BABEȘ-BOLYAI UNIVERISTY

FACULTY OF BUSINESS

Master Thesis

Scientific coordinator,
Conf. Dr. Dragoș Păun
Graduate student,
Teodora Iulia Popa

Cluj-Napoca
2020
 BABEȘ-BOLYAI UNIVERSITY
FACULTY OF BUSINESS
SPECIALIZATION
INTERNATIONAL BUSINESS ADMINISTRATION

Master Thesis
Sudan: Economic Development Before
and After COVID-19

Scientific coordinator,
Conf. Dr. Dragoș Păun
Graduate student,
Teodora Iulia Popa

Cluj-Napoca
2020
Abstract

The potential economic development is mainly focused on fiscal, economic, and social conditions
improvements, in the least developing countries. For a better observation must be taken into
consideration the education of the population, the working conditions, domestic and international
policies, and the market conditions with a focus finding the best option for improving conditions
(Kopp, 2019). For a better overview the macroeconomic and the microeconomic factors should be
analyzed and the benefits of each sector that contribute to the economic wealth of the country
taking into consideration the problems the country encounters.
Contents
Abstract ........................................................................................................................................... 3

Introduction ..................................................................................................................................... 3

1. Chapter 1 – Theoretical aspects .............................................................................................. 5

1.1. The country profiles ......................................................................................................... 5

1.2. The main economic indicators ......................................................................................... 5

1.3. Domestic credit to private sector (% GDP) ...................................................................... 6

1.4. Traditional financing methods ......................................................................................... 6

1.5. Islamic Financing Methods .............................................................................................. 7

i) Morabaha .......................................................................................................................... 7

ii) The Salaam ................................................................................................................... 8

iii) Mosharka ...................................................................................................................... 9

1.6. Investment in agriculture ................................................................................................ 10

1.7. Crude oil price ................................................................................................................ 10

2. Chapter 2 - Country Profile................................................................................................... 11

2.1. Economic overview ........................................................................................................ 12

2.2. Sudan’s Ongoing Efforts Towards 2030 ........................................................................ 20

2.3. Sources of Government Budget ..................................................................................... 21

2.4. Domestic Private Finance............................................................................................... 24

3. Chapter 3 - Sudan during COVID- 19 .................................................................................. 26

3.1. Economic Shocks: food and medical shortfalls ............................................................. 27

4. Chapter 4 - Future Development of Agricultural Sector ...................................................... 32

Conclusion and recommendations ................................................................................................ 33

References .................................................................................................................................... 34

1
Table of Figures
Figure 1 - Sudan Political Map ..................................................................................................... 11
Figure 2 - Inflation Rate (%) and Annual Change ........................................................................ 14
Figure 3 - Inflation Rate (%) and Annual Change ........................................................................ 14
Figure 4 - Inflation Rate (%) and Annual Change ........................................................................ 15
Figure 5 - Inflation Rate (%) and Annual Change ........................................................................ 15
Figure 6 - Sudan Indicators of Public and Publicity Guaranteed External Debt under Alternative
Scenarios ....................................................................................................................................... 18
Figure 7 - Sudan Crude Oil Production; Crude Oil Production in Sudan decrease to
65BBL/D/1K in January 2020 from 79BBL/D/1K in December 2019 ........................................ 19
Figure 8 - Crude Oil Exports ........................................................................................................ 19
Figure 9 - Government Budget Deficit (as % of GDP) ................................................................ 21
Figure 10 - Sudan Corporate Tax Rate; Source: https://tradingeconomics.com/sudan/corporate-
tax-rate, accessed June 2020 ......................................................................................................... 22
Figure 11 - Personal Income tax rate ............................................................................................ 22
Figure 12 - Source of revenue for PETS states 2018 (in SDG per capita) ................................... 23
Figure 13 - Domestic Credit to the private sector in Sudan (% of GDP) .................................... 24
Figure 14 - Bank credit to deposits Sudan (1990-2017) (%) ........................................................ 25
Figure 15 - Global oil demand impact of COVID 19, total demand (up), losses down) .............. 26
Figure 16 - Percentage decline in oil demand; Data for 2020 is based on IEA estimates ............ 27
Figure 17 - Growth Projections..................................................................................................... 28

Table of tables
Table 1 - Main economic indicators of Sudan, 1990-2018 ........................................................... 12
Table 2 - Peformance of Sudan's Economy, 1990-2018 ............................................................... 16
Table 3 - Total arrears of external debt (2015-2019) (in million USD and as a% of Total External
Debt) ............................................................................................................................................. 17
Table 4 - Composition of arrears in External Debt (2015-2019) (%) ........................................... 17

2
Introduction

‘A fool will not even find water at the Nile’- Sudanese proverb.
The Republic of Sudan, or shorter, Sudan, suffers from multiple crisis such as: political crisis,
socioeconomic crisis and financial crisis which is greatly affected since 2011 by the separation of
South Sudan and now, in 2020, by the pandemic of COVID-19.
Despite people’s opinion of its African position, Sudan is mainly composed of plains and plateaus
drained by the Nile Rivers and its tributaries. From this there can be deducted that beside the oil
production, for which Sudan is mostly known, agriculture can be a part of the main activities.
Jack G. Kaikai asked the fundamental question on which my paper is based on “The economy of
Sudan: A potential breadbasket1 of the Arab world?”.
This paper is an analysis of the economic overview of Sudan over the last three decades. The main
focus was on the years 1990, 2000, 2010 and 2018, and in some cases other additional information
from other years that had a major importance in the analysis to be made. Another important aspect,
that this paper consist, is the most influencing factor in global economy nowadays, the global
lockdown due to COVID-19 and how Sudan is reacting to it from the economic and financial point
of view.
The importance of the research question is to get an introspect of how a low developing country
in the third world is facing its macroeconomic and microeconomic problems. Many other studies
were done, but most of them are in the early 2000s or before its separation from South Sudan. This
thesis’ case study is focusing on Sudan’s potential economic development in the past decades,
before the pandemic and its potential development after the virus. The country is mainly
concentrated in exporting oil, even though it is not producing the same large amount as the pre-
secession Sudan, which was among one of the fastest-growing oil-led economies in Africa. The
agricultural sector has slight decline between 2000 and 2010, and represented about 30% of the
Gross Domestic Product (GDP).
In the post-secession Sudan, the oil industry dropped to less than 20% in 2012 and its nowadays
value of share is 1.01% of the GDP. The agricultural sector remained the same, even with a bit of

1
Breadbasket – a country or a region of a country that has an agricultural area that provides large amounts of wheat
or other grains.

