA Allocation under ADF-13

6.7.1 Eligibility for Pillar I resources is accessed on the basis of the Bank Group’s Operations

Guidelines of the Fragile States Facility (paragraph 3.1.11), which stated that exceptional support for

countries in arrears “would be allowed in the absence of debt regularization in transitional countries

with chronic arrears showing a firm commitment to regularize their debts.” Furthermore, paragraph

3.1.12 states that “in such arrangements, which must be approved by the Board of Directors, an

eligible country could be allowed to utilize all its supplemental funding to support operations plus a

maximum of 50% of its PBA determined grant allocation for capacity building prior to debt

regularization, in line with the Bank’s proposals for technical assistance.” In addition, according to

para 3.5 of the Bank Strategy for Enhanced Engagement in Fragile Situations, a country “is eligible

for supplemental operational support under Pillar I, if it meets the criteria of a two-stage process. The

first stage is an assessment of the prevailing commitment to consolidate peace and security and the

second stage is the assessment of country’s commitment to pursue a sound program to improve

macroeconomic conditions and pursue sound debt policy, sound financial management practices

and transparency of public accounts”.

6.7.2 It should be recalled that the Board of Directors had approved Sudan eligibility to FSF Pillar 1

in June 2011 (ADB/BD/WP/2010/179/Add.1 and ADF/BD/WP/2010/128/Add.1). Sudan continued to

progress both on the political and economic fronts, particularly the preparation of a country-owned

Arrears Clearance and Debt Relief Strategy (ACDRS) in 2013, which paved the way for the utilization

26

The CBoS publishes monthly and quarterly reports on inflation money supply and exchange rates while the Central

Bureau of Statistics half yearly and annual fiscal and national accounts.

18

of the FSF Pillar 1 resources (ADB/BD/WP/2012/126/Add.1 and ADF/BD/WP/2012/88/Add.1), used

to finance the Public Financial and Economic Management (PFM) Project in December 2013. Indeed,

Sudan has continued to make notable progress in terms of reforms and the commitment to arrears

clearance and debt relief within the context of the agreed Joint Approach (JA) of Sudan-South Sudan

to the international community which entails the framework of the “Zero Option”.

6.7.3 In satisfying the first stage requirements, Sudan has made significant progress in improving

the political stalemate with South Sudan, evident in the signing of the Cooperation Agreement in 2012

and the Matrix of Implementation in 2013, which forms a solid framework for permanently resolving

post-secession issues (the implementation status of these agreements is presented in Annex 1). On

internal peace, the Doha Document for Peace in Darfur (DDPD) represents a solid milestone which

augurs well for stability in Darfur (para. 2.1). Finally, the on-going AUHIP-brokered negotiations

between the GoS and SPLM-N, as well as the initiation of national dialogue for inclusive political

reform, further demonstrate progress towards consolidation of internal peace and security (para. 2.1,

also Annex 1).

6.7.4 In the second stage, Sudan has made considerable progress in implementing sound

macroeconomic policy reforms, including bold austerity measures in both 2012 and 2013 (para. 2.2)

and monetary policies. This has significantly reduced fiscal deficit, reduced exchange rate distortions,

curbed inflation and stabilized the economy. Openness, transparency and accountability in the use of

public resources are now being strongly strengthened by a Bank-financed project on public financial

management, approved in 2013. The country has also achieved nearly all technical milestones for

HIPC debt relief as set by the Technical Working Group (TWG) comprising the Bank, WB, IMF and

creditors, Sudan and South Sudan, and the AUHIP as facilitator. Notable among these milestones are:

i) completion of the I-PRSP adopted in 2012; ii) over 90% reconciliation of external debt in 2012; iii)

establishment of debt scenarios in 2012; iv) preparation of an Arrears Clearance and Debt Relief

Strategy (ACDRS) in 2013; v) concluding and initiating the implementation of new SMP agreed with

the IMF in 2014. The Government will use its debt relief strategy to prepare a coordinated arrears

clearance plan for the Bank and the BWIs as soon as it gets positive signals from creditors on HIPC

debt relief.

6.7.5 It should be recalled that the Presidents of Sudan and South Sudan dispatched a joint letter to

the international community in September 2013, soliciting support to the Joint Approach (JA) with

special emphasis on debt relief. Subsequently, the Tripartite Outreach Committee (TOC) on Sudan’s

external debt (comprising Sudan, South Sudan and the AUHIP) met in December 2013 and developed

a program of outreach to creditors but the outbreak of conflict in South Sudan has slowed down

progress. High level dialogue has, however, continued, with the two countries meeting at the 7th

TWG

Meeting (in October 2013) and at the 8th

TWG Meeting (in April 2014)27

to make a joint appeal to

creditors on debt relief. In particular, the April 2014 meeting reiterated Sudan’s progress in

negotiating and commencing implementation of a new SMP with the IMF, and encouraged the GoS to

step up the political dialogue and outreach to bilateral creditors, especially the Paris Club. In this

context, the TOC also met in May 2014 to finalize the modalities for the political outreach where the

two countries identified the creditors to be approached and agreed on a timeframe. With this

commendable progress in policy reform and meeting technical conditions for HIPC debt relief, Sudan

has a compelling case for accessing and utilizing the allocated Pillar I resources of the FSF (see

Annex 10).

6.7.6 Also, in assessing the country’s exceptional eligibility to 50% of its PBA, it is important to

note that Sudan now requires far reaching support of the international community, given the chronic

fragile situation which could have costly regional implications if ignored. Based on the exceptional

27

South Sudan was absent at this particular meeting given the crisis the country is experiencing.

19

eligibility for FSF Pillar I resources, and given the Government’s demonstrated firm commitment

towards macroeconomic management, political progress (especially with regards to South Sudan) and

satisfactory technical achievements and commitment towards regularizing external debt, Management

is also of the view that Sudan is eligible to a maximum of 50% of its PBA allocation under ADF-13

cycle. These additional resources will provide the Bank with the means to continue to be relevant and

assist in this extremely fragile situation, in close coordination with other development partners. The

exceptional access will also provide the Bank with the means to intensify its efforts in assisting Sudan

achieve debt relief and eventually put the economy on a sustainable growth path. Inaction on the

contrary could be very costly with regional implications.

6.7.7 With regard to Pillar III of the FSF, which provides dedicated resources to enhance the

Bank’s engagement in all fragile situations at all levels, Sudan has substantial needs for capacity

building interventions. Therefore, Sudan’s access to FSF Pillar III resources will be explored during

2014-2016, to finance: i) TA and capacity building for the mining sector to compensate for loss of oil

revenue, expected to be financed with UA 1.0 million; ii) Institutional Capacity building for social

safety nets, to be financed with UA 1.5 million; and iii) Institutional Capacity Building Support to

Microfinance Sector, expected to be financed with UA 1.5 million.

7. CONCLUSIONS AND RECOMMENDATIONS

7.1 Conclusion

7.1.1 Sudan has made good progress on both the political and economic fronts, though daunting

political challenges still remain. With this progress, the country is now eager to re-engage with the

international community but progress remains slow. This difficulty to make headway, especially on

debt relief front, comes with the risk that the country could slide into deeper fragility that could have

regional implications and painful costs. This risk is exacerbated by the conflict in South Sudan.

7.1.2 While the recent economic reforms are endearing donors to slowly scale up engagement, the

slow progress on debt relief and lack of access to concessional financing could reverse important

policy reforms gains and stall progress in poverty reduction and social service delivery. To this end,

the country is looking up to the Bank to remain engaged as a trusted partner, continue providing

innovative financing that has increased the Bank’s visibility, and to step up policy dialogue to build

traction in the resolution of the country’s external debt.

7.1.3 Management is of the view that Sudan’s notable progress is consistent with the milestones

required for the utilization of FSF Pillar I resources under ADF-13, amounting to UA 60 million in

line with the priorities of the Country Brief 2014-2016, and access to 50% of the grant component of

the PBA allocation, amounting to UA 27.99 million over the same period. These resources are

programmed to finance strategic technical assistance, capacity building and targeted operations that

are critical to prevent Sudan from sliding into deeper fragility.

7.2 Recommendation

7.2.1 The Boards of Directors are hereby invited to consider approving the Country Brief 2014-2016

for Sudan.

7.2.2 The Boards of Directors are also invited to consider approving Sudan’s exceptional eligibility

and utilization of the FSF Pillar I resources under ADF-13 cycle (UA 60 million), and 50% of the

grant component of PBA under ADF-13 (UA 27.99 million) as programmed in the Country Brief

2014-2016.

