Page 544 - 2016 - Vol. 40

focuses on spending cuts and tax increases, will seriously
undermine pro-poor service delivery and the potential for
long-term growth. Federal transfers to state governments,
the main financing tool for service delivery under
decentralization, accounted for only 3.3% of GDP in 2011,
down from the budgeted 4.1 % share. Developments in
economic policy in 2011 were affected by post secession
issues, including the dispute over the Abbey area and other
borders, loss of oil revenues and the impact of the latter on
the government's budget, foreign reserves and the exchange
rate. To confront these challenges, the government of
Sudan introduced fiscal austerity and adjustment measures
as well as measures to promote non-oil exports. It also
continued to negotiate with the government of South Sudan
over fees for transportation of South Sudan's oil through
Sudan. Notwithstanding the fiscal reforms, expenditure
reduction remained below the level needed to compensate
for lost revenue, resulting in an overall fiscal deficit of 5%
of GDP in 2011. With the intensification of armed conflicts
and political discontent and the creation of new states, the
fiscal stance remains largely expansionary. The wage bill
amounted to 44% of government spending in 2011. The
relatively high wage bill in 2011 is mainly attributable to

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