Sudan's economy faces "daunting" challenges after the secession of oil-producing South Sudan and emergency measures are needed to stabilise it, the International Monetary Fund said on Tuesday.
Sudan has been struggling with high inflation worsened by a shortfall of foreign currency after South Sudan split away as an independent country in July, taking about three quarters of oil production with it.
Oil provided most of Sudan's state revenues and dollar inflows before the split. The loss of oil revenues drove up annual inflation to 28.6 per cent in April as Sudan needs to import much of its needs.
The IMF said initial findings from a recent mission to Sudan found the economic situation in 2012 had not improved from 2011, when growth slowed to 2.7 per cent, year-end inflation reached 19 per fcent and the fiscal deficit was about 4 per cent of gross domestic product.
"The mission and the authorities agree that the challenges confronting Sudan are daunting and require appropriate reforms to stabilize the economy. More work is needed to improve prospects for inclusive growth and job creation," it said.
The IMF said it recommended a "two-pronged reform strategy" that included both short-term measures to "regain control of, and stabilise, the economy" and medium-term structural reforms.
Continued tensions and clashes between Sudan and South Sudan - provoked by a string of disputes over the position of their shared border, oil transit fees, territorial claims and other issues - have further worsened the economic conditions in both countries.
In January, landlocked South Sudan shut off its oil output of about 350,000 barrels per day in the heat of a row with its northern neighbour over how much it should pay to export through pipelines running to a Red Sea terminal at Port Sudan.
Last month the two sides clashed along the disputed border, where many of the oil reserves lie, resulting in damage to a major facility at Heglig that served both sides.
Fields around Heglig had produced about half of the 115,000 barrels per day of oil that were left to Sudan after the split. Officials say the area is producing crude again, but have declined to say how much.
The two sides resumed African Union-brokered talks in Ethiopia on Tuesday to try to ease the hostilities and work out the remaining issues.
Souther Sudanese overwhelmingly voted to split away from the north in a referendum promised in a 2005 peace deal that ended decades of civil war between the two sides.
About 2 million people died in that conflict, fought over ideology, religion, ethnicity and oil.