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Sudan
ECONOMIC DEVELOPMENT
Historically, the colonial government was not interested in balanced
economic growth and instead concentrated its development efforts
on irrigated agriculture and the railroad system throughout the
Anglo-Egyptian condominium (see The Anglo-Egyptian Condominium,
1899-1955 , ch. 1). Incidental government investment had gone
mainly into ad hoc projects, such as the construction of cotton
gins and oilseed-pressing mills as adjuncts of the irrigation
program. A limited amount of rainfed mechanized farming, similarly
on an ad hoc basis, had also been developed during World War II.
After the war, two development programs-- actually lists of proposed
investments--were drawn up for the periods 1946-50 and 1951-55.
These plans appear to have been a belated effort to broaden the
country's economic base in preparation for eventual Sudanese independence.
Both programs were seriously hampered by a lack of experienced
personnel and materials and had little real impact. Independently,
the private sector had expanded irrigated agriculture, and some
small manufacturing operations had been started, but only three
larger industrial enterprises (meat and cement plants and a brewery)
had been constructed, all between 1949 and 1952. As a result,
at independence the new Sudanese government's principal development
inheritance was the vast irrigated Gezira Scheme (also seen as
Jazirah Scheme) and Sudan Railways.
Not until 1960 did the new government attempt to prepare a national
development plan. Since that time, three plans have been formulated,
none of which has been carried through to completion. Work on
the first of these, the Ten-Year Plan of Economic and Social Development,
for the fiscal years ( FY--see Glossary) 1961-70, began in late
1960, but the plan was not formally adopted until September 1962,
well over a year after its scheduled starting date. The total
ten-year investment was set at £Sd565 million, at the time equivalent
to more than US$1.6 billion. The private sector was expected to
provide 40 percent of the amount. Unfortunately, the goals were
overly ambitious, and the government had few experienced planners.
The plan as prepared was not adhered to, and implementation was
actually carried out through investment programs that were drawn
up annually and funded through the development budget. Projects
not in the original plan were frequently included. Investment
was at a high rate in the first years, well beyond projections,
and a number of major undertakings had been completed by mid-plan,
including the Khashm al Qirbah and Manaqil irrigation projects,
a sugar factory at the former site, another at Al Junayd irrigation
project, and the Roseires (also called Ar Rusayris) Dam.
As the 1960s progressed, a lack of funds threatened the continuation
of development activities. Government current expenditure had
increased much faster than receipts, in part because of the intensification
of the civil war in the south, and government surpluses to finance
development vanished. At the same time, there was a shortfall
in foreign investment capital. The substantial foreign reserves
held at the beginning of the plan period were depleted, and the
government resorted to deficit financing and foreign borrowing.
The situation had so deteriorated by 1967 that implementation
of the Ten-Year Plan was abandoned. Sudan's international credit
worthiness became open to question.
Despite major financial problems, real economic gains were nevertheless
made during the Ten-Year Plan, and per capita income rose from
the equivalent of US$86 in 1960 to about US$104 at the end of
the decade. Late in the 1960s, the government prepared a new plan
covering FY 1968 to FY 1972. This plan was discarded after the
military coup led by Nimeiri in May 1969. Instead, the government
adopted a Five-Year Plan of Economic and Social Development, 1970-74.
This plan, prepared with the assistance of Soviet planning personnel,
sought to achieve the major goals of the May revolution (creation
of an independent national economy; steady growth of prosperity;
and further development of cultural, education, and health services)
through socialist development.
During the plan's first two years, expenditures remained low,
affected largely by uncertainties that stemmed from the civil
war. After the war ceased in early 1972, the government felt that
the plan failed to provide for transportation improvements and
large-scale productive projects. In 1973, the government therefore
established in the Interim Action Program, which extended the
original plan period through FY 1976. New objectives included
the removal of transportation bottlenecks, attainment of self-sufficiency
in the production of several agricultural and industrial consumer
items, and an increase in agricultural exports. To accomplish
these goals, proposed public sector investment increased from
£Sd215 million to £Sd463 million (however, actual expenditures
during the five years, excluding technical assistance, were £Sd250
million). Private sector projected investment was estimated at
£Sdl70 million originally, but the nationalizations carried out
in 1970 and 1971 discouraged private investment in productive
undertakings. Foreign private capital investment became negligible,
and domestic private capital was put mostly into areas considered
less subject to takeover, such as service enterprises, housing,
traditional agriculture, and handicrafts (see Manufacturing ,
this ch.). The denationalizations since 1972 resulted in increased
private foreign investment in development. The final investment
total during the first five years was considerably above the original
plan projection. The plan failed to achieve its goal of a 7.6
percent annual growth rate in gross domestic product ( GDP--see
Glossary), however, and was extended to 1977.
