________________________________________________________________________________

Country Report

Sudan

Generated on January 27th 2020

Economist Intelligence Unit
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United Kingdom

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ISSN 2047-5853

Symbols for tables

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Sudan 1

Sudan
Summary
2 Briefing sheet

Outlook for 2020-24

4 Political stability
5 Election watch
6 International relations
6 Policy trends
8 Fiscal policy
9 Monetary policy
9 International assumptions
10 Economic growth
11 Inflation
11 Exchange rates
12 External sector
13 Forecast summary

Data and charts

14 Annual data and forecast
15 Quarterly data
15 Monthly data
16 Annual trends charts
17 Monthly trends charts
18 Comparative economic indicators

Summary
18 Basic data
21 Political structure

Recent analysis
Politics
25 Forecast updates
26 Analysis

Economy
28 Forecast updates

Country Report January 2020 www.eiu.com © Economist Intelligence Unit Limited 2020

Sudan 2

Briefing sheet
Editor: Sreya Ram
Forecast Closing Date: January 10, 2020

Political and economic outlook

The military and opposition groups have set up a transitional civilian administration in Sudan,
improving near-term political stability. There remains a risk of the military reneging on the deal
and attempting a power grab at the end of the transitional period.
Although both sides in South Sudan's civil conflict signed a peace deal in September 2018, the
agreement is fragile, and the risk of it collapsing remains considerable, particularly as the
formation of the transitional government is facing delays.
After contracting by an estimated 2.5% in 2019, Sudan's economy will return to growth as
political instability eases following the political settlement. Real GDP growth will still be weak,
however, averaging just 2% a year in 2020-24.
The Central Bank of Sudan revalued the exchange rate of the Sudanese pound from
SDG47.5:US$1 to SDG45:US$1 in May. However, as downward pressures resume, the central
bank will be forced to devalue the currency in 2020.
Inflation in Sudan will stay high throughout the forecast period, owing to currency weakness,
ineffective monetary policy and the monetisation of large fiscal deficits. The Economist
Intelligence Unit expects inflation to average 27.5% a year in 2020-24.
Sudan's current-account deficit will narrow in 2020-24 as inflationary pressures moderate, the
pace of currency depreciation slows and the government implements policies to boost exports.
Key indicators
2019a 2020b 2021b 2022b 2023b 2024b
Real GDP growth (%) -2.5 1.5 1.9 2.1 2.2 2.4
Consumer price inflation (av; %) 50.8 43.4 26.3 24.2 23.4 20.1
Government balance (% of GDP) -5.5 -5.6 -4.9 -4.6 -4.4 -3.9
Current-account balance (% of GDP) -14.4 -12.8 -12.2 -11.2 -9.4 -7.8
Exchange rate SDG:US$ (av) 45.77 59.12 68.10 73.48 80.11 81.51
a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts.

Country Report January 2020 www.eiu.com © Economist Intelligence Unit Limited 2020

Sudan 3

Key changes since November 28th

On the back of a rise in Sudan's domestic food prices in November, which we expect to persist
in early 2020, we have raised our inflation estimate for 2019 to an average of 50.8% (from 50.4%
previously) and our forecast for 2020 to 43.4% (from 41.4% previously).

The month ahead

Mid­February—Inflation (January): We expect month-on-month rises in inflation to continue
in January and the first quarter of 2020, as domestic food prices stay high and the black-market
exchange rate stays weak. But average inflation will fall in 2020 owing to high base effects and
an easing of supply-side shortages as Sudan's economy recovers.

Major risks to our forecast

Scenarios, Q4 2019 Probability Impact Intensity
The military seizes power from the Sovereign Council and re-establishes Very
High 20
military rule in Sudan high
Businesses suffer from a shortage of suitably skilled labour High Moderate 12
Infrastructural shortcomings disrupt firms' operations High Moderate 12
The government removes corporate tax exemptions High Moderate 12
The government continues to heavily manage the exchange rate despite
Moderate High 12
waning reserves
Note. Scenarios and scores are taken from our Risk Briefing product. Risk scenarios are potential
developments that might substantially change the business operating environment over the coming two
years. Risk intensity is a product of probability and impact, on a 25-point scale.
Source: The Economist Intelligence Unit.

Country Report January 2020 www.eiu.com © Economist Intelligence Unit Limited 2020

Sudan 4

Outlook for 2020-24

Political stability
The near-term political outlook has improved following the swearing-in of a Sovereign Council
(SC, which will lead the country during the transitional period) in August 2019 and the formation
of a new transitional government in September, the first cabinet since the army ousted Omar al-
Bashir as president in April. The SC and cabinet were appointed as part of the transitional
agreement between the Declaration of Freedom and Change Forces (DFCF, a coalition of
opposition groups that led the protests against the Bashir regime and then the military) and the
former Transitional Military Council (TMC, which has now been dissolved to form the SC, which
has 11 members—five from the former TMC and six civilians), which was signed in mid­July.
During the 39-month transitional period, the presidency of the SC will be rotated between a
military head (for the first 21 months) and a civilian head (for the next 18 months). Elections are
due to be held at the end of the transitional period in December 2022. Abdel Fattah al-Burhan, the
head of the TMC, has been appointed as the president of the SC for the first 21 months, and
Abdalla Hamdok, a prominent economist, has been appointed as the prime minister. Mr Hamdok
selected 18 of the 20 members of the new cabinet, with the interior and defence portfolios
appointed by the military.
The Economist Intelligence Unit regards the transitional agreement with caution. It is likely that
the TMC agreed to it only in order to end the social unrest that was starting to gather momentum
again following a brief lull after a crackdown by the army on demonstrators on June 3rd.
Leadership of the SC for 21 months gives the military enough time to consolidate power and to
subsequently renege on the deal, rather than transferring it to a civilian head. The deal is likewise
viewed with scepticism by many Sudanese citizens. Hence, although near-term political stability
has improved and we expect the military to adhere to the deal, there remains a high risk of the
military backtracking on the agreement and clinging to power, leading to a resurgence in social
unrest. As uncertainty surrounding the military's intentions remains elevated, social tensions will
stay high throughout 2020-24. Political tensions are also likely to worsen ahead of the planned
parliamentary and presidential elections in late 2022. Throughout the forecast period, the military
will continue to play an important role in the country's politics. The security situation will remain
poor in Blue Nile state and the Darfur region throughout the forecast period, as highlighted by the
tribal clashes in these areas in December.
The security situation in South Sudan will remain poor throughout the 2020-21 forecast period.
The president, Salva Kiir, and the main opposition leader, Riek Machar, signed a peace deal—the
Revitalised Agreement on the Resolution of the Conflict in South Sudan—in September 2018.
According to the agreement, a unity government was due to be formed on November 12th 2019
(after a six-month extension to the original deadline was agreed to in May), with Mr Machar
serving as the first vice-president. However, with key issues surrounding security arrangements
and state boundaries still unresolved, the signatories agreed to another extension, of 100 days
(until February 22nd), to the deadline to form a government. The failure to form a government in
February will damage what little confidence there is in the peace deal, but the alternative of
forming the government without Mr Machar's support would eventually lead to the deal breaking
down. We expect the peace deal to fail in 2020-21, as it lacks mechanisms for policy formulation,
governance and dispute settlement, which are vital to ensuring its success. As a result, we expect
political instability and regular outbreaks of fighting to persist throughout much of 2020-21.
However, the armed forces are well equipped to quell any resistance before it escalates to the
point where it poses a threat to the regime.

The Economist Intelligence Unit's coverage of Sudan

and South Sudan
The Economist Intelligence Unit's coverage includes South Sudan within the Sudan Country
Report. As South Sudan becomes more established as an independent state and more data
become available, we will launch a new Country Report. Unless otherwise indicated, the text and
all data in the tables and charts refer to Sudan.

