sudan - international university of japan

Country Profile 2005

SudanThis Country Profile is a reference work, analysing thecountry�s history, politics, infrastructure and economy. It isrevised and updated annually. The Economist IntelligenceUnit�s Country Reports analyse current trends and provide atwo-year forecast.

The full publishing schedule for Country Profiles is nowavailable on our website at http://www.eiu.com/schedule

The Economist Intelligence Unit15 Regent St, London SW1Y 4LRUnited Kingdom

The Economist Intelligence Unit

The Economist Intelligence Unit is a specialist publisher serving companies establishing and managingoperations across national borders. For over 50 years it has been a source of information on businessdevelopments, economic and political trends, government regulations and corporate practice worldwide.

The Economist Intelligence Unit delivers its information in four ways: through its digital portfolio, where itslatest analysis is updated daily; through printed subscription products ranging from newsletters to annualreference works; through research reports; and by organising seminars and presentations. The firm is amember of The Economist Group.

LondonThe Economist Intelligence Unit15 Regent StLondonSW1Y 4LRUnited KingdomTel: (44.20) 7830 1007Fax: (44.20) 7830 1023E-mail: [email protected]

New YorkThe Economist Intelligence UnitThe Economist Building111 West 57th StreetNew YorkNY 10019, USTel: (1.212) 554 0600Fax: (1.212) 586 0248E-mail: [email protected]

Hong KongThe Economist Intelligence Unit60/F, Central Plaza18 Harbour RoadWanchaiHong KongTel: (852) 2585 3888Fax: (852) 2802 7638E-mail: [email protected]

Website: www.eiu.com

Electronic deliveryThis publication can be viewed by subscribing online at www.store.eiu.com

Reports are also available in various other electronic formats, such as CD-ROM, Lotus Notes, on-line databasesand as direct feeds to corporate intranets. For further information, please contact your nearest EconomistIntelligence Unit office

Copyright© 2005 The Economist Intelligence Unit Limited. All rights reserved. Neither this publication norany part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means,electronic, mechanical, photocopying, recording or otherwise, without the prior permissionof The Economist Intelligence Unit Limited.

All information in this report is verified to the best of the author's and the publisher's ability. However, theEconomist Intelligence Unit does not accept responsibility for any loss arising from reliance on it.

ISSN 0269-705X

Symbols for tables�n/a� means not available; �� means not applicable

Printed and distributed by Patersons Dartford, Questor Trade Park, 151 Avery Way, Dartford, Kent DA1 1JS, UK.

Kassala

Wad Medani

El Obeid

KHARTOUM

Port Sudan

AtbaraBerber

Wadi HalfaWadi Halfa

Dongola

KarimaSinkat

Suakin

Merowe

El DamerEl Damer

Shendi

Abu Hamad

OmdurmanKassala

Wad Medani

Khartoum North

Gedaref

Gallabat

El Damazin

Kurmuk

El Dueim

Sodiri

En Nahud Umm RuwabaEl Nahud

GeneinaGeneinaEl Fasher

BabanusaBabanusaKadugli

Malakal

Bor

Malakal

NasirNasir

Bor

Aweil

BentiuBentiu

Wau

Gogrial

Rumbek

Juba

Nimule

Yei

MaridiYambio Juba

Nimule

Yei

KapoetaMaridi

Yambio

Dilling

Umm RuwabaKostiKosti

Sennar

Singa

SUDAN

EGYPT

LIBYA

CHAD

CENTRALAFRICAN REPUBLIC

DEMOCRATICREPUBLIC OF CONGO

UGANDA

KENYA

ETHIOPIA

ERITREA

RED SEA

Halaib

El Obeid

Nyala

Ghazal R.

White

Nile

R.

JongleiCanal

BlueNile R.

Nile R.

Whi

teNi

leR.

Nile

R.

L ibyan De s e r t

Nubian Deser t

L. Nuba

Al Gezira

Jebel MarraJebel Marra

Atbara R

0 km 100 200 300 400

0 miles 100 200

' The Economist Intelligence Unit Limited 2005

February 2005

Main railway

Main road

International boundary

International airport

Capital

Major town

Other town

Country Profile 2005 www.eiu.com © The Economist Intelligence Unit Limited 2005

Comparative economic indicators, 2004

Gross domestic productUS$ bn

Sources: Economist Intelligence Unit estimates; national sources.

0 50 100 150 200 250

Bahrain

Jordan

Yemen

Lebanon

Sudan

Syria

Oman

Qatar

Libya

Tunisia

Iraq

Kuwait

Morocco

Egypt

Algeria

United Arab Emirates

Israel

Iran

Saudi Arabia

0 5 10 15 20 25 30 35

Sudan

Yemen

Egypt

Syria

Iraq

Morocco

Jordan

Iran

Algeria

Tunisia

Libya

Lebanon

Oman

Saudi Arabia

Bahrain

Israel

Kuwait


Qatar

-4 0 4 8 12 16

Israel

Oman

Saudi Arabia

Kuwait

Lebanon

Morocco

Syria

Bahrain

Libya

Jordan


Tunisia

Qatar

Algeria

Sudan

Iraq

Egypt

Yemen

Iran

0 2 4 6 8 10

Oman

Yemen

Syria

Egypt

Lebanon

Morocco

Israel

Libya

Saudi Arabia

Tunisia

Algeria

Bahrain


Jordan

Iran

Sudan

Kuwait

Qatar

Iraq

Gross domestic product% change, year on year


Consumer prices% change, year on year


Gross domestic product per headUS$ �000


35.9

Sudan 1

© The Economist Intelligence Unit Limited 2005 www.eiu.com Country Profile 2005

Contents

Sudan

3 Basic data

4 Politics4 Political background5 Recent political developments15 Constitution, institutions and administration16 Political forces19 International relations and defence

25 Resources and infrastructure25 Population26 Education27 Health28 Natural resources and the environment28 Transport, communications and the Internet32 Energy provision

33 The economy33 Economic structure35 Economic policy42 Economic performance44 Regional trends

44 Economic sectors44 Agriculture48 Mining and semi-processing52 Manufacturing53 Construction54 Financial services55 Other services

55 The external sector55 Trade in goods57 Invisibles and the current account58 Capital flows and foreign debt60 Foreign reserves and the exchange rate

61 Regional overview61 Membership of organisations

67 Appendices67 Sources of information68 Reference tables68 Population (m)68 Government finances68 Money supply69 Gross domestic product

2 Sudan


69 Prices and earnings69 Labour force69 Area, output and yield of selected crops70 Livestock numbers70 Animal and dairy production70 Cotton crops70 Consolidated balance sheets of the deposit money banks71 Foreign trade71 Main exports fob71 Main imports cif72 Main trading partners72 Main composition of trade73 Balance of payments, IMF series74 External debt, World Bank series74 Foreign reserves74 Exchange rates

Sudan 3


Sudan

Basic data

2,506,000 sq km

33.61m (2003, IMF estimate)

Population in �000, 1993 census

Khartoum (capital) 925 El Obeid 228Port Sudan 305 Wad Medani 219Kassala 234 Gedaref 189Omdurman 229 Juba 115

Northern Sudan: hot and dry September-May, rainy season April/May toSeptember/October depending on latitude (average annual rainfall 100 mm).Southern Sudan: long rains April-October (average annual rainfall 1,000 mm)

Hottest month, May, 26-42°C; coldest month, January, 16-32°C; driest months,January-April, usually no rainfall; wettest month, August, 72 mm averagerainfall (average annual rainfall 200 mm)

The official language is Arabic, which is spoken by about 60% of thepopulation; English is also widely spoken in the south. There are an estimated115 tribal languages, of which over 27 or more are each spoken by more than100,000 people

Metric system. Some local measures are also used: 1 diraa=58 cm; 1 feddan=0.39ha; 12 keilas=1 arde=1.98 hl; 100 rotl=1 canter (cotton, small)=44.93 kg; 315 rotl=1canter (cotton, large)=141.5 kg

The Sudanese dinar officially replaced the Sudanese pound in 1999. The valueof the dinar was set at SD1=S£10. The average official exchange rate in 2004 wasSD257.8:US$1

2 hours ahead of GMT

In addition to Islamic holidays, the following public holidays are observed ingovernment-controlled areas: January 1st, Independence Day; June 30th,Revolution Day.

Land area

Population

Main towns

Climate

Weather in Khartoum(altitude 390 metres)

Languages

Measures

Currency

Time

Public holidays

4 Sudan


Politics

Lieutenant-General Omar Hassan Ahmed al-Beshir has been president ofSudan since he gained power in a coup d�état in June 1989. Although head ofstate, for much of this period he was the junior partner to Hassan al-Turabi, thefounding father of the ruling National Congress (NC!known as the NationalIslamic Front until January 1999) and former speaker of the National Assembly(parliament). With the support of the military, Mr Beshir mounted a de factopalace coup in late 1999, imposing a state of emergency and sideliningMr Turabi. Mr Beshir was re-elected to serve a second (and theoretically final)five-year term as president in December 2000. Since mid-2002 peace talks withthe southern rebel group, the Sudan People"s Liberation Army (SPLA), havedominated the political agenda, and an agreement was finally concluded inJanuary 2005. It remains overshadowed, however, by continuing unrest andviolence in the western province of Darfur.

Political background

The present-day borders of Sudan have their origins in the land administeredin the early 19th century by Egyptian rulers and the subsequent Mahdist state.From 1819 Egypt ruled Sudan with the help of a small number of Britishadministrators. An uprising, led by the Mahdi (the head of the Ansar, anIslamic sect), succeeded in freeing Sudan from foreign control in 1885. However,the British regained control in 1899, ostensibly in partnership with Egypt.

Following considerable nationalist protest in Sudan, the UK effectively relin-quished control of the country in 1954, although formal independence wasdelayed until 1956, by which time the northern Arab urban elite were firmlyentrenched in power. The first episode in what became an intractable civil warin southern Sudan occurred with a mutiny by southern forces in 1955,following months of unrest and dissatisfaction at growing northern dom-ination. In the late 1950s and 1960s periods of weak democracy alternated withmilitary rule; neither addressed southern demands for political expression andeconomic development. Consequently, fighting in the south continuedthroughout the 1960s, as political and economic power remained in the handsof a small, northern-dominated elite.

The first meaningful interlude in the civil war occurred following a militarycoup in May 1969 that brought Colonel Jaafar al-Nimeiri to power. The colonel�sgovernment reached a formal peace agreement with southern rebels in March1972. The accord (known as the Addis agreement) gave the south someautonomy, while incorporating the southern political elite into national politics.An attempted coup in 1976 by Sadiq al-Mahdi, a leading northern oppositionfigure and leader of the Umma Party, encouraged Mr Nimeiri to attempt topolitically accommodate northern opposition figures by taking a tougherapproach to southern demands. Many Ansar and Muslim Brotherhood exilesreturned to Khartoum. Among them was the Brotherhood�s leader in Sudan,and Mr Mahdi�s brother-in-law, Hassan al-Turabi. In 1983 the Addis agreement

Mahdism and British control

Independence and theproblem of integration

The Nimeiri era

Sudan 5


broke down when the Khartoum government split the south into threeadministrative provinces, apparently in a bid to reduce the south�s political in-fluence. Southern concerns were compounded by fears that the developmentof southern oil resources and construction of the Jonglei Canal would lead tonorthern economic exploitation of the south. As a result, civil war broke outagain, with the SPLA, under the leadership of Colonel John Garang, playing amajor role.

The civil war was only one of Mr Nimeiri�s problems. In the early 1980s theeconomy suffered several consecutive years of severe contraction, leading to amarked fall in already low living standards. Mr Nimeiri�s political base erodedas the economy flagged, and his rule became increasingly erratic. He eventuallysought the support of Mr Turabi�s Muslim Brotherhood, and brought him intogovernment as attorney-general. In late 1983 Islamic law (sharia) and taxation(zakat) were introduced, to the dismay of non-Muslims. The disintegration ofthe economy in the early 1980s was exacerbated by severe drought during the1984/85 season, which caused a serious crop failure in the west of the country.Subsidies on vital commodities such as petrol and food were lifted in 1985,sparking off a mass uprising against the government in and around Khartoum.The military stepped in and removed Mr Nimeiri, governing the country until ageneral election later that year. This brought to power Mr Mahdi, who had beenprime minister briefly in the 1960s.

Recent political developments

Coalition governments headed by Mr Mahdi were unsuccessful in addressingthe country�s political and economic problems, and negotiations with thesouth, where the civil war continued, proceeded slowly. On June 30th 1989army officers led by Brigadier-General (now Lieutenant-General) Beshiroverthrew Mr Mahdi, in what was proclaimed to be the �National SalvationRevolution�. In July 1989 Mr Beshir formed a new cabinet, dominated bymembers of the National Islamic Front (NIF), who had been instrumental inplanning the coup. The NIF government purged the army of possibleopponents shortly afterwards, while also developing its own parallel securityforces and institutions to mitigate the political threat posed by the military.

While the coup itself was unexpected, the regime�s success in holding on topower has been a source of even greater surprise to most outside observers. Formuch of its period in power, there have been an array of regional andinternational actors lined up against the Islamist regime. These include the US,following Sudan�s support for Iraq in the 1990-91 Gulf war, and neighbouringEgypt, owing to alleged Sudanese involvement in the attempted assassinationof its president, Hosni Mubarak. African states!notably Uganda, Eritrea andEthiopia!also strongly opposed the Arab, Islamist government in Khartoum,and actively supported the armed opposition against it. Despite efforts by thesepowers to promote instability!and notwithstanding the periodic escalation ofthe civil war, economic dislocation and civil unrest!the regime has maintainedits control with relative ease.

Unstable democracy

The NIF in power

6 Sudan


The most serious threat to NIF rule has arguably been factional rivalry betweenits two main figures, Mr Turabi and Mr Beshir, and the party and militarysupport they respectively commanded. For most of the past ten years the twobranches of the regime managed a somewhat uncomfortable power-sharingarrangement, with Mr Beshir as president and Mr Turabi as head of the rulingparty and speaker of parliament. The contradictions of the dual leadershipsystem came to crisis point in 1999, however, as Mr Turabi sought to forcethrough constitutional amendments that would have strengthened hisauthority and that of his supporters at the expense of the president and hiscamp. Unwilling to accept this, Mr Beshir seized the initiative, declaring a stateof emergency in late 1999, claiming full executive power and suspendingparliament. The move apparently took Mr Turabi by surprise, and he offeredlittle response. Buoyed by his success, Mr Beshir stepped up his campaign,purging his rival�s most senior supporters from influential posts and, in June2000, sacking Mr Turabi as head of the ruling party and expelling him from it.

Mr Turabi was allowed to form his own party, the Popular National Congress(PNC), but the group enjoyed little influence and boycotted the December 2000parliamentary and presidential elections. In a bid to rebuild a political base,Mr Turabi shocked observers in March 2001 by announcing that he had signedan agreement with the SPLA to campaign against Mr Beshir�s government.However, the alliance did little to increase his influence, and it led to his arrestand imprisonment on sedition charges. He was released in late 2003 and,despite continued outspoken criticism of the government, the authoritiesappeared initially prepared to tolerate his presence on the political scene.However, in March 2004 Mr Turabi was rearrested, along with a number ofarmy officers, on suspicion of conspiring to stage a coup. His party, the PNC,was closed down and a number of its senior officials also detained. Hisincarceration could possibly turn into a long stretch for, in September, thegovernment claimed to have unearthed another coup plot, which they allegedwas instigated by the jailed cleric. Many more of his supporters were roundedup. While for some time now Mr Turabi may have been a very weak politicalforce, it is evident that the government still considers him something of a threatand would prefer to keep him under lock and key for the time being.

Despite the occasional threat to his regime, Mr Beshir has continued to consol-idate his grip on power. After winning a second five-year term in the December2000 elections, he filled parliament with his supporters and has also carriedout several reshuffles to his cabinet, which have tightened his grip on keyministries and his control of the regional governments. The improvement inSudan�s ties with its neighbours and the West!spurred in part by the fall frompower of Mr Turabi, as well as Sudan�s post-September 11th 2001 co-operationwith the US!has also strengthened the president�s hand. While the recentDarfur crisis!for which many foreign governments blame Mr Beshir�s regime!has not helped Sudan�s international relations, his position remains solid.

A brief hiatus in the civil war followed the 1989 coup, but later in that year thenew government intensified its operations against the rebels. The overthrow inMay 1991 of the Ethiopian president, Mengistu Haile Mariam, a strongsupporter of the southern rebels, provided the Khartoum government with a

The civil war

President consolidates positionafter ousting Mr Turabi

Sudan 7


distinct military advantage, and by late 1993 many of the major towns in thesouth had been recaptured from the rebels. However, alleged Sudanese inter-ference in their internal affairs alienated both Eritrea and Ethiopia, which beganto offer support to the rebels, at the same time that the northern MuslimSudanese opposition also started to take up arms. In addition, Uganda resumedits support of the SPLA in the mid-1990s.

In late 1996 the SPLA launched its first major offensive since 1991 and by 1997it had gained control of much of the south, although the strategically andpolitically important regional capital, Juba, remained in government hands. Itsubsequently mounted offensives elsewhere using bases in Eritrea to attacktargets in eastern Sudan, including the main Khartoum-Port Sudan highway,the oil export pipeline, and even the city of Kassala. Throughout most of 2001and the first half of 2002, however, the focus of its campaign was centralsouthern Sudan, notably Bahr al-Ghazal province, and Unity province (knownby the opposition by its pre-coup name of Western Upper Nile), the regionhaving become of prime strategic importance as the site of Sudan�s growing oilindustry. Although the oil zones were well defended, one oil firm was forcedto withdraw from an outlying concession as a result of rebel activity in early2002, and a small SPLA raiding party successfully breached security at themain fields in late 2001. However, the government was, on the whole, able tomaintain the security of the key oilfields, and production and supply werenever severely disrupted. However, despite oil wealth providing thegovernment with the means to buy new weaponry, the vast theatre of warweakened the government�s military might, ensuring that a decisivebreakthrough on the battlefield always remained remote.

Important recent events

August 1998

The US attacks a suspected chemical weapons factory close to Khartoum, inresponse to alleged Sudanese support for international terrorism; the governmentclaims that the installation is a privately-owned pharmaceuticals factory, which waslater widely acknowledged to be the case.

August 1999

Completion of a 1,610-km oil pipeline linking southern oilfields to the exportterminal near Port Sudan. Oil exports begin.

December 1999

The president, Omar Hassan Ahmed al-Beshir, imposes a state of emergency. Hesuspends parliament and begins a purge of the supporters of his rival, Hassan al-Turabi. The state of emergency is extended for a further year in December 2001 andagain in December 2002.

June 2000

Mr Turabi is expelled from the ruling National Congress (NC). He forms his ownparty, the Popular National Congress, but is placed under arrest in February 2001 onsedition charges after signing a co-operation agreement with the southern rebel force,the Sudan People"s Liberation Army (SPLA).

8 Sudan


December 2000

Mr Beshir wins 86% of the votes cast to be elected president for a further five-yearterm. The NC wins the overwhelming majority of seats in the National Assembly.Opposition boycotts the polls and there are widespread claims of vote rigging.

January 2002

US brokers partial ceasefire agreement between the government and the rebel SPLAcovering the Nuba Mountain region of Southern Kordofan.

July 2002

With the support of the US and European intermediaries, the Inter-GovernmentalAuthority on Development (IGAD)-sponsored peace talks lead the government andthe SPLA to sign the Machakos Protocol, which stipulates that a referendum onsouthern self-determination be held in 2008.

October 2002

Government and rebels agree to a ceasefire in the south, allowing the second roundof peace talks to resume after being suspended following the rebel capture of thestrategic town of Torit in September. A Memorandum of Understanding (MoU) issigned marking a degree of progress.

October 2002

Having been the focus of an international divestment campaign for several years, aCanadian firm, Talisman, the only publicly listed Western oil company working inSudan, announces that it has agreed to sell its stake in the consortium developingSudan�s oil resources.

October 2002

US signs the Sudan Peace Act into effect, threatening new sanctions against Sudan ifthe government does not pursue peace talks �in good faith�.

January/February 2003

The third round of IGAD talks takes place, with promising signs of progress resultingin �complete agreement� on some issues, notably the constitutional review process.A second MoU is signed.

March 2003

War in Iraq overshadows events in Sudan and a fourth round of talks fails to makeany headway.

August 2003

After no further progress in talks in June, the negotiations almost break downcompletely when the government rejects a comprehensive IGAD settlement knownas the Nakuru proposal.

October 2003

The government"s chief negotiator resigns and the vice-president assumes control ofthe talks, leading direct negotiations with the SPLA leader, John Garang. The USsecretary of state, Colin Powell, visits Naivasha to encourage both parties to movetowards a resolution. The Naivasha agreement on security arrangements is signed.

Sudan 9


January 2004

Settlement on resource-sharing reached, giving a considerable degree of financialautonomy to the south. Negotiators believe a final deal can be signed by end-March,which comes and goes without an agreement. The situation in Darfur, which wasprone to sporadic outbreaks of violence, deteriorates.

May 2004

Three more protocols, devoted to the administrative details of sharing resources andpower, are signed in Naivasha, bringing a comprehensive peace deal within sight.Two agreements covering three disputed territories!Blue Nile, the Nuba Mountains,and Abyei!are also signed, according them special status. The crisis in Darfurdeepens, with the breakdown of a ceasefire agreement, signed in April in Chad. Thescale of the humanitarian crisis becomes more apparent. A report to the UN SecurityCouncil only elicits a lukewarm response, with members undertaking to �monitorthe situation closely�.

July 2004

The UN secretary-general, Kofi Annan, visits Darfur and issues joint communiquéwith government to disarm the militias and establish security in the region. The UNSecurity Council passes Resolution 1556, which again calls on the government todisarm militias in Darfur and allow the free flow of humanitarian aid. Theresolution also requires the secretary-general to report back to the Security Councilwithin 30 days on the level of progress achieved.

September 2004

US accuses Sudan of genocide and calls for sanctions on the country.

November 2004

The UN Security Council convenes a special session on Darfur in Nairobi, Kenya.The subsequent resolution goes little further than demanding compliance toprevious resolutions and stops short of sanctions. A second ceasefire agreementbetween the government and Darfuri rebels is agreed at talks sponsored by theAfrican Union in Abuja, Nigeria. Talks to finalise the north-south peace deal resumein Kenya.

January 2005

North-south peace deal is finally concluded. A further reconciliation agreement issigned between the government and the northern opposition alliance, the NationalDemocratic Alliance (NDA). The Darfur crisis rumbles on with no end in sight.

The SPLA and the government have conducted direct negotiations since 1997under the auspices of the Inter-Governmental Authority on Development(IGAD), a regional association of seven African states (Djibouti, Eritrea, Ethiopia,Sudan, Somalia, Uganda and Kenya) established to achieve regional co-operation and economic integration. In 1998 the talks produced an agreement inprinciple to resolve the conflict in the south through a referendum on self-determination. However, the process lost momentum as the two sides provedunable to agree on a range of key issues, and although talks continued, thegovernment and rebels appeared to be doing little more than going through themotions of attending meetings in a bid to score propaganda points againsteach other.