3
increase, while the share of the service sector dropped from approximately 26% in 2010 to less
than 2.5% in 2018. This huge fall and all Sudan’s economic structure is related to oil.
General inflation has been like a Mountain-Rousse in Sudan, it has very many ups and sudden
downs. At the end of 2019 it was 50.99%, which meant a 12.30% decrease from 2018, but it is
expected to get to 81.28% at the end of the current year.
The paper is based on secondary data researches, analyzing and comparing the values in different
years. Data collection was from web-sites, International Monetary Fund articles, World Bank
articles, and other papers studying trends, fiscal policy, development and economy in Sudan.
The main reason of this paper is to inform people that Sudan has a very high potential of developing
in others sectors, rather than the oil one, and how the foreign investments and loans can help Sudan
achieve a wealthy economy.
Moving forward, the paper is structured on four chapters and conclusion with some
recommendations. In the first chapter there is a chain of theoretical aspects explained with some
definitions found on some articles. The second chapter reflects the country’s profile related to
economy. In this chapter discussed the main economic indicators (GDP, inflation rate, oil price),
Sudan’s outgoing efforts towards 2030 (a summary about an implementation program of
development), the sources of government budget (indicating some taxes), and the domestic private
finance (domestic credit from banks is a flow with potential for financing development in Sudan).
In the next chapter the current situation of COVID-19 is explained moving from global economy
to Sudan’s one and explaining the economic shocks that this country is facing (food and medical
shortfalls). The last chapter covers the possible future development of the country, specifically the
agricultural chapter and debates why it cannot develop in the current days. In the end, the
conclusion is mainly centering on the recommendations for developing and creating a strategy for
obtaining strong budget from the agricultural sector and even considering it to be the most
important for the country’s principal source of economy.

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 1. Chapter 1 – Theoretical aspects

The chapter main focus is on theoretical description of the terms that will be discussed in the
following chapters. For this reason, we will illustrate: the country profile, the main economic
indicators of Sudan, domestic credit to private sector, crude oil price, investment in agriculture,
traditional financing methods, Islamic financing methods.

1.1. The country profiles

The country profiles provide an overview of summary information on selected parameters that
describe the socioeconomic, political and financial situation of a country, as well as a preliminary
estimate economy impacts caused by macroeconomic risks. Such preliminary estimates can be
used as an input to more refined estimates of a country's economic impacts. Full profiles provide
an instant guide to history, politics and economic background of countries and territories, and
background on key institutions.

1.2. The main economic indicators

According to (Barone, 2020) “An economic indicator is a piece of economic data, usually
of macroeconomic scale, that is used by analysts to interpret current or future investment
possibilities. These indicators also help to judge the overall health of an economy.” The main
indicators are:
• Gross domestic product (GDP) = “the total monetary or market value of all the finished
goods and services produced within a country's borders in a specific time period. As a
broad measure of overall domestic production, it functions as a comprehensive scorecard
of a given country’s economic health”. (Chappelow, 2020)
• Unemployment rate = “the share of the labor force that is jobless, expressed as a
percentage. It is a lagging indicator, meaning that it generally rises or falls in the wake of
changing economic conditions, rather than anticipating them. When the economy is in poor
shape and jobs are scarce, the unemployment rate can be expected to rise. When the
economy is growing at a healthy rate and jobs are relatively plentiful, it can be expected to
fall.” (Chappelow & Barnier, 2020)

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 • Inflation = “a quantitative measure of the rate at which the average price level of a basket
of selected goods and services in an economy increases over some period of time. It is the
rise in the general level of prices where a unit of currency effectively buys less than it did
in prior periods. Often expressed as a percentage, inflation thus indicates a decrease in
the purchasing power of a nation’s currency.” (Chen, 2020)
• Corporate Tax Rate = “a levy placed on a firm's profit by the government. The money
collected from corporate taxes is used as a nation's source of income. A firm's operating
earnings are calculated by deducting expenses, including the cost of goods sold
(COGS) and depreciation from revenues. Next, tax rates are applied to generate a legal
obligation that the business owes the government.” (Kagan, 2020)
• Personal income tax = “a tax that governments impose on income generated by businesses
and individuals within their jurisdiction. By law, taxpayers must file an income tax return
annually to determine their tax obligations. Income taxes are a source of revenue for
governments. They are used to fund public services, pay government obligations, and
provide goods for citizens. Certain investments, like housing authority bonds, tend to be
exempt from income taxes.” (Kagan & Berry-Johnson, 2020)
• Government external debt = “the portion of a country's debt that is borrowed from
foreign lenders, including commercial banks, governments, or international financial
institutions. These loans, including interest, must usually be paid in the currency in which
the loan was made. To earn the needed currency, the borrowing country may sell and export
goods to the lending country.” (Kenton, 2020)

1.3. Domestic credit to private sector (% GDP)

“Domestic credit to private sector refers to financial resources provided to the private sector by
financial corporations, such as through loans, purchases of nonequity securities, and trade credits
and other accounts receivable, that establish a claim for repayment”. (IndexMundi, 2019)

1.4. Traditional financing methods

Loans are divided from the period’s factor, to the following:

6
 • Short term loans: they are seasonal, given for a period that does not exceed a year of time
for the purpose of financing the seasonal cultivation operations such as purchasing of seeds,
fertilizers and insecticides.
• Medium Period Loans: They are given for a period exceeds twelve months or even 24
months that is to fulfill the farmers need for the medium range for buying the cultivation
production necessities for the production operation which exceed a year of time and does
not exceed two years such as buying tools and agricultural machineries.
• Long Term Loans: Those exceed two years of time and performed for the erection of mass
schemes such as agricultural industries’ schemes and soil reformation and maintenance and
implanting of fruits trees.