Country Report January 2020 www.eiu.com © Economist Intelligence Unit Limited 2020

Sudan 5

Election watch
Parliamentary and presidential elections are due to be held by end-2022 following the 39-month
transitional period. We forecast that new opposition groups will emerge in the run-up to the
elections, as Mr Bashir's National Congress Party has mostly been marginalised, with its leaders
arrested, in an environment of deep-seated public frustration with the political system. However,
there remains a risk of the military attempting a power grab after 21 months, making the election
timetable uncertain. If elections are held with the military still heading the SC, they are unlikely to
be credible or accepted by the international community, meaning that Sudan would continue to
face international opprobrium and would continue to rely on assistance from traditional allies in
the Middle East.
In South Sudan, Mr Kiir and Mr Machar have agreed to delay the formation of the unity
government to allow outstanding issues to be resolved. According to the peace deal, this
government will remain in office until legislative and presidential elections, which are scheduled to
be held in 2021. We expect further delays in the formation of the government, mainly because the
provisions and schedule for implementing the agreement are ambitious and probably unrealistic,
given the dire fiscal position of the government and a lack of political will. This will have a knock-
on effect on the election timetable. Even if the coalition government is formed, there is a high
chance that it will break down, given that the key opposition parties will probably remain
suspicious of an attempted power grab by rival parties. Furthermore, underlying peace and
security issues remain unresolved, keeping social tensions high. Either way, Mr Kiir will remain in
power at least until 2021, unless he is forcibly ejected or has to step down because of health
problems, which is not our core forecast.

Country Report January 2020 www.eiu.com © Economist Intelligence Unit Limited 2020

Sudan 6

International relations
Sudan's relationship with the international community is likely to improve, following the formation
of the transitional administration. The African Union lifted its three-month suspension of Sudan's
membership in September after Mr Hamdok announced the new cabinet. In addition, the UN, the
UK, the US and Norway have also expressed support for the new administration and are
committed to investigating the June 3rd violence and other incidents of human rights violations
and abuses during the recent period of military rule. France's foreign minister, Jean-Yves Le Drian,
announced €60m (US$67m) in aid and offered to help to rebuild international relations and assist
in managing Sudan's foreign debt. Although we expect relations with the international community
to begin to improve (assuming as we do that the military will adhere to the deal), this is unlikely to
translate into significant financial support until elections take place at the end of the transitional
period. In the near term, a key focus of the government's foreign policy will remain getting Sudan
removed from the US list of state sponsors of terrorism (which bars Sudan from receiving financial
assistance from international institutions, such as the World Bank and the IMF). We expect
Sudan to be removed from the list before end-2021.
Sudan will continue to seek to strengthen relations with China, which remains the country's most
important investor and which is not expected to be particularly displeased if the military
backtracks on the deal, as long as Sudan fulfils its debt-repayment obligations. Although
increased risk­aversion among Chinese firms—especially with regard to states perceived to have
poor repayment records—has reduced the prospects of substantial new Chinese investment in
Sudan (and South Sudan), some investment will be forthcoming as Chinese firms seek to
strengthen relations with the country's new government. Gulf Arab countries—mainly Saudi
Arabia and the UAE—and Egypt will remain important partners for Sudan.
In the short term, most international efforts in South Sudan will focus on humanitarian assistance
and ensuring that all parties adhere to the power-sharing agreement. According to the UN, the
number of South Sudanese refugees in Sudan, Uganda, Ethiopia, Kenya and the Democratic
Republic of Congo increased to over 2m as of December 2019. Relations with the US will remain
strained. After the failure of the leaders to meet the November deadline to form a unity
government, the US recalled its ambassador to South Sudan, stating that it will re-evaluate its
relationship with the South Sudanese government. In early January the US imposed sanctions on
South Sudan's first vice-president, Taban Deng Gai, accusing him of serious human rights abuses
and of derailing the peace process.

Policy trends
The appointment of a technocratic cabinet and a stabilising political situation (at least in the near
term) will help to improve decision-making and policy implementation. The incumbent
administration will focus on addressing inflationary pressures and stabilising the currency, goals
that the current cabinet has the ability to fulfil in the short term. The government will also
prioritise improving its fiscal and external balances, which have deteriorated significantly in recent
years and restructuring the large debt. However, restoring fiscal and external balances to
sustainable levels is likely to be achieved only over the medium term, if at all, given a narrow
export and revenue base. Oil accounts for a significant proportion of government revenue and
export earnings, and a small decline in international oil prices in 2020 will not help the government
in its efforts to balance the budget or address external imbalances. The authorities will therefore
focus on maximising income from hydrocarbons by attracting foreign direct investment (FDI) to
boost the capacity of existing oil wells and exploring new ones, alongside diversifying the
economic base. However, in the short term, the chances of economic diversification efforts
proving a success will be undermined by the limited scope for new borrowing (given the huge
public debt burden) and the weakness of the public finances. The business environment will
remain poor amid political uncertainty and high currency risk, deterring some foreign investment.
Landlocked South Sudan depends on Sudan to export oil. The two countries have agreed to
extend existing financial arrangements, under which South Sudanese oil is piped and exported
through Sudan, to March 2022. Under the agreement, South Sudan will pay Sudan US$26/barrel
for oil transported through the pipeline operated by Petrolines For Crude Oil, which is owned by
the Greater Nile Petroleum Operating Company, and US$24.1/b for oil transported through the
Country Report January 2020 www.eiu.com © Economist Intelligence Unit Limited 2020
Sudan 7
pipeline operated by the Bashayer Pipeline Company (which is owned by the Petrodar Operating
Company). According to the deal, South Sudan will also supply the Khartoum refinery and the
Um-Dabakir power station (near the Sudan-South Sudan border) with 28,000 barrels/day (b/d) of
crude oil. Although the resumption of oil production in South Sudan (and higher oil prices
compared with the 2015-17 average) will boost Sudanese government revenue, growth will be
constrained by volatile oil production in South Sudan.
Sudan's transitional government opened up the gold market to the private sector, effective from
January 1st. Prior to this, the Central Bank of Sudan was the sole body legally allowed to buy and
export gold. Under the new regulations, private mining companies can now export up to 70% of
their production, with proceeds to be deposited in local banks; the remaining 30% must be sold to
the central bank. Although this is likely to attract some FDI in the gold sector, it will remain well
below potential as the government-set exchange rate and the requirement to sell 30% of
production to the central bank will act as deterrents. At least in the early part of the forecast
period, the gold sector will remain dominated by artisanal, unlicensed miners and will continue to
suffer from high levels of bureaucracy and a generally poor operating environment. Smuggling will
therefore remain a major issue, understating the true level of exports and depriving the
government of tax revenue.
In the short to medium term, South Sudanese policy will focus on attempting to stabilise the
economy and encouraging foreign investment in the oil sector—the main source of government
revenue and export earnings. South Sudan has proven oil reserves of 3.75bn barrels, which could
make it one of the region's major oil producers. However, the poor security situation, political
instability and a lack of fiscal discipline have halted production and affected the government's
ability to benefit financially from these reserves. Oil production has resumed in some fields
following the peace deal—production has increased from an estimated average of 120,000 b/d in
2017-18 (July/June) to 145,000 b/d in February. Moreover, the government has discovered an
oilfield in the Northern Upper Nile state, which reportedly contains 5.3m barrels of oil.
Nonetheless, the authorities will struggle to increase production to pre-conflict levels of
350,000 b/d, not least because of damaged oil infrastructure and a high risk of resumption of
fighting deterring foreign investment. The prospects of restoring oil production and thus
economic growth hinge strongly on the success of the peace deal.
In its Article IV review, the IMF stated that South Sudan remains in high debt distress and called
on the government to implement sound fiscal and debt-management policies. Any progress on
seeking debt restructuring or repaying arrears will remain slow. Besides boosting oil output, the
government's longer-term priorities include infrastructure development, agriculture and mining.
However, a full and lasting peace will need to be reached before South Sudan can make progress
on developing legal and regulatory frameworks and improving the business environment.

