A Joint World Bank Group and Sudan’s Ministry of Finance and Economic Planning Assessment on the Sudan (IPRSP)

Interim Poverty Reduction Strategy Paper. The importance of the IORSP that it is one of the basic conditions for foreign debt relief under the HIPC (Heavily Indebted Poor Countries) Initiative. In the first two parts of this review, the focus was on the issues of creating an enabling political and economic environment, agriculture as an engine of growth, human resources and education. In this part the attention is on health, water and sanitation, social welfare, security and protection, governance and other relevant issues.

Nonpublic Funding Programs
The Social Insurance Fund (SIF)


The SIF is a mandatory insurance system for all private sector employees and self-finance public corporations as well as state owned banks and companies. The major resources are from the Employers and the employee’s subscription in which the employer contributes 25 percent of the wage and the employee 8 percent. The Fund is organized by the 2008 Act which stipulates its status as an independent legal entity under the supervision of the Minister of Welfare and Social Security.
The compensation of after service benefits paid for pensioners is extremely low and does not cope with the inflation rates. Expansion in social support programs without ensuring funding could future sustainability of the fund as indicated by the last Actuarial Study.26 The arrears accumulated by the states represent also a serious challenge to the sustainability of the Fund services


Food Aid and Nutrition Programs


The Humanitarian Appeal funding of UN and Partners Work Plan is coordinated by the United Nations Office for the Coordination of Humanitarian Affairs (OCHA) in partnership with Humanitarian Affairs Commission (HAC). The Commission is supervised by the Ministry of Welfare and Social Security. The appeal is implemented by UN agencies and NGOs. It covers a wide range of activities including: agriculture, economic recovery and infrastructure, education, food, health, nutrition, mine action, protection and rule of law, shelter and nonfood items and multi sector.
What is considered here as social safety net program is the direct assistance in food and nutrition. The major provider of the food is the WFP, and main provider of nutrition is UNICEF. The main beneficiaries are war affected and displaced population in the country. WFP has several
food programs including General Good Distribution, supplementary ration for children, and school feeding. UNICEF supports the tackling of micro-nutrient deficiencies, low birth weight and chronic malnutrition through increased routine vitamin A supplementation, iron and folic
acid supplementation, promotion of iodized salt, and the marketing of fortified foods such as flour and sugar.


Subsidies


Sudan runs an extremely expensive generalized subsidy system for fuel and wheat. Subsides were around 22 percent of total public expenditures in 2014 which is equivalent to the federal and  development budgets combined. Total subsidy increased from 1.9 percent of GDP in 2012 to
2.3 percent of GDP in 2013 and further to 2.4 percent of GDP in 2014. The subsidies are dominated by fuel representing over 75 percent of the total subsidies. Most of the benefits from subsidies are captured by higher-income households. The top income quintile receives 48 percent of
total subsidy compared to 3 percent received by the bottom income. However, there are certain variations for the different products where in the case of kerosene the top quintile receive only 21 percent compared to Gasoline where the top quartile receive 68 percent of the subsidy benefits.27 The subsidy resources could benefit the poor more effectively if they were targeted. The IMF concluded that fuel subsidies are expensive, inefficient and inequitable.
Similarly a recent Bank study of social safety nets in 22 African countries concluded that general subsidies are costly mechanisms for redistributing income and often do not benefit the poor.  The study found that fuel subsidies do not benefit the poor in Cameron, Mauritania and Sierra Leone
and concluded that reducing poorly targeted programs and subsidies can make fiscal space for more effective and better targeted safety nets. Likewise, well performing safety nets providing support to the most vulnerable groups can be important mitigating mechanisms to facilitate reform of expensive general subsidies.


Social Safety Nets


Social safety net is one of the components of the social protection. Considerable number of poor and vulnerable people is unable to meet basic commodities and essential services needs due to the conflicts and displacement. Therefore, special consideration is to be given to social safety nets which include cash transfers, in-kind support, as fee waivers for basic services and school feeding and nutrition programs.
Expenditures on social safety net increased during the IPRSP review period. Safety net expenditures—defined as non-contributory programs to include cash and in kind transfers, health waivers; and subsidies—rose from 2.4 percent of GDP in 2012 to 3 percent in 2014 while excluding subsidies expenditures increased from 0.5 percent in 2012–2013 to 0.6 percent in 2014.
Most African countries spending on social safety nets—which average about 1.7 percent as a share of GDP—is higher than Sudan’s spending. Africa’s average spending on social safety nets, however, masks wide variation, ranging from 3.5–3.7 percent of GDP in Botswana and South Africa (middle income countries) to 0.2–0.3 in Benin and Tanzania (low income countries). Neighboring Ethiopia’s Productive Safety Net Program costs 1.2 percent of GDP.

