Overview

Until the second half of 2008, Sudan's economy boomed on the back of increases in oil production, high oil prices, and large inflows of foreign direct investment. GDP growth registered more than 10% per year in 2006 and 2007. From 1997 to date, Sudan has been working with the IMF to implement macroeconomic reforms, including a managed float of the exchange rate. Sudan began exporting crude oil in the last quarter of 1999. Agricultural production remains important, because it employs 80% of the work force and contributes a third of GDP. The Darfur conflict, the aftermath of two decades of civil war in the south, the lack of basic infrastructure in large areas, and a reliance by much of the population on subsistence agriculture ensure much of the population will remain at or below the poverty line for years despite rapid rises in average per capita income. In January 2007, the government introduced a new currency, the Sudanese Pound, at an initial exchange rate of $1.00 equals 2 Sudanese Pounds.

Sudan is buffeted by civil war, political instability, adverse weather, weak world commodity prices, a drop in remittances from abroad, and counterproductive economic policies. The private sector's main areas of activity are agriculture and trading, with most private industrial investment predating 1980. Agriculture employs 80% of the work force. Industry mainly processes agricultural items. Sluggish economic performance over the past decade, attributable largely to declining annual rainfall, has kept per capita income at low levels. A large foreign debt and huge arrears continue to cause difficulties. In 1990 the IMF took the unusual step of declaring Sudan noncooperative because of its nonpayment of arrears to the Fund. After Sudan backtracked on promised reforms in 1992–93, the IMF threatened to expel Sudan from the Fund. To avoid expulsion, Khartoum agreed to make token payments on its arrears to the Fund, liberalize exchange rates, and reduce subsidies, measures it has partially implemented. The government's continued prosecution of the civil war and its growing international isolation continued to inhibit growth in the nonagricultural sectors of the economy during 1999. The government has worked with foreign partners to develop the oil sector, and the country is producing just over half a million barrels per day (2007, from Sudan tribune website).

Macro-economic trend

Sudan's primary resources are agricultural, but oil production and export are taking on greater importance since October 2000. Although the country is trying to diversify its cash crops, cotton and gum Arabic remain its major agricultural exports. Grain sorghum (dura) is the principal food crop, and wheat is grown for domestic consumption. Sesame seeds and peanuts are cultivated for domestic consumption and increasingly for export. Livestock production has vast potential, and many animals, particularly camels and sheep, are exported to Egypt, Saudi Arabia, and other Arab countries. However, Sudan remains a net importer of food. Problems of irrigation and transportation remain the greatest constraints to a more dynamic agricultural economy.

History since independence

Current GDP per capita of Sudan grew 46% in the Sixties reaching a peak growth of 170% in the Seventies. But this proved unsustainable and growth consequently scaled back to 34% in the Eighties. Finally, it shrank by 26% in the Nineties.

Until the early 1970s Sudan's agricultural output was mostly dedicated to internal consumption. In 1972 the Sudanese government became more pro-Western, and made plans to export food and cash crops. However, commodity prices declined throughout the 1970s causing economic problems for Sudan. At the same time, debt servicing costs, from the money spent mechanizing agriculture, rose. In 1978 the International Monetary Fund (IMF) negotiated a Structural Adjustment Program with the government. This further promoted the mechanized export agriculture sector. This caused great economic problems for the pastoralists of Sudan.

During the late 1970s and 1980s, the IMF, World Bank, and key donors worked closely to promote reforms to counter the effect of inefficient economic policies and practices. By 1984, a combination of factors, including drought, inflation, and confused application of Islamic law, reduced donor disbursements and capital flight led to a serious foreign-exchange crisis and increased shortages of imported inputs and commodities. More significantly, the 1989 revolution caused many donors in Europe, the U.S., and Canada to suspend official development assistance, but not humanitarian aid.

