Sudan is in northern Africa, with a coastline bordering the Red Sea. It sits at the crossroads of Sub-Saharan Africa and the Middle East, with desert as well as fertile land and abundant livestock. The country has been beset by conflict for most of its independent history and, under the terms of the 2005 Comprehensive Peace Agreement, the southern states seceded to form the Republic of South Sudan in July 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 revenues 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.
Meanwhile, South Sudan descended into civil war in December 2013 and its conflict continues to put pressure on Sudan, with an estimated 332,885 people from there having sought safety in Sudan as of March 2017, according to the United Nations, as well as a drastic reduction in cross-border oil flows. The famine currently afflicting northern parts of South Sudan is causing a greater influx of refugees into Sudan.
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, however, Sudan and South Sudan extended their 2012 agreement on oil financial arrangements 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 in recent years 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 for financial and trade transactions between US citizens and entities, and their Sudanese counterparts. However, the order to ease sanctions is under six-month review and could either be rescinded or made permanent.
Away from oil, agriculture and livestock are essential to Sudan’s economic diversification and could contribute to medium-term macroeconomic stability. While these sectors presently contribute approximately 35%–40% of Gross Domestic Product (GDP), they 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.
However, 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, Sudan’s 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 agriculture and livestock sectors as well as 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, as well as inadequate incentives for private sector investment and participation.
Last Updated: Apr 19, 2017