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Sudan 8

Fiscal policy
Although spending as a proportion of GDP will decline in 2020-24 (mainly because of increases in
nominal GDP), expenditure will remain fairly high in nominal terms as the new administration will
maintain high levels of current spending to placate the public. Indeed in its 2020 budget, the
government plans to retain subsidies (mainly for food) and increase wages. Moreover, high
spending will help to mitigate the impact of other socially difficult economic reforms on the
vulnerable sections of the society. Plans to gradually phase out fuel subsidies will be carried out
haltingly in the short term as already high inflation will increase resistance to such measures. A
final decision on the level of various subsidies is expected to be made in March after a conference
on the national economy is held, when we expect the government to decide to retain subsidies for
a short time or at least until the economy is back on track. Peace and restoration efforts,
particularly for areas like Darfur and Blue Nile, will also weigh on expenditure.
Revenue growth will pick up from 2020 in line with a recovery in Sudan's economy after two
consecutive years of real economic contraction, but it will remain sluggish. The government will
be cautious about implementing tax hikes for fear of political disquiet holding back economic
recovery. The opening up of the gold market to private mining companies will only lead to a small
increase in government revenue in the early part of the forecast period as the government-set
exchange rate and the requirement to sell 30% of gold output to the central bank will continue to
deter mining companies. The revenue/GDP ratio will increase in 2021-23 (before dipping in 2024) as
oil prices pick up and a more stable political situation supports improved tax collection. However,
poor revenue management and a large informal sector will continue to act as major obstacles to
significantly boosting income throughout the forecast period. In recent years revenue has been
boosted by oil transit fees (income earned by Sudan for transporting South Sudanese oil to the
Red Sea coast for onward export), following the resumption of oil production in South Sudan.
Overall, we expect Sudan's fiscal deficit to edge up from an estimated 5.5% of GDP in 2019 to 5.6%
of GDP in 2020, as revenue comes under pressure, and to narrow gradually in 2021-24, reaching
3.9% of GDP in 2024, supported by stronger tax collection and oil-related revenue. The deficit will
be financed both domestically and through external loans from the Gulf states. Monetisation of
the fiscal deficit is also likely to continue.
South Sudan's public finances have been severely affected by the volatility of oil production and
exports (its main source of revenue) and by government spending pressures. South Sudan's
finance minister, Salvatore Garang Mabiordit, presented the budget for fiscal year 2019/20 (July-
June) in July 2019. The budget reportedly envisages a 155% increase in spending, with the bulk
expected to be funded by higher oil revenue. Although an expected increase in oil production
during 2019/20-2020/21 and a resumption in economic activity will support some revenue growth,
most of the income will be transferred to Sudan as oil transit fees or used to repay oil advances
and finance the peace deal. With diminished resources, the authorities will struggle to meet their
expenditure projections, and they will be forced to resort to cutting crucial capital spending and
key public services. We believe that a similar practice has led to accumulation of arrears on wages.
Although the government has agreed to pay six months of salary arrears, given its limited
resources and huge spending pressures, it will be forced to resort to delaying wage payments
throughout much of the forecast period. The fiscal situation will remain unsustainable. The
government will seek to finance its deficits via new borrowing in the form of Treasury bills and
donor funding, although the latter may prove problematic, given increasing donor discontent
about the country's lengthy political crisis.

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Sudan 9

Monetary policy
The Central Bank of Sudan (CBS) manages monetary policy largely by issuing Islamic financial
certificates, setting reserve requirements and manipulating the exchange rate. However, high
levels of dollarisation reduce the efficacy of monetary policy. The government's financial needs
will compel the CBS to continue printing money; broad money supply (M2) is growing rapidly,
expanding by 67% year on year in November. Foreign reserves will remain under pressure as the
CBS tries to maintain an overvalued currency peg. Under pressure from the public to address
inflationary pressures, the Sovereign Council will place a much greater emphasis on tackling
inflation, and we expect a substantial monetary adjustment in the context of a macroeconomic
stabilisation plan.
Monetary policy in South Sudan will remain ineffective and will be largely guided by fiscal
conditions throughout the forecast period. We remain sceptical about the government strictly
adhering to its policy of zero central bank financing. The country remains heavily underbanked,
and banks are largely non-compliant with the minimum statutory capital requirements, further
undermining the effectiveness of monetary policy. As a result, the Bank of South Sudan (the
central bank) is unlikely to make rapid progress on enforcing the minimum reserve requirement of
20%, narrowing the gap between the official and the black-market rates to 2-3% (it was estimated
at about 80% in April 2019) and rebuilding foreign-exchange reserves.

International assumptions
2019 2020 2021 2022 2023 2024
Economic growth (%)
US GDP 2.3 1.7 1.8 2.0 1.8 2.2
OECD GDP 1.6 1.5 1.8 1.9 1.8 2.0
World GDP 2.3 2.4 2.8 2.9 2.8 2.9
World trade 1.5 2.3 3.6 3.7 3.7 3.8
Inflation indicators (% unless otherwise indicated)
US CPI 1.8 1.6 1.9 2.1 1.8 1.8
OECD CPI 1.9 1.8 2.0 2.2 2.1 2.0
Manufactures (measured in US$) -0.1 1.9 4.0 4.1 3.5 3.1
Oil (Brent; US$/b) 64.0 63.0 67.0 71.0 73.8 71.0
Non-oil commodities (measured in US$) -6.6 0.8 3.9 1.8 0.9 2.5
Financial variables
US$ 3-month commercial paper rate (av; %) 2.2 1.5 1.5 1.8 2.2 2.3
US$:€ (av) 1.12 1.13 1.16 1.21 1.24 1.24
¥:US$ (av) 108.48 106.03 104.73 100.85 97.63 95.43

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Sudan 10

Economic growth
As high inflationary pressures and sharp currency movements dampened private consumption
and deterred investment in 2019, we estimate that real GDP contracted by 2.5% that year.
However, we expect real GDP growth to recover from 2020, assuming that a political transition
supported by international assistance produces a credible macroeconomic programme with
improved economic management. Moreover, growth in oil and gold exports and investment in
public infrastructure and capital projects will buoy demand and support economic growth. GDP
growth will pick up only gradually, as economic reforms will be introduced slowly in the early
years of the political transition, and high inflation throughout the forecast period will constrain
private consumption growth. Despite diversification efforts, the hydrocarbons and mining sectors
will remain key drivers of growth throughout the forecast period. Real GDP growth will pick up in
2020, to 1.5%, but will remain relatively weak amid a poor global oil price outlook. Economic
growth will then accelerate, to an annual average of 2.1% in 2021-24, and economic reform
measures will bear fruit. There is also a downside risk that even these modest levels of expansion
will not be attained if reforms are not implemented or if the military reneges on the deal.
With a stable political environment and a macroeconomic stabilisation package that we expect the
new administration to implement, foreign investment in the oil and gold sectors will increase in the
second half of the forecast period. With development work on some existing oil blocks continuing
simultaneously, we expect oil output to rise to an average of 138,000 b/d in 2024.
For South Sudan, GDP figures remain difficult to determine with any accuracy, owing to the large
informal sector, a lack of data covering trade with Sudan (traditionally one of its largest trading
partners) and poor data-collection capacity. According to data published by the IMF, real GDP
growth is estimated to have contracted by 2.4% in 2017/18, adding to a cumulative decline of
about 24% in 2014-17. The IMF calculates that real income, adjusted for terms of trade losses, has
declined by 70% since 2011. The economic outlook for the country depends on the ability of the
authorities to establish credible and lasting peace. Sustained peace in South Sudan and an
improvement in the security situation, which are unlikely, would help to boost fixed investment
and government and private consumption, but the economy will remain heavily dependent on the
oil sector over the medium term. Owing mainly to a low base and rising oil output and exports,
economic growth is expected to strengthen in 2019/20 and 2020/21. However, given disappointing
policymaking in recent years and continued instability, owing to wavering confidence in the peace
deal (with a knock-on effect on grants and foreign investment), growth will remain sluggish and
below potential.
Economic growth
% 2019a 2020b 2021b 2022b 2023b 2024b
GDP -2.5 1.5 1.9 2.1 2.2 2.4
Private consumption -3.5 1.1 1.5 1.5 1.6 2.0
Government consumption 2.0 2.3 2.7 3.0 3.4 3.7
Gross fixed investment -1.8 0.6 2.1 2.5 2.6 3.3
Exports of goods & services -2.0 2.5 2.5 2.9 3.3 3.9
Imports of goods & services -1.0 1.5 2.8 3.2 3.8 5.5
Domestic demand -2.3 1.3 1.8 2.0 2.1 2.4
Agriculture 1.0 1.5 2.5 2.9 3.0 2.0
Industry -2.5 1.5 1.9 2.2 2.4 2.7
Services -3.0 1.0 1.2 1.5 1.7 2.1
a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts.

