kEST I CTED

Report No. AE-27

FILE CoPY

This report is for official use only by the Bank Group and specifically authorized organizationsor persons. It may not be published, quoted or cited without Bank Group authorization. TheBank Group does not accept responsibility for the accuracy or completeness of the report.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL DEVELOPMENT ASSOCIATION

THE ECONOMIC DEVELOPMENT

AND PROSPECTS

OF

THE SUDAN

(in four volumes)

VOLUME I

THE MAIN REPORT

June 9, 1972

Eastern Africa Department

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EQUIVALENTS

Currency

100 Sudanese Piasters 1 L Sudan1 L Sudan (Ls or Ls) U.S. $2.8721 U.S. $ 34.8 Piasters

Area

1 Feddan = 1.038 acres

Weight

1 Bale = 420 lbs. (approx.)1 large Kantar 315 lbs.Tons are short tons of 2,000 lbs., unless otherwisestated.

THE MISSION

This report is based on the findings of a mission which visitedthe Sudan during November and December 1971. The mission consisted ofthe following:

Kudlapur G.V. Krishna - Chief of MissionShawki Farag - General EconomistShankar Acharya - Economist (Public Enterprises)M. Altaf Hussain - Agricultural EconomistDonald H. Bickers - Transportation EconomistRobert W. MacDonald - Financial AnalystF.T.D. Reid - Highway EngineerJames M. Kesson (Consultant) - Railway Engineer

Messrs. Stanley Please (Economic Program Department), A. SaniEl Darwish (Industrial Projects Department) and Khalil E. Nougaim (Develop-ment Finance Companies Department) joined the mission for brief periods inan advisory capacity.

THE ECONOMIC DEVELOPMENT AND PROSPECTS OF SUDAN

VOLUME I

THE MAIN REPORT

TABLE OF CONTENTS

Page No.

BASIC DATA

MAPS ....................................................... .

SUMMARY AND CONCLUSIONS ...... .......... i - iv

I. SOCIO-ECONOMIC FRAMEWORK ................ 1

II. ECONOMIC PERFORMANCE IN THE 1960S ................ 6

A. The Growth of the Economy ................ 6B. Employment, Wages and Prices ................ 15C. Monetary Developments ................ 17D. Foreign Trade and Balance of Payments ........... ..... 20

III. PUBLIC FINANCE, RESOURCE MOBILIZATION AND DEVELOPMENT PLANNING.. 24

A. Overall View ................ 24B. Central Government Recurrent Budgets ......... ....... 25C. Local Authorities Finances ................ 29D. Public Enterprises Current Operations ........... ..... 29E. Development Planning ........................... 33

IV. DEVELOPMENT PROSPECTS UP TO 1975 ................ 35

A. The Five-Year Plan, 1970/71 - 1974/75 ........... ..... 35B. Investment Targets ................ 36C. Financing of the Plan ................ 43D. Balance of Payments Projections ..... ........... 45E. External Public Debt ................ 46

V. SOMFE BASIC DEVELOPMENTAL ISSUES ................ 48

A. Adequacy of the Statistical Information ................ 48B. Planning Mechanism and Procedures ....... ......... 49C. Internal and External Financial Balance ................ 50D. The Role of the Private Sector ..... ........... 52E. External Assistance and Creditworthiness ................ 53

STATISTICAL APPENDIX

ANNEXES (under separate cover)

VOLUME II - THE PUBLIC ENTERPRISES

VULUME III - THE AGRICULTURAL SECTOR

VOLUME IV - THE TRANSPORT SECTOR

THE SUDAN

BASIC DATA

Area: 2.5 million square kilometers

Population (1971) 15.8 millionRate of Growth: 2e5 percent p.a.Population Densityt 6.3 per square kilometer

Political Status: Independent Republic

Gross Domestic Product at Current Factor Cost (1969): Ls 506 million(US $1,452 million)

Sectoral Distribution of GDP (Current Prices):

Sector Average166-169

Agriculturs and Livestock 38Manufacturing, Construction and

Mining 13Transport, Communication and Public

Utilities 10Commerce, Finance and Services 39

100

GNP Per Capita:

Trotal (1969): Ls 578.L millionPer Capita : Ls 39 (US$ 112)

Savings and Investment: % of GDPAverage 1966-196 9

Gross Fixed Capital Formation 12.9Gross Domestic Savings 11.9

Public Sector Operations: Average Average1961/62-1964/65 1965/66-1970/7-

(Ls million)

Current Budget:Central Government Revenue 72-4 122.6Central Government Expenditures 61.7 118.0Central Govermnent Surplus 10.8 4.6Other public sector surplus/deficit 505 -1.5Total public sector surplus/deficit 16.3 3.1

Development Budgets:Central Government Developnent Expenditures 28.7 19D3Other public sector " 9.9 9.2Total public sector it 38.6 28.1

Financing Development Expenditures:Public Sector Surplus 16.3 3.1External Sources (gross) 14.8 12.8Internal Sources (Bank financing) 7.5 12.2

External Public Debt: December 19 0(US $ million)

Total outstanding 378.5Net of Undisbursed 283.4Total Debt service (FY 1971) 36.)Debt, Service as % of Exports 10.5

Money and Credit: June 1961 June 1971(LE million)

Money 39.0 111.6Money and Quasi-money 43.6 132,7Foreign Assets (net) 60.2 -21.6Claims on public sector (net) -41.9 97.0Claims on private sector 340o 73.1

Balance of Payments: Average Average1261/62 5/66 1966/67-1970/71

( Ls million )

Merchandise Exports f.o.b. 75.7 89*1Merchandise Imports coiofo 86,2 94.8Net Invisibles -13.5 -17,0Current Account Balance -24.0 -15,0Net Capital Inflow 11.2 6o7

Commodity Concentration of Exports (Percent):Average Average

1961/62-1965/66 1966/67-1970/71

Cotton and Cotton Seed 57.1 61.8Gum Arabic 8.4 9.0Groundnuts 10.6 6.8Sesame 7.3 7.8

Foreign Exchange Reserves (April 1972): US$ 44 million - 1½< month's imports

IMF Data:

Currency Sudanese pound (Ls or Ls)

Exchange Rate (official) I Ls 1 - 2.55187 grams of fine gold = US$ 2.87156

Exchange Rate (effective) Ls 1 1 US$ 2.50 for all transactions except forthe proceeds from cotton and gum exports whichare converted at the official exchange rate.

IMF Quota : SDR 72 million as of December 1970

Fund holdings of Sudanese pounds : 129 percent of quota (June 1972)

Allocations of SDR's s SDR 24.9 million

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MARCh- 1972 BF10 3889

THE ECONOMIC DEVELOPMENT AND PROSPECTS OF THE SUDAN

VOLUME I

SUMMARY AND CONCLUSIONS

(M) The Sudan is the largest country in Africa but, with a per capitaGNP of only $110, it is also among the continent's poorest. While muchof the Sudan is desert or semi-desert, there is a substantial margin of landwhich is suitable both for agriculture and livestock raising. The WhiteNile and the Blue Nile have endowed the country with an abundance of waterwhiich has enabled it to develop the biggest irrigation system in tropicalAfrica. With an estimated population of only 15.8 million, there is nopressure of population on land; indeed, in some parts of the Sudan, a short-age of labor has limited the expansion of agricultural production. Therefore,some of the agricultural programs - particularly those in the rainfed areas- have to be based on mechanization.

(ii) The Sudanese economy is based largely on cotton. It is an impor-tant producer of long and extra-long staple cotton, and also of gum, sesameand groundnuts. Its considerable livestock resources have hardly beentapped. The manufacturing sector is relatively small and, apart from theprocessing of some agricultural commodities, it is limited to the productionof consumer goods and some building materials. There is some potential formining (chrome, iron ore and copper). There have been some exports of chromeore and the feasibility of developing the iron and copper deposits needs tobe thoroughly investigated. The inadequacy of transport could prove to bethe biggest bottleneck in the development of the mining sector.

(iii) The deficiency of the transportation system is among the majorproblems facing the Sudan. The railway is virtually the only mode of trans-port. While it has played, and continues to play, a very important role, itis becoming increasingly evident that the railway will be unable to meet thegrowing traffic, except through further modernization and a significant im-provement in operating efficiency. There is a growing reluctance to acceptthe railway's monopoly of the transport system, and the speedy developmentof other modes of transport - in particular roads and an oil pipeline - isbeing suggested. However, the railway represents one of the biggest invest-ments in the country and, while there is a justification for investment incomplementary facilities, e.g. feeder roads and storage, investment in othermodes of transportation should be undertaken only after a careful evaluationof its economic justification. This applies, in particular, to the stretch ofthe Khartoum-Port Sudan road between Gedaref and Port Sudan.

(iv) The public sector has for a long time been dominant in the Sudaneseeconomy. It embraces all modern irrigated agriculture, the railways,virtually all power and water supply. After the nationalization measures

- ii -

of May 1970, a significant proportion of industry, commerce and finance wasalso transferred to the public sector, so that an estimated 50 percent ofthe GDP is now generated within the sector.

(v) Since its independence in 1956, the economic development of theSudan has been adversely affected by political instability, frequent changesin government and government policy, and the consequent failure to orderpriorities and pursue consistent development goals. During this period, thegovernment has had to cope with a difficult security problem in the southernpart of the country, which has diverted resources to military tasks, therebyholding back economic development in some critical areas.

(vi) During the past five years, the economy has shown little growth.This is primarily due to the depressed level of investment, both public andprivate. In addition to the low growth rate, the economy has suffered fromexcessive monetary expansion to cover the public sector deficits. While theGovernment has been successful in achieving a high rate of growth of revenue,the rise in recurrent expenditure has absorbed most of it, and developmentexpenditure has decreased. Prices have risen steadily, and the externalposition has been under pressure owing to the rapid growth of imports andprogressive decline in net capital inflow. While there has been some growthof cotton exports, there has been a stagnation in the export of gum arabic,sesame and groundnuts. Sudan's foreign assets were substantially depletedby 1968 and net foreign assets are now negative. En 1970/72, there was anet outflow of public capital.

(vii) A new development Plan covering the period 1970/71-1974/75 waslaunched in July 1970. The Plan aims at an average annual rate of growth ofGDP of 7.6 percent, based on a total investment of Ls 427 million. Publicsector investment is estimated at Ls 257 million, to be financed about equal-ly by foreign and domestic sources. The Plan has been in operation only fora year, and hence there can only be a limited assessment of performance.During the first year of the Plan, investment in the public sector (Ls 27million) was below target, and there are indications that no significantimprovement will take place in the second year either. The principal fac-tors causing a slowdown in investment are a shortage of resources and in-adequacies in the preparation of projects.

(viii) It is the mission's view that the present economic stagnationcould be overcome if the government were to take appropriate steps to cur-tail expenditure, increase revenues and export earnings and reactivate theprivate sector. The resolution of the security problem in the south shouldhelp in reducing the strong military presence in that part of the country,and thereby release considerable resources for economic development.

(ix) The mission estimates that during the rest of the Plan periodi.e., 1972/73-1974/75, total investment could amount to about Ls 200-220million, divided about equally between the public and private sectors.

- iii -

Including investment in the first two years, total public sector investmentduring the whole Plan may then amount to Ls 150-170 million, or somewhatunder two-thirds of the Plan target for this sector. The mission endorsesthe high priority given to the agricultural sector, but it would give rela-tively greater emphasis to transport and somewhat less to industry, bycomparison with the Plan.

(x) If the public sector is to carry out an investment program amount-ing to Ls 100-120 million, and if external assistance is to cover about 50percent of this amount, public savings of about Ls 50-60 million have to begenerated over the next three years. This would clearly require a ceilingon recurrent expenditures in each of the three years.

(xi) The scale of investment considered feasible in the public sectortakes into account the prevailing financial and administrative constraints.If total investment amounting to Ls 200-220 is to be realized, the role ofthe private sector would be critical. This would, in turn, require thatthe government clarify the respective roles of foreign and local privateenterprise, and create a suitable environment, including the early settlementof claims arising from the nationalization measures of 1970. The missionrecommends that public sector investment be directed largely to agricultureand transport, leaving most investment in new industries to the private sector.

(xii) The mission's assessment of the export potential shows that exportscould grow at the rate of 3.5 percent a year. Imports are expected to growat the rate of 3.2 percent a year, with capital goods accounting for themajor proportion of the increase. During the last three years of the Plan,it is estimated that the cumulative deficit on the merchandise accountwould amount to about Ls 50 million. The deficit on the services accountis estimated at Ls 33 million. If amortization amounting to Ls 45 millionand a desirable increase in reserves of Ls 22 million are added to the def-icit in the current account, a total gross inflow of capital amounting toLs 150 million would be required.

(xiii) At the end of June 1972 external assistance amounting to Ls 108million was available from existing commitments for the public sector program.During the rest of the Plan, this could result in disbursements amounting to Ls 45million. On the assumption that the Sudan's external aid requirements duringthe balance of the Plan amount to Ls 50-60 million, further commitments wouldhave to be arranged to ensure additional disbursements of Ls 5-15 millionduring the Plan. Further, it is desirable that commitments be also securedin order to have a firm basis for disbursements in the initial years of thenext Plan. A very approximate estimate of tctal new commitments required forboth these purposes is in the order of about La 70-80 million. This does notinclude the aid requirements, which are still to be determined, for the re-construction and development of the Southern Region.

- iv -

(xiv) At the end of 1970, the Sudan's external public debt amounted to$378.5 million equivalent and debt service payments in 1970 amounted to 10.5percent of export earnings. The mission estimates that by 1975 the debtservice ratio may be about 15 percent. This figure could be higher, however,depending on the terms upon which some of the very recent debt has been con-tracted (on which complete information is not yet available) and also on theterms for the payment of compensation in respect of nationalized enterprises,which have not yet been negotiated.

(xv) The Sudan's capacity to service additional debt is severely limitedby its balance of payments situation, which is likely to be strained for sometime. Hence, it is desirable that external assistance be provided almostentirely on concessional terms. The government should exercise particularcaution in incurring new debts with short maturities and carrying highinterest.

I. SOCIO-ECONOMIC FRAMEWORK

Introduction

1. The Sudan is the largest country in Africa. It covers an area of2.5 million sq. km lying between latitude 4° and latitude 220 north. It isbordered by eight countries, and has a coastline extending over some 750 kmon the Red Sea. A large part of the Sudan is desert, semi-desert or lowrainfall savannah woodland. The northern region of the country has littlerainfall to support agriculture, but in the central region (Kassala, BlueNile and Kordofan Provinces), there is considerable scope for rainfed culti-vation. The three southern provinces - Bahr el Ghazal, Upper Nile andEquatoria - receive about 40 inches of rainfall a year; but transportationproblems and political unrest have prevented the utilization of their con-siderable potential. Most of the country is flat, but there are a fewmountains; two of them - the Marra range in the far west and the Imatongmountains in the far south - rise to over 3,000 meters above sea level.

2. The scant rainfall in most parts of the Sudan is compensated bythe White Nile and the Blue Nile rivers. The White Nile, which originatesin Uganda, flows through the entire length of the Sudan before reachingEgypt. The Blue Nile originates in Ethiopia and joins the White Nile inKhartoum, the capital. The area lying between the two Niles - the "triangle"- is one of the most productive areas of the country and has undergonesystematic development over the past few decades, particularly in the fieldof irrigated crop production.

Population

3. The last census of population in the Sudan was held in 1955/56and showed a population of 10.3 million. A census had been planned for1970, but was not held owing to unsettled political conditions; there issome possibility that one will be held in 1972. A crude growth rate of2.8 percent was used to measure changes in population since the 1955/56census, on the basis of which the population in mid-1969 was estimatedto be 14.9 million. A lower growth rate of 2.5 percent a year has beenused since 1967/68 and, on this basis, the population in mid-1971 wasabout 15.8 million.

4. About one-half of the population is concentrated in threeprovinces - Blue Nile, Kordofan and Darfur - which account for about 40percent of the country's area. The largest concentration is in the BlueNile Province (which includes the "triangle") with an estimated densityof 22.5 persons per sq. km as compared with the national average of about6.3 persons per sq. km.

5. On the basis of the age distribution revealed by the 1955/56census, it is estimated that about 47 percent of the population is 14 yearsold or under. The economically productive population (ages 15-59) amountedin mid-1971 to an estimated 7.4 million out of a total population of 15.7million.

- 2 -

6. The Sudan's economy is predominantly agricultural and the over-whelming majority of the population lives in the rural areas. The urbanpopulation comprises about 11 percent of the total. More than half ofthe urban population is in the Khartoum metropolitan area which includesKhartoum, Khartoum North and the old city of Omdurman.

Land UJtilization

7. Out of the Sudan's total area of nearly 2.5 million square km(about 598 million feddans), it is estimated that only about 200 millionfeddans or a little over a third of the land is potentially usable, ofwhich some 80 million feddans represent range land. Consequently, thetotal potentially cultivable area amounts to 120 million feddans. About16 million feddans are presently under crops, and hence there is consider-able scope for expanding production, both through an extension of rainfedcultivation and further irrigation. Land which is suitable for livestockraising has not been utilized in a systematic manner, principally becauselivestock is very much within the subsistence sector and very little com-mercial development has taken place.

Irrigation

8. During the past five or six decades, the economic developmentof the Sudan has been influenced more by the expansion of production underirrigation than any other factor. The total irrigated area is a littleunder four million feddans, including irrigation by gravity, flood andlift. Traditional water-lifting devices such as the water wheel and thecounterbalanced dipper have been used for a very long time but, over theyears, the use of mechanically driven pumps increased considerably; thearea irrigated by pumps exceeds one million feddans. There are over 2,000plots irrigated by pumps under government license. Until 1969, these pumpschemes were under private ownership, but the Government has since takenover 250 schemes devoted to cotton, mostly after the expiration of thelicences, and, in some cases, when leases were surrendered. The two biggestpump schemes are the Guneid Project (about 45,000 feddans) and the Es SukiProject (90,000 feddans). Flood irrigation accounts, on the average, forabout 150,000 feddans or irrigated area each year. The biggest of the irriga-tion projects are based on gravity and in an average year, close to two millionacres are irrigated by gravity. The best known of these is the GeziraScheme on the Blue Nile which, since its inception in 1925, has beensteadily expanded. The Gezira changed a way of living which had prevailedfor centuries, and laid the foundation for Sudan's entry into the modernworld. The second biggest gravity irrigation project is the Kashm ElGirba scheme (400,000 feddans), for which water is provided from a damacross the Atbara river.

-3-

Transportation

9. With an area of 2.5 million sq. km, the Sudan is highly dependenton its railway. Sudan Railways have a total route km of about 4,750, allof which is an unballasted, single-track railway. The railway was ori-ginally built for administrative purposes and for opening the country, buthas performed a very valuable economic function by carrying the country'ssteadily rising imports and exports. Its southern and western extensionsto Wau and Nyala have generally not yet proved economic 1/, but the railwayprovides the only dependable link to remote parts of the country. However,under the pressure of growing traffic and the inadequate utilization of thepresent stock of locomotives and rolling stock, the railway's capacity isbecoming severely strained. The road system is virtually non-existent, therebeing only a total of 330 km of bitumenized roads and some stretches withinmunicipal limits. The fact that some traffic does move by road reflectsnot so much the suitability of roads but the considerable difficulty ingetting wagon space on the railway. River transport could play a moreimportant role than at present but, on the principal southern route willlargely depend on the restoration of economic activity in the southern partof the country.

10. There is a growing pressure within the Sudan to develop alter-native modes of transportation to break the present bottleneck and to en-sure sufficient complementarity between the production and transportationsections; these issues are discussed in Annex III of the report. What isall too clear is that the development of transport has fallen behind, whichis not only hampering the realization of the Sudan's great potential, butperpetuating the uneven development of the different regions and imposingconsiderable sacrifices on consumers and producers. There is urgent needfor a review of the priorities of the transportation system and for aphased program of investment to eliminate longstanding problems.

Manpower

11. As compared with most other countries in Africa, the Sudan hasa far lesser problem with regard to the availability of high-level manpower.This is attributable in part to the fact that the educational system hasevolved over a longer period. One of the features of the system is that,although the number of children in elementary and secondary schools isstill small in relation to their total age group, universities and otherinstitutions of higher learning cater for relatively larger numbers. Uni-versity education in the Sudan is of much longer standing that in mostcountries at a comparable level of economic development, and enrollmentin universities and other institutions of higher learning has increasedrapidly. In 1968/69, for example, it amounted to about 11,000 or about

1/ The situation could improve if there is a restoration of economicactivity in the area, for which prospects have now improved, followingthe resolution of the difficult "qouthern Problem" (see paragraphs 14-16).

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twice as high as the combined enrollment in comparable institutions inKenya, Tanzania and Uganda. Higher education is provided in a number ofdisciplines, so that in some of these fields, e.g., irrigation and agri-culture, the availability of manpower poses few problems.

12. On the other hand, there has been a growing problem in absorbingsome of the output of the educational system, particularly universitygraduates with general arts degrees. Although the Government has in thepast hired all university graduates as a matter of course, this procedureclearly entails considerable wastage. Moreover, it detracts from theneed to proceed with the proper planning of the educational system so asto make it more responsive to the requirements of economic development.

13. The last report on manpower resources and requirements in theSudan was prepared in 1967. Some of the underlying assumptions of thereport have been overtaken by events, and hence there is a need for a newcomprehensive survey to serve as the basis for a manpower plan. In theabsence of such a plan, there will continue to be a paradoxical situationcharacterized on the one hand, by an abundance of educated people and,on the other, by an acute shortage of staff with training and skills whichare directly relevant to economic development.

The "Southern" Problem

14. One of the most critical problems which confronted the Sudan sinceits independence in 1956 was a rebellion in the southern provinces of BahrEl Ghazel, Equatoria and Upper Nile. The origin of the rebellion lies partlyin the cultural and religious differences that separate the largely arabised,Muslim north from the Nilotic people of the south, of whom the majority arebelieved to be pagans, followed by Christians as the largest religious groupand small numbers of Muslims. Before the Sudan became independent, thesouthern provinces lacked any close identification with the north, and officialpolicy was not geared to promoting the integration of the two parts of thecountry. The suspicion and misunderstandings of the pre-independence periodcontinued after 1956, and, before long, a secessionist movement emerged inthe south. An attempt by the Government to find a military solution to theseevents simply aggravated the problem, and a number of splinter groups emerged,some of which began to engage in guerilla-type activity against the govern-ment forces. Many lives were lost, thousands of people took refuge in theneighboring countries and economic activity in the south came to a virtualstandstill. A few feeble attempts were made to resolve the problem throughnegotiations, but not with much success. The unsettled conditions in thesouth necessitated a large military presence, with increasing expenditureson the armed forces, and the consequent diversion of resources from economicdevelopment. The failure to find a solution to this problem proved anembarrassment to the Government.

