Sudan must drop oil dependency to sustain economic growth, world bank says
June 10, 2010 (WASHINGTON) — The World Bank said in a report released today that Sudan must reduce its dependency on revenues from oil exports to sustain its economic growth and prevent outbreak of more conflicts.
The recommendations come as the country prepares for a crucial vote on the country’s unity scheduled to take place in early 2011. The people of Southern Sudan will decide whether they want to remain within a united country or form their own state. It is widely expected that secession will be the overwhelming choice of Southerners.
The separation of Sudan into a two states will deny the North billions of dollars in revenue generating from vast oilfields in the south of the country. Currently the North and the South are splitting the proceeds of crude in accordance with the Comprehensive Peace Agreement (CPA) signed in 2005.
About 75 per cent of Sudan’s proven reserves of 6.3bn barrels are in the south but the pipeline that carries the oil to export terminals and refineries runs through the north. The south needs Khartoum’s co-operation to sell its oil; the north needs revenues from its neighbor’s resources.
Some officials at the Government of South Sudan (GoSS) have suggested that they may continue to share oil for a limited time even after breaking up with the North in order to prevent what they described as a collapse in their neighbor’s economy.
The World Bank said that while Sudan has gone through its most extended period of growth since their independence in 1956, it is facing the challenge of maintaining that. Sudan’s GDP, has grown fivefold—from $10 billion in 1999 to $53 billion in 2008, the world bank said, and its per capita income has increased from $334 to $532 in contrast to being range-bound between $200-300 since the 1960s.
“While oil-led growth over the past 10 years has greatly improved the Sudanese economy, its sustainability is under threat,” said a statement announcing the publication of the bank’s latest Country Economic Memorandum on Sudan.
“The unbalanced development of the country, with a large disparity between the centre and periphery remains a potential source for conflict and political instability,” it added.
The bank urged Sudan to do more to encourage private sector investment and develop agriculture “as the next big alternative source of growth to the oil sector in the medium-term”.
Sudan’s economy has thrived, thanks to oil exports and foreign investment from Asia and the Gulf over the past decade, although much of the wealth remains concentrated in Khartoum.
This week the governor of Sudan’s central bank Sabir Mohamed Al-Hassan made similar statements on the country’s economic future after a possible split.
“If Southern Sudan secedes, it could affect the economy negatively unless the government takes measures to counter it,” Hassan said at a lecture in Khartoum quoted in Bloomberg. He said that national revenue will drop by $6.7 billion if South Sudan becomes an independent state which requires seeking alternative source of revenue.
“All kinds of investments are needed,” he said. “The thing that is needed more is strategic partnerships between the government and the Sudanese private sector from one side, and the government and the foreign private sector, especially for large scale projects, commercial farming.”
Northern Sudan must develop agriculture and industries such as gold mining and ethanol production to decrease its dependency on oil, Hassan said. Even so, while an independent south would “affect GDP negatively and economic growth in general,” Hassan said that “we should not exaggerate in this matter.”
Last month a senior official at Sudan’s ruling National Congress Party (NCP) said that Sudan oil reserves in the North will cover the loss from losing those in the South. This year Sudan started drilling for oil in the Red Sea.
Sudan has been under U.S. economic sanctions since 1997 which prevents it from doing business with any American company.
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Mzalendo Mwema
Sudan must drop oil dependency to sustain economic growth, world bank says
South is bliss.
Angelo Ajiech Manyuat
Sudan must drop oil dependency to sustain economic growth, world bank says
Yes, the probability indicate that Sudan will solely experienced economic decline if we Southerners decided to secede. In fact, we’ll not accept this time to rely on the Northerner’s economy while it’s our oil that sustain their economy. In another development, I wish if I were all Southerners, then we must vote to secede so that we can manage our our affairs without waiting others to tell us what to do. We have more than capability now to handle our own affairs regardless of what northerners think about us. In other words, we’re highly educated now as well as sophisticate which is why its convince me to believe that arabs cannot keep mislead us while we’re responsible. But and not all, I believe we’re way better than them in term of education and responsibility. Last and not the least, this is a perfect time for us to wake up and act smartly otherwise our poor calculation will bring a negative impact on our children unlike what our Great grandparent did to us.
murlescrewed
Sudan must drop oil dependency to sustain economic growth, world bank says
This is not only a good advice for the Sudan as a whole but an important one that South must heed. When your economy is 98% reliant on oil export, something must be very wrong and other sectors are being neglected. South will almost suddenly experience an economic meltdown unless it continues to let oil agreement remain intact for another 10 years before North is finally cut off.