1.5. Islamic Financing Methods

The types of Islamic financing, in Islamic banks, varies, though, they all agree on the partnership
in profits and losses and total ruling out of interest rates and some of these types are speculation,
partnership, venture, salaam sales, lease and other formulas.

i) Morabaha
It is a type of sales in which commodities are sold adding a certain profit to their cost price,
Muslims have agreed on its legibility according to Allah’s Quran “Allah has allowed sale and
prohibited usury” and the saying of prophet Mohammed (pbuh)” the best gaining of living is the
man working with his own hands or a blessed sale” or that which does not include trickery or
fraud.
The morabaha might take place between two parties one of them agrees to sell a commodity to the
other in a later payment higher than its recent price, this type of speculation is rarely dealt with,
but the more common type is of speculation sale is in which Islamic banks deals is the one in which
the client ask the bank to buy him a commodity from the local or import it from the foreign market.
The client names the commodity and gives its qualities to the bank on which result the bank buy
or import the commodity and display it for the client for sale against its cost price in addition to a
profit previously agreed upon, so, this type of speculation include three parties:
• The demander of purchase, or the second purchaser who desires to buy the commodity.

7
 • The party ordered to purchase, he is the first purchaser (the bank) and he is also the second
seller.
• The first seller, who possess the commodity for sale.
Morabaha sale is considered a sale of credibility and honesty because the purchaser trusts the seller
to tell him about the price of the commodity and it is conditional in speculation to have the price
cost and profit agreed upon. The speculation is divided on the bases of the factor of time to three
types:
• Short run Morabaha: has a period ranges between three to six months, it is mostly limited
to financing of export, import or internal commerce sectors.
• Moderate term Morabaha: its period ranges between six months to a year and used to
purchase production factors, the client payback in one lump sum or in installments.
• The long-term speculation: ranges between a year and three years it is mostly for the
purchase of immobile assets.
The percentage of profit taken by the Islamic bank varies from a sector to the other, these monetary
values are defined by the bank authorities, and speculation is used as a financing formula in varied
spheres such as import, purchase of raw material and machinery and it found a lucky opportunity
among Islamic banks for it is simplicity in dealing and the secure revenues for the bank.

ii) The Salaam

It is one of the types of sales allowed by Islam, to make life facilitated and easier for people it is
defined as:” the delayed sale, on the honesty account , of a certain item known by its description
with prompt payment, , the payment differs in kind from the sold item ,or a delayed sale for a
prompt payment and the prove for its legibility is Allah’s saying:(o’ you who believe when you
deal with each other in transactions involving future obligations in a fixed period of time reduce
them to writing).
The salaam derive its legibility from the benefit it attains for both of its parties as the owner of the
commodity needs the price to face the requirements of production operations and personal
expenditures and the owner of the capital needs a specific commodity to consume or for his
industry or trade and to avoid the refuge of the commodity owner to usury loans to meet his needs,
salaam was legitimated ,the salaam has three conditions:
• the formula the condition and acceptance;

8
 • the contract parties: the deliverer and receiver;
• the capital and the object of capital (the capital is the price and the object of capital is the
commodity for which the price is paid).
Salaam as a finance formula represent a delayed sale with certain differences as delayed sale is the
formula in which the price is lately paid and the commodity is promptly delivered but in salaam
the price is paid in advance to the delivery of the commodity and as it is likely to increase the price
of the commodity in delayed sale it is also likely to increase the size of the commodity in salaam
sale. And for the accuracy of salaam sale, there are numerous conditions to be fulfilled such as:
The capital object (the commodity) must be liable to control its qualities by measuring or weighing
and counting and this is possible in cereals, fruits and animals.
The characteristics of the capital object must be mentioned on which base the price is estimated as
to its quality, old or new. Defining the amount of the object of capital according to the standards
recognized by the government. The object of capital must be an obligation for an agreed time,
where legal nature of salaam lies because if the object of capital was present it would not be salaam
as much as a normal sale, for the time it must be specified by date and it is incorrect to specify it
by harvest or the incidence of the steamers arrival or the like of untimely specified events. Though
salaam sale was firstly related to crops and animals but Islamic jurisconsults have allowed it for
industry and commerce.

iii) Mosharka
It is one of the financing methods of money exploitation formulas in Islamic banks and it is the
most of elasticity, totalitarianism and suitability of financing formulas, it is a contract between two
or more to practice trading in a shared capital among them and profits and loss are also shared
among them according to the size of each one’s contribution to the capital or according to their
agreement. Partnership is a form of business in it a number of persons collect their capitals to run
a commercial or industrial projects and it is applicable on production activities or long run
activities, this means that include more than one contributor with his money, where all the parties
contribute to the enterprise with varied percentages and profits and losses are divided according to
each one’s contribution to the capital.
• The absolute moshakra: It is that which is not limited to a time or place or a type of trade,
in this case the money owner gives the money to the venture to have the profits shared

9
 among them in an agreed upon formula, Islamic banks usually refuse to practice this type
of venture for the risk it includes for the difficulty in following up and control over the
money.
• The Limited Mosharka: Which has been limited by a time or specific place, a specific type
of commodities, sale or purchase from a specific person, this type is common among the
Islamic banks because it is more controllable than the absolute speculation.
Taking into consideration the recent events with the pandemic, and the fact that, as mentioned
before, Russia, the biggest producer of wheat for Sudan reduced its amounts of deliveries Sudan
should focus more on agriculture as a development priority. This should be its aim even if
everything restarts. As it was previously discussed, the production of oil in The Republic of Sudan
decreased a lot since South Sudan gained its independence and has only about 20% of the oilfields.