From FY 1973, after introduction of the Interim Action Program,
through 1977, development expenditures grew to more than 1 billion
Sudanese pounds. The government initiated several irrigation projects
at Rahad, Satit southeast of Khashm al Qirba, Ad Damazin, and
Kinanah; and established factories at Sannar, Kinanah, at Shandi
on the Nile northeast of Khartoum, Kusti, Kaduqli, Nyala, and
Rabak on the White Nile south of Khartoum. Roads between Khartoum
and Port Sudan were paved with tarmacadam. Excavation began on
the Jonglei Canal. Chevron discovered oil. The original plan called
for almost half of investment to be provided by surpluses in the
central government budget. Although this assumption appeared highly
optimistic in view of the modest surpluses attained during the
last half of the 1960s, tax revenues did increase as projected.
Earnings from public corporations, however, fell short of projections,
and growth in government current expenditures greatly exceeded
revenue growth. As a result, not only were there no surpluses
in the public sector, but the government had to borrow from the
Bank of Sudan to cover the current expenditure account. Foreign
capital, although abundant, also did not equal the spending on
development, and, contrary to the expectations of the plan's drafters,
the government had to resort to domestic borrowing to proceed
with project implementation.
In early 1977, the government published the successor Six- Year
Plan of Economic and Social Development, 1977-1982. Its goals
and projections also appeared optimistic because of the worsening
domestic economic situation, which was marked by growing inflation.
The inflation stemmed in large part from deficit development financing
(printing money), increasing development costs because of worldwide
price rises, and rising costs for external capital. During the
plan's second year, FY 1978, there was no economic growth as the
deficit development financing in the mid- and late 1970s led the
Sudan into a deepening economic crisis. At the same time, external
debt pressures mounted, and Sudan failed to meet its scheduled
payments (see Foreign Trade and Balance of Payments , this ch.)
A substantial cutback in further development expenditures became
unavoidable. The result was an abandonment of Six-Year Plan projections,
a restriction of expenditures generally to the completion of projects
under way, improvement of the performance of existing operational
projects, elimination of transport constraints, and a series of
short-term "rolling" programs that particularly emphasized exports.
In October 1983, the government announced a three-year public
investment program, but efforts to Islamize the economy in 1984
impeded its implementation, and after the Nimeiri overthrow in
April 1985, it was suspended (see table 5, Appendix). In August
1987, an economic recovery program was initiated. This program
was followed, beginning in October 1988, by a three-year recovery
program to reform trade policy and regulate the exchange rate,
reduce the budget deficit and subsidies, and encourage exports
and privatization. There was little possibility for early economic
recovery offered by the military government of General Umar al
Bashir that took office on June 30, 1989. The government's economic
policies proposed to Islamize the banking system, but foreign
business interests viewed this measure as a disincentive to do
business in Sudan, because no interest would be paid on new loans.
Furthermore, Islamic banks and other economic supporters of the
regime were to be granted disproportionate influence over the
economy, which led to widespread resentment among other sectors.
Finally, the government did not go far enough to satisfy the International
Monetary Fund ( IMF--see Glossary) or other major creditors that
it had sufficiently reduced subsidies on basic commodities, thus
reducing its budget deficit. Bashir had announced an economic
recovery program in mid-1990, but in 1991 its results were still
awaited.
The late 1970s had seen corruption become widespread. Although
always present, corruption never had been a major characteristic
of the Sudanese economic scene. The enormous sums that poured
into Sudan in the late 1970s from the Arab oil- exporting countries,
the United States, and the European Community, however, provided
opportunities for the small clique that surrounded Nimeiri to
enrich themselves. This corruption fell into three principal categories:
embezzlement of public funds, most of which left the country,
agricultural acquisition schemes, and investment in the mercantile
sphere.
