Overview

 

Sudan, one of Africa 's poorest countries, is a predominantly agriculture economy although the development of the oil-export industry has led to substantial shifts in the economic structure. Estimates for 2003 indicate that the services sector is the leading contributing sector to Sudan 's GDP. Services contribute 41% to the GDP, agriculture 38.7%, and industry 20.3%.

 

With more than half of the state budget devoted to the war effort, economic development is inhibi ted by the country's security situation, the severe shortage of foreign exchange, inadequate infrastructure and exorbitant debt. The national economy has, however, begun to show recovery symptoms. Sudan 's GDP grew by 6% in 1999 and inflation dropped sharply to 16% after peaking at 166% in 1996. By 2004 the inflation rate was down to 8.8%. The GDP real growth rate for 2004 was 5.9%. The growth is attributed to oil, which has boosted state income since exports began in mid-1999, and to the new programme of IMF reforms started in 1997. Nevertheless, oil exports that now account for about some 70% of export earnings (77% in the first quarter of 2001), are unlikely to boost the economy significantly unless the civil war can be ended. GDP growth, driven by developments in the oil sector, is expected to remain strong in the next few years. Furthermore, there are risks to entering the international market as control of natural resources is one of the key issues in the civil war.

 

Agriculture, which contributes 38.7% of GDP (2003) and employs some 80% of the population (1998), remains the most important sector, cotton and sesame being the main generators of export earnings. It is highly vulnerable to climatic conditions and subject to volatile commodity prices.

Import and export

 

Oil exports have constituted a new source of foreign currency, the trade balance for the fiscal year ending September 2000 achieving a remarkable improvement with a surplus of $226,2m, directly attributed to the introduction of oil exports, as well as the reformation of the economic policies encouraging exports. Revenues rose to $1,327m compared to $430m the previous year, and imports decreased to $1,100m from $1,400 the previous year. By 2004, revenues were up to $2,402 billion and by 2003 imports had risen to $2,383 billion f.o.b.

 

Sudan 's main import commodities are foodstuffs, manufactured goods, refinery and transport equipment, medicines and chemicals, textiles and wheat. Principal sources of imports are Saudi Arabia, China and the United Kingdom.

 

In addition to oil exports, the Sudan also exports petroleum products, sesame, livestock, groundnuts, gum arabic and sugar. Its main export partners are China, Saudi Arabia and United Arab Emirates respectively. In 2004, Sudan had $847,2 million reserves of foreign exchange and gold.

Labour market and unemployment

 

In 1999 the labour force totalled 9,7m, and the female participation rate was 56%. There is a lack of skilled labour in almost all areas of economic activity. Unemployment was estimated at 18.7% in 2002.

Agriculture, forestry and fishing

 

The agricultural sector is the most important sector of the economy, employing 80% of the workforce and contributing 38.7% to GDP. Nomadic pastoralism and small-scale farming exist, but it is rain-fed mechanised schemes and the huge irrigation schemes that are most important. The Al Gezira Scheme is the country largest irrigation scheme and the most important historically and economically. More than 100,000 tenant farmers and their families operate the scheme in partnership with the government.

 

An estimated 5% of potential arable land is cultivated and less than 1% is irrigated. The traditional farming areas are semi-arid and used for livestock rearing which forms an important part of the agricultural economy, particularly in the traditional sector. Goats are one of the major assets owned by poor rural households and Western Sudan. Sudan has a significant hide and skin sector. Export crops are grown in the irrigated areas, mostly in the Gezira area between the Blue and White Niles. The government wants these areas increasingly to be used to produce food for the people, rather than export earnings. The principal food crops are sorghum (durra) (48% of the cultiva ted land), millet (22%), groundnuts (8%), sugar-cane, dates, cassava, wheat and beans. Cotton was traditionally the main cash crop, providing at its peak 53% of export earnings in the 1970s. In the mid-1990s it was replaced by sesame which earns around 21% of export earnings. Earnings from gum arabic, Sudan's other important export, have been declining since the mid-1990s, the result of US sanctions as well as growing competition from other producers and from artificial substitutes.

