Sudan Economic Difficulties

Sudan Vision

Khartoum – Sudan sits at the crossroads of Sub-Saharan Africa and the Middle East, and is bordered by seven countries: Egypt, Eritrea, Ethiopia, South Sudan, the Central African Republic, Chad, and Libya. Sudan also borders the Red Sea, to the northeast.
Its capital, Khartoum, lies at the confluence of the White and Blue Niles, and its main port on the Red Sea. Although mostly desert, Sudan has fertile land, mountains, and livestock.
For most of its independent history, the country has been beset by conflict. Under the terms of a peace agreement in 2005, its southern states seceded, forming the Republic of South Sudan in 2011.
The secession of South Sudan induced multiple economic shocks. The most important and immediate shock was the loss of the oil revenue that accounted for more than half of Sudan’s government revenue and 95% of its exports. This has reduced economic growth, and resulted in double-digit consumer price inflation, which, together with increased fuel prices, triggered violent protests in September 2013. Continuous food price hikes were also the immediate cause of demonstrations that started in December 2018.
In 2013, the outbreak of civil war in South Sudan damaged both economies depriving Sudan of much needed pipeline revenues. The war in South Sudan also precipitated an increase in Sudan’s already large population of refugees and internally displaced persons (IDPs) with Sudan now serving as a source, destination and transit country for irregular migration, including refugees and asylum-seekers using the East African North-bound migratory route through Libya to Europe. The country hosts an estimated 763 thousand South Sudanese refugees and 159 thousand refugees and asylum seekers from Eritrea, Syria, Yemen, and Chad.The recent peace accord between the warring parties brokered by Sudan and Ethiopia appears to be holding, but the war damaged oil infrastructure, further eroding revenue availability to Sudan.
Following the global oil price slump in 2015/2016, Sudan and South Sudan agreed to lower oil transit fees for South Sudanese oil via Sudan’s pipeline, as it became uneconomic to export it. In December 2016, they extended their 2012 agreement on oil for three years on the same terms, with the exception of provisions for the adjustment of transit fees in line with global oil prices.
Armed conflict in Sudan’s westernmost region of Darfur has subsided but many parts of the region remain precarious because of the proliferation of arms and banditry. Efforts to settle another conflict in South Kordofan and Blue Nile remain deadlocked.
Comprehensive U.S. sanctions on Sudan, levied in 1997 and expanded in 2006, were lifted in October 2017. This generated initial optimism, but foreign investors and commercial banks have been reluctant to reengage. Trade and financial transactions between Sudan and the World economy remain very limited as Sudan continues to be designated by the U.S. as a state sponsor of terrorism, preventing full normalization of relations with the U.S. While there was optimism late 2018 that talks to remove the designation are expected to begin soon, the protests that escalated in December 2018 might have hampered progress on the talks.

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