I

ANNEX 1: STATUS OF THE COOPERATION AGREEMENT, THE JOINT

APPROACH, INTERNAL CONFLICT AND MDGs

Status of the Cooperation Agreement, the Joint Approach and Internal Conflicts

1. Overview Sudan’s current political dynamics are complex have both external and internal drivers. The

current crisis in South Sudan, largely has impeded the full implementation of the September 2012 Cooperation

Agreements. With Sudan domestic conflicts particularly in the areas of South Kordofan, Blue Nile and Darfur

regions continue to create instability and insecurity. At present, only one of Sudan’s seven neighbours (Ethiopia)

enjoys stability while all others are drifting into some form of fragility or the other (Egypt, Libya, Chad, Central

Africa Republic, South Sudan, Eritrea). This is a concern that must be perceived, viewed and addressed with a

regional fragility lens in line with the Bank’s fragile State Strategy.

2. Status of Implementation of the Cooperation Agreement

2.1 On borders, the failure or inability to actually affect the zero border line is seriously impacting trade and flow

of commerce, as no trade corridors can be established in the absence of the zero line. The lack of physical capacity

to demarcate the borders is compounded by the reluctance of sedentary communities residing within the buffer zone

to vacate as well as some reluctance on the part of the military on both sides. Thus, in spite of the goodwill from the

leadership on both sides, these two issues coupled with capacity gaps have so far made implementation of the zero

line a difficult task. The two sides have now agreed to determine the zero line and buffer zone by early April 2014.

2.2 Oil flow through Sudan resumed in May 2013, and Sudan begun to receive oil transit fees. However since

the beginning of conflict in South Sudan, volumes have been affected particularly from the oil wells around Bentiu.

About 700 Sudanese experts are currently working in South Sudan oil fields in various technical capacities to ensure

a smooth flow of oil.

2.3 The stand-off on the status of Abyei still continues, due to a failure to agree on the eligibility to vote in the

plebiscite deciding the region’s fate. Abyei is under a joint administration observed by UN forces, the United

Nations Interim Forces for Abyei (UNISFA), largely comprising Ethiopian troops. The failure to resolve Abyei issue

raises grave concerns including the real potential to turn into a full scale war. There have been significant tensions as

well as fierce fighting between the Misseriya (northern) and the Ngok Dinka (southern) tribes in the Abyei area. The

latest was in early March 2014, which left several Misseriya dead, and prompted accusations between the two

governments.

2.4 The agreements on the economic framework for cooperation were centered on central banking, trade and

the payment of post-service benefits for southerners who accrued pension benefits in Sudan but were forced to leave

after secession. No visible progress has been made on these issues due to the failure of the two countries to agree on

a payment system for their mutual transactions. This situation is adversely affecting trade, which is already

constrained by infrastructure gaps and the failure to enforce the zero border line.

3. The Joint Approach (JA)

3.1 Prior to secession, the two countries agreed to undertake a Joint Approach (JA) to the international

community to assist in resolving four key outstanding post-secession challenges. The ‘four tracks’ of the JA are: i)

financial contributions from the international community to fill one-third of the financing gap of Sudan resulting

from the secession; ii) funding to address South Sudan’s urgent development challenges; iii) direct debt relief from

creditors of Sudan’s external debt, and iv) assistance in the lifting of all economic sanctions imposed on Sudan.

With the exception of external debt, none of the other tracks have actually taken off the ground. While technical

progress on the ‘Zero Option’ approach on external debt has been significant, the political progress to secure

commitment from creditors is yet to gain traction.

3.2 In the context of the Zero Option, the two countries agreed in 2011 that the continuing state (Sudan) would

assume liability for all the external debt, contingent upon: i) a joint outreach to the creditor community in search of

HIPC debt relief, and ii) Sudan reaching HIPC decision point within a specified period. The validity of the Zero

Option has been extended twice and the last extension expires in September 2014. If debt relief is not achieved by

this date, the two parties will resort to debt apportionment which will be complex and may exacerbate the risk of

resumption of hostilities. The government has shown some flexibility in extending the Zero Option deadline but has

made it clear that good progress towards reaching decision point is absolutely necessary.

3.3 On the debt relief track, the country has made significant progress in meeting the milestones set in the non-

binding technical roadmap set by the Technical Working Group (TWG) on Sudan’s debt. These include debt

reconciliation, establishment of debt scenarios, preparation of an I-PRSP, preparation of a debt relief strategy with

AfDB assistance, initiating the preparation of a full PRSP with AfDB assistance, and a new SMP currently under

II

consideration by the IMF Board. The Tripartite Outreach Committee (TOC) comprising Sudan, South Sudan and the

AUHIP convened its first meeting in December 2013, just 2 days before the outbreak of the South Sudan conflict,

which has stalled progress. However, the two countries met in March 2014 and also participated in the 8th

TWG

meeting held in Washington DC at the Spring Meetings in April 2014, where they reiterated their commitment to the

process.

3.4 The April 2014 meeting noted progress made by Sudan in negotiating a new Staff Monitored Program

(SMP) with the IMF, and encouraged the Government to of Sudan to report progress on the implementation of the I-

PRSP. The need to accelerate progress in reaching out to creditors was also underscored, especially Paris Club

Creditors and key bilaterals. Through the TOC, the two countries are now determined to reach out to key bilateral

creditors and build the momentum for the debt relief process. The program and modalities for this outreach was

agreed in December 2013 meeting in Addis Ababa under the auspices of the AUHIP.

3.5 Preliminary ideas of holding a “Sudan Conference” on gathering international financial support for both

countries in the short-term (first and second tracks) are being discussed by the three IFIs (AfDB, WB and IMF).

Such a conference would also highlight progress in the implementation of the JA, especially in gathering creditor

support for the third track (debt relief). In the meantime, the Sudan Field Office has worked with African Legal

Support Facility (ALSF) and secured a $1.0 million grant to assist Sudan handle pending litigation cases filed by

creditors, which are now six in total.

4. Internal Political Dynamics

4.1 Sudan continues to struggle to fully implement agreements on Darfur and to reach a peace deal with the

Sudan Peoples’ Liberation Movement-North (SPLM-N) fighting in South Kordofan and Blue Nile States. The

Government’s announcement in January 2014 of a ‘road-map’ for national dialogue political reform has raised

hopes that the initiative could lead to progress towards resolving Sudan’s internal conflicts.

4.2 The 5th

Round of negotiations between GoS and the SPLM-N, mediated by the AUHIP through a proposal

to the two parties, resumed in February 2014 aimed at ending the three-year conflict. However, the talks broke down

due to divergent positions of the two parties with regards to the three tracks: political, security and humanitarian.

The SPLM-N calls for humanitarian aid to be delivered through mechanisms outside the control of the government,

and calls for unified negotiation that will include all warring factions, including those in Darfur (who have already

signed the DDPD agreement). The GoS rejects these demands saying that they are contrary to UN Resolution 2046

of 2 May 2012 which stipulates, among other things, a separate modality for the resolution of the Two Areas (South

Kordofan and Blue Nile states) to that of the broader Sudan/South Sudan issues.

4.3 The talks between Sudan and SPLM-N broke down on 3 March 2012 and resumed in in 2013 after

consultations among the AUHIP, the African Union Peace and Security Council (AUPSC) and the United Nations

Security Council (UNSC). The 6th

Round concluded in May 2014 without any breakthrough. Efforts are underway

both from the Government and the AUHIP to get the talks to resume.

4.4 The implementation of the Doha Document for Peace in Darfur (DDPD), have been stalled by several

factors, notably the failure of some rebel groups to sign the agreement, frequent break-away of sub-factions from

‘parent’ groups that signed the agreement, and intermittent armed conflicts among local communities for resources

(notably gold, and sometimes water and pasture).

4.5 The insecurity in Darfur has also been a source of frustration with the lack of access due to active conflicts

making it harder to fully transition from humanitarian and peacekeeping to development operations, generating a

reported annual peacekeeping and humanitarian cost of about USD 1.34 billion for the entire country. The number

of displaced people since the start of the Darfur conflict, is estimated at 2.5 million. In South Darfur state, which is

still witnesses sporadic clashes, some 48,000 new Internally Displaced People (IDPs) were recorded in February and

March 2014 alone. The African Union (AU) and the UN-AU mission in Darfur (UNAMID) have attempted to bring

the warring factions to the table, but progress is still limited.

5. Status of MDGs

5.1 Poverty: As revealed by the Bank-financed household survey of 2010, about 47 % of the population lives

below the poverty line. The poverty gap ratio and the poverty severity index stand at 16.2% and 7.8% respectively,

indicating that income poverty is wide and deep. Sudan is not likely to achieve this particular MDG. It is unlikely

that Sudan will achieve MDG1.