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Sudan 11

Inflation
Inflation slowed to an estimated average of 50.8% in 2019 (owing mainly to high base effects in
2018), and we forecast that it will decelerate further in 2020 to an average of 43.4%. The still-high
inflation rate in 2020 reflects the pass-through effects of an anticipated exchange-rate devaluation
and of depreciation of the black-market exchange rate. Moreover, high money supply growth will
maintain price pressures. We expect inflation to slow steadily over the remainder of the forecast
period, to an average of 20.1% in 2024. This assumes, however, that the new administration will
allow the central bank to take steps to contain and subsequently reduce the monetisation of the
fiscal deficit and that the agricultural sector does not suffer from another serious drought.
In South Sudan, inflation had fallen to about 40% in December 2018, compared with a peak of
480% in 2016 and we estimate that it slowed further to an average of 35% in 2019. Inflation is likely
to slow further in 2020, owing mainly to reduced recourse to central bank financing of the budget
deficit. Nonetheless, inflationary pressures remain high, as a result of ongoing supply-chain
bottlenecks caused by conflict and severe local food shortages. Moreover, heavy flooding in
parts of South Sudan in late 2019 is likely to have affected agricultural production and led to an
uptick in domestic food prices. We expect that inflation will fall to 25% in 2020, and to 18% in 2021.
However, there is an elevated risk of a renewed acceleration in inflation if the latest peace deal
breaks down, triggering internal clashes that would affect the supply chain. Moreover, the small
size of the economy and the vulnerability of the agricultural sector to extreme weather events
mean that sharp swings in prices are possible.

Exchange rates
After repeated devaluations of the currency in 2018 (and a revaluation in May 2019), the Sudanese
pound is currently pegged to the US dollar at SDG45:US$1. Throughout the forecast period, a
large current-account deficit and monetisation of the fiscal deficit will maintain downward
pressure on the currency. With limited scope for FDI and export earnings to boost reserves in the
short term, the gap between the official and the black-market rates will remain large, keeping
inflation high and forcing the central bank to devalue the currency throughout 2020-24. The black-
market exchange rate averaged SDG88:US$1 in mid-January. Overall, we expect the Sudanese
pound to weaken from an estimated annual average of SDG45.8:US$1 in 2019 to SDG59.1:US$1 in
2020 and SDG81.5:US$1 in 2024.
Despite South Sudan's move to a floating exchange-rate regime in December 2015 (albeit with
some restrictions on imports and on foreign-exchange convertibility), a deterioration of the
security situation in 2016 (following the breakdown of the peace deal) led to the reintroduction of
a multiple exchange-rate system. The South Sudanese pound has depreciated significantly since
2015, reaching SSP159.8:US$1 in September. The premium of the parallel-market rate over the
official rate has also increased, and was estimated to be about 80% in April, reflecting weak
economic fundamentals and low foreign reserves. According to the latest IMF report, South
Sudan's international reserves provide only up to two weeks of import cover. With persistent
political instability and a large current-account deficit, we expect the currency to continue to
depreciate during 2020-21.

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Sudan 12

External sector
We forecast that Sudan's export earnings will grow by almost 13% in 2020 (following a sharp fall in
2018-19, owing to political turmoil and economic recession). Export growth from 2020 onward will
be supported by a recovery in economic activity, in line with improved political stability following
the takeover of a new administration. A recovery in gold and oil production (and prices in 2021-23)
in these years will further boost export growth and offset the effects of lower global oil prices in
2024. From 2020 onward, the import bill will also rise as a growing economy attracts capital inputs
and consumer goods. As export growth exceeds import growth, the trade deficit will narrow in
2020-24.
Although South Sudanese oil exports may rise slightly in 2019, transit fees to Sudan from South
Sudan for those exports will be constrained by a reduction in the rate per barrel, with a knock-on
effect on services credits. The primary income balance, which mainly reflects profit repatriation,
will remain in deficit throughout the forecast period, although it will narrow as oil and gold
earnings increase. The secondary income balance will remain in surplus, in line with our
expectation of inflows of donor aid to Sudan to support the political transition. The current-
account deficit as a proportion of GDP will narrow from an estimated 14.4% in 2019 to 12.8% in
2020, and to an average of 10.2% a year in 2021-24. The deficit will be largely financed by Chinese
and Gulf loans and short-term financing.
The external position of South Sudan will remain weak in 2020-21. South Sudan will remain an oil-
dependent country, with oil exports accounting for about 97% of total exports. Although oil-
export volumes will increase following the resumption of oil production, they will remain well
below pre-conflict levels. An expected softening of oil prices in 2020, to an average of US$63/b
from US$64/b in 2019, will have a knock-on effect on export earnings and hence hard-currency
availability in that year. South Sudan imports almost all goods for domestic consumption.
Nonetheless, the reintroduction of the multiple exchange-rate system and persistent shortages of
US dollars have compressed import growth. However, a dependence on food imports will remain
substantial, as agriculture is yet to recover from the civil war, which led to a large displacement of
population—more than 40% of the population are either internally dispersed or live in
neighbouring countries. As a result, the current-account deficit will widen throughout the forecast
period. The current account could edge back into surplus if local oil production recovers.
However, there could be substantial deficits if political uncertainty drags on, leading to lower aid
inflows and thus to a decline in current transfer credits.

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Sudan 13

Forecast summary
Forecast summary
(% unless otherwise indicated)
2019a 2020b 2021b 2022b 2023b 2024b
Real GDP growth -2.5 1.5 1.9 2.1 2.2 2.4
Oil production ('000 b/d) 104.0 110.0 115.0 120.0 130.0 138.0
Crude oil exports (US$ m) 892 906 972 1,163 1,363 1,485
Consumer price inflation (av) 50.8 43.4 26.3 24.2 23.4 20.1
Government balance (% of GDP) -5.5 -5.6 -4.9 -4.6 -4.4 -3.9
Exports of goods fob (US$ bn) 3.0 3.4 3.8 4.3 4.9 5.5
Imports of goods fob (US$ bn) 6.8 7.0 7.7 8.4 8.6 9.2
Current-account balance (US$ bn) -4.6 -4.6 -4.9 -5.3 -5.2 -5.2
Current-account balance (% of GDP) -14.4 -12.8 -12.2 -11.2 -9.4 -7.8
External debt (year-end; US$ bn) 62.2 64.5 65.9 67.8 69.6 72.1
Exchange rate SDG:US$ (av) 45.77 59.12 68.10 73.48 80.11 81.51
Exchange rate SDG:US$ (end-period) 45.00 65.79 69.25 80.11 80.11 84.32
Exchange rate SDG:¥100 (av) 42.19 55.76 65.02 72.86 82.06 85.42
Exchange rate SDG:€ (av) 51.27 66.51 78.82 88.54 99.13 101.07
a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts.