1.6. Investment in agriculture

“It is a low-risk investment that keeps pace with inflation and increases in value over the long-
term, it is a tangible asset that provides benefit to the community, and it can diversify a portfolio.
But how exactly does an investment like this make money? Depending on the investment and the
type of farm, investors can profit through several different ways.” (Anon., 2018)

1.7. Crude oil price

Like most commodities, the fundamental driver of oil's price is supply and demand in the market.
Oil markets are composed of speculators who are betting on price moves, and hedgers who are
limiting risk in the production or consumption of oil. Oil supply is controlled somewhat by a cartel
of oil producing nations called OPEC. The demand for oil is driven by everything for gasoline for
cars and airline travel to electrical generation. (Kosakowski, 2020)

Now that we have covered the theoretical aspects of what this has the most focus on, we will move
forward to apply them more precisely on the next case study which is done on Republic of Sudan.
There the terms will be described, analyzed and discussed and a better view of the aspects can be
deducted and understood.

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2. Chapter 2 - Country Profile

Sudan was separated in 2011 into Northern Sudan, officially the Republic of the Sudan, with a
predominantly Arab population and South Sudan, formerly the southern part of Sudan, now
officially the Republic of South Sudan, with a majority population of people with a Black African
heritage.
The country is situated in north-eastern Africa, between Egypt to the north and Eritrea, bordering
the Red Sea in north east. It is also bordered by Libya in north west, by Chad in west, by
the Central African Republic in south west, by South Sudan in south and by Ethiopia in south east,
and it shares maritime borders with Saudi Arabia.
Sudan occupies an area of now 1,886,068 km², it is the 16th largest country in the world, more
than five times the size of Germany, or slightly less than one-fifth the size of the USA.
Sudan has a population of 41.5 million people (June 2019 est.)2, Capital city is Khartoum, largest
city is Omdurman, Sudan's main port is Port Sudan. Spoken languages are Sudanese Arabic, the
predominant language in the country, and Beja (Bedawi) spoken along the Red Sea.3

Figure 1 - Sudan Political Map

Source: http://www.mapsopensource.com/sudan-political-map.html, accessed June 2020

2
Based on the information found on https://en.wikipedia.org/wiki/Sudan
3
See https://www.nationsonline.org/oneworld/sudan.htm

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 2.1. Economic overview
Table 1 - Main economic indicators of Sudan, 1990-2018
Sudan 1990 2000 2010 2018
Population. total (millions) 20.15 27.28 34.55 41.80
Population growth (annual %) 3.4 2.4 2.2 2.4
Poverty headcount ratio at national poverty lines (% of population) - - 46.5 -

Macroeconomic indicators
GDP (current US$) (billions) 12.41 12.26 65.63 40.85
GDP growth (annual %) -5.5 6.3 3.5 -2.3
Inflation. GDP deflator (annual %) 66.2 9.9 19.6 23.9
Gross capital formation (% of GDP) 11 25 23 19
Industrial structure (value added)
Agriculture. forestry. and fishing. value added (% of GDP) 39 41 23 31
Industry (including construction). value added (% of GDP) 15 20 27 2
Services. etc.. value added (% of GDP) 15 15 23 2

Employment structure (% of total employment)

Agriculture 61.8 58.7 49.2 53.3
Industry 19.02 20.6 22.6 19.2
Services 20.1 20.8 28.2 27.5
Employment to population ratio. 15+. Total (%) 42.5 43.33 41.82 40.43

Trade structure
Exports of goods and services (% of GDP) 4 16 20 10
Imports of goods and services (% of GDP) 7 13 17 12
Revenue. excluding grants (% of GDP) - 8.0 12.9 9.5
Net lending (+) / net borrowing (-) (% of GDP) - -0.4 -4.8 -1.9
Human resources
Labor Force. total 5400000 7990000 9900000 12500000
School enrollment. secondary (% gross) - 35 43 47
Public spending on education. sotal (% Of GDP) - 1 2.2 0.98
Source: World Development Indicators database, accessed June 2020; World Bank, WDI database, accessed June
2020; http://tradingeconomics.com , accessed June 2020; https://data.worldbank.org/ , accessed June 2020;
https://databank.worldbank.org/ , accessed June 2020

12
Sudan was considered by 2010 the 17th world’s fastest growing economy and the fastest
development of the country from oil profits no matter that international sanctions were noted by
The New York Times in an article in 2006.
Due to the separation of South Sudan, which consisted of more than 80% of Sudan’s oilfields,
Sudan recorded a phase of bankruptcy, GDP decreased to 3.4% in 2014, 3.1% in 2015 and was
projected to have an increase to 3.7% , starting 2016, But as it is showed in Table 1, the GDP at
the end of 2018 had a major fall, while inflation remained high and it is still increasing, in March
2020 was 81.6%4. In 2017 Sudan’s GDP was US$123.053 billion and fell to US%40.852 billion
in 2018.
It can be seen in Table 1 that the agricultural production remains important because it employed
more than 53.3% by the end of 2018, 80%5 and it contributes by a third to GDP.