5.2 Universal Primary Education: There has been a slight increase in enrolment from 65.1% in 2004 to 71.1%

in 2010. This translates into an annual average increase of 1.1 percentage point. If this trend continues, during the

III

next three years, it is unlikely that Sudan will achieve the target for MDG 2. Moreover, there is a significant

difference between urban (82%) and rural (60%) population. This translates into an annual average increase of 1.1

percentage. If this trend continues, during the next two years, it is unlikely that Sudan will achieve the target for

MDG 2.

5.3 Gender Equality and empowerment: Sudan has made some encouraging progress in this regard, for

example in net primary and secondary school enrolment. Nonetheless more still needs to be done and the target of

2015 for achieving Gender Equality is unlikely to be realised.

5.4 Child Mortality: Under five Mortality Rate in Sudan declined from nearly 130/1000 live births (LB) from

the mid-1990s to 78/1000 LB in 2010 (SHHS 2010). it still remains very high compared to other countries in the

region. The result of SHHS (2010) showed a clear progress in IMR declining from nearly 80/1000 LB in mid

1990s to 57 in 2010. However, unless intensive and effective interventions that equally address underlying causes of

child mortality are implemented, the rate would unlikely come down before 2015.

5.5 Maternal Mortality Rate (MMR): The MDG target for maternal mortality is to reduce the ratio by three-

quarters from 509 per 100,000 to 140 per 100,000 live births. The MMR in rural areas stood at 225/100, 000 and

194/100,000 in urban areas. Delivery by trained personnel in Sudan stood at 72% in 2010 compared with 57% in

2006 while institutional deliveries accounted for 21% of all births in 2010 compared with 19.4% in 2006. Marked

disparities in MMR are also observed across states in Sudan. The proportion of delivery by skilled personnel stood

at about 89% in urban areas compared to 66% in rural areas. Though the MMR for Sudan has improved from 534

per 100.000 in 2006 to 216 per 100,000 in 2012 it is likely that the 140 target will be met by 2015.

5.6 HIV/AIDS: The estimated HIV prevalence among the population of 15-49 years in Sudan is 0.67%. The

average HIV prevalence rate among pregnant women attending antenatal care (ANC) stood at 0.19 % (0.33% in

rural sites and 0.14% urban sites, 0.26% among IDPs pregnant women and 0.27% for refugees). According to these

estimates, Sudan is considered to be a country with low HIV prevalence rate. The FMOH has developed a number of

short- and long-term HIV/AIDS strategic plans. Some progress has been made in provision and delivery of services

related to HIV/AIDS (PMTCT, Condom distribution ART and VCT centers), which will be critical in assisting

Sudan in meeting the target by 2015.

5.7 Malaria is one of the areas which Sudan has made tangible progress. A remarkable reduction has been

witnessed in estimated malaria cases and deaths spanning the period 2001 to 2010, from 7.5 million cases to 3.1

million cases while deaths declined from 35,000 in 2001 to 8,844 in 2009. Evidence shows that all states except

Blue Nile (12.5%) and West Darfur (7.1%) reported prevalence of less than 3%.

5.8 TB: Prevalence of all forms of TB in Sudan was estimated at 120 per 100,000. The actual detection rate was

estimated at about 60%. Although Sudan shows improvement from 2004 detection rate (40%), achievement is still

far below the global target of 70%. This low case detection is particularly a problem in war-affected and post-

conflict areas.

IV

ANNEX 2: SUMMARY OF FRAGILITY ASSESSMENT ON SUDAN

1. The African Development Bank commissioned a fragility assessment on Sudan. The assessment was supplemented by

a fragility assessment mission to Sudan in May, 2014 and which included dialogue with the government, other

development agencies and civil society. The assessment and the mission identified a number of key drivers of fragility

in Sudan

Political Drivers of Fragility

2. A long history of conflict: The country has gone through a significant period of recurrent conflict both internally and

externally with countries in the region. Conflict often brings developmental efforts to a halt, and in many instances, as

when conflict has lasted a long time, it can roll back any progress that had been made prior to the beginning of conflict.

The regions of Darfur, Kordofan and Blue Nile regions attest to this. Conflict has created insecurity, arresting

development, and rolled back any gains that had been made in the decades before. 3. An unstable region: Sudan is surrounded by countries that are unstable, at war, or experiencing their turmoil. These

include the Central Africa Republic (CAR,) Chad, Egypt, Eritrea, South Sudan, Libya, and Democratic Republic of

Congo (DRC). Borders with these countries are porous, and each period of conflict leads to an influx of refugees into

Sudan, and along with it brings demands for social services, disruptions in the lives and livelihoods of communities

around the borders and general instability. 4. Changing Dynamics in the Maghreb and Gulf regions: Through the period of sanctions Sudan maintained strong

relationships with many countries in the Maghreb and the Gulf regions. The recent changes of government in Tunisia,

Libya and Egypt on the one hand, and the decisions on the part of Saudi Arabia to curtail incoming funds into Sudan

through its banks have all had significant economic and political effects on Sudan. The changing dynamics create

uncertainty in the larger region, and will require new approaches and engagements, In the case of Egypt the relationship

is particularly important given the need for the effective management of Nile waters and the need to avoid and

ameliorate tensions over this issue. 5. Political Transition: Sudan is currently going through a political transition, with a new constitution and an election

expected to take place. The process of transition and constitution making is a challenge in any society. A successful

transition requires the balancing of the interests of many communities and groups. In Sudan this balancing act is

particularly challenging due to grievances around the issue of exclusion, especially in regions that have experienced

conflict or insurgencies. The government has initiated a national dialogue that is aimed at bringing together all actors and

stake holders together in order to develop a jointly agreed upon process that will be inclusive and bring the sense of

stability and national cohesion. The success of the national dialogue will be critical to Sudan’s future peace and stability. Economic Drivers of Fragility 6. A macro-economic environment that makes it difficult for the government to provide social goods and services

thus threatening social cohesion: The Sudan government has been under sanctions for a long period of time. It has also

had significant arrears and is not able to borrow from development agencies at concessional rates. This situation,

combined with the loss of most of its oil revenue following the secession of South Sudan has created a situation where

the country is constrained in its ability to provide social goods and services. The lack of hard currency has also impacted

the country leading to high inflation, spiralling costs of living, and pressures on the most poor, particularly in urban

areas. This has led to social unrest and a challenge to social cohesion. If the macroeconomic environment remains the

same, it is likely that more social crises would result. The government has taken measures to try and restrain spending

given the reduction in resources; the removal of certain subsidies has on the significantly affected vulnerable groups. 7. Inequalities in allocation of public resources and in access to public services and good: There are significant

variations in the allocation of resources from state to state and even within states. As a result, some states are better able

to provide public goods and services than others. In states that have gone through conflict or are going through conflict,

such as Darfur, Kordofan, Blue Nile and so some extent the eastern states this gap in access to services and resources is

particularly notable due to the years of development lost as a consequence of war, and the displacement of people. The

inequality in allocations and access have also resulted in greater poverty particularly in rural areas far from the capital,

disenfranchisement, and the development of insurgent movements driven by sentiments of economic and political

exclusion leading to insecurity, instability and violence in the South, West and Eastern regions of the country. 8. To address this challenge, the government of Sudan has spent a significant amount of political capital in the effort to

build a sense of nationhood. The government has also embarked on a process of decentralization and improvement of

social welfare approaches. This is intended to provide communities and their leaders with more say in development in

their region and provide a safety net for the poor. The government of Sudan will require support in order to improve

public financial management systems, increase accountability and transparency particularly in the process of

disbursement of funds to state governments. There is also a need to increase efficiency and the equity in such processes

as this is one of the areas of capacity and structural weakness which can lead to perceptions of exclusion particularly if

state disbursements fail to arrive on time or at all repeatedly.

V

9. The capacity to maintain peace and security, promote rule of law, control corruption and effectively manage public

finance for delivery of services to the population remains very weak. There is an additional need to improve the capacity

of both the federal government and state governments to deliver services. Weak governance and lack of accountability

increases fragility particularly in post conflict or conflict areas.

10. A narrow economic base: For a long period of time the government of Sudan relied on revenue from oil and in the

decades when there was oil available, other sectors that had had strong contributions to the economy became neglected.