However, as Sudan became the world’s largest debtor to the World Bank and International Monetary Fund by 1993, its relationship with the international financial institutions soured in the mid-1990s and has yet to be fully rehabilitated. The government fell out of compliance with an IMF standby program and accumulated substantial arrearages on repurchase obligations. A 4-year economic reform plan was announced in 1988 but was not pursued. An economic reform plan was announced in 1989 and began implementing a 3-year economic restructuring program designed to reduce the public sector deficit, end subsidies, privatize state enterprises, and encourage new foreign and domestic investment. In 1993, the IMF suspended Sudan’s voting rights and the World Bank suspended Sudan’s right to make withdrawals under effective and fully disbursed loans and credits. Lome Funds and EU agricultural credits, totaling more than one billion Euros, also were suspended.

As a result of oil export earnings around $500 million in 2000–01, Sudan’s current account entered surplus for the first time since independence. In 1993, currency controls were imposed, making it illegal to possess foreign exchange without approval. In 1999, liberalization of foreign exchange markets ameliorated this constraint somewhat. Exports other than oil are largely stagnant. The small industrial sector remains in the doldrums, spending for the war continues to preempt other social investments, and Sudan’s inadequate and declining infrastructure inhibits economic growth. Since January 2007, a new currency was introduced in parallel to the Sudanese dinar (SDG), the new Sudanese pound (SDG) at the conversion rate of one new pound for one hundred dinars (or one thousand old pounds). Starting July 2007, the Sudanese pound is the only Sudanese currency with legal tender.

Infrastructure

Sudan infrastructure is at a relatively good because of oil wealth generated. Some parts of the country are better off mainly in the northern states due to oil productions and the wealth gained from it. The telephone system in Sudan is well equipped by regional standards, and is maintained by modern standards. One of Sudan's greats projects was the Merowe Dam. Khartoum infrastructure is one of the best in North Africa. It hosted two Arab league Summits in 1967 & 2006. Khartoum was also rewarded the Arab Capital of Culture in 2005. Modern buddings in Khartoum are on the rise due to the oil wealth generated. After South Sudan's independence, Sudan lost 80% of it oil fields leaving 20% for Sudan which led to an economic recession throughout the country that staggered the construction of a number of projects.

Retailing

Khartoum has one of the largest open markets or souqs, the Souq Al Arabi. The market is spread over several blocks in the center of Khartoum proper just south of the Great Mosque (Mesjid al-Kabir) and the minibus station. It is divided into separate sections, including one focused entirely on gold.Al Qasr Street and Al Jamhoriyah Street are considered the most famous high streets in Khartoum State. In 2010, Sudan's first medium scale shopping mall opened, located in the southern suburb Arkeweet. The Afra Mall has a supermarket, retail outlets, coffee shops, a bowling alley, movie theaters, and a children's playground. In 2011, Sudan opened the Hotel Section and part of the food court of the new, Cornithia hotel Tower. The Mall/Shopping section is still under construction.

Railways

Sudan has 4,725 kilometers of narrow-gauge, single-track railroads that serve the northern and central portions of the country. The main line runs from Wadi Halfa on the Egyptian border to Khartoum and southwest to Al Ubayyid via Sannar and Kusti, with extensions to Nyala in Southern Darfur and Wau in Bahr al Ghazal. Other lines connect Atbarah and Sannar with Port Sudan, and Sannar with Ad Damazin. A 1,400-kilometer line serves the al Gezira cotton-growing region. A modest effort to upgrade rail transport is currently underway to reverse decades of neglect and declining efficiency. Service on some lines may be interrupted during the rainy season.

Economy of Sudan

In 2010, Sudan was considered the 17th-fastest-growing economy in the world and the rapid development of the country largely from oil profits even when facing international sanctions was noted by The New York Times in a 2006 article. Due to the secession of South Sudan, which contained over 80 percent of Sudan's oilfields, the economic forecast for Sudan in 2011 and beyond is uncertain.

Development in Khartoum.

Even with the oil profits before the secession of South Sudan, Sudan still faced formidable economic problems, and its growth was still a rise from a very low level of per capita output. In any case, the economy in the Sudan has been slowly growing over the last ten years, and according to a World Bank report the overall growth in GDP in 2010 was 5.2 percent compared to 2009 growth of 4.2 percent.[8] This growth was sustained even during the crisis in Darfur and period of southern autonomy preceding South Sudan's independence.

