Sudan: Economy

In 2004, the cessation of major north-south hostilities and expanding crude oil exports resulted in 6.4% GDP growth and a near doubling of GDP per capita since 2003. The aftereffects of the 21-year civil war and very limited infrastructure, however, present obstacles to stronger growth and a broader distribution of income. The country continued taking some steps toward transitioning from a socialist to a market-based economy, although the government and governing party supporters remained heavily involved in the economy.

Sudan’s primary resources are agricultural, but oil production and export have taken on greater importance since October 2000. Although the country is trying to diversify its cash crops, cotton, and gum arabic remain its major agricultural exports. Grain sorghum (dura) is the principal food crop, and millet and wheat are grown for domestic consumption. Sesame seeds and peanuts are cultivated for domestic consumption and increasingly for export. Livestock production has vast potential, and many animals, particularly camels and sheep, are exported to Egypt, Saudi Arabia, and other Arab countries. However, Sudan remains a net importer of food. Problems of irrigation and transportation remain the greatest constraints to a more dynamic agricultural economy.

The country’s transportation facilities consist of 5,978 kilometers of railways, 16 airports with paved runways, and about 11,900 kilometers of paved and gravel road--primarily in greater Khartoum, Port Sudan, and the north. Some north-south roads that serve the oil fields of central/south Sudan have been built; and a 1,400 kilometer. (840 miles) oil pipeline goes from the oil fields via the Nuba Mountains and Khartoum to the oil export terminal in Port Sudan on the Red Sea.

Sudan’s limited industrial development consists of agricultural processing and various light industries located in Khartoum North. In recent years, the GIAD industrial complex introduced the assembly of small autos and trucks, and some heavy military equipment such as armored personnel carriers and the proposed "Bashir" main battle tank. Although Sudan is reputed to have great mineral resources, exploration has been quite limited, and the country’s real potential is unknown. Small quantities of asbestos, chromium, and mica are exploited commercially.

Extensive petroleum exploration began in the mid-1970s and might cover all of Sudan’s economic and energy needs. Significant finds were made in the Upper Nile region and commercial quantities of oil began to be exported in October 2000, reducing Sudan’s outflow of foreign exchange for imported petroleum products. There are indications of significant potential reserves of oil and natural gas in southern Sudan, the Kordofan region and the Red Sea province.

Historically, the U.S., the Netherlands, Italy, Germany, Saudi Arabia, Kuwait, and other Organization of Petroleum Exporting Countries (OPEC) have supplied most of Sudan’s economic assistance. Sudan’s role as an economic link between Arab and African countries is reflected by the presence in Khartoum of the Arab Bank for African Development. The World Bank had been the largest source of development loans.

Sudan will require extraordinary levels of program assistance and debt relief to manage a foreign debt exceeding $21 billion, more than the country’s entire annual gross domestic product. During the late 1970s and 1980s, the International Monetary Fund (IMF), World Bank, and key donors worked closely to promote reforms to counter the effect of inefficient economic policies and practices. By 1984, a combination of factors--including drought, inflation, and confused application of Islamic law--reduced donor disbursements, and capital flight led to a serious foreign-exchange crisis and increased shortages of imported inputs and commodities. More significantly, the 1989 revolution caused many donors in Europe, the U.S., and Canada to suspend official development assistance, but not humanitarian aid.

However, as Sudan became the world’s largest debtor to the World Bank and IMF by 1993, its relationship with the international financial institutions soured in the mid-1990s and has yet to be fully rehabilitated. The government fell out of compliance with an IMF standby program and accumulated substantial arrearages on repurchase obligations. A 4-year economic reform plan was announced in 1988 but was not pursued. An economic reform plan was announced in 1989 and implementation began on a 3-year economic restructuring program designed to reduce the public sector deficit, end subsidies, privatize state enterprises, and encourage new foreign and domestic investment. In 1993, the IMF suspended Sudan’s voting rights and the World Bank suspended Sudan’s right to make withdrawals under effective and fully disbursed loans and credits. Lome Funds and European Union agricultural credits, totaling more than 1 billion euros, also were suspended.

Sudan produces about 401,000 barrels per day (b/d) (2005 est.) of oil, which brought in about $1.9 billion in 2005 and provides 70% of the country’s total export earnings. Although final figures are not yet available, these earnings may have risen to an estimated $2 billion as of the end of 2004. Oil production in Sudan as of 2007 was at 466,100 barrels of oil a day. With a resolution of its 21-year civil war between the North and South, Sudan and its people can now begin to reap the benefit from its natural resources, rebuild its infrastructure, increase oil production and exports, and be able to attain its export and development potential.

In 2000-2001, Sudan’s current account entered surplus for the first time since independence. In 1993, currency controls were imposed, making it illegal to possess foreign exchange without approval. In 1999, liberalization of foreign exchange markets ameliorated this constraint somewhat. Exports other than oil are largely stagnant. The small industrial sector remains in the doldrums, and Sudan’s inadequate and declining infrastructure inhibits economic growth.
 

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