These include agriculture, livestock sales to the gulf and artisan gold production. With the loss of revenue from oil the

government is exploring other sources of income as well as livelihoods for the Sudan people. Gold production and even

natural gas are options; however the transformation of the economy will require time. Moreover, competition for access

to new resources may hold the potential for internal conflict.

11. Low infrastructure and human capital base for economic activity: Over the years, infrastructure and human

capital development in Sudan has been constrained by war, violence and poverty The significant difference between

States in economic development is partly driven by the differential levels of infrastructure and human capital combined

with the asymmetric distribution of resources, productive assets and access to economic activity.

Social Drivers of Fragility

12. Population shifts and influxes: In the recent decades, population shifts and influxes both from outside and with

Sudan have created tremendous pressure on social services and in some areas changed the structure of society and

livelihoods. In Darfur, 10 years in IDP camps has changed the approach to livestock keeping that existed before the war.

Today the population clusters around towns, where there is less range for livestock. Many have turned to fewer but more

expensive breeds of cattle for greater milk or better milk production, but these are often out of the reach of the most poor.

Even with a return to peace, there are many among the young who may not identify with the previous way of life and

will need new approaches. Similarly with the secession of South Sudan, many Sudanese business people and others

living in South Sudan found themselves returning to cities such as Khartoum. Combined with the influx from States in

conflict as well as refugees from the region including Chad and CAR, the city has found itself dealing with increasing

demands for social services and a rising need to create employment at a period when the macroeconomic environment is

at its worst.

Environmental Drivers of Fragility

13. Regular and persistent droughts: Like many countries in the Horn of Africa, Sudan suffers from regular and

sometimes persistent drought. These droughts often exacerbate existing communal challenges due to increased

competition between pastoralists and farming communities for access to water, land and pasture. Such competitions are

likely to become more acute in the face of climate change, as the periods between drought get shorter and the actual

length without rainfall longer. This environmental degradation in the face of rapidly increasing population and the

concomitant competition for natural resources have impact on food security in the country, particularly in the poorer

regions. Summary Sudan’s economic and political stability are intrinsically intertwined. Resources are needed to address the development

gap between the centre (Khartoum) and far flung areas. Without such resources, the gap, both in access and

infrastructure could continue to fuel grievances and insurgencies. A key political and economic achievement needed in

order to stabilize Sudan’s security situation and ensure sustainable and inclusive development is the normalization of

financial relations with the rest of the world, so that it can proceed to debt relief and can obtain access to concessional

finance. This will also strengthen the central government vis-à-vis other political financiers. In addition, there is a need

for greater cohesion, and an inclusive approach to development that provides greater equity and access for all. Moreover,

there is need to stabilize the situation in South Sudan and address other regional economic and political dynamics,

including the emerging relationships with the new post revolution governments in Tunisia, Libya and Egypt, so as to

have a more stable, secure region with middle-income thriving economies.

VI

ANNEX 3: END OF PERIOD ACHIEVEMENTS OF COUNTRY BRIEF2012-2014

Contributions /

Activities

Expected Results Target

Population

Performance Indicators Time

Frame

Achievements 3

PILLAR I: POLICY DIALOGUE

1) Dialogue on Debt

and Arrears

2). Technical

Assistance to GoS on

debt relief issues

HIPC/MDRI debt relief

provided;

HIPC decision point reached;

Utilization of pillar 1 resources

of FSF.

GoS and entire

population

Debt scenarios established;

Agreement with GoS on a coordinated

arrears clearance plan;

Operation approved under Pillar 1 of

FSF;

Debt reconciliation fully completed;

Joint Staff Advisory Note on the I-PRSP

done.

2013

2013

2013

End-2012

End-2012

Achieved in 2013;

In progress;

Achieved in 2013;

Achieved in 2012;

Achieved in 2013.

3) Technical Assistance

for Updating the Darfur

Joint Assessment

Mission

Conditions for sustainable peace,

recovery and development in

Darfur created.

Darfur

population

Darfur pledging conference organized

and resources mobilized.

A Darfur Early Recovery Program

Framework adopted and implementation

initiated.

A longer term recovery and development

framework adopted and initiated.

1st quarter

2013

Continuous

Continuous

Achieved in 2nd Qtr of 2013. $

1.047 billion was pledged at the

conference.

Achieved in 2ndQtr of 2013

On-going; framework prepared

and adopted but yet initiated.

4) Technical assistance

to the African Union

High Level

Implementation Panel

(AUHIP)

Conditions for sustainable peace

and security established

GoS and entire

population.

Comprehensive agreement on CPA issues

Framework for Implementation of

Agreement established and

implementation initiated

End 2012

Continuous

Achieved in 2012;

Framework developed and

implementation discussion on-

going.

5) Dialogue on Political

and Economic

Developments

Satisfactory implementation of

I-PRSP and Staff Monitoring

program.

Government of

Sudan and the

entire

population.

Monitoring and evaluation system

established for the I-PRSP

Regular Briefing, Update and Reviews

Continuous

Achieved. M&E systems, the I-

PRSP developed; Implementation

on-going

6) Dialogue and

Technical Assistance on

Regional Initiatives

Sudan component of Drought

Resilience and Sustainable

Livelihoods Program in the Horn

of Africa (DRSLP) is approved.

At least one Regional Operation

is identified.

Government of

Sudan and the

entire

population.

Financing plan confirmed DRSLP

Regular Dialogue and

Conferences/Seminars with GoS and

RECs on RISP East Africa

1st quarter

2014

Continuous

On-going. The DRSLP for the

Horn of Africa (DRSL) was

developed but Sudan dropped out

of phase I due to funding; Sudan to

be included in Phase II in 2014. Regular dialogue with the GoS and

on RISP on-going.

PILLAR II: Knowledge Work, TA and Capacity Building

7) Economic and Sector

Work (energy ,

livestock, and private

sector and

diversification studies)

Clearly defined and well-

articulated national and sector

policies relating to private sector

development, diversification,

livestock and energy.

Government of

Sudan and the

entire

population.

Various studies completed with Action

Plans

4th quarter

2013

On track. 2 studies completed in

2013. 1 on Infrastructure in Darfur

and 1 in Trade Between Sudan and

South Sudan. An Economic

Diversification Study is on-going.

VII

ANNEX 4: THE STATUS OF THE BANK GROUP’S ONGOING OPERATIONS

No. Project Name Window Approval

Date

Disburse

Deadline

Amount

Approved (UA -

million)

Amount

Disbursed (UA -

million)

Disbursed

Rate (%)

Out-standing Issues Assessment of

Implementation

(Traffic Lights)

1 Inst. Capacity Building for

Poverty Reduction and

Good Governance

Nigerian Technical

Cooperation Fund 07.03.2007 31.03.2014 9,620,000 9,139,000 95.10% Project completion report being prepared

2 Darfur Water Project for Peace & Conflict

Resolution

African Water Facility (ADF-

AWF)

24.5.2012 31.01.2016 3,000,000 300,000.0 40.0% Procurement activities for both priority works and investment study is nearly

finalized and processing of second

disbursement request is on-going

3 Capacity Building for

Debt Management and

Resource Mobilization

Fragile States

Facility (FSF)

5.3.2012 31.12.2014 1,050,101 1,050,101 100%. Implementation of project in progress

4 Technical Assistance to the Mamoun Beheiry

Research Center (MBC)

NTCF 13.6.2012 14.7.2013 260,500 150,960.0 58.0% Last disbursement request is being processed and studies earmarked for this project is on-

going.

5 Capacity Building for Increased Access to

Energy in Sudan

South-South Cooperation

Trust Fund

27.12.2012 NA 340,500 170,250 50% Enumerators have been training and data collection is currently on-going. The last

disbursement request is being prepared by

the project..

6 Policy Dialogue on Debt and Arrears Clearance

Fragile State Facility

05.07. 2012 31.12.2013 50,000 50,000 100% The project was completed in December 2013 and a PCR is being prepared.

7 Technical Assistance to Full Poverty Reduction

Strategy Paper

Fragile State Facility

16.06. 2013

30.06.2015 1,973,285 203,400 10% Project is 10% disbursed and it was launched in February 2014 and training of

enumerators is on-going.

8 Emergency Relief to Blue and White Nile States

Special Relief Fund

24.06.2013 30.09.2014 651,856.49 651,825.49 100% Project is 100% disbursed and rehabilitation of schools is on-going with expected

completion date of September 2014.

9 University of Nyala

Livestock Project.

Korean Technical

Cooperation

Trust Fund

21.05.2013 21.05.2016 331,333.33 165, 700 50% Project is 50% disbursed and training workshop on basic molecular biology

already undertaken in March 2014 in Nyala

and Khartoum.