In Figure 2, Figure 3, Figure 4 and Figure 5, that can be found below, can be observed the big ups
and downs of Sudan’s inflation rate. The outline is based on the lowest and highest values that the
inflation rate achieved during the period of 1960 and 2018. As it can be noted in the period of
1960-2000, in 1968 the inflation hit the bottom with a negative inflation rate of 10.03% and one
of the biggest annual change of -21.05%, the lowest annual change was in 1997 and it scored -
86.17%. This enormous annual change was preceded by the highest peak of inflation rate during
the observed period, +132.82% inflation rate with an annual change of +64.45%.
The history seems to repeat in the new century, especially after the secession of South Sudan.
During the period of 2000 and 2010 the inflation rate was almost a straight line, but after South
Sudan took 80% of the oil lands, in Sudan there was a crisis and since then the inflation rate is
constantly increasing. From 2000 to 2018, the lowest value achieved was in 2001 with an interest
rate of +4.87% and annual change of -3.16% and the highest is at the end of 2018 with a rate of
+63.29% and the biggest annual change of this century of 30.94%. At the end of 2020 it is expected
to reach more than + 81%.

4
See https://tradingeconomics.com/sudan/inflation-cpi
5
See https://en.wikipedia.org/wiki/Economy_of_Sudan

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Figure 2 - Inflation Rate (%) and Annual Change
Source: https://www.macrotrends.net/countries/SDN/sudan/inflation-rate-cpi, accessed June 2020

Figure 3 - Inflation Rate (%) and Annual Change

Source: https://www.macrotrends.net/countries/SDN/sudan/inflation-rate-cpi, accessed June 2020

14
Figure 4 - Inflation Rate (%) and Annual Change
Source: https://www.macrotrends.net/countries/SDN/sudan/inflation-rate-cpi, accessed June 2020

Figure 5 - Inflation Rate (%) and Annual Change

Source: https://www.macrotrends.net/countries/SDN/sudan/inflation-rate-cpi, accessed June 2020

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Table 2 - Peformance of Sudan's Economy, 1990-2018
Year 1990 2000 2010 2018
GDP Share of Agriculture
(%) 39.02% 40.68% 23.31% 31.47%
GDP Share of Industry (%) 14.68% 20.08% 26.92% 2.38%
GDP Share of Services
(%) - - 44.48% 49.5%
Source:https://www.theglobaleconomy.com/Sudan/share_of_industry/, accessed June 2020;
https://www.theglobaleconomy.com/Sudan/share_of_agriculture/ , accessed June 2020
We compare the data in Table 2 from 2010 and 2018, and there can be seen a very drastic decrease
in GDP Share of Industry and this is because of the secession of South Sudan. Oil was Sudan’s
main export and it had a booming between 2000 and 2010, but after South Sudan gain its
independence it took Sudan’s biggest partners for oil export. Moreover, industry in Sudan consists
of agricultural processing, electronic assembly, plastics manufacturing, furniture, tanning, sugar
production, meat processing and other various light industries located in any of the 10 Industrial
areas in Khartoum.
In recent research there has been found that many countries are depending in Sudan for medicines
and medical services, so Sudan concentrates on becoming a core for the medical industry in East
Africa, producing facilities and concessions for medical investments and succeeding in covering
about 70% of needs and exporting to many neighbor nations.
Table 2 shows that there has been a decrease of almost 50% between 2000 and 2010 in GDP share
of Agriculture, but stared recovering until the end of 2018. From table one it can be seen that in
1990 agriculture was the main source of living in Sudan for almost 62% of the working population.
However, Sudan’s macroeconomy has been dependent, over the last few decades, on its exports
of oil. Nowadays it is estimated that oil accounts for between 70% and 90% of Sudan’s total
exports. Its primary importers are: Japan, China, South Korea, Indonesia and India. Even though
it represents 1.01% of Sudan’s GDP – which I very small compared to agriculture and services,
which it is showed in Table 2.
Sudan remains in debt distress and is eligible for debt relief under the Heavily Indebted Poor
Countries (HIPC) Initiative. Public and external debt remain unsustainably high with most external
debt in arrears. The external debt, as percentage of GDP, is also growing with the pace of

16
depreciation of the Sudanese Pound (SDG); the debt reached US$52,183 or 127% of GDP at the
end of 2019.
The external debt portfolio in Sudan is characterized by the increasing share of arrears, which is
representing 87% of the total debt on average. This increase was mainly caused by weak
repayments and the accumulated penalty interest. Despite the relative decrease in principal and
interest arrears, the share of total arrears in total external debt is still considerably high as illustrated
in Tables 3 and 4 below.
Table 3 - Total arrears of external debt (2015-2019) (in million USD and as a% of Total External Debt)

Item/Year 2015 2016 2017 2018 2019

Total debt (in million USD) 43,884 45,022 46,781 49,747 52,183
Total arrears (in million USD) 33,956 36,307 308,545 38,175 38,25
Total Arrears (as % of Total External
Debt) 85% 86% 87% 87% 87%
%Growth of Total Arrears 4% 7% 6% -1% 0.2%
Note: Amounts in nominal values.
Source: https://tradingeconomics.com/sudan/inflation-cpi, accessed June 2020

Table 4 - Composition of arrears in External Debt (2015-2019) (%)

Item/Year 2015 2016 2017 2018 2019

Principal Arrears 31% 31% 32% 30% 30%

Interest Arrears 12% 12% 11% 12% 11

Penalty Arrears 57% 57% 57% 58% 59%

Total Arrears 100% 100% 100% 100% 100,00%

Source: https://tradingeconomics.com/sudan/inflation-cpi, accessed June 2020

17
Figure 6 - Sudan Indicators of Public and Publicity Guaranteed External Debt under Alternative Scenarios
Source: https://www.imf.org/external/pubs/ft/dsa/pdf/2017/dsacr17364.pdf, accessed 2020

18
Figure 7 - Sudan Crude Oil Production; Crude Oil Production in Sudan decrease to 65BBL/D/1K in January 2020 from
79BBL/D/1K in December 2019
Source: https://tradingeconomics.com/sudan/crude-oil-production, accessed June 2020

Sudan’s Crude Oil: Exports was reported at 164.530 Barrel/Day th in Dec 2018. This records an
increase from the previous number of 141.130 Barrel/Day th for Dec 2017.
Sudan’s Crude Oil: Exports data is updated yearly, averaging 173.460 Barrel/Day th from Dec
1999 to 2018, with 20 observations. The data reached an all-time high of 389.080 Barrel/Day th in
2010 and a record low of 57.260 Barrel/Day th in 1999.
Sudan’s Crude Oil: Exports data remains active status in CEIC and is reported by Organization of
the Petroleum Exporting Countries.