South Sudan: forecast summary

2018a 2019a 2020b 2021b
Oil production ('000 b/d) 120.0 145.0 175.0 180.0
Consumer price inflation (av) 83.5 35.0 25.0 18.0
Crude oil exports (US$ bn)c 1.8 2.3 2.9 3.1
Exports of goods fob (US$ bn)c 1.8 2.3 2.9 3.1
Imports of goods fob (US$ bn)c 2.2 2.8 3.2 3.4
a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts. c Fiscal years (ending June
30th).

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Sudan 14

Data and charts

Annual data and forecast
2015a 2016a 2017a 2018a 2019b 2020c 2021c
Gross domestic product
Nominal GDP (US$ m) 96,741 95,558 123,053 30,856 32,040 36,136 40,415
Nominal GDP (SDG bn) 582.9 593.6 822.4 995.6 1,466.4 2,136.3 2,752.2
Real GDP growth (%) 4.9 4.7 4.3 -2.3 -2.5 1.5 1.9
Expenditure on GDP (% real change)
Private consumption 3.5 3.0 3.0 -3.2 -3.5 1.1 1.5
Government consumption -9.1 12.5 15.5 -1.1 2.0 2.3 2.7
Gross fixed investment 4.5 3.7 3.0 -2.9 -1.8 0.6 2.1
Exports of goods & services 3.5 4.1 3.5 0.8 -2.0 2.5 2.5
Imports of goods & services 2.5 -1.0 -1.0 -0.4 -1.0 1.5 2.8
Origin of GDP (% real change)
Agriculture 2.8 5.2 2.5 -1.5 1.0 1.5 2.5
Industry 4.7 5.5 4.5 -1.7 -2.5 1.5 1.9
Services 6.4 3.8 4.5 -3.2 -3.0 1.0 1.2
Population and income
Population (m) 38.9 39.9 40.8 41.8b 42.8 43.9 44.9
GDP per head (US$ at PPP) 4,552 4,704 4,881 4,768b 4,646 4,688 4,751
Fiscal indicators (% of GDP)
Public-sector revenue 9.3 9.7 9.4 12.5 8.7 7.1 7.3
Public-sector expenditure 10.5 11.6 11.1 16.4 14.2 12.7 12.2
Public-sector balance -1.2 -1.8 -1.7 -3.8 -5.5 -5.6 -4.9
Net public debt 29.7b 33.3b 30.4b 96.7b 174.0 161.8 150.7
Prices and financial indicators
Exchange rate SDG:US$ (end-period) 6.09 6.59 6.68 47.50 45.00 65.79 69.25
Consumer prices (end-period; % change) 12.6 30.5 25.1 72.9 61.5 20.6 27.8
Stock of money M1 (% change) 22.7 36.5 67.7 92.1 95.0 50.0 45.0
Stock of money M2 (% change) 20.5 29.0 68.4 111.8 62.8 41.2 36.5
Murabaha (profit) rate (av; %) 12.8 12.0 13.7 14.4 15.1 15.4 15.7
Current account (US$ m)
Trade balance -5,389 -4,386 -4,120 -3,580 -3,787 -3,624 -3,835
Goods: exports fob 3,169 3,094 4,100 3,485 3,015 3,400 3,843
Goods: imports fob -8,558 -7,480 -8,220 -7,065 -6,802 -7,024 -7,678
Services balance 139 106 185 339 211 116 154
Primary income balance -1,163 -867 -1,651 -1,812 -1,416 -1,603 -1,743
Secondary income balance 953 933 975 376 382 472 504
Current-account balance -5,461 -4,213 -4,611 -4,679 -4,610 -4,638 -4,920
External debt (US$ m)
Debt stock 49,845b 52,713b 56,111b 59,070b 62,232 64,535 65,885
Debt service paid 523b 294b 237b 215b 290 342 388
Principal repayments 371b 377b 375b 244b 213 253 292
Interest 101 60 90 57 75 88 98
Debt service due 1,587b 1,597b 2,063b 2,194b 2,484 2,512 2,144
International reserves (US$ m)
Total international reserves 174 199 198107b 394 373 408
a b c
Actual. Economist Intelligence Unit estimates. Economist Intelligence Unit forecasts.
Source: IMF, International Financial Statistics.

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Sudan 15

Quarterly data
2017 2018 2019
4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr
Prices
Consumer prices (2005=100; av) 586.3 765.1 843.1 945.0 997.4 n/a n/a n/a
Consumer prices (% change, year on
27.4 54.1 60.9 66.4 70.1 n/a n/a n/a
year)
Financial indicators
Exchange rate SDG:US$ (av) 6.683 25.370 28.100 28.100 47.500 47.500 45.800 45.000
Exchange rate SDG:US$ (end-period) 6.683 28.100 28.100 28.100 47.500 47.500 45.800 45.000
M1 (end-period; SDG m) 121,001145,585160,980187,229232,444273,345350,135400,333
M1 (% change, year on year) 67.7 84.0 76.8 90.5 92.1 87.8 117.5 113.8
M2 (end-period; SDG m) 203,368278,312296,926326,919430,786493,002573,066626,585
M2 (% change, year on year) 68.4 105.4 91.9 89.2 111.8 77.1 93.0 91.7
Balance of payments (US$ m)
Goods: exports fob 1,037 870 898 761 956 n/a n/a n/a
Goods: imports fob -2,524 -1,574 -1,515 -1,695 -2,282 n/a n/a n/a
- -
Merchandise trade balance fob-fob -704.0 -617.1 -933.7 n/a n/a n/a
1,486.6 1,325.7
Services balance 30 107 120 98 14 n/a n/a n/a
Primary income balance -419 -488 -461 -449 -414 n/a n/a n/a
Net transfer payments 200 91 81 30 174 n/a n/a n/a
Current-account balance -1,676 -994 -878 -1,255 -1,552 n/a n/a n/a
Reserves excl gold (end-period) 178 n/a n/a n/a n/a n/a n/a n/a
Sources: IMF; International Financial Statistics; Bank of Sudan; Ministry of Finance

Monthly data
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Exchange rate SDG:US$ (av)
2017 6.68 6.68 6.68 6.68 6.68 6.68 6.68 6.68 6.68 6.68 6.68 6.68
2018 18.00 30.00 28.00 28.00 28.00 28.00 28.00 28.00 28.00 47.50 47.50 47.50
2019 47.50 47.50 47.50 46.70 45.00 45.00 45.00 45.00 45.00 45.00 n/a n/a
M1 (end-period; % change, year on year)
2017 40.6 41.7 39.7 41.4 46.4 49.7 55.5 60.6 55.4 65.2 66.5 67.7
2018 72.8 80.6 84.0 88.4 83.6 76.8 77.1 75.9 90.5 86.1 85.1 92.1
2019 88.2 81.6 87.8 120.1 112.9 117.5 127.8 119.6 113.8 99.2 99.0 n/a
M2 (end-period; % change, year on year)
2017 32.6 33.3 34.5 35.6 41.8 45.6 50.9 56.6 55.8 62.4 65.7 68.4
2018 92.3 108.4 105.4 105.8 100.0 91.9 89.1 84.4 89.2 109.1 103.7 111.8
2019 88.9 74.4 77.1 91.8 91.9 93.0 100.4 97.1 91.7 64.0 67.0 n/a
Stock of domestic credit (end-period; SP m)
2017 131,985 134,560 139,601 143,158 151,186 159,907 164,414 168,912 172,238 176,006 181,215 191,828
2018 193,861 198,705 202,959 212,492 217,361 223,288 228,644 243,143 253,253 256,764 270,280 309,739
2019 313,219 329,748 343,371 354,158 367,964 370,617 380,190 387,684 393,667 401,957 n/a n/a
Consumer prices (av; % change, year on year)
2017 32.9 33.5 34.7 34.8 -5.9 -7.9 -6.7 -6.6 -6.3 -7.6 -13.6 -13.0
2018 5.8 7.2 8.1 9.5 60.9 62.1 135.9 140.4 143.1 142.6 144.0 148.9
2019 106.7 107.8 109.4 108.2 108.8 115.1 52.6 53.1 53.5 57.7 60.7 n/a
Foreign-exchange reserves excl gold (end-period; US$ m)
2017 170 169 170 172 173 174 176 177 177 176 177 178
2018 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
2019 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
Sources: IMF; Bank of Sudan; Haver Analytics.

