Third Sudan Consortium Oslo, May 5-7, 2008

1. Joint Staff Assessment Report (JSAR) Assessment of Progress on JAM Implementation PREPARED BY THE STAFF OF THE IMF, WORLD BANK AND UN Third Sudan Consortium Oslo, May 5-7, 2008

2. Outline of the Presentation • Economic and Social Progress since the signing of CPA • Progress Toward MDGs • Macroeconomic Situation • Resource Mobilization, Public Expenditure and Public • Financial Management • Adherence to Financial Obligations for the JAM • Projects: • GONU and GOSS • Donors • Looking Forward (2008-11) • Systemic Constraints / Challenges • Financing Development

3. Progress Towards MDGs Sudan faced a set of complex and deep-seated developmental challenges at the time of signing of the CPA

4. Progress Towards MDGs Selected Key Achievements (2005-2007) : Northern Sudan • Education: The gross enrolment rate in four states reached over 80%; Survival rate to grade 5 reached 94.2% in 2006; 540 classrooms constructed. • Health: DPT3 coverage reached 84%; more than 90% of children under five received one dose of measles; 782 new health facilities (42 hospitals, 352 primary health centres and 388 health units) constructed; 712,000 long lasting ITNs distributed free. • HIV/AIDS Prevention/Control: Voluntary Counseling and Testing centres has increased from one in 2001 to more than 45 in 2006 and the number of treatment centres increased from just one in 2001 to 14 in 2006. Prevention of mother to child transmission services has been initiated in three priority states. • Water and Sanitation: Safe drinking water sources provided for an additional 2.07 million rural population; non-functioning water sources re-established to serve 2.1 million people.

5. Progress Towards MDGs Increased spending in health and education + ongoing decentralization initiatives  Improved utilization of public services

6. Progress Towards MDGs Selected Key Achievements (2005-2007) : Southern Sudan • Education: Enrolment in primary schools increased from around 300,000 in 2005 to over a million in 2007; Over 14,000 primary and secondary teachers had been recruited, and now over 25,000 teachers are estimated to be working in Southern Sudan. • Health: Distribution of bed nets increased from 253,000 in 2005 to an estimated one million in 2007; The number of people treated with Artemisinin Combination Therapy in 2006 reached around 500,000; The Mass Measles Campaign, launched in 2005, had by 2007 reached some 3.2 million people—75% of all children under 15. • HIV/AIDS: Voluntary Counseling and Testing services have expanded from around nine centers in 2005 to more than 40 in 2007 covering some 20 towns; Anti-Retroviral drugs are now available in four hospitals. • Water and Sanitation :1,400 new water points constructed and 2000 boreholes rehabilitated; A $80m rural water supply project is under implementation; 25,000 latrines for households and schools constructed; and Over a million people oriented to hygienic practices.

7. Progress Towards MDGs: …Yet what has been achieved, pales in significance to what remains to be done

8. Macroeconomic Situation Sudan has been a top growth performer in the region, with oil sector playing a pivotal role • Economic growth has been strong by regional standards • Benefits of increased oil production and higher international prices • Positive spill-over from oil sector—particularly in construction and services sectors • Recent increase in food prices a potential risk to macroeconomic stability

9. Macroeconomic Policies • Fiscal position has deteriorated during 2005–07 and there has been a significant build-up of domestic arrears • Monetary and exchange rate policies remained prudent, but private sector credit growth has fallen • Financial sector indicators have deteriorated in recent years • After a sharp increase in 2005–06, the external current account has improved slightly in 2007 • The external debt arrears constrain access to concessional finance Sudan’s Fiscal Position

10. Resource Mobilization, Public Expenditure and Financial Management: GONU Trend and composition of revenue and expenditure for GONU – 2005 to 2007 • Revenue: Managing the volatility of oil revenue flow remains critical; Raising the level of non-oil revenue to GDP ratio is important for long-term fiscal sustainability. • Expenditure:Surge in CPA related spending (including transfer to states) has led to sharp increase in expenditure; Execution rate was 88% in 2006 and 89% in 2007; and Poverty-reducing spending increased significantly from 3.4% of GDP in 2004 to 6% in 2007; Considerable scope to improve budget execution and the quality of spending.

11. Resource Mobilization, Public Expenditure and Financial Management: GOSS Trend and composition of revenue and expenditure for GOSS – 2005 to 2007 • Revenue. Diversification of revenue base is essential to fiscal sustainability; Non-oil revenue collection has been minuscule, especially relative to potential. • Expenditure. Wage bill growth and increase in operating expenses have adversely affected development spending; Improving budget execution and strengthening the financial management practices are critical to raise the effectiveness of public expenditure.

12. Adherence to Financial Obligations for the JAM Projects: GONU • GONU obligations in the JAM across the eight clusters were estimated at $3.2 billion • Execution rate has been impressive (88%), but under-spending in 6 of the 8 JAM sectors (exceptions are infrastructure and productive sectors) • Spending on ‘Three Areas’ has been significantly low

13. Adherence to Financial Obligations for the JAM Projects: GOSS • Against a commitment of US$ 1.4 billion, GOSS contribution to JAM projects was US$ 551 million • This was largely due to revenue under-runs, greater salary and operating expenses than assumed in the JAM report and shortfalls in donor funds • Relatively higher execution rate for infrastructure sector (79%), relative to basic social services (35%)

14. Adherence to Financial Obligations for the JAM Projects: Donors • While donors contribution has been lower than the JAM estimates, it has been significantly higher than the pledges made at Oslo in 2005. • The ability of the donors to allocate significant funds for recovery and development activities has been constrained by large and expanding humanitarian aid.

15. Systemic Constraints / Challenges • Sudan’s development has been (continues to be) affected • by: domestic conflicts, resource curse, geography (large parts • of the country are far from the coast), and poverty traps. • The development needs are huge and the potential is • considerable. It calls for: •  More effective decentralization •  Reduced disparity in resource allocation •  Improved policy and quality of institutions •  Enabling environment for rapid and shared growth •  Greater involvement of private sector and CSOs •  Continued support of international development partners • Need for a broad-based, inclusive development framework • that is supported by good policies and adequate funding.