Figure 8 - Crude Oil Exports

Source: https://www.ceicdata.com/en/indicator/sudan/crude-oil-exports, accessed June 2020

19
2.2. Sudan’s Ongoing Efforts Towards 2030
“The Government’s 2030 vision set through the Twenty-Five Year National Strategy 2007-2031
provides a foundation for the country’s efforts for sustainable development and poverty reduction.
The Government has initiated work towards mainstreaming the SDGs by means of a presidential
decree to formulate national mechanisms to supervise the implementation of the SDGs. The
“National Mechanism to Supervise the Sustainable Development Goals”, with the National
Population Council (NPC) as its secretariat, includes all relevant stakeholders for monitoring
progress on achieving the SDGs. The national mechanism is expected to play a crucial role in
coordinating and pursuing the entire government to achieve the SDGs.
The NPC led the drafting of the National Program for Sustainable Development 2017- 2030. This
national program started at a very slow pace and reviews the lessons learned from the MDGs era.
It also represents mechanisms and proposes priority pillars for 2017-2020 for SDGs
implementation, and maps the existing national policies, strategies, plans as well as ministries and
agencies, which are relevant to the SDGs. Through consultations with relevant stakeholders, the
national program for sustainable development will need to be endorsed at the level of the Council
of Ministers.
Although data and national statistical capacities need to be enhanced, Sudan shows a particular
commitment to the follow-up and review of the 2030 Agenda and the SDGs. Currently, NPC and
the CBS are reviewing the framework of indicators for Sudan’s SDGs. CBS in partnership with
the United Nations Population Fund ended a mapping of data availability against the SDGs in
2017. Also, a new round of the MICS was be conducted in 2019 to assess progress on key
indicators on the well-being of children and women making use of the MICS 2014 as a baseline.
At the global level, Sudan signed up for the Voluntary National Review at the High-Level Political
Forum on Sustainable Development in 2018 to present the progress in SDGs. In addition, GoS
plans to produce thematic and biannual SDGs reports.” (Siddig & Ismail, 2018)
With the secession of South Sudan in 2011, three quarters of Sudan’s oil output, which was the
main source of foreign currency and government income, were lost. The global oil price slump in
2015 exacerbated the situation of low oil revenue. Apart from oil revenue, Sudan has deposits of
other metals and minerals, but these deposits are under-exploited. Generally, there have been major
investments aimed at supporting diversification of the economy.

20
Figure 9 - Government Budget Deficit (as % of GDP)
Source: https://tradingeconomics.com/sudan/government-budget, accessed June 2020

2.3. Sources of Government Budget

Tax includes such items as income and profit tax, property tax, tax on goods and services (VAT),
and tax on international trade (customs). Non-tax revenues include revenues from state-owned
enterprises, goods and services sales, sales of goods from government corporations, oil revenue,
administrative charges, fines, penalties and confiscations, oil transit fees, and Transitional
Financial Arrangements from South Sudan (Siddig & Ismail, 2018). Indirect taxes, out of the total
tax revenues, represented 92.1% in 2015, 92.3% in 2016, and 92.9% in 2017.

Source: https://www.theglobaleconomy.com/Sudan/indirect_tax_rate/, accessed June 2020

21
Figure 10 - Sudan Corporate Tax Rate; Source: https://tradingeconomics.com/sudan/corporate-tax-rate, accessed June 2020

Figure 11 - Personal Income tax rate

Source: https://www.theglobaleconomy.com/Sudan/personal_income_tax_rate/ , accessed June 2020

22
Figure 12 - Source of revenue for PETS states 2018 (in SDG per capita)

For the six states in the PETS states, own revenue per capita was in 2018 almost nine times higher
in Khartoum in comparison to Blue Nile, Figure 8. Federal transfers “compensate” for the low
revenue “capacity”, which could level out the difference as measured by total revenue per capita.
As confirmed by analysis of PETS data, the allocation of federal transfers to the states determines
to a large extent state per capita spending on health, but, being a mix of transfers with different
allocation criteria, for some states it serves to level out differences in revenue capacity while for
others it does not.
Sudan adopted the federal system of governance in 1992 with three tiers: federal, state, and local.
States and localities were assigned certain expenditure responsibilities by the constitution, such as
basic education, primary health, water supply, etc. The amended Interim National Constitution of
2005 granted state governments the right to legislate for raising revenue collection through a
variety of local taxes and charges for services provided by the state. According to Article 195 of
The Interim National Constitution, states were given the authority to legislate for raising revenue
or collecting taxes from the following sources: (i) state land and property tax, and royalties; (ii)
service charges for state services; (iii) licenses; (iv) state personal income tax; (v) levies on
tourism; (vi) state government projects and national parks; (vii) stamp duties; (viii) agricultural
taxes; (viii) excise duties; and (ix) border trade charges or levies in accordance with national
legislation. The Interim National Constitution in Article 196(a) also assigned to localities the
following tax sources: (i) real estate’s proceeds; (ii) sales tax; (iii) agricultural and animal
production tax; (iv) local land and river means of conveyance fees; (v) local industrial and crafts
production fees; (vi) local services for mining fees; and (vii) any other local resources.28 State tax
collections are weak due to state-level tax policies, poor administration, and weak tax base (with

