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EXECUTIVE SUMMARYContext: Sudan is a fragile state mired in a heavy debt burden, international sanctions, and volatile domestic and regional political environments. These problems, together with limited revenue mobilization, are constraining Sudanâ??s growth prospects and poverty reduction efforts. The economic situation worsened following the secession of South Sudan in 2011, resulting in the buildup of large economic imbalances. The authorities have embarked on a stabilization program and are expecting that a return of peace in South Sudan will ensure continuation of oil flows, which are cru

Cover -- CONTENTS -- CONSUMER SUBSIDIES -- FIGURE -- 1. Distribution of Fuel Subsidy by Income Quintile -- TABLE -- 1. Fiscal Cost of Consumer Subsidies (2016-17) -- References -- CHALLENGES FACING CORRESPONDENT BANKING WITH SUDAN -- A. The Roll Back of Economic Sanctions against Sudan -- B. Prospects for Re-connecting Sudanese Banks with the International Financial System -- C. Possible Remedial Measures for a Balanced Recovery of CBRS in Sudan -- BOX -- 1. Economic Sanctions Against Sudan -- FIGURES -- 1. Surveys in CBRS -- 2. LCs Positions in Foreign Currency -- 3. CBRS by Country -- 4. CBRS per Currency -- References -- REVISION OF GDP DATA FOR STAFF ANALYSIS -- A. Introduction -- B. Compiling Revised Estimates of Expenditure-Side GDP data -- C. Projections for 2017-22 -- D. Conclusion -- References.

KEY ISSUES Context: The July 2011 secession of South Sudan led to the buildup of large economicimbalances in Sudan. The authorities responded in June 2012 with a comprehensivepackage of corrective measures, which laid the ground for a much-needed adjustmentprocess. The reform process was expected to continue in 2013, through a secondpackage of measures, which the authorities recently put together, but has yet to beimplemented. The March 2013 agreement with South Sudan on oil and security mattersis offering an opportunity to continue the adjustment process by implementing boldreforms to address the post-secession challenges. Outlook and risks: Risks are mainly to the downside and risks include domestic politicalinstability and volatile security conditions, notably tensions at the border with SouthSudan. Strong and steady implementation of reforms is crucial for improvingmacroeconomic stability and enhancing medium-term growth prospects. Focus of the Article IV discussions: Discussions focused on: (i) near-term policies forrestoring macroeconomic stability; and (ii) a medium-term strategy for rebuilding theeconomy and implementing policies for sustained and inclusive growth, higheremployment, and poverty reduction. Policy recommendations: Action is needed on the following fronts: (i) fiscal adjustmentgrounded in a sound medium-term framework, including a gradual phase-out of fueland wheat subsidies, and strengthening of social safety nets thus making way for higherquality spending; (ii) a tighter monetary stance to address high inflation and exchangerate pressures; (iii) unification of the exchange rates and markets together with furtherexchange rate flexibility; and (iv) further liberalization of the economy and improvementin the business environment in order to boost private sector-led growth. Staff-Monitored Program: Strong corrective

KEY ISSUESPolitical Context: Sudan is embarking on a difficult national dialogue with the opposition and some armed groups in the Blue Nile and South Kordofan regions. The objective is to break the current destructive cycle of instability and prepare for the upcoming presidential election in 2015. This dialogue, if successful, could help create the conditions needed to address the challenges that emerged after the secession of South Sudan, including sustaining a much-needed broad economic recovery and adjusting the economy to its new potential. The current staff monitored program (SMP) is providing an adequate policy framework and a path in this direction.Macroeconomic situation and outlook: Tight monetary conditions and improved fiscal performance, together with lower food prices, contributed to lower inflation at end-March. However, the curb market exchange rate further depreciated against the U.S. dollar on account of the uncertainties in the oil market triggered by the South Sudan conflict, further widening the gap between the official and curb market rates to more than 50 percent. The outlook for 2014 remains broadly favorable, with growth expected to reach 2.5 percent, and inflation to continue its downward trend to about 18 percent.Program performance: Performance under the SMP through end-March 2014 was affected by adverse shocks and security spillovers. All end-March quantitative benchmarks were met, except for the ones on net international reserves and net domestic assets of the Central Bank of Sudan (CBOS). The indicative targets on social spending and the non-oil primary deficit were also missed by a slight margin. Corrective actions have been taken to ensure that these targets will be met in the second quarter. Urgent measures are needed to address the gap between the official and curb market exchange rates. The authorities have