10 Technical Capacity Building for Public

Finance and

Macroeconomic Management Project

FSF Pillar 1 Resources

06.12.2013 05.12.2018 22,190,000 0.00 0.00 Conditions for first disbursement have been fulfilled and first disbursement request sent

to the Bank for processing. Recruitment of

the project manager, procurement officer and the PFM specialist is also on-going.

11 African Legal Support

Facility (ALSF)

ALSF 09.03.2014 20.04.2014 651,856.49 0.00 0.00 Letter of Agreement signed on 20 April

2014 and preparations on-going for start of

implementation.

Total 40,119,432.31 11,071,461.33 57.31%

VIII

ANNEX 5: CB/CPPR METHODOLOGY, CONSULTATION AND RESULTS

A) Methodology and Results from CPPR Survey

The Bank surveyed Project Implementations Units regarding their perception of Country Portfolio Performance in Sudan

during January -February 2014. These questionnaires took into account all the 11 operations. Most of the respondents were

the respective project managers. There were 7 categories of issues outlined in the questionnaires and these include: Procurement, Audit, Financial

Management, Project Management, Monitoring and Evaluation System, and Government and AfDB Supervision. Also, the

issues in the questionnaire were assigned ratings from satisfactory to unsatisfactory, with a mid-response being acceptable. Generally, the portfolio performance for Sudan is healthy, since on average, 35.3% of the respondents rated it as acceptable

(see table on client perception), while 21.8% of respondents deemed it as satisfactory and 6.5% as unsatisfactory. These

figures, however, do not tell the full story as on average, about 36.4% of participant did not respond to some of the

questions. The issue of “no response” could possibly be due to the fact that, some respondents did not have much to say on

those issues. Having considered a high number of issues rated acceptable, it is important to note that there are some major constraints

which are hindering Sudan’s portfolio performance. These challenges are ranked in order of importance, with about 75% of

respondents rating untimely processing of disbursement requests as the most challenging. In term of category, the top-five

issues are as follows: financial management (untimely processing of disbursement requests), institutional environment

(government leadership or commitment), procurement (delays with process within the Bank), Bank Supervision (frequent

task manager changes) and project management (inadequate skills and experience). These observations thus play a vital role by allowing ranking issue in order of their importance. The observations in the

survey also highlight the consistency in the challenges pertaining to the country portfolio. For instance, while 42% of

respondents had nothing to say on monitoring and evaluation system, about 43% of respondents claim irregular reporting to

the Bank is a challenge, indicating a constraint pertaining to reporting of operations. Additionally, some analysis was made

to identify the three most important constraints of each category. The issues are listed below with the percentage of

respondents. This allows targeting the most important constraints to continue improving the country portfolio performance

of Sudan. CLIENT PERCEPTIONS OF OVERALL PORTFOLIO QUALITY (IN % OF RESPONDENTS)

Issues Satisfactory Acceptable Unsatisfactory No Response

Procurement 33 34 0 33

Financial Management 50 17 0 33

Audit 34 33 0 33

Project Management 33 17 0 50

AfDB Supervision 17 34 16 33

M&E System 50 17 0 33

GoS M&E System 34 0 33 33

Average 35.3 21.8 6.5 36.4

Source: CPPR Survey

No. Issues Major Constraints %

Financial Management Untimely response to Government/project disbursement requests by

AfDB

75

Broader Institutional

Environment

Inadequate Government leadership/commitment 75

Audit i)Accounting and financial management system not in place at an early

stage of project; and;

ii) Project staff not familiar with AfDB's audit standards/requirements

75

Project Management i) Inadequate skills/experience; and ii)inadequate funds for project

management or operational costs

50

Procurement Project staff not familiar or not experienced with AfDB procurement

rules and procedures

50

AfDB Supervision Frequent Task Manager and team member changes 50

M&E System Lack of an effective M&E system 25

CLIENT PERCEPTIONS OF MAJOR PROJECT CONSTRAINTS (IN % OF RESPONDENTS)

Category 1st most important issue % 2nd most important

issue

2% 3rd most important

issue

3%

Procurement Project staff not familiar or not 50 Delays in AfDB no 25 insufficient number of 25

IX

28The New Deal will use Peace building and State building Goals as an important foundation to enable progress towards the MDGs and to

guide work in fragile and conflict affected states

experienced with AfDB

procurement rules and procedures

objection response qualified bidders

Financial

Management

Untimely response to

Government/project disbursement

requests by AfDB

75 Project staff not

familiar with AfDB

rules and

procedures

50 Delays in release of

funds from designated

or special account to

implementation level(s)

25

Audit i)Accounting and financial

management system not in place

at an early stage of project; and;

ii) Project staff not familiar with

AfDB's audit

standards/requirements

75 inadequate capacity

of auditors/auditing

body

25 inadequate or weak

internal audit functions

25

Broader

Institutional

Environment

Inadequate Government

leadership/commitment

75 Inadequate AfDB

leadership/

commitment

50 Inadequate institutional

implementation

capacity

25

Project

Management

i) Inadequate skills/experience;

and

ii)inadequate funds for project

management or operational costs

50 Inadequate MDA

support to the

project

50 Inadequate staffing

level

25

AfDB

Supervision

Frequent Task Manager and team

member changes

50 inadequate

communication and

responsiveness

50 insufficient AfDB

supervision

levels(frequency)

25

M&E

System

Lack of an effective M&E system 25 lack of clarity of

the M&E

procedures within

AfDB

25 lack of baseline/target

data

25

B) Summary of Joint CB/CPPR Consultations

1. Overview 1.1 The Bank CB/CPPR team visited Khartoum, Sudan, from 23 February to 4 March 2014 to undertake the

preparation of the Country Brief (CB), covering the period 2014-2016 and a Country Portfolio Performance Review (CPPR).

The mission was coordinated through the Sudan Field Office (SDFO) of the Bank in Khartoum and was comprised from

Bank’s staff from different departments and SDFO. 1.2 The mission held consultations with officials of the Ministry of Finance and National Economy (MoFNE),

Ministry of Health, Ministry Agriculture and Irrigation, Ministry of Education, Ministry of Welfare and Social Security,

Central Bureau of Statistics, Central Bank of Sudan, UN Women, Procurement and Contract General Directorate, Chamber

of Accounts, World Bank, USAID, IMF, and UNDP, as well as the project teams of the various Bank-financed projects. The

projects include: (i) Technical Capacity Building for the Preparation of a Poverty Reduction Strategy Paper (TCB-PRSP),

(ii) Institutional Capacity Building for Poverty Reduction and Good Governance, (iii) Emergency Assistance to White Nile

and Blue Nile states, (iv) Emergency Relief to Khartoum State Schools, (v) Capacity Enhancement for Debt Management

and Resource Mobilization, (vi) Technical Assistance on Arrears Clearance and Debt relief, (vii) Darfur Water Project for

Conflict Resolution and Peace Building, (viii) Capacity Building and Technical Assistance to the Mahmoun Beheiry Centre,

(ix) Public Financial and Macroeconomic Management Capacity Building Project, (x) Capacity Building and Assessment of

Options for Increasing Access to Energy in Sudan, (xi) Livestock Adaptation to Climatic Change and (xii) Policy Dialogue

Support to Arrears Clearance and Debt Relief (PDAC). 1.3 The mission also participated in a Country Portfolio Performance Review workshop held on 4 March 2014. A wrap-

up meeting was held with the officials of the Ministry of Finance and National Economy and the project coordinators on 4

March 2014 to present the findings of the mission and to discuss the proposed areas of Bank Group intervention and the way

forward for the Country Brief, 2014-2016. 2. Country Brief (CB) 2.1 The Country Brief for Sudan, which represents the Bank’s intervention strategy in the country, will discuss several

Political and Economic Developments. The Bank Group strategy will be aligned with the priorities outlined in the National

Development Plan (NDP), 2012-2016 and the principles articulated in the Bank’s Strategy for Enhanced Engagement in

Fragile States and crafted around the core principles as the Busan New Deal and Good International Practices and

Engagement in Fragile States.28It will be informed by on-going studies and analytical work undertaken as well as the

findings of consultations undertaken during the CB mission. In this context, the mission expressed the Bank’s commitment

to active engagement in the process of developing the full PRSP to which the CB, 2015-2017 will be aligned. 2.2 Resource Issues: Potential Internal Bank resources include: (i) Country Allocation under ADF-13 (Grant): That is the possibility to access Performance Based Allocation (PBA) can

X

be explored;

(ii) Pillar 1 of the Fragile States Facility (FSF) (Grant): That is the possibility of; accessing pillar 1 resources of the Fragile

States Facility can be explored;

(iii) Pillar 3 of the FSF (Grant): Country Allocation to be determined;

(iv) Regional Operation Window (RO) for multinational operations. That is the possibility consists in committing part of the

FSF pillar 1 to leverage resources from the Bank-wide global RO envelop with a cost-sharing factor of 1.0 to 2 to be

confirmed;

(v) Private Sector Window for targeted commercially-viable, enclave and Public-Private Partnership (PPP) operations,

including some integrated capacity building activities. Private Sector financing options can be explored; and,

(vi) Bilateral Trust Funds administered by the Bank for targeted capacity building and pipeline development activities.

