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.

The negative impacts of the continuous increase in wages and salaries leave little resources for many states to meet the running expenses let alone development. As seen from Table 5.22 above, several states were unable to meet the expenses of the textbooks or the seating for students. Many students are sharing textbooks and some are sitting on the ground.
The existing federal system needs to be reformed to address one of the major root causes of the Sudanese conflict which is the disparities among the states. The aggregate economic and social indicators in Sudan do not reflect the large geographical disparities in the country. Improvements in
the social services indicators mentioned previously in this document mask significant regional disparities. Table 5.23 reflects disparities in important selected indicators. Vertical and horizontal equalization formulas seem not to fully capture these disparities as seen for example from the per
capita transfers of the state when compared to the level of poverty in the states.
Capacities in all financial management aspects are weak invariably in all states. The weakness of staff capacities is a major reason for the poor PEM. States lack electronic networking system linking all departments, let alone localities. None of the states have an electronic archiving system in place. The average number of computers available is ten computers per state and when they are available most of staff is not trained to use them. Also, staff is poorly trained. The Staff in all states is not trained to conduct revenues and expenditures forecasting, budgeting, cash flow planning and management and other budget related analysis. Only 72 senior managers (out of 96) have knowledge and experience in how to review and interpret the three key financial documents; a cash flow projection worksheet, a balance sheet and an income statement.39
There are apparent weaknesses in the public expenditure management and financial governance.
States do not prepare their budgets within a medium term expenditures framework, but rather formulate incremental budgeting. Localities budgets are not fully integrated into the states budgets. The Auditor General indicated in his last report that retention and extra budgetary practices
still exist in the states, but there are improvements in 2013 compared to 2012. Internal auditing in the states suffers from lack of uniform legislation between the federal government and the states and weak capacities (there are rarely certified auditors in states). Staff of the procurement
in most of the states is unqualified. There are wide discrepancies in the reporting of the financial
data.
Lack of continuous consultations in financial matters between the state and the federal Ministry of Finance and Economic Planning adds an additional burden to the state’s financial planning. Lack of consultations is cited as a concern by many states. States are sometimes taken by surprise when certain decisions of direct or indirect fiscal implications on their budgets are taken by the federal
government without consultations. A good example is wage increases where in many instances the federal government suddenly announces wage increases or employment benefits without prior consultations with states. This complicates the budget process, weakens expenditures forecasting and discredit the budget preparation. Some State Ministers alluded, for example, to the  fact they have to suddenly deal with 7 federal circulars related to benefits for compensation of employees which surfaced late in the year of 2014 and which will have implications on the state’s budget in 2015. These circulars were issued by the federal government without due consultations with the states. Moreover, states would not know well in advance their share in transfers which also jeopardize the already weak planning and budgeting process.
Borrowing by sub national governments if went unchecked can create long-term problems for fiscal sustainability. Almost all states are accumulating expenditures arrears, which fall under four categories: (i) obligation to social security institutions namely the Pensions Fund and the Social Security Fund; (ii) after service compensation to holders of constitutional posts; (iii) unpaid
contractual commitment to private sector contractors and suppliers; and (iv) employees benefits.
Accumulated arrears for South Darfur as end 2012 amounted to SDG 210 million equivalent to around 188 percent of its annual own revenues; Gezira arrears (SDG 366 million) amounts to about 106 percent of its annual own revenues.40 These arrears have crippled the work of the social insurance institutions like the NPF and the NSSF in some states with negative impacts on poverty.
Implications for PRSP
Despite progress achieved in the area of human rights considerable challenges remain. Identifying and specifying actions to address remaining human rights is an area that needs to be looked into by the PRSP.
Pending issues of concern to the UN Human Rights Council need to be addressed. These issues include prosecution of the perpetrators responsible for the lethal shooting of demonstrators in September 2013 and March 2014. There were also concerns regarding restrictions on the media,
pre- and post-publication censorship, seizure of newspapers, the banning of some journalists and violations of the rights to freedom of expression and freedom of association and of peaceful assembly. Furthermore, there are also concern related to the human rights and security situation
in conflict-related areas, particularly in the Darfur and the states of Southern Kordofan and Blue Nile, and the profound negative impact of this on civilians, in particular women and children.
The amendment of the Press and Publication Act of 2009 to ensure more protection for journalists and newspaper publishers is still an unfinished job.
Vertical and horizontal financial transfers have not yet succeeded in narrowing disparities among the states. This necessitates a review of the formulas with the view to consider other options in the transfers like blocked and specific purpose grants to address the disparities in certain critical areas like education. However, this should be accompanied by strict adherence to prudent financial management by the states. Allocation of resources between wages, running expenses and development is a concern.
A comprehensive capacity building program funded and supervised by the federal government is needed. This is essential to improve efficiency in managing the states resources and service delivery.