23
variation among states). Considerable reform is required to boost the state taxes, which could
constitute a major source of finance for improved basic services delivery. (Diop, et al., 2014)
2.4. Domestic Private Finance
Domestic credit from banks is a flow with potential for financing development in Sudan. The
extent to which domestic credit and domestic private investment contribute to development will
need more data and research on where the financed investment is made. More analyses are also
needed on the degree of control the Government has on re-orienting domestic private finance flows
and the extent of alignment of the current domestic investment patterns with the SDGs and national
development goals and targets. (Siddig & Ismail, 2018)

Figure 13 - Domestic Credit to the private sector in Sudan (% of GDP)

Source: https://www.theglobaleconomy.com/Sudan/domestic_credit_private_sector/, accessed June 2020

For that indicator, there was provided data for Sudan from 1990 to 2017. The average value for
Sudan during that period was 8.69 percent with a minimum of 1.62 percent in 1999 and a maximum
of 13.96 percent in 2006. The latest value from 2017 is 8.84 percent. For comparison, the world
average in 2017 based on 163 countries is 57.62 percent.

24
Figure 14 - Bank credit to deposits Sudan (1990-2017) (%)
Source: https://www.theglobaleconomy.com/Sudan/bank_credit_to_deposits/ , accessed June 2020

25
3. Chapter 3 - Sudan during COVID- 19
Amid the coronavirus pandemic, several countries across the world resorted to lockdowns to
“flatten the curve” of the infection. These lockdowns meant confining millions of citizens to their
homes, shutting down businesses and ceasing almost all economic activity. According to the
International Monetary Fund (IMF), the global economy is expected to shrink by over 3 per cent
in 2020 – the steepest slowdown since the Great Depression of the 1930s.Due to recent events -
COVID-19 pandemic- the economic effects of suspending most activities have directly clashed
the world’s commodity markets and most likely to affect them for some months more. The
pandemic affected demand and supply of commodities. (2020)
The eruption of COVID – 19 had one of the largest impacts on the crude oil markets. Oil prices
have declined 70% from their January highest point, and a historically large production cut by
OPEC+ failed to lift prices. Mitigation measures taken to slow the spread of COVID – 19 have
resulted in a historical collapse in travel and transport. Crude oil demand is expected to decline
9% in 2020, more than twice as large as any previous fall. (Anon., 2020)

Figure 15 - Global oil demand impact of COVID 19, total demand (up), losses down)
Source: Rystad Energy OilMarket Cube

26
Figure 16 - Percentage decline in oil demand; Data for 2020 is based on IEA estimates
Source: BP Statistical Review, IEA, and World Bank, accessed June 2020

3.1. Economic Shocks: food and medical shortfalls

As agriculture prices are less tied to economic growth and have undergone minor declines over
the first months of the year, with the exception of rubber which fell sharply, and rice, which rose
due to worsening crop conditions and some trade restriction. Mainly, the agricultural prices around
the glove are expected to remain predominantly stable in 2020 as production levels of most
essential foods are at record highs.
Without any other expectations, taking into consideration the global lockdown, the issue of
economic forecasts in bleak, particularly for Sudan with acutely existing issues. Challenges of
economy present themselves on all levels across society.
On the macroeconomic level, Sudan was already facing an economic recession between 2018-
2019. The elimination of wheat and flour subsidies in February 2018, coupled with continual
devaluations of the Sudanese pound (SDG) caused shortages of essential commodities and hard
currency. The economic crisis is disrupting public services, impacting agricultural activities, and
resulting in dramatic price increases for staple foods. However, in a newly released World

27
Economic Outlook6 report by the IMF, considering the impact of COVID-19 after measuring this
pre-existing decrease, Sudan’s economy is now expected to narrow again. (Anon., 2020)

Figure 17 - Growth Projections

Source: IMF, World Economic Outlook, April 2020; https://www.imf.org/en/Publications/WEO/Issues/2020/04/14/weo-april-
2020, accessed June 2020

6
See https://www.imf.org/en/Publications/WEO/Issues/2020/04/14/weo-april-2020

28
On the microeconomic level, the economic impact has had relentless implications for Sudanese
citizens. There is a critical problem of food and medicinal availability. Sudan is obliged to import
2.2 million metric tons of wheat, meaning 75% of the country’s needed amount, and the percentage
is similar for other basic crops (e.g. maize, rice). But for all that exporting countries, such as Russia
(most important provider of wheat for Sudan), have implemented restrictions on the amount of its
exports due to the virus.
Concerning medicines, the amount of imported medicine in 2019 was already 20% less than in
2017 and due to the crisis, new measures have created conditions for major delays to supply. These
include customs clearance procedures, as well as the 14-day quarantine period for any shipments
passing through the Suez Canal, where most imports to Sudan pass. The effect on Sudanese
consumers is markedly increased prices on essential goods, and in some places seeing food sold
for double its normal price, which, coupled with employment insecurity due to lockdown
measures, has been very disruptive.
The Sudanese government has adopted several measures to counter these effects. The Ministry of
Finance signed an agreement with WFP Sudan to import 200,000 tons of wheat. However, this
import will eventually be paid for in Sudanese pounds from the government’s reserves. There has
also been coordination with UN-agencies in order to secure humanitarian funding. Over $47
million has been mobilized17 to support the health sector’s capacity to tackle coronavirus,
including awareness-raising initiatives and capacity building at the local and national levels. The
EU too has included support for Sudan in its ‘Team Europe’ assistance package for partner
countries fighting COVID-19. Sudan is referenced in this regard through €80 million, of which
includes a €10 million humanitarian project to provide access to clean water and hygiene, while
assisting awareness-raising measure. Notably, ‘Team Europe’ is not new money, rather a re-
shifting of already allocated money to new areas considering COVID-19. As such, another €30
million humanitarian assistance, announced for Sudan on 1 March 2020 for food and nutritional
care, is likely composite of this funding package.
However, there are significant considerations here. First, financing needs qualification and
accountability that is effectively targeted towards achieving a specific objective, in order to be
successful. There have been considerable issues with corruption and transparency of funding
instruments in the past. Through interviews with BIC, many Sudanese citizens shared this fear of
corrupted and wasted money. Second, the bulk of international financial assistance to Sudan has