These are competitive resources for which options can be explored.

2.3 Pillars and Strategic Orientations: The NDP, 2012-2016 and the I-PRSP constituted the basis of the current CB,

2012-2014 and are still being implemented. The country still faces most of the challenges that prevailed in 2012. The CB

2012-2014 was prepared in response to these challenges in line with the national policy framework, and thus its pillars are

still relevant. Therefore, the Bank will continue to maintain its focus in the new CB 2014-2016, through policy dialogue,

analytical work, technical assistance and capacity building, using resources that are not affected by Sudan’s arrears situation.

Based on the above analysis, the Bank Group strategy in the context of the CB 2014-2016 will focus on two main pillars.

The two pillars of the CB will include: (i) Policy Dialogue and Analytical Work; and (ii) Technical Assistance (TA),

Capacity Building and Targeted Operations. The particular emphasis will be on creating the conditions for attaining peace

and stability and achieving macroeconomic resilience, which will entail assisting the country to build its human and

institutional capacity. The focus areas will include pubic finance management, debt, aid coordination and implementing

infrastructural programs as well as quick-win infrastructure projects with a rapid impact on improving peace, security,

livelihood and the investment climate. 3. Country Portfolio Performance Review 3.1 The objective of the CPPR was to assess portfolio performance and identify systemic issues within and outside the

control of individual projects and operations. A Country Portfolio Performance Review workshop was held on 4 March 2014

in SDFO with participation by all project coordinators and SDFO staff as well as officials from the Ministry of Finance and

National Economy. Staff from ORSF, FFCO, etc. also attended the CPPR. The main objective of the workshop was to assess

portfolio performance and define the Bank’s strategy for Sudan for the period 2015-2017. This will take into account the

ADF XIII portfolio pipeline and the Bank’s ten-year strategy. The CB will also provide an update on political, economic,

and social developments and will be combined with a CPPR. 3.2 The CPPR examined the performance of the Bank’s on-going portfolio, took stock of the progress made and

identified specific actions required to improve the performance of the portfolio. A Country Portfolio Improvement Plan

(CPIP) matrix, which will highlight recommendations and actions required to improve the performance of the portfolio, will

be prepared to guide the management of the portfolio and will be the final product prepared with a Cover Note for

submission to the Board. The workshop enabled a rigorous assessment of risks related to the portfolio. The workshop

provided a full picture of the performance of the portfolio and the underlying factors affecting it as well as provided some

insights into the Bank’s long term strategy, 2013-2022. The discussions in the workshop which was based on a review of

data sets was instrumental in providing detailed performance measures of the portfolio that should be useful for

improvement of the projects going forward. 3.3 The general assessment of the on-going portfolio at in February 2014 is that there were 11 projects including 4

Trust Fund-financed operations, with a total commitment of UA 40.12 million and an average disbursement rate of 57.31%.

The workshop agreed on measures to improve the disbursement rate through timely processing of procurement and

improved adsorptive capacity. As at end of 2013, the portfolio performance was assessed as satisfactory. This assessment is

the average of the last supervision mission rating conducted by task managers. The satisfactory assessment of the portfolio is

supported by an analysis of key indicators which show significant portfolio performance improvement since 2012. In 2013,

there were no problematic projects, and only one ageing project, which is the Institutional Capacity Building Project for

Poverty Reduction and Good Governance project that will be completed this month. 3.4 In the area of financial management, the mission observed that the government uses both the cash basis and

accrual basis of accounting. The use of accrual system is not completely adopted by the Government. Assistance is required

by the Government to change its accounting system to accrual system. The government is also enthusiastic to adopt the

international public financial accounting standards (IPFAS). In terms of reporting, the mission noted that the current

reporting system by the Government is through the use of government financial system (GFS). The government is keen on

assistance to enable it move to the IPFAS reporting system. The mission observed that the projects financed by development

partners is recorded outside the government budget and follows different systems of reporting and control. This is not normal

since the government has no control over the finances of projects. 4 Recommendations 4.1 Recommendations for the Government include:

(i) There is need for continuous interaction through meetings with PIUs to ensure that they understand the

Bank’s procedures to avoid implementation delays and enhance the quality of the portfolio;

(ii) The PIUs should ensure active participation in training sessions organized by the Bank; and,

XI

(iii) The PIUs should seek guidance in the process of preparing procurement documents and submitting

disbursement requests to avoid possibilities of rejection.

(iv) Further, the secondment of staff to other countries in Africa is required in order to gain experience on the

treasury single account system.

4.2 Recommendations for the Bank include:

(i) Ensure that the no-objection for procurement is given in a short period each time the required documents are

submitted by the PIU;

(ii) Issues identified during supervision missions should be followed up closely and addressed in timely manner;

and,

(iii) PIUs and project managers should attend regular project meetings and be proactive in addressing issues,

especially those relating to procurement.

5. Conclusion

5.1 The mission successfully concluded discussions on the CB 2014-2016 and the CPPR. The discussions held and the

information collected will be useful in finalization of the respective reports.

XII

ANNEX 6: COUNTRY PORTFOLIO IMPROVEMENT PLAN

Challenges Recommendations Responsible Milestone/Timin

g

1 Disbursement

1.1 Absence of clarity on

disbursement procedures and

rules

1.1 Continuous training on the use of the Bank’s disbursement rules and procedures. AfDB (FFCO3) Continuous

2 Procurement

2.1 Project staff not familiar

with AfDB procurement rules

& procedures.

2.2 Failure to prepare a general

procurement notice at the

beginning of each project.

2.3 The project staff find the

Bank’s procurement rules to be

complicated.

2.4 Lack of procurement

specialist at SDFO

2.1 Provide continuous training on the Bank’s procurement rules and procedures.

2.2 Follow-up with the project to ensure that a General Procurement Notice is prepared at

the appraisal stage of the project

2.3 Provide continuous training to project staff on the Banks procurement procedures.

2.4 SDFO will continue to receive support of procurement staff based in ETFO.

However, the portfolio of SDFO is growing and it should be considered feasible to have

a local professional to assist with procurement issues on projects.

AfDB (ORPF2)

Government/ Country

Office/ORPF2

AfDB/ (ORPF2)

Country Office/

(SDFO/ETFO)

Continuous

Starting with

ADF-13

Continuous

Continuous

3 Project Management

3.1 The project management

staff have inadequate skills and

training essential for effective

conduct of your responsibilities.

3.2 Inadequate funds for

project management of

operational costs

3.1 The Bank should continue to provide training through periodic meeting with the

project implementation staff.

3.2 The project management cost should be discussed and agreed during appraisal of the

project. However, the allocation of incentives to the project staff can be requested and

considered on a case by case basis depending on availability of funds in a given project.

AfDB(EADI/ORPF)

Government

Continuous

Starting with

ADF-13

4 Financial Management

4.1 Inadequate capacity of

auditors/auditing body

4.2 Project staff not familiar

with the Bank’s audit

requirements.

4.1 The project implementation units should liaise with the Chamber of Audit in

obtaining a short list of six audit firms from which the competitive selection of an auditor

is to be done.

4.2 The Bank’s financial management expert should continue to periodically train the

project staff on the Bank’s project audit requirement.

Government

AfDB(ORPF1)

Starting with

ADF-13

Continuous

5. Monitoring & Evaluation

5.1 Lack of understanding of

M&E principles in the project

team

5.1 The Bank should continue to periodically meet the project team including the M&E

specialists and inform them of the need for timely preparation of the quarterly progress

report as a monitoring tool. A sample template of the monitoring report should again be

AfDB(SDFO)

Continuous

XIII

5.2 Lack of adequate capacity

at the project level to fulfil

M&E tasks

5.3 Frequent task manager &

team member changes

5.4 There are inadequate

communication and

responsiveness from the Bank.

5.5 Insufficient follow up by

the Bank teams after missions

shared with all project implementation units.