While historically agriculture remains the main source of income and employment hiring of over 80 percent of Sudanese, and makes up a third of the economic sector, oil production drove most of Sudan's post-2000 growth. Currently, the International Monetary Fund IMF is working hand in hand with Khartoum government to implement sound macroeconomic policies.This follows a turbulent period in the 1980s when debt-ridden Sudan's relations with the IMF and World Bank soured, culminating in its eventual suspension from the IMF. The program has been in place since early '90s, and also work-out exchange rate and reserve of foreign exchange.[8] Since 1997, Sudan has been implementing the macroeconomic reforms recommended by the International Monetary Fund.[citation needed]

In 1999, Sudan began exporting crude oil and in the last quarter of 1999, recorded its first trade surplus. Increased oil production (the current[when?] production is about 520,000 barrels per day (83,000 m3/d)) revived light industry, and expanded export processing zones helped sustain gross domestic product (GDP) growth at 6.1 percent in 2003. These gains, along with improvements to monetary policy, have stabilized the exchange rate. The People's Republic of China is Sudan's largest economic partner, with a 40 percent share in its oil.The country also sells Sudan small arms, which have been used in military operations such as the conflicts in Darfur and South Kordofan.

Oil was Sudan's main export, with production increasing dramatically during the late 2000s, in the years before South Sudan gained independence in July 2011. With rising oil revenues, the Sudanese economy was booming, with a growth rate of about nine percent in 2007. Sustained growth was expected the next year in 2008 due to not only increasing oil production, but also to the boost of hydroelectricity (annual electricity yield of 5.5 TWh) provided by the Merowe Dam. The independence of oil-rich South Sudan, however, placed most major oilfields out of the Sudanese government's direct control. In order to export oil, South Sudan must rely on a pipeline to Port Sudan on Sudan's Red Sea coast, as South Sudan itself is landlocked, as well as on Sudan's superior refinery infrastructure. The exact terms of a revenue-splitting agreement between Juba and Khartoum have yet to be established, but Sudan will likely receive a significant portion of the income from South Sudan's oil sales as a fee for the use of Sudanese pipelines, refineries, and port facilities, perhaps as much as 50 percent of the profits.

Agriculture production remains Sudan's most-important sector, employing eighty percent of the workforce and contributing thirty-nine percent of GDP, but most farms remain rain-fed and susceptible to drought. Instability, adverse weather and weak world-agricultural prices ensures that much of the population will remain at or below the poverty line for years.

The Merowe Dam, also known as Merowe Multi-Purpose Hydro Project or Hamdab Dam, is a large construction project in Northern Sudan, about 350 kilometres (220 mi) north of the capital, Khartoum. It is situated on the River Nile, close to the Fourth Cataract where the river divides into multiple smaller branches with large islands in between. Merowe is a city about 40 kilometres (25 mi) downstream from the dam's construction site.

The main purpose of the dam will be the generation of electricity. Its dimensions make it the largest contemporary hydropower project in Africa. The construction of the dam was finished December 2008, supplying more than ninety percent of the population with electricity. Other gas-powered generating stations are operational in Khartoum State and other States.

Tourism

Sudan is one of the largest Arab nations. It is rich in history dating back to the Ancient Egyptians and the Ancient Nubians. There are many pyramids all over Sudan, attracting many tourist from Syria, Egypt, Morocco, Jordan and other Arab countries. They also attract tourist from Western nations. Sudan was voted the 8th most popular Arab nation to visit by the Council of Arab Economic Unity. Sudan also has many modern hotels including the five star Corinthia Hotel Khartoum in Khartoum. The government of Sudan also pledge $1 billion dollars a year to increase the Tourist Industry.