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Sudan 16

Annual trends charts

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Monthly trends charts

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Comparative economic indicators

Basic data
Sudan
Land area
1.9m sq km

Population
40.5m (2017, World Bank)
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Sudan 19

Main towns
Population in '000; 2013 estimates from World Gazetteer
Khartoum (capital): 2,804
Omdurman: 2,800
Kassala: 369
El Obeid: 284
Wad Medani: 276
Gedaref: 256

Climate
Hot and dry in September-May; rainy season from April/May to September/October depending
on latitude (average annual rainfall 100 mm)

Weather in Khartoum (altitude 390 metres)

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

Languages
Arabic and English are official languages. There are also over 70 tribal languages, of which several
are each spoken by more than 100,000 people

Measures
Metric system. Some local measures are also used:
1 diraa = 58 cm; 1 feddan = 0.42 ha; 12 keilas = 1 arde = 1.98 hl

Currency
In 2007 the Sudanese pound replaced the Sudanese dinar as the national currency at a value of
SDG1=SD100. The pound is made up of 100 qirush/piaster. Average official exchange rate in 2018:
SDG32.3:US$1. In October 2018 the central bank devalued its exchange rate to SDG47.5:US$1;
the black-market rate is weaker

Time
3 hours ahead of GMT

Public holidays
Independence Day (January 1st); the Prophet's birthday; Coptic Christmas (January 7th); Peace
Agreement Day (January 9th); Coptic Easter; Labour Day (May 1st); Revolution Day (June 30th);
Eid al-Fitr (May 24th-26th 2020); Eid al-Adha (July 30th-August 3rd 2020); Islamic New Year
(August 20th 2020); Christmas Day (December 25th)
The dates of Islamic festivals are based on the lunar calendar and depend on the actual sighting
of the moon

South Sudan
Land area
644,329 sq km

Population
12.6m (2017, World Bank)

Capital
Juba (population: 450,000, 2017 estimate, World Gazetteer)
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Sudan 20

States
Population in '000 (2008 census)
Jonglei: 1,359
Central Equatoria: 1,104
Warap: 973
Upper Nile: 964
Eastern Equatoria: 906
Northern Bahr el-Ghazal: 721
Lakes: 696
Western Equatoria: 619
Unity: 586
Western Bahr el-Ghazal: 333

Climate
Rainy season from April to October (average annual rainfall 1,000 mm)

Weather in Juba (altitude 550 metres)

Hottest month, March, 24­38°C; coldest month, July, 21­31°C; driest months, December­February,
8mm average rainfall; wettest month, August, 145 mm average rainfall (average annual rainfall 954
mm)

Languages
The official languages are English and Arabic. There are an estimated 200 different ethnic groups,
many with their own tribal languages. The most widely spoken of these are Dinka (spoken by 2m-
3m), Nuer, Shilluk, Zande, Bari, Ubangian and Otuho

Measures
Metric system. Some local measures are also used:
1 diraa = 58 cm; 1 feddan = 0.42 ha; 12 keilas = 1 arde = 1.98 hl

Currency
A new currency, the South Sudanese pound, was launched in July 2011. It has been depegged
from the Sudanese pound, and in December 2015 the central bank shifted from the official rate of
SSP2.95:US$1 to a floating exchange rate, devaluing the currency. The average exchange rate in
2018 was SSP141.38:US$1

Time
3 hours ahead of GMT

Public holidays
Independence Day (July 9th); Martyrs Day (July 30th); Constitution Anniversary (December 5th);
Christmas Day (December 25th)

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Political structure
Sudan
Official name
Republic of Sudan

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Sudan 22

Legal system
Sharia (Islamic law) applies in both civil and criminal cases in the north—although there are some
special provisions for non-Muslims

National legislature
Sudan has a bicameral parliament, consisting of a 426-member National Assembly (with 60% of
seats elected by majority voting in geographical constituencies and 40% by proportional
representation, including 25% reserved for women) and a Council of States composed of two
representatives elected by each state assembly. The National Congress Party (NCP) has 323
seats; the Democratic Unionist Party (DUP) led by Mohammed Osman al-Mirghani has 25;
independent candidates have 19; and the DUP led by Jalal al-Digair has 15

National elections
Presidential and parliamentary polls held in April 2015; next elections due by end-2022

Head of state
Abdel Fattah al-Burhan took office as head of the Sovereign Council in September 2019

National government
In April 2019 the president, Omar al-Bashir, was ousted by the army, and a Transitional Military
Council was set up. The military and civilians have agreed to form a 11-member Sovereign Council
that will govern the country for a transitional period of 39 months, after which elections will be
held. However, the parties are yet to agree upon the roles of the council and a parliament. Before
Mr Bashir's ousting, the government was dominated by the NCP

Main political parties

The main northern opposition parties include two wings of the DUP, and the Umma Party and the
Popular Congress Party, which did not contest the April 2015 elections. In Darfur the main
political-military groups are the Justice and Equality Movement and the fragmented Sudan
Liberation Movement

The presidency
Head of Sovereign Council: Abdel Fattah al-Burhan
Prime minister: Abdalla Hamdok

Key ministers
Agriculture & natural resources: Yasser Abbas Mohamed Ali
Cabinet affairs: Omar Munis
Culture & information: Faisal Saleh
Defence: Jamal Aldin Omar
Education: Mohamed el-Amil el-Tom
Energy & mining: Adel Ibrahim
Federal government: Youssef Adam Aldai
Finance & economy: Ibrahim Elbadawi
Foreign affairs: Asma Mohamed Abdalla
Health: Akram Ali Altom
Industry & trade: Madani Abbas Madani
Interior: Idriss al-Traifi
Irrigation & water resources: Yasser Abbas Mohamed Ali
Justice: Nasr al-Din Abdel Bari
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Sudan 23

Religious affairs: Nasr al-Din Mufreh

Social development & labour: Lena el-Sheikh Mahjoub
Youth & sports: Wala'a Essam al-Boushi

Central bank governor

Hussein Yehia Janqool

South Sudan
Official name
Republic of South Sudan

Legal system
South Sudan has a non-Islamic legal system

National legislature
South Sudan has a bicameral parliament. The lower house, the National Legislative Assembly, is
made up of the members of the Comprehensive Peace Agreement-era Southern Sudan Legislative
Assembly and the former southern members of Sudan's National Assembly prior to South Sudan's
independence. Under the terms of the August 2015 peace agreement 68 new members have been
added to the Legislative Assembly following the swearing-in of a government of national unity. It
now has 400 members. The upper house, the Council of States, is made up of the former southern
members of Sudan's Council of States prior to South Sudan's independence, plus 20 members
appointed by the president. An interim constitution was passed by parliament days before
independence in July 2011 and was expected to serve for four years before a permanent
constitution is approved at a national conference, but this has been delayed