15. After President Nimeiry came into power in 1969, there was arenewed attempt to resolve the problem, but progress was slow. Followingthe events of July 1971, when an unsuccessful attempt was made to overthrowthe Government, President Nimeiry assumed personal responsibility for dealingwith the southern problem. As an initial step in gaining the confidence ofthe south, a southerner was appointed Vice-President and three southernerswere appointed as Commissioners of the three southern provinces. PresidentNimeiry visited all parts in the south in an attempt to find a basis forreconciliation. He also initiated much behind-the-scenes activity, includingsecret negotiations with rebel groups, and it was announced in March 1972 that asolution had been agreed and that a cease-fire would follow. A cease-firehas since gone into effect and details of the new arrangements have beenannounced. They provide for a large measure of autonomy for the SouthernRegional Government which would have its own legislature and governor. TheGovernment in Khartoum would be responsible for defense, foreign affairs,customs, currency and economic planning whereas the south would exerciseconsiderable discretion on all other matters. The implementation of the newarrangements is still in a preliminary stage.

16. The announcement of a solution to the southern question representsby far the most significant event in the Sudan for many years. During thisentire troubled period there has been little or no economic development inthe south and its potential has remained untapped. Plans for the economicdevelopment of the south have been conceived since before Sudan's indepen-dence, but not much has been achieved, the sole exception being the ZandeScheme. It is known that the soils and climate of the south will enableit to produce many commodities which currently the Sudan imports, e.g.,coffee, tea and tobacco. The south also has rich timber resources and agreat potential for livestock. It should be possible to establish a comple-mentary relation between the north and the south, thereby laying the basisfor the latter's development. It should be noted, however, that, when theBank's economic mission visited the Sudan at the end of 1971, conditions inthe south were still unsettled, and this precluded any meaningful review ofthe problems and potential of this part of the country. The present reportis, therefore, largely concerned with northern Sudan. However, the Bank iskeeping abreast of developments in the Southern Region since the conclusionof the agreement, and it is proposed to carry out a separate review of itsdevelopment prospects, to supplement the findings of the present report.

II. ECONOMIC PERFORMANCE IN THE 1960S

A. The Growth of the Economy

17. The growth of the Sudanese economy appears to have slowed downduring the past five years. A precise quantification of developments isnot possible owing to the lack of a reliable series of national accountscovering the whole period. There is an old series covering the period upto 1965, and a new series for the period 1966-68, but the two do not havea common basis. The last year to which the latter series extends is 1969,for which there are only provisional accounts. No accounts are availablefor 1970 and 1971, and hence there are gaps in the information which pre-clude a complete analysis of the factors which have influenced growth,particularly in the recent past.

18. In the absence of recent and comprehensive GDP figures, it isnecessary to fall back on other indicators to serve as a measure of growth.Reliable statistics do exist for items such as agricultural production(particularly those items which are destined for the export market), publicfinance, banking and foreign trade, and these indicate that, during the1960s, the economy achieved only a modest growth. It would appear that,during the last three years (1969-71), the real growth fell below the rateof population growth, suggesting that per capita incomes may be stagnating.

19. During the period 1966-68, GDP at current factor cost grew atthe rate of 7.4 percent a year (Tables 2.1 and 2.2, Statistical Appendix).However, the inflation which has prevailed for many years has resulted inprice increases averaging 5-7 percent a year. Moreover, in 1969, GDP atcurrent factor cost actually declined by 4 percent, owing to adverse weatherwhich affected agricultural production. Hence, for the period 1966-69 as awhole, the real growth rate must have been substantially lower than 7 percent.The relative contributions of the various sectors to GDP is shown below:

GDP 1966-69 - SECTORAL DISTRIBUTION

Sector 1966-69 (M)

Agriculture and Livestock 38Manufacturing, Construction, Mining 13Transport, Communications, Public Utilities 10Commerce, Finance, Services 39

100

20. During the period 1966-69, total consumption averaged about88 percent of output, and hence domestic savings were small. Since theoverall level of investments (13% of GDP) was also small, the resourceconstraint did not appear to be particularly marked. However, if thelevel of investment has to be raised significantly, there will have to bea much larger mobilization of domestic savings.

21. The public sector dominates all non-traditional economic activitiesin the Sudan. It embraces the bulk of modern irrigated agriculture, bank-ing, most of transport 1/, virtually all power and water supply and a signi-ficant proportion of industry and conmerce. Over 50 percent of GDP is esti-mated to be produced within the public sector. The Government's policytowards the private sector has not yet been clarified following the nation-alization measures of 1970.

Agriculture

22. Agriculture in the Sudan is a combination of commercial and tradi-tional farming. Its role in the economy is much bigger than its contributionto GDP of 38 percent indicates. The bulk of the country's population is en-gaged in agriculture and about 98 percent of exports originate in the agri-culture sector. The principal exports are cotton, oil seeds, vegetable oils,gum, oil cakes, livestock, hides and skins and, in years of good harvest,also sorghum (dura). The country is self-sufficient in its staple food grain- sorghum.

23. During the 1960s, Sudan expanded the area under cultivation atan annual average rate of 3.7 percent. It also increased its utilizationof the Nile water from four milliard to 11.7 milliard m3 as compared withits share of 18.5 milliard m3 in the Nile Water agreement. 2/ At constant1969 prices, the value of agricultural output increased at 4.3 percent ayear between 1960/64 and 1965/69. Crops performed better than livestock,the two recording growths of 4.6 percent and 3.6 percent respectively. Adetailed analysis of the agricultural sector is included in an Annex tothis report.

1/ The principal exception is road transport which is in the private sector.

2/ According to the 1959 Water Agreement with Egypt, Sudan is entitled to18.5 milliard m3 of the annual flow of the Nile, as measured at Aswan.

B -

Table 1: PRODUCTION OF MAJOR CROPS(thousand tons)

Five-Year Average Five Year Average Growth 1970/711960/61 - 1964165 1965/66 - 1969/70 Rate (Tentative)

Crop/Year _ ('000 tons)

Cotton 148 203 6.5 252

Extra long staple 131 172 5.6 212Medium 5 22 34.0 35Short 12 9 -6.0 5

Cereals

Sorghum 1,247 1,258 0.2 1,529Millet 290 305 1.0 460Wheat 36 95 21.0 134Maize 21 18 -3.1 23

Oil Seed

Cottonseed black 250 329 5.6 405Cottonseed white 34 55 10.1 67Groundnuts 228 298 5.5 351Sesame 172 162 -1.2 282Castor seed 5 17 28.0 17

Others

Sugar cane (stripped) 170 690 32.0 800Gum 45 48 1.3 45

Source: Volume III - Statistical Tables.

24. Four ministries and six public corporations are actively involvedin the agriculture sector. The demarcation of responsibility among theministries is not always clear and the delegation of authority to the cor-porations and overall coordination need improvement. The developmentstrategy centers on increasing agricultural acreage. However, it appearspossible to improve productivity in the existing farmed areas at relativelylow cost. For example, the Gezira scheme has about 2 million irrigatedfeddans under one management. The production of crops, especially cropsother than cotton, can be stepped up through the use of good quality seed,production credit and higher farm gate prices. About 15 percent of thesown area in Gezira needs land levelling. More ginning capacity is neededto shorten the ginning season and reduce risk of crop damage. Groundnutscould be introduced over a large part of the half million feddans currentlyunder irrigation for sorghum, and sorghum production could be expanded inrainfed areas.

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25. The technical, administrative and financial recommendations ofthe 1967 IBRD mission for improvement of the Gezira scheme, were reviewedand generally agreed by a national committee. Some administrative re-organization has been made, but some important recommendations, particularlythose pertaining to the introduction of a land and water charge in place ofcrop sharing, improvements in land tenure, and decentralization of adminis-tration, have not beetn implemented. The mission recommends that a freshreview be mnade of tnese recommendations.

26. Rainfed agriculture is also facing problems. About 12 millionout of a total area of 16 million feddans are rainfed, including about 1million feddans under mechanized farming. Further expansion is possiblein mechanized areas but the choice of crops is limited. Three possiblecrops are sorghum, cotton, and sesame. But the market for the one whichcan be grown most successfully, sorghum, is limited. The presence of pestsis discouraging cotton, while sesame, which is labor intensive, face alabor shortage and hence higher labor costs.

27. The use of farm machinery is increasing, and helping to improvecultural practices and orercome labor shortages. For the Sudan to remaincompetitive, however, investments and costs must be kept low. More selec-tive purchasing, additional supervisory and operating staff, a reductionin the number of makes and models of machinery and some concentration ofsimilar kinds of machinery in one or two schemes might improve the situa-tion. It is important to take advantage of improved technology to helpoffset the increasing cost of labor and other inputs.

28. The Sudan has an enormous livestock potential which is largelyuntapped. However, an export oriented project is being formulated withassistance from the Kuwait Fund. Another important project being prepared(with FAO help) is expected to increase the output of fisheries from 16,000ton/year at present to 30,000 ton/year in the next 4 to 5 years.

29. Other constraints on the expansion of output and generation ofhigher incomes in agriculture relate to transportation and prices. Theoutput of certain export crops such as groundnuts has been retarded byprice distortions. The transport system, which is almost entirely basedon a single mode - the railway - is unable to cope with seasonal peaks indemand created by the lack of up-country storage and inter-year fluctua-tions in farm output.

Manufacturing

30. Industrial development began during World War II, and acceleratedafter independence. Local and foreign capital established a number of in-dustries to meet domestic demand in consumer and intermediate goods. Theshare of the manufacturing sector in GDP at current prices rose to 9.1 per-cent in 1969 and employment in this sector amounted to about 34 thousand.

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31. Up to 1960, manufacturing had been undertaken only by privateinterests. In 1961, the Government decided that the establishment ofcertain other industries was vital to the economy, but felt that theprivate sector would not have either the interest or resources to under-take the required investment. Accordingly, the first Government-ownedmanufacturing operation, a tannery, went into production in November 1961,followed by a large sugar mill in late 1962, and a cardboard factory inearly 1963. The Government established the Industrial Development Corpora-tion (IDC) in 1965 to manage the Government investments in industry which,at that time, totalled Ls 22.2 million distributed over 9 factories, and toundertake new investments. The nationalization measures of May 1970, expandedpublic ownership in the industrial sector and the IDC was replaced by theIndustrial Production Corporation (IPC). The IPC is like a holding companywhich controls eight sub-corporations. The net fixed assets of the IPCgroup are estimated at Ls 39.3 million as of June 1971, distributed over46 enterprises.

32. Since independence, and until the broad nationalization measurestaken in 1970, it was the Government's intention to encourage the privatesector to undertake new industrial ventures. In 1956, the "Approved Enter-prises (Concessions) Act" provided certain concessions to enterprises whichwere beneficial to the public interest, had favorable prospects for success-ful development, and adequate sources of capital and management. TheMinistry of Industry and Mining was established in 1966 and the "IndustrialOrganization and Promotion Investment Act" was approved in 1967 to providemore favorable conditions for private investment. A revised version ofthis Act which attempts to remedy some of its practical shortcomings isabout to be approved by the Council of Ministers. In the meantime, someguidelines have been issued to clear up the confusion which follows any large-scale nationalization measures, and an effort is being made to spell outclearly the relative domains of the private and public sectors.

33. In 1962, the Government established the Industrial Bank ofSudan (IBS) to assist in and to promote the establishment of privately-owned industrial enterprises and the expansion and modernization of exist-ing ones. The paid-up capital of the IBS is Ls 2.5 million out of whichit had disbursed Ls 1.7 million as of November 1971 on medium- and long-term financing of 128 projects. The IBS has also extended guaranteesin the order of Ls 1 million. It is estimated that the impact of theoperations of IBS was a net increase in investment in the industrial sectorof Ls 7.7 million, in addition to other intangible but important benefitssuch as assistance to business management and the proper preparation ofprojects. Doubtful debts, however, represent about 29 percent of the IBSportfolio and it needs additional resources in order to continue and expandits activities.

34. Industrial statistics are inadequate for an accurate analysis ofthe overall trends in output. The only up-to-date data available is thatfor products subject to excise taxes and produced within the public sector.

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They show on the whole a rising level of output for most items. The onlyexceptions were items which were affected by shortages of raw materials, e.g.sugar, and by a combination of competition by imports from bilateral sourcesas well as shortage of raw material, e.g. shoes, or by the decline in demandfor cigarettes and beer due to the increase in excise duties in 1969/70 whichwas later repealed.

Table 2: INDUSTRIAL PRODUWCTION 1965/66 - 1970/71

Unit 1965/66 1966/67 1967/68 1968/69 1969/70 1970/71

Cement '000 tons 73.2 101.1 128.7 140.7 194.1 227.2Flour " 44.8 39.9 48.8 51.5 111.6 176.0Sugar " 11.3 85.9 93.2 90.8 86.2 72.5Soap (toilet) 1.7 1.2 1.3 1.3 2.0 2.2Soap (other) " 17.1 17.6 17.1 18.0 21.7 25.7Wine Million Liters 1.3 1.7 1.6 1.5 2.1 3.4Beer 7.5 7.8 7.4 7.2 4.7 7.0Cigarettes '000 kilos 535 647 661 532 601 675Matches Million 3130 3854 3952 3875 4890 4412Shoes Million Pairs 7.2 8.2 9.5 10.7 2.7 12.0

Source: Ministry of Industry and Mining.

A recent industrial survey 1/ showed that the total value of output (gross)of the manufacturing industries 2/ is about La 63.6 million, with valueadded amounting to 25 percent. Establishments which employ 30 persons ormore contribute more than 90 percent of the output. There is a heavy con-centration of industry in and around Khartoum, where 80 percent of all themanufacturing establishments are located.

Mining

35. Mineral output was negligible until the establishment of twocommercial gold operations in the mid-1950s and the gradual developmentof a salt industry based on solar evaporation of Red Sea Water. Sinceindependence, reconnaissance mapping has started and, as of now, aboutone-third of the area of Sudan has been covered. The coverage was in-tended mainly to find ground water but recently it has been directed to-wards mineral resources. In 1960/61, a small manganese ore mine cameinto production and in 1962, chromite and iron ore mining were started

1/ This was the first attempt to make a comprehensive survey of theindustrial sector in the Sudan. It was undertaken by the IndustrialDevelopment Center for the ARAB States in August 1969 and completedin January 1970. The report is being translated into English by UNIDO.

2/ Excluding cotton ginneries.

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on a small scale in the Red Sea area. The iron ore was exported toYugoslavia, but with the closure of the Suez Canal in 1967, the exploi-tation of iron ore came to an end. The Government has been trying tofind alternative markets where the transportation cost is less, but sofar without success. While the reserves of chromite are estimated at 1.5million tons, annual production does not exceed 25,000 tons - and during thepast year has been even lower - owing to transportation problems to PortSudan. Chromite is the main exportable mineral at present and it is minedby two companies, one private and one government owned. The share of theprivate company in the total output is about 20 percent. If the transportationconstraint is eased, annual output of chromite could be increased to 100,000tons in a year or two.

36. Recent geological studies 1/ have revealed the existence of surfacedeposits of iron ore at Abu-Tolo in Kordofan province estimated at 30mill:Lon tons, with a high iron content of 60-62 percent. This is in addi-tion to the reserve of 8-10 million tons in the Red Sea area of the samequality. There are also deposits of iron ore estimated, on the basis of pre-liminary information, at between 30-40 million tons but with a lower iron contentof 30-40 percent. Copper deposits in the province of Darfur are estimated,on the basis of preliminary information, at 10 million tons, but the coppercontent is believed to be low and thus would require processing before shipment.Exploration for oil started in 1959 but was discontinued with no results;however, some oil companies have shown interest in resuming the search.

Transport 2/

37. The transport system of the Sudan consists basically of 4,757route km of single track railway, 3,500 route km of river services, andaboul: 18,000 km of road and track. Only about 330 km of roads are as-phalted and about 5,000 km are built to gravel standards. Many of thegravel roads and all the remaining tracks are virtually impassable duringthe wet season. There are 20 all-weather airfields, and a single seaport,Port Sudan. The railway is by far the country's most important transportmode. Traffic is heavily concentrated on the routes connecting the pro-ductive areas, which are substantially concentrated within 400 km south andeast of Khartoum, to Port Sudan. In terms of ton-km, nearly 60 percentof freight traffic on the Sudan Railways (SR) moves on the 787-km main linebetween the port and Khartoum, which accounts for only 17 percent of therailways' total network. The two main lines between the port and Sennar,the one via Khartoum and the other via Kassala, together account for three

1/ The Department of Geological Survey has a staff of 80, about half ofthem are specialized qualified surveyors. In addition to this wellstaffed Department, the U.S.S.R. and the UNDP have been extendingassistance to the Sudan in the field of geological survey.

2/ A detailed analysis of this sector is contained in an Annex to thisreport.

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quarters of SR's total freight traffic. In contrast, the Western andSouthern Extension lines, which added nearly 25 percent to SR's route-kmwhen completed in 1961, carry only about 8 percent of total ton-km, andachieve an average freight traffic density of only about 140,000 tons p.a.compared with nearly two million tons over the Port Sudan-Khartoum route.

38. The Sudan Railways are operating well below potential capacityand operations are not meeting current requirements; these factors arehaving a restrictive effect on the economy. In tlrie foreseeable future,the railway is likely to remain the principal means of transport in theSudan, and therefore raising its efficiency is critical to the economy.The infrastructure is adequate to carry the traffic foreseen for a lengthyperiod with equipment being added as necessary to meet requirements. Moreattention needs to be paid to spreading the seasonal export traffic byincreased inland and seaport storage, especially for grains. A feasibilitystudy for a grain storage project is being undertaken with assistance fromthe Kuwait Fund for Arab Economic Development.

39. In view of its geographical position, the Sudan's maritime tradewas particularly affected when the Suez Canal was closed in 1967. Theconsequences are illustrated by the Cape Surcharge on freight rates whichis 50 percent on traffic to West European ports, and 75 percent to Mediter-ranean ports. They are also reflected in the number of ships calling atPort Sudan, which dropped from 1,253 in FY 1967 to only 756 in FY 1971,while the average cargo loaded or unloaded at Port Sudan increased cor-respondingly from 1,850 tons to 4,200 tons per ship calling. The absenceof shipping space previously available on vessels transitting the Canalhas made it necessary to charter many ships for Sudan traffic alone, withthe result that Port Sudan is handling whole shiploads of timber, fertil-izers and other commodities much more frequently than in the past. PortSudan is operated efficiently, but has almost reached its capacity limit.

Table 3: SUDAN RAILWAY FREIGHT TONNAGES, 1964-19711/1(000 Metric Tons)

Total TrafficFinancial Year Excluding Bulk Including Bulk

Petroleum PetroleumProducts Products

1964 2,706 3,0451965 2,283 2,5991966 2,226 2,5651967 2,271 2,6301968 2,134 2,5051969 2,437 2,8661970 2,466 2,9521971 2,524 3,021

/1 Revenue earning tonnages only.

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Power

40. Public domestic electricity supplies were first introduced inthe Sudan in 1908. However, it is estimated that no more than 10 percentof the total population live in areas where electricity is now available.The provision of electricity throughout the country is the responsibility ofan autonomous agency, the Central Electricity and Water Corporation (CEWC).

41. The CEWC system has an installed capacity of about 90 MW, only15 MW of which are supplied by the hydro source at Sennar Dam and the restare thermal. The system capacity will be augmented by the commissioning ofthe three 30 MW generators at the Roseires Dam during calendar 1972. Theutilization of hydro sources may improve the financial position of CEWCsince it will cut the expenditure on fuel which is now imported for itsthermal units.

42. Mining and rural electrification could sharply increase the de-mand for electricity over the next decade. As noted in paragraph 36, copperdeposits would require processing before shipment, owing to their lowercopper content, and such processing would be hampered by lack of power.The fact that the Sudan has no proven deposits of oil or coal at the presenttime considerably enhances the importance of hydroelectric power in thecountry. However, the peak load occurs in summer when the hydro stations'operating head is at its lowest and, as a result, the plant utilizationefficiency of the stations is poor. A study is required to determine theoptimal mix of hydro and thermal power, and provision for such a study couldbe included in the Rahad irrigation project.

Services

43. The largest service sector in the Sudan is commerce and financewhich in 1966-1968 accounted on the average for 24 percent of GDP. 1/ In1970, all commercial banks, 27 commercial enterprises (mostly foreignowned) and some hotels were nationalized. The commercial enterpriseswere consolidated into a holding company, the General Trading Corporation(GTC). Another 14 specialized cotton exporting companies were national-ized and grouped into 4 firms under the jurisdiction of the newly formedSudan Cotton Marketing Corporation (SCMC). Thus, services are nowlargely in the public sector.

1/ It is felt that the national accounts data over-estimate the contributionof this sector due to conceptual and statistical deficiencies.

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44. The change in the procedure for marketing cotton is of specialinterest. Prior to the creation of SCMC, the Gezira Board used to collectthe cotton, gin and grade it, and then send it to Port Sudan for finalclassification before storage in the warehouses. The Gezira Board had acommittee to review world prices and supply and demand information andthen set prices for Sudanese cotton. These prices were called "reserveprices" 1/ and were kept secret. The second stage in the marketingprocess was an auction in which the 14 private exporting firms would bid forthe specific grades, but a sale would not be completed until the bid pricewas at least equal to the "reserve price." Cotton from private schemes wassold at a flat rate while it was in the field and sometimes sold at theGezira prices, but at a discount. The "reserve price" was reviewed fromtime to time during the marketing season. Exporters made a down paymentand were given two months' grace period to pay the rest. The cotton wasstored free during the grace period. The private cotton schemes were takenover by the Government before 1970 and thus virtually all cotton productionis in the public sector.