29
been framed in terms of humanitarian aid, which is unsurprising due to the preexisting issues in
the country. From the EU, for example, we see that the EU normally considers “support to basic
service delivery” as the means by which its funding improves the socioeconomic situation of
Sudan. This is not the same as sending millions of euros to support and prevent the banking sector
from collapsing or ensuring liquidity in the treasury of a country. Compare this attitude to the sheer
amount of money mobilized to stabilize and support the economies of the EU’s immediate
neighbors. For Morocco, the EU has mobilized €150 million, with discussions in place for up to
€300 million. For Tunisia, this figure is €250 million, while for Egypt €200 million. Another
glaring issue is that Sudan remains on the US’s state-sponsors of terrorism list, which is a huge
deterrent to external investment and blocks much of the joint World Bank-IMF Heavily Indebted
Poor Country (HIPC) Initiative that is supposed to give debt relief and write-off other State arrears.
This has prevented much of the additional assistance that could have been mobilized to assist the
country through COVID-19. What is needed is an approach to funding that is varied enough to
have a more sustainable vision of the country’s needs, such as initiatives to help support local
businesses for instance, while being targeted and accountable. The issue of how to qualify which
firm receives support and under which conditions will be key. T Accountability could be better
achieved through a utilization of a transparency mechanism could identify whether firms are
financially accountable for example, such as blacklisting those with assets linked to tax havens as
has been attempted recently by the Danish government. And in order to make funding more
targeted, there could be different ways to ensure that money reaches those who need it is by doing
more to connect funding to local initiatives. Some European development finance institutions, such
as Germany’s KfW-GED25, are undertaking such initiatives in Sudan and other African countries,
and best practices could be identified here. Additional coordination could be achieved using pre-
existing capacity such as the UN’s in-country teams.
There are indeed several local initiatives that have been implemented to assist Sudan through this
outbreak. The Sudanese Football Federation provided residence facilities to the Ministry of Health
to be used by doctors and medical staff. Also, 180 women volunteering at the Orphans Care Home
in Mygoma in Khartoum decided to remain at the home throughout the duration of the lockdown
in order to continue their care. Kassala, in eastern Sudan, launched a food distribution project for
3,000 vulnerable families following a donation by a philanthropist. Several initiatives 27 have been

30
implemented by local pharmacists and organizations, such as Builders Without Borders. And there
are also locally run schemes to produce and distribute free facemasks. (Anon., 2020)

31
4. Chapter 4 - Future Development of Agricultural Sector
The agricultural sector is assumed to be the most effective sector in Sudan, with its contribution to
GDP by over 40%, additionally to its contribution to other sectors (e.g. transportation,
industrialization).
The periodic automatic cultivation sector depicts an important source of national income in Sudan
and has a contribution of 18% to the domestic product. The seasonal cultivation is confronted by
problems such as the low productivity that results in consequences of high production cost which
make the availability of finance more complicated especially in case of the international
deterioration of prices, when the government has instructed banks to finance and imposing a
ceiling for the finance of the agricultural sector , this exposed banks to the risks of farmers’ distress
at paying back for the low and the fluctuation of productivity in the dry seasons or for the scarcity
of rain as an ample number of farmers were distressed at the payback of loans of banks which
added to problems of distressed debts and negatively influenced the situation of some banks. And
by this, banks refused to get involved in the risks related to seasonal cultivation which has resulted
in more deterioration in this sector.
The obstacle of finance is considered as one of the well-known barriers of agricultural
development, where lots of farmers, especially the tiny producers, started to search for funds for
the projects. (Hamid & Albushari, 2018)
As discussed in the previous chapters, the government and other non-governmental institutions try
to adopt a plan for opening the borders mor foreign investments in agriculture. Investment in
agriculture is a very low-risk one and it is influenced the inflation rate. It is a tangible asset that
can benefit a lot to the community and helps to diversify the portfolio. The investors should know
that they can make money form the cashflow of the harvested crops, from land appreciation which
is one of the limited resources nowadays considering the expansion of construction and the fact
that in African countries Sudan is well irrigated.

32
Conclusion and recommendations

As the title of this thesis suggests, the scope of this paper was to discover the main sector for
Sudan’s potential economic development before and after the pandemic with COVID-19. Starting
with the analysis made on the economic overview of the country during different centuries, years
and crisis, the paper debated more or less the pros and cons of which sector should the government
consider so they would expand the countries economy. Moreover, from this paper analysis can be
learnt how the pandemic is affecting the global economy, but mostly how is it affecting a least
developing country, as Sudan.
Furthermore, in the last chapter was noted that the main issue of the non-development of the
agricultural sector in Sudan is the lack of financial support. The land farm is generally harvested
by small and local farmers that do not have the possibilities to expand without some help from the
banks, the government or other local or foreign investors.
In my opinion, Sudan should consider to target and exploit the most of its farmland as an economic
development.
For the agricultural sector, I recommend that:
• the banks to increase the awareness related to the Islamic loans through advertising or even
by finding the local farmers and proposing them this kind of methods;
• the feasibility studies to be made by specialized and qualified systems
• ensuring that the funds are properly used
• prepare farmers marketing skills to ensure that they get the expected payback
• decide the products’ prices to keep away from the losses that could result from inflation of
other economic issues. (Hamid & Albushari, 2018)

33
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