Peace talks and ceasefires

10 Sudan


While the IGAD process stalled, other avenues for talks between the govern-ment and the various rebel groups emerged, and appeared to make greaterprogress. Secret direct talks between the government and the Umma Party, ledby Mr Mahdi, saw an agreement between the two, under which Umma left theexiled opposition umbrella organisation, the National Democratic Alliance(NDA), and Mr Mahdi and many of its most senior members returned toKhartoum in late 2000. Negotiations to draw Mr Mahdi into the ruling politicalstructure proved unsuccessful, however, with the former prime minister joiningthe boycott of the end-2000 elections and rejecting ministerial posts offered tohimself and the party. Some members of Mr Mahdi�s party did split away fromUmma, and entered the government!in relatively minor roles! in 2002. Egyptand Libya also launched a peace initiative in 1999, winning initial support fromthe government and opposition for a national reconciliation conferencedrawing together the government and all rebel groups!in contrast to IGAD,which includes only the SPLA. However, Egypt�s insistence that the peace talkstake place on the basis of a unified Sudan (Egypt has long opposed secession,fearing it could disrupt Nile River water flows) was resisted by the SPLA andthe initiative lost speed.

The moribund peace process received a major boost, however, when the USstepped up its efforts to bring the war to a close. The US president, George WBush, appointed a special envoy, John Danforth, in 2001, who held extensivetalks in Sudan and around the region over the latter part of the year. Thediscussions resulted in an agreement in 2002 for a partial ceasefire covering theNuba Mountain region of Southern Kordofan, together with undertakings bythe government to end aerial bombing attacks on civilian areas, and to allowan investigation into allegations that it promoted slavery. In another major stepforward, the government also agreed to all aspects of the deal being monitoredby international observers. When the agreement was adhered to over the firstmonths of 2002, the US, supported by the UK, Norway and other Europeanstates, sought to build momentum, and after months of discussions andlobbying, a five-week IGAD meeting was convened in mid-June. Under pressurefrom European and US representatives, a Memorandum of Understanding(MoU) was signed by the two sides to hold a referendum on self-determinationin the south in six years. Until the referendum takes place, it was also agreedthat Islamic law would not be applied there.

The deal!known as the Machakos Protocol, after the town in Kenya where itwas signed!was hailed as a breakthrough by the SPLA and the government,and those regional and international parties involved in the peace process. Theprotocol has served as a broad, guiding set of principles upon which thesubsequent, and more detailed, negotiations were based; and in providing asound framework, the Machakos agreement injected a new spirit of optimisminto the peace talks, which maintained the much-needed!albeit occasionallyfaltering!momentum.

The main outstanding issues that were left deliberately vague at Machakosincluded the sharing of political power and economic resources (notably oil)between the north and the south. Machakos committed the two sides only toan �equitable� distribution of wealth and power between the north and

US revives moribund peaceprocess

Sudan 11


south!a sleight of hand that was necessary to have an agreement signed, butwhich left thorny details to be thrashed out later. Other difficult issues includedsecurity arrangements, particularly the deployment of government troops inthe south during the interim period!rejected by the rebels but insisted upon bythe regime. The application of sharia law was left to be tackled subsequently, aswas the status of the "three areas" (Abyei, Nuba Mountains and the Upper BlueNile) that lie in the disputed border area between north and south.

The government and rebels met for a second round of talks between Augustand November 2002, but the negotiating teams failed to build upon the level ofsuccess attained in the previous round. Nevertheless, the rebels agreed to aceasefire in much of the south!a government precondition for talks to beresumed following the SPLA�s capture of Torit in September (which led theregime to suspend negotiations for over a month)!and its subsequentextension until the end of March 2003.

A third round of negotiations took place in Kenya in January and February2003. Like the second round, they got off to a stuttering start, interrupted byintermittent hostilities between the warring factions in southern Sudan.Without the brokerage of the US, the talks could very well have broken down,but an agreement was secured to maintain the ceasefire and the negotiationseventually reached a successful conclusion. Indeed, an MoU signed by bothsides stated that �complete agreement� had been reached on some issues,including: the constitutional review process; the establishment of independentand national institutions; and the holding of a national referendum beforeelections are held in six years time. There had also been �significant, but notcomprehensive� agreement on the structure of the legislature, executive andjudiciary, the government of national unity, and on governmental institutions atsubnational level.

Two subsequent rounds of talks, held in March and again in June, failed tomake any headway, in part as a result of hostilities in Iraq. In particular, theintense diplomacy and extensive military preparations in the run-up to theoutbreak of war in Iraq in late March absorbed the energies of the US and UKgovernments and continued to dominate their foreign policy agendas over thefollowing months. This pushed the Sudanese peace process into the back-ground, reducing pressure on the two sides to make further progress. Theslowdown in the talks was also a reflection of the wide gulf that remainedbetween the two sides, a gulf that Machakos had failed to bridge.

In August the talks reached crisis point, with press reports stating thatnegotiations had been �suspended indefinitely�. The impasse centred on aproposal tabled by IGAD mediators during negotiations in Nakuru, Kenya,which was an attempt to fast-track the talks to a final agreement for fear of theprocess stagnating. The Nakuru proposal was, in essence, based on the IGAD�sassessment of the thrust of the talks over the preceding 12 months, and was anattempt to highlight the areas where it believed the two parties would be ableto compromise. Nakuru appeared to be close to a middle ground between thetwo sides� positions on issues such as political representation in the civil serviceand parliament. However, on the more contentious issues, such as the degree

Talks stall

12 Sudan


of political and economic autonomy offered to the southerners and securityarrangements, Nakuru appeared to favour the south.

Whereas the SPLA said they were "happy with the draft", the governmentrejected it out of hand. It appeared that the talks had run into a brick wall.Both sides, however, agreed to reconvene at the negotiating table in Septemberand, contrary to all expectations, signed an agreement on security arrange-ments for the post-war period. The reinvigorated talks were partly a result ofthe direct negotiations between the vice-president of the north, Ali UthmanMohammed Taha, and the leader of the SPLA, John Garang. Previously, thetalks had been conducted by less senior officials, who were reluctant to makeany concessions without referring back to their respective leaderships.However, the talks were also given a fillip by the presence of the US secretaryof state, Colin Powell, who impressed upon both parties the commitment ofthe US to a final resolution.

Under the security agreement!known as the Naivasha Accord!the governmentpledged to withdraw to northern Sudan the 100,000 troops that are deployedin the south. The SPLA will also pull its forces back into southern territory,completing the first full disengagement of troops since the early 1980s. Thegovernment will be allowed two and a half years to redeploy its forces,whereas the SPLA is required to withdraw its troops from eastern Sudan withinone year. This stipulation reflects the different levels of men and materiel thatthe respective forces have moved into the various fields of combat.

Although remaining separate during the six-year interim period, the twoforces!the government troops and the SPLA!will be treated equally as�Sudan�s National Armed Forces�, becoming a single national force should areferendum decide upon unity. A third unit will also be established, constitutedby joint rebel and government forces, and will provide the nucleus of the futurenational army. This third, integrated force, initially around 40,000 strong, willbe deployed in territory disputed by the two sides, as well as in parts of thesouth and around Khartoum. It will steadily increase in size as the governmentand SPLA progressively reduce their own forces. In the meantime, a new jointdefence board, comprised of government and rebel chiefs of staff and otherofficials from the two sides, will encourage co-ordination between the twoseparate forces and will actively command the third, integrated force. The jointdefence board will operate under the presidency, will act on consensus andwill have a rotating chairmanship. An international force will monitor theseparation of the forces and oversee the maintenance of the comprehensiveceasefire between them.

This time, the two parties managed to maintain the momentum injected intothe talks at Naivasha. They met again in December, and in early January 2004produced another agreement, this time on resource-sharing. Differences in thisarea looked difficult to narrow, with much of the discussions centring on thedivision of oil revenue. Before the round of talks, the government was insistingthat it retained 90% of all oil income, arguing that the mineral was a "nationalresource". In the end, they agreed to a 50-50 split, after 2% of the revenue isallocated to the oil-producing regions themselves. Structures for a single

Preliminary settlement agreed

Final accord signed

Sudan 13


currency were approved, and banking arrangements that allowed for Islamicbanking in the north and more conventional banking methods in the southwere settled.

Talks resumed in mid-March and by May a comprehensive deal had beenfinalised with the signing of three further protocols. Under these, Sudan will beruled by a central government, with separate legislative, executive and judicialbranches. The "national unity" government will be headed by the currentpresident, Mr Beshir, with the leader of the SPLA, Mr Garang, as vice-president.There will be a bicameral legislature; 52% of the seats in the lower house!theNational Assembly!will be given to the NC party, 28% to the SPLA and theremaining 20% will be divided among Sudan"s other political factions from thenorth and south.

Within the executive, seats in the national government, as well as seniorpositions in the national civil service, are to be allocated on a ratio similar tothat in the National Assembly. The agreement wrests further power from thenorthern elite by requiring the presidency to make "collegial" decisions, withthe northern president explicitly required to receive approval from the southernvice-president over issues such as the appointment of senior judges, thesuspension of parliament or declarations of war. As part of the politicalstructure, Khartoum remains the national capital for the interim period, butunder a special administration that will distinguish it from the rest of theterritory of the north. In particular, the accord confirms that southerners in thecapital area will not be subject to Islamic law, which applies across the rest ofthe north!a key SPLA demand.

In addition to the central government, Sudan"s provinces will each have theirown legislature and executive, emulating, to a degree, federal structures thatexist in countries such as the US and Germany. The representation of thevarious political groupings will be strictly regulated, however, with the NCholding 70% of the seats and posts in northern provincial governments and10% of those in the south, with the remainder being divided among the otherparties. The SPLA will have 10% of the posts in the north and 70% in the south.

In addition, the power-sharing agreement also provides for a government ofsouthern Sudan, of which Mr Garang will be president. It will have its ownlegislature in which the SPLA will have 70% of the seats (against 15% for the NCand 15% for the other southern parties). All of these posts will be appointed inthe first instance, but elections are to be held after a maximum of three years(to allow for a census to be conducted).

The protocols covering the disputed areas!Blue Nile, the Nuba Mountains, andAbyei!were the most difficult to thrash out and was one of the issues that heldthe talks up, and threatened to derail them, throughout the long negotiationprocess. Each of these areas are geographically part of the north, but havehistorical, tribal and ethnic links to the south, and are home to significantnumbers of SPLA supporters. The government had repeatedly refused alldemands that the areas be treated differently!partly because of the substantialoil resources believed to be in Abyei, and also because of the recognition that adangerous precedent could be set for other areas that might wish to be exempt

14 Sudan


from northern rule. In the end, however, the government compromised, signinga protocol that gives the disputed areas special status. The protocol coveringBlue Nile and Nuba leaves the provinces within the north, but affords themadditional autonomy and a political structure that divides posts on a 55:45 ratiobetween the government and the SPLA, rather than a 70:30 split. It alsoestablishes a rotating governorship for the provinces, which will pass betweenthe parties after 18 months. Different arrangements were agreed in the thirdprotocol for Abyei, where residents will be part of both Western Kordofan (inthe north) and Bahr al-Ghazal (in the south) for the interim period, and the areawill be administered directly by the presidency. At the end of the period, thepeople of Abyei will vote to choose which province they wish to be a part of!a referendum that will be held simultaneously with, but separately from, theself-determination vote in the south.

The Darfur conflict began in early 2003, when a group calling itself the SudanLiberation Army (SLA) began guerrilla attacks on government positions inDarfur. The SLA, which is drawn primarily from the black African Zaghawa,Masaalit and Fur tribes of the region, said that it was responding to attacks bynomadic Arab tribes, known as janjaweed, on African villages that the govern-ment had failed to protect. Traditional rivalry between Arab and black Africantribes has been exacerbated in recent years by disputes over pastoral land,which has been gradually squeezed over the years by creeping desertification.More broadly, the SLA said that it had taken up arms to demand that the largeand very poor Darfur region be given a fair share of the state�s resources, and toseek an end to the region"s political marginalisation. After several months oflow-intensity conflict between the SLA, the Justice and Equality Movement(JEM, a second Darfur-based rebel group) and government-backed forces,fighting escalated in the latter months of 2003. As well as an increase inreported clashes between rebel and government forces, there was also a sharprise in janjaweed attacks on civilians across Darfur!which reports by develop-ment organisations from the region suggested was the result of a governmentdecision to arm the janjaweed and use them as a proxy to crush the Darfuruprising. The janjaweed attacks spread terror across the region and caused alarge number of deaths. As a result, many have fled their villages, precipitatinga massive humanitarian crisis that the UN labelled the world�s worst.

Typical reports pointed to janjaweed fighters entering villages on horseback andin four-wheel-drive vehicles, stealing property, destroying crops, burning homesand killing the men. There were also widespread!and consistent!reports of thesystematic rape (and sometimes abduction) of women captured in the villagesthat had come under attack. The janjaweed campaign!with reports that it wasstill ongoing in January 2005 (although on a more limited scale)!has been far-reaching, with some estimates suggesting that as many as 25% of all villages inDarfur have come under attack, and reports showing widespread destructionacross the region, but particularly in central and western areas. As well asleaving an estimated 30,000-50,000 people dead, the campaign has led tolarge-scale displacement, with at least 1.2m people (some estimates put thefigure as high as 2m) fleeing their homes and moving to camps in Darfur orneighbouring Chad to escape janjaweed attack. This has in turn triggered a

The Darfur crisis

Sudan 15


US$600m emergency aid operation that has proved unable to prevent deathrates estimated in September 2004 at 10,000 people a month in the camps forrefugees and internally displaced persons.

Constitution, institutions and administration

Since the 1989 coup the regime has introduced a series of reforms ostensiblydesigned to broaden popular participation in political decision-making. In theimmediate aftermath of the coup, the Revolutionary Command Council ofNational Salvation was given full legislative and executive powers, andMr Beshir, its chairman, was named head of state. The constitution has sincebeen changed, and the president is now elected by universal suffrage every fiveyears. In December 2000 Mr Beshir won the presidential election by a largemajority, amid widespread opposition boycotts and allegations of vote rigging.

The Machakos Protocol

The document, signed on July 20th 2002, has provided the direction forsubsequent talks and will form the basis for a constitutional review process,leading to an entirely new!and nationally agreed!constitution.

Machakos itself is predicated on the principle that the unity of Sudan willremain the ultimate aim of any peace agreement and that it is to beconsidered the priority for both sides. However, it also stipulates that thesouth has a right to control and govern affairs in its own region and have theright to self-determination through a referendum, to be held six years after thesigning of an accord. The protocol also adds that any accord must be sodesigned as to make a unified Sudan an attractive option for southerners.

Immediately after the signing of a final deal, a pre-interim period of sixmonths will be allowed for the establishment of institutions and mechanismsprovided for in the peace agreement, as well as for the drafting of aconstitutional framework, which will outline the structure of government tobe adopted during the six-year interim period.

Sudan will be managed by a national government, which will act as thesovereign body of all Sudan. A bicameral parliament will operate alongside anational unity government in which the south would be proportionatelyrepresented. However, its legislative powers will be constrained by limitationsplaced on the application of Islamic (sharia) law. Legislation that does notimpinge on the people of the south will have sharia law as its source,whereas legislation that does affect the south will be based on popularconsensus.

The protocol ensures freedom of belief and worship and bases the eligibilityfor public office on citizenship and not religion. This guarantees southerners ashare of senior and middle-ranking positions within the civil service, and thegovernment is also committed to the principle of �collegial� decision-makingby the executive and to the fair division of revenue between the north andsouth.

Reform has not weakenedNC�s hold on power

16 Sudan


In 1990 the government instituted a system of popular congresses in a pyramidstructure reminiscent of the Libyan popular participation model. These groupsact at the village level and are selected every two years. The system waswidened in 1992 by the creation of a 300-member National Assembly(expanded in 1996 to 360 deputies). Ninety of the seats are directly appointed(to �safeguard� representation for trade unionists, graduates and women), withthe remainder elected on a constituency basis. The president also appointedmembers for constituencies where fighting prevented a vote being held. In2000 there was no voting in 17 constituencies. For much of the 1990s, theparliament was Mr Turabi�s key power base and as a result it was closed downwhen the power struggle between him and Mr Beshir emerged into the open inlate 1999. It remained suspended until the election in December 2000, whichreplaced Mr Turabi�s supporters with Beshir loyalists who won an estimated90% of the seats in parliament, with the remainder going to local independents.

The current regime has also moved to institute a federal system of government.In early 1994 the country was divided into 26 states, superseding the nine statesset up after 1991, with the president appointing state governors. The newconstitution upheld this structure. Elections to state assemblies were held inmost of the northern states in 1999, but did not take place in the south, owingto the civil war. Some 45% of deputies to the state assemblies are elected, 45%are nominated by the state-level popular congresses and 10% are nominated bythe president on the advice of the state governor. Following the imposition ofthe state of emergency at end-1999, a number of state governors regarded asallies of Mr Turabi were replaced by appointees more loyal to Mr Beshir. Afurther reshuffle took place in January 2001 following the presidential election.

Despite the federal structure, Sudan is still a highly centralised polity, asevidenced by the widespread discontent in Sudan"s far-flung regions overeconomic marginalisation and a lack of effective political representation at thecentre. Indeed, this is one of the main political contentions within Sudan, andone which fuelled the Darfur rebellion. A truly federal state, as provided forunder the north-south peace deal, with a diluted central authority and moreautonomous regions, is designed to make for a more stable peace. The real testis whether the central government is willing to cede authority in practice.

Political forces

The NC, formerly the NIF, an offshoot of the Islamic Muslim Brotherhood, hasbeen the ruling party since the 1989 coup. Although officially only one of themany �political associations� legally operating since the start of 1999, it is by farthe dominant grouping. It has established an unprecedented degree of politicaland economic control over the areas of Sudan not in rebel hands, and hasworked hard to bring the army under its authority. Mr Turabi, the de factoleader of the NIF, became speaker of parliament in 1996, acquiring a recognisedpolitical position in addition to the power he already exercised as the party�sgeneral secretary. In mid-2000, however, he was ousted from the party as partof the power struggle between himself and Mr Beshir. After his expulsionMr Turabi formed his own party, the PNC. The party was closed down in

Federalism

Parliament

The National Congress

Sudan 17


March 2004, when Mr Turabi and a number of his supporters were accused ofconspiring to overthrow the government.

Main political figures

Lieutenant-General Omar Hassan Ahmed al-Beshir

President since 1989, and re-elected for what should!in theory!have been his final five-year term in December 2000,Mr Beshir has only enjoyed full executive power since the declaration of the state of emergency in 1999 allowed him tosideline his formerly powerful rival, Hassan al-Turabi. He has since built on these gains, appointing allies to all sensitivenational and regional posts, establishing control of parliament and the ruling National Congress (NC). Mr Beshir�s mainpower base, however, remains the army and security forces. He will, however, remain as president during the interimperiod outlined in the peace deal, effectively giving him another six years as head of state.

Ali Uthman Mohammed Taha

Regarded widely as the country�s number two, and a key architect of the 1989 coup, Mr Taha was appointed first vice-president in March 1998. His relations with the president are tense, partly because of his close links with the Islamistmovement. He had been viewed as a critic of the current US-sponsored peace talks, apparently fearing that a deal betweenthe president and rebel leader, John Garang, will reduce his influence. However, he subsequently took control of thegovernment"s side of the negotiations and was personally responsible for the renewed impetus and the final conclusion ofthe deal. Cynics suggest that his change of heart stemmed from a desire to secure for himself a key political role in theaftermath of any peace deal; he will become second vice-president during the six-year interim period.

John Garang

Leader of the Sudan People�s Liberation Movement (SPLM) and the Sudan People�s Liberation Army (SPLA), Mr Garang hasa reputation for military efficiency and political ruthlessness. A former Sudanese army officer, he has led the SPLM since itsinception in 1983. Under the terms of the peace deal, he will accede to the position of first vice-president.

Sadiq al-Mahdi

The great-grandson of the Mahdi who defeated the British in the 1880s, Mr Mahdi is hereditary leader of the Ansar sect, thetraditional backbone of the Umma Party. He has twice been prime minister, and presided over the unstable period ofdemocracy in 1985-89. He escaped house arrest in Khartoum in late 1996 and took up an active role in the exiled NationalDemocratic Alliance (NDA), but in March 2000 left the opposition after months of secret talks with the government. Hereturned to Khartoum in late 2000, but regime hopes that he would endorse the existing political structure by joining thegovernment remain unfulfilled, following his refusal to accept ministerial positions that were offered to him and the UmmaParty�s boycott of the end-2000 elections. His stance proved unpopular among some of the Umma members, both withthose who wished to remain in opposition and those eager to enter government. In August 2002 eight high-rankingmembers of Umma (led by Mr Mahdi�s cousin, Mubarak al-Fadil al-Mahdi) broke away from the party, establishing theReform and Renewal Party and taking up positions in government. However, Mubarak al-Mahdi was sacked as presidentialadviser in October 2004 over differences with senior government figures, which stemmed from Mubarak al-Mahdi�sfrustration over the lack of influence his party was able to wield.

Mohammed Osman al-Mirghani

One of the primary figures in the opposition NDA, Mr Mirghani is the head of the Khatmiyya sect and of the DemocraticUnionist Party, a traditionally pro-Egyptian party that was in a coalition government with the Umma Party before the 1989coup. In January 2005 the NDA signed a reconciliation agreement with the government in Cairo, effectively putting an endto the parties� differences and paving the way for Mr Mirghani�s return to Khartoum. However, Mr Mirghani subsequentlypoured cold water on the accord by stating that the NDA would not participate in a transitional government.

Hassan al-Turabi

Spiritual founder and father figure of the National Islamic Front (NIF, now the NC) and speaker of parliament from 1996 to1999, Mr Turabi was regarded as the country�s main political player for much of the post-1989 coup period. He sought to

18 Sudan


strengthen his authority in mid-1999, triggering a power struggle with the president�s branch of the regime that he lost overthe following year as Mr Beshir imposed emergency rule, closed parliament and expelled Mr Turabi and his supportersfrom government and the ruling party. Mr Turabi was placed under house arrest in February 2001 when he signed anagreement with the rebel SPLA, but was released in late 2003. Following allegations of his involvement in a coup attempt,he was rearrested in March 2004. He remains in prison. Mr Turabi is deeply distrusted by neighbouring states and the Westfor his Islamist views, and is held personally responsible by many for Sudan�s links with international �terrorism�. Hisfamed underground organisational skills lead some to believe he will return to the political fore, but his popular supportseems weak, and it appears that his political influence is waning.

The main southern opposition group is the predominantly black-African SudanPeople�s Liberation Movement (SPLM), whose armed wing is the SPLA. ColonelJohn Garang leads both organisations, although since the cessation of hostilitiesthe organisation prefers to call itself the SPLM to give the impression that it is apolitical, rather than a military, group. The movement took up arms to fight fora democratic, federal Sudanese state and, although some in the SPLM are still infavour of a fully independent southern Sudan, it accepted the principle of self-determination for the south, within a unified state, as the basis for talks withthe government. At the start of 2003 the SPLA controlled much of the far southand south-west, and as part of a unified command structure within the NDA,was fighting government forces in the central and south-eastern provinces,although the implementation of a ceasefire in October 2002 led to a markeddownturn in the fighting.

