Sudan is situated in northern Africa, with a coastline bordering the Red Sea. It sits at the crossroads of Sub-Saharan Africa and the Middle East, with fertile lands, abundant livestock, and manufacturing. However, 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.
South Sudan’s current conflict continues to put pressure on Sudan, with more than 100,000 having sought safety in Sudan as of mid-October 2014, as well as a drastic reduction in cross-border oil flows. An additional 7,000 South Sudanese fled to Sudan since fighting broke out in the capital Juba in July 2016, and more continue to arrive on daily basis.
Following the global oil price slump in 2015/16, Sudan and South Sudan agreed to lower oil transit fees for South Sudanese oil as it had become uneconomical for export. In addition, longstanding disputes in Darfur, South Kordofan, Blue Nile, and areas bordering South Sudan (such as Abyei) remain.
The near absence of inclusive public institutions that can adequately mediate demands for power and wealth sharing between the center and the periphery has been an underlying source of fragility and conflict in Sudan. The unequal allocation of public resources and access to natural resources are main drivers of conflict, feeding into a potent mix of ideology, ethnicity and socio-economic marginalization that threatens to pull the country further apart.
The secession of South Sudan induced multiple economic shocks. The most important and immediate was the loss of the oil revenue which accounted for over half of government revenues and 95% of exports. This has left huge macro-economic and fiscal challenges, much reduced economic growth, and double-digit consumer price inflation which, together with increased fuel prices, triggered violent protests in September 2013.
Sudan did not use the oil windfalls to invest in human development, diversify its economy, or promote private sector growth. Political instability, corruption and economic uncertainty compromise the enabling environment for business development, growth, and employment (2010 Investment Climate Assessment). Other constraints include inadequate infrastructure services (e.g., transport and electricity), access to finance and taxation policies.
Agriculture and livestock are essential to Sudan’s economic diversification (away from oil) 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 2014, Sudan’s external debt stock stood at $43.6 billion in nominal terms, about 85% 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.
Poverty and Social Developments
Main determinants of poverty in Sudan include:
- Sustained and multiple conflicts, which undermine opportunities for economic and social development, which in turn feed longstanding grievances driving fresh conflict
- 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, especially between the center and the periphery, and governance failures as reflected in poor policy credibility and implementation as well as inadequate incentives for private sector investment and participation.
Last Updated: Oct 05, 2016