Sudan sits at the crossroads of Sub-Saharan Africa and the Middle East, 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 more than half of Sudan’s government revenue and 95% of its exports. This has reduced economic growth, and resulted in double-digit consumer price inflation, which, together with increased fuel prices, triggered violent protests in September 2013.
Since December 2013, South Sudan’s civil war continues to put pressure on Sudan by drastically reducing cross-border oil flows. In addition, more than 400,000 people have sought safety in Sudan and along with an increase because of the 2017 famine.
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 U.S. sanctions on Sudan, levied in 1997 and expanded in 2006, were lifted in October 2017, allowing previously banned financial and trade transactions between U.S. citizens and entities and their Sudanese counterparts. However, Sudan continues to be designated by the U.S. as a state sponsor of terrorism, preventing full normalization of relations with the US. Talks to remove the designation are expected to begin soon.
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.
Last Updated: Oct 02, 2018