Government Role in the Economy

Since the 1990s Sudan has applied economic reform policies aimed at improving the balance between aggregate demand and supply, attenuating inflationary pressures, strengthening the balance of payments position and achieving higher economic growth rates through:

  • Liberalization of prices of goods, services and other factors of production

  • Correction of cost and price distortions including the exchange rate and the cost of financial services

  • Privatization of public enterprises

  • Reformation and liberalization of trade and the financial sector including financial restraint to moderate pressure on imports and the balance of payments

  • Reformation of the government tax system taking into consideration the whole tax structure and in particular tax concessions to provide investment relative prices and incentives

  • Broadening the tax base, reducing exemptions, simplifying tax administration, adopting a Value Added Tax since 2000 and revising cost sharing of service deliveries.

  • Moderation of expansionary monetary policies to reduce inflation and attain a sustainable budget deficit.

The economy has responded positively to these reform measures despite the sharp slow down of foreign financial aid due to outside political pressures and hostilities. An average annual growth rate of 6% of GDP was achieved during 1990-2001. Agriculture, which accounts for an average contribution of 50% of GDP, has recorded an average annual growth rate of 8% and the cultivatable area has expanded from 7.7 million hectares in 1989 to around 17 million hectares in 2001. The industrial sector contributed by 15.3% of GDP during the period 1990-2001. Its growth is mainly due to intermediary industries, such as mining and quarrying whereas petroleum production and petroleum exports have more recently started to influence a change in production structure and output. The average service sector contribution was about 35% of GDP during 1990- 2000.

With the peace deal with the southern rebels, the prospects for economic growth expected to improve. Real GDP growth will continue to accelerate over the forecast period, driven largely by significant foreign investment inflows into large capita projects and increased export volumes on the back of expanded capacity in the oil sector. Economic growth as a whole will remain strong, despite the growth in import demand, which will accelerate by about 17% in 2005. Real GDP growth should rise to 6.4% in 2004 driven by the impact of lower prices on consumption and consumption will pick up in 2005, reaching 6.8% of GDP as a peace deal bolsters private-sector confidence, allowing for widening economic activity.