As a force, the SPLA was strengthened by its �merger� with the Sudan People�sDefence Force (SPDF) in early 2002. The SPDF is headed by Riek Machar, whodefected from the rebels in April 1997 after talks with the government thatculminated in him being appointed assistant president and head of theSouthern States Co-ordination Council, which �administers� southern Sudan onthe government�s behalf. His real power within the regime was extremelylimited, and by mid-1999 relations between Mr Machar and his supporters andthe government had soured. He left Khartoum soon after, and his men began tofight against the government, eventually leading to his decision to reincorporatethe SPDF within the SPLA.

The agreement is important because the SPDF is drawn largely from the Nuertribal group, while the SPLA is predominantly Dinka. The alliance thusincreases the area within which the rebels may operate and boosts their firepower. The tribal divides between the two organisations, however, suggest thatthe �merger� may prove difficult to sustain in the long term. The rivalry whichled to the SPLA splitting along tribal lines in 1991 remains in the background,and could return to the fore, undermining co-ordination between the forces.

Under the terms of the peace deal, the SPLM will be subsumed into a nationaltransitional government, not only assuming a role within the central body-politic in Khartoum, but also operating as a semi-autonomous authorityrunning the political, economic and military affairs of southern Sudan.

The NDA is an umbrella body of the main rebel groups, and operates fromexile in Asmara, Eritrea. Little unites the members of the NDA other than theiropposition to the government. Even here, however, opinions vary considerablybetween the secular, southern African groups such as the SPLM, and northern,

The SPLM/A

The National DemocraticAlliance (NDA)

Sudan 19


Islamic groups such as the Democratic Unionist Party. The government hasbeen able to exploit these divisions and long-standing rivalries within the NDA,opening secret talks with separate groups inside the alliance. This has beenfacilitated by the nature of the IGAD-sponsored peace process, which left theSPLA as the only rebel group directly negotiating with the regime. In late 1999the government scored a significant success when it negotiated an accorddirectly with a leading northern NDA member, former prime minister Sadiq al-Mahdi, who subsequently left the organisation and returned from exile toSudan.

In January 20o5 the NDA signed a reconciliation agreement with the govern-ment, auguring the group�s return to Khartoum. However, its leader, MohammedOsman al-Mirghani, who had chosen to spend his exile in Cairo, stated that thegroup would not participate in a national transitional government.

International relations and defence

Although there has been some thaw in US-Sudan ties in recent years, the UScontinues to regard Sudan with a measure of hostility, and considerable sus-picion. Relations soured immediately after the 1989 coup brought the Islamistregime to power, and deteriorated further when the Khartoum governmentbacked Iraq in the 1990-91 Gulf war. The US subsequently accused Sudan ofinvolvement in international terrorism, and imposed trade sanctions on it fol-lowing the attempted assassination of the Egyptian president, Hosni Mubarak,in 1995. It also alleged that Sudan had links to extreme Islamist groups carryingout attacks against US interests around the region in the 1990s. This includedthe 1998 attack on the US embassies in Tanzania and Kenya in which 260people were killed. The US blamed this attack on Osama bin Laden, who livedin Sudan between 1994 and 1996 and was subsequently held responsible forthe September 11th 2001 attacks on New York and Washington. The USretaliated against Sudan following the embassy attacks, firing cruise missiles atan alleged chemical weapons plant near Khartoum, bringing bilateral relationsto a low point. That the target of the US attack was later widely acknowledgedto have been a bona fide pharmaceutical factory undermined the credibility ofUS allegations in the eyes of many, but did not lessen US animosity.

In addition, the government�s conduct of the civil war has led to accusations inthe US that the Islamist government is engaged in widespread human rightsabuses, and conducting a jihad (broadly meaning a struggle against injustice)against Sudan�s minority Christian population. There have also been claimsthat the government is promoting slavery. These allegations have been taken upby politically powerful liberal, Christian and black pressure groups, building anunusually diverse coalition in the US Congress and press, demanding a toughUS policy towards Sudan.

Despite these pressures, there was evidence of a shift in US attitudes in recentyears, boosted by the removal from power of the regime�s Islamist ideologue,Hassan al-Turabi, in late 1999. The most significant improvement in ties,however, came after the September 11th 2001 attacks, when Sudan�s knowledgeof Islamist groups operating in the Middle East, and in particular its intelligence

US-Sudan ties have thawedsince September 11th

20 Sudan


on Mr bin Laden, became of signal importance to the US. Recognising itsopportunity, Sudan decided to co-operate with the US, and in the months afterthe attacks did so on a sufficient scale to earn public acknowledgement fromthe US State Department. Sudan�s extensive co-operation played a role in theUS decision to end its opposition to the lifting of UN sanctions on Sudan, andled to a bill seeking to tighten US sanctions being pushed into the background.In addition, the improvement in relations contributed to the US decision to in-volve itself more fully in the Sudan peace process, the success of which hasalso eased some of the tension in bilateral ties.

Nevertheless, the powerful, largely Christian, US-based lobby groups deeplyhostile to the Islamist government in Khartoum have remained active. Thesegroups were instrumental in moving the Sudan Peace Act through Congress in2002, and in pressuring the administration to sign it into effect in October thatyear. The US president�s decision to accept the law that he had rejected just afew months earlier is in line with the mistrust that many in the administrationcontinue to view Khartoum, and which has also led the president to maintainUS trade sanctions on Sudan. However, details of the Sudan Peace Act alsoshow that the administration is continuing its efforts to pursue a more nuancedpolicy toward the regime. Compared with the first bill, the measures threatenedagainst the regime in the law Mr Bush signed into effect had been substantiallydiluted. The Sudan Peace Act also imposes no immediate sanctions, but insteadleaves the president with the authority to trigger the penalties by declaring thatSudan is not approaching the peace talks �in good faith�. As such, the law offersthe US an additional lever to encourage progress at the peace talks, but alsoleaves the administration with the scope to hold back from introducingpunitive measures if it feels that it has more to gain from pursuing co-operationwith the regime. Under the Sudan Peace Act, Mr Bush reported to Congress inOctober 2003 that he believed the parties "were close to an agreement # werenegotiating in good faith," and that "negotiations should continue". The US hasalso increased its diplomatic representation in Khartoum (the embassy hadbeen closed in the mid-1990s because of security concerns and staff relocatedto Kenya), although an ambassador has yet to be appointed.

The regime�s behaviour in Darfur has further complicated relations.Washington holds Khartoum directly responsible for the atrocities in the regionand in late 2004 tried to push a measure through the UN that labelled thegovernment�s actions there as genocide. This was not accepted by the SecurityCouncil and a subsequent report by the UN, released in February 2005,concurred. Nevertheless, it did state that �war crimes # and serious violationsof international human rights� had taken place. While the US was keen for theUN to impose sanctions on Sudan, its efforts to that end lacked real vigourbecause of concerns about derailing the north-south deal, which was alwaysthe more important issue. Despite its serious misgivings, the US remainsengaged in Sudan, and will continue to do so in order to secure peace, butbilateral measures will remain in place for as long as Washington is wary ofKhartoum�s motives.

Although other Western states are suspicious of the Sudanese government�spolitics, they have generally adopted a less confrontational approach than the

European ties benefit from�critical dialogue� process

Sudan 21


US. Since the late 1990s the EU has pursued a policy of �critical dialogue� withSudan, focusing on concerns over the government�s human rights record, whileat the same time promoting diplomatic ties, trade and investment. Theapproach has been periodically disrupted by criticism of Sudan from humanrights groups in Europe and the European Parliament, but has nevertheless ledto a substantial improvement in bilateral ties in recent years and in early 2002the EU announced that progress in its dialogue with the government hadreached a point at which it could restore financial support to Sudan, some 11years after it was suspended. Although a peace deal has been signed with thesouth, it is now likely that the funds will be withheld until after a lastingresolution to the Darfur crisis has been secured.

The UK has been part of the EU�s critical dialogue process with Sudan, but asthe former colonial power, its relations have also had their own, distinctivedimension. Since 2000, the UK adopted a leading role in international efforts topromote peace, with the UK prime minister, Tony Blair, in 2001 singling out theSudanese conflict as a focus for UK policy in Africa. A senior and highlyexperienced former British ambassador to Khartoum, Alan Goulty, wasappointed as special envoy in February 2002. In January 2002 the formerinternational development secretary, Clare Short, became the first Britishminister to visit Sudan since the 1989 coup. Since then, the former foreign officeminister for Africa, Baroness Amos, and her successor, Hilary Benn, have visitedthe country.

This more proactive stance has resulted in a marked improvement in bilateralties. These had reached their nadir in 1998 when the UK was alone insupporting the US decision to fire cruise missiles at a pharmaceuticals factoryin response to allegations that the regime was developing chemical weaponsthere. After the attacks, diplomatic relations were reduced to chargé level,although ambassadors were reinstated the following year.

In part because the US and others shunned Sudan, the country�s links with anumber of Asian states developed rapidly following the 1989 coup. Sudan hasparticularly good relations with China, which is the largest stakeholder in theforeign consortium that is developing the oil export industry. As well as oil,China has also established a leading role in the development of other sectors,building a new power plant and refinery north of Khartoum, and financing thefirst stage of the refurbishment of the long-neglected railway system. As a result,China has also become Sudan�s leading trade partner, absorbing a quarter of allSudanese exports in 2003, and supplying almost 20% of its imports. AMalaysian firm, Petronas, also has a large holding in the oil industry, and theMalaysian government actively promotes investment opportunities in Sudan tolocal private-sector firms. India is also playing a growing role in Sudan, with astate-owned company, ONGC, having bought a stake in the oil industry. Sinceentering the country, the Indian government is said to have invested up toUS$1bn. Investment links have also been established with several former Sovietrepublics, although Russian companies have attracted the most attention, withuncorroborated reports suggesting that Sudan has bought arms in return for oilconcessions. Indeed, Russia sees Sudan as one of its top clients in the defenceindustry, a relationship that Russian weapons manufacturers claim has

Commercial links drive strongties with Asia

22 Sudan


burgeoned since 2002. Although details of defence sales between the countriesis scant, it is known that one of the largest recent orders, delivered in August2004, consisted of 12 MiG fighter jets. Sudan has also procured from Russiaattack helicopters and a range of other weapons and munitions.

As a former colonial power in Sudan, Egypt has long taken a close interest in itsaffairs. Egypt�s particular sensitivity to developments in Sudan, however, stemsin large part from its overwhelming reliance on the flow of Nile River waterfrom upstream Sudan. This is governed by a 1959 bilateral water-flow treatywhich guarantees Egypt a minimum of 55.5bn cu metres/year, against 18.5bn cumetres/y for Sudan. The Egyptian government is concerned by any develop-ments that could place the highly favourable treaty in jeopardy, most notablythe secession of the south, which would require the agreement to berenegotiated or lead to its abrogation.

Relations soured following the 1989 coup, and deteriorated sharply in theaftermath of Sudan�s decision to support Iraq�s occupation of Kuwait in 1990. Aminor territorial dispute with Egypt over the Halaib Triangle on the Red Seacoast subsequently took on a confrontational tone, and brought the states closeto conflict in 1994. Relations reached crisis point in 1995, however, when Egyptaccused Sudan of involvement in an attempt to assassinate Mr Mubarak inEthiopia. As a result of this alleged attempt, the UN Security Council imposedsanctions on Sudan, which Egypt supported. Over the following years, Egyptalso became convinced that Sudan was providing support to violent Islamistgroups operating in Egypt.

Tension eased slightly in the late 1990s, but the thaw really began to accelerateafter Mr Beshir�s successful emasculation of Mr Turabi following the impositionof the state of emergency in December 1999. Egypt had long viewed Mr Turabias the real source of Sudan�s Islamist threat, perceiving Mr Beshir a lesser risk toits interests. Egypt therefore moved quickly to normalise ties followingMr Beshir�s palace coup, encouraging him to continue his campaign against hisrival and consolidate his position. The enthusiasm with which Egypt acted tosupport him even led to widespread speculation that it might have pressuredMr Beshir into acting against Mr Turabi in the first place. Egypt also attemptedto raise the level of its involvement in the Sudan peace process, launching apeace initiative in partnership with Libya in 1999 that consequently won stronggovernment support, but was in effect rejected by the SPLA in 2001.

Since that time, bilateral ties have come under growing strain, largely as a resultof the US-driven IGAD peace process, and the Machakos deal agreed betweenthe SPLA and the government in mid-2002. Egypt was angered by its exclusionfrom the negotiating process that led to the deal, and deeply alarmed byundertakings for a vote that could lead to the secession of southern Sudan. Ithas subsequently refused to endorse the peace process, and rejected US offersfor it to take up observer status at the talks. A series of visits to Cairo in late2003 and early 2004 by senior Sudanese officials, as well as leading membersof the SPLA, appear to have stabilised ties to some degree.

Egypt retains a close interest inSudanese affairs

Sudan 23


Ties with the Arab monarchies of the Gulf have strengthened considerably, andhave now fully recovered from the damage done by Sudan�s pro-Iraq stanceduring the 1990-91 Gulf war. Gulf states have emerged as key investors inSudan�s non-oil sector, with Qatari and UAE companies, for example, investingheavily in the expansion programme of Sudan�s telecommunications company,SudaTel. The Gulf states are also the key markets for Sudan�s growing livestockexport industry, while there has also been some Gulf investment in the oilsector. The Saudi-based Islamic Development Bank is also one of the fewmultilateral agencies to restore funding to Sudan. The giant Merowe Damscheme, which will more than double Sudan�s power generation capacity, is tobe financed predominantly by concessionary loans provided by the develop-ment funds of Kuwait, Saudi Arabia and the UAE. The level of supportprovided by the Gulf monarchies appears in large part to reflect their desire tosupport the �Arab� government in its war against the �non-Arab� south. Sudanhas also benefited from improved relations between the Gulf and Iran in recentyears!previously, Sudan�s close political and military links with Iran caused theGulf states further alarm.

Sudan�s Sub-Saharan African neighbours have long regarded the Arab-dominated government in Khartoum with suspicion, and have sided with theAfrican SPLA fighting for autonomy from Arab rule. The emergence of thestridently Islamist government following the 1989 coup led to a furtherdeterioration in ties and more forceful support for southern rebel groups. Eritreahas hosted the rebel NDA since the coup and continues to provide rebel groupswith support and a logistical base. Sudan also suspects that some African stateshave acted as a channel for US support to the rebels. Sudan, for its part, has inthe past supported opposition groups seeking the overthrow of the govern-ments in Uganda and Eritrea. Eritrea accused Sudan of involvement in an assas-sination attempt on its president in 1997, and Ethiopia claimed that Sudan wasbehind the attempted assassination of Mr Mubarak in Addis Ababa in 1995.

The eruption of the war between Eritrea and Ethiopia in 1998 proved somethingof a turning point, giving Sudan the chance to improve relations with the twostates, which were both keen to ensure Khartoum did not side with theiropponent. This opened the way for the signing of a series of bilateral treatiespromising an end to support for opposition groups, and improved co-operationon a number of levels. There has been particular progress in the developmentof ties with Ethiopia, leading to improved economic relations and more nor-malised political links, culminating in the establishment of the "Sanaa Forumfor Co-operation", a grouping of Sudan, Ethiopia and Yemen that is designed toenhance security and economic development in the region.

The improvement of ties with Eritrea stalled, however, as the government inAsmara failed to follow through on undertakings to curb rebel activity fromEritrean territory. An upsurge in attacks from Eritrea in late 2002 led to amarked deterioration in ties, with Sudan responding by closing the border,increasing its support for Eritrean rebel groups, and even hinting at thepossibility of war. Although conflict appears highly unlikely, prospects for morenormalised relations appear poor while the current Eritrean regime, led byPresident Isaias Afewerki, remains in power. Indeed, in early 2004 the govern-

Ties with the Gulf monarchieshave recovered

African hostility to Sudan haseased but suspicions remain

24 Sudan


ment claimed that training camps for the Darfur rebel group, the SLA, had beenset up in Eritrea, further increasing the antagonism between the two countries.

Relations with Uganda have improved more markedly, in part as a result ofactive brokering efforts led by a former US president, Jimmy Carter. This led tothe resumption of diplomatic relations in 2001, and an exchange of ambas-sadors in 2002. Offering definitive proof that Sudan was living up to obligationsincluded in the agreement brokered by Mr Carter to end its support forUgandan rebels, the government in mid-2002 allowed Ugandan troops to crossthe border to attack the Lord�s Resistance Army!a guerrilla group that hadpreviously enjoyed Sudanese protection. In return, Uganda was to cease itsalleged support for the SPLA. The agreement was renewed several timesthroughout 2003, and has been maintained since, despite occasional accusatoryexchanges between Kampala and Khartoum that the other party had renegedon the deal.

Sudan�s army is ill-equipped, but it has more arms and vehicles than the rebelSPLA. It has also begun to add to its military hardware following the develop-ment of its oil export industry, building new arms facilities inside Sudan and,according to critics of the regime, bypassing UN restrictions to purchase armsfrom abroad. Upsurges in fighting compel the army to rely more heavily onconscripts, including university students. This has been deeply unpopular, andthere are frequent reports of desertion. Alongside the regular army, the NC hasits own military wing, the Popular Defence Force (PDF), which, despite being a�political� fighting force, serves on the front in the war against the rebels. Onlyabout 10% of the force are on active duty at any one time. The Sudanese airforce is small, and its equipment made up largely of outdated Antonovbombers, which were used, until the 2002 ceasefire, for attacking soft targets inrebel-held areas in the south and in the Nuba Mountains south of El Obeid. Ithas also been reported that Antonovs have supported the government�s proxymilitias in attacks in Darfur. Sudan is estimated to have spent US$465m ondefence in 2004, the equivalent of 3% of GDP.

Military forces, 2004GovernmentArmy 104,800Conscripts 20,000Air force 3,000Navy 1,800

Popular Defence ForceActive 17,500Reserve 85,000

OppositionSPLA 20,000-30,000SLA 5,000-10,000 a

Justice & Equality Movement 1,000-2,000a

Sudan Allied Forces 500a

Beja Congress Forces 500a

New Sudan Brigade 2,000a

a Economist Intelligence Unit estimates.

Sources: International Institute for Strategic Studies, The Military Balance 2004/05; Economist Intelligence Unit.

Defence forces

Sudan 25


Resources and infrastructure

PopulationEstimates of Sudan�s population are imprecise. The government conducted itsmost recent census, which put the total population at 24.9m, in 1993, but as itcould not be carried out in the south even that survey!now 12 years out ofdate!is far from conclusive. The UN suggests that the population stood at 31.1mat the end of 2000, close to the estimates put forward by the IMF, which putthe population at the end of 2003 (the latest year for which figures areavailable) at 33.61m.

Population profile: most recent dataTotal population (m; 2003) 33.6Annual growth rate (%; 1975-2002) 2.5

Annual growth rate (%; 2002-2015) 1.8Urban population (%; 2002) 38.0

Population under 15 years (%; 2002) 39.7Labour force (m; 2001) 12.7Economic participation rate (%; 2002) 66.9

Life expectancy at birth (male years; 2002) 54.1Probability of surviving to 40 (2002) 27.6

Infant mortality per '000 live births (2002) 64.0

Sources: World Bank; US Bureau of Census, International Database; IMF, Sudan: Recent Economic Developments; UN, State of the

World's Children.

However, some revised!but unsubstantiated!estimates of Sudan"s populationput the total at 40m, one-third higher than the World Bank"s 2001 figure. TheIMF estimates that average population density is just 10.6 persons per sq km,but this is misleading, as one-half of the population lives on just 15% of theland. Urbanisation is on a par with regional averages, with some 38% of thepopulation living in the main towns and cities in 2002 according to the UN,compared with 32% across Sub-Saharan states. However, it is below the MiddleEastern average of 54%.

Estimated demographic structure of population by age and sex, 2002(% of total)

Age Total Male Female0-9 32.1 16.4 15.6

9-14 12.8 6.5 6.315-29 27.5 14.1 13.4

30-49 18.7 9.1 9.650-64 6.7 3.2 3.565+ 2.0 1.1 0.9

Total population 100.0 50.6 49.4

Source: US Bureau of Census, International Database.

Sudan has a young population. US census bureau estimates suggest that over30% of the population is under the age of ten and 45% under the age of 15,although the UN believes the latter figure is slightly lower at 40%. Populationgrowth rates have eased, standing at 2.5% for 1975-2002 according to the World

26 Sudan


Bank, and around 2.2% since 2000. However, the reliability of these figures isopen to question given the difficulty of collecting data, and set against averages of2.9% and 3% in Sub-Saharan Africa and the Middle East. The US Census Bureausuggests that the annual demographic growth rate for Sudan is 2.8%.

The exceptional characteristic of Sudan�s population is its ethnic, religious andlinguistic diversity. The 1956 census!the first conducted after independence andthe last to give detailed information on the ethnic background of the popul-ation! indicated that there were 19 major ethnic groups and 597 subgroups.Arabs constituted the largest proportion of the population, but were not anoverall majority, even in the north, where they accounted for around 40% of thetotal. They were followed by Dinka (12%), Beja (7%) and Fallata (6%). The southernregion contained about 25% of the total population. Subsequent population dis-placements caused by the war, inter-tribal fighting and the refugee exodus toneighbouring countries have been considerable.

Although Islam is the official state religion, only an estimated 60% of thepopulation are Muslims. In the north there are significant non-Muslim groupsin the Nuba Mountains, the Red Sea Hills and parts of Darfur in the west.Animists make up about 60% of the total population in the south, and Christiansabout 10%.

Education

Although data vary according to source, the UN estimated illiteracy in 2002 at29% for men and 51% for women. This rate is comparable with Sudan�s Africanneighbours, although significantly worse than the average for the Arab world.According to the World Bank, however, the figures mask a modest improve-ment over recent years, with illiteracy among males over 15 falling from 39% to30% between 1990 and 2001; for women in the same age range and over thesame period the figure declined from 68% to 52%. The impression that the basiceducation system has strengthened is also supported by data from the UNHuman Development Report 2003, which estimates illiteracy among the 15-24age range in 2001 at 21%, compared with 35% in 1990. Low enrolment rates,however, hamper educational development. The World Bank estimates that in2002 primary school enrolment was just 46% of the relevant age group, andsecondary school enrolment only 21%. In contrast, the World Bank estimatesEgypt has 100% enrolment for primary education, and 75% for secondaryeducation; in Kenya the figures are 85% and 24%, respectively.

Low educational standards are in part a reflection of Sudan�s widely dispersed,predominantly rural population as well as the impact of the war, which hasdisrupted education in much of the country and continues to absorb publicfunds. According to the UN, public spending on education amounted to slightlyless than 1.4% of gross national income between 1995 and 1997, while 3% ofGDP was spent on the military. In contrast, educational spending in neigh-bouring Eritrea stood at 1.8% of GDP in the same period, and 4% in Ethiopia.There has been some effort to reorientate the education system ideologically, byincreasing the role of Islam and the dominance of Arabic in schools. However,aside from this, little else has been attempted and even this appears only to

Sudan 27


have reduced the number of competent English speakers. Secondary and highereducation have been especially disrupted, as most male students are requiredto serve in the army or Popular Defence Force before they can enter university,leading to a sharp fall in enrolment. Assuming that the peace agreement signedin early 2005 between the northern government and southern rebels isimplemented, it is likely that the two regions will run parallel systems ofeducation over the six-year interim period and beyond. The paucity ofeducational facilities in the south will also require a significant increase inpublic spending, a good portion of which may be funded by foreign donors.