National elections
The term of the National Legislative Assembly is four years from July 9th 2011, but an election has
been delayed as a result of the civil war, and will now probably not take place before 2021

Head of state
Salva Kiir Mayaardit

National government
The new cabinet of the Transitional Government of National Unity was sworn in on April 29th
2016. As was agreed previously, 16 of the 30 ministries in the new cabinet have gone to Salva
Kiir's bloc in the ruling Sudan People's Liberation Movement (SPLM). Ten have been assigned to
Riek Machar's bloc (known as the SPLM in Opposition; SPLM-IO), two to the SPLM "former
detainees" bloc and two to other opposition parties

Main political parties

The main opposition party is the SPLM-Democratic Change, a faction with alleged ties to the
north, which broke away from the SPLM in 2009. Other opposition parties have little influence,
including the United Democratic Party and the South Sudan Democratic Forum

The presidency
President: Salva Kiir Mayaardit
First vice-president: Taban Deng Gai
Second vice-president: Wani Igga

Key ministers
Agriculture: Onyoti Adigo
Cabinet affairs: Martin Elia Lomoro
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Sudan 24

Culture, youth & sports: Nadia Arop Dudi

Defence & veteran affairs: Kuol Manyang Juuk
Education, science & technology: Peter Nyaba Adwok
Electricity, dams, irrigation & water resources: Sofia Gai
Finance & economic planning: Salvatore Garang Mabiordit
Foreign affairs & international co-operation: Nhial Deng
Gender, child & social welfare: Awut Deng Acuil
Health: Riek Gai Kok
Interior: Alfred Ladu Gore
Justice: Paulino Onango Wanawilla
Labour, public service & HR development: Peter Nasir Jalengi Marcello
Land, housing & physical planning: Mary Alfonse Lodira
National security: Obuto Mamur Mete
Petroleum: Ezekiel Lul Gatkuoth
Transport, roads & bridges: John Jok Luk

Central bank governor

Dier Tong Ngor

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Sudan 25

Recent analysis
Generated on January 27th 2020

The following articles have been written in response to events occurring since our most recent forecast was
released, and indicate how we expect these events to affect our next forecast.

Politics
Forecast updates
Conflicts in Africa set to intensify in 2020
January 14, 2020: Political stability

Event
In early January data from the Armed Conflict Location & Event Data Project (ACLED, a US-based
non-government organisation) showed that violence in Africa escalated in 2019.

Analysis
The security situation deteriorated across significant parts of Africa in 2019, which is in line with a
general rise in protests and social unrest already noted by The Economist Intelligence Unit across
the continent over the same period. ACLED recorded 12,053 violent incidents (including
bombings, violence against civilians and battles) in Africa between January 2019 and the start of
2020, with 29,407 fatalities reported. That compares with the 11,461 reported incidents involving
27,858 deaths that ACLED recorded in Africa during the same period of the previous year. The
rise in both violent incidents and related deaths in 2019 implies that conflicts in different parts of
the continent will intensify in early 2020, as both non-state actors (such as the Nigerian jihadi
group Boko Haram) and foreign powers (such as Turkey) step up their operations on the
continent.
Violence occurred across all regions of Africa in late 2019 and this geographic spread will make it
difficult to concentrate diplomatic efforts and peacekeeping resources effectively in 2020. In
south-western Africa, post-election tensions in Mozambique resulted in incidents of violence
between the ruling party, Frelimo, and its rival, Renamo. The security crisis in the Sahel has
worsened, causing the temporary postponement of a meeting between the presidents of the G5
Sahel group of countries (a regional alliance fighting militant groups in West and Central Africa
consisting of Mali, Niger, Burkina Faso, Mauritania and Chad) and France until January 13th 2020.
In East Africa, the Somali militant group al-Shabab launched three terrorist attacks across the
border into neighbouring Kenya in January 2020, one of which killed three US Defence
Department personnel (including a US soldier). In nearby Ethiopia, security remains extremely
fragile despite an ongoing loosening of previously tight restrictions by the central government. In
North Africa, fighting in Libya seems likely to intensify as foreign powers increase their
involvement in the country's civil war. The deepening involvement of Middle Eastern powers in
entrenched African conflicts looks set to be another enduring theme in 2020, especially in the
Horn of Africa and Libya.

Impact on the forecast

The data showing a rise in violent incidents and deaths in 2019 support our forecast that conflicts
will intensify across Africa in 2020, in line with increased social unrest in many countries.

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Sudan 26

Former security agents rebel against government

January 16, 2020: Political stability

Event
On January 14th former members of the country's main intelligence service, the National
Intelligence and Security Services (NISS, which has now been renamed the General Intelligence
Service), mutinied against the transitional government in Khartoum, the capital.

Analysis
The mutiny was the biggest violent confrontation between disgruntled elements of Sudan's old
guard and the transitional government since the latter was formed in September 2019. The
transitional government is in the process of reforming Sudan's security apparatus, with some units
likely to be disbanded, merged or have their operations limited. The government had given more
than 10,000 members of the intelligence service's operations unit (which guarded key military
installations and often gathered intelligence in times of conflict) a choice to join either the army or
the Rapid Support Forces (RSF, a paramilitary unit). Those unwilling to join the either service were
offered a severance compensation, which they were not satisfied with. According to the
authorities, the revolt was sparked by a row over the severance pay of the agents.
The former agents took control of some intelligence buildings, including one near Khartoum
International Airport, and opened fire on loyalist government security forces, forcing the
authorities to shut down the air space for five hours. The revolt was then successfully quelled by
the Sudanese army and the RSF. The heavy gunfire led to the death of two soldiers and left four
others wounded.
Restructuring the once-feared security forces, such as the NISS, which grew powerful under the
former regime of Omar al-Bashir and was blamed for suppressing dissent, was among the key
demands of the revolution that led to Mr Bashir's ousting. However, reorganisation of the security
forces is unlikely to be smooth. Renaming of the former intelligence agencies will fail to push out
the old guard, some of whom still seem to be in power in the Sovereign Council. Moreover,
merging a part of the intelligence force with the RSF is unlikely to lead to an improvement in the
security situation given that the RSF itself emerged from the former feared Janjaweed militia
known for their role in the Darfur war. Despite efforts to restructure the security apparatus, the old
guard are likely to be an influential force in Sudan's political and security landscape throughout
the 2020-24 forecast period.

Impact on the forecast

We continue to expect that the security situation will remain fragile and that the military will
remain influential in Sudan's politics throughout the forecast period.

Analysis
Ethiopia, Egypt and Sudan edge towards deal on giant dam
January 21, 2020: International relations
Progress has been made towards an agreement on the operation of the Grand Ethiopian
Renaissance Dam (GERD)—a massive project launched by Ethiopia in 2011 to harness Nile
waters to boost the country's power­generating capacity—following meetings between the
foreign ministers and technical teams of Egypt, Ethiopia and Sudan hosted by the US Treasury
Department in mid-January in Washington. On January 15th the US Treasury issued a
statement outlining six points of agreement noted by the participants, and setting a schedule of
January 28th-29th for further meetings to conclude a final comprehensive accord. This marks
considerable progress given Egypt's long-standing opposition to the project amid concerns over
water supply from the Blue Nile.
The apparent breakthrough came after the Egyptian Ministry of Foreign Affairs had accused
Ethiopia of bad faith in its presentation of the results of tripartite meetings in Cairo, Khartoum and
Addis Ababa to discuss how to reconcile the filling of the GERD reservoir with the interests of the
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Sudan 27
downstream states that depend on Blue Nile water flows. Egypt is deeply concerned that the filing
of the dam—Egypt relies on the Nile for 90% of its freshwater needs—will have serious negative
consequences for water scarcity and hurt the economy. As a result, discussions over the dam
between Ethiopia, Sudan (the other downstream state) and Egypt have been acrimonious.
However, Egyptian officials are also aware that they have failed to block the dam—which is about
75% complete—and the progress on the talks may be attributable to a realisation that their best
chance for a reasonable outcome lies with the current Ethiopian government led by Abiy Ahmed.