45. The SCMC now sets the price of cotton on a f.o.b. basis. Producersship the cotton to Port Sudan and SCMC is the sole buyer. Once cotton is inPort Sudan, the four firms which are under the jurisdiction of SCMC competefor it in order to expand their share of exports, while SCMC directly handlessales on account of bilateral agreements only. Payment to producers will bemade in 8 equal installments covering 80 percent of the value of cotton and ststarting from the date of delivery to Port Sudan. The remaining 20 percentwill be paid within one year from delivery. The new procedure is expected toimprove the marketing of cotton and obtain higher average prices for producers.It is interesting to note that the new procedure for payment to producerscovers the value of the entire crop, and not only the amount sold as in theold system. This implies that SCMC will now assume responsibility forfinancing the inventory of unsold cotton as well.

B. Eirployment, Wages and Prices

46. Labor statistics are scarce in the Sudan, but the labor force wasestimated to be 7.4 million in 1971. 2/ with males accounting for about two-thirds of the total. The distribution of the labor force among economicRectors is estimated as follows:

1/ The "reserve prices" were the minimum prices at which specific grades of

cotton would be sold. It was the intention of the Board to get thehighest possible price for each grade. If the bids were below the"reserve price" for a particular lot, the lot concerned would be with-drawn from auction, and offered again at a subsequent action.

2/ This is based on a projection from the 1956 population census. Thereare no recent estimates of employment by sector.

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Sector %

Agriculture and Livestock 72Industry, Handicrafts & Construction 6Transport and Communications 2Commerce and Trade 4Services and Miscellaneous 16

Total 100

Wage employment is very small but unemployment is not as severe a problemin the Sudan as in many other countries; in fact the development of someparts of the country has been handicapped by a shortage of labor. It isestLmated that total employment in the Central and local Government is inthe order of 120 thousand, and thus if account is taken of the other publicentities then the public sector is the largest employer in the country.The concentration of educated manpower in the public sector imposes a strainon the limited financial resources of the Government. The Government's longstanding policy of providing employment to any university graduate who seeksit, coupled with the depressed level of activities of the private sector,has made the Government the residual employer. Salaries in the Governmentrange from i6s 13.9 to bs 195.4 per month but wages in the public entitiesand the nationalized firms are higher. In the private sector, wages forunskilled workers are lower than in the Government, while skilled laborearns 5-15 percent more than its Government counterparts.

47. Labor legislation and organizations are undergoing a completereview. It is planned to consolidate the number of unions (from 562 to30) under a new law thereby achieving not only improved but more uniformbenefits for all employees. Additionally, it will be possible to coordi-nate and offer more vocational training and other benefits to the unionmembership.

48. Prior to 1970, a cost of living index based on a 1950 householdbudget survey was prepared. A new series of indices based on a householdbudget survey which took place in 1967/68 is available for 1970 onwards(Table 8.1 - Statistical Appendix). Both series, however, tend to under-state price increases as a result of using Government fixed prices forsome staple items.

49. The cost of living index for lower salaried officials rose from158.3 in 1961 to 194.2 in 1969, while the index for higher salaried offi-cials rose from 157.4 to 216.3 during the same period. In July 1968, apay increase for all public sector employees ranging from 15-27 percentwas granted. The Government had also been subsidizing the cost of breadbut, in April 1971, it decided to reduce the weight of bread and thus reducethe subsidy without altering the price.

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C. Monetary Developments

50. The banking system in the Sudan consists of the Central Bank(Bank of Sudan), 7 commercial banks, and 3 specialized credit institu-tions - the Agricultural bank, the Industrial bank and the Estates bank.Savings bankl facilities are provided by the network of post offices inthe country. In May 1970, the seven commercial banks were nationalized.The present policy is to retain the competitive nature of commercialbanking by retaining at least two branches of different commercial banksat each center to provide a viable alternative for customers. The Boardof Directors of the Bank of Sudan was given control over the nationalizedbanks and the Clhairman of the Board of Directors was raised to ministerialrank.

51. Credit to the public sector rose at an average annual rate of19.7 percent from Ls 18.4 million in 1961 to Ls 110.4 million in 1971. 1/Public sector deposits decreased, however, from Ls 60.3 million to Ls 13.4million during, the same period. The increasing dependence of the publicsector on the banking system was a result of the very low level of theCentral Government savings and of the dissaving by the public entities.Deficit financing in the last three years has averaged about Ls 20 millionannually. The limit on Government borrowing from the Bank of Sudan wasreduced from 15 to 10 percent of anticipated Central Government revenue,and the outstanding Government debt of Ls 32 million as of June 30, 1971was consolidated and removed from the ceiling. 2/

52. According to the Bank of Sudan Act, foreign exchange reserveshad to be no less than 25 percent of the aggregate amount of currency incirculation and the sight liabilities of the Central Bank. As a resultof declining reserves, Article 32 of the Bank of Sudan Act was amended inlate 1969 so as to provide for a fixed minimum reserve of Ls 7 million ascurrency cover. A 5-Year loan of the same amount was received fromKuwait to meet the currency cover requirement.

53. Credit to the private sector, mainly for export and importfinancing, rose at the annual rate of 8 percent during the period 1961-1S71 (Table 6.2 - Statistical Appendix). Medium- and long-term financingfor the private sector is of relatively minor importance. There are noreserve rerluirellents placed on the commercial banks but the Bank ofStidnn closely rmonitors the liquidity ratio which has been falling in re-cent venrs from 20 percent in June 1966 to 7 percent in September 1971.

1/ As nioted in earlier sections, there was a drastic change in the scopeof the public and private sectors as a result of a series of national-iz.ation measure:3.

2/ This amount is to be repaid within a period not exceeding ten yearsand at 0.5 percent annual rate of interest.

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In order to restrain the growth in credit, the Central B.ank inl :archi 1971

introduced an overall ceiling on commercial bank lendinjg. Moreover,within this ceiling it is the intention that the June level of comlmercialbanks' import crd(lits (Ls 9.5 millioin) will be reduced by 10 percent as

of December 1971 and by a further 10 percent by ttarch 1972.

54. As a result of the expansion of credit, the rate of groxwth of

money supply (including quasi money) has been in the order of 12.3 percenat

for the last ten years. Since the growth of output lhas been significantly

lower, the result has been a continuous rise in prices and imports. Hlow-ever, restrictions on imports, and to some extent on prices, did not per-

mit the full absorption of the excess liquidity and it is believed that the

economy is very liquid. Sudan has adopted 3 successive stabilization pro-

grams, supported by IMF standby arrangements, designed principally to im-

prove the financial position of the public sector. The nieed for a new

stabiLization program is realized by the Government, whichl has recently

reaclhed an agreement with the IMF on such a program. 1/

55. The three specialized banks provide medium- andl long-term credit

in the fields of agriculture, industry, and real ustate. The Agriculture

Bank is the oldest, established in 1959, and it has thle lartgest volume of

operations (loans outstanding amount to Ls 10 million) among the special-

ized banks (see also Volume III). The Industrial Bank was established in

1962 but the scale of operations has been limited by its resources amount-

ing to Ls 2.5 million and also by the depressed private sector activities

(see also Volume II). The Estates Bank began operations in 1967 to provide

some loans for home ownership and, increasingly, its emphasis has been on

low-income housing. The Bank's operations have been constrained by a lack

of capital; as of November 1971 paid-up capital amounte(d to ls 3.6 million

or about half of its authorized capital.

1/ See IMP report dated M4arch 10, 1972

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Table 4: Oi(TFTAPY SU.VElY - A SUTIARY(Ls million)

Jtne June June June1961 1965 1968 1971_

½et Fonrei,n Assets 60.2 21.3 2.0 -21.6Claims or ther Public Sector 13.4 30.5 62.0 11(0.4Cla-ims on the Private Sector 34.0 45.7 60.5 73.1Clzaimrs on the Specialized Banks - 2.4 5.9 12.7

Assets = Liabilities 112.6 99.9 130.4 174.6

oney 39.0 56.3 74.6 111.6Currency (21.0) (31.4) (42.1) (65.9)Private demand deposits (18.0) (24.9) (32.5) (45.7)

Quasi iloney 4.6 9.9 17.4 21.1Public Sector D)oposits 60.3 14.9 19.5 13.4Coimatern-art Funds 1.5 5.3 2.7 1.9

ntlher Itetrms (net) 7.2 13.0 16.2 26.6

Snource: Bank of Sudan, and IMF R1eports, and Table 6.1 - StatisticalAppelndix.

The l1obtli zation of Financial Savings

5. Iintijl 1)l 1, commorcial banks in. the Sudan had not been veryrictive in mobilizin-, the community's savings. This was the result of severalfactors. First, the commercial hanks llad a small nuTmher of branches with

] iTnited feo':raphi.cal coverag,e, andi they were not willing to accept

srmall savings accounts. Secondly, the commercial banks were relying on

t1e snestaniitil novnrnm(nent denposits for liquidity. WJithi th-ec, transfer of*OvJrii1mont d(nsits tn thie Central Bank, the commercial banks starte(I toencoulr. e savirv; cimnosi ts. At present, the commercial bankcs offer 3-4

percont interest on savings accounts, and balances held in such accounts

rose from l.s 't million in 1967 to Ls 13.4 million in 1971.

)7. Thi io.n;t 1i;iportar;t institution for the mobilization of privateSax''i:1L!.i:; tl!J' PosLt Office Saving;s Bauk. 'Tlie Banlc offers 4 percent interest,La:-. fri (, an-i' LOi Vi lL (e of its dep)osits has risen from .Ls 9.4 ,iiillioii in1 ,7 tL li,~ 11.4 rEi. jWn iin 1971. Thle estahlishmaent of inisurance compaiiiesU! 1 L:1'. C, ' 212 o 1 is crea tcG a new methlo(d of savili-. Cnr insurance. isl.i,t,lc CorICIoii, blut p)ri;ate 1lfe insurance is still in its bcginning. The

:lai,i difFi.ulty facing perLvaLe 1i.fe insurance is that the iidividual Sudlanesese]ldor! uii(crSdndlf(in the bonefits of such a scheme. In 1970, the Government

(t'(:i('etC tiot tho insuranc(:e bhusiness in thc Sudan slhoul(d hIc wholly confinedto si. maiii nationial companies anid their subsidiaries. Hlence all expatriateCoM,lpdlDiCS Werc' prohibited from undenrriting new business, but were allowedto co]nict preiaia on existing policies and to settle claimls arising fromtU)clh.1

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58. There is considerable scope for the banking system to mobilizea larger volume of small savings. Schemes suclh as lottery and prizebonds have not yet been tried. The use of mobile banking units might behielpful in widening the domain of small savers. The impact of a rise inthe interest rate offered on saving deposits might be substantial in viewof the excess liquidity in the system. At present, the Government is con-sidering the establishment of a savings bank with the assistance of agroup of Italian banks which are also expected to contribute Es 100,000to the capital resources. The Government is also studying the system ofprize bonds in Egypt for possible adoption in the Sudan.

D. Foreign Trade and Balance of Payments

Overall View

59. In recent years the Sudanese balance of payments has beencharacterized by (a) a heavy reliance on cotton as the major export; and(b) a rising level of imports due to the inadequacy of local food produc-tion and the limited range of local manufacturing industry. Although thegrowth of imports has, on the average, been slower than that of exports,Sudan has had a continuous deficit on the current account averaging Ls 19.4million a year throughout the 1960s. 1/ The problem was aggravated by theclosure of the Suez Canal in 1967, since it raised the import bill andreduced export receipts. Furthermore, owing principally to politicalinstability, the net inflow of capital, which averaged only about Ls 8.9million a year during this period, began to decline until it becamenegat:ive in 1970/71 (Table 3.7 - Statistical Appendix). These factorsled t:o a rapid depletion of Sudan's foreign reserves, and forced theGovernment to contract short-term loans on less than favorable terms.

Table 5: SUMMARY OF BALANCE OF PAYMENTS(Ls million)

1961/62 1966/67 1967/68 1968/69 1969/70 1970/71

Balance on Trade -16.7 -9.0 -9.6 -2.9 8.3 -15.4Balarnce on Services -11.1 -8.5 -8.9 -8.8 -12.2 -7.5Balance on CurrentAccount -27.8 -17.5 -18.5 -11.7 -3.9 -22.9

Net Official Capital 14.4 10.3 11.4 6.0 6.0 -(.1Errors & Omissions 7.3 -0.4 2.2 -1.6 2.7 1.9ttonetary Movements 6.1 7.6 4.9 7.3 -4.8 21.1

(- = increase)

Source: Table 3.7 - Statistical Appendix.

1/ In contrast to many other African countries which started the 1960s withlarge surpluses on its current account, for the period 1957-61 Sudan hadan average annual deficit on its current account of Ls 9 million.

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'ferchanI l ;STrade

6n. Oudant' exports consist of one principal commodity - cotton; anda number of mlinor cormodities such as cottonseed, gum arabic, sesame, ground-nuits, sorghljurm, livestock and livestock products. Over the last ten years,tile average annual gronwth rate of merchandise exports has been 3.3 percent.Cotton ea7ports grcw at an averagc annual. rate of 5.8 percent, while otherexports hlrlve 1been virtually stagnant. The share of cotton in total exportsiaas ;emer:rllv benn over 5( percenit of the total and it is unl.ikely thatthiis ratio \-11 1 c1hinge over the next few years.

Tab e (,6: T', (:(Y T( SJTTT(N AMP) (,I'OI"T'I! OF 1EX'PORTS, 1961/62-17)70/71(Ls million)

Annual Average Annual Average Growth1961/62-1965/66 1966/67-1979/71 Rate

(1) Total .,;xpor ts 75.7 89. 1 3.3

(2) Cottoin Fzx)orts 36.5 48.2 5.2(3) (2) as ,' c02 (1) 4 8. 2 /a 54.1 -

(4) Otllmrr E;-ports 39.2 40.9 0.3(5) (4) as ' of (1) 52.3 45.9 -

/a Thlere were twio poor crop years in this period.Source: Tablc 3.2 - Statistical Appendix.

61.'I'!IC )g-tO of cottonl exports has been the result of thelrise in t1ii, volumce of production and relatively firm and

risin zprices For ;udianese cotton.

19! 5/(( 1966)/67 1967/68 1968/6) 1969/70 1970/71

Volu-ie of Cotton..'Aports (000 bales) 66( 759 924 1,(004 1,201 1,197

Unit nrice of a halef.o.b. (I.s) 35.5 45.4 47.9 52.4 53.2 53.7

TIhe outplut alnd e;.portr; of other crops liave fluctuate(d from year to year,and soneC of theml: declille,. Some exports, particularly oilseeds, have suf-ferecd froii co,q)cetiLioii from llest Africa.

62. ~ 'udan';,s total imports rose froin Ls 84.6 million in 1961/62 tol.s 11m.9 imilliln in 1970/71 or at an average annual rate of 2 percent.

The most significant features concerning imports is that, over the last

teli years, consumer goods imiports grew at the average rate of 4 percent*.I.hil.e iiimports of capital ;oods have declined bothi in relative and absoluteterns, corre!;po11dinf to the lower levels of investment.

- 2: 2

Tal lIC 7: T1 TAG l TSTRIUJTIT.ON OT; IP Y li,. 'IJ K' *1!)

Annual Ave!riag,e Anlini 1 Av( t:p, 'e ('rowti:!1 961 /62-1 9 65/!66} 19 tf6/0 7-1' i7(o/7 1 'a tI c

. .~~~~~~~~~~~~4

( ) CoiiSuic'r Cooa; 45.2 50. '3 !4, 0(2) Initermediate No,.)ods 34.4 36. 2 2I.(3) Capital. Goods 20. 4 13.3 -7.2]

Total 10(.0 1 00.0 I.A

Soutrce: Tabole 3.1, Statistica'l- Appendix.

,i. I)uring-, the 1960s the value of imports averaged about 10 per-ceni-t hlaigher thiani mierchandise exports. Siiice an inicreasing perceita-c ofi'iuvorts are consumn2er and intermediate goods, thte share of ex:port earni.ng,sw.hiichi is available to finance imports of capital. :;o(Is lips lo.'o b.oth snl.land decreasing,. 'ClTe average deficit on the trade bnalajice.. in tiLh last: te-nyvars hII,s h)eeln in the ordler Of Ls 8).1 mill ion.

64. Therc has been a notable change in the geo,riliicai pattern ofSuda:l'; foreignz trade. Exports to the, convertibl e cui-rrecy areas hasdeclinledO in thle last few years as arosult of bilater:l r i" ets With)the U.S.S.t. , India an(I Eastern European CouTItries. 1/ 'This has been matchelby a Cdeclinle in the share of the convertible currency areas in Sucdan'stotal imports. Hiowever, Western Europe, includtingY 1 1K1., accoutits forthe bulk of thle. Sudan's trade, followed by Indic.a, and the . .B. N. (Tables3.5 and 3.6 - Statistical Appendix). At present, thle Government is mia!kin,an effort to increase exports to convertible currencv area,s and is tinder-tal-ing- a reviewy of trade agreements ,rith a viek-7 to reenIlci; 'p tIti' Vnl-I'lte oftraie ciannelled throug.h them.

65. Mlost of the imajor exports are. handled by pulllic sector enterpnisas,whfiile othLer authonrizced exports are open to private ex-porters l ithout alicense. All. im,prorts require licenses. Biased primaril.y ott the prevailirihfnr(-Ži,n exchan-e buidge.t, tile issuatice of import lic.(ens is ; utided ithiobroader g1oals of import policy, which are the need tn nrntect Jocal imhits-tries, the mainiteniance of a reasonably adeqiuate level of consumrer po-nods,ensurin'- ef Ficiiet isie of avatlahIbc forci ,n cchoan:e, ;and the nee for

irtnort tax; reveni)es to make a reasonal)ti.e cniitrlhutioni to t ! ¶}ut I

1/ Six hilateral. payment agreenents are mairitained 1b'y th-e Studa.n 71ithEg,ypt, India, Czechoslovakia, E.ast Germany, liungary, and Poland.In a(iditioni, a trade ag,reement featuring annual 7import anld exp.orttargets is Maintained with thoe U.S.S P. ITnder tihis ag.reerent, tl1eU:.S.S. T . is to purchase annuallv 30(,000( bales of Sudanese cotton,in return for Ls 12 million Sudanese imports from the U.S.S.R.

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Services, Officin] Capital and Ueserves

(ver ti:, l-:-;t Len years, receipts andi payrcents on thie services

.-'(:(11 it '.;8Vt: b'1,u 'tkJ(ri,j)J flI)OuIt LS 12.6 million and Ls 23.9 rmiillion a

!':IL re::; (:t: 'V ly. t %'a:elLu for forei,n travel, educational- support andEi! l j A :i Iii b l.lm ::ir srlinject to liriits whlichi are enforced froml Li.ic to

tL: e. rn 1`70z, :, toL: xa!; impo2ed on foreign exchange for travel othertir, For 'c(IL C inn;l -urposes and i:iedical treatment, giving rise to an

A': et ivo '-:c.nn8e rate o. lof 1 = US4-2.40. The same e,;c1ang2e rate is ap-;i,- ti re[; i tt1anc:; !' Sudanese natioTals working abroacl (othler tlhan

;ov-r.L i nit ofr Fi( iA and stdeonts) as a nicans of encouraging,; stuch reriit-t:nlue. :. v I j i'rit;, .'overnrient's decision to assur.e responsibility forV- a ,^eat Of poiueo;irons to !ritish nationals who previously served in

"!l, 1 rc(i'i(( : rvier, IayI'llnts by ILs 40,000 starting in FY71/72.

fi7 . Q'ros;s c:lri t li inflowzs have been declining over tihe last decade;1i,n, :ii,(c rp-avri(nit: lIav( boen increasini,, the net inflow avcraged abotut

l.r; 1 1. : i l1ien evo-r th( period FY62-66 but declined to Ls 6. 7 million ovcrthe period TPY67-71. Tihe Bank Group has been the major source of externalfinnncin- siice i t aecountcd for about 60 percent of the gross inflow intie last t vo zrnrs.

FY62-FY71LS lTillion Percent

(ro-.rz Capital Inflow 138.1 1 (0.0idanln/TIDA Disbursements 82.1 59.5,ri' i) (73.4) (53.2)r i (8.7) (6.3)

,:: . ';.td;,,a e; 'ros;r roserves of convertible foreigii exchian,,e wxhichi

LnI ;t: sa recor; lovel of Is 60.8 mil lion in 1961 have been fallini;flonti uluonl :1y lintil. tley aIntinted to Ls 9.6 million in June 1971, includinjgt' -aL1tit:ory curr(rncy cover of Ls 7.0 million (Table 6.4 - Statistical'I))rldl::). ';ilcli a ] o level of reserves is ecluivailent to only a montll'si po t!;. 'et: Forel;,,' asse;ots hiave been negative since 1968<. Trle detertora-Lioni in r rvc'; ' CAn r (:acdW(I by withdrawals to finance governniental expendi-tLures at leve(l 1ijhjlrh could not he sustained with available resources.A\t tlw end( of TuNr 1'71, !it foreign assets amounted to minus Ls 21.61ii 1] i olm .

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III. PUBLIC FINANCE, RESOURCE MOBILIZATION AND DEVELOPMENT PLANNING

A. Overall View

69. The public sector in the Sudan comprises the Central Government,the local authorities, and a number of public enterprises. The national-ization measures of May 1970 brought the banking and a large portion ofmanufacturing and trading into the public sector. Until 1971/72, theCentral Government prepared an ordinary budget which covered the CentralGovernment's current accounts classified in three chapters: Chapter I -Wages and Salaries; Chapter II - Services and Recurrent Material; and,Chapter III - Small Capital Expenditures: and a development budget whichincludes the investment program of the Central Government and most of thedevelopment expenditures of the self-financing public enterprises. In the1971/72 budget, Chapter III of the ordinary budget was enlarged to becomethe development budget. There are many financial flows between the CentralGovernment and the other public enterprises, but the Sudan does not havean integrated public sector accounting system. Moreover, data on the oper-ations of many public enterprises as well as local Governments are far fromcomplete.

70. Over the period 1961/62 - 1970/71, Central Government's recurrentrevenues and expenditures rose at the annual rates of 11.3 and 12.3 percentrespectively. Despite efforts to increase revenues, recurrent expenditureskept rising and, as a result, the surplus on the recurrent budget has beensmall, averaging about Ls 8 million a year, and has fluctuated widely. Ifaccount is taken of the major public enterprises then the aggregate publicsector savings has averaged about Ls 10.0 million a year over the lastdecade. This level of savings, though small, shiould be viewed as the upperlimit of the actual savings of the public sector in the absence of completedata on its operations.

