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WEEKLY NEWSLETTER
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Sudan
Index
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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