Agriculture

Agricultural products in total account for about 95 percent of the country's exports. In 1998 there was an estimated 16.9 million hectares (41.8 million acres) of arable land and approximately 1.9 million hectares (4.7 million acres) set aside for irrigation, primarily in the north of the country along the banks of the Nile and other rivers. Cash crops (as of 1999) grown under irrigation in these areas include cotton and cottonseed, which is of primary importance to the economy with 172,000 tons and 131,000 tons produced annually respectively,sesame (220,000 tons), sugarcane (5,950,000 tons), peanuts (980,000 tons), dates (176,000 tons), citrus fruits, yams (136,000 tons), tomatoes (240,000 tons), mangoes, coffee, and tobacco. The main subsistence crops produced in Sudan are sorghum (3,045,000 tons), millet (1,499,000 tons), wheat (168,000 tons), cowpeas, beans, pulses, corn (65,000), and barley. Cotton is the principal export crop and an integral part of the country's economy and Sudan is the world's third largest producer of sesame after India and China

Industry

Sudan’s limited industrial development consists of agricultural processing and various light industries located in Khartoum North. In recent years, the Giad Industrial Complex in Al Jazirah state introduced the assembly of small autos and trucks, and some heavy military equipment such as armored personnel carriers and the proposed “Bashir” main battle tank. Although Sudan is reputed to have great mineral resources, exploration has been quite limited, and the country’s real potential is unknown. Small quantities of asbestos, chromium, and mica are exploited commercially.

Electrical generation

Sudan is seeking to expand its installed capacity of electrical generation of around 300MW;of which 180 MW is hydroelectric and the rest thermal. European investors, considering the continuing U.S. economic, trade, and financial sanctions regime, are the most likely providers of technology for this purpose. More than 70% of Sudan’s hydropower comes from the Roseires Dam on the Blue Nile grid. Various projects are proposed to expand hydropower, thermal generation, and other sources of energy, but so far the government has had difficulty arranging sufficient financing. A new dam which is being established in Merowe which has been opened in 2008 and generates 1250 MW of electricity.

Petroleum

Extensive petroleum exploration first began in Sudan in the mid-1970s. Significant finds were made in the Upper Nile region and commercial quantities of oil began to be exported in October 2000, reducing Sudan’s outflow of foreign exchange for imported petroleum products. Today, oil is an important export industry in Sudan. Estimates suggest that oil accounts for between 70% and 90% of Sudan's total exports. The primary importers of Sudanese oil are Japan, China, South Korea, Indonesia, and India.

Most of Sudan's oil reserves are located in the Muglad and Melut rift basins in the south of the country. Oil fields in the south, such as those at Heglig and in the South Sudanese state of Unity, formerly part of Sudanese territory, are linked to the country's refineries via pipelines. The two largest oil pipelines are the Greater Nile Oil Pipeline, which travels 1,600 kilometres from the Unity oil field to Port Sudan on the Red Sea via Khartoum, and the PetroDar pipeline, which extends 1,380 kilometres from the Palogue oil field in the Melut Basin to Port Sudan.

Gold

In September 2012, Sudanese President Omar al-Bashir opened the country’s first gold refinery and it is speculated to be one of the largest such constructions in Africa.The refinery will produce more than 328 tonnes of gold annually. Economic analysts say that the refinery is part of government’s strategy to make up for lost oil revenue after the South Sudan split of 2011.

The refinery will also be able to process silver and its opening should reduce the amount of gold and silver smuggled to other markets.[11] According to Reuters, Sudan hopes to double its gold revenues this year to $3 billion. In August 2012, the finance ministry of Sudan said that the export of gold ore from Sudan would be prohibited once the refinery was opened.

Crude oil from the Muglad Basin is known as "Nile Blend" and is refined at the Khartoum crude oil refinery. In 2006, the China National Petroleum Corporation upgraded the Khartoum refinery, doubling its capacity to 100,000 barrels per day (16,000 m3/d). Oil from the Melud Basin is known as "Dar Blend" and is refined at the Port Sudan Refinery, which has a capacity of 21,700 barrels per day (3,450 m3/d). In 2005, the Sudanese government contracted Petronas to build a new refinery at Port Sudan.

Sudan's crude oil output is predicted to peak in 2008, although current revenue levels may be sustained for a decade or more.