Health

Health provision has been badly affected by the civil war, which drainedresources, and led many healthcare professionals to leave the country. The UNDevelopment Programme estimates that there are fewer than 40 doctors in thewhole of southern Sudan!a figure which would seem to exclude the far largernumber of foreign health professionals that worked in the south throughoutmuch of the civil war under the auspices of the many non-governmentalorganisations (NGOs) active in the region. Nevertheless, despite their effortsmany basic drugs have not been widely available, with only 15% of thepopulation estimated to have access to essential medicines in 1997 according tothe World Bank, compared with more than 80% in Egypt and 72% in Ethiopia.Around 40% of the population in Sudan was estimated by the UN not to haveaccess to adequate sanitary facilities in 2001, and 25% were without access tosafe water.

Frequent famines have occurred recently in the south and centre of the country,although other regions have also been affected. The famines have stemmedfrom desertification, poor weather, droughts and the displacement anddestruction caused by conflict, and have led to widespread malnutrition. Themost recently affected areas have been the western Darfur provinces, whereconflict between the government and rebel forces in early 2003 triggered ahumanitarian crisis that has forced over 1m people from their homes. The crisisis not included in the most recent statistical work, which suggests that onaverage 25% of the population was undernourished in 1999-2001. Some 17% ofchildren under the age of five were reported to be underweight for their ageover 1995-2002. There are frequent epidemics, which the government healthservice is unable to combat because of management deficiencies and drugshortages. However, child immunisation programmes have improved, withvaccinations rising from negligible levels in 1980 to around 60% by 2001 formost major childhood diseases. In addition, there are few reported cases ofinfection with human immunodeficiency virus (HIV), with the infection rateamong 15-49 year olds put at 2.3% in 2003, compared with some 7% in Kenyaand 25% in Zimbabwe.

Most government spending on health services is for hospital facilities in urbancentres, and in many areas little primary healthcare exists, other than thatprovided by NGOs operating within Operation Lifeline Sudan, the UNumbrella operation that co-ordinates relief efforts in the south. Totalexpenditure on healthcare barely changed between 1990 and 2000 according to

Poor provision

28 Sudan


the UN, when spending reached 0.7% and 1% of GDP respectively. In 1990-98there were on average 1.1 hospital beds and 0.1 physicians per 1,000 of thepopulation, which was almost unchanged on 1980 levels. The UN estimatesthat life expectancy at birth in 2002 was 55.5 years compared with 44 years in1970-75. This places Sudan ahead of neighbouring countries such as Ethiopia(life expectancy of 45.5 years in 2002) and Chad (44.7), although it lags behind alife expectancy of 68.6 years in Egypt. As with the education system, theimplementation of the 2005 peace treaty between the northern governmentand southern rebels will require a substantial increase in public spending toestablish the foundation of a healthcare system in the south.

Natural resources and the environment

Sudan is the largest country on the African continent, and has a diversetopography. Much of the country is a plain, with Mt Kinyeti (close to theborder with Uganda) the highest point at 3,187 metres. Rainfall levels varythroughout the country. The further north, the shorter the rainy season, andat about 19û latitude there are no regular rains. In Khartoum the average rainfallis 200 mm/year. The low-rainfall (440-800 mm/year) savannah belt between10û and 14û latitude necessitates a pattern of shifting cultivation. Of Sudan�stotal land area of 251m ha, around 50% is regarded as agricultural land,although only 16.9m ha is of sufficient quality to be used for arable land orpermanent cropping.

The White Nile and the Blue Nile both flow into Sudan, and meet in Khartoum.As well as being a major source of water, the Nile is an increasingly importantsource of power, and is used for transport. To the south, the vast Sudd swampprovides a vital climatic and ecological zone for Sudan and the surroundingregion. Sudan has significant hydrocarbon reserves, which it began to export inlate 2001. Fields are currently in production or under development in southern,central and south-eastern Sudan (see Economic sectors: Mining and semi-processing). Commercial deposits of oil are thought to exist further south, aswell as in Red Sea and northern provinces. There are also believed to bereserves offshore. In addition, Sudan has modest deposits of gold that havebeen mined periodically since the 1920s. The belts currently underdevelopment are located in the Red Sea Hills, west of Port Sudan.

Transport, communications and the Internet

Sudan�s road infrastructure is inadequate. The total road system is around20,000-25,000 km long, but only about 3,000-3,500 km are asphalt all-weatherroads (excluding paved roads in urban areas). Of this, almost 1,200 km is madeup of the country�s key highway lining Port Sudan and Khartoum, which wascompleted in 1980. In addition to the asphalt system, there are around 3,000-4,000 km of gravel roads, but the remaining routes are fair-weather earth andsand tracks. New asphalt roads are under construction, and are being fundedlargely by grants and concessionary loans from the Islamic Development Bank,the Arab Monetary Fund and other Arab development organisations. They

Roads

Sudan 29


include improved connections to the north and south of Khartoum, as wellnew roads in the oil regions.

After several months of refurbishment work, the highway linking Ethiopia andSudan was reopened in 2002 following the improvement in diplomatic ties,and to permit the planned expansion of bilateral trade. There are also plans inplace to build a new highway linking Port Sudan to Atbara, a route whichwould also take several hours off the journey time between the port and thecapital. The new route would also be safer than the existing highway throughKassala, which has been vulnerable to rebel attack in the past. The Kuwait Fundfor Arab Economic Development agreed in principle to provide US$110m tofinance construction of the route in 2002, but no start date for construction hasbeen announced. At least one new highway linking the north and south is alsolikely to be constructed to cement the recent peace deal between thegovernment and rebels in the south. New roads across the south are alsourgently required if the area is to be consolidated as a functioning political andeconomic entity.

Sudan�s ageing rail system consists of 4,725 km of narrow-gauge single track, themain line of which runs from Wadi Halfa, via Khartoum, to El Obeid. Tracks alsorun from Khartoum to Port Sudan, and from El Obeid to Nyala in SouthernDarfur and to Wau in the Bahr al-Ghazal region. There is also a light railwayroute serving the al-Gezira irrigated area. The network!much of which wasbuilt during the colonial period!is in poor condition, requiring substantialrefurbishment and investment in new signalling systems, along with theaddition of double tracks to boost capacity and increase speed. The rollingstock has also deteriorated, reflecting poor maintenance and investment, aswell as age. As much as half of the rolling stock is out of service. In 2003 therail network carried 1.26m tonnes of freight and 109,000 passengers!a fall of1% and 24%, respectively, on the performance the previous year..

The government has begun a modest railway rehabilitation programme,however, and has listed the Sudan Railway Corporation as one of the assets itwishes to privatise in the coming years. China has announced that it is ready tofinance the purchase of new Chinese locomotives and support repairs to thenetwork, while the government claims to have received a number of enquiriesfrom foreign private companies interested in taking over the management anddevelopment of the network. The most ambitious rail project is a US$1.5bn,2,200-km railway linking Port Sudan to Addis Ababa in Ethiopia, which wasproposed by the two governments in late 2000. As well as improvingcommunication between the two states, the rail link would also connect withexisting lines running south of Ethiopia, creating a single route across much ofAfrica. No funding body has come forward to finance the project, however,although interest in it has been revived with the signing of the peace dealbetween the government and the rebel Sudan People�s Liberation Movement(SPLM), particularly as the link would give the southern government a viableoutlet for trade that would not be controlled by the government in Khartoum.

Port Sudan is the country�s major commercial port. About 20% of Port Sudan�straffic is being diverted to Suakin, 65 km to the south, which was reopened in

Railways

Ports and river navigation

30 Sudan


1991 and can handle some 1.5m tonnes/year of cargo. A new port has beenconstructed close to Port Sudan to act as the country�s oil-export point. Thetanker terminal at Bashair has five storage tanks, with capacity of around2m barrels, and handled average exports of 230,000 barrels/day in 2004.Additional capacity is being constructed nearby to cope with the increases inSudanese production anticipated in 2006.

Although the Nile River provides an important inland transportation route,traffic levels are generally low. The most important route used to be the 1,500-kmstretch of the White Nile between Kusti and Juba, but scheduled traffic stoppedin the mid-1980s as security conditions deteriorated. In early 2003 a tributary ofthe White Nile, known as the Sobat River corridor, was reopened to traffic,greatly enhancing, in particular, the distribution of food aid. Further gains incapacity are likely once peace is properly established, although naturalobstacles, such as unnavigable rapids or waterfalls (known as cataracts), willcontinue to limit traffic, along with the growing number of dams along theriver. Seasonal variations in water levels also limit load carrying. Some pas-senger and cargo boats travel between Dongola and Karima, which lie 187 kmapart between the third and fourth cataracts. A joint Sudanese-Egyptian rivertransport company linking Wadi Halfa and Aswan across Lake Nuba (theEgyptians call it Lake Nasser) tends to be disrupted when political tensionbetween Egypt and Sudan increases.

Modes of transport, 2003�000 tonnes freight �000 passengers

Sudan Shipping line 192.9 20.2Sudan Airways 12.5 495.6Sudan railways 1,266 109

River transport 43.6 4.6Land transport 14,991 25,791

Source: Bank of Sudan.

Air services in Sudan are limited. The national carrier, Sudan Airways, has afleet consisting of three Airbus 300-600Rs, two Boeing 737-200s, two Iliushin18s and a number of freighter aircraft. It has a monopoly on domestic flights,covering 15 local airports of which Khartoum, Port Sudan, El Obeid and ElFasher are the most important, and the only ones to have night facilities. Thereare also airstrips at the oilfields north of Bentiu. Sudan Airways was one of thestate-owned firms identified by the government in 1999 for privatisation, andtwo Western companies were commissioned to advise on the sale. So far,however, there has been no sign of further progress, even though the firm isone of the few state-owned enterprises to report an operating profit. Thegovernment is committed to building a new international airport north ofKhartoum, but hopes to develop it as a regional hub for East Africa are unlikelyto be fulfilled. A growing number of foreign airlines, however, have begun toserve Khartoum in the past few years as demand from business travellers hasincreased with growth in the oil sector. These airlines include British Airways,Emirates, the Dutch carrier KLM and Lufthansa of Germany.

Air

Sudan 31


Telecommunications provision has improved rapidly in the past eight years. In1995 there were less than 75,000 main telephone lines in the country, accordingto the International Telecommunication Union (ITU)!a teledensity ratio of 0.28per 100 people. By 2003, however, the number of mainlines had increasedtwelvefold to 900,000, lifting the teledensity ratio to 2.7. This places Sudanahead of some of its immediate neighbours (Kenya has a teledensity ratio of1.0, Ethiopia of 0.6), although it still lags far behind some of its more developedneighbours such as Egypt and Libya, which had ratios of 12 and 14 in 2003respectively.

The expansion of provision has been driven by the Sudan TelecommunicationsCompany (SudaTel), which was formed out of the Ministry of Post andTelecommunication in 1994. Originally 100% government owned, shares in thefirm were subsequently listed on the Khartoum Stock Exchange, and later soldabroad, most notably in the Gulf, where the UAE and Qatari telecoms com-panies bought substantial stakes, boosting paid-up capital. The firm hasfinanced a programme of capacity expansion and upgrades, including the instal-lation of a fibre-optic network. There has also been a deliberate drive to boostprovision in more remote rural areas as well as the main urban centres. As partof the government"s ongoing economic reform programme, SudaTel�s monopolyposition was ended in 2004 with a second licence awarded to KarnaTel!amajority privately owned consortium in which the well-regarded UAE firm,Etisalat, will have a 40% stake. The firm paid US$80m for the licence, which wasawarded in November 2004, and requires it to invest US$200m during its firsttwo years of operation. Given the extent of still unmet demand, it is unlikelythat the establishment of KarnaTel will have an impact on prices over the nearterm at least. The new firm is due to begin operations during 2005.

SudaTel was a co-founder (with a 40% stake) in MobiTel, Sudan�s global systemfor mobile communications (GSM) network, whose subscriber base has alsoincreased rapidly as coverage and capacity have improved. Founded in 1997, thecompany had only 8,000 subscribers in 1999, according to the ITU; this figureincreased to 23,000 in 2000 and then to over 190,000 by the end of 2002.According to the most recent data, subscription numbers reached 650,000 bythe end of 2003. There remains scope for further rapid growth, as the user ratein 2003 of only 1.95 per 100 of the population is considerably below theaverage of 6.2 for Africa as a whole. In a bid to support further growth incapacity and to introduce competition, the mobile network has also beenliberalised, with the government issuing a tender for a second licence as soonas Mobitel�s guaranteed period of exclusivity ended in 2003. The licence waswon by a consortium led by the Yemeni Saba Group, which paid US$130m forthe contract.

SudaTel has also been at the centre of efforts to develop Internet usage, and isthe majority owner of the country�s first Internet service provider, SudaNet,which began full operation in 1998. As with other areas of telecoms, data showrapid growth in recent years, albeit from a low base. In 1999 the ITU estimatethat there were just 5,000 Internet users in Sudan, with this figure rising to30,000 in 2000 and 84,000 in 2002. The absolute increase, however, lifted thenumber of users per 10,000 of the population to just 26, compared with 41 and

Telecommunications and theInternet

32 Sudan


125 in neighbouring Uganda and Kenya respectively. Growth is constrained bythe low number of personal computers in the country (just 200,000 in 2002according to the ITU) as well as concerns over the quality of service provision,with users complaining that the narrow available bandwidth leads to slow andunstable connections. The high cost (relative to average earnings andcomparable Internet services internationally) of Internet access also discouragesgrowth in usage.

The government runs the national television service, whose news output isclosely monitored. The many privately owned local and national newspapersare also subject to control, but are far freer than in many Arab states. Newspapersreport widely on domestic and international developments, often adoptingstances that differ from the official government line. The press is also able tocriticise the government, although those journals which are too outspoken onsensitive issues (such as the Darfur crisis during 2003 and 2004) risk temporaryclosure and fines. Local and foreign journalists often complain of official harass-ment or detention. The rebel SPLM runs its own newspapers and magazines,which are likely to emerge as the basis for the press in the south once the 2005peace deal is implemented.

Energy provision

Sudan�s power system is inadequate and has long been a major impediment toeconomic growth. Although estimates vary, most suggest that the state-ownedNational Electricity Corporation (NEC) has achieved average output of around500 mw for much of the past decade!someway below theoretical installedcapacity of about 800 mw and, more importantly, far below potential demand.In large part the paucity of supply reflects chronic underinvestment both in themaintenance of existing power facilities and in the development of newcapacity. Moreover, as a result of Sudan"s heavy reliance on hydroelectricplants, power generation also fluctuates according to the volumes of waterflowing through the Nile. Seasonal variations are also compounded by theheavy levels of sediment that flow through the Nile at particular times of theyear. During the rainy season, for example silt-laden water is allowed to passthrough the floodgates of the Roseires dam (Sudan"s largest power facility) toavoid damaging the turbine blades. NEC and the Ministry of Energy operatetwo interconnected electrical grids!the Blue Nile grid and the Western grid!although they cover only a small portion of the country, and even in thoseareas supply is inadequate and unreliable, leaving power production depen-dent on small, diesel-fired power stations which are expensive and unreliable.Elsewhere, consumers rely on production from their own, oil-driven generators.

Power generation has begun to rise, however, and is set to grow dramaticallyin the medium term as well-progressed plans to boost production come onstream. In late 2004 the government officially inaugurated a new 275-mwpower plant just outside Khartoum!the first new facility to be constructed ina generation. Significantly, the plant was constructed by a private, foreignconsortium led by a Malaysian company, DIT Power, which will operate theplant as an independent power project (IPP). The IPP is estimated to have cost

The media

Sudan has ambitious plans toboost power capacity

Sudan 33


around US$200m, finance which the government could not have generatedfrom its own recurrent resources, and for which NEC would have been unableto raise funds given doubts over its!and the sovereign"s!credit worthiness.Without a shift in policy to allow private firms to enter the power sector, it istherefore unlikely that the project would have ever got off the ground.

Other projects are also under way, including the construction by a Chinesefirm, Harbin Power Engineering Company, of a 220-mw gas-fired power stationbeing built close to the new al-Jeili refinery, north of Khartoum. The mostambitious project, however, is the construction of a giant, 1,250-mw hydro-electric plant at Merowe, 450 km north of Khartoum. Estimates of the likelycost and timing of the scheme vary, but the most conservative suggest it willtake six to seven years to complete and will require spending of at leastUS$1bn. Several Gulf Arab development funds have already signed agreementsto provide US$600m in concessional funding, the latest of which was signed inJanuary 2004 with the Abu Dhabi Investment Fund and was worth US$150m.The main contractor for the construction of the dam!appointed in mid-2003 fora civil engineering project worth US$650m!is the China International Water &Electric Corporation, while in December 2003 the Harbin Power EngineeringCompany was awarded a US$450m contract to build an electricity generatingstation at the site. Work started on the scheme in mid-December 2003, with thefirst unit due to come on stream in July 2007 and all ten turbines scheduled tobe fully operational by the end of July 2008. The dam will more than doublepresent output, even after the smaller diesel and gas projects are completed,revolutionising power generation in the country. To be effective, however, it willalso require extensive investment in the country�s two interlocking �national�grids and transmission systems, which are inadequate to cope with such a largeincrease in load and cover only a small part of the country.

As well as revolutionising the power generation situation in Sudan, the projectis expected to create a vast new area of cultivable land, although it will alsorequire the forced evacuation of many thousands of residents from thereservoir area. Critics also point out that full generating capacity will not bepossible during much of the year owing to variable water flows through theNile, while evaporation rates from the reservoir will also be high during the hotsummer months.

The economy

Economic structure

Despite its substantial natural resources, Sudan is an extremely poor country,both by regional and international standards. Poor economic management,coupled with the severe economic disruption and imbalances caused by thecivil war, have blocked development. This will ease if the peace deal betweenthe government and southern rebels signed in early 2005 is brought into effect,but it will take many years to finally overcome. In terms of both employmentand contribution to GDP, agriculture is the most important sector. The sector isdominated by several key crops, produced by a combination of rain-fed and

34 Sudan


irrigated agriculture, including the vast al-Gezira irrigation project south ofKhartoum. Even on the irrigated projects, underinvestment in channel main-tenance has left output vulnerable to climatic conditions, leading to fluctuatingoutput levels. Furthermore, war has periodically hampered agriculturalproduction, forcing farmers away from their land, and disrupting cultivationand the flow of inputs. Although this disruption has eased since the ceasefirebetween government and rebel forces was brought into effect, the gains havebeen partly offset by the upsurge in fighting in the western Darfur region(which has badly damaged output in the area).

Output is also undermined by the inadequacy of the transport network. Withpoor transport facilities, food supplies frequently fail to move from areas ofthe country that have surpluses of food crops, to others suffering shortages.Cotton was traditionally Sudan�s leading cash crop, but values have fallen inrecent years, reflecting weaker commodity prices and a reduction in plantingareas. Cotton was displaced by sesame in 1996 as the primary export revenueearner, although production levels of sesame have since waned, with earningsreaching only US$75m in 2003!the lowest level since 1995!although interimdata show a more robust performance over 2004. The fastest growing sector,however, is livestock, which has gained a foothold in markets in the Gulf(particularly Saudi Arabia) and attracted some foreign investment.

Main economic indicators, 2004a

Real GDP growth (%) 6.4Consumer price inflation (av; %) 9.0

Current-account balance (US$ m) -582Exchange rate SD:US$ (av) 257.8b

Population (m) 34.35Foreign debt (year-end; US$ bn) 17.2

a Economist Intelligence Unit estimates. b Actual.

Sources: Economist Intelligence Unit; IMF, International Financial Statistics.

Although Sudan remains a predominantly agricultural economy, the develop-ment of the oil export industry is altering the country�s economic structure.Following the opening of the 1,600-km oil export pipeline in August 1999,output reached 185,000 barrels/day (b/d) in 2000, rising to an average of250,000 b/d in 2002 and 280,000 b/d in 2003. An expansion in pipelinecapacity allowed output to rise to an estimated average of around 325,000 b/din 2004!a gain of some 15% for the second year in succession. If foreign oilfirms working in the industry succeed in meeting their development targets,however, recent gains are set to be dwarfed by increases projected for 2005 and2006, with output expected to rise by 40% a year to close to 750,000 b/d by thestart of 2007. Development of the sector has led to a sharp increase in foreigninvestment flows, and has boosted development of the industrial sector. Themost dramatic change, however, has been on Sudan�s trade profile, with oilnow the dominant export commodity, earning an estimated 83% of overallexport revenue in 2004. There has also been a striking increase in total exportearnings, which in 2004 are estimated to have reached six and a half timestheir level the year before oil exports began. The sector�s development has alsoended Sudan�s reliance on imported petroleum products, while associated

Sudan 35


industrial facilities have also begun to develop, notably the new refinery andpower station at al-Jeili, north of Khartoum.

Comparative economic indicators, 2004Sudana Egypt a Libyaa Yemen a Kenyaa

GDP (US$ bn) 19.2 71.9 25.3 13.9 14.1

GDP per head (US$) 560 980 4,458 673 433GDP per head (US$ at PPP) 740 3,806 10,412 1,126 1,248

Consumer price inflation (av; %) 9.0 10.7 2.9 11.3 11.6Current-account balance (US$ bn) -0.6 3.6 10.9 0.8 -0.7Current-account balance (% of GDP) -3.0 4.6 43.0 5.5 -5.0

Exports of goods fob (US$ bn) 3.9 12.1 20.6 4.9 2.6Imports of goods fob (US$ bn) -3.2 -20.9 -7.9 -3.7 -4.5

External debt (US$ bn) 17.2 33.8 4.1 6.6 6.8Debt-service ratio, paid (%) 4.0 7.4 3.9 3.5 10.3


Source: Economist Intelligence Unit, CountryData.

Economic policy

There has been a sea change in the government�s approach to economic policy-making over the past few years. After decades of neglect, a crisis that broughtSudan to the brink of expulsion from the IMF in 1997 led to the establishmentof a comprehensive economic reform and structural adjustment programmedrawn up in association with the Fund. The package includes measuresdesigned to stabilise the macroeconomic environment (particularly to curtailrunaway inflation), strengthen Sudan�s external accounts and to boost growththrough privatisation and deregulation. The programme also seeks to reformthe banking sector, liberalise trade and overhaul investment and foreign-exchange controls. When the programme was announced, it was met with con-siderable scepticism among foreign observers, who believed!almost withoutexception!that Sudan would lack the discipline and the ability to implementthe reform measures demanded of it. The reality, however, has been quitedifferent. Although some structural aspects of the programme have beendisappointing (notably privatisation), in its annual Article IV consultations theIMF has praised the government for its adherence to the reform agenda,notwithstanding calls to speed up the pace of change and warnings that theprogramme still has a long way to run. The exception to this occurred in 2001,when the government appeared to lose control of fiscal management, andfound itself unable to meet its payment obligations (see box) to the Fund. Inreturn for the IMF temporarily suspending payments, the governmentintroduced a series of emergency fiscal measures, which over the full yearsucceeded in producing a budget outturn close to target.