71. Public sector development expenditures totalled] Ls 334 millionduring the period 1961/62 - 1970/71, of whiclh the share of the CentralGovernment was 72 percent, the balance representing investment by the pub-lic enterprises. The average annual investment, as well as saving, in thesecond half of the 1960s was lower than in the first, resulting largelyfrom political uncertainty and the consequent failure to assign high prior-ity to economic development and also to generate resources on an adequatescale. With regard to the financing of investment, external sources pro-vided about 41 percent, while public sector savings and internal borrowingcovered the remainder equally. The decline in public sector savings is aparticularly disquieting feature, and has contributed significantly to themounting deficit.

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Table 8: PUBLIC SECTOR DEVELOPMENT EXPENDITURES AND ITS FINANCTNG

Annual Average Aunual Avot:-a-19601 / 62-19 tl/."" / (I ( 1h)(I (I/ ;- ;I i

Amount Percent Amount Percent(La m) (LB m)

Development Expenditures 38.6 100.0 28.1 100.0

Financed by:

External Sources 14.8 38.0 12.8 46.(0

Public Sector Savings 16.3 42.0 3.1 11.0

Deficit Financing 7.5 19.0 12.2 43.0

Source: Table 5.1 - Statistical Appendix

B. Central Government Recurrent Budgets

72. There has been a steady increase in Government revenues over thelast decade but the structure of revenue has not changed much. Indirecttaxes provide about two-thirds of total revenue and have been growing at anaverage annual rate of 12 percent. Direct taxes have shown a very highgrowth rate, but still do not account for more than 8 percent of total re-venue. Government proprietary receipts are another source of revenue andmight increase in importance if the nationalized companies become more pro-fitable. Total Government revenue as a percentage of GDP increased from18.8 in 1966 to 26.6 in 1969, and the corresponding figures for tax revenuewere 14.0 and 17.7 percent.

Table 9: ThIE STRUCTURE OF CENTRAL GOVERNMENT REVEINUE

Annual Average1961/62-1965/66 1966/67-1970/71 Growth Rate

1. Total Pevenue (Ls million) 72.4 122.7 11.22. I)irect Taxes (Ls million) 3.1 8.4 22.03. (2) as % of (1) 4.3 6.8 -4. Indirect Taxes (Ls million) 45.2 79.6 12.05. (4) as % of (1) 62.4 64.9 _6. Total Tax Revenue (2 + 4) 48.3 88.0 12.77. (6) as % of (1) 66.7 71.7 _8. Proprietary Receipts 7.4 15.9 16.69. (8) as % of (1) 10.2 13.0 -

Source: Table 5.2 - Statistical Appendix

26 -

73. The direct taxes consist of: business profit tax, personal income

tax, rental tax, and a defence tax which replaced the emergency tax. A

consolidated tax is levied when multiple sources of income are involved.

The business profit tax is the oldest form of taxation in the Sudan dating

baclc to 1913. After deducting the first Ls 30n, 1/ the tax is applied at an

increasing rate ranging from 15-60 percent. Personal income tax was intro-duced in 1964. At the beginning, it exempted incomes up to Ls 1,350, hut

was later revised to apply on incomes in excess of Ls 170 at a rate ranging

from 1-80 percent. The rental tax was introduced in 1964, not only to in-

crease Government revenues, but to discourage private capital from over-

investing in houses since this had been a non-taxable field of activity.

The rates of this tax are the same as those of the husiness profit tax.

In FY1969/70 an emergency tax was imposed, btut in FY197n/71 it was replaced

by a defense tax at the rate of 2 percent on all taxable incomes.

74. Most of the direct taxes in the Sucdan are relatively new and the

prospect for increasing their contributions to the budget is good. It is

estimated that only 5 percent of the potential tax payers are paying taxes.

This is partly because of the limited capacity of the tax administration,

and the current practice, which was discontinued in December 1971, of per-

mitting the local authorities to assess and collect taxes from tax payers

hoio earn less than Ls 1,000, which has not proved very satisfactory. At the

beginning of 1972, some measures were adopted to strengthen the tax adminis-

tration.

75. Indirect taxes consist of import duties, excise duties, the sugar

monopoly profit, and export duties and royalties. Import duties doubled in

the last ten years as a result of both overall ancl selective increases in

the tariffs. A particularly important increase resulted from the imlposition

of a 5 percent surcharge, which was subsequently increased to 15 percent in

July, 1969. In 1970/71, import duties as a proportion of imports reached

43.2 percent compared with 30.5 percent in 1961/62. Import duty rates are

generally ad valorem and some commodities do not carry any duty. Excise and

consumption duties rose from Ls 3.1 million in 1961/62 to Ls 26.3 million in

1970/71 representing an average growth rate of 27 percent. 1)uties on tradi-

tional items such as alcoholic beverages, tobacco products, gasoline, soap

and matches have been increased substantially in the last few years. More-

over, the coverage of excise duties expanded to include new items.

76. Most export items were subject to an export tax until 1968. After

that year, only cotton and gum arabic have been subjected to an export tax.

A fixed rate per kantar is applied to cotton, while a 5 percent ad valorem

tax is levied on gum exports. The Government has a monopoly over the im-

port and distribution of sugar, and the profits that the Government derives

from this source has increased from Ls 1.6 million in 1961/62 to Ls 18.7

million in 1970/71.

1/ A proposed amendment of the tax law to reduce the exemption level to

Ls 170 to be comparable with the personal tax exemption allowance was

approved in December 1971.

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77. other important revenue sources are profits transferred by theGezira Board, the Bank of Sudan and some of the nationalized companies,while smaller amounts accrue from fees, fines and charges. Transfers bythe Gezira Board averaged about Ls 7 million a year over the last decade.In 1970/71, profits from the Bank of Sudan amounted to Ls 4.4 million whilethe nationalized firms made their first contribution of Ls 1.3 nillion tothe budget. Stamp duty, fees and charges rose from Ls 5.8 million in 1961/62to Ls 9.8 million in 1970/71 at an average growth rate of 6 percent.

78. On the whole, the Government has made a strong effort to mobilizedomestic revenues. The only exception is direct taxes where more adminis-trative work is needed to expand the scope of the business profit tax andto improve collection. Indirect taxes could produce more revenues if theGovernment were to raise the price of commodities directly under its control,e.g. sugar. It is estimated that a 1 piaster per pound increase in the priceof sugar would yield Ls 5 million, and there would be no difficulty in col-lecting it. It would, of course, be necessary for the Government to undertakestudies on elasticity of demand for the commodities to serve as a backgroundfor such decisions. The level of indirect taxes is approaching the pointwhere the knowledge of demand variations is necessary. Beer is a case inpoint. The excise on beer became so prohibitive in 1969/70 that the increasewas withdrawn because of rapidly falling demand and a corresponding declinein duty collections.

79. Central Government recurrent expenditure rose from Ls 51.6 millionin 1961/62 to Ls 146.4 million in 1970/71 (Tables 5.3 and 5.4 - StatisticalAppendix). The rapid growth of defense expenditures, subventions to localauthorities, and general administration have accounted for most of the in-crease. The Government policy of absorbing the unemployed, whenever pos-sible, lias contributed significantly to the rise of recurrent expenditures.The number of Central Government employees increased from 33 thousand in1961/62 to about 66 thousand in 1970/71. It is doubtful whether there hasbeen a corresponding improvement in the services provided by the Government.

80. Expenditure on defense and security rose continuously during thelast decade from Ls 11.0 million in 1961/62 to Ls 46.8 million in 1970/71,or an average annual increase of 17.5 percent. While defense expenditureincreased steadily in the period 1961/62 - 1968/69, a sharp rise occurredin the following two years, averaging about Ls 9.2 million annually. De-fense and security absorbed 32 percent of the total expenditure in 1970/71which exceeded the combined expenditures on social and economic services(Table 5.3 - Statistical Appendix). The actual level of expenditure on thisitem is higher than is indicated by the budget figure, since imports of someitems of military equipment have been obtained on credit and will show inthe budget only when the repayments of the corresponding credits take place,presumably after 1975. Political instability, the emergence of the army asa major political force in 1969 and continued disturbances in the southernpart of the cotntry have been the major causes of this rapid increase.

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81. Expenditures on economic and social services have grown very slowlyrelative to all other categories. The combined expenditure on these servicesamounted to nearly one-half of the total in 1961/62, but was down to 30 per-cent in 1968/69. The growth rate of expenditure on economic services at 3.3percent is the lowest of all categories. While this is to some extent attri-butable to the depressed level of development expenditure, it is also indic-ative of the priority given to other forms of expenditure.

Table 10: CLASSIFICATION OF RECURRENT EXPENDITURES

Annual Averages1961/62-1965/66 1966/67-1970/71 Growth RateAmount % of Amount % ofLe m total Ls m total

Social Services 12.5 20.3 21.3 18.7 11.3

Economic Services 17.1 27.7 20.() 17.6 3.2

Defense and Security 14.3 23.2 32.5 28.7 17.9

Subventions to Local Authorities 6.8 11.0 13.1 11.6 14.0

General Administration /a 11.0 17.8 26.5 23.4 19.3

Total Recurrent Expenditures 61.7 100.0 113.4 100.0 13.0

Ta Includes the debt service.

Source: Table 5.3 - Statistical Appendix

82. The net surplus on the recurrent budget averaged about Ls 10.8 mil-lion in the period 1961/62 - 1964/65 but declined to Ls 5.2 million in thelast five years. 1/ As a result, the Government's dependence on the bankingsystem to finance development expenditures has increased. tfhile the Ministryof Treasury is legally permitted to issue Ls 40 million of Government stock,total issues amounted to Ls 7.7 million as of September 1971. The largestholder of these stocks are the nationalized commercial banks and it is pro-bable that there is no market for Government securities in the private sector.

83. The Central Government cash position has deteriorated considerablyover the last decade. Between June 1961 and June 1971, the Government netposition with the banking system has shifted from a positive balance of Ls24.4 million to a negative balance of Ls 45.7 million. If account is alsotaken of borrowing by other public sector entities, then the net position of

1/ See Table 5.1 - Statistical Appendix.

- 29 -

the public sector had reached a large negative figure of Ls 97 million byJune 1971. However, no firm conclusions can be drawn solely from the cashposition, since cash deficits of the Central Government must be seen in thecontext of purchases of stores - particularly sugar and wheat, while publicenterprise cash deficits should be reviewed in conjunction with temporarystock build-ups, accounts receivable and unusually large stores purchasescaused bv the closure of the Suez Canal.

84. The budget for 1971/72 estimates that recurrent revenues and ex-penditures will amount to Ls 192.7 and 184.5 million respectively (Ls 164.4million and Ls 146.4 million respectively in 1970/71) and hence that a sur-plus of Ls 8.2 million would be available for development. The budget didnot include any new taxes, for it was assumed that the major proportion ofthe increased revenue would emanate from (i) improved tax collection -particularly of direct taxes which were expected to increase to Ls 22.9million from Ls 15.1 million in the previous year - and (ii) the higherprofits of the nationalized companies which were expected to transfer Ls 13.0million to the Government. Revised estimates show that the projected increasewill not materialize, and also that recurrent expenditure may be higher thanoriginally estirmated. The government has since taken some steps to curtailexpenditure. Although allocations for some items were reduced, it appearsunlikely that there would be a recurrent budget surplus.

C. Local Authorities Finances

85. There are 83 local councils and 9 provincial councils in the Sudan.These councils prepare an annual budget and they derive their revenues fromlocal taxes. They are empowered to raise and introduce new taxes by localorders. The revenues thus collected have not, however, been sufficient tocover their expenditures. Since they are not permitted to borrow from theBank of Sudan, the Central Government has to cover their deficits. Informa-tion on the finances of the local authorities shows that, during the 1960s,their revenues averaged about Ls 14.5 million a year, which covered less than50 percent of their total expenditures which averaged Ls 30 million a year.There is considerable potential for increasing the revenues of the localcouncils and reducing their dependence on the .Central Government. An IMFreport in 1969 suggestedi several measures to improve the taxation structureof the local authorities and the methods of assessment and collection oftaxes, and also to clarify the financial relations with the Central Govern-ment. Consideration should be given to the implementation of these recom-meTndations.

r). Public EFntcrprises Current Operations-_/

86. The public enterprise sector dominates all non-traditional economicactivites in the Sudan. It embraces the bulk of modern irrigated agriculture,most of transport, virtually all of power and water supply, about half of

1/ The operations of the public enterprises are discussed in detail inVolume II - Annex 1.

- 30 -

manufacturing and a significant proportion of commerce and finance. About

50 percent of GDP is estimated to be produced in the expanded nublic sector.Three broad types of public enterprises may be distinguished:

(a) agricultural production enterprises;(b) "traditional" public utilities associated with transport,

power and water supply; and(c) the manufacturing, commercial and banking units, most of

which became part of the public sector because of the1970 nationalizations.

List of Public Enterprises

A. Agricultural Production Enterprises /1

- Sudan Gezira Board- Public Agricultural Production Corporation- Agrarian Reforms Corporation

B. Public Utilities

- Sudan Railways- Central Electricity and Water Corporation- Sudan Airways

- Sudan Shipping Line

C. Industrial, Commercial and Banking Enterprises

- Industrial Production Corporation- General Trading Corporation- Cotton Marketing Corporation- The Banking System /2 composed of:

Bank of SudanIndustrial Bank of SudanSudan Agricultural BankEstates Bank7 commercial banks

D. Miscellaneous Nationalized Corporations

/1 Two nominally corporate entities have been excluded. The AgriculturalDevelopment Corporation acts as a temporary holdinz company for ongoingagricultural schemes. The Mechanized Farming Corporation is mainly aland-leasing intermediary (with some supervisory functions) betweenprivate farmers and suppliers of credit and inpuits. Neither entityis primarily in the business of producing and selling goods andservices on a continuing basis.

/2 The Bank of Sudan owns the three specialized banks and supervises theseven commercial banks.

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In terms of fixed capital invested, the Gezira Scheme, the Sudan Railways,the Central llectricity and W4ater Corporation and Industrial ProductionCorporation are the important ventures.

87. The scope of the public sector reflects major changes which haveoccurre(I during the 1960s, particularly in the last two years. The Govern-ment's entry into industrial production began early in the last decade, butit was only in 1965 that the Industrial Development Corporation (IDC) wasforme(d as a holding company for the units set up by the Government. Publicparticipation in agricultural production schemes dates back to the inceptionof the Tokar project in 1868. The Gezira Board, which was set up in 1950upon the expiration of the concessions granted to the private companies, dom-inates public agriculture, particularly after the completion of the Managilextension in the early 1960s. The Khasm el Girba Scheme was the other majorpublic agricultural development during the decade. In 1967 this was combinedwith other puhlic schemes such as the Gash, Tokar and Nuba under an apexorganization - the Public Agricultural Production Corporation (PAPC). In196g the Government began taking over the private pump schemes along thetwo Niles grouping them under a new third major public production agency -the Agrarian Reforms Corporation (ARC).

88. The remaining pump licenses were taken over in the late 1960s. Asa result of the nationalization measures of 1970, 38 manufacturing units,representing about a third of the capital invested in private manufacturing,were nationalized and grouped with the IDC units under a new organization -the Industrial Production Corporation (IPC). All commercial banks, 27 com-mercial enterprises (mostly foreign-owned) and some hotels were also nation-alized. The commercial enterprises were consolidated into a holding company,the General Trading Corporation (GTC). Another 14 specialized cotton export-ing companies were nationalized and grouped into 4 firms under the jurisdic-tion of the newly formed State Cotton Marketing Corporation (SCMC). Compen-sation is to be paid to the owners of the enterprises concerned, but the termshave not yet been finalised.

89. The results of current operations for some of these enterprises forthe last five years, and tentative forecasts until 1974/75 are shown in Tables5.7 and 9.4 - Statistical Appendix. The agricultural production schemes arepartnership arrangements between tenants who supply labor, the Governmentwhich provides land and irrigation facilities and the managing board whichsupervises both physical and financial aspects of the scheme. Cotton isusually the "Joint account" crop; the jointly incurred expenses for cultivation,processing and transport are charged against sales revenues and the net profitsdistributed between partners according to agreed proportions. For other cropsin the rotation the tenants bear much - but not all - of the cost and appro-priate all the sales proceeds. Owing partly to these special profit-sharingarrangements, and partly to the crop-based accounting conventions, no obviousmeasure of current surplus for the fiscal year may be gleaned from the schemesprofit-and-loss accounts. The managing boards' cash surplus (or deficit) may

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be used as one crude proxy for current surplus of these enterprises. 1/ Onthis basis the three main agricultural production enterprises have run intoserious problems in the last two years. Both Gezira and the Agrarian ReformCorporation ran deficits of about Ls 8 million in fiscal 1970/71, while thelatter had shown a similar cash deficit in 1969/70.

90. It would be premature to regard these deficits as proof of a trenddecline in profitability of the agricultural enterprises. For example, in theGezira profits on joint account continued to increase until the 1968/69 crop(see Vol. II - Appendix Table 1), the last one for which audited accounts areavailable. No serious declines are expected when accounts for the next twocrops become available. Rather, the deficits are attributable principally toan increase in the demand for working capital to finance a larger volume ofcrops. On the other hand, if large cash deficits continue, and appear to ex-ceed the amounts warranted by working capital needs, it would be a clear signof financial weakness. It is too early to reach a final judgement on thismatter.

91. The two largest "traditional" public utilities, Sudan Railways, andthe Central Electricity and Water Corporation (CFWC) continued to earn sig-nificant net profits over the last 5 years (see Table 5.7 - StatisticalAppendix). But in recent years both have run into liquidity problems becauseof difficulties in collecting revenue from their customers. The Sudan Rail-ways, for example, had accounts receivable of Ls 12 million by the end ofJune 1971. To the extent that public agencies are to blame, the governmentshould make every effort to ensure prompt payment. If not, not only willthese organizations face a liquidity problem, but their operational efficien-cy and investment programs are bound to suffer. CEWC's earnings are expectedto improve after fiscal 1971/72. This forecast is based on the expected com-missioning of the three 30 M4 generators at the Roseires Dam during calendar1972, which will take over base load supply and allow some savings on importedfuel for the thermal units.

92. The Sudan Airways and Sudan Shipping Lines are smaller operations.The former has run a Treasury-subsidized loss over the past 5 years but maybe able to break even (on a gross basis) after the planned conversion of 3more Fokkers from defense to civilian use. The Sudan Shipping Line hasenjoyed large profits over the last few years. Even if the re-opening of theSuez Canal increases competition from other lines the company should continueto earn significant surpluses with a newly expanded fleet.

93. The accounts of the nationalized commercial and manufacturing enter-prises for the first year of operation were not yet completed during the mis-sion's visit. Unlike the agricultural and "traditional" public enterprises,units of the IPC and GTC will continue to pay business profits tax and willtransfer 50 percent of residual profits to the Treasury, although their account-ing profits do not always reflect the real economic viability of these enter-prises. Coordination of public policy towards these units is seriously ham-

1/ Almost all the payments through the boards refer to current goods andservices. Investment on the scheme is done by the Central Government.

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pered by the organizational problems, particularly the creation of a new admin-istrative structure. The current reappraisal of the extent of pullic ownershipin these areas may lead to a clear delineation of the respective roles of pub-lic and private enterprises.

E. Development Planning

Inttroduction

94. Sudan's first experiment in planning started in 1946 with the pre-paration of a public sector development program covering the period 1946-19S1.A Development Priorities Committee was established to evaluate and recowmendthe project content of the program. The total investment target of this pro-gram was Ls 13.8 million and most of the projects were executed on time. InJanuary 1951, a Committee for Construction and Development was establishedto undertake the preparation and execution of a public sector devnlopmentplan for 1951-1956. Total investment under this program amounted to -i '4 3-4lion and about two-thirds of it was directed to the productive sertors apdthe remainder to improve the social services. These two Five-Year Plans werenot based on any survey of the national and human resources of the country.They were a compilation of uncoordinated projects suggested by the variousMinistries. Finally, they were limited to the public sector an41 did not prL-vide any guidance or indicative targets for the private sector. After 1956,annual plans were prepared owing to administrative difficulties in, preparinga meaningful five-year Plan. Central Government development expendituresduring the period 1958/59 - 1960/61 averaged Ls 14.7 million a year.

The Ten-Year Plan 1961/62 - 1970/71

95. The first effort at comprehensive development planning in the Sudanwas the Ten-Year Plan, 1961/62 - 1970/71. The underlying strategy of thePlan was to concentrate available financial and skilled manpower resourceson building or creating a modern sector rather than in spreading them overthe mass of traditional agriculture and handicrafts. A large part of thewhole program was centered on taking advantage of the increased supply ofNile water available under the 1959 agreement with Egypt. The Plan projectedinvestment during the Ten-Year period amounting to Ls 565 million, with theshares of the public and private sectors amounting to Ls 337 million and Ls228 million respectively. Investment on this scale was assumed to generategrowth of GDP at an annual rate of 5.2 percent, which would permit per capitareal income to grow annually at 2.3 percent.

96. The projected phasing of public investment was to a considerableextent determined by various large projects which had already been startedor approved at the beginning of the Plan period, notably the Roseires dam,the Kashm el Girba dam and associated irrigation works, and the Sennar Hydro-electric Power Works. Thus, public investment was projected to reach a peakin the first four years of the Plan and then decline to a level of Ls 32 mil-lion annually for the rest of the Plan period. In the first four years ofthe Plan, the major projects particularly in the agriculture sector wereexecuted. Although the Plan was virtually abandoned after the Cctober 1964revolution, its quantitative targets continued to provide guidelines for thepreparation of the annual development budgets of the period 1965/66 - 1969/70.

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97. For the nine year period 1961/62 - 1969/70, total public sector

development expenditures amounted to Ls 307 million or an average of Ls 34

million a year. In financial terms, the actual realization appears to repre-

sent about 91 percent of the Plan target, but this is misleading since the

Plan assumed a stable price level, which was not the case and hence fewer

projects were executed. The problem was aggravated by faulty cost calcula-

tions. For example, the cost of the Kashm el Girba project which was origi-

nally estimated at Ls 40 million amounted in fact to Ls 80 million. The

sectoral distribution of the actual public sector development expenditures

shows that 78 percent of the total was directed to the productive and phy-

sical infrastructure sectors (agriculture, irrigation, transport, power)

compared with the Plan allocation target of 68 percent.