The most common ways of embezzling public funds were acquiring
liquid assets from banks or government agencies, selling the state's
assets, selling state land, and smuggling. The siphoning off of
liquid assets usually required the connivance of a high government
official. Between 1975 and 1982, more than 800 cases were reported
of embezzlement of, on the average, more than £Sd1,000. In one
case, principal bank officials embezzled £Sd3 million; another
bank made a loan of £Sd200 million to a businessman whose business
was fictitious.
State property sold by embezzlers included gasoline and medicines.
State officials also sold real estate in residential areas at
below the market price. An impressive residence would then be
built on the property for rental to diplomatic officials or executives
of multinational companies. In the past, small operators penetrating
the vast and unpatrolled borders of Sudan carried out smuggling,
but in the late 1980s it became a vast and sophisticated business.
Of the smuggling operations uncovered, one involved £Sd2.5 million
in cloth, another £Sdl million in matches, and a third £Sd0.5
million in automobiles.
Another highly profitable form of corruption was the selling
of state farmlands, each about 30,000 feddans (1 feddan
is equivalent to 0.42 hectares). Mechanized Farming Corporation
(MFC) officials sold large numbers of feddans at low
prices to senior officials in Khartoum; many of the latter exploited
the land for profit at the expense of the peasantry and caused
profound ecological deterioration.
As corruption ran rampant during the late 1970s until Nimeiri
was overthrown, commercial companies, particularly in the export-
import trade, profited through their influence on public policy
and through special permits they received. The Islamic institutions
that dominated Sudanese banking facilitated this corruption (see
Islamic Banking , this ch.). These banks, of which the most important
was the Faisal Islamic Bank, possessed privileges not enjoyed
by Sudanese national banks, such as exemption from taxation and
the right to transfer profits abroad. An example of the combination
of political power and financial capital was the Islamic Development
Company. Established in 1983 as a limited shareholding company
with an authorized capitalization of US$1 billion, the company
was chartered to invest in agriculture, industry, services, construction,
and Islamic banks. In practice, it concentrated on the export-import
trade, where high profits could be made quickly and easily, in
contrast to the slow returns of agricultural development projects.
The board of directors consisted of ten persons, four Sudanese
and six foreign nationals, mostly Saudis, including a son of the
late King Faisal ibn Abd al Aziz Al Saud. Of the Sudanese, three
belonged to the National Islamic Front, and the fourth was the
son of the leader of the Khatmiyyah, a Muslim religious group
associated with the National Unionist Party. All had connections
with Islamic banks and the Sudanese parliament. Their purpose
was to strengthen the Islamist movement's economic power by tying
their commercial enterprise to the state in order to achieve a
privileged position in the marketplace. They accomplished this
aim by granting shares valued at US$100,000 to founding members
and to prominent persons, ranging from the republic's president
to wealthy Muslim businessmen.
Between 1978 and 1985, agricultural and industrial production
had declined in per capita terms. Imports during much of the 1980s
were three times the level of exports. By 1991 the value of the
Sudanese pound against the dollar had sunk to less than 10 percent
of its 1978 value, and the country's external debt had risen to
US$13 billion, the interest on which could be paid only by raising
new loans.
Two reasons for this decline were the droughts and accompanying
famine occurring in the 1980s and 1991, and the influx of more
than 1 million refugees from Eritrea, Ethiopia, Chad, and Uganda,
in addition to the persons displaced by the continuing war in
southern Sudan who were estimated to number between 1.5 million
and 3.5 million. Nevertheless, the decline in Sudan's agricultural
and industrial production had begun before these calamities. Few
development projects were completed on time and those that were
failed to achieve projected production. After 1978 the GDP steadily
fell so that the vast sums of money borrowed could not be repaid
by increased productivity. Sudan found itself in a cycle of increasing
debt and declining production.
These economic problems had two fundamental causes. First, in
planning little thought was given to the impact of any one project
on the whole economy and even less to the burden such huge projects
would place on a fragile infrastructure. Some ministries undertook
projects by unilaterally negotiating loans without reference to
the Central Planning Agency. Second, remittances by Sudanese laborers
in the Persian Gulf (thousands of workers were based in Kuwait
and Iraq, until many of them were expelled) placed a stress on
Sudan's economy, because the government was forced to relax its
stringent currency controls to induce these workers to repatriate
their earnings. Such funds were largely invested in consumer goods
and housing, rather than in development projects.
Data as of June 1991
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