IMF, Sudan Reach Reform Deal

Sudanese customers queue to access money services at the Faisal Islamic Bank (Sudan) in Khartoum, Sudan June 11, 2019. REUTERS/Mohamed Nureldin Abdallah
Sudanese customers queue to access money services at the Faisal Islamic Bank (Sudan) in Khartoum, Sudan June 11, 2019. REUTERS/Mohamed Nureldin Abdallah
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IMF, Sudan Reach Reform Deal

Sudanese customers queue to access money services at the Faisal Islamic Bank (Sudan) in Khartoum, Sudan June 11, 2019. REUTERS/Mohamed Nureldin Abdallah
Sudanese customers queue to access money services at the Faisal Islamic Bank (Sudan) in Khartoum, Sudan June 11, 2019. REUTERS/Mohamed Nureldin Abdallah

The International Monetary Fund (IMF) said Wednesday it reached an agreement with Sudan on a reform deal that would back the 12-month Staff-Monitored Program (SMP).

An IMF mission led by Daniel Kanda held virtual meetings with the authorities from June 8-21 to discuss their reform package.

At the end of the mission, Kanda issued a statement revealing that "the Sudanese authorities and IMF staff have reached a staff-level agreement on policies and reforms that can underpin an SMP, subject to approval by the IMF's management and Executive Board.”

"The SMP aims at narrowing large macroeconomic imbalances, reducing structural distortions that hamper economic activity and job creation, strengthening governance and social safety nets, and making progress towards eventual HIPC debt relief.

“In support of these objectives, the reform package envisages increasing domestic revenue and reforming energy subsidies to create room for increased spending on social programs,” the statement read.

The new financing, however, has been held up by the need to settle decades of arrears to the IMF and Sudan’s listing, while under Omar al-Bashir’s rule, by the United States as a state sponsor of terrorism.

The Sudanese government pins hope on a conference of potential donors in Berlin this week.

Meanwhile, the economy is on the verge of collapse with inflation exceeding 100 percent and a shortage of bread and drugs.

Prime Minister Abdalla Hamdok finds himself desperate for foreign support.

“You have an unfinanced transition which is being hammered by a pandemic and a potential plague” of locusts, said a Western diplomat. “It puts pressure on the international community to put more money upfront quickly to ameliorate the degradation.”

Inflation topped an annual 100 percent last month as the government printed money to fund bread and fuel subsidies. Sudan’s currency has fallen to 150 to the dollar on the black market compared to 55 at the official rate, due to hard currency shortages.

Analysts and diplomats say Khartoum needs to deliver more substantial steps to overhaul an economy where key companies earning foreign currency such as gold exporters are controlled by military figures.

The government needs an estimated USD1.9 billion to cover the cash payment program. A preparatory document for the conference calls for “a pathway for Sudan’s re-engagement with international institutions” leading to eventual debt relief.

“The government is bankrupt effectively,” said Magdi el-Gizouli, a Sudanese academic and a fellow of the Rift Valley Institute. “They don’t have the funds for the cash program.”

The Berlin conference describes participants as “partners” rather than donors, to recognize that Sudan has its own resources and needs political and economic support rather than financial handouts, said Aisha al-Barir, a Sudanese government coordinator for the conference.

“Sudan is working on economic reform to take advantage of its own resources,” she said, pointing to a gold sector reform announced last week. Sudan also plans to liquidate or privatize many dysfunctional state firms.



Oil Prices Rise as Iran Suspends Cooperation with UN Nuclear Watchdog

An aerial view shows a crude oil tanker at an oil terminal off Waidiao island in Zhoushan, Zhejiang province, China January 4, 2023. China Daily via REUTERS
An aerial view shows a crude oil tanker at an oil terminal off Waidiao island in Zhoushan, Zhejiang province, China January 4, 2023. China Daily via REUTERS
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Oil Prices Rise as Iran Suspends Cooperation with UN Nuclear Watchdog

An aerial view shows a crude oil tanker at an oil terminal off Waidiao island in Zhoushan, Zhejiang province, China January 4, 2023. China Daily via REUTERS
An aerial view shows a crude oil tanker at an oil terminal off Waidiao island in Zhoushan, Zhejiang province, China January 4, 2023. China Daily via REUTERS

Oil futures edged up on Wednesday as Iran suspended cooperation with the UN nuclear watchdog and markets weighed expectations of more supply from major producers next month, while the US dollar softened further. Brent crude was up 55 cents, or 0.8%, to $67.66 a barrel at 1301 GMT, while US West Texas Intermediate crude rose 58 cents, or nearly 0.9%, to $66.03 a barrel.

Brent has traded between a high of $69.05 a barrel and low of $66.34 since June 25, as concerns of supply disruptions in the Middle East have ebbed following a ceasefire between Iran and Israel. Iran enacted a law on Wednesday that stipulates any future inspection of its nuclear sites by the International Atomic Energy Agency needs approval by Tehran's Supreme National Security Council. The country has accused the agency of siding with Western countries and providing a justification for Israel's air strikes, according to Reuters.

"The market is pricing in some geopolitical risk premium from Iran's move on the IAEA," said Giovanni Staunovo, a commodity analyst at UBS. "But this is about sentiment, there are no disruptions to oil." Planned supply increases by the Organization of the Petroleum Exporting Countries and its allies including Russia, a group known as OPEC+, appear already priced in by investors and are unlikely to catch markets off-guard again imminently, said Priyanka Sachdeva, senior market analyst at brokerage Phillip Nova. Four OPEC+ sources told Reuters last week the group plans to raise output by 411,000 barrels per day next month when it meets on July 6, a similar amount to the hikes agreed for May, June and July. "We are all talking about additional supply coming to the market, but the supply has not really hit the market," UBS' Staunovo said. "Probably because it's being consumed domestically."

Overall OPEC+ exports are relatively flat to slightly down since March, Staunovo said. He expects this trend to persist over the summer as hot weather drives higher energy demand. The greenback continued to weaken, falling to a 3-1/2-year low against its major peers on Wednesday. A weaker dollar tends to support oil prices, as it can boost demand for buyers paying in other currencies.

The release of the key US monthly employment report on Thursday will shape expectations around the depth and timing of interest rate cuts by the Federal Reserve in the second half of this year, said Tony Sycamore, an analyst at IG.

Lower interest rates could spur economic activity, which would in turn boost oil demand. Official US oil stockpile data from the Energy Information Administration is due to be released at 10:30 a.m. EDT (1430 GMT) on Wednesday. American Petroleum Institute data late on Tuesday showed US crude oil inventories rose by 680,000 barrels in the past week at a time when stockpiles are typically drawn down amid summer demand, sources said.