98. While the Plan assumed that Ls 220 million or about two-thirds of

the proposed investment would be financed by public sector savings, in

practice, such savings covered only 32 percent of the total. External sour-

ces financed about 41 percent of the total development expenditures. Deficit

financing emerged, therefore, as a principal source of finance, contrary to

the Plan's assumptions. This led to the depletion of Sudan's foreign re-

serves, coupled with an appreciable increase in the price level.

99. The information on private sector investments is neither accurate

nor complete; a rough estimate is that it was in the range of Ls 45-50 mil-

lion a year up to 1968. Since then, it has dropped considerably owing to

unsettled political conditions and frequent changes in policy pertaining to

the sector, culminating in the nationalization measures of 1970. Private

investment in housing and transport vehicles appears, however, to have

continued at the old level.

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IV. DEVELOPMENT PROSPECTS UPTO 1975

A. The Five-Year Plan 1970/71 - 1974/75

100. After the May 1969 revolution, a new Ministry of Planning was estab-lished and it absorbed the Economic Planning section from the former Ministryof Finance and Economy. Planning units were established in some key minis-tries, and the principal responsibility for putting the Plan together wasgiven to a team of Russian planning experts. The Plan aims at increasinggross domestic product at an average annual rate of 7.6 percent. 1/ The big-gest contribution to the increase in GDP is expected to emanate from agricul-ture and livestock, and from transport and communications. The share of thedirectly productive sectors in GDP is projected to increase from 61 to 67percent.

101. In order to achieve a growth of 7.6 percent a year, the Plan proj-ects total investment of Ls 426.7 million. 2/ This volume of investmentcompared with the projected increase in GDP implies an incremental capital/output ratio of 1.7:1. Such a low ratio is based largely on the Plan'sassumption that excess capacities exist in the economy and that these can befully utilized. In addition, the capital/output ratio was projected to below for investments aimed at bringing large areas of rainfed land under cul-tivation. The share of the public sector in total investment is Ls 256.7million or 60 percent of the total, and the remainder of Ls 170 million isto be undertaken by the private sector.

102. The Plan has been in operation only for one year, and hence therecan only be a limited assessment of its results. During the first year ofthe Plan, public sector investment amounted to Ls 26.6 million as against thePlan target of Ls 37.1 million. External sources and borrowing from theCentral Bank financed the whole amount since public savings were negative.In the current fiscal year (1971/72), the public sector development budgetis Ls 64.2 million, but the indications are that the actual outcome may notexceed 50 percent of the budget figure. The principal factors causing theslowdown in investment are the shortage of financial resources and inade-quacies in the preparation of projects.

103. The Government's current thinking is that the Plan is intended onlyto provide broad framework to guide the preparation of annual plans. However,if the planning process is to become effective, the machinery for the identi-fication and preparation of projects as well as for their implementation needsto be strengthened. Improvements in the budgetary system and the need formore accurate reporting are needed. Finally, in the absence of larger publicsector savings, the development effort will remain severely constrained.

1/ The Plan uses GDP figures computed at 1967/68 prices.

2/ The original investment target was Ls 385 million, but was subsequentlyrevised.

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B. Investment Targets

104. The sectoral distribution of the investment under the Plan isshown in the table below.

Table 11: INVESTMENT UNDER THE 1970/71-1974/75 PLAN(Ls million)

Public PrivateSector Sector % Sector Total %

Agriculture 99.5 38.8 26.5 15.6 126.0 29.5

Industry 36.5 14.2 24.0 14.1 60.5 14.2

Transport &Communications 47.0 18.3 - - 47.0 11.0

Public Utilities 19.7 7.7 - - 19.7 4.6

Education 15.0 5.8 7.2 4.2 22.2 5.2

Health 8.4 3.3 1.8 1.1 10.2 2.4

Housing - - 78.8 46.4 78.8 18.5

General Admin-istration &Miscellaneous 30.6 11.9 31.7 18.6 62.3 14.6

256.7 100.0 170.0 100.0 426.7 100.0

With respect to the public sector program, apart from a number of projectsin irrigation, agriculture and transport, much remains to be done on projectpreparation in order to translate investment targets into specific projects.As to the private sector program, the series of nationalization measuresimplemented since 1969 have inevitably introduced some uncertainty with re-gard to future investment, quite apart from the problems arising from limitedinvestible resources and entrepreneurial ability. A technical committee hasbeen set up by the government to examine methods of encouraging private in-vestment.

Agriculture

105. The Plan priorities are basically consistent with the task of rea-lizing the potential of this sector. The extension of irrigation, promotionof mechanized rainfed farming and exploitation of animal wealth, togetherwith needed supporting services, constitute the central theme of development.However, the investment target for agriculture is optimistic, whether judgedin relation to previous plans or performance during its first 18 months ofthe present Plan. In addition, the targets for agricultural output do nottake sufficient account of the transportation constraint, and of the market

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for specific products, the choice of which is limited by ecological and eco-nomic factors. There is a need to review project priorities and to revisefinancial allocations in the light of such a review. Project implementationcould he inproved through better formulation and phasing.

106. The present machinery for the planning and administration of agri-culture needs to be reorganized to meet new requirements. At present, fourMinistries - Agriculture, Animal Resources, Irrigation, and Cooperation andRural Development - several departments and six corporations are responsiblefor overseeing all activities of the sector. The principles of autonomy anddecentralization have been carried very far in a short time. Although theSudan has a large number of qualified professionals relative to many develop-ing countries, their number is still small in certain categories, e.g. plan-ners, extension personnel, managers, engineers, and husbandrymen. A selec-tive deployment of available staff resources is necessary. Some of the newfunctions recently transferred to the Ministry of Rural Development and Co-operation should revert to the Ministry of Agriculture in order to eliminateduplication of services. The Agricultural Production Corporation and theAgrarian Reforms Corporations are carrying out very similar functions, and astrong case exists for merging them. The suggested reorganization shouldstrengthen coordination, define responsibility, delegate authority, improvework efficiency and minimize waste and expense. At present, some of thecorporations have no governing boards; some were never formed and otherswere dissolved and have not been revived. The legal status of one or twoentities is unclear.

107. The project portfolio in agriculture includes 105 projects. Mostof them have not yet been prepared. Only about one-half, including on-goingprojects, are being implemented, and progress in some cases is disappointing.An example of the latter is the Es Suki pump irrigation project. The proj-ect which encompasses 90,000 feddans is the largest but not the only exampleof projects which ran into problems. Planting was carried out hurriedly, incertain cases, even before tenants were chosen to look after crops. Less thanhalf of the supervisory and extension staff was deployed, without adequatetransportation. Only half the cropped area was irrigated due to poor coordi-nation between the Ministries of Agriculture and Irrigation and the ElectricityCorporation. Untested Canals breached during initial operation. Contourstudies prove(d inadequate. The administrative decision on the choice betweenthe conventional crop sharing system and a fixed land and water charge systemwas not made until the crops were being harvested.

108. On the otber hand, where project formulation and preparation werecarefully made and good management provided, the results have been encourag-ing. For example, the First Mechanized Farming Project was successfully com-pleted a year ahead of schedule with substantial cost savings. According tothe Plan, the biggest project in the agricultural sector is the Rahad Irriga-tion Project. The Plan envisages a total investment of Ls 21.8 million on theirrigation part of the project. Important changes have since taken placewith regard to the size and phasing of the project. It is now expected that

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phase I of the project would cost about Ls 28.7 million ($82 million), includ-ing the agricultural aspects of the project. The project for which BankGroup financing may become available, will be ready for execution in the latterpart of the 1972/73 fiscal year. Investment in the project during the Planperiod may amount to Ls 18.8 million. The mission estimates that public sectorinvestment in the agricultural sector as a whole could amount to about Ls 65million or two-thirds of the Plan target.

109. An important factor which limits the rate at which crops which donot face market limitations e.g. sesame, can be expanded is the shortage oflabor, particularly in the areas suitable for rainfed farming. It is possibleto meet the labor shortage, to some extent, through mechanization, but prob-lems of storage and transport then become evident. It is feasible to in-crease the output of livestock, oil seed cake, groundnuts, principally forexports. It is also planned to export significant quantities of sorghum,but this depends on whether the commodity can be offered at a price which isclose to the export parity price.

110. Most of the Sudan's exports depend on the railway, which is theprincipal mode - and for many bulky commodities, the only mode - of trans-portation. The railway has had problems in coping with the present volumeof agricultural exports amounting to about 800,000 tons. It is estimatedthat by 1975 the tonnage will be 56 percent higher or 1.25 million tons. Abetter distribution of traffic through the year by the construction of morestorage facilities would improve the railway's carrying capacity, providedthis could be done with reference to demand patterms. The feasibility studyfor a grain storage project referred to in paragraph 38 above is particularlyimportant for this purpose. Transport and production costs would have astrong bearing on sales of export commodities.

Industry

111. The public sector investment program of Ls 36 million in industryand mining (Ls 60 million including private investment in industry) emphasizesthe fuller utilization of the present industrial capacity as well as the crea-tion of twenty new industrial projects. The list of new industrial projectsincludes one factory for agriculture machinery, two tanneries, two spinning,weaving and finishing factories, one factory for plywood, and two factoriesfor the production of canned foods. It also includes the construction of twolarge factories, one for Kenaf and the other for sugar production. The pro-jected investment in industrial projects during the Plan is Ls 25.8 million.However, many of the projects are still preliminary proposals and are not yetbacked by technical and economic feasibility studies, and hence the projectedinvestment should be regarded as very tentative.

112. Development expenditure in the industrial sector in the first yearof the Plan amounted to Ls 0.3 million as compared with the budgeted figureof Ls 1.9 million. For 1971/72, the development budget provides Ls 2.6 mil-lion, but expenditure will be much less. However, there are signs of renewedprivate sector interest which, if it materializes, could offset the short-fall in public sector investment to some extent.

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113. Perhaps the biggest problem facing the industrial and, nmire par-ticularly, the mining sector is transportation. For the mining X:,tor, n';:*only is the available transport capacity limited, but the cost is nrohibi-tive. The shortage of skilled labor, power, and to some exteut, rater, arealso constraints on the future development of the industrial sector. Thereis a need for a long-term strategy for this sector which would b1n compatiblewith programs for other relevant sectors such as transport, power. technicaleducation, agriculture and livestock.

114. To date, total investment in industry within the public sector isquite large (Ls 50 million), but the net profit after tax of all the linitFcontrolled by IPC is expected to be only about Ls 2.1 million in 1971/712Thus, the return on the capital invested in these corporations is in theorder of 4 percent. Such a low return indicates some inefficienc- withinmany of the corporations. Considering the fact that the Government has verylimited resoruces (and many competing and pressing needs), there t>f a queG,-tion whether it should undertake much new investment in the industrial sec-ovs

115. There are many reasons why the Government should limit its effortsduring the Plan Deriod to the expansion and improvement of its existing i.nvestments rather than to embarking on new ones. Most of the projects In tnePlan are in the nature of proposals, whose economic viability still rema-luesto be proved. Investment decisions concerning them should be taken onlyafter their economic feasibility is fully investigated. In the meantime, the

Government may find it advantageous in the long run not to accept offers ofturnkey jobs from suppliers of machinery to execute these projects, untilthe required studies have been completed.

116. The Sudan has a fairly large monetised economy in which consider-able numbers of people earn incomes regularly through the production andsale of agricultural crops. There should be a steadily rising demand for avariety of products produced by small- and medium-scale industries. Some ofthese products are currently imported, and hence there is some scope forimport-substitution as long as it is economical to produce them locally andthat this wotild contribute to a real savings in foreign exchange costs. Inthe first instance, the focus should be on industries which will processlocal agricultural products and increase their value added before export.Cotton, gum, hides and skins fall in this category.

117. The mission had earlier recommended that a study be conducted witha view to formulating a master plan for the textile industry during the nextdecade. In April 1972, a tentative plan for the development of the cotton in-dustry was published. The plan is intended to cover the next 15 years in threephases. During the first phase, it is intended that the needs of the domesticmarket be largely met, whereas in the next two phases, the emphasis will be crnexports. Investment during the 15 year period is tentatively estimated atLs 91 million.

118. The role of the private sector appears crucial in the industrialfield, and much could be achieved by creating conditions which would be con-ducive to its revival. By consolidating its position and opening the door

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to the private sector to undertake new investments, within the limits of aclear industrial strategy, the Government could, in the long run, make animportant contribution to industrial development. The mission estimatesthat for the public sector the investment target of the Plan of (Ls 36 mil-lion) might have to be reduced to about Ls 20 million, owing to the paucityof well-prepared projects and the very limited progress achieved in the firsttwo years. If the steps recently taken by the government to reactivate theprivate sector are successful, the shortfall in public sector investmentcould, to some extent, be overcome.

Transport

Railways

119. The future of the Transport Sector is more fully discussed in anannex to this report. The inability of the Sudan Railways (SR) to satisfycustomer demand has led to increasing unwillingness to rely on it as the solemeans of transport to and from the coast and, as a result, studies of an al-ternative oil pipeline, and eventually a road, are already underway. Mean-while, increased efficiency and some investment in equipment are essentialif the Railways are to carry the export traffic expected by 1975. The in-frastructure is considered adequate but, even if efficiency is significantlyimproved, the mission considers that SR's planned investment of Ls 14 millionfor the 5 years 1970/71 - 1974/75 will still have to be raised to aboutLs 21.0 million.

Ports

120. It is apparent that Port Sudan (the country's only port) has nomargin of capacity to meet an expansion in traffic, and that congestioncould easily develop. Already the port is kept fluid bv resorting to double-banking ships and working to pontoons on the seaward side, while many shipmovements are made within the port to minimize the use of berth space. Thereis little doubt that the existing facilities would prove inadequate to copewith the increase in exports forecast by FY 1975.

121. The Plan includes only Ls 80,000 for investment in Port Sudan, butthe Government is currently considering a Yugoslav proposal to construct anew port near Suakin, about 45 km south of Port Sudan. The Yugoslav proposalis for an early start to construction, using equipment available after com-pletion of a naval installation adjacent to Port Sudan. A preliminary de-velopment plan prepared by consultants as long ago as 1964 suggested thatthe new site could accomodate 34 general cargo berths (with 45 ft. depth),and 5 oil berths (with 55 ft. depth).

122. In the mission's view, however, consideration should be given tothe scope for increasing capacity initially in Port Sudan itself. It shouldbe possible to achieve this by; (i) better use of the existing storage areas;(ii) reconstructing three of the existing berths and developing bulk storage

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facilities on the extensive unused area behind them; and (iii) unLoadingcrude oil outside of the harbor, thereby not only releasing berth space, buteliminating interruptions to dry cargo movement whenever oil is being off-loaded. The mission estimates that the investment required for these facili-ties would amount to about Ls 5.5 million up to 1975 and a further Ls 3.6million until such time that work should begin on a new port (abotit 1977).In this way it may be possible to delay for some years the need for an entirelynew port which, together with its rail and road connections and other essen-tial infrastructure, would require a very large investment.

Roads

123. The Plan's revised estimate of investment for roads is Ls 23.3 mil-lion. The major investment will be the construction of the W4ad Medani-Gedarefroad, the estimated cost of which is Ls 8.0 million. Mainland China hasagreed to finance this project and to supervise its construction. The :--condbiggest project is a road from Nyala to Zalingi, the cost of which is tenta-tively estimated at Ls 7.0 million. While this road is necessary to servethe needs of the Jebel Marra area, it is somewhat questionable whether itshould be btiilt to standards which require such a big investment. A proposcdIDA credit for roads includes a provision for a road study which w'ill helpdetermine priorities in road investment and of its phasing. The mission rec'-ommends that any large investment in the Nyala-Zalingi road be deferred untilthe study is completed. This recommendation also applies to the Dilling-Kadugli road, in connection with which about Ls 0.3 million has already beenspent for equipment. With regard to road equipment, which is another bigitem in the Plan, the IDA credit referred to above, is expected to financethe major part. In sum, the mission recommends an initial investment by theRoads and Aerodromes Department of Ls 15.3 million. This is not strictlycomparable with the Plan figure of Ls 23.3 million. If the proposed roadstudy should indicate a need for further investment, the total figure wouldobviously require revision.

Shipping

124. The Sudan Shipping Line proposes to buy two cargo ships at a totalcost of Ls 3.5 million. The Line has been operating efficiently and theshare of Sudanese foreign trade carried by ships of the Line, which is pre-sently very small, is likely to increase.

Airways and_Civil_Aviation

125. Sudan Airways proposes to undertake a total investment of Ls 5.0million, most of which is for two jet aircraft for external flights. Dis-cussions have been held with Kuwait with a view to obtaining finance or air-craft to replace two old Comets which are nearing the end of their usefullife. The proposed investment in civil aviation is Ls 1.3 million, mostlyfor improvement to Khartoum airport, a number of internal airports, buildingsand navigational facilities.

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Inland Waterways

126. The projected investment in inland waterways is Ls 0.8 million.There is a need for a systematic assessment of the role of inland waterways,and the mission recommends that a consultant be retained for this purpose.The normalization of life in the southern provinces would enhance the im-portance of inland waterways, since this is the only means of moving peopleand goods in many of these areas.

Total Public Sector Investment Program

127. The mission's estimate of a desirable public sector investment pro-gram is Ls 224 million. While the mission endorses the high priority givento the agriculture sector, it would give relatively greater emphasis totransport and somewhat less to industry, by comparison with the Plan. Thegreater emphasis on transport is based on the recognition that, in the past,the Sudan's developmental effort in the productive sectors has to some extentbeen thwarted by a transportation bottleneck, and hence that infrastructureinvestment is crucial to the success of further efforts to increase produc-tion and marketing.

Table 12: PUBLIC SECTOR INVESrIENT PROGRAM(Ls million)

Sector Plan % Mission Estimate _

Agriculture 99.5 37.9 65.0 29.0Industry 36.5 13.9 20.0 9.0Transport & Communications 52.7/a 20.1 65.0 29.0Others 73.7 28.1 74.0 33.0

262.4/a 100.0 224.0 100.0

/a This figure is higher by Ls 5.7 million by comparison with the cor-responding figure in Table 11, and represents revisions since the Planwas published. The increase in projected investment is for roads.

128. Total public sector development expenditures in the first year ofthe Plan (1970/71) amounted to Ls 27 million and the comparable figure for1971/72 is expected to be of the same order. This would leave a balance(based on the mission estimate of total investment) of about Ls 160.0 mil-lion for the last three years of the Plan. Investment of this magnitudecould only be viewed as a target. Financial constraints and the presentcapacity of the public sector to implement a program on this scale wouldprobably lead to a lower level of investment. Public sector development ex-penditures averaged Ls 39 million in the period 1961/62 - 1965/66, but de-clined to Ls 28 million in the period 1966/67 - 1970/71. Therefore, duringthe rest of this Plan period, the most important consideration should be to

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build up the financial and administrative capacity of the public sector toundertake a larger volume of development expenditures. The mission estimatesthat during the last three years of the Plan (1972/73 - 1974/75) public sec-tor development expenditures will be in the range of Ls 100-120 million.

Private Sector Investment

129. The Plan target for private sector investment is unlikely to mate-rialize unless the Government takes specific steps to reactivate this sector.W4hile the present policy of assigning a dominant role to the public sectorcontinues, no meaningful estimate can be made of private investment duringthe Plan. It is estimated that gross private investment averaged Ls 43 mil-lion a year in the period 1966-1968, i.e. prior to large-scale nationalization,and it was financed mostly from internal resources. Therefore, given theright climate and suitable policies and incentives, it is possible that pri-vate investment may again reach much higher levels, although the amount wouldbe somewhat less than the Plan target of Ls 170 million, in view of the li-mitations imposed on it in the earlier years of the Plan.

Total Investment

130. The mission estimate of total feasible investment during the Five-Year Plan period is in the range of Ls 320-340 million. 1/ Such a level ofinvestment, using incremental capital/output ratios of 2.5:1 and 3.5:1 wouldproduce an increase in GDP in the range of Ls 90-130 million over the Planperiod. This would indicate a growth rate of GDP between 3-4 percent, which,when viewed in the context of a population growth rate of 2.5 percent wouldresult in an increase in real per capita income of 0.5-1.5 percent a year.It should be noted, however, that the mission's estimate of total investmentis divided equally between the private and public sectors. Financial andplanning constraints would prevent a sharp rise in the public sector invest-ment program in the short run, and hence the investment within the privatesector will be the crucial parameter in realizing the projected growth rate.

C. Financing of the Plan

131. The Plan envisages that external sources will finance 50 percentof the public sector investment program, while public savings will cover therest. To achieve this level of public savings, recurrent revenue is pro-jected to increase at 6.7 percent, while recurrent expenditures are assumedto increase only at 3.5 percent. The increase in revenue is expected tooriginate from business taxes through improved assessment and collectionprocedures and selected increases in import duties primarily for protectivereasons. Moreover, it is assumed that improvement in the management of thepublic sector entities would enable them to achieve substantial profits andto transfer significantly higher amounts to the Central Government.

1/ The resolution of the 'Southern Problem' will create, in its wake, aneed for considerable sums of money for relief and rehabilitation ofdisplaced people in the immediate period, and for infrastructure andproductive activities in the longer run. The estimates above do notinclude any provision on this score.

- 44 -

132. As noted in paragraph 128, the public investment program forFY1972/73 - 1974/75 would be in the order of Ls 100-120 million. Assumingthat external and internal sources would finance this program equally, thenthe public sector is to achieve a surplus of Ls 50-60 million over the threeyear period. This contrasts sharply with an annual average public savingsof about Ls 3 million in the last five years. The analysis of some of thepublic entities (see Volume II - Annex 1), shows that they could produce asurplus of Ls 35 million during the last three years of the Plan if the SudanRailways earnings forecast materialize, and if the Central Water & Electri-city Corporation's anticipated cost-savings in operations are realized as aresult of commissioning the Roseires project (Table 9.4-Statistical Appendix).If the financial conditions of the other public entities do not deteriorateand if the Central Government could realize an increasing surplus on the cur-rent budget, the projected level of public savings could be reached. Theimplications on the recurrent budget are discussed in paragraph 152.