 

Livestock, mainly goats, are an important contributor to the agricultural economy. Hides and skins are exported. Sudan also possesses vast freshwater and marine fishing potential, but the Nile fisheries are barely exploited. Fishing on the Red Sea coastline is being encouraged.

Mining and semi-processing

 

Oil deposits were first discovered in the early 1980s. Development of the field was brought to a halt by rebel activity, but in the mid-1990s a consortium of oil companies with the government formed the Greater Nile Petroleum Operating Company (GNPOC) to continue with development. Oil companies were to receive the bulk of revenue in the first five years in order to recover costs, with the government taking the remaining 40%. After the initial cost recovery the division will move in Sudan 's favour, with the government planning to take as much as 80% of oils earnings. In August 1999 the government inaugurated the strategically important 1,600 km GNPOC-built export pipeline which connects the oil field to a new refinery north of Khartoum. The refinery began operations in May 2000. Oil pipelines totalled 2,297 km by 2003. For 2004, oil production was estimated at 209,100 barrels per day. The growth of the oil industry has stimula ted the development of a number of associated industries.

 

Sudan has very large mineral deposits, but exploration and extraction has been made difficult by political instability and the awkward terrain. Chromite is extracted from the Ingessana Hills, near the Ethiopian border; gold and gypsum are mined in the Red Sea Hills, and iron ore deposits have been worked in the Fodikwan area. Other mineral deposits (few of which are found in sufficient quantities to warrant commercial extraction) include zinc, lead, copper, talc, nickel and tin.

Industry and manufacturing

 

The industrial and commerce sector contributed 20.3% to GDP in 2003 and employed 7% of the workforce by 1998. In 1999 the sector's contribution had increased to 15% and in the year 2000 rose sharply again to 20.6%, due to the entry of petroleum revenues, thus reaching 20.3% by 2003. Activity is centred on the processing of agricultural products, particularly sugar, textiles, oilseeds, flour and footwear. There has been a sharp growth in sugar production which is expected to continue with production reaching 1m t/y by 2005. Inadequate infrastructure, shortages of imported inputs, power cuts and lack of skilled manpower has thwar ted government efforts at developing large-scale industries. A fish factory that was constructed by the Arab-German Fisheries Company, Port Sudan, is expected to produce 40,000 tonnes of tuna, 5,000 tonnes of by-product fodder and 30,000 tonnes of shrimp.

Government finance and fiscal policy

 

An economic recovery strategy was adopted in 1997 and implemented through a programme of IMF reforms under the Staff Monitored Programme (SMP). Supported by the implementation of structural reforms to enhance resource allocation and encourage private sector activity, it was followed by a medium-term SMP for the period 1999-2001. Sudan has followed the reform programme closely in recent years and fiscal discipline has now been restored after years of poor economic performance. The government has promised to accelerate the privatisation process. In an effort to secure the future of the oil sector, indications are that economic policy will focus on attracting foreign partners to invest in infrastructure and exploration projects, particularly if a lasting peace can be established.

 

Debt continues to be challenge for Sudan. Despite increased growth rates and lower inflation rates since oil exports began, public debt was 87% of the GDP and external debt $16.09 billion for 2004.

Foreign aid and donors

 

Despite the civil war, Sudan continues to receive substantial aid. Most of the aid is channelled through the UN's Operation Lifeline Sudan, which acts as an umbrella organisation overseeing aid distribution. USAID estimates that the US alone had spent US167m in 1998 on both short-term emergency work and longer-term development projects. In 2001, Sudan 's economic aid totalled $172 million. Furthermore, in 2002, the European Union reinstated development aid for the Sudan. The UN has completed a comprehensive work plan for the post-war rehabilitation of the war-ravaged areas of the country.

Regional and International economic grouping/alliances:

 

•  Gulf Co-operation Council (GCC)

•  League of Arab States

•  Organisation of Petroleum Exporting Countries (OPEC)

•  Organisation of Arab Exporting Countries (OAPEC)