Sudan sits at the crossroads of Sub-Saharan Africa and the Middle East, its powerful neighbor, Egypt, bordering it to the north, Libya and Chad to the west, and Eritrea and Ethiopia to the east. Its capital, Khartoum, lies at the confluence of the White and Blue Niles, and its main port on the Red Sea. Although mostly desert, it has fertile land, mountains, and livestock.
The country has been beset by conflict for most of its independent history. Under the terms of a peace agreement in 2005, its southern states seceded, forming the Republic of South Sudan in 2011.
The secession of South Sudan induced multiple economic shocks. The most important and immediate was the loss of the oil revenue that accounted for over half of Sudan’s government revenue and 95% of its exports. This has left huge challenges, as well as much reduced economic growth, and resulted in double-digit consumer price inflation, which, together with increased fuel prices, triggered violent protests in September 2013.
South Sudan descended into civil war in December 2013 and its conflict continues to put pressure on Sudan, with about 460,000 people having sought safety with it, according to the United Nations, as well as a drastic reduction in cross-border oil flows. The famine that afflicted northern parts of South Sudan in mid-2017 caused a greater influx of refugees into Sudan as well.
Following the global oil price slump in 2015/2016, Sudan and South Sudan agreed to lower oil transit fees for South Sudanese oil via Sudan’s pipeline, as it became uneconomic to export it. In December 2016, they extended their 2012 agreement on oil for three years on the same terms, with the exception of provisions for the adjustment of transit fees in line with global oil prices.
Armed conflict in Sudan’s westernmost region of Darfur has subsided but many parts of the region remain precarious because of the proliferation of arms and banditry. Efforts to settle another conflict in South Kordofan and Blue Nile remain deadlocked.
Comprehensive US sanctions on Sudan, levied in 1997 and expanded in 2006, were eased in January 2017, allowing financial and trade transactions between US citizens and entities and their Sudanese counterparts. The suspension of sanctions was placed under a six-month review in order to determine whether the sanctions should be fully repealed. When that period ended in July, the U.S. administration extended it by three months, citing the need for more time to review it.
Away from oil, agriculture and livestock are essential to Sudan’s economic diversification and could contribute to medium-term macroeconomic stability. These sectors presently contribute approximately 35%–40% of Gross Domestic Product (GDP), but could contribute significantly more with greater investment and better governance. Sudan now recognizes the need for greater attention to agriculture and livestock, as reflected in its Interim Poverty Reduction Strategy Paper (I-PRSP) and the Five-year Program for Economic Reforms approved by its parliament in December 2014.
Sudan remains a highly-indebted country that has accumulated sizeable external arrears and has been in non-accrual status with the World Bank Group (WBG) since 1994. At the end of 2015, its external debt amounted to $50 billion (61% of GDP) in nominal terms, about 84% of which was in arrears. While the country is eligible for debt relief under the Highly-Indebted Poor Countries Initiative, it must come to an amicable understanding with its main creditors in partnership with South Sudan.
In November 2016, Sudan and South Sudan extended for two years their 2012 agreement on debt apportionment, whereby Sudan retains all the external liabilities after the secession of South Sudan, provided the international community gives firm commitments on the delivery of debt relief within two years. Without such commitment, Sudan’s external debt would be portioned out with South Sudan’s based on a formula that is yet to be determined.
Poverty and Social Developments
The main determinants of poverty in Sudan include: conflicts and a dependence on oil, which has resulted in the neglect of its agriculture and livestock sectors, as well as of alternative sources of energy. The unequal distribution of fiscal resources and access to natural resources; governance failures as reflected in poor policy credibility and implementation; and inadequate incentives for private sector investment and participation.
Last Updated: Oct 12, 2017