Sudan - Overview of economy



For the past 2 decades, Sudan has suffered from a violent civil war, chronic political instability, devastating

drought, weak world commodity prices, decreases in remittances from abroad, and counterproductive economic policies. Agriculture is the largest portion of the economy, accounting for 39 percent of the gross domestic product (GDP) and employing nearly 80 percent of the workforce. Other important areas of the private sector include trading and the processing of agricultural products. Sluggish economic performance over the past decade, attributable to declining annual rainfall, has kept per capita income at low levels. A large foreign debt and huge arrears continue to cause economic difficulties.

In 1990, the International Monetary Fund (IMF) took the unusual step of declaring Sudan non-cooperative because of its nonpayment of arrears to the Fund. After Sudan backtracked on promised reforms in 1992-93, the IMF threatened to expel Sudan from the Fund. To avoid expulsion, the Sudanese government agreed to make token payments on its arrears, to liberalize exchange rates , and to reduce subsidies . By 2000, the government had partially implemented these measures. The government has also tried to develop the oil sector, and, working with foreign partners, the country is now producing approximately 150,000 barrels per day. But the continuing civil war and the country's growing international isolation has inhibited growth in the nonagricultural sectors of the economy.

In addition to civil strife, Sudan has an economy which suffers from the country's geographic location. Sudan belongs to the Sahel belt of Africa along the Sahara Desert, which comprises some of the poorest countries in the world. The dry climate in the central parts of the country makes economic and agricultural performance difficult. The main agricultural activities concentrate, therefore, in Khartoum, Port Sudan, or around the Nile River.

In 1999, the government changed its economic behavior and started implementation of IMF programs, including privatization and economic liberalization. It decreased subsidies on some products, which consequently led to a 30 percent increase in the price of chicken and beef and a 20 percent increase in the price of oil and petrol. Foreign direct investments , mainly from rich Arab countries, have enabled oil pipelines and extraction accessories construction, producing an estimated oil income for 2000 of US$300 million. The reforms have sparked the economy. The GDP growth was predicted to be 7 percent in 2000.

The privatization program was expected to include some of the largest state-controlled companies, including the state airlines Sudan Air, the state energy giant NEC, the irrigation system Al-Gezira, the sugar factories, and the maritime transport providers. French energy company, Electricité de France, has already expressed its interest in NEC, and 1 consortium (group) from South Korea was pursuing the purchase of the irrigation system. The future regulation of the private sector remains unclear. The legislature has not laid firm regulations for the private sector and some financial experts fear that that may limit the activities of private companies and allow monopolies in some sectors. The uncertainty surrounding the legislation for the private sector has stalled foreign investment in the country.

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