Overall, the reform programme has led to significant improvements. Inflationhas fallen sharply from triple digits to under 10%, the currency has stabilised,the fiscal account has moved close to balance and the economy has generatedseveral years of impressive real growth. Foreign investment has also risen, andbank intermediation has improved considerably following the relaxation oftight Bank of Sudan (the central bank) credit allocation rules.

IMF reform package drivespolicymaking

36 Sudan


Sudan and the IMF

Sudan�s external debt arrears are a critical problem for the government.Previous administrations borrowed heavily for an over-ambitious develop-ment programme in the early 1970s (see The external sector: Capital flows andforeign debt), and the country was badly hit by the rise in internationalinterest rates and the increase in oil prices at the end of that decade. The IMF�s�declaration of non-co-operation� with Sudan in September 1990 citedcontinuing problems with arrears since 1984. In 1993 the IMF withdrewSudan�s voting rights and in 1997 threatened to expel the country from theFund. From this low point, relations have steadily improved. In 1997 Sudanbegan working with the IMF on a structural reform programme, and, much tothe surprise of many local and international observers, has adhered to itclosely, gaining plaudits from the Fund. The government also agreed to makesmall payments on its debt arrears to the Fund!a schedule it met everymonth until mid-2001 when it was forced to negotiate a rescheduling.Payments have since resumed, at a slightly reduced rate.

The repayments and adherence to reform initiatives led the IMF to lift thenon-co-operation order on Sudan in 1999, and in 2000 Sudan�s voting rightswere restored. The moves are largely symbolic, and for the foreseeable futureSudan will continue to be denied access to financial support from theorganisation. However, the steady normalisation of ties with the Fund marksSudan�s further reintegration into the international financial community, andwill do much to convince the country�s other creditors that the government isserious in its efforts to order its economic affairs. The IMF has also beeninvolved with efforts to establish an economic framework for peace betweenthe north and south, and committed to offering economic support for theimplementation phase, including rescheduling Sudan"s remaining arrears tothe Fund, and backing government efforts to gain access to the heavilyindebted poor countries (HIPC) initiative.

There remain, however, a wide range of problems that have yet to be overcome,and which continue to disrupt and distort policymaking. Key among these hasbeen the civil war, which, despite a ceasefire, has placed a heavy burden ongovernment finances, undermined local and foreign confidence and led tomassive dislocations within the domestic economy. It has also drawn spendingaway from more productive uses, with most estimates suggesting that themilitary absorbed over US$1m a day in public spending.

Although many of these distortions will ease as the 2005 peace agreement isimplemented, the Ministry of Finance and National Economy has warned thatdefence spending in the short term will not fall, as funding the implementationof the security agreement will prove to be expensive. It will also only be withthe passage of time that confidence!both local and foreign!will build, andconsumption and investment patterns adjust fully for the new era. Moreover,decades of civil conflict, social and political upheaval, and internationalisolation have also left a legacy of neglected physical, social and financialinfrastructure that will take many years to overcome. Corruption also remainswidespread, and Sudan�s massive external debt arrears have yet to be

Sudan 37


addressed, hindering access to new foreign funding. Sudan�s dependence ontwo volatile economic sectors!oil and agriculture!also leaves it vulnerable toexogenous shocks in the international commodity markets or, in the case ofagriculture, to climatic conditions.

Sudan looks to the peace dividend

Although implementation has yet to begin, the conclusion of a final peace accord between the government and the mainrebel groups in the south and north has focused attention on the impact of peace on economic policy. According to IMFestimates, a peace settlement will lift Sudan�s potential rate of sustainable real growth to around 7% over the medium term,compared with the estimated ceiling of about 5% should the conflict persist. Although the Fund�s figures appear somewhatarbitrary, it is clear that a peace agreement would substantially alter the way in which the Sudanese economy functions,and would enhance its growth prospects. Key developments would include the following.• Substantial increases in domestic production in war-affected areas as fighting no longer disrupts production processes.

Increase in domestic trade, exchange and financing between the north and south will boost growth and ease prices.• A general increase in domestic confidence would boost consumption and investment levels. Foreign sentiment towards

Sudan would also improve, as political and security risks eased, leading to higher foreign investment, particularly inthe oil sector. The US has also signalled that a peace agreement would be likely to lead to the removal of US sanctionson Sudan!further enhancing its trade and investment prospects.

• A substantial inflow of foreign aid to finance reconstruction work in war-affected areas and the rehabilitation ofneglected infrastructure linking northern and southern Sudan. Western governments and regional and internationalmultilateral agencies have already begun to draw up aid and development plans for the post-war period.

• The acceleration of negotiations to restructure Sudan�s large foreign debt stock. The IMF has already signalled itsopenness to discussions over the rescheduling of Sudan�s arrears to the Fund!a development that could lead quicklyto Sudan gaining access to Paris Club settlements and the IMF/World Bank heavily indebted poor countries (HIPC)initiative. Resolution of arrears would improve Sudan�s access to new lending from official and even private sources.

• Some easing of the army�s heavy and unproductive draw on public finances, although military spending wouldremain comparatively high given the maintenance of two armies. Military spending would fall further as peace wasconsolidated.

There will necessarily be some risks associated with the initial post-war period, however, presenting fresh challenges to theBank of Sudan (the central bank) in its efforts to maintain stability. These include the following.• Operating a dual monetary system!one sharia-compliant, the other not.• High expectations of an immediate improvement in living standards, together with the inflow of foreign aid, may

make it difficult for the government to maintain its fiscal discipline, and a surge in domestic demand could alsothreaten price stability.

• The likelihood of massive relocation and return of hundreds of thousands of internally displaced persons and refugeesoutside the country to previous areas of conflict.

• Import demand could rise rapidly as reconstruction begins, with the central bank�s still modest holdings of foreignreserves leaving it with only a limited capacity to manage surges and dips in liquidity.

• Sudan"s institutions may prove inadequate with the restructuring of the government and civil service following apeace agreement bringing in personnel who lack experience of the reform agenda. Establishing effectivecommunication and policy co-ordination between the central economic policy bodies and those that will enjoyconsiderable autonomy in the south will also prove difficult.

• The ongoing Darfur conflict may delay the peace dividend. Despite pledges made to push the parties toward signingthe final accord, disbursing aid and other rewards to the government while the violence in Darfur!for which manyWestern governments and influential domestic political groupings hold the regime responsible!persists will provepolitically difficult. This could potentially leave policymaking in limbo until the conflict in the west is resolved!adangerous position given the frailties of the peace accord in the south.

38 Sudan


Sudan ran substantial budget deficits over much of the past 20 years. In largepart this reflected uncontrolled expenditure on defence, which official figuressuggest runs at one-quarter of total expenditure but which unofficial estimatesput at 50% of total spending. Not only has military spending been a highconstant draw on public finances, but upsurges in the conflict have also led tosharp, periodic increases in demands for funds, undermining the finance andnational economy ministry�s spending plans. Subsidy spending has been highover the post-coup period, while support to ailing state-owned enterprises(SOEs) has also added to public expenditure, although much has remained off-budget. Disruption associated with the war has also undermined the tax-col-lection system, as have years of neglect and corruption, keeping tax yields low.

As part of the broader economic reform programme, the government hasimplemented a number of measures that have strengthened both its fiscalstance and its policymaking abilities. On the expenditure side, these include aseries of technical accounting measures that have strengthened the finance andnational economy ministry�s control of spending by regional authorities, andallowed it to manage spending by the main central government ministriesmore rigorously. Using the improved controls at its disposal, the governmenthas also sought to slow the pace at which spending has risen, restrictingrecurrent spending by holding down real public-sector wage increases,introducing some subsidy cuts and raising additional fees on education andother services.

Budget revenue and expenditure, 2004 outturn(SD bn)

Total revenue 846.8 Tax 286.3 Non-tax (incl others) 560.4 Oil 513.7 Non-oil 46.7Total expenditure 769.0 Capital 195.8 Current 573.2Balance 77.7 % of GDP 1.6

Source: Economist Intelligence Unit.

This discipline has slipped in recent years, in large part because higher oil pricesand sustained gains in oil production have supported significant gains inoverall revenue, making it difficult!and perhaps less necessary!for the regimeto hold expenditure growth so firmly in check. Higher economic growth hasalso boosted the government"s tax take, further strengthening its fiscal position.Although data are incomplete, the Economist Intelligence Unit estimates thatspending rose by an average of more than 20% over 2001-04!a significant rateof real growth even allowing for inflation, which averaged around 8% over thesame period. Revenue, however, grew even more strongly, rising by an averagerate of close to 30% over the same period. Indeed, according to our estimates,revenue in 2004 was two and a half times higher than in 2000!a remarkableshift. As a result of these trends, the reported central government deficit hasbeen small, remaining under 1% of GDP despite the growth in spending. We

Reform agenda strengthensgovernment finances

Sudan 39


believe the government may even have recorded a small surplus in 2004 forthe first time in more than 25 years.

The transition to peace will be expensive, and the finance and nationaleconomy ministry has warned the IMF that the deficit will grow in the shortterm. Under the wealth-sharing agreement, the numbers within the civil servicewill increase, pushing up the wage bill. This will come on top of a 50% rise incivil service salaries, approved by parliament for 2004, in order to iron out paydifferentials between ministries. With no reduction in military spendingforeseen, and with the determination of the government not to increase taxes(the authorities do not want to make peace economically unpalatable by raisingdirect taxation), fiscal discipline will be challenging to maintain, testing thegovernment"s commitment to the reform programme.

Following the 1989 coup, the new Islamist leadership passed legislationrequiring Sudan�s whole financial system to comply with Islamic financingprinciples. The most important of these was the prohibition of conventionalinterest charges, which were judged by Sudan�s ruling elite to amount to ribh!usury. The measures generated chaos, requiring the Bank of Sudan to overhaulits monetary management system, as well as to devise and supervise aregulatory framework for the commercial and specialised credit banks. Ratherthan undermining the financial system, however, the switch to Islamicprinciples simply added to a host of shortcomings that were already in place.Chief among these was heavy political interference in monetary policydecisions, with the central bank required to provide direct and indirect fundingto the government to bridge mounting fiscal deficits, as well as providing low-cost support to loss-making SOEs. The monetary instruments at the centralbank�s disposal were weak before the introduction of Islamic principles, andremained so after the event, undermined by the poorly developed commercialbanking system and interest rates that were set at sub-inflationary levels. As aresult, inflation averaged over 100% between 1990 and 1996, peaking at morethan 130% in 1996, as monetary growth soared and the value of the Sudanesepound (renamed the dinar in 1999) plummeted.

Controlling monetary growth was one of the key variables identified by the IMFwhen its adjustment programme was drawn up in 1997. As a result, the modestreform measures that the central bank had begun to draw up in the mid-1990swere extended and implementation accelerated. Among the measuresintroduced as part of the package has been a system of Islamic open-marketoperations, with central bank Musharaka (�profit sharing�) Certificatesintroduced as short-term instruments sold at weekly auctions to mop upliquidity. Longer-term Government Musharaka Certificates were also establishedfor the same purpose.

In addition, the central bank strengthened its monitoring of the commercialbanks, requiring them to comply more closely with minimum reserverequirements, and established a discount window for short-term bank credit, amove that increased the impact of central bank interest rate policy. Underpressure from the Fund, the government also accepted the abolition of facilitiesat the central bank that had previously allowed for the extension of low-cost

Monetary policy is set withinIslamic guidelines

40 Sudan


credit to the central government and state-owned institutions. Combined witha reduction in central government deficits, this has strengthened liquiditymanagement, and supported a marked reduction in consumer price inflation tounder 10% in 2001, a level that has been sustained since.

Having embedded the banking sector in Islamic principles and brought themoney supply under control, the Bank of Sudan is now faced with the task ofdecoupling the system once more. Under the wealth-sharing agreement, whichforms part of the peace accord with the southern rebels, the country willoperate under one currency with one central bank, but the south will useconventional banking instruments while the north will continue its Islamicsystem. This will entail the establishment of a dual banking system, withsecular laws in place in the south and sharia in the north. The central bank,which will operate a subsidiary in the largely autonomous south, will find itdifficult to ensure a level playing field, with the need to maintain equal rates offinancing and return. Sudan has had some experience of this before. Prior tothe implementation of sharia law in 1983, the bank operated a parallel Islamicsystem, which in effect amounted to a de facto dual banking system. Yet thebank can also draw on knowledge from other working models (Bahrain andMalaysia operate dual banking systems of sorts), and while the return torunning two separate banking operations will be fraught with difficulty andwill undoubtedly impact upon key monetary fundamentals, the process maywell be manageable.

The IMF reform programme has also focused on the banking sector, and inparticular the banks� failure to provide credit to support private-sector growth.Between 1996 and 1998 commercial bank claims on the private sector fellmarkedly in real terms, and even dropped in nominal terms between 1998 and1999. To combat this, the central bank introduced a series of reforms in 2000aimed at strengthening the (mainly state-owned) banks and increasing theircommercial independence, while also tightening supervision. The most signif-icant change, however, was the relaxation of rigid government credit allocationrules. Boosted further by the inflow of oil revenue, commercial bank claims onthe private sector have accelerated rapidly, rising year on year by 64% at the endof 2000, by 41% at the end of 2001, and by an additional 67% in 2002, onlyslowing slightly in 2003 to 57%. The pace of growth remained rapid in 2004,standing at 53% over the first eight months of the year according to the mostrecent IMF data. Although the increase in intermediation suggests that thereforms have had some success, such a rapid acceleration inevitably raisesconcerns over its possible impact on inflation. Questions also remain over thequality of the new assets the banks have so quickly built up.

To support growth, reduce the drain on public finances and fund infrastructuredevelopment projects that remain beyond the reach of its own resources, thegovernment has sought to draw local and foreign capital into areas of theeconomy that were previously reserved for the state, and has committed itselfto privatising SOEs. The divestment programme actually began in the early1990s, with the passage of the Privatisation of State Corporations Act in 1992,which earmarked 190 public corporations for sale. However, although 17 public

Privatisation and foreigninvestment

Private sector boosted byincreased credit lines

Sudan 41


corporations were sold during Phase 1 (1993-95), the privatisation programmefailed to build momentum, and the planned high-profile sale of several keyassets, including the National Electricity Company and Sudan Airways, hasfailed to materialise. Other, smaller sales have taken place in recent years,such as the divestment of the Atbara cement factory, the Sudan Duty-Free ZoneCompany and the Bridges and Road Corporation.

Overall, however, the pace has been slow, reflecting a range of factors, not leastof which has been the skills shortage among senior officials charged withoverseeing what has often been a highly complex process of defining andvaluing SOE assets. The valuation process has also been undermined by thelarge losses run by most state companies for many years. These have led to theaccumulation of substantial debts, many of which are owed to public-sectorfinancing agencies or commercial banks that were required to extend creditto them. The poor state of the SOEs has discouraged potential private operators,who are not only unwilling to take on the companies� debts, but are also awareof the substantial investment many of the firms require after years of neglect.There has been substantial opposition to the privatisation programme amongSudan�s influential labour unions, which have recognised that divestmentwould necessarily lead to large numbers of job losses if new operators soughtto run the SOEs on a commercial basis. Officials have also been aware thatprices would rise post-privatisation, with companies needing to generate profitsand losing access to concessional funding. In addition, accusations ofcorruption have dogged the privatisation programme, with government officialsalleged to have demanded payments, while those linked to the senior ranks ofthe regime are reported to have bought state assets at prices well below theirtrue value.

There have been some successes, however, notably the formation of the SudanTelecommunications Company (SudaTel), which began operations as a jointpublic-private company in 1994. Since its establishment, the company hasoverseen the steady growth of the country�s fixed-line and mobile telephonenetwork, successfully attracting investment funds from the domestic marketand abroad (see Resources and infrastructure: Transport, communications andthe Internet). Both sectors of the telecom industry have also been opened tocompetition, with foreign firms bidding to gain a stake in what is seen as a veryattractive market. Foreigners have also played a leading role in the developmentof Sudan�s oil industry, funding the building of upstream resources, theconstruction of industry infrastructure including the export pipeline, anddownstream facilities such as the new al-Jeili refinery (see Mining and semi-processing). The government has also successfully attracted foreign investmentinto the power sector, with the country�s first ever independent power project(IPP) coming on stream in late 2004, with other projects planned for the comingyears (see Resources and infrastructure: Energy provision). According to theBank of Sudan, foreign direct investment (FDI) inflows stood at US$713m in2002 and US$1.3bn in 2003. Over the first half of 2004 new official figures putFDI inflows at just over US$700m, equivalent on an annualised basis to 7% ofGDP!one of the highest ratios in the region. Despite having an economy some

Government efforts to boostFDI have been successful

42 Sudan


three and a half times larger than Sudan, Egypt generated FDI inflowsaveraging just over US$460m in 2001-03, compared with US$880m in Sudan.

Foreign direct investment inflows in Sudan and Egypt(US$ m)

20042001 2002 2003 Jan-Jun

Sudan 574 713 1,349 707

Egypt 510 647 237 n/a

Sources: Bank of Sudan; Central Bank of Egypt.

No breakdown of the FDI trends is available, but it is likely that while agrowing proportion of the funds is being attracted into infrastructure andassociated projects, the bulk of the finance is linked to the development of theoil sector. As such, China, Malaysia and India are likely to be the main sourcesof foreign capital, particularly as firms from the first two countries have alsoexpanded their presence outside Sudan�s oil industry.

Economic performance

The real economy has shown sustained strong growth in recent years,averaging around 6% a year since the start of the IMF-monitored reformprogramme in 1997. In nominal US dollar terms, this means that the value ofeconomic output in 2004 was 125% higher than in 1996, resulting in a 90% risein dollar GDP per head over the same period. Although the overall trend isclear, a detailed analysis is difficult given the long time lag in the release ofnational accounts data. While the IMF!in co-operation with the central bank!has released an estimate for overall real GDP growth in 2003 of 5.9%, nobreakdown has been published.

Historically, economic growth in Sudan was primarily a function ofperformance in the agricultural sector, which accounted for up to 40% of GDPover the 1990s according to Bank of Sudan data. Although a number of factorshave affected the output of this sector in recent years, the most significant!theweather!is beyond the government�s control. However, government policyalso had an impact, with factors such as incentives provided to farmers throughprocurement prices, access to seed and fertilisers, and supply of fuel for sowing,ploughing, harvesting and transport of produce affecting performance. As aresult of GDP dependence on agriculture, growth figures fluctuated wildly, andthere were a series of recessions in the 1980s and 1990s.

Gross domestic producta

2004 Annual average 2000-04(% real change) 6.4 6.0



While agriculture remains the dominant sector, both as a proportion of GDPand as a source of employment, the emergence of the oil sector has begun toshift the balance. This is apparent most immediately in the tradable sector, withhigh oil earnings pushing export values (in both nominal and real terms)

Sudan 43


sharply upward. The oil sector has also driven a dramatic increase in invest-ment expenditure, which in turn has funded a significant strengthening ofimport spending. High oil earnings have fed into the domestic economythrough increases in government consumption and government capitalspending. Overall, we estimate that gross fixed investment accounted foraround 16% of GDP in 2004 in nominal terms compared with about 12% in2000, while the value of net exports rose to 6.3% compared with 2.2% in 2000,despite rapid growth in import spending. As a result, while private consumptionremained the largest component of GDP, its share fell from 74% in 2000 to 68%in 2004.

GDP growth figures must be treated with caution. The IMF figures are relianton government data that are not only skewed for political purposes, but arealso inefficiently collected, with all areas of the country directly affected by thecivil war excluded from official statistics. The recent rapid growth has also takenplace from a very low base, and has been highly uneven. As a result, Sudanremains a poor country overall, and the majority of its citizens, particularly(although not exclusively) away from the main urban areas, remain extremelypoor even by regional standards.

The monetisation of the government�s budget deficit created severe inflationarypressures for much of the 1990s, with price growth averaging 56% a year in1995-99 and reaching a peak of 133% in 1996. Since the government began toimplement its IMF-approved reform programme the following year, however,price growth has slowed substantially, falling to less than 50% in 1997 andbelow 20% in 1998 and 1999. The downward trend continued, with averageconsumer price growth falling into single digits in 2001 and remaining thereover the following years. As well as reflecting the stabilisation of publicfinances, the easing of inflationary pressures over recent years also marks thesuccess of a series of monetary reforms implemented by the central bankwithin the framework of the IMF programme. This includes the developmentof basic open market operations, which have proved successful in giving thecentral bank some control over liquidity growth. The stability of the dinar,which has effectively been pegged against the US dollar at around SD256:US$1since 1999, has also curbed price growth, particularly as the nominal peg hasequated to an appreciation in real terms. The government has also continued tosubsidise a range of basic goods and services, although the scope and depth ofthe subsidy programme has eased in line with the economic reform drive. Aswith much of the macroeconomic data for Sudan, the inflation figure must betreated with a degree of caution as price data are only collected in the maincities in the north, for a basket of goods that reflects living standards prevailingthere. A broader study would likely show a more volatile performance,particularly as food prices have risen and fallen sharply over recent years incentral, southern and western Sudan according to the strength of supply.

Inflationa

2004 Annual average 2000-04% change; av 9.0 7.3



Inflation

44 Sudan


Inflation eroded real wages and living standards throughout the 1990s. Salaryscales and a minimum monthly wage were formerly set under the job evalua-tion and classification scheme dating from 1978, and although levels have beenincreased, prices have risen more rapidly. There have been periodic attempts torectify this, with large public-sector pay increases announced in the 1999 and2003 budgets. Overall, however, average real pay levels remain low, adding tothe importance of other sources of income, such as private transfers fromfamily members abroad, or earnings from work in the parallel economy.

Regional trends

The development of Sudan�s federal system of 26 states has contributed tochanges in the country�s economic structure, increasing the relative wealthdifferentials between eastern and western Sudan on the one hand and thericher central area of the country on the other. Since 1996 the role of stategovernments has been gradually expanded to include some responsibility forraising taxes and for providing community and social services. Revenuegenerated from rental income tax and some agricultural taxes and tariffs arethe direct responsibility of state governments, while VAT earnings are sharedbetween the central and regional bodies. Despite devolution, the centralgovernment maintains control over national development projects withinstates. Some states have required extra financial assistance to help establishtheir administrative and service-delivery capacity. In addition, some states, suchas Northern state, are so resource-poor that they continue to rely ongovernment transfers. The role of the provincial governments will bestrengthened further as the peace agreement between the government andrebels is brought into effect, with the new government of the south to beafforded considerable autonomy over economic as well as political affairs.

Economic sectors

Agriculture

Agriculture is Sudan�s largest economic sector in terms of its contribution toboth GDP and employment. Although official data continue to lag, theEconomist Intelligence Unit estimates that agriculture (including livestock andforestry) directly accounted for just under 40% of GDP in 2004, compared with18% for industry (including oil). The sector provided about 80% of the country�sexport earnings until the oil industry came on stream, and, according to IMFestimates, provides jobs for about two-thirds of the working population.Nomadic pastoralism and small-scale, rain-fed farming exist across much of thecountry, particularly in the south where they remain the main form ofproduction. Mechanised projects and the huge irrigation schemes watered bythe Blue Nile, White Nile and Atbara rivers are more important in the north.