5.2 The Bank’s should continue to conduct at least two supervision mission in a year and

also the M& E experts should be trained on the key responsibility of an M&E expert.

5.3 The project should be informed timely when project task managers are changed.

5.4 The Bank will continue to hold periodic meetings with each project coordination

team to discuss specific project issues. In addition, the quarterly project coordinators

meeting will also continue to be held to share lessons and experiences on project

implementation issues.

5.5 After completion of a supervision mission, the Bank should follow-up the

implementation of mission recommendations. The frequency of the desk reviews should

be increased.

AfDB (Sector

departments)

AfDB (Sector

departments)

AfDB (SDFO)

AfDB (Sector

departments)

Starting with

ADF-13

Continuous

Continuous

Starting with

ADF-13

XIV

ANNEX 7: PIPELINE OF PROJECTS

No Project Name Sector Financing

Source

Amount

(UA)million

Preparation Status

1 Capacity Building Support in the

Education Sector (OSHD)

Social/OSHD FSF Pillar 1 15 Identification Mission

undertaken in April 2014

2 Building Capacity for Inclusive Service

Delivery in Health Sector

Social/OSHD 50% PBA 27.989 Identification mission

undertaken and appraisal

expected in 2014

3 Drought Resilience and Sustainable

Livelihood in Horn of Africa Phase II

Agriculture/OSAN FSF Pillar 1

RO envelope

FSF: 10

RO: 20

Mission to update appraisal

report planned for in

May2014

4 Kenana Red Sea Sugar Refinery Project Private Sector/OPSM Senior Loan 17.5 Due Diligence Mission

planned in 2014

5 Darfur Gender Empowerment Project Social Bilateral Trust

Funds

0.68 Project proposal being

prepared

6 Institutional Capacity Building in the

Mining Sector

Mining FSF Pillar III 1.0 Project proposal being

prepared

7 Capacity Building Support to Social

Welfare

Social FSF Pillar III 1.5 Discussions on-going

8 Institutional Capacity Building Support

to Microfinance sector Project

Microfinance FSF Pillar III 1.5 Discussions on-going

9 Agriculture Value Chain Development

Project

Private Sector Private Sector Not determined Discussions on-going

XV

ANNEX 8: RESULTS BASED ACTIVITY FRAMEWORK 2014-2016

Contributions /

Activities

Expected Results Target Population Performance Indicators Time

Frame*

Assumptions/Risks

A) Pillar I: Governance and Accountability

1) Dialogue on debt

and arrears.

i) Progress towards HIPC/MDRI decision

point

ii) Technical Assistance on debt

relief provided

GoS and entire population

i)Agreement with GoS on a coordinated arrears clearance plan

ii)14th SMP concluded

iii) Technical Assistance operation approved under Pillar 1 of FSF;

iv) Legal support to debt relief

provided

Q3, 2015

Q2,2015 Q4,2014

Q3, 2015

Assumption: Commitment of creditors to grant debt relief.

Risk: i) Lack of progress in

dialogue with creditors. ii) South Sudan crisis.

Mitigation Measure: i) Regional

dialogue and mediation is on-going. The Bank is supporting the

process.

2) Technical

Assistance to Full

PRSP.

i)National baseline poverty survey

conducted

ii)Full PRSP prepared iii) I-PRSP

implementation

supported

GoS and the entire population.

i) The household poverty survey data is available and validated.

ii)PRSP document is prepared and

validated iii) Training of relevant staff to use

the systems, tools and instruments

conducted. IV) Sector strategies prepared.

Q1, 2015

Q2, 2015

Q2, 2015

Q2, 2016

Assumption: Poverty reduction and commitment for macro-economic

reforms and good governance

remain government's priority Risk: i) Armed conflicts and civil

strife do not hamper survey

activities Mitigation Measure: i) Regional

dialogue and mediation is on-

going.

3) Technical

Assistance to Doha

Document for

Peace in Darfur

(DDPD).

Progress in

implementation of the

DDPD achieved.

Darfur population i) Implementation of Darfur

Development Strategy (DDS)

supported to utilise pledged resources.

Continuous Assumption: Donors delivers all

resources pledged.

Risk: i) Deterioration of security in Darfur

Mitigation Measure: i) UNAMID

provides security; peace mediation between rebel groups is on-going.

4)Institutional

Capacity Building:

i) Public Financial

Management

Capacity Building project.

i) Enhanced

accountability in the use of public

resources.

ii) Increased effectiveness in

macroeconomic

policy.

i)Ministry of Finance

(MoFNE) and Central Bank (CBoS),

ii)Line Ministries

iii)Entire population.

i) Integrated Financial Management

Information System (IFMIS) rolled out.

ii) Relevant staff trained in IFMIS.

iii) 10 MoFNE staff trained in advanced macroeconomic

management techniques.

iv) DMFAS 6.0 installed at MoFNE and CBoS to enhance good debt

management practice.

Q3, 2016

Q3, 2016

Q4, 2015

Q4, 2015

Assumption: Commitment to

macroeconomic reforms and good governance remains government

priority.

Risk: i) Weak institutional and implementation capacity

ii)Security risk from challenging

political environment Mitigation measure: i) Medium and

long term technical assistance is provided; project structure

emphasizes ownership.by

government; ii) Regional dialogue and mediation is on-going.

ii) Capacity

enhancement for

debt management and resource

mobilization

i) GoS transparency

and accountability in

budget and expenditure

management

enhanced. ii) GoS capacity

enhanced to manage

debt sustainably iii) Framework to

facilitate tracking of

aid flows and disbursements

established.

GoS units managing

PFM and external aid.

i) Financial management information

system installed.

ii) Required hardware installed and connected at various user levels

iii) Relevant staff trained in

implementation and monitoring. iv)Scoping study on resource

mobilization conducted

v) Strategic study and design of future public investment program

undertaken.

vi) Study tours for relevant staff of the Ministries undertaken

Q4, 2014

Q4, 2014

Q4, 2014

Q4, 2014

Q4, 2014

Q4, 2014

Assumption: Good financial

governance remain government

priority Risk: i) Resistance to PFM reform

systems.

Mitigation Measure: i) Project structure emphasizes ownership by

the government

iii) Darfur Water Supply project

i)Water and sanitation structures rehabilitated

in Darfur selected nine

communities. ii)Maintenance

capacity of

communities built iii)State capacity built

to support community

Four million people in Darfur states

i)Percentage of displaced former residents of the towns returning

ii) Communities maintaining water

structure with state support

Q3, 2015

Assumption: UNAMID continue to provide security.

Risk: i) Conflict escalates

Mitigation Measure: i) Agreement with UNAMID renewed; ii)

Mediation with rebels intensified.

B) Pillar II: Skills and Technology

5)Economic and i) Policy guidelines GoS and the entire i) Completed study reports Q3, 2016 Assumption: Government

XVI

Sector Work (energy sector ,

livestock, and

economic diversification

studies)

and recommendations provided

ii) .Analysis guiding

policy processes provided

population.

ii) Available data emerging from studies

commitment to implementation of policy recommendations.

Risk: None

6)Project

Activities:

i) Building Capacity for Inclusive

Service Delivery in

the Health Sector

i) Skills and technology gaps filled

ii)Human resources

capacity with required skills and technology

delivered

iii) Comprehensive safety net package

developed and

implemented.

i) Ministry of Health (MoH)

ii) Ministry of Welfare

and Social Security (MoWSS)

iii) GoS and entire

population

i) Selected number of hospitals equipped with improved health

service technology

ii) Number of qualified health professionals increased

iii) Number of new enrolments in

safety net program is increased.

Q4, 2016

Q4, 2016

Q4, 2016

Assumption: Skills and technology in health continue to be

government priority.

Risk: i) Fragility of systems might slow down implementation;

Mitigation Measures: Project has

inbuilt structure to strengthen local capacity.

ii) Capacity Building for Skills

Development in the

Education Sector

i)) Capacity of teacher training institutions

built

ii) Quality of education improved

i) Ministry of Education (MoE)

ii) GoS and entire

population

i) Number of qualified and skilled teachers produced

ii) Number of high quality graduates

produced.

Q3, 2016

Q3, 2016

Assumption: Economic diversification remains government

priority.

Risk: i) Graduates do not find jobs. Mitigation Measure: i) Bank and

development partners assisting the

government to create jobs.

iii) Emergency

Assistance to Blue

Nile and White Nile States Flooded

Schools

i)21 schools

rehabilitated

ii) 16000 students returns to school

Blue Nile and White

Nile states

i) Number of students returning to

school

ii) Number of rehabilitated schools up and running

Q4, 2014

Q4, 2014

Assumptions: Project fully

implemented

Risk: No risk

C) Food Security

i) Drought Resilience and

Sustainable

Livelihood Program

(DRSLP)

Sudan component of DRSLP is appraised

and implemented.