133. At the end of June 1972, external aid commitments for the Sudan'sdevelopment program amounted to La 108 million. The breakdown of thisassistance was:

Ls million

Multilateral

Bank/IDA 9.6

ADB 0.3

Bilateral

Western Bilateral Sources 8.1

'Eastern Bloc' and Mainland China 71.0

Arab Bilateral Sources 19.1108.1

134. While external aid in the pipeline appears to be adequate for theSudan's needs, the major proportion of this aid is not committed to specificprojects, and it is probable that disbursements - particularly of 'EasternBloc' aid - will be slow. The mission estimates that total disbursementsfrom existing commitments may amount to no more than about Ls 45 million,requiring that further commitments be arranged to ensure additional dis-bursements amounting to Ls 5-15 million in order to meet the Sudan's aidrequirements during the next three years amounting to Ls 50-60 million. Itis also desirable, in order to ensure continuity in the Sudan's investmentprogram, that further commitments be obtained so that there will be a firmbasis for disbursements in the initial period of the new Plan. A veryapproximate estimate of total new commitments required for both thesepurposes is in order of Ls 70-80 million. In addition aid commitments,which are still to be determined 1/ are also required for the reconstructionand development of the Southern Region. If disbursements proceed faster thanpresently envisaged, the requirements of new aid will be correspondinglyreduced.

1/ The Bank is planning to send a "special" mission to the Southern Region inlate 1972 to review the present situation and assess prospects for thefuture.

- 45 -

135. It should be noted here that projects outside of the agriculturaland transport sectors do not generally attract significant amounts ofexternal financing and thus for individual projects the ratio of externalfinancing should be higher than the aggregate ratio of 50 percent. Sincethe foreign exchange component of most projects may not be that high, localcost financing would be necessary. The mission estimates that, for projectswhich are eligible for foreign aid, the aid should amount, on the average,to about two-thirds of the cost of such projects.

D. Balance of Payments Projections

136. The mission's assessment of the export potential of the major com-modities shows that the Sudan's exports could grow at 3.5 percent annually(Table 9.1 - Statistical Appendix). The mission also estimates that imports will.grow at 3.2 percent annually (Table 9.2 - Statistical Appendix). Imports ofcapital goods are projected to average Ls 35 million in the period 1972-1975compared with Ls 13 million in the last five years reflecting the stepped-upinvestment program. Imports of consumer and intermediate goods are estimatedto rise at 4 and 3 percent respectively which is in line with their recenttrend. On this basis, total merchandise exports and imports during 1972/73-1974/75 will amount to Ls 345 million and Ls 395 million respectively.

137. The deficit in the balance on the services account averaged about Ls10 million a year in the last three years, and is expected to rise moderatelyreflecting higher interest payments on the recently accumulated short-termdebts. During the last three years of the Plan, the total deficit on the ser-vices account may amount to Ls 33 million. On these assumptions, the cumula-tive current account deficit for the period 1972/73 - 1974/75 will be in theorder of Ls 83 million. In order to cover this deficit and to provide for thecreation of a minimum level of foreign exchange reserves equal to at least twomonths' imports, the Sudan would require a net inflow of capital of no less thanLs 105 million. The gross counterpart of such an inflow would be Ls 150 mil-lion. The last figure does not include any provision for payment of compen-sation for nationalized assets, since this matter is still under considera-tion. Any payments on this score will, of course, increase the requiredgross capital inflow by an equivalent amount.

- 46 -

Table 13: SUMMARY OF MISSION PROJECTION OF BALANCE OF PAYMENTS(Ls million)

Cumulative1972/73 - 1974/75

I. Current Account

Exports 345Imports 395

Trade Balance -50

Services (net) -33

Balance on Current Account -83

II. Capital Account

Inflow 150Outflow 45Net Inflow 105

III. Required Level of Reserves -22(- = increase)

E. External Public Debt

138. Sudan's external public debt at the end of 1970 was US$378.5 millionequivalent, including undisbursed commitments of US$94.6 million. This figuredoes not include portions of the frame agreements with Bulgaria, Czechoslovakia,U.S.S.R. and Yugoslavia, which have not yet been allocated to projects (Table4.1 - Statistical Appendix). The breakdown of the total debt outstanding bysource is:

Source Amount PercentUS$

IBRD/IDA 126.1 33.3

Bilateral Sources 205.7 54.4

Suppliers 7.7 2.0

Private Banks 37.4 9.9

Publicly Issued bonds 1.6 0.4

378.5 100.0

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139. In 1970/71, interest and amortization payments amounted to US$3L~4million or 10.5 percent of the value of exports of goods and services.(Table 4.2 - Statistical Appendix). Debt service payments will reach US$49.0million in 1972 and US$47.0 million in 1973. The mission estimates that, by1975, the debt service ratio may be somewhat in excess of 15 percent. Whilethe analysis of debts contracted between 1964-1970 shows that the averageinterest rate was 3.9 percent, the average grace period 4.3 years and theaverage maturity 17.7 years, this relatively soft structure of debt may bechanged by the Government's accumulation of short-term debts and suppliers'credits in 1970 and 1971 which are not included in these calculations.

140. The nationalization measures of 1970 which involved a total of 39companies will add a considerable amount to Suddan's total external publicdebt. Committees were appointed to lay down general principles for the pay-ment of compensation and to evaluate claims in accordance with them. Noagreement has been reached yet. The present nationalization laws stipulaLethat all compensation will be in the form of Government bonds carrying inter-est of 4 percent and redeemable after 10 to 15 years, but this is consideredunacceptable by the foreign interests involved. There is also a differenceof views concerning the valuation of the assets.

- 48 -

V. SOME BASIC DEVELOPMENTAL ISSUES

141. During the 1960s the economic development of the Sudan was ad-versely affected by political instability, the lack of clear priorities,failure to adhere to specific programs and projects and, finally, theabsence of a consistent economic policy. The execution of a few largeprojects was carried out very much on an ad hoc basis. UThile successiveadministrations paid lip service to development, there was no systematicdevelopment planning and the Ten-Year Plan ceased to be relevant forpolicy. While annual plans replaced the Ten-Year Plan after 1965, boththe overall objectives of the latter and the underlying strategy began tolose their significance. In the circumstances, the Sudanese economy re-gistered only a modest growth, and per capita income virtually stagnated.

142. There is a considerable potential in the Sudan - particularly inthe agricultural field - and an orderly program aimed at harnessing thispotential could have a major impact on living standards. Ilowever, thereare a number of factors which are inhibiting development, and unless theyreceive prompt attention the development effort could be slow and frustating.The mission considers that the factors noted below have an important bearingon the success of the present Plan.

A. Adequacy of the present statistical information.B. Planning mechanism and procedures.C. Internal and Extern41 financial balance.D. Role of the private sector.E. External assistance and creditworthiness.

A. Adequacy of Statistical Information

143. The statistical and information system in the Sudan is inadequatefor planning purposes. There has not been any population census since 1956 1/and there has not been a recent manpower survey. Information on theagriculture and industrial sectors is far from complete but an industrialcensus is planned for 1972. Reliable and comprehensive price statisticsdo not exist. Information on the financial performance of the public sectoris scanty. The last published Annual Economic Survey was for 1969. Thoseresponsible for formulating policy have an inadequate knowledge of financialand economic developments within the country as a whiole. There are nostatistics on employment in the economy as a whole, and even public sectoremployment statistics are deficient.

144. With the exception of banking statistics, there is neither detailednor aggregate data on the operations of the public enterprises. The CentralGovernment accounts, while they are prepared on time, do not present anaccurate picture of the financial position of the public sector. To derive

1/ A population census is planned for 1973.

- 49 -

an indication of the surplus or deficit of the public sector current opera--tions, it is necessary to rely on the Central Bank data. This L3 ur;atis--factory since such data represents essentially the cash position of thepublic sector, and no clear picture emerges of the many intra-pu&!.½ sectortransfers. What is needed is an integrated public sector budgetarv andaccounting rystem.

145. As a result of the lack of basic data, as well as the ac'te short-age of qualified staff in the Department of Statistics, no reliabie seriesof national income accounts is available. The new series of GDP 4'n-ers theperiod 1966-1969. There is hardly any information concerning GDk' in 1970and 1971. Economic planning and evaluation cannot be effective with suchincomplete knowledge of the economy. The Department of Statistics needsconsiderable reinforcing, both in qualified personnel and equipment, andadequate financial allocations should be made to meet its needs. Moreover,it is necessary to design a 3-5 Year Plan to fill the gaps in basic ntatiqtftsancl to improve and streamline the procedures for collecting and processinginfornation. Technical assistance phould be obtained from internationalagencies or bilateral sources for this purpose.

B. Planning Mechanism and Procedures

146. The Ministry of Planning in its present form is very much under-staffed. There appears to have been little association of Sudanese personnelin the preparation of the Plan, and the team from the USSR, which wasprincipally responsible for the task, was called upon to prepare a plan,with no clear indication of the Government's priorities and in the face ofvast gaps in information concerning projects and their financing. There isno systematic communication between the expatriate evaluation team, thePlanning Ministry, and the other public sector entities, and this complicatesa detailed analysis of actual performance in specific sectors. It should benoted that, in the past, the development effort of the country was limitedto a few large projects prepared and executed by agencies well experiencedin the work. Htowever, the present Plan covers a program of investment inmany relatively small projects in all sectors of the economy. Thus, thereis an urgent need to strengthen the staff of the Ministry of Planning withstaff experienced in formulating projects. A team of planning experts fromEgypt recently reviewed planning procedures in the Sudan and have formulatedrecommendations for improving the organization of the Planning Ministry. Therecommendations have since been reviewed by the Government. On this basis, aNational Planning Act, which outlines the planning system and out1ines the func-tions of the Ministry of Planning, was passed in April 1972. Finally, whilethe Plan represents the general framework for the development effort, theannual development budget should be viewed as a well-defined program for action.As such it should not include those projects which have not been prepared insufficient technical-economic detail and have only a low probability ofexecution.

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147. In order to increase the effectiveness of the Ministry of Planning,the mission recommends that the staff resources be augmented considerably andthat, initially, some experts be obtained under technical assistance fromUNDP or bilateral sources. The experts thus obtained should give top prior-ity to the training of Sudanese officials in the identification and prepara-tion of projects. The Sudan has a vast reservoir of staff with adequateacademic training to build on, but potential staff of a high calibre wouldbe difficult to retain until the planning function is vested with far greaterimportance than it currently enjoys. The Ministry of Planning is currentlyresponsible for negotiating external assistance. The mission recommends thatthis function be transferred to the Ministry of Treasury, hut that the Plan-ning rMinistry be made fully responsible not only for nreparing the develop-ment budget, but also for spelling out the recurrent expenditure implicationsof the public scctor investment program to ensure adequate allocations. Themachinery for evaluation of Plan implementation should be staffed largely bySudanese officials with sufficient authority to seek adherence to Plan targetsas spelled out in the annual development budgets.

C. Internal and External Financial Balance

148. Internal and external financial balance can be maintained if the ex-change rate is realistic, credit expansion is within the limits dictated bythe real growth of the economy, and fiscal policy aims at limiting the growthof recurrent expenditures and realizing the savings necessary to finance anincreasing level of development expenditures. The Sudanese Government hasrecently concluded discussions with the IMF concerning a stabilization pro-gram which will serve as a basis for a new stand-by. The program which willencompass measures related to the exchAnge rate and the volume of bank creditshould play an important part in restoring financial stability.

149. In the years to come three factors may, to some extent, improvethe financial situation of the public sector. These are: (a) the generalawareness that the financial position of the public sector is critical andthat its heavy reliance on the banking system has led to a serious liquidityproblem; (b) a commitment to move the economy ahead, and the realization thatan effort to generate local resources on an increasing scale must form anessential part of any program which aims at ensuring faster growth; and (c)the recently announced settlement with the rebel movement in the southernpart of the country and the possibility of curtailing defense expenditureswhich have been rising continuously, largely on account of the southern pro-blem, and have absorbed over one fourth of the recurrent budget in the lastfive years. When translated into fiscal terms, these measures could signi-ficantly alter the public finance picture within the next 2-3 years.

150. As noted in paragraph 132, the mission's projection of the publicsector investment program over the period 1972/73-1974/75 requires the gen-eration of public savings amounting to about Ls 50-60 million. While twopublic sector enterprises (SR and CEWC) could produce a surplus of Ls 34million, 1/ it is assumed that the net surplus of the public enterprise as a

1/ A detailed discussion of this item is included in Volume II.

- 51 -

whole may not amount to more than Ls 20 million over this period in view ofnrssib.e dinsavings bv some enterprises. Therefore, the Central. )rue7nmi.ni:has to achieve a surplus on its recurrent budget in the range of J- 30-40Taillion, after meeting expenditures on the extra-budgetary items. Theattainment of such a level of savings, although modest, should not be viewedas a once ard for all operation, but should be considered in the _^-ntext cflong term budgetary strate-y aiming at building the capacity of the Govern-menit to sten uO develoDment expenditures. The mission assumes that, duringthe rest of the Plan, the public sector's recourse to the Bankin- Systemshould be limited to the requirements of working capital.

151. The mission estimates that total recurrent revenue over the petiod1972/73-1974/75 could amount to about Ls 577 million or an average annualgrowth rate of 5.7 percent (Table 9.3 - Statistical Appendix). This estimateis based on the assumption that, while some margin exists for additional tax>--tion - particularly through increases in the price of products sii j-7 tcGovernment monopoly, e.g. sugar - the major increase will stem from improvedcollection.

152. If revenue on this scale can he obtained and if surpluses totallinF-about Ls 30-40 million are transferre(d to the development budget, 'here wouldbe a balance of about Ls 535-545 million available for recurrent rxpenditilreduring the three years 1972/73-1974/75. This would permit recurrent expendituresto increase at a rate not exceeding 4.5 percent a year from the 1970/71 level.of Ls 158 million.

Table 1: PROJECTION OF CENTRAL GOVERNMENT FINANCES, 1972/73-1974/75(Ls million)

Annual Average Projections Cumulative1969/70-1970/71 1972/73 1973/74 1974/75 1972/73-1974//5

Revenue 157 179 193 205 577

Expenditures 153 172 180 188 540

Net Surplus 4 7 13 17 37

It is of the utmost importance that the Government adhere to this ceiling asa means of assuring sufficient domestic resources for development. The alter-native would be a continuation of the depressed level of development expendi-ture, increased1 reliance on deficit financing, and smaller flows of externalaid

153. IWithin the recurrent budget, the allocation for economic and socialservices were cut baclk to meet the growing expenditure on defence and secu-rity. The resolution of the difficult security problem in the SouthernProvinces should Provide the Sudan not only with a badly-needed respite fromunproductive expenditure, but enable it to achieve a better balance betweenvarious budgetary items.

- 52 -

D. The Role of the Private Sector

154. In spite of the present dominance by the public sector of theSudanese economy, a not inconsiderable part of the economic growth in the1950s and most of the 1960s is attributable to private enterprise. As a re-sult of the successive nationalization measures, there was a substantial ero-sion of the role of the private sector, hut there are some indications thata relatively significant role may again be assigned to it. Ihle mission'sestimate of total investment over the next 3 years is equally divided be-tween the public and the private sector and hence assumes some revival ofprivate enterprise. Since the public sector investment program cannot bestepped-u) considerably over the next few years, owing to the shortage ofresources as well as the limited administrative capacity to prepare andexecute projects, the fulfillment of the private sector target is correspon-dingly more important.

155. Inr the Sudan there has been no ideological predisposition againstprivate investment. Both the Ten-Year Plan and the current Five-Year Planplaced strong emphasis on the role of the private sector. The decline inprivate investment in recent years may be explained in terms of the generaleconomic and political instability and the nationalization measures of 1970.W4hat is needed to reactivate this sector at present are some explicit poli-cies on the part of the Government which will clearly define the scope oft!e privaL;. sector. Such a clarification should spell out the position onthe indig.-LLOus private sector and foreign investment. However, foreignprivate investment will not be forthcomin,c until the issue of the compensa-tion for Ltie nationaliz2d firms is settled. A settlement of this issue willnor only Lu encourage, foreign investment but also stimulate the indigenousprivate sector, since foreign investors have in the past preferred to setup enterprises in association witlh local partners. A statement concarningthe _cope for foreign investment, the nature and extent of participation by theGovernmunt, and the proceaures for compensation in the event of nationaliza-tion t:; apparently under consideration bv the Government. WThen issued, sucha stat_i:nc should h.ve an important influence on the course of privateentecLprise.

156. Since cormmercial banks are reluctant to enter the field of medium-a..d long-tiz:in Einancing, the strengthening of specialized f uancial institu-tioris coulG h,!VC. a ;t!iulating effect .n private inve.:;rment. On the financialSCia-, tile :Loalm3 by su instltutio;: vnable the nobilizatton of 2 largervolun.. oJt pfivat.i sv: tgs Lor productive activitie:;. As w.ts noted in paragraph33, it is estimate4 that lendingg by thie fndustriLil ',sank of Ls 1.7 maillion hasincreased iLuvest:;n-; in thie. Industrial :ec-tor to a total of Li 7.7 million.On the technical sik, ;uch inst ttutio,u' couldc, provide a sort of busincss"ezc.Lusn,) servic:.l' rj relativrtlv irexp.rie.nced local btxsilie,tw;UeL in preparingand uxc:utmg prcjcee :.

- 53 -

157. The provision of an adequate public services and infrastructure isof crucial importance if private investment is to flourish. The transporta-tion system is a major constraint which has a depressing effect on output andprofitability, and gives rise to an increase in the demand for workingcapital to finance stocks. The mission's assessment of a feasible level ofpublic sector investment has attached a higher priority to the transportsector than the Plan. In addition to the provision of adequate physicalinfrastructure, the design and the implementation of a technical educationand training program is needed to counter the shortage of skilled workers aswell as top managers and technicians.

E. External Assistance and Creditworthiness

158. The mission's balance of payments projections for the period 1972-1975 shows that the required capital inflow is about Ls 150 million (US$430.5million). The debt service ratio was 10.5 percent in 1970/71; after detailspertaining to debts contracted recently become known, the ratio may requirean upward adjustment. The Government's recent accumulation of short-termdebts and the prospect of reaching an agreement on the payment of compensa-tion in respect of the nationalized firms will augment Sudan's need for grossinflows of foreign capital. Neither of these factors has been included inthe calculation of the balance of payments gap owing to the lack of informa-tion. In addition to its need for foreign assistance for its developmenteffort, the Sudan also needs to overcome its negative net reserves and theconsequent short run liquidity problem.

159. The Sudan's capacity to service additional credits on commercialterms over the next few years is severely limited by its balance of paymentsposition which is likely to remain strained for some time. This suggeststhe need for substantial long-term assistance on extended grace periods andrelatively moderate interest terms. Since foreign exchange earnings areunlikely to grow at more than 3.5 percent a year, any substantial borrowingon conventional terms would lead to a fairly rapid increase in the debt ser-vice ratio. The Government should exercise particular caution in incurringnew debts with short maturities and carrying high interest.

STATISTICAL APESNDIX

Index

Table No.

Population

1.1 Estimated Population by Province, 1971

National Accounts

2.1 Industrial Origin of Gross Domestic Product at Current FactorCost, 1966-1969

2.2 Gross Domestic Product and Expenditures at Current Market Prices,1966-1969

2.3 Gross Capital Formation by Sector and Type of Asset, 1966-1969

External Trade, Balance of Payments

3.1 Imports by Major Categories, 1961/62 - 1970/713.2 Exports by Main Commodities, 1961/62 - 1970/713.3 Quantity and Value of Main Exports, 1960-19703.1 Direction of Cotton Exports, 1965/66 - 1970/713.5 Direction of Exports, 1965/66 - 1970/713.6 Direction of Imports, 1965/66 - 1970/713.7 Estimated Balance of Payments, 1961/62 - 1970/713.8 Breakdown of Current Invisible Transactions, 1967/68 - 1970/713.9 Balances under Bilateral Payments Agreements, 1966-1971

External Public Debt

1.1 External Public Debt Outstanding as of December 31 1]970h.2 Debt Repayable in Foreign Currency, 1966-1985

Fiscal S-tatistics

5.1 Summary of Public Sector Finances, 1961/62 - 1970/715.2 Central Government Revenues by Source, 1961/62 - 1970/715.3 Classification of Central Government Recurrent Expenditures by

Type of Service, 1961/62 - 1970/715.l4 Central Government Recurrent Expenditures by Chapter, 1961/62 -

1970/715.5 Classification of Central Government Development Expenditures,

1965/66 - 1970/715.6 Classification of Public Sector Development Expenditures,

1966/67 - 1970/715.7 Gross Current Surplus of Public Enterprises, 1966/67 - 1970/71

Monetary Statistics

6.1 Monetary Survey, 1964-19716.2 Analysis of Commercial Banks' Credit to the Priva-te Sector, 1966-716.3 Commercial Bankst Reserves, Borrowings and Liquidity Position, 1966-716.4 Gross Reserves and Net Foreign Assets, 1963-1971.

Sector Statistics

7.1 Cotton-Production, 1965/66 - 1970/717.2 Summary of Cotton Statistics, 1965/66 - 1970/7L7.3 Area Under Cotton and Yield Per Feddan, 1966/677--1970/717.4 Area and Output of Main.Crops, 1960/61 - 1970/7L7.5 DUitrkbution of Students, 1964/65 - 1969/70

Prices

8.1 Cast of Living Index, 1961-718.2 Cotton Export Prices,: 196h/65-1970/71

Mission Projections

9.1 Mission Projection of'Merchandise Exports, 1975'9.2 Mission Estimate of Merchandise Imports, 1972/73?1-- L974/759.3 Mission Estimates of'C'entral Government Revenue;,197h'/759.4 Mission Projections of Gross Current Surplus ofF Pib-lic

Enterprises, 1971/72 - 1974/75

Table 1.1: ESTIMATED POPULATION RY PROVINCE, 1971-a/('000)

Province Population Percent of Total

Bahr El-Ghazal 1,533 9-7

Blue Nile 3,178 20.1

Darfur 2,039 12.9

Equatoria 1,391 8.8

Kassala 1,455 9.2

Khartoum 755 4.9

Kordofan 2,719 17.2

Northern 1,344 8.5

Upper Nile 1,375 8.7

Total 15,809 100.0

v Based on the 1956 Census results. For the period1956-1968 a growth rate of 2.8 percent was used.A lower growth rate of 2.5 percent is assumed forthe period after 1968.

Source: Economic Survey, 1969.