Living standards

Sudan 45


The mechanised rain-fed subsector is concentrated in the Blue Nile area, intowns such as El Damazin, Kosti and Gedaref. In southern Sudan higher rainfallallows for two planting seasons, the first in April with a harvest in July, and thesecond in July with a harvest from November. In the north, rain arrivesbetween July and August, and the harvest is from November onwards. It isestimated that a total of 11.2m feddans (4.4m ha) were being farmed undermechanised rain-fed schemes in the early 1990s.

The irrigated subsector consists of about 3.5m feddans of cultivated land.Supply of water to the irrigated sector was agreed in the 1959 Nile Waters Treatywith Egypt, which grants 18.5bn cu metres of water to Sudan annually. Sudancurrently uses about 14bn cu metres of this, although the figure is rising. Themain crops grown are sesame, cotton, sorghum, sugar, wheat, groundnuts andoilseed. The largest (and most famous) irrigation project in Sudan is al-Gezira,but other major programmes are also in operation, including the 300,000-feddan (117,000-ha) Rahad scheme, which receives water from the Roseiresdam. There are long-standing plans to heighten the dam, which would increasethe amount of water available for irrigation, as well as boosting powergeneration. The 330,000-feddan New Halfa scheme receives water from theKhashm al-Girba reservoir on the Atbara River, near Kassala.

Al-Gezira

The al-Gezira scheme is the country�s largest irrigation project and the mostimportant historically and economically. It covers 880,000 ha between the Whiteand Blue Nile rivers and is the world�s largest irrigated agricultural scheme undersingle management. More than 100,000 tenant farmers and their families operatethe scheme in partnership with the government and the Sudan Gezira Board, whichprovides the administration, credit and marketing services. However, the relationshipbetween the tenant farmers and the board has frequently been difficult, withfarmers attempting to circumvent regulations in order to increase their individualreturns. The breakdown in the relationship accounts for many of the problemsafflicting the scheme, including low productivity. The government has neglected the

46 Sudan


upkeep of the Al-Gezira scheme in the past, leading to water losses and a build-up ofsilt in irrigation canals. The scheme is also heavily indebted.

Farmed land is owned by the government under the Unregistered Land Act of 1970,which was subsequently confirmed by the 1984 Civil Transactions Act. Customaryrights of usage and access have evolved, and are dependent upon communitymembership by kinship or marriage. When land needs to be left fallow, cultivationrights revert to the community.

Despite its continuing importance, the sector as a whole has suffered fromunderinvestment, leading to a deterioration in its basic infrastructure. This hasbeen evidenced by a marked decline in the irrigated area under cultivation,although there has been some pick up since 2001. The privatisation of someservices to the collective irrigation projects has exacerbated many of theproblems faced by the sector, with the debt-ridden farms unable to meet con-tractor payments, even for basic services such as channel clearance. Decliningcredit provision to the agricultural sector has also undermined growth, as thelarge number of non-performing loans to private agricultural enterprises havediscouraged the commercial banks from providing new credit, and formerspecialised credit institutions such as the Agricultural Bank have begun tooperate on a more commercial basis.

Following the food shortages of 2001, however, there was a concerted attemptto boost land area used for food production. According to the figures availablefrom the UN Food and Agriculture Organisation (FAO), this led to a 30% year-on-year increase in land area under cultivation in government-held areas in2001-02, and further gains in 2002-03, although in large part this was a result ofrainfall patterns as much as policy trends. The increase in food production fordomestic consumption has been at the expense of export-orientated cash crops,although output appears to have grown in 2004. Food output is alsoconstrained by volatile prices, which rise sharply during years of shortage andfall dramatically in years of surplus, distorting both farmers" incomes and theirplanting intentions for the following year. Civil conflict!both in the south and,more recently, in the west!also has a devastating impact on farming in areaswhere the conflict is most intense, forcing farmers away from the land theycultivate and damaging access to supplies.

Cotton: Cotton was traditionally the single most important export crop forSudan, but its contribution to export revenue has decreased in recent years. Inthe 1970s it accounted for an average of 53% of export revenue, but by 1995 thishad dropped to 22%, and it was replaced by sesame as the most importantagricultural export commodity the following year. The US Department ofAgriculture estimated output in 2003/04 at around 76,000 metric tonnes,compared with some 60,000 tonnes in 2001/02 and around 80,000 tonnes in2002/03. Despite the reported drop in output, a pick-up in average pricesboosted export earnings to around US$110m compared with a five-year averageof around US$60m. Interim data suggest revenue remained at just overUS$100m in calendar year 2004. Nevertheless, cotton earnings were just 4% ofthe reported total for export earnings during 2003.

Key crops

Sudan 47


Sesame: Sesame seed production increased in importance over the 1990s, withproduction rising rapidly from less than 100,000 tonnes in 1991, to a peak of416,000 tonnes in 1996. Planting areas rose in the same period from 530,000 hato 1.86m ha. In 1996 sesame displaced cotton as Sudan�s single most importantexport commodity, earning a total of US$141m, which represented 23% of totalexport revenue. According to the FAO, production eased to around 275,000tonnes/year (t/y) over the following two years, before bouncing back to some329,000 t/y in 1999 and 2000. Over subsequent years, however, planting areasand production have dropped, with the most recent Bank of Sudan (centralbank) data putting output at 122,000 tonnes in the 2002/03 season comparedwith 274,000 tonnes the year before. Export earnings have also trended down-ward over this period, although interim data for 2004 show a pick-up, appar-ently confirming anecdotal reports that the area planted for sesame increased.

Gum arabic: Historically, Sudan�s other famous agricultural export has beengum arabic, widely used in the production of soft drinks and other goods. Gumarabic is collected from wild acacia trees in Darfur and Kordofan in the westand centre of the country. Output reached a peak of 84,000 tonnes in 1994/95but fell over the following years to around 16,000 tonnes by 2000!a level ofproduction that has been maintained since. Markets for the product arerelatively price-sensitive, as synthetic substitutes for the gum exist. High pricesset by the Sudanese government in the mid-1990s encouraged the marketing ofsynthetics, as well as entry into the market by other producers. Formerly amonopoly supplier on the world market, Sudan now faces competition fromChad, Mauritania, Senegal, Mali and Nigeria.

Sorghum and wheat: Production of the Sudanese staple, sorghum, variesaccording to climatic conditions and the amount of irrigated land used for thecrop. According to FAO data, production of sorghum averaged around 3m t/yover the 1990s, but annual output varied from as little as 1.2m tonnes in 1990 toa peak of 4.3m tonnes in 1998. Output has historically been cyclical, withshortages in one year resulting in high prices that encourage increased plantingthe following year. This boosts output and pushes prices down, curbingplanting the next year. Following the food shortages of 2000 there was a sharppick-up in output in 2001 (from 2.5m tonnes to 4.4m tonnes), but production fellonce again in 2002 to under 3m tonnes. Production rose strongly again in2003/04, aided by good climatic conditions and the implementation of theceasefire between government and southern rebel forces, which allowedbroader and more effective cultivation across much of the south. The govern-ment has sought to promote sorghum exports, but poor marketing, coupledwith protectionism in neighbouring countries, has limited the progress that hasbeen made. Sudan does have a grain reserve scheme but it is ineffective,mainly owing to funding constraints and infrastructural hindrances.

Although sorghum is the key cereal, wheat is also produced. Output has fol-lowed a similar pattern to that for sorghum, varying according to governmentpolicy and climatic conditions, as well as being driven by domestic price cycles.Production reached a ten-year peak of 640,000 tonnes in 1997 as around330,000 ha were harvested, but slumped to under 175,000 tonnes in 1999. Thepush for higher food production in 2001 lifted output back up to 300,000

48 Sudan


tonnes, and up to an estimated 330,000 tonnes in 2003, although productionremains insufficient to meet rising domestic demand, leaving Sudan relianton imports.

Apart from forestry products such as gum arabic, Sudan�s forests providecharcoal, a vital energy source for the rural population. Forest stocks are,however, being depleted, especially in eastern and central Kordofan. Forestcover declined by an annual average of 1.1% during 1981-90, and anecdotalevidence suggests that the trend has continued to date. According to the FAO,total forest cover in Sudan fell by 0.8% per year in the 1990s, which was wellabove the world average, as forestry production and trade increased.

The bulk of Sudan�s fish catch comes from freshwater sources. The Suddswamps in the south and the Nile rivers provide an abundant source of fish,particularly Nile perch. The fish catch rose steadily in the 1990s, increasing from33,300 tonnes in 1991 to 56,000 tonnes in 1999, with the Ministry of Agricultureand Forests estimating a yield of 68,000 tonnes in 2003.

Livestock forms an increasingly important part of the agricultural economy, andhas displaced cash crops as the fastest growing non-oil export sector. As a resultof government encouragement, there has been a surge in commercial livestockproduction, notably of camels, goats, sheep and cattle. Much of the productionhas been for sale abroad, with the Arab states of the Gulf (especially SaudiArabia) showing strong demand for Sudanese output. Export growth was badlyaffected by an outbreak of Rift Valley Fever in 2000 in Saudi Arabia, which waslinked to meat exports from East Africa and led to a blanket ban on importsfrom the region (including Sudan) across the Gulf. As a result, export earningsfell from US$139m in 1999 to US$75m in 2000 (the ban was imposed late in theyear) and just US$15m in 2001. Most Gulf countries had lifted their ban onSudanese meat imports by late 2001, and the sector rebounded strongly over2002. Data from the Bank of Sudan for 2002 show total livestock sales ofUS$117m for the year as a whole, establishing it as the leading non-oil exportsector. Exports remained at close to US$100m in 2003, while interim data pointto revenue of almost US$150m during 2004.

Mining and semi-processing

In the early 1980s a US firm, Chevron, discovered large deposits of oil in fieldsnear Bentiu in Unity state and Melut in Blue Nile. Development was brought toa halt when a series of rebel attacks on the Chevron plant forced the companyto withdraw, but in the mid-1990s a Canadian firm, Arakis, bought the Chevronconcession in the Muglad basin, in Wehda (Unity!also known as WesternUpper Nile) province north of Bentiu. In March 1997 Arakis signed a consortiumagreement with the China National Petroleum Corporation (CNPC), theMalaysian state oil company, Petronas, and the Sudanese state-owned firm,SudaPet, forming the Greater Nile Petroleum Operating Company (GNPOC).

In 1998 Arakis was bought out by another Canadian firm, Talisman, whichcontinued to develop the sector in collaboration with the other members of theGNPOC. Under pressure from international campaign groups, Talisman agreed

Forestry and fisheries

Livestock

Oil

Sudan 49


the sale of its share to a state-owned Indian oil company, ONGC, in late 2002.ONGC took ownership of Talisman�s 25% stake in GNPOC towards the middleof 2003. The GNPOC concession covers blocks 1 and 2, and includes an oilexport pipeline and marine storage terminal. By agreement with thegovernment, foreign oil companies received 60% of the concession�s grossrevenue to recover costs, with the government taking the remaining 40%.Following the completion of the initial cost-recovery stage, however, thedivision has moved in Sudan�s favour.

Prior to 2005, GNPOC was the only concession to be in production. However,there are a large number of other fields at an advanced stage of development,the most significant of which is the Petrodar concession, covering blocks 3 and 7and being developed by a consortium led by CNPC (41%) and Petronas (40%),but also including Sudapet (8%), Gulf Oil (6%) and the al-Thani Corporation (5%).During 2003 and 2004 the consortium began capital works valued at close toUS$2bn, including the construction of a new export pipeline and exportterminal, as well as in-field production and transportation facilities. Productionis expected to come on stream in 2005. Over the four years since the concessionwas first awarded, drilling and surveying work has identified three major fields

50 Sudan


within the blocks, Adar-Yale, Agordeed and Palogue, with the latter generatingthe greatest degree of interest among consortium members. Data vary, but someestimates suggest that overall recoverable reserves from the three fields could beas high as 1.4bn-2bn barrels. CNPC also operates Block 6, which has begunproduction but is expected to see output rise strongly over 2005 and 2006.

As a legacy of Total�s investment in the 1980s, Total holds the concession forBlock 5, but made clear that it will not seek to reactivate its investment until thecivil war has been brought to a close. It is not clear how the French firm willrespond now that a peace deal between the government and southernrebels has been signed. Development of Block 5a, which is located on thesouthern border of the main GNPOC concession, is more advanced but hasexperienced problems. A Swedish company, Lundin Oil, was operating thesector, but pulled out in late 2003. The firm had plans to begin production in2002, after commercially viable deposits were discovered in 2001, but develop-ment was stalled by deteriorating security conditions in the area, which forcedLundin to withdraw its staff in early 2002. Lundin was in partnership withPetronas, which bought its share. An Austrian firm, OMV, was also involved inthe block, but in late 2003 it sold its holding to ONGC, leaving its sole holdingon Block 5b.

The pipeline, the civil war and human rights

Moves towards peace have shifted the focus away from the impact of oil on Sudan"scivil war. However, up until recent months, the production and transportation of oilhad evolved into a highly sensitive issue, since it was alleged by human rightsgroups that the government was ignoring basic human rights in order to access oilwealth. The construction of the pipeline between the oilfields and the exportterminals at Port Sudan was the key factor in the equation.The completion of the oil export pipeline (at 1,610 km, the longest in Africa) wasarguably the most impressive economic achievement of the post-1989 NationalIslamic Front (NIF) era. The project not only provides the government with an add-itional revenue stream, but also began a restructuring of the domestic economy andexternal accounts, as well as generating interest in a number of other oil and non-oildevelopment projects. The government also expected the pipeline to reward it with asubstantial military, political and economic advantage in the 15-year civil war.

During the fighting, the rebels, well aware of the strategic importance of the oilproject, carried out successful attacks on the pipeline, disrupting oil flow for severaldays on each occasion. They also threatened the oil installations themselves,although defences around the main Greater Nile Petroleum Operating Company(GNPOC) facilities prevented any serious attacks from taking place. Nevertheless, in2001 a small rebel raiding group successfully carried out a hit and run attack close tothe consortium�s base, while convoys carrying materials were also attacked. Rebelgains also forced Lundin, a Swedish company, to suspend development in its con-cession area, just to the south of the GNPOC area.

In addition, the development of the oil industry has prompted countries and non-governmental organisations (NGOs) opposed to the Islamist regime in Khartoum tostep up their campaign against the government, targeting foreign firms working in

Sudan 51


the country in a bid to force them to divest. As the only publicly listed Westerncompany working in Sudan, Talisman of Canada bore the brunt of the NGOs�campaign and saw its general meetings and offices picketed by campaigners, whoalso sought to pressure institutional investors to sell their holdings in the firm.Canadian capital market analysts suggest that unease over the company�s links withSudan and the effect of the divestment campaigns left Talisman stock trading at adiscount of as much as 12%. Given the profitability of the concession!which enjoyedthe lowest operating costs of all Talisman�s assets, and the fastest growing rate ofproduction!the company initially resisted selling its stake in GNPOC. As pressureincreased, however, Talisman�s executives were forced to reconsider their position,and in October 2002 Talisman announced it had agreed to sell its GNPOC stake (at asizeable profit on its initial capital outlay) to a state-owned Indian oil firm, ONGC.

Talisman�s experience led other Western-owned multinationals to hold back frominvesting in Sudan. Although it is widely expected that peace will allow inter-national firms to return, it will take time for them to be convinced that the war isindeed over. They will also need to be reassured that human rights concerns havebeen resolved, with the high-profile Darfur crisis only adding to their fears.

GNPOC�s intensive exploration programme has led to a rapid increase inknown reserves. In late 1997 these stood at just 417m barrels, but by the end of2004 Ministry of Energy and Mining officials claimed that proven reserveswere 800m barrels while probable reserves were as high as 2.5bn. The oilproduced to date has shown low sulphur and metal content, and hascommanded a price on the international markets close to the Indonesian blend,Minas, the medium-sweet benchmark in Asia, where a large part of Sudan�sexports have so far been sold. Sudanese crude, which has an API of 34°, ismarketed as �Nile Blend�.

Oil concessionsReserves Production

Block (m barrels) (barrels/day) Operator Stakeholders1,2 & 4 1,000 320,000 GNPOC CNPC (40%), Petronas (30%)

ONGC (25%), Sudapet (5%)

3 & 7 350 Due to commence in CNPC (41%), Petronas (40%), Sinopec (6%),third quarter of 2005 Petrodar Al Thani (5%), Sudapet (5%)

5A 150 Under exploration Lundin Petronas (69%), ONGC (26%),(now bought out) Sudapet (5%)

5B 150 Under exploration Petronas Petronas (41%), Lundin (24.5%),ONGC (24.5%), Sudapet (10%)

6 120 10,000 rising to 40,000 CNPC CNPC (92%), Sudapet (8%)8 - Under exploration Petronas Petronas (77%), Sudapet (15%), Hitech (8%)

9 - Under exploration Zafer Zafer (84%), Sudapet (16%)10,11,12,13,14 & 15 - - Free

Source: Middle East Economic Survey.

In August 1999 the government inaugurated the GNPOC-built, oil exportpipeline which connects the Unity and Heglig fields to the export terminalclose to Port Sudan, via the al-Jeili refinery north of Khartoum. The pipeline hasa design capacity of around 450,000 barrels/day (b/d), but first-phase capacityof some 250,000 b/d. This was sufficient to absorb initial production, which

Reserves and production

52 Sudan


rose from a start-up level of around 130,000 b/d in 1999 to 185,000 b/d in 2000,and 230,000 b/d in 2001. As new fields came on stream in 2002, however,production reached pipeline capacity, restricting average output to an estimated245,000 b/d for the year. Following the completion of first-phase expansionwork to the pipeline, output rose to an average of 280,000 b/d in 2003 and anestimated 325,000 b/d in 2004. Provided the development of blocks six, threeand seven proceed on time, production is expected to average over 450,000 b/din 2005 and some 650,000 b/d in 2006, firmly establishing Sudan as thesecond largest producer in Sub-Saharan Africa.

On average, domestic consumption stands at around 70,000 b/d, leaving anestimated average of about 250,000 b/d for export in 2004. The bulk of thisdeparts the country as crude, although Sudan also has a small surplus ofrefined products which are sold abroad.

Sudan"s main refinery is al-Jeili, located north of Khartoum. The new facility wasbuilt as a joint venture with CNPC and came on stream in mid-2000 at a cost ofaround US$600m. The facility had an initial capacity of around 60,000 b/d!enough to leave Sudan self sufficient (on a net basis) in petroleum products. Therefinery is fed directly from the export pipeline that passes close by.

Work has already begun on plans to expand capacity at al-Jeili, with capacityexpected to rise to around 100,000 b/d, possibly as early as 2006. The refineryis expected to use oil flowing from Block 6, which is operated by CNPC (whowill also carry out the expansion of al-Jeili). A new products-only pipeline isalso to be built linking al-Jeili to an export point near Port Sudan. The govern-ment has also announced plans for a complete overhaul of the 40-year-oldrefinery at Port Sudan. Production at the facility currently stands at around20,000 b/d, but this could be raised to as much as 80,000 b/d under govern-ment proposals. In addition to these facilities, there is also a 15,000-b/d plant atEl Obeid, a small refinery at Abu Gabra, with a capacity of about 2,000 b/d,and a 5,000-b/d topping plant built by Concorp.

Gold is mined in Sudan, largely in joint ventures with Chinese or French com-panies. Reserves are estimated at 37 tonnes and are concentrated around theRed Sea Hills. The government says that extraction is now at a rate of 5 t/y.Sudan also has untapped deposits of minerals, including chromite, silver, ironore, copper, lead, mica, asbestos, talc, tungsten, zinc, diamonds and uranium.The state-owned Sudanese Mining Company (SMC) produces chromite fromunderground mines in the Ingessana Hills south-west of El Damazin. Reservesare put at 1m tonnes, but chromite exports fell from 10,000-15,000 t/y in the1980s to 3,000 t/y in 1994. SMC also runs a small gypsum quarry in the RedSea Hills producing 20,000 t/y. Gypsum reserves are estimated at over500m tonnes.

Manufacturing

The manufacturing sector showed poor growth over much of the past decade,constrained by shortages in investment, trained personnel, raw materials, andforeign exchange for the import of essential intermediate inputs. These

Refineries

Gold and minerals

Sudan 53


problems led to chronically low capacity utilisation rates. In 1997, for example,the Ministry of Industry estimated that average capacity utilisation for textilescompanies was just 10%, despite the ready local supply of high-quality cotton.

Although many problems remain, the situation has begun to improve. Accor-ding to the central bank, the manufacturing sector grew by an average of 7% ayear between 1999 and 2003, and accounted for 8.2% of GDP. Although growthis occurring from a low base, the improvement is significant, and is likely inpart to be a product of the government�s economic reform programme, whichby stabilising Sudan�s macroeconomic environment and easing foreign-exchange and trade regulations has encouraged and facilitated investment. Themanufacturing sector has also benefited from the reform of the banking sectorand rapid growth in credit to the private sector. The development of the oilexport industry has also supported growth, making foreign exchange availablefor crucial imports that were previously beyond domestic producers� reach.

The most successful industries are in food processing, notably sugar refining.Production rose rapidly throughout the 1990s, from 430,000 t/y in 1994 to730,000 t/y in 2003, according to the Sudanese Sugar Company and Kenana!the key local producers. Refined sugar production now exceeds domesticdemand, making Sudan the Arab world�s only net sugar exporter. In addition,Sudan has developed a small vehicle industry located in the Giad Cityindustrial zone. Other small-scale manufacturing sectors include pharma-ceuticals, electrical goods, cement, soft drinks and flour. Despite repeatedgovernment claims that it is on the verge of revival, the textile sector hascontinued to languish. The sector could add significant value to local cottonand yarn production, and according to most estimates could not only meetdomestic demand (thus ending Sudan�s reliance on expensive imported goods)but also support a small export base as well. Textile manufacturing is alsorelatively labour intensive, in contrast to other, more capital good-based sectors.However, while the government puts total capacity at the 80 or so textilefactories at around 300m yards a year, actual output in 2003 was just 15m!acapacity utilisation rate of just 5%.

Construction

In rural areas most houses are built of traditional materials such as clay, mudbricks, straw and timber; demand for cement and other building materials islargely limited to urban areas. Given the rapid rural to urban migration duringthe past decade, estimates of the country�s housing stock are highly speculative.Most housing is privately owned. As with so much of the economy, growth inthe construction sector was erratic throughout the 1990s, with short-livedbooms in the mid-1990s (growth averaged close to 20% a year in 1994 and 1995according to official data) giving way to stagnation and decline. The sector hasbenefited from the sustained pick-up in overall economic growth rates since2000, with activity reportedly rising by around 12% in real terms in 2003.Although no breakdown of activity is available, growth is likely to have beendriven by the ongoing industrialisation programme, and continuing urban-isation. In 2003 the sector accounted for 5% of GDP.

54 Sudan


Financial services

The Bank of Sudan was established in 1959. It is officially charged withmanaging monetary and credit policy, and has responsibility for setting capitaland reserve requirements, and minimum profit rates (interest rates). There are26 commercial banks in Sudan, of which 17 are wholly or majority privatelyowned. Several foreign banks have operations in Sudan, including a Lebanesebank, Bank Byblos, which established itself in the country in mid-2004. Thereare also a number of non-bank financial institutions, most of which areinsurance firms. Following the 1989 coup, the banking sector became one of thefew in the world to be run entirely on Islamic finance principles, including abar on the charging (and payment) of interest. The shift to the Islamic system,the upheaval of the post-coup period and extensive political interference in thebanks� operations compounded the pre-existing frailties of the banking sector,generated by years of neglect and the demands of the war. Bad debts grew as aproportion of total loans, profitability fell, and the banks� capital bases wereeroded. Intermediation also fell, with bank credit to the private sector falling inreal (and even nominal) terms throughout most of the early and mid-1990s.

