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Sudan

 
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Sudan

FOREIGN AID

Foreign capital has played a major role in development. The great reliance on it and the general ease with which it was acquired were major factors contributing to the severe financial problems that beset the country after the mid-1970s. Sudan obtained public sector loans for development from a wide variety of international agencies and individual governments. Until the mid-1970s, the largest single source had been the World Bank, including the International Development Association (IDA) and the International Finance Corporation (IFC). By 1975 the World Bank and its organs had furnished the equivalent of US$300 million. Excluding repayments, the outstanding amount had risen to US$786 million in 1981, as major commitments to projects including agriculture, transportation, and electric power were made (chiefly by IDA, which accounted by 1981 for more than US$594 million of the outstanding total).

The Arab oil-producing states, as their balance of payments surpluses grew in the 1970s following increases in world petroleum prices, also became significant suppliers of development capital through bilateral loans and Arab international institutions. The largest of the latter was the Arab Fund for Economic and Social Development (AFESD), through which was proposed the 1976 program to develop Sudan as a breadbasket for the Arab world. The implementing agency, the Arab Authority for Agricultural Investment and Development (AAAID), was established in Khartoum, based on an agreement signed in November 1976 by twelve Arab states. After the mid-1970s, Saudi Arabia, one of the founders of AAAID, through its Saudi Development Fund became the largest source of investment capital, apparently convinced that Sudan's development could complement its own, especially in making up its large food deficits. Unfortunately, the ambitious plans for Sudan's becoming the Arab world's major food source faded by the mid-1980s into an economic nightmare as agricultural production declined sharply.

In 1977 the United States resumed economic (and military) aid to Sudan. This aid followed a ten-year lapse beginning with a break in diplomatic relations between the two countries in 1967, with relations restored in July 1972 (see United States , ch. 4). In 1977 the United States had become concerned about geopolitical trends in the region, particularly potential Libyan or Marxist Ethiopian attempts to overthrow the pro-Western Nimeiri government. In the five-year period 1977-81, United States economic aid amounted to almost US$270 million, of which twothirds was in the form of grants. By 1984, when the United States had become Sudan's largest source of foreign aid, the country's worsening economic and political situation, particularly Nimeiri's domestic policies with regard to the south and the imposition of the sharia (Islamic law) on society, caused the United States to suspend US$194 million of aid. In 1985, following Nimeiri's visit to Washington, the United States provided Sudan with food aid, insecticides, and fertilizers. After Nimeiri's overthrow in April 1985 and Sudan's failure to make repayments on loans, the United States discontinued non-food aid. The aid had been administered by the United States Agency for International Development (USAID). It not only included direct funds for projects and project assistance through commodity imports (mainly wheat under the Food for Peace Program), but also generated local currency that was used to support general development activities. USAID continued providing humanitarian relief assistance to distressed regions in Sudan through early 1991.

Britain also made substantial aid contributions to Sudan, notably the sum of US$140 million to the Power III Project in the 1980s (see Electric Power , this ch.). In January 1991, Britain suspended its development aid to Sudan, which had amounted to US$58 million in 1989, while continuing humanitarian aid. This policy change was caused by a number of factors, including alleged terrorist activities by Sudanese agents against Sudanese expatriates in Britain. In addition to Britain, France, West Germany, Norway and other countries, EC have provided significant economic or humanitarian aid to Sudan (Britain, Japan, West Germany, and the Netherlands also have been Sudan's main sources of imports). Japan is a major buyer of Sudanese cotton, while Sudan imports Japanese machinery. In early 1990, to ease Sudan's debt burden, the Danish government cancelled Sudan's outstanding debt totalling more than US$22.9 million. Other major financial assistance came from Arab countries, especially from Saudi Arabia (Sudan's largest importer) and Kuwait. By December 1982, Sudan owed the Persian Gulf states US$2 billion. Saudi Arabia's assistance after 1980 mainly took the form of balance of payments support and petroleum shipments, rather than project aid. The total amount of aid from Arab states dropped in 1988 to only US$127 million, the lowest figure since the late 1970s. Arab aid totaled US$215 million in 1985, US$208 million in 1986, and US$228 million in 1987. Sudan's support of Iraq in the 1991 Persian Gulf war alienated the Gulf states and Saudi Arabia, sharply curtailing their economic aid to Khartoum. The increasingly close ties between Sudan and Iran in the early 1990s also concerned the Gulf states and Saudi Arabia and was a factor in their diminished financial aid to Khartoum. Economic cooperation was initiated with Libya in the late 1980s, with Libya becoming Sudan's third largest supplier in 1989.

In mid-1991 the World Bank announced its decision to close its Khartoum office by December 31, 1991. The decision resulted from the deterioration in relations between Sudan and international monetary bodies following cessation of debt repayment by Khartoum to the World Bank and the IMF.

Among communist countries, prior to the collapse of communist regimes in the Soviet Union and Eastern Europe, China had been the most important provider of development funds. By 1971 it had furnished loans equivalent to US$82 million, and through 1981 an additional US$300 million was reported to have been made available. Sudan valued these loans because they were interest free and had long grace periods before repayments started. Economic cooperation with China continued into the 1980s. Sudan and China signed a trade cooperation protocol in March 1989, with technical agreements also renewed. A commercial protocol between the two countries was signed in April 1990. China remained a significant importer of Sudanese cotton in the mid-1980s, while Sudan imported about US$76 million in goods from China in 1988. Relations between Sudan and the Soviet Union improved markedly following Nimeiri's overthrow in 1985, but the overthrow did not result, as Khartoum had hoped, in Soviet economic assistance, but rather in a decrease in United States aid.

Data as of June 1991

 

Sudan - TABLE OF CONTENTS

  • The Economy

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