Table 2.1: INDUSTRIAL ORIGIN OF GROSS DOMESTIC PRODUCT AT CURE=NT FACTOR COST, 1966-1969

(Ls million)

1966 1967 1968 1969 a/

* ~ ~ ~~% % %

1. Agriculture and Livestock 173.0 37.9 190.2 38.8 199.9 37.9 180.3 35.7

2. Mining and Quarrying 1.9 0.14 2.0 0.4 2.3 0.14 1.7 0.3

3. Manufacturing 36.6 8.o 40.0 8.2 1. 5 7.9 12.9 8.5

h. Electricity and Water 16.6 3.6 16.3 3.3 16.7 3.2 16.3 3.2

5. Construction 23.9 5.2 21.7 4.4 21.3 4.6 22.3 1.14

6. Commerce, Hotels, etc. 89.6 19.6 96.3 19.7 108.0 20.5 90.3 17.9

7. Transport and Communication 31.8 7.0 31.b 6.4 33.8 6.4 33.6 6.6

8. Finance and Insurance 15.2 3.3 17.1 3.6 19.0 3.6 27.1 5.4

9. Government Services bO.6 8.9 46.3 9.5 51.5 9.8 76.8 15.2

10. Miscellaneous Services 27.8 6.1 28.2 5.7 30.0 5.7 14.3 2.8

Total GDP 457.0 100.0 489.8 100.0 527.0 100.0 505.9 100.0

a/ Preliminary

Source: Department of Statistics

Table 2.2: GROSS DOMESTIC PRODUCT AND EXPENDITURES AT CURRENT MARKET PRICES, 1966-1969(Ls Million)

1966 1967 1968 1969

GDP at Factor Cost 457.0 489.8 527.0 505.9

Plus Indirect Taxes 15.7 50.4t 59.9 88.2

Less Subsidies -5.1 -4.1 -3.7 -9.0

Equals GDP at Market Prices b97.6 536.1 583.2 585.1

Consumption L16.3 h76.9 521.2 505.3Private 1h2.7 371.7 b09.1 372.7Government 93.6 105.2 112.1 132.6

Gross Domestic Fixed CapitalFormation 71.8 70.h 70.9 70.5

Increase in Stocks 3.8 2.6 9.9 1h.6

Exports of Goods and NonFactor Services 89.0 93.h 103.L 103.5

Minus Imports of Goods andNon Factor Services -103.3 -107.2 -122.2 -108.8

GDP at Market Prices 097.6 536.1 583.2 585.1

SoLrce: Department. of Statistics -

Table 2.3: GROSS CAPITAL FORNATION BY SECTOR AlD TYPE OF ASSST, t966- 1969(Ls million)

1966 1967 1968 1969

Construction and Builtirng 26.0 25.C 29.0 Wt.2

Private 12.6 13.7 t4-5 17.6Public 13. 11.3 145 29.6

Land Improvement and Plantations 7 0 9 1.9

PrivatePublic 3.14 1.7 0.9 1.9

Transport Equipment 11.1 12.7 183. 519

Private 7.2 9.0 8.4 -Public 3.9 3.7 5.1 5.9

Machiner,y and Equipment 23.6 20.5 23.8 15.3

Private 17.3 16.1 13.4 12.2Public 6.5 6.4 10.4 3.1

Livestock 3.2 a 3-7 0-2

Private 3.2 3-3 3.7 0.2Public

Other Tlnclassified 74. 3

Private -Public 4.3 7-3

"otal Gross Fixed Capital Formation 71.8 70.5 70.9 70.5

Private (40.3) (0.0) (40.0 (29.8)Public (31.5) (30-5) (30-9) (40.7)

Increase in Stocks 3. 2. 6 9± 114.6

Private 3.8 2.6 9.9 13.5Public _ _ _ 1.1

Total Capital Formation 75.6 73.1 80.8 65.1

Private 44.1 42.6 49.9 1-3

Public 31.5 30-5 30.9 1.8

a/ Preliminary

Source: Department of Statistics

Table 3.1: IMPORTS BY MAJOR CATEGORIES, 1961/62 - 1970/71 -a/(Ls million)

1961/62 1962/63 1963/64 1964/65 1965/66 1966/67 1967/68 1968/69 1969/70 10/7,_1X/

Consumer Goods 40.0 3P. 3L5.I 3L.2 48.o 2§. l 5 .2

Raw Materials 26.3 32 27. 6 26.4 24.1 23.8 29.6 37.4 28.2 4 1.9

For Building Industry 8.8 6.1 9.8 7.9 7-3 10.3 8.1 9-3 6.6 9.7

Fuel 4.4 5.3 3.2 3.1 1.1 1.0 2.2 5.5 8.7 4.1

For Agriculture 5.2 0.2 5.1 5.7 6.o 4.0 3-7 7-3 5.2 9.9

Others 7.9 24.6 9.5 9.7 9.7 8.0 15.6 15.5 7.7 18.2

Capital Goods 21.6 16.9 23.7 10.7 10.7 12.2 4.2 13.4 12.0 17.0

Total Imports (c.i.f.) 86.9 83.4 86.6 73.0 77.8 73.8 70.4 103.5 93.8 102.1

v Figures are based on Customs returns and are not quite comparable to balance of payments data..b/ Imports up to May 1971.

Source: Bank of Sudan.

Table 3.2: EXPORTS BY MAIN COMMOLITIES, 1961/62 -1970TL

(Ls million)

1961/62 1962/63 1963/64 1964/65 1965/66 1966/67 1967/68 1968/69 1969/0 1970/1

Ginned Cotton 36.6 45.2 43-3 28.2 35.8 35-0 44.7 58.5 63.0 67.3

Cotton Seed 3.5 3.8 4.1 1.7 0.8 1.2 1.3 1.3 2.4 1.8

Gum Arabic 4.9 7.0 6.5 7.4 4.2 8.4 8.3 6.6 9.6 7-3

Groundnuts 5.1 7.0 8.3 9.9 7.5 6.1 6.2 5.4 4.8 8.0

SesaTn 5.7 5.1 4.2 5.3 5.8 6.7 6.5 7.4 6.7 7.4

Livestock 1.1 0.9 2.2 1.4 2.6 1.1 3.3 1.6 2.8 2.3

Dura 1.3 1.4 1.8 1_5 2.8 o.6 o.6 0.5 - 0.6

Others S,7 6.4 7,4 8.1 14.6 10.1 7.9 9.0 1o.6 14.5

Total Erxorts (f.o.b.) 639 68 7. 63.2 69.2 109.2

i/ Figures are based on CustAom returns and are not quite comparable to balance of payments data.

Source: Bank of Suian

Table 3.3: QUANTITY AND VALUE OF MA1N EXPORTS, 1960-170(metric tons and Ls thousands)

1960 1961 1962 1963 19.4 1965 1966 1967 1968 1969 1970Cromodity Quantity Value Quantity Value Quantity Value ŽQuatity Value Quantity Value Quantity Value Quantity Value Quantity Value Quantity Value Quantity Value Quantity Value

Cotton 105,201 33,147 105,482 31,024 158,407 43,028 177,9S5 455518 112,931 32,209 106,361 31,155 11,155 34,306 171,510 40,927 163,473 48,195 190,828 51,o37 215,629 63,671

Gum arabic 5l,o8l 6,970 51,234 6,141 38,667 4,567 47,110 5,647 52,359 6,761 57,599 7,5283 55,579 7,134 40,728 3,338 50,736 7,348 50,459 o,646 67,441 9,091

Sesame 76,366 4,594 62,795 4,177 76,686 5,606 69,353 4,807 101,163 6,454 70,583 4,750 167,500 5,650 75,488 6,531 84,725 6,217 103,488 7,153 83,749 6,497

.roundnuts 67,335 4,393 85,945 5,355 121,126 6,672 117,966 6,401 155,198 9,120 159,326 8,596 107,935 7,255 103,859 6,50? 38,261 4,598 69,927 5,022 65,d92 5,524

Cottonseeds 93,032 2,784 118,227 3,663 204,265 5,177 150,139 3,796 45,346 1,155 65,292 1,560 29,173 759 32,169 1,042 36,120 893 112,087 2,260 84,615 2,012

Dura 170,981 2,795 93,342 1,670 75,729 1,484 73,515 1,551 61,205 1,539 111,700 2,112 76,614 1,872 -- -- 54,841 1,071 6,753 133 -- --

Hides 4,763 1,025 4,674 1,026 4,503 972 6,052 1,230 3,453 989 5,469 1,2149 5,837 1,604 4,243 1,433 15,010 1,507 13,648 1,940 5,761 1,696

Other crops -- 7,710 -- 6,963 -- 11,153 -- 9,610 -- 10,031 -- 10,336 -- 11,59Q -- 9,271 -- 10,205 -- 9,260 -- 15,423

Total -- 63,426 -- 62,219 -- 78,959 -- 78,650 -- 68,238 -- 67,956 __ 70,729 -- 74,059 -- 80,631 d6,251 -- 103,916

Source: IMF Reports

Tab>e 3.4: DIREPITDIT 0r oCTTrO _ L,-SORTs, 1463./66 - 1970/7 a/(Ls million)

196S/66 ci 0965/67 /6-, ' _I____ /6 . - 1 269/70 5 ; 1970A 1 _

Western Europe 12.59 3j 1S3Q 07. 19.16 -- 2.00 4j i 30.2 u+.42 2i.S

West Germany 3.92 1.1 4.60 13.3 5.67 12.7 7-14 13.L 6.80 10.9 3.07 4.6Italy 3.46 9-8 4.B9 14.1 5-25 11,3 7-44 14.0 8,29 1 31.2 4.95 7-4Tnimied Kingdom 2.28 6.5 2.56 7.- 4.19 9.4 3-59 6.8 4.79 7.7 2.97 4.4France 1.46 4.2 1.58 4.6 1.36 3.1 0.67 1.2 1.16 1.9 1.15 1.7Holland- 0.32 °*3 1.24 3-6 1 .07 2.1, 0.72 1.3 0.26 0.4 .t 0.2Belgium 0.32 0.9 0.45 1.3 0.56 -.3 0.87 1.7 1.03 1.6 0.71 1.1Other 0.81 2.3 0.98 2.9 1.08 2.4 1.65 3.1 1.59 2.5 1.43 2.1

Eastern Europe and Miainlanld China 12.3) 35.0 21.1 12 . r 28.0 20.09 3-1 - 20.15 8 12.0 IL. 94 ,C-5

U .S.S.-I. L.16 11.8 0.73 2.1 3.96 3.9 5-.9 9.6 13.78 21.0 15-95 23.8Mainland China 4.69 13'3 3.92 11.3 2.79 6.3 5.26 9.9 1.81 2.9 10.22 15.2Rumania - - 0.28 C.83 2.77 6.2 2.13 4'° t. 49 '?,3 t-34 2.0Poland 1.16 3.3 0.77 2.2 1.141 3.2 1.83 3.5 1.97 1.5 2.44 3.6Hlungary 0.30 1.4 0.84 2.4 0.92 2.1 1.19 - 1.26 2.0 1.46 2.2Czechoslovakia D.39 I.1 0.25 0.7 0.26 °.6 .23 2.4 0.21 0.3 0.67 1.3Yugoslavia 1. 14 3.2 - - 0.10 0.2 ".56 2.9 0-54 -.9 0.63 0.9East Germany - - 0.13 0.4 - - 1-76 3.3 0.57 0.9 o.80 1.2Other O0.31 0.9 0.41 1.2 0.24 D.5 - - 0.12 C.2 0.23 0.3

Asia 10.02 23.4 1C.25 2. 9.95 22.4, 10.54 19. 17.53 28.0 17.20 25.6

India 7.25 20.5 6.21 17.9 6.01 13.3 5.68 1C.7 12.61 27.' i;.53 17.2.,apan 2.1; 6.o 3.47 10.0 3.37 7.6 4.26 8.0 3.99 6.14 4.14 6.2Other 0.6D 1.9 0.57 1.5 0.57 1.3 0.6-0 1.1 0-.93 1.5 1.53 2.2

Western Eemisaphere - - 0.15 0.4 2.15 4.3 0.32 0.6 0.51 0.9 0.8

U1.itea C:tatas - - 0-11 D.3 093 4.3 0.26 0.5 0.31 0.9 0.35 0.8

Other - -004 0.t C0.22 0.5 0.0D 0.1 - - _

Other Countries 0.31 . 0.665 0136- 0.74 . 0.33 0; 9 0_6 1.6

Total 35.27 100.0 3L.70 100.0 4-.LT 100.0 537 6 100.0 62.6D6 1O.C 67.16 100.0

of which: Payment AggeementCountries-' 9.43 26.3 8.27 23.2 8.60 19.3 11.71 22.1 16.62 2L.1 17.32 25-5

a/ Figures are based on Customs returns and are not quite comparable to Dalance of paymerts data.E/ India, Czechoslovakia, East Germany, Eungary and Poland.

SaJce: Barxk of Sudan

Table 3.5: DIRECTION OF EXPORTS, 1965/66 - 1970/71(Ls million)

1965/66 % 1966/67 % 1967/68 % 1968/69 L 1969/70 % 1970/71 %

Western Europe 3237 ". 2 34.8 50. 36.0 43.9 45. 41.3 41.3 85. 32.3

Italy 8.3 11.2 9.5 13.7 8.8 11.2 10.9 12.2 11.5 11.5 10.0 9.1West Germany 6.7 9.0 7.6 11.0 8.8 11.2 12.2 13.5 11.9 11.9 8.5 7.8United Kingdom 4.6 6.2 4.7 6.8 6.8 8.6 4.6 5.1 6.6 6.6 5.3 4.9France 3.5 4.7 4 5.8 3-8 4.9 1.6 1.7 2.2 2.2 2.! 2.2The Netherlands 3.8 5.1 5.3 7.6 3.5 4.4 5.1 5.6 3.8 3.8 4.0 3.6Belgium 1.5 2.0 1.7 2.5 2.6 3.3 2.3 2-5 1.6 1.6 2-3 2.1Spain 0.5 0.7 0.8 1.2 0.8 1.0 0.9 1.0 1.1 1.1 1.2 1.1Other 3.8 5.2 1.2 1.7 0.9 1.1 3.3 3.7 2.6 2.6 1.6 1.5

Eastern Europe and Mainland China-8 24.0 9-8 14.1 16.4 20.8 21.2 23.6 22.5 22.5 x5.7 32.7

U.S.S.R. 5.7 7.7 1.4 2.0 5.4 6.9 5.9 6.6 13.5 13.5 16.9 15.5Poland 2.3 3.1 0.7 1.0 1.4 1.8 1.7 1.9 0.9 0.9 2.7 2.5East Germany o.6 0.8 0.2 0.3 0.2 0.3 1.8 2.0 0.4 0.4 0.9 0.8Czechoslovakia 1.1 1.5 1.3 1.8 1.5 1.9 1.1 1.2 0.8 o.8 o.9 0.8Hungary o.6 0.8 1.1 1.6 1.2 1.6 1.2 1-3 1.3 1.3 1.6 1.5Yugoslavia 1.2 1.6 0.1 0.2 0.2 0.2 1.4 1.6 1.1 1.1 0.7 0.6Rumania - - 0.3 0.4 1-5 1.9 1.1 1.2 1.3 1.3 1.4 1.3Bulgaria 0.5 0.7 0.3 0.4 0.2 0.2 - - o.4 0.4 0.3 0.3Mainland China 5.8 7-8 4-4 6.4 4.8 6.0 7.0 7.8 2.8 2.8 10.3 9.4

Asia 16.5 22.2 17.1 24-7 16.7 21.2 22.0 24.2 26.8 26.8 2. 25.2

India 7.8 10-5 6.2 9.0 6.6 8.3 7.6 8.4 13.1 13.' 11.9 10.9Japan 3.7 5.0 5.0 7.2 5.7 7.3 8.2 9.1 8.2 8.: 9.0 8.2Saudi Arabia 1.5 2.0 3-3 4.8 2.6 3.3 3.2 3.5 2.6 2.6 2.4 2.2Iraq 0.3 0.4 0.3 0.4 - - - - 0.2 0.2 0.3 0.3Lebanon 0.4 0.5 0.7 1.0 o.6 0.8 1.2 1.3 0.8 0.8 0.7 0.7Other 2.8 3.8 1.6 2.3 1.2 1.5 1.8 1.9 1.9 1.9 3.2 2.9

Western Hemisphere 2.2 8.0 .2 4.6 S.O 6.3 2.5 2.8 3.7 3.8 4.4 4-0

United States 1.8 2.4 3.0 4.4 4.3 5.5 2.5 2.8 3.7 3.8 3-5 3.2Venezuela - - 0.1 0.1 0.3 0.3 -- - - - - -Other o.4 o.6 0.1 0.1 0.4 0.5 - - - - 0.9 0.8

Africa 4.8 5.8 3.4 4.9 3.8 4.8 3.2 3 S.2 5.2 5-4 5.o

Egypt 2.7 3.6 3.0 4.4 3-4 4.3 2.8 3.1 4.6 4.6 4.7 4-3Other 1.6 2.2 0.4 0.5 0.4 0.5 0.4 0.4 o.6 0.4 0.7 0.7

Other countries o.6 0.8 0.9 1.4 0.9 1.2 0.5 o.6 o.4 o.4 0.9 0.8

Total 74.1 100.0 69.2 100.0 78.8 100.0 90.2 100.0 99.9 100.0 109.2 100.0

Source: Bank of Sudan

Table 3.6: flIRCTION OF DlWORTS, 1965/66 1907

(Ls million)

i965/66 1966/67 j% 1967/68 IL 1968/69 ± 1969/70 2$ 1970/71 I

western luro)-,- L2_._ 42.254 40.4 43.6 42.1 42.2 453 38.6 35.1

'7r tiEnkm1. 9.9 17.5 24.2 13.0 18.5 18.4 17.8 21.9 23.5 15.5 14.1"i-s Ceriaarc L.1 5.3 4.8 6.5 4.1 5 .8 5.7 5.5 6.6 7.1 7.7 7.0

P'ranoe 1.8 2.3 1.2 1.6 2.8 4.0 4.0 3.9 2.4 2.6 2.1 1.9Italy 2.7 3.5 2.8 3.8 3.8 5.4 5.5 5.3 2.9 3.1 2.0 1.8The Nletherlands 2.8 3.6 2.2 3.0 1.8 2.6 3.6 3.5 2.9 3.1 3.4 3.1fleigi' ~ 2.3 2.9 1.6 2.2 0.8 1.1 2.1 2.0 1.6 1.7 2.5 2.3Sweden 0.4 0.5 1.1 1.5 0.5 0.7 0.8 0.8 1.2 1.3 1.0 0.9Other 3.5 4.5 2.7 3.6 3.6 5.1 3.5 3.3 2.7 2.9 4.4 4.0

Eastern Eurc-e and M4ainland China L i~ 14.1 19.1 13.8 19.6 17.0 16.4 16.1 17.3 28.8 26.2

Nainlarnd Ih4na 3.1 4.0 6.0 8.1 5.4 7.7 5.1 4.9 4.5 4.8 7.5 6.8G.S.S.R. 2.1 2.8 ~2.1 2.6 283.8 4.1 5. 1.1 4.0 4.2 4.5 11.7 10.6

Poland 1.1 1.4 1.1 1.5 1.1 1.5 1.2 1.2 1.7 1.8 2.8 2.6Czechoslolrakia t-6 2.1 1.2 1.6 0.6 0.8 1.0 1.0 1.1 1. 0.9 0.8'•ugoslavi, 1. 2. 0.30. 0).2 .30.9 0.8 0.9 1.0 1.2 1.1Rumania 1.1 1.4 1.0 1.4 1.0 1.5 1.8 1.7 1.7 1.8 1.9 1.7Other 0.4 3.3 1.7 2.3 1.L 2.0 2.9 2.8 2.0 2.2 2.8 2.6

Asia 21.1 13.8 18.7 14A3 20.-3 24.0 23.2 22.6 24,.2 26.0 236

Japan 8.0 10.3 3.5 4.7 4.1 5.8 11.2 10.8 6.9 7.4 4.5 4.1India 7.0 9.0 7.9 10.8 8.2 111.7 9.7 9.4 11.2 12.0 17.9 16.3Lebanon. 0.2 0.3 0.7 0.9 0.9 1.3 0.7 0.7 o.6 0.6 0.6 .Other 1.2 1.5 1.7 2.3 1.1 1.5 2.4 2.3 3.9 4.2 3.0 2.7

Westerni Heminhsa'e 55 71 69 . . . 3.32323h3. -

United S-oa.tes 5 .0 6.o, 6.2 8.4 4.2 6.0 2.4 2.3 2.6 2., 3.1 2.8Other 0.5 0.7 0.7 0.9 0.7 1.0 0.9 0.9 0.8 0.- 1.0 0.9

Africa 3.2 10.5 529 72$ 6.0 6.26.6 828.

Egypt 3.3 4.3 3.2 4.4 3.2 4.5 4.1 4.0 4.3 .67.0 6.4Uganda- 2.3 2.9 0.1 0.2 0.5 0.7 0.7 0.7 1.0 1.1 1 .5 1.3Kenya 1.1 1.4 0.4. 0.5 0.3 0.4 0.5 0.4 0.4 0.4 0.2 0.2Other 1.5 1.9 0.4 0.5 0.9 1.3 0.7 0.7 0.5 0.5 0.2 0.2

Other countries 1329 1.2 0.805 1.2 132$1. 1.4 1325 .3±~ 3.32

Imports not classified by country 2.8 32$ 0. 2$±2 .j2$ 127 8.1 72 .4$ J2 $ 0.1 0.1

Total 77.8 100.01 73.82 100.0 7024 100.0 103.5 100.0 933 100.0 110.0 100.0

a/ Figures are based on Customs returns and are not quite comparable to balance of payments data.

Source: Bank of Sudan.