Consequently, the system was a focus of the IMF reform programme, whichcame into effect in 1997. A number of measures have been introduced tostrengthen the system, notably the tightening of capital adequacy ratios and theestablishment of a new paid-in capital minimum. Previously, there had been nominimum capital requirements, and their introduction was designed both tomake the sector more robust and to force Sudan�s smaller banks to merge.Classification and provisioning regulations against bad and suspect loans werealso tightened, internal liquidity ratios revised upward and central bankmonitoring and supervision requirements strengthened. In addition, the centralbank reformed its liquidity management tools to encourage the development ofa more active interbank local and foreign-currency market. The sector has alsobeen liberalised, most notably through the relaxation of strict credit allocationrules that had previously required the commercial banks to focus new lendingon areas designated for �priority development� by the government. There havealso been moves towards privatising or part-privatising the state-ownedcommercial banks and restructuring the state-run Agricultural Bank, the RealEstate Bank, the Savings and Social Development Bank, and the Workers Bank.As the economic reform programme has progressed, and oil-driven economicgrowth has picked up, the sector has also attracted growing interest fromforeign banks, particularly other Middle Eastern institutions seeking outlets forsharia-compliant funds.

The comprehensive reform programme has enjoyed some success, most visiblyin the marked growth in credit to the private sector since mid-2000 (see TheEconomy: Economic policy). Other aspects of the programme are taking longerto implement, however, reflecting the scale of the problems the sector built upbefore reform began. Dealing with non-performing loans has been a particularissue, which has impeded efforts to clean up the banks� balance sheets. Thecentral bank has also yet to fully enforce the minimum paid-in capital require-ments, a factor that explains the failure to implement any mergers within thesector. To accelerate the process, the IMF has undertaken to carry out a

Sudan 55


Financial Services Assessment Programme (FSAP), which will strengthen theFund�s influence over the reform programme, and offer a more substantiveframework for medium-term restructuring. This has yet to take place, and mayform part of a more comprehensive support and technical assistanceprogramme likely to be necessary when the implementation of the peaceagreement between the government and rebels leads to the establishment ofparallel Islamic and non-Islamic banking systems operating under a singlecentral bank.

Other services

Without a significant improvement in the country�s infrastructure andincreased political stability Sudan has little potential for tourism. However, withthe prospect of peace in the south an overland tourist route through Africa maybecome a possibility. The lack of suitable accommodation outside the capitaland poor domestic rail and air services ensure that the few tourists who arrivetravel via Khartoum to a small number of principally archaeological destin-ations in the north and east of the country. There is considerable potential inthe country�s Red Sea diving resources, but onshore facilities are inadequate,and those who dive in Sudanese waters often do so from cruise ships thattravel south from Egypt. There are four �first-class� hotels in Khartoum, totallingabout 1,200 beds, and a further five standard-class hotels. Most cater forbusiness and aid agency workers. Three hotels and tourist facilities in theDindar National Park have been offered for privatisation.

The external sector

Trade in goods

The structure of Sudan�s trade account has changed dramatically since thecountry began to export oil in 1999. Before that time, agricultural products(cotton, sesame and gum arabic) had been the state�s main source of revenue,with export earnings averaging around US$500m a year. Now, however,Sudan�s export profile is dominated by oil and related products, which haveaccounted for some 80% of all export revenue generated since 2000. Theestablishment of the oil sector has also led to a massive rise in the value ofSudan�s export earnings, which the Economist Intelligence Unit estimatesreached US$3.9bn in 2004!equivalent to the state�s entire export revenue in theeight years before oil came on stream. There are still some vulnerabilitiesassociated with Sudan�s export profile, which remains exposed to price trendson the volatile commodity markets. However, with oil production and exportvolumes rising rapidly, export earnings are likely to remain strong in the eventof all but the most catastrophic drop in prices.

56 Sudan


Foreign trade, 2004(US$ m)

Exports fob 3,889Imports fob -3,222

Trade balance 667


In addition to boosting export earnings, the development of the oil sector hasaltered Sudan�s import profile. With the increase in oil production andexpansion of the local refinery network Sudan has become largely selfsufficient in petroleum products, which had previously accounted for as muchas a quarter of overall spending. The demands of the oil sector have alsorequired a sharp increase in the import of capital goods needed for ongoingdevelopment and expansion plans. The increase in export earnings has alsoboosted the availability of foreign exchange, making currency and creditavailable to finance a range of imports for which funds were previouslyunavailable. Altogether, this has resulted in a marked increase in importspending, which has more than doubled from around US$1.4bn in 2000 to anestimated US$3.2bn in 2004.

Overall, the surge in import earnings has been offset by higher export receipts.Official data show that the trade account was close to balance in 2003, afterrecording modest surpluses of around US$300m-400m in 2000 and 2001 and adeficit of about US$350m in 2002. Based on interim data, we estimate thatSudan generated a trade surplus of around US$670m in 2004!the largest it hasever recorded.

Historically, Saudi Arabia has been Sudan�s most important export market, ab-sorbing close to 20% of total Sudanese exports over the second half of the1990s, despite political difficulties associated with Sudan�s support for Iraq inthe 1990-91 Gulf war. Saudi Arabia remains an important destination for non-oil exports (particularly livestock), but the development of the oil exportindustry has reformulated the overall pattern of trade, with China (the leadingconsumer of Nile Blend) established as the country�s largest export market.

Main trading partners, 2003Exports fob to: % of total Imports cif from: % of totalChina 24.0 China 19.2

Saudi Arabia 20.4 Saudi Arabia 7.6Japan 9.7 France 6.2

UAE 4.8 UK 5.5Germany 4.3 India 5.3

Source: IMF, Direction of Trade Statistics.

Sudan�s new-found self sufficiency in oil products has also impacted on importpatterns. According to IMF figures, Libya, Sudan�s leading goods supplier since1990, saw the value of its exports to Sudan fall from some 15% of total importsin 1999 to less than 1% in 2000 and 2001 as demand for imported refined goodsended. Instead, China has established itself as the country�s main supplier,underlining the leading role it has established for itself in Sudan�s oil and non-

Trade links with Asia takeprecedence

Sudan 57


oil economy. The high rankings for the UK and France reflect Sudan�s need toimport a range of finished products that are not manufactured locally.

US sanctions

In November 1997 the US president, Bill Clinton, signed an executive orderprohibiting trade and financial transactions between US companies andSudan. The sanctions were imposed to punish Sudan for human rightsabuses, the supposed persecution of Christians and alleged sponsorship ofinternational terrorism. Sudan was also included on a list of states to besanctioned under the US Freedom from Religious Persecution Bill andInternational Religious Freedom Bill, although with the executive order inplace, no new additional economic restrictions have been imposed. Theimpact of sanctions has generally been limited. The volume of trade betweenthe two countries before sanctions was small, and the freezing of Sudanesegovernment assets required by the executive order affected only US$4m-4.5m,according to the Bank of Sudan (the central bank).

In early 1999 the US Congress passed the Sanctions Reform Act, whichexcluded foodstuffs from sanctions on a number of named countries,including Sudan. This led to the resumption of US agricultural exports toSudan, although trade remains small scale. Despite the improvement in US-Sudanese ties, the president, George W Bush, renewed the executive orderevery year. In late 2002 the US also passed the Sudan Peace Act, whichrequired Mr Bush to impose new sanctions on Sudan (including measuresthat targeted the oil industry) if he judged that the regime was not negotiatingwith the rebels "in good faith". The measure was never used but was one ofthe levers that helped push the regime toward a peace agreement. It is certainthat sanctions will be lifted once this agreement is brought into effect,although this may be delayed by the unresolved conflict in Darfur!for whichthe US holds the government responsible. Restrictions on arms purchases,however, may remain.

Invisibles and the current account

Like its trade profile, Sudan�s current-account structure has changed dram-atically as a result of the development of the oil industry. The value of non-merchandise outflows has surged since oil exports began, largely reflecting therepatriation of profits generated by the foreign firms that have led the develop-ment of the sector. In 2003, for example, income debits reached US$880m as oilrevenue soared, compared with just US$11m in 1998!the year before oil exportsbegan. We estimate that they rose to more than US$1.4bn in 2004. Servicedebits have also leapt, reaching more than US$800m in 2003 compared withjust US$200m in 1998. In large part this rise is as a result of costs associatedwith the rising volume of Sudanese imports, although the costs of transportingthe government�s share of oil to market has also increased.

The main source of non-merchandise credits has remained current transfers,composed largely of remittances from the country�s substantial overseas work-

58 Sudan


force. The value of these transfers rose from around US$500m in the secondhalf of the 1990s to over US$1.2bn in 2003 according to official data, withinterim figures pointing to further growth in 2004. The upward trend in partreflects strong economic growth in the oil-rich Gulf, where many expatriateswork, as well as the strength of the euro against the US dollar. However, it alsomarks growing confidence in the domestic banking system and the stability ofthe Sudanese dinar, which has encouraged expatriates to transfer and convertfunds through official channels, rather than by informal means. As a result, partof the apparent gain in the value of transfers over recent years is likely to be aconsequence of statistics capturing flows that were previously unrecorded.

Overall, these trends in the non-merchandise account have boosted net out-flows to an annual average of around US$900m since 2000 compared withless than US$100m in the second half of the 1990s. This has largely offset theimprovement in the trade position, and ensured that the current account hascontinued to generate deficits of around US$500m-750m over the past fiveyears, close to the reported levels of the 1990s. With the economy growingrapidly over the period, however, the value of the shortfalls as a percentage ofGDP has eased to an average of around 5%, compared with more than 8% inthe five years before oil exports began.

Current account, 2004a

(US$ m)

Goods: exports fob 3,889Goods: imports fob -3,222

Trade balance 667Services: credits 141

Services: debits -893Services balance -752

Income: credits 21Income: debits -1,448Income balance -1,427

Current transfers: credits 1,432Current transfers: debits -501

Current transfers balance 930Current-account balance -582



Capital flows and foreign debt

The current regime has been saddled with the high external debt run up byprevious administrations. During the 1970s, encouraged by the internationalbanking and diplomatic community, Sudan borrowed heavily to finance adevelopment programme that failed to deliver the growth hoped for. When oilimport prices and interest rates rose steeply, Sudan found that its debt burdenwas unsustainable. In 1987 the government decided to limit debt-servicepayments to 25% of expected export earnings, but was unable to meet even thisrepayment schedule. The country accumulated substantial arrears, andrelations with creditors, including the IMF, deteriorated. Sudan was declared

Debt

Sudan 59


non-co-operative by the IMF in 1990 and was faced with the threat of expulsionfrom the Fund (see The economy: Economic policy). Relations with the IMFimproved in the late 1990s, with the non-co-operation declaration lifted in 1999and voting rights restored in 2000 as Sudan began to make payments on itsarrears. The repurchases, which have averaged around US$8.4m a quarter since1997, represent only a small fraction of its debt to the organisation, however,which stood at an estimated US$1.5bn at the end of 2003.

The World Bank estimated Sudan�s total external debt at US$16.4bn at the endof 2002, which is likely to have risen to at least US$17.2bn by the end of 2004.IMF data, however, suggest that the World Bank figures may be too low, withthe Fund putting the total foreign debt stock (including arrears) at US$24.2bn atthe end of 2003. Almost all medium- and long-term debt is owed by thegovernment, with Paris Club bilateral and multilateral debt to organisationssuch as the IMF, the International Bank for Reconstruction and Development(IBRD) and the Arab Monetary Fund (AMF) making up around one-half of thetotal. Some 90% of Sudan�s total debt is in arrears, as is 100% of its debt tocommercial creditors.

Sudan will require a rescheduling and forgiveness package if it is to deal withthese arrears. Such a programme!including the possibility of access to theheavily indebted poor countries (HIPC) initiative!was one of the incentivesheld out by Western governments involved in the peace talks between thegovernment and southern rebels over 2002-04. Now that these talks havesuccessfully been concluded, it is likely that debt deals will form part of abroader economic programme to consolidate the new post-conflict order. A firststep toward HIPC access will be the rescheduling of Sudan�s remaining arrearsto the Fund, together with the drawing up and endorsement of an economicprogramme sufficient to support an IMF poverty reduction and growth facility(PRGF). As well as facilitating an HIPC agreement, a deal with the IMF shouldalso open the door for successful negotiations with the Paris Club and otherWestern creditors.

On top of all this, a peace deal will require new finance to implement peacemeasures and to kick-start development programmes. This money must comefrom multilateral lenders as Sudan cannot afford (or indeed gain access to)commercial debt. The government of the south will also be able to contractdebt once the peace deal with the government begins to be implemented,although if this is to receive a sovereign guarantee, it must be assumed that thenational government in Khartoum will have some say over the value andterms of disbursements that are made. According to the central bank, Sudanreceived loans worth a total of just US$85m in 2003, almost double the US$45mreceived the previous year, but still the equivalent of just 0.6% of GDP. All ofthe debt was disbursed by Arab bilateral or multilateral concessional financingFunds. More substantial inflows are expected in the coming years, includingfunds from the economic development agencies of Saudi Arabia, Abu Dhabiand Kuwait, which have agreed to finance much of the US$1.2bn cost of thegiant hydroelectric power plant being built at Merowe in northern Sudan (seeResources and infrastructure: Energy provision).

60 Sudan


Sudan continues to receive substantial aid, despite international frustration atthe continuation of conflict!which donors recognise as the cause of much ofthe suffering in Sudan. Over the past decade, most of the aid has been channelledthrough the UN�s Operation Lifeline Sudan!an umbrella organisation co-ordinating relief work in southern Sudan. As the humanitarian crisis in Darfurdeepened over 2003 and 2004, that region also attracted significant sums,although again the finance was released to non-governmental organisations(NGOs) and UN agencies active in the area, not to the government.

Foreign reserves and the exchange rate

Although the current account has remained in deficit despite the developmentof the oil industry, increased net capital flows (principally foreign directinvestment in the oil sector) has improved Sudan�s overall external accountposition substantially, allowing the central bank to build reserves. In 1991reserves (not including gold) were virtually exhausted, standing at justUS$7.6m!equivalent to only two days of import cover. They remained at closeto these levels until 1995, when foreign-currency holdings rose to aroundUS$180m before falling away again over the following years. Reserves haveshown more sustained growth, however, since oil earnings came on stream in1999, with holdings rising to US$250m at the end of 2000, US$440m at the endof 2002 and US$1.4bn at the end of the third quarter of 2004!the most recentpoint for which data are available. Even allowing for the marked increase inimport spending apparent over the past few years, reserves of this level equateto around 4.1 months of import spending!still modest by international norms,but the highest year-end total the country has ever recorded.

The Sudanese government experimented with various exchange-rate systemsin the 1990s, none of which generated the stability the government sought.Shortly after introducing a single rate, the government was forced to return to amulti-tier system in 1993 as the market value of the pound plummeted. TheSudanese pound was allowed to float once again in September 1995, but rapiddevaluation forced the government to reimpose restrictions in July 1996,although the black market continued to flourish.

Under tutelage from the IMF, the exchange rate was unified once again in late1998, and allowed to operate as a �managed float�. In reality, the new regimehas become a fixed peg against the dollar, with the dinar standing atSD257:US$1 between 1999 and mid-2001. The rate weakened marginally toSD263:US$1 in 2002 and 2003, but over the course of 2004 resumed trading ataround SD257:US$1. Although the rate has shown little change, at the end of2001 the Bank of Sudan (the central bank) introduced a new system formanaging the dinar, under which an �indicative rate� for the dinar against theUS dollar was established, based on a weighted average of transactionsbetween the central bank, the commercial banks and other foreign-exchangeaccount holders. The bank holds biweekly auctions at which it buys and sellsforeign exchange according to bids received, allowing for a 1.5% spread aroundthe indicative rate. Outside of these auctions, the Bank of Sudan officially playsno role, with the trade instead occurring on the interbank market!although this

Aid

Exchange-rate regime

Sudan 61


has shown no volatility, with rates of exchange instead tracking those estab-lished by the Bank of Sudan�s auctions.

Stability in nominal terms constitutes a marked appreciation in real terms givenprevailing exchanges in Sudan. In talks with the government, the IMF haswarned that this could lead to the country�s non-oil exports losing their com-petitiveness. The government has been reluctant to allow the dinar to movetoward a freer float, however, partly because it fears the possible impact oninflation, but also because the stability of the dinar has become an importantsymbol of the new-found stability of the domestic economy itself. The govern-ment has also been able to point to the continued growth of non-oil exportearnings as evidence that the exchange rate is not overvalued. The weakness ofthe US dollar itself over 2004 and 2005 has also eased pressure on thegovernment to allow the dinar to weaken in nominal terms.

Regional overview

Membership of organisations

The Intergovernmental Authority on Drought and Development (IGADD), thebrainchild of the then president of Djibouti, Hassan Gouled Aptidon, wasestablished in January 1986 with six East African members: Djibouti (where thesecretariat is based), Ethiopia, Kenya, Somalia, Sudan and Uganda. Its aim wasto co-ordinate and channel funding into agricultural development and thealleviation of drought and desertification. Progress on development andenvironmental projects was slow, but the organisation made headway as aforum for regional politics and facilitated the successful reconciliation ofSomalia and Ethiopia in 1988. However, regional events in 1991 underminedIGADD: the presidents of Ethiopia and Somalia were overthrown, Eritreagained independence, and the self-proclaimed Somaliland Republic emerged.

Although IGADD gained a seventh member, Eritrea, in September 1993, itachieved little success in its attempts to help resolve internal conflicts in Sudanand Somalia. Thus, in March 1996, at a summit in Nairobi, IGADD renameditself the Intergovernmental Authority on Development (IGAD) and adopted anew charter proclaiming conflict resolution to be its priority. IGAD also pledgedto pay more attention to economic integration. However, with the outbreak ofwar between Ethiopia and Eritrea in May 1998, Sudan�s increasingly tenserelations with both Eritrea and Uganda, and with Ethiopia and Eritreasupporting different factions in the civil conflict in Somalia, the organisationwas severely handicapped in the late 1990s.

IGAD�s fortunes have improved since the turn of the decade. The uneasy UN-monitored peace between Ethiopia and Eritrea has held, and progress has beenmade in the quest for peace in Sudan. The latter culminated in the agreement,signed in Machakos, Kenya, in July 2002, that a referendum on self-determination for the south would be held after a six-year interim period. Afterthe resumption of fighting a few months later, IGAD quickly brokered aceasefire, which was swiftly followed by the resumption of talks. However, it isUS pressure on both sides, as well as US influence over the debate within

Intergovernmental Authorityon Development (IGADD)

62 Sudan


IGAD, rather than IGAD itself, that has been moving the rapprochement ahead.IGAD�s ongoing Somali reconciliation talks finally bore fruit in September 2004,with the creation of a new, 275-member, Federal Transitional Parliament and theselection of a house speaker and interim president. Long-term prospects for theSomali peace process will remain poor for the moment, but the recent progresshas offered greater hope than at any point in the last decade. Additionally,IGAD holds regular discussions on economic integration and infrastructural co-operation, but given the tensions between its members they are unlikely toresult in concrete action.

More commonly known as the Arab League, the organisation was formed in1945 to strengthen relations between Arab states and co-ordinate policies forthe good of the whole Arab nation. Its membership has stood at 22 sinceComoros was admitted in 1993. Palestine is treated as a full member of theorganisation. The League, which has observer status at the UN GeneralAssembly, is based in Cairo.

The Arab League has attempted to mediate in a number of regional conflicts,and was the overseer of the Arab boycott of Israel. It has been criticised as anineffective talking-shop; one of its handicaps is a system whereby unanimousdecisions of the Arab League Council are deemed binding on all members, butmajority decisions are binding only on those states that voted for them.

The Arab world has become increasingly divided in recent years, furthernegating the effectiveness of the League. US and UK policy toward Iraq was amajor cause of tension within the Arab world from the second half of the1990s, with even some countries strategically allied with the West taking asignally different position from Kuwait�s staunch support for Iraq�scomprehensive containment. However, when, from 2002, the prospect of aUS/UK ground invasion to overthrow the regime of the Iraqi president, SaddamHussein, became increasingly likely, a common Arab stance opposing anymilitary action against the Iraqi regime and in support of the lifting of UNsanctions was agreed at the April 2002 Arab League summit in Beirut. This wasstrongly criticised by Kuwait, given the implied criticism that was made of it inthe resolution. However, the early success of the US-led military campaign tooverthrow the Iraqi regime helped to minimise the tensions that had beenexpected within the Arab League and led to League recognition of the new IraqGoverning Council set up under US auspices. The sovereign interim Iraqigovernment has since maintained relatively co-operative relations with its Arabneighbours, although concerns over security threats emanating from Syria andSaudi Arabia remain.

An escalation in Israel-Palestinian violence in September 2000 promptedgreater unity between Arab League members, with the body promoting anumber of initiatives in the context of a perceived lack of US engagement onthe issue. However, an ebbing of Palestinian-Israeli violence has seen thoseArab states that have diplomatic relations with Israel!Jordan and, in particular,Egypt!adopt a more central role in peacemaking efforts. Nonetheless,differences within the League are likely to persist over the terms on whichpeace talks should be resurrected. In contrast, the US"s commitment to

League of Arab States

Sudan 63


democratisation in the Middle East is showing signs of having prompted amore concerted Arab League position, balancing criticism with attempts topublicise efforts within the region to conduct internal change.

The African Union (AU) is the successor to the Organisation of African Unity(OAU) and is based in the Ethiopian capital, Addis Ababa. The AU was formallylaunched in July 2002 at a meeting of African heads of state in the SouthAfrican city of Durban. This came two years after the AU�s formation was firstagreed in Togo in July 2000 and followed a one-year transitional period thatbegan after the ratification of the constitutive act of the AU by two-thirds of themember states in May 2001. The AU is modelled on the EU and has ambitiousplans for a parliament, a central bank, a single currency, a court of justice andan investment bank. The most advanced of these is for a Pan-AfricanParliament, which held its first session in South Africa in October, although itwill not play a legislative role for five years. The president is currently GertrudeMongella from Tanzania. The AU also aims to have common defence, foreignand communications policies, based loosely on those of the EU. Even if thesegoals are not fulfilled, the organisation fills the need for a forum for discussingthe continent�s problems and the idea of pan-African unity exerts a strong holdover member countries. In practical terms, the most high-profile AU event is theannual conference of heads of state, which is hosted by the member state thatis due to hold the chairmanship of the organisation for the following year. Theday-to-day affairs of the AU are managed by the AU commission, which ismodelled on the EU commission and was endorsed by the AU heads of statesummit in July 2003. The commission is headed by the former Malianpresident, Alpha Konaré, aided by a deputy, Patrick Mazimhaka of Rwanda,both of whom were elected at the summit. There are also seven appointedAU commissioners.