GoS and the entire population.

i)DRSLP approved by the Board and implementation started

ii) Livelihood of selected beneficiary

community improved.

Q4, 2016

Q4, 2016

Assumption: Board approves access to FSF Pillar 1 resources

Risk: i) Non-Availability of funds

to undertake the project

Mitigation Measure: i) Sudan’s

progress in macroeconomic and

fiscal management qualifies the country to access FSF Pillar I

resources and Regional Operations

envelope

Financing Options

i) FSF Pillar 1 resources (UA 60 million); ii) 50% of Sudan’s PBA allocation (UA 27.98million); iii) Bilateral Trust Fund Resources; and iv) Multilateral Trust

Funds/Facilities.

* Q = Quarter

XVII

ANNEX 9: SELECTED MACROECONOMIC INDICATORS

ANNEX 9: SELECTED MACROECONOMIC INDICATORS

Indicators Unit 2000 2008 2009 2010 2011 2012 2013 (e)

National Accounts

GNI at Current Prices Million US $ 10,940 47,213 52,248 56,618 59,508 ... ...

GNI per Capita US$ 320 1,140 1,230 1,300 1,333 ... ...

GDP at Current Prices Million US $ 12,257 54,082 52,840 64,850 63,997 51,583 47,338

GDP at 2000 Constant prices Million US $ 12,257 20,989 21,954 22,429 23,034 22,900 23,408

Real GDP Growth Rate % 8.4 2.3 4.6 2.2 2.5 1.4 3.6

Real per Capita GDP Growth Rate % 5.8 -0.3 2.0 -0.3 0.2 -2.9 -0.2

Gross Domestic Investment % GDP 18.5 21.2 21.1 20.2 19.2 20.6 21.4

Public Investment % GDP 2.4 7.1 4.2 3.7 2.6 4.9 6.0

Private Investment % GDP 16.1 14.1 16.9 16.5 16.6 15.6 15.4

Gross National Savings % GDP 9.9 19.2 11.1 18.0 18.8 10.9 12.1

Prices and Money

Inflation (CPI) % 6.9 14.3 11.3 13.0 20.0 36.0 22.0

Exchange Rate (Annual Average) local

currency/US$ 2.6 2.1 2.3 2.3 2.7 3.5 ...

Monetary Growth (M2) % ... 16.3 23.3 26.1 19.0 ... ...

Money and Quasi Money as % of GDP % ... 19.2 22.0 22.5 23.5 ... ...

Government Finance

Total Revenue and Grants % GDP 10.4 24.0 16.5 19.3 18.9 12.0 13.9

Total Expenditure and Net Lending % GDP 11.1 24.1 20.7 19.6 19.9 16.4 18.7

Overall Deficit (-) / Surplus (+) % GDP -0.7 -0.1 -4.2 -0.3 -1.0 -4.4 -4.8

External Sector

Exports Volume Growth (Goods) % 130.6 -4.8 3.0 5.4 -36.8 -64.7 13.4

Imports Volume Growth (Goods) % 14.4 -7.0 8.5 0.1 -13.9 -15.8 -3.8

Terms of Trade Growth % 9.0 20.1 -34.9 44.6 28.3 34.1 5.1

Current Account Balance Million US $ -50 -1,065 -5,264 -1,383 -303 -5,258 -4,210

Current Account Balance % GDP -0.4 -2.0 -10.0 -2.1 -0.5 -10.2 -8.9

External Reserves months of

imports 1.0 1.6 1.2 1.1 0.2 ... ...

Debt and Financial Flows

Debt Service % exports 2.9 3.7 3.1 3.0 2.4 9.5 8.0

External Debt % GDP 155.0 60.2 66.0 60.9 64.8 84.8 96.2

Net Total Financial Flows Million US $ 320 2,587 2,395 2,173 1,205 ... ...

Net Official Development Assistance Million US $ 225 2,566 2,351 2,076 1,138 ... ...

Net Foreign Direct Investment Million US $ 392 2,601 1,816 2,064 1,936 ... ...

XVIII

ANNEX 10: ELIGIBILITY FOR FSF SUPPLEMENTAL SUPPORT FUNDING

First Stage Criteria

Commitment to

Consolidate

Peace and

Security

i) Comprehensive agreement reached on CPA issues and a framework for Implementation of

Agreement established and implementation initiated.

ii)The government has initiated a national dialogue aimed at bringing together all actors and stake

holders together in order to develop a jointly agreed upon process that will be inclusive and bring the

sense of stability and national cohesion. The success of the national dialogue will be critical to

Sudan’s future peace and stability

iii) The 5th

Round of negotiations between GoS and the SPLM-N, mediated by the AUHIP through a

proposal to the two parties, resumed in February 2014 aimed at ending the three-year conflict in

South Kordofan and Blue Nile States.

iv) On Darfur, the Doha Document for Peace in Darfur (DDPD) continues to serve as the main

framework for attaining peace in the region. International efforts, especially of the AUHIP, the UN

and IGAD, have engaged contending parties in peace dialogue that could now lead to a permanent

resolution of the conflict.

v) The pillars of the I-PRSP and the key results areas of the NDP are complementary and mutually

reinforcing both seeking to create the conditions for achieving peace and security, and reduce

unemployment and poverty through enhancing governance and institutional capacity.

Unmet Social and

Economic Needs i) About 47 % of the population lives below the poverty line.

ii) Only 60.1 per cent of the population have access to drinking water, while only 27.1 per cent have

seen improvement in sanitation.

iii) The under-five child Mortality Rate in Sudan still remains very high compared to other countries

in the region. Unless intensive and effective interventions that equally address underlying causes of

child mortality are implemented, the rate would unlikely come down before 2015.

iv) Even though the maternal mortality rate (MMR) for Sudan has improved from 534 per 100.000 in

2006 to 216 per 100,000 in 2012 it is not likely that the 140 target will be met by 2015.

v) FDI as a proportion of GDP peaked at 10.1% in 2006, but progressively declined to 0.5% in 2012.

The total external debt of Sudan as at December 2013 amounted to US$ 43.8 billion, which

represents serious obstacles to developing global partnerships for development.

.

Second Stage Criteria

Improving

Macroeconomic

Conditions and

Pursuit of Sound

Debt Policy

i) GoS has developed a five year National Development Plan for the period 2012-2016.

ii) GoS has reconciled 95% of the debt with the help of the TWG on Sudan’s debt,

iii) Debt scenarios have been established and an arrears clearance and debt relief strategy prepared.

iv) Government is planning to prepare coordinated arrears clearance plan for the Bank and the BWIs

which is needed to kick-start discussions on the HIPC process.

v) GoS adopted its Interim Poverty Reduction Strategy Paper (I-PRSP) in December 2012 and

implemented bold economic reforms in both 2012 and 2013.

vi) GoS has started implementing a new Staff Monitored Program (SMP) negotiated with the IMF in

early 2014.Having successfully implemented 13 previous SMPs, an effective implementation of this

SMP will strengthen Sudan’s case for HIPC debt relief, improve macroeconomic management that

would buttress the government efforts to control inflation and revitalize growth

vii) Progress in macroeconomic performance and management is noteworthy, driven largely by fiscal

policy reforms, gold exports, rebounding agricultural sector and resumption of South Sudan’s oil

export. .

Sound Financial

Management

Practices

(i) The GoS is currently undertaking an assessment of the Integrated Financial Management

Information System (IFMIS) as part of the Bank financed Public Financial and Macroeconomic

Management project (PFEM).

(ii) The result of this assessment will be used to develop sound financial management practices to

enhance governance and accountability in addition to improved financial reporting and budgetary

process.

(iii) Recent activities includes, amongst other things, the: preparation of 2012 annual financial

statements and submission to Parliament of the 2012 Audit Report within the statutory deadlines,

2013 budget approval by Parliament.

XIX

Transparency of

Public

Accounts

(i) GoS has prioritised enhancing public financial integrity institutions as one of its priorities. This

commitment has been evidenced by the submission to Parliament for approval of the budget.

(ii) GoS is also in the process of strengthening the offices of the Accountant General and

Auditor General by building capacity within the framework of the PFEM project.

(iv) The Central Bank of Sudan, Customs Department, Khartoum Stock Exchange and the Debt

Management Unit at the Ministry of Finance is included in the IFMIS assessment to enhance

transparency in the financial management systems.