US mediation efforts make headway

The US Treasury has been playing a mediation role since October 2019 in an effort to resolve the
disputes over the GERD. Following the most recent meetings, it said that the respective ministers
had noted that:
the filling of the GERD reservoir will be done in stages in an adaptive and co-operative manner,
taking into account hydrological conditions and the downstream impact;
the filling will take place during the July-August annual flood season, with the option of
extending into September;
the initial phase will entail a rapid fill to 595 metres above sea level and early generation of
electricity, while providing mitigation measures for Egypt and Sudan in the event of severe
drought;
subsequent stages will be done according to a mechanism to be determined, while also
providing for mitigation measures in dry periods;
long-term operation will be covered by a mechanism taking into account power-generation
needs and the interest of the downstream states; and
an effective co-ordination mechanism and a dispute settlement framework will be established.
The statement did not specify the time limits for filling the reservoir—a key area of dispute—and it
appears that some of the core issues in dispute remain to be agreed in detail.

But major differences remain

According to a statement issued by the Egyptian foreign ministry on January 10th after a
ministerial meeting over the previous two days in Addis Ababa, prior to the Washington talks,
Egypt has become convinced that Ethiopia is intent on creating a fait accompli by going ahead
with the filling of the reservoir behind the dam without accepting any safeguards for the
downstream countries—Egypt and Sudan—that have vital interests in the waters of the Blue Nile.
The Egyptian foreign ministry accused Ethiopia of wilfully distorting Egypt's positions during the
negotiations that have been held under US and World Bank auspices over the past few months.
In particular, the ministry took issue with claims by the Ethiopian Ministry of Foreign Affairs that
Egypt had demanded a filling period of 12 to 21 years. It said that there was already a consensus
that the filling period should be six to seven years, on condition that the Blue Nile's discharge was
average or above average. Egypt has sought assurances that the schedule could be stretched out
in the event of below-average discharges, while guaranteeing that the dam's hydroelectric plant
(originally planned with a capacity of 6,450 MW, now reduced to 5,150 MW) could operate at 80%
of capacity. The ministry denied that it had specified any time limit, and it claimed that Ethiopia's
refusal to drain the natural discharge of the dam during its being brought into operation indicated
that it has plans to use this water for future projects.
If Ethiopia goes ahead with the filling of the GERD reservoir from July 2020, as currently planned,
without an agreement being reached, Egypt is likely to respond by depicting this as a breach of
international law. Given that the current administration in Ethiopia is more receptive to a deal than
its predecessor governments and that Mr Abiy is inclined to foster deeper international ties, these
talks are Egypt's best chance to negotiate a favourable outcome, and a deal therefore looks likely
to be concluded unless domestic pressure builds in Egypt, forcing its government to backtrack.

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Sudan 28

Economy
Forecast updates
Delays expected in 2020 over activating free-trade zone
January 15, 2020: Economic growth

Event
At end-December the president of the African Development Bank (AfDB), Dr Akinwumi Adesina,
was endorsed by the Economic Community of West African States (ECOWAS) at the 56th
ordinary session of the Authority of Heads of State and Government of ECOWAS, for a second
five-year term at the AfDB from 2020.

Analysis
The ECOWAS endorsement came in part for Dr Adesina's work on pushing through the African
Continental Free Trade Area (AfCFTA) in 2019 (a key component of the AfDB's wider push for
deeper regional integration in Africa under him). Dr Adesina estimates that the continent-wide
free-trade zone (FTZ) will be worth US$3.3trn once it formally begins on July 1st 2020. Officially,
the AfCFTA came into force on May 30th 2019 after being ratified by 22 countries (the minimum
number of signatory countries required to activate enactment of the agreement's provisions,
without which the agreement would have lain dormant; 54 African states have signed the
agreement and 27 have ratified it). However, international trade agreements are not self-
executing and African countries were given until mid-2020 to prepare for it actively.
Despite this grace period, The Economist Intelligence Unit remains sceptical as to whether most
AfCFTA signatory states will be ready to implement the agreement by the July 2020 deadline—
many because their governments are too distracted or uninterested to implement it meaningfully.
Some larger African countries, such as Nigeria, are still ambivalent about the agreement and,
therefore, hesitant to push (and support) their smaller, less developed neighbours into preparing
for its activation. Other important economies, such as Ethiopia and South Africa, are gripped by
domestic crises that are absorbing reformers' energies. Moreover, the institutional frameworks to
deal with legal issues arising from implementing AfCFTA (such as the non-complementarity of
many goods across different markets) remain too weak in many African states to be ready, even
with over a year's notice. Sluggish implementation of necessary legal changes and other obstacles
will, therefore, see the vast majority of African states fail to meet the July 2020 deadline. While
pan-African institutions like the African Union (AU) and the AfDB will continue to push for
action, we expect the agreement's activation will be postponed (de facto if not de jure) until at
least the end of 2020.

Impact on the forecast

In line with the expected postponement of AfCFTA's implementation, we maintain our forecast
that substantive benefits from the treaty will not occur within the 2020-24 forecast period.

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Sudan 29

Link-up of Egypt's and Sudan's electricity grids starts up

January 15, 2020: Economic growth

Event
On January 12th an interconnection between the electricity grids of Egypt and Sudan began
operating.

Analysis
The electricity ministries of the two countries agreed in April 2018 to connect their national grids.
The project, costing an estimated US$32m, was aimed at harnessing Egypt's surplus power to
alleviate Sudanese supply shortages. Siemens, a German company, completed a new 220-kV air-
insulated substation at Toshka, in Egypt's southern desert—capable of transmitting 400 MW of
power—in February 2019 for the Egyptian Electricity Transmission Company (EETC), a
government firm, but delays to the installation of the 170-km high-voltage transmission line to
Dongola, in northern Sudan, by Larsen & Toubro, an Indian company, postponed activation.
Power transfer will start at 50 MW and rise to 240 MW by year-end, Mohammed Shaker el-
Markabi, Egypt's electricity and renewable energy minister stated in December. A second-phase
upgrade of the line to 500 kV is under consideration. Aside from the project's commercial aims,
Egypt is keen to bolster ties with Sudan to gain support in its ongoing dispute with Ethiopia over
the controversial Grand Ethiopian Renaissance Dam.
Egypt's primarily-thermal power-generation capacity has risen rapidly in recent years to about
30 GW, and, although demand growth is also strong, a surplus of an estimated 15 GW exists even
during summer's peak demand. The government is thus aiming to become a major electricity
exporter, in line with wider aspirations to become a regional energy hub. Egypt already has
interconnections with Jordan and Libya with capacities of about 450 MW and 100 MW
respectively. A far-larger interconnection project with Saudi Arabia with capacity of 3 GW has
been on the drawing board since 2010, but talks on a revised form of the project, taking into
account Saudi Arabia's planned new city Neom on the Red Sea coast, were reported to have
intensified in 2019. In November the EETC and its Jordanian counterpart signed a Memorandum of
Understanding with the Gulf Co-operation Council (GCC) Interconnection Authority to carry out
technical studies on interconnection with the existing 400-kV grid linking the six GCC states, while
studies are under way on a possible Egyptian power link to Cyprus and Greece.

Impact on the forecast

We expect the interconnection to support economic growth in both Sudan, currently hindered by
poor infrastructure, and Egypt, which is increasingly realising its energy export ambitions. The
scheme will help to strengthen bilateral ties; our growth and international relations forecasts for
both countries are unchanged.

Country Report January 2020 www.eiu.com © Economist Intelligence Unit Limited 2020