One of the main problems facing the AU is that many of the proposed newinstitutions and policy co-ordination mechanisms are costly and cannot befunded within the AU�s current resource allocations. To help to counter this, atthe July 2004 Annual Summit Mr Konaré presented a 2004-07 StrategicFramework aimed at launching Africa into the 21st century. Under this, memberstates are supposed to pledge 0.5% of GDP to fund the AU, which will allow itto double the staff at its headquarters and to push ahead with theimplementation of the New Partnership for Africa�s Development (Nepad). Thisis a potential bone of contention with the South African government, which iskeen for Nepad to remain in its South African headquarters. However, to date,many members still fail to pay their membership dues so further commitments,other than from external donors, are unlikely. In December 2003 donors andexternal lenders expressed their full support for the AU�s initiatives and thecreation of new institutions.

The main criticism levelled at the OAU in the last decade was that little realaction resulted from its policy announcements. There are concerns that the AU,like its predecessor, will be undermined by a lack of real commitment to itsinitiatives amongst the 53 member states, many of which suffer from very weakgovernance. This problem is further compounded by the fact that manymember states are unlikely to give up the sovereignty required to make several

African Union (AU)

64 Sudan


of the proposed initiatives!such as a single currency or a court of justice!operate effectively.

The AU will also battle to overcome opposition to the principle of non-interference, which has been a major hindrance to the resolution of conflicts onthe continent and is a contentious issue among member governments.Although non-interference was enshrined in the old OAU, this is not the casewith the AU, which has set up a Peace and Security Council (PSC; to replace theOAU�s Mechanism for Conflict Prevention, Management and Resolution)modelled on the UN Security Council. It is envisaged that the PSC will sanctionmilitary intervention in member states in cases of genocide, unconstitutionalchanges of government and gross human rights abuse. The proposed militaryintervention by the AU is to be through a standing armed force, which isprojected to comprise five battalions by 2010 and has already received somefunding from both the EU and the US. Even without the establishment of thePSC, since May 2003 the AU has had an observer mission in Burundi, led bySouth Africa and including troops from Mozambique and Ethiopia, to helpenforce a peace agreement in Burundi"s civil war. An AU observer mission wasalso sent to the Darfur region of Sudan in July 2004, and a protection force isbeing deployed. If this is increased, to become a real peacekeeping force, itcould prove to be the first real test of the AU�s commitment to intervening inmember countries� domestic affairs.

Based in Lusaka, Zambia, the Common Market for Eastern and Southern Africa(Comesa), is the successor organisation to the regional Preferential Trading Area(PTA), and came into force on December 8th 1994 with 12 members. Comesanow has 19 members: Angola, Burundi, Comoros, the Democratic Republic ofCongo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Madagascar, Malawi, Mauritius,Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia and Zimbabwe. TheComesa region has a total population of around 385m and an estimated GDPof US$170bn. Lesotho, Mozambique and Tanzania have all withdrawn fromComesa since 1997 to concentrate on their membership of the Southern AfricanDevelopment Community (SADC), while Namibia withdrew in July 2003,stating that its industries were too weak to compete with Comesa�s Free TradeArea (FTA). South Africa�s decision not to join Comesa makes SADCmembership more attractive to its main trading partners.

The original PTA, launched in 1981, aimed to liberalise trade and encourage co-operation in industry, agriculture, transport and communications. Comesa�sprincipal aims build on these ideals; its main goals are to eliminate thestructural and institutional weaknesses of member states and to promote thepolitical security and stability necessary for sustained development, bothindividually and collectively as a regional bloc. These aims are to be achievedthrough monetary union with a single currency and a common central bank.The creation of an FTA on October 31st 2000 was to be a major step towardsachieving them. By mid-2004 11 of the 19 members had agreed to participate(Burundi, Djibouti, Egypt, Kenya, Madagascar, Malawi, Mauritius, Rwanda,Sudan, Zambia and Zimbabwe), with Swaziland being granted a derogation toparticipate on a non-reciprocal basis (in order to reciprocate, Swaziland would

Common Market for Easternand Southern Africa (Comesa)

Sudan 65


require the permission of other member states of the Southern AfricanCustoms Union, to which it also belongs).

The eleven FTA members have removed all barriers to intra-regional trade,although they retain tariffs on imports from outside Comesa, and the Rwandangovernment has stated that it will only offer zero tariffs on goods produced byComesa countries participating in the FTA. To encourage other members to jointhe FTA, a fund was created in 2002 to compensate those countries facingrevenue loss, although the source and extent of this funding is not clear. Indeed,this fund does not appear to have been used when Burundi and Rwandajoined in early 2004, with both countries estimating large drops in customsrevenue as a result of participating.

The reluctance of most of the remaining eight member countries outside of theFTA to join, coupled with intense disagreements over a Common ExternalTariff (CET), is jeopardising any chance of the organisation meeting its objectiveof a customs union by December 2004. Senior members at the Comesasecretariat have reportedly acknowledged that the customs union will have tobe delayed into 2005 at least. The target of full monetary union by 2025remains, but seems similarly improbable.

Between 2001 and 2003 trade among Comesa FTA countries grew by 48%,compared with growth of 22% among Comesa countries as a whole. Intra-regional trade was valued at US$5.3bn in 2003. In 2002 intra-Comesa trade as aproportion of total trade ranged from 4.3% for the Seychelles to 18% for Kenya.Over the past 30 years the share of Comesa exports as a percentage of intra-regional exports has grown only slightly, from 9% in 1970 to 10.7% in 2002(although these figures do not capture the high level of illegal crossbordertrade). Reasons for the low level of intra-Comesa trade include a lack ofpolitical commitment and political stability in member countries, and weakbalance-of-payments and foreign-reserves positions. In some cases there arehardly any official trade links between member states. Egypt, Kenya, Ugandaand Zimbabwe accounted for 58.8% of the trade between members of Comesain 2002.

As industry and manufacturing are generally poorly developed, manymembers are unprepared to reduce tariffs further for fear of undermining localindustries (Tanzania�s main reason for leaving) and fiscal revenue collection. Afurther constraint has been the strict and cumbersome rules of origin, whichare open to conflicting interpretations, and there have been some instances ofmember countries refusing to honour the relevant certificate of origin presentedwith Comesa imports. In addition to these impediments, progress towards freetrade is hampered by political tensions between member states.

Regional free-trade areas like Comesa"s FTA aim to increase intra-regionalcommerce, leading to higher economic growth rates, but they attract criticismfrom many who feel that this cannot be achieved while supply-sideconstraints!such as poor infrastructure, inefficient transport links, loweducation and skills levels, and cumbersome bureaucracy!remain. Comesa hasconcentrated on trade integration, but the lack of uniformity in investmentcodes and regulatory arrangements has been an impediment to crossborder

66 Sudan


trade and investment. The commitment to Comesa of many of its members isweak and meetings are frequently cancelled. Moreover, attempts at promotingcrossborder investment and monetary harmonisation have been superseded byinitiatives introduced by the East African Community and SADC.

Under the old PTA system, a multilateral clearing facility was established and aPTA unit of account (UAPTA), equivalent to the IMF�s SDR, was used to settledebts between members, the balance being payable in US dollars. In 1997 theUAPTA was replaced by the Comesa dollar, which is pegged to the US dollar. AComesa court was officially opened in March 2001, although it had beenestablished three years earlier. In theory, the court, which aims to be anindependent arbitrator in trade-related disputes, has jurisdiction over nationalcourts, but in practice it does not have the powers to enforce its rulings and hasbeen hamstrung by a lack of finance. Comesa also set up the African TradeInsurance Agency (ATI) in 2001. Financed by a US$5m start-up loan from theWorld Bank, the ATI aims to provide political risk cover for investors in allmember countries. In November 2002 Comesa, along with other Eastern andSouthern African regional integration organisations, established the Inter-regional Co-ordinating Committee (IRCC) to promote regional economicintegration and the integrated management of natural resources, transportand communications.

Sudan 67


Appendices

Sources of information

The Sudanese government publishes some statistics on the economy, but theseare extremely difficult to access outside the country. With closer monitoring ofthe Sudanese economy by the IMF, timely data are now more readily available.However, some of this information, which is reliant on government data, is ofquestionable quality (see The economy: Economic performance).

Bank of Sudan, Annual Report

Bank of Sudan, Foreign Trade Statistical Digest

Ministry of Finance, Economic Survey

Ministry of National Planning, Foreign Trade Statistics

Bank for International Settlements, Banking and Financial Market Developments(quarterly), Basle, Switzerland

Energy Data Associates, Bishops Walk House, 19-23 High Street, Pinner HA5 5PJ

IMF, Direction of Trade Statistics (quarterly and annual), Washington DC

IMF, International Financial Statistics (monthly), Washington DC

IMF, Staff Reports on the 2000 Article IV Consultations, June 2000, Washington DC

IMF, Sudan: Statistical Annex, July 2000, Washington DC

International Institute for Strategic Studies, The Military Balance (annual), London

UN Food and Agriculture Organisation (FAO), Production Yearbook (annual),Rome, and FAOSTAT at www.fao.org

United Nations Development Programme (UNDP), Human DevelopmentRepor 2002

World Bank, Global Development Finance (annual), Washington DC

World Bank, World Development Indicators (annual), Washington DC

World Bank, World Tables (annual), Washington DC

Africa Rights, Food and Power in Sudan, London, 1997

International Crisis Group, God, Oil and Country, 2002

J Millard Burr & Robert O Collins, Requiem for the Sudan, Westview, Colorado, 1995

G M Craig (ed), The Agriculture of the Sudan, Oxford University Press, 1991

Minority Rights Group, Sudan: Conflict and Minorities, London, 1995

Peter Woodward, Sudan, 1898-1989, Rienner, London, 1990

Peter Woodward (ed), Sudan since Nimeiri, Croom Helm, London, 1991

International statistical sources

National statistical sources

Select bibliography

68 Sudan


http://www.sudan.net (daily news updates on Sudan in English and Arabic)

http://www.bankofsudan.org (central bank annual, quarterly economic reports)

http://www.fao.org (includes details of Sudanese agricultural production)

http://www.wfp.org (includes details of emergency food relief work in Sudan)

http://www.crisisweb.org/projects/project.cfm?subtypeid=21 (periodic reports onSudan civil war and peace process)

Reference tables

Population (m)1999 2000 2001 2002 2003

Total 30.74 31.44 32.15 32.88 33.61 % change, year on year 2.1 2.3 2.3 2.3 2.2

Source: IMF, International Financial Statistics.

Government finances(SD bn)

1999 2000 2001 2002 2003Total revenue 205.2 326.3 370.0 472.2 703.6 Tax 154.0 200.1 188.7 213.7 266.8 Non-tax (incl oil) 51.2 126.2 181.3 258.5 436.8

Total expenditure 227.0 349.8 401.2 517.8 735.9 Current 197.5 275.3 322.5 377.0 563.0 Capital 29.5 74.5 78.7 140.8 172.9

Budget balance -21.8 -23.5 -31.2 -45.6 -32.3

Sources: 1996-1999: IMF, Sudan: Recent Economic Developments; Sudan: Statistical Annex; 2000: Bank of Sudan, Annual Report.

Money supply(SD bn unless otherwise indicated; end-period)

2000 2001 2002 2003 Sept '04Money (M1) incl others 235.0 271.0 352.0 458.0 530.0 % change, year on year 42.4 15.3 29.9 30.1 31.8Quasi-money 113.0 161.0 211.0 276.0 350

Money (M2) 348.0 432.0 563.0 734.0 880 % change, year on year 37.0 24.1 30.3 30.4 31.9

Source: IMF, IFS.

Useful websites

Sudan 69


Gross domestic product(market prices)

1999 2000 2001 2002 2003Total (US$ m)At current prices 10,639.8 11,248.8 12,079.6 13,552.5 15,818.5

Total (SD m)At current prices 2,687,093 2,892,296 3,124,990 3,568,510 4,128,322At constant (1982) prices 1,294.2 1,360.8 1,444.4 1,533.0 1,624.2 % change, year on year 6.5 5.1 6.1 6.1 5.9Per head (SD)At current prices 87,414 91,994 97,200 108,531 122,830At constant (1982) prices 42 43 45 47 48 % change, year on year 4.1 2.8 3.8 3.8 3.6

Source: World Bank.

Prices and earnings(% change, year on year)

1999 2000 2001 2002 2003Consumer prices (av) 16.0 5.7 5.8 8.4 7.8

Source: IMF.

Labour force1997 1998 1999 2000 2001

Total (m) 11.5 11.8 12.1 12.4 12.7

Women as % of total labour force 28.8 29.0 29.3 29.5 29.8

Source: IMF.

Area, output and yield of selected crops1999 2000 2001 2002 2003

SorghumArea ('000 ha) 4,529 4,195 5,742 5,003 7,081Yield (kg/ha) 5,181 5,931 7,652 5,647 7,327Production ('000 tonnes) 2346 2488 4394 2825 5188MilletArea ('000 ha) 2,393 2,087 2,586 2,437 2,570Yield (kg/ha) 2,085 2,377 2,235 2,384 3,051Production ('000 tonnes) 499 496 578 581 784

Groundnuts (in shell)Area ('000 ha) 1,514 1,462 1,531 1,350 1,900Yield (kg/ha) 6,911 6474 6,465 9,384 6,316Production ('000 tonnes) 1,047 947 990 1,267 1,200SesameArea ('000 ha) 2,174 2,006 1,587 1,174 850Yield (kg/ha) 1,513 1,406 1,864 1,039 3,824Production ('000 tonnes) 329 282 296 122 325WheatArea ('000 ha) 142 91 120 115 150Yield (kg/ha) 12,113 23,266 25,225 21,385 22,133Production ('000 tonnes) 172 212 303 246 332Gum arabicProduction ('000 tonnes) 18 28 n/a n/a n/a

Source: FAO.

70 Sudan


Livestock numbersa

('000 head)

1999 2000 2001 2002 2003Camels 3,031 3,108 3,203 3,342 3,300Cattle 35,825 37,093 38,325 38,183 38,325

Chickens 36586 36,465 36,820 37,000 37,000Sheep 44,802 46,095 47,043 48,136 47,000

Goats 37,346 38,548 39,952 41,485 42,000

a Livestock numbers are total stocks of live animals.

Sources: FAO; IMF, Statistical Annex.

Animal and dairy production('000 tonnes)

1999 2000 2001 2002 2003Meat 639 664 739 740 698

Milk 4,800 4,851 4,887 4,911 5,056Poultry meat 30 30 31 31 31

Eggs 44 45 46 46 47Fish 53 n/a n/a n/a n/a

Cattle hides 53 55 56 56 56

Source: FAO.

Cotton crops('000 bales unless otherwise indicated)a

2000/01 2001/02 2002/03 2003/04 2004/05Area ('000 ha) 240 150 180 180 200Yield (kg/acre) 324 399 527 423 435

Production 340 275 375 350 400Local sales 90 45 45 20 20

Exports 250 225 300 375 325

a 1 bale=480 lb.

Source: US Department of Agriculture, Foreign Agricultural Service.

Consolidated balance sheets of the deposit money banks(SD bn)

2000 2001 2002 2003 Aug 2004Reserves 57.15 57.41 67.68 91.01 111.08

Foreign assets 73.66 89.73 127.92 130.27 155.89Claims on central government 4.20 7.33 20.88 35.04 38.33

Claims on private sector 71.48 101.14 178.43 279.63 348.64Total assets incl others 215.37 266.46 410.45 553.74 666.56Demand deposits 84.13 109.14 147.46 194.63 238.97

Time & savings deposits 106.74 157.98 210.26 271.88 332.31Foreign liabilities 3.81 9.11 13.72 14.79 16.91

Capital accounts 32.20 47.64 73.69 110.31 103.5Total liabilities incl others 215.37 266.46 410.45 553.74 666.56

Source: IMF, International Financial Statistics.

Sudan 71


Foreign trade(US$ m)

20042000 2001 2002 2003 Jan-Jun

Exports fob 1,806.7 1,698.7 1,949.1 2,542.2 1,670.5

Imports cif 1,552.7 1,585.5 2,446.4 2,736.2 1,829.2Trade balance fob: cif 254.0 113.2 -497.3 -194.0 -158.7


Main exports fob(US$ m)

20042000 2001 2002 2003 Jan-Jun

Petroleum & products 1,408 1,377 1,511 1,994 1,292

Sesame 147 105 75 75 109Livestock & meat 66 2 117 98 81

Gold 46 44 53 59 14Cotton 53 44 62 108 57Gum arabic 23 24 32 40 19

Sugar 13 12 10 7 11Ground nuts 6 9 6 1 2


Main imports cif(US$ m)

20042000 2001 2002 2003 Jan-Jun

Machinery & equipment 323.5 442.5 620.8 662.0 500.2

Petroleum & other crude materials 219.2 108.0 186.9 141.0 92.1Manufactured goods 293.7 296.5 555.0 728.8 442.3

Transport equipment 158.7 202.9 255.8 372.0 311.9Chemicals 221.1 123.6 206.5 226.5 89.1Wheat & wheat flour 207.9 138.1 221.3 200.7 135.9

Textiles 60.5 85.7 140.3 121.2 80.8Tea 28.7 31.0 30.7 32.4 16.8

Drinks & tobacco 18.7 23.7 26.5 17.3 16.8Total incl others 1,552.7 1,585.5 2,446.4 2,736.2 1,829.2

Sources: IMF, Sudan: Recent Economic Developments; Bank of Sudan.

72 Sudan


Main trading partners(% of total)

1999 2000 2001 2002 2003Exports fob to:China 6.9 32.6 46.2 53.3 24.0Saudi Arabia 17.6 5.8 4.9 4.7 20.4Japan 10.4 18.1 14.5 13.4 9.7UAE 1.2 � � � 4.8

Imports cif from:China 16.0 11.9 13.4 20.1 19.2Saudi Arabia 7.2 9.6 8.2 7.5 7.6France 6.4 4.9 6.0 3.8 6.2UK 10.2 6.5 6.8 5.5 5.5

Source: IMF, DOTS.

Main composition of trade(US$ m; fob-cif)

1999 2000 2001 2002 2003Exports fobOil 276.0 1,408.0 1,377.0 1,510.9 1,994.2Livestock 114.0 66.0 2.0 117.1 97.9Sesame 127.3 146.9 104.5 74.6 74.5Cotton 47.2 53.0 44.4 62.2 107.9Total exports incl others 780.0 1,806.7 1,698.7 1,949.1 2,542.2Imports cifMachinery & equipment � 323.5 442.5 620.8 662.0Manufactured goods � 293.7 296.5 555.0 699.0Transport equipment � 158.7 202.9 255.8 372.0Wheat & wheat flour � 207.9 138.1 221.3 200.7Total imports incl others 1,415.0 1,552.7 1,585.5 2,446.4 2,736.2

Source: IMF, DOTS.

Sudan 73


Balance of payments, IMF series(US$ )

1999 2000 2001 2002 2003Goods: exports fob 780.1 1,806.7 1,698.7 1,949.1 2,542.2Goods: imports fob -1,256.0 -1,366.3 -1,395.1 -2,293.8 -2,536.1

Trade balance -475.9 440.4 303.6 -344.7 6.1Services: credit 81.6 27.4 14.6 132.2 36.5

Services: debit -274.9 -647.6 -660.3 -818.2 -830.3Income: credit 19.1 4.6 17.8 29.2 10.0

Income: debit -123.2 -579.6 -571.9 -638.0 -879.2Current transfers: credit 702.2 651.3 730.4 1,085.9 1,218.4Current transfers: debit -393.7 -453.3 -452.5 -454.5 -516.8

Current-account balance -464.8 -556.8 -618.3 -1,008.1 -955.3Direct investment in Sudan 370.8 392.2 574.0 713.2 1,349.2

Direct investment abroad 0.0 0.0 0.0 0.0 0.0Inward portfolio investment

(incl bonds) 0.0 0.0 0.0 0.0 0.0Outward portfolio investment -10.0 -10.0 -10.0 1.0 15.0

Other investment assets -78.5 -38.4 -53.4 -55.1 -148.0Other investment liabilities 41.2 102.9 92.8 41.6 181.2

Financial balance 323.5 446.7 603.4 700.7 1,397.4Capital account nie credit 13.0 45.8 16.5 11.9 0.0Capital account nie debit -67.2 -68.7 -135.8 -105.2 0.0

Capital account nie balance -54.2 -22.9 -119.3 -93.3 0.0Net errors & omissions 750.5 167.2 368.4 -0.5 492.2

Overall balance 73.2 114.8 123.9 -150.9 245.3Financing (� indicates inflow)Movement of reserves -9.0 -98.1 -58.6 129.5 -322.9Use of IMF credit & loans 0.0 0.0 0.0 0.0 0.0

Source: IMF, IFS.

74 Sudan


External debt, World Bank series(US$ m unless otherwise indicated; debt stocks as at year-end)

1998 1999 2000 2001 2002Public medium- & long-term 9,225.9 8,852.0 8,646.8 8,487.5 9,042.9Private medium- & long-term 496.0 496.0 496.0 496.0 496.0

Total medium- & long-term debt 9,721.9 9,348.0 9,142.8 8,983.5 9,538.9 Official creditors 7,666.4 7,505.2 7,329.7 7,201.7 7,494.8 Bilateral 5,615.2 5,494.1 5,383.5 5,302.5 5,504.3 Multilateral 2,051.2 2,011.1 1,946.2 1,899.2 1,990.5 Private creditors 2,055.5 1,842.8 1,813.1 1,781.8 2,044.1

Short-term debt 6,349.0 6,069.5 5,973.7 5,879.5 6,276.6 Interest arrears 5,893.0 5,760.6 5,703.4 5,738.5 6,139.4Use of IMF credit 772.1 714.7 625.0 551.2 573.2

Total external debt 16,843.0 16,132.2 15,741.5 15,414.2 16,388.7Principal repayments 58.5 43.5 58.6 53.9 22.3

Interest payments 2.7 13.4 2.4 1.8 1.2 Short-term debt 0.0 0.0 0.0 0.0 0.0Total debt service 61.2 56.9 61.0 55.7 23.5

Ratios (%)Total external debt/GDP 157.5 151.6 139.9 127.6 120.9Debt-service ratio, paida 5.2 4.0 2.6 2.4 0.8

Note. Long-term debt is defined as having original maturity of more than one year.

a Debt service as a percentage of earnings from exports of goods and services.

Source: World Bank.

Foreign reserves(US$ ; end-period)

2000 2001 2002 20032004

SepTotal reserves incl gold 247.3 117.8 440.7 847.2 1,359.2Total international reserves excl

gold 247.3 117.8 440.7 847.2 1,359.2Gold, national valuation 0.0 0.0 0.0 0.0 0.0

Source: IMF, IFS.

Exchange rates(SD per unit of currency unless otherwise indicated; annual averages)

2000 2001 2002 2003 2004US$ 257.1 258.7 263.3 261.0 257.8

£ 389.0 372.4 394.6 426.1 470.6� 237.6 231.7 248.8 295.5 320.1R 37.0 30.0 25.0 34.5 40.0

Rmb 31.1 31.3 31.8 31.5 31.1¥ 2.39 2.13 2.10 2.25 2.38

Source: IMF.

Editors: Philip McCrum (editor); Hania Farhan (consulting editor)Editorial closing date: February 28th 2005

All queries: Tel: (44.20) 7830 1007 E-mail: [email protected]

sudan - international university of japan

Documents