However, cross country comparisons should be interpreted with care as Sudan’s social safety net system differs from other African countries. The African experience has shown that what is typically included in social safety nets are school feeding, public work programs, fee waivers, cash
transfers and vouchers, food and in-kind distributions, nutrition programs and other as noted in a recent World Bank study.

Remittances


Remittances are considered as an essential and strong informal social protection mechanism for millions of families in Sudan. Sudanese working abroad according to the Secretariat of the Sudanese Working Abroad are around 4 million persons (of whom 2 million are working in Saudi Arabia) and their total remittances are estimated to be around US$ 4 billion per year (about 7 percent of GDP) transferred mostly outside the banking sector.30 US sanctions and other undeclared sanctions imposed by non-US bank (due to over compliance) resulted in a breakdown in relations with corresponding banks in recent years and consequently transfers of remittances were severely affected. However, they are not considered in the calculations of safety net expenditures and pro-poor spending.


Achievements


Sudan has made significant increase in coverage for most of the social protection programs. Table 5.21 shows the increase in the number of social protection beneficiaries by program. However, progress varies from one program to another. Despite progress made, the country has a long
way to go to reach adequate coverage in certain programs like health insurance and microfinance given the magnitude of vulnerability and widespread poverty as well as the low base from which these programs started.


Challenges

The main weakness in the social protection programs in Sudan is basically the inefficient use of resources. Sudan requires streamlining of the current system to increase resource use efficiency.
Substantial resources are spent on non-targeted social protection programs like subsidies. Waste of resources occurs due to inappropriate targeting. There is weak coordination particularly given the given the large number of agencies involved..
The cash transfer program, for example is thinly spread across the states, indicating there is room for better targeting. A breakdown of cash transfer by geographic locations reveals important variation across the states. While North Darfur state has the highest poverty rate
(69.4 percent), Khartoum state has the highest share of cash transfer (nearly 16 percent of benefited families are located in Khartoum). Khartoum and Gezira states (where poverty is relatively low) host more than 25 percent of cash transfer beneficiaries. Residents of Darfur and other conflict affected areas were significantly worse-off in terms of cash transfer than the rest of the country.

Implications for PRSP

Subsidies: The issues of subsidies removal needs to be seriously looked into. Lifting of subsidies could be sequenced to minimize impacts on the poor (like starting with lifting items that are less important to the poor as recommended by the IMF) and utilize the subsidy resources for a well-targeted compensation programs.

Social security funds:

The weakness capital of the social security institutions poses great risks to the sustainability of their services. The weakness is a result of low coverage and hence low contributions by subscribers, resistance of the private sector for mandatory social security insurance, the large arrears accumulated by the federal government and the states, the low rate of returns from the invested money of the social funds, and the high inflation rates.


Coverage:
The coverage of social protection needs to be expanded and performance of the outlets that provide the treatment services for the health insurance need to be improved. Many areas which are remote and in which poverty is higher are not well served with health services outlets; the health facilities providing services to the health insurance in rural areas suffer from the shortages of the medical staff due to lack of incentives; and there are weaknesses in the availability of all the packages covered by the health insurance in the health centers. A strong monitoring is needed as there is an emerging black market trade in the freely distributed medicines including for children less than five years.
Zakat: Several recommendations were made to improve the Zakat performance in the conference held in Khartoum in March 2015. These recommendations included using modern management tools and appropriate IT technology for increasing management efficiency, enhancing partnerships with civil society organizations to improve the targeting; streamlining expenditures priorities; and strengthening internal audit..
Targeting and equity: Targeting mechanisms for the cash transfers reviewed for further improvements and has to be supported by transparent data base and a monitoring system. Further improvement is required in targeting of beneficiaries and the delivery mechanism for the cash
transfers. This should be based on a rigorous evaluation of the current experience. There should be more equity considerations in the social protection programs. A large variation in the coverage among states is clear with the poorest states getting the least benefit.


Institutions:


Review of the existing institutional set up to particularly enhance the coordination aspects is needed. Impact of sanctions: Economic sanctions and over compliance by non US commercial banks severely affected transfers of remittances to Sudan by Sudanese national working abroad. Remittances are used as an important safety net for millions of poor families around the country.