Table 3.7: ESTIThEFD BALANCE OF PAYI-f TS, 1961/62 - 1970/71(Ls million)

1961/62 1962/63 1963/64 1964/65 1965/66 1966/67 1967/68 1968/69 1969/70 1970/71

I. CURRENT ACCOUNT -27.8 -16.0 - 36.5 -20.9 -18.6 -17.5 -18.5 -11.7 - 3.9 - 22.9

1. Exports, F.o.b. 67.9 87.5 82.2 67.9 73.0 73.2 79.1 90.6 99.0 103.6Cotton 35.9 45.5 40.7 27.7 32.6 34.2 39.3 48.0 59.5 59.6Others 32.0 42.0 41.5 40.2 40.4 39.0 39.8 42.6 39.5 43.8

2. Imports, C.i.f. 84.6 87.9 104.2 75.1 79.0 82.2 88.7 93.5 90.7 119.0Govt. Direct Purchases 27.0 27.7 38.1 23.2 20.2 23.4 19.1 19.9 25.7 49.4Others 57.6 60.2 66.1 51.9 58.8 58.8 69.6 73.6 65.0 69.6

Trade Balance (1-2) -16.7 - 0.4 - 22.0 - 7.2 - 6.0 - 9.0 - 9.6 - 2.9 8.3 - 15.43. Services, net -11.1 -15.6 - 14.5 -13.7 -12.6 - 8.5 - 8.9 - 8.8 -12.2 - 7.5

Receipts 11.0 10.1 12.4 12.6 10.7 12.1 13.2 12.9 12.9 17.7Payments -22.1 25.7 26.9 26.3 23.3 20.6 22.1 21.7 25.1 25.2

II. OFFICIAL CAPITAL AND TRANSFERS 14.4 5.8 10.7 10.7 14.2 10.3 11.4 6.o 6.0 - 0.1Drawings 18.2 8.7 15.8 13.o 17.5 14.2 15.1 10.6 13.1 11.1Repayments 3.8 - 2.9 - 5.1 - 3.1 3.3 3.9 3.7 4.6 7.1 11.2

III. NET ERRORS & OMISSIONS INCLUDINGMISC. CAPITAL MO7MENTS 1/ 7.3 7.2 4.7 1.6 - 2.3 - 0.4 2.2 - 1.6 2.7 1.9

IV. BALANCE OF PAYMENTS DEFICIT/SURPLUS - 6.1 - 3.0 - 21.1 - 6.6 - 6.7 - 7.6 - 4.9 - 7.3 4.8 - 21.1

V. MONETARY MOVEMENTS 6.1 3.0 21.1 8.6 6.7 7.6 4.9 7.3 - 4.8 21.1

1/ Includes the allocation of SDRs of Ls3.3 million in 1969/70 and Ls2.7 million in 1970/71.

Source: Bank of Sudan

Table 3.8: BREAKDOWN OF CURRENT INVISIBLE TRANSACTIONS, 1967/68-1970/71(Ls million)

1967/68 1968/69 1969/70 197Q/71

Payments 22.1 21.7 25.1 25.2

Travel 2.4 2.5 2.5 2.7Transportation 2.6 2.0 2.1 2.3Insurance 0.4 0.7 0.6 0.6

Investment expenditure: Govern-ment 3.3 3.6 4.1 4-3Investment expenditure: Other 1.6 1.3 2.0 0.7Government expenditure n.i.e. 4.8 4.3 4-1 3.5Dol-at ions 0.4 0.6 0.5 0.9Pension etc. (Government) 0.4 0.4 0.2 0.4Pension etc. (private sector) 0.1 0.2 0.4 0.1Commission, management fees, etc. 0.2 0.4 0.4 0.2Foreign contractors 1.6 2.1 1.8 1.8Private savings 1.1 0.8 1.6 o.6,osses, refunds, etc. 0.2 0.3 0.3 0.3

Eciuication 0.4 0.7 0.8 1.0f. .1 ims 0.1 0.1 0.1 0.2Others 0.5 1.7 3.6 5.6

Receints 13.2 12.9 12.9 17-7

Mravel 0.2 0.2 0.3 0.3Transportation 0.9 0.9 0.5 1.2Insurance 0.1 0.2 0.1 0.8Investment income: Government 1.0 0.5 1.0 0.6

investment income: Other - - - -(;overnment receipts, n.i.e. 2.8 2.4 2.8 2.2Donations 0.3 0.4 0.3 0.2Pensions 0.1 - 0.1 0.1Commission, management fees, etc. 0.5 0.5 0.9 1.0Private transfers 0.1 0.2 0.2 0.4Services 0.4 0.5 0.7 0.5Advertisement 0.1 - - 0.1Losses of weight and quality - - 0.1 0.2Others 6.7 7.1 5.9 10.1

Net balance -8.9 -8.8 -12.2 -7.5

Source: Bank of Sudan

a/Table 3.9: BALANCES UNDER BILATERAL PAYMENTS AGREEMENTS, 1966-1971(Ls thousand)

Countries Dec. 1966 Dec. 1967 Dec. 1968 Dec. 1969 Dec. 1970 Sept. 1971

Egyptbh 4,372 4,466 3,814 3,516 986 312

1965 trade account 1,388 1,972 2,633 2,796 890 -122

1965 consolidated account 2,984 2,494 1,181 720 96 434

India 1,963 -1,143 -3,241 -930 -6,020, -9,402

Czechoslovakia 72 29 53 -439 31 -675

Eastern Germany 75 3 -93 113 126 -236

Hung,ary -1 53 186 -1 21 146

Poland 489 98 145 127 -47 294

Overall balance (net) 6.970 3,506 864 2,386 -4,903 -9,089

j A minus sitn indicates a claim on the Sudan.j bExcludes Egyptian coins equivalent to Ls 231,000, repatriated to the Arab Republic of Egypt, on which

settlement has not been reached.

Source: Bank of Sudan.

Table 1.1: EXTERNAL PUBLIC DEBT OUTSTANDITG AS OF DECEMBER 31, 1970 a/(U.S. $'OOO)

Debt Outstanding December 31, 1970Creditor CountryType of Credit Disbursed Undisbursed Total

Denmark - 1,552 1,552Germany (Fed. Rep. Of) 4,120 - 1h,120Italy 1,997 - 1,997

Suppliers 6,117 1,552 7,669

France 8,619 - 8,619Kuwait 8,488a - 8,488Netherlands 2,821 - 2,831Saudi Arabia 17,500 - 17,500

Private Banks 37, %18 - 37,148

United Kingdom 1,610 - 1,610Publicly Issued Bonds 1,610 - 1,610

IBRD 91,202 13,141 loh,616IDA 12,277 9,223 21,500

Loans From Intl. Organizations 103,h80 22,62.6 126,116

Algeria 2,026 - 2,026Arab Rep. of Egypt 857 857Bulgaria 151 151China, Peoples Rep. Of - L0,650 L0,650Czechoslovakia 3,16- 3.164Germany (Fed. Rep. Of) 16,32L 887 17,211Italy 10,989 379 11,368Kuwait 14,7,7 L,928 146,665Libya 17,LOO - 17,100Netherlands 1,659 2,287 6,9h6Saudi Arabia X,322 16,769 20,091Sweden 6,321 X,5.85 9,666United Kingdom 10,1145 1,1'2 11],277USA 561 - 56LUSSR 12,518 - 12,518Yugoslavia 5,11-4 - 5,111,

Loans from Governmerts 135,291 70,377 205,668

Total External Ptiblic Debt 282,936 9L,565 378,501

a/ Debt with a maturity of over one year.b/ Excludes the uncommitted portion of the following frame agreements:

1. Bulgaria 7,0192. Czechoslovakia 26,1393. Korea (North) 3,600b1. USSR 1X,7775. Yugoslavia 8,105

Loans from Govts. 58,670TOTAL 58,670

Source: Economic and Social Da-ta Division, Economic Program Department, IBRD.

Table 4.2: DEBT REPAYABLE IN FOREIGN CURRENCY, 1966-1935(US$' 000)

Debt OutstandingBeginning of Period Transactions During Period_

Year Disbursed Including Service PaymentsOnly Undisbursed Commitments Disbursements Principal Interest Total_ (1) (2) (3) (4) (5) (6) (7)

igf!t 140,5 : 230,027 3,693 38,351 9,124 6,5d5 15,7091967 170,213 229,571 75,541i 48,183 7,205 5,338 12,5431963 213,395 296,124 40,476 31,250 11,276 9,148 20,42419S9 233,34,5 320,064 42,523 56,342 12,375 9,642 22,5171970 278'<,925 351,9 50,120 28,617 18,737 10,934 29,671

1971 283,936 373,501 25,253 29,489 13,617 43,1061972 295,645 349,452 9,272 34,986 13,715 48,7011973 269,931 314,466 - 7,102 34,579 12,174 46,7531974 242,453 279,36 f 6,446 34,412 10,514 44,9271975 214,487 245,474 6,235 25,757 8,952 34,7101976 195, 014 219,716 - 6,713 23,493 7, 847 31,3411977 176,234 196,223 - 5,08 3 20,315 6. o5 27,0201976s 163,0O-, 175,903 - 4,718 16,296 5.106 22,1031979 151,428 159,610 - 4,117 14,501 5,076 19,5771930 141,045 145,110 - 4,065 13,645 4,399 18,0451981 131,464 131,464 - - 9,444 3,822 13,2651562 122,021 122,021 - 7,804i 3,379 11,1631963 114,217 114,217 - - 7,664 3,001 10,6651984 106,553 106,553 - - 7,532 2,657 10,ld8198i5 99,021 99,021 - - 7,833 2,312 10,145

/ The projections exclude the following for which repayment terms are not available:Loans from Governments

Saudi Arabia - 16,769

Source: Economic and Social Data Division, Economic Programn Department, IBRD.

Table 5.1: SUMMARY OF PUBLIC SECTOR FINANCES, 1961/62 - 1970/71(Ls million)

1961/62 1962/63 1963/64 1964/65 1965/66 1966/67 1967/68 1968/69 1969/70 1970/71

Central Government

1. Recurrent revenue 60.3 74.4 78.6 73.7 75.2 85.9 99.0 114.6 149.4 164.4

2. Recurrent expenditures 51.6 58.5 60.8 63.2 74.3 83.2 86.4 107.1 144.0 146.4

3. Budgetary Surplus (1-2) 8.7 15.9 17.8 10.5 0.9 2.7 12.6 7.5 5.4 18.0

4. Extra budgetary allocations -/ - - - - - - 7.1 - 4.4 11.4

5. Net surplus/deficit - (3-4) 8.7 15.9 17.8 10.5 0.9 2.7 5.5 7.5 1.0 6.6

Public Enterprises

6. Surplus/deficit on currentexpenditures 4.5 14.2 5.1 6.0 -2.3 4.2 3.0 0.4 -5.7 -9.8

Total Public Sector

7. Current surplus/deficit (5+6) 13.2 30.1 22.9 16.5 -1.4 6.9 8.5 7.9 -4.7 -3.2

8. Public sector developmentexpenditures 4o.1 41.8 48.2 30.0 33.2 26.5 25.2 30.5 31.8 26.6

9. Overall deficit (8-7) 26.9 11.7 25.3 13.5 34.6 19.6 16.7 22.6 36.5 29.8

10. Financed by:

External sources 18.2 8.7 15.8 13.8 17.5 14.2 15.1 10.6 13.1 11.1

Internal sources 8.7 3.0 9.5 - 17.1 5.4 1.6 12.0 23.4 18.7

1/ Represent expenditures on the Government stores, overdue payments to contractors and miscellaneous non-budgeted expenditures.2/ Defined as the surplus earmarked for developmient expenditures.3/ Mainly borrowing from the Bank of Sudan.

Source: Ministry of Treasury and the Economic Surveys.

Table 5. 2: ClihRAL GGVERNMEZT REVENIES BY SO?JRCS 1961/62 - 190/1(Ls rnillion)

1961/62 1962/63 1963/6L 1964/65 1965/66 1966/67 1967/68 1966/69 1969/70 1970/71

I. Taxes on Income and Profits 1.9 2.2 3.4 3.8 4.1 4.2 3.0 5.8 11.7 15.1

II. Taxes on Prcdaction and Consbnption 4.7 5.3 5.3 16.1 21.1 27.5 32.0 33.o 38.2 45.0

Sugar monopoly profit 1.6 1.5 . 11.0 13.9 16.5 18.2 19.4 10.0 it.?Sxcise and consuenption taxes 3.1 3.- 4.7 5.1 7.2 11.0 13.-8 14.4 20.2 26.3

III. Ta-xes on International Trade 31.4 36.7 41.6 31.1 32.9 32.3 36.0 44.4 9.4 59.5

Import duties 25.5 29.3 35.1 25.9 27.2 26.2 30.2 39.0 43.1 51.4Export duties and royalties 5.6 6.9 (.5 o.2 5.7 6.1 5.5 5.2 '., 6.1

IV. Stamp Duty, Fees, and Charges 5.5 o.9 7.7 8.a 6.0 6.8 6.5 3.4 9.0 9.3

V. Proprietary 'Receipts 7.5 13.9 9.4 5.0 1.4 5.5 8.4 12.6 29.4 23.5

5ezira Board 6.0 12.0 7.3 2.3 - - 3.9 6,.C 20.9 Lc' 12.3 aTInterest, rent, prcfits and dividends 1.5 1.9 2.1 2.2 1.4 5.5 4.5 S.6 8.5 11.2

VI. Pension Zontributions 3.6 0.! 0.5 0.6 Q*7 0.9 1.2 1.2 0.9 0.7

-711I. Unclassified _ 1.3 2.7 2.1 2.8 1.6 2.6 1.2 2.9 3.2

XIII. Reimbursement and Interdepartmental Services 5.4 7.7 3.0 6.1 6.2 7.1 6.9 7.4 7.9 7.6

TOTAL REvIUE 73.7 75.2 W- 114.6 DUT l4

a/ Includi-ng payment of arrears of Ls 14.3 million.T Including payment of arrears of Ls 4.5 nillion.

c/ Including Ls 2.3 million representing the sale to the Bank of Sudan of part of the Government's share in the capitalof the specialized banks.

j Including Ls m.7 million representing the sale to the Bank of Sudan of part of the Government' s share in the specializedbanks and Ls 1.3 million, representing the net profit transfers of the nationalized finrs to the Central Government.

Source: Ministry of Treasur-y

TABLE 5.3: CLASSIFICATION OF CENTRAL aOVEPRNMENT RECURRENT EXPENDITURES BY TYPE OF SERVICE1961/62-197C/71

(Ls Million)

1961/62 1962/63 1963/64 1966/65 1965/66 1966/67 1967/68 1968/69 1969/70 1970/71

I Social Services 9.9 11.3 12.2 13.5 15.7 17.6 16.3 21.1 27.3 24.0Education 767 77 r.6 1.7 -77 10.7 -I7h -77Health/ 4.3 4.8 4.6 4.4 4.9 5.6 5.8 6.5 7.9 7.9Other - 1.0 1.2 1.5 0.9 1.2 1.3 1.8 1.6 3.& 2.2

II Economic Services 15.7 17.4 19.7 16.5 16.3 19.1 18.0 20.8 21.2 20.9Agriculture & Livestock TT7 377 -577 TJ 7 5 .95 T7 -773 775,Irrigation & H.E.P. 1.8 2.2 2.3 2.3 2.8 3.0 3.0 3.9 3.7 3.3Communication & Transport 3.8 5.1 6.8 6.0 3.6 4.1 4.1 3.8 6.5 6.9Public Works 3.8 6.1 4.3 2.5 3.5 4.6 4.5 5.1 2.1 1.7Other Ž o.7 o.6 0.6 o.6 0.6 0.7 0.3 1.2 1.9 1.5

III Defense and Security 11.0 12.6 13.8 16.6 19.6 24.1 25.0 29.5 37.1 46.8Defense 7.2 307 9.7 14.6 17..2 22.6 27.3 37.7Internal Security 3.8 3.9 4.0 3.9 5.0 6.6 6 .8 6.9 9.o 9.1

IV Subventions to LocalAuthorities 4.5 4.7 3.8 9.0 11.3 9.0 j.8 10.1 20.1 17.6

V Interest and Amoritzationof Loans 2.9 3.5 1.6 0.9 1.5 2.5 3.1 6.5 9.2 11.3

VI Jeneral Administrationand Unclassified 7.6 9.0 9.7 :,7 9.4 10.9 15.2 19.1 29.1 25.3

Total Excenditures 51.6 53.5 60-. 63.2 74.3 3Q3.2 36.6 107.1 144.0 146.4

a/ Covers expenditures of the Ministry of Informati on and Social Affairs and the Ministry of Cooperation and LaborbJ Covers expenditures of the Ministry of Commerce and Supply and the Ministry of Industry and Mining

Source: Ministry of Treasury

Table 5.1: CENTRAL GOVERMMENT RE3URRENT EXPENDITURES BY CHAPTER1961/62 - 1970/71

(Ls million)

CHAPTER II/ CHAPTER IIE/ CHAPTER III_ Total- of A

B A B A B A B A to B

196L/62 19.4 :L6.9 26c2 30.9 143 3.8 49.9 51.6 103.14

1962/63 16.8 18.3 31.2 35.5 4.2 14.7 52.2 58.5 112.1

1963/614 18.8 2Ool 31.8 36,5 4.2 4.2 514.8 60.8 111.0

19614/65 19.5 20.8 35.1 40.o2 2.4 2.2 57.0 63.2 110.9

1965/66 26.0 27.3 142.1 414.14 1400 2.6 72.1 74.3 103.1

1966/67 305 33.0 47.6 46.3 5.2 3.9 83.3 83.2 99.9

1967/68 32.5 314.5 148.5 149.1 4.7 2.8 85.7 86.14 100.8

1968/69 41 .1 44.6 54e6 6oe1 4°4 2.4 100.1 107.1 107oO

1969/70 47,3 50.0 83.8 89.6 lo0O 4h4 141.1 144.0 102.1

1970/71-I 42.0 36,3 68.2 71.14 3.2 1.7 150o.4 i6.4 97.3

B: Budget Estimates; A: Actual Expenditures

a/ Wages and Salariesb/ Services and Recurrent Materialc/ Small Capital Expendituresd/ Defense Expenditures for 1970/71 amounting to Ls 37 million are not

allocated among the chapters but they are included in the total

Source: Ministry of Treasury

Table 5-5: CLASSIFICATION OF CENTRAL GOVERNMENT DEVELOPMENT EXPENDITURES1965/66 - 1970/71

(Ls Million)

1965/66 1966/67 1967/68 1968/69 1969/70 1970/71

I Agriculture and Irrigation 11.8 9.5 7.0 7.h 6.o 6.3

II Industry and Mining 2.2 2.6 1.5 1.3 0.1 0.3

III Transport & Conimunication 1.3 0lo 1.3 2.6 2.5 1.1

IV Electricity and 'ater 1.1 51 2.4 5.1 h.8 3.5

V Education 1b7 1.h 009 1.3 1.5 1.5

VI Health 0.4 0.7 0.7 0.8 1.0 o.6

VII Other 1-7 1.3 17 3-7 4.1 3-9

Total 20.2 21.7 1223 20.0 17.2

Source: Ministry of Treasury

Table 5.6: CLASSIFICATION OF PUBLIC SECTOR DEVELORPENT EXPENDITURES, 1966/67 - 1970/71(Ls Millions)

1966/67 1967/68 1968/69 1969/70 1970/71

Agriculture and Irrigation 9.5 7.0 7.4 6.o 6.3

Industry and Mining 2.6 1.5 1.? 0.1 0.3

Transport and Communication 3.7 7.7 5.2 7.1 2.7

Electricity and Water 5.1 4.6 9.2 10.6 9.4

Education 1.41 0.9 1.3 1.5 1.5

Health 0.7 0.7 0.8 1.0 o.6

Other 3.5 2.8 5.1 5.5 5.8

Total (actuals) 26.5 25.2 30.5 31.8 26.6

Source: Ministry of Treasury

Table 5.7: GROSS CURRENT SURPLUS OF PUBLIC ENTERPRISES, 1966/67- - 1970/71 a/

(Ls million)

Actualts

1966/67 1967/68 1968/69 1969/70 1970/71

"Traditional" Public Enterprises -/ 4.08 2.39 2.52 5.65 5.99

of which:

c /Sudan Railways 2.90 1.22 1.05 3.76 3.63

CEWC 1.04 0.91 1.09 1.67 1.79

Sudan Airways d/ -0.54 -0.45 -0.33 -0.43 -0.11

Sudan Shipping Line - 0.68 0.71 0.71 0.65 0.68

Agricultural Enterprises 0.10 0.65 -2.09 -11.39 -15.76

of which:

Gezira Board 0.10 0.65 0.11 -1.13 -8.22

PAPC n.a -2.20 -2.08 0.71

ARC _ _ - -8.18 -8.25

TOTAL 4.18 3.04 0.43 -5.74 -9.77

a/ The IPC (IDC) and the GTC have been excluded for lack of information.

b/ On an accrual basis.c/ For existing organization. Forecasts on basis of separate organizations for port, railwaysd/ and steamers are given in the Transport Annex.

Break-even assumption on current account for forecast.e/ Based on calendar year financial results.f/ Cash surpluses (+) of managing boards.

Source: Volume II, Annex 1.

Table 6.1: MONETAR'Y SURVIEY, 1964-1971(Ls million)

196h4 1965 1966 1967 1968 1969 1970 1971End of Period June June June June June Jure June June

Foreign assets (net L 29.97 21.31 14.58 6.95 2.02 ZiUl -0.49 -21.58

Claims on public sector, of which: 21.05 30.47 .61 6.86 62.02 74.08 96.67 110.39Domestic credit to Central Govt. S - 4.14 15.04 19.65 25.88 33.74 43.63 46-74External short-term cr,edit to

Central GoveropentSy - - - 3.48 - - - _Credit to P -A- - - - 2.20 12.46 20.00Credit to Gezirs Board - 0.30 - - - - - 3.46Credit to CEWC ! - - - - - 0.70 1.70 2.49Credi to Sudan Railways - - - - - 2.82 5.45Otherl' 21.05 26.03 25.57 33-73 36.15 37.44 36.o6 32.25

Claims on specialized banks v 2.00 2 .40 4 -51 iLl. 5-90 7.90 12.Claims on private sector 57.44 45-76 47.68 i52l3 60.47 61.14 60.31 3-131

Assets = Liabilities 110.46 99.94 107.38 120.17 130.41 138.45 164.39 ilt.52

Money and quasi-money, of which: 64.75 66.22 78.90 86.20 91.98 110.64 127.28 132.80Currency 30.07 31.44 37-52 40.21 42.09 53-56 61.21 65.93Private demand depositsaL 25.99 24.88 29.56 30.98 32.52 36.12 43-89 45-73Quasi-mcney 8.69 9.90 11.82 15.01 17.37 20.96 22.18 21.14

Public sector deposit , of which: 28.20 15.92 11.91 17.22 19. 10.90 t.L89 13.43Central GovernmentS

17.46 5-45 1.65 1.04 o.63 1.23 3.15 1.03

'MF stand-by blocked account - - - 7.46 8.37 1.20 -

Local and provincial governments 8.76 7.19 6.91 5.71 5.67 4.58 6.22 7.85PATCh - - - - 0.10 0.10 0.13 0.26Gezira Board 8.49 0.18 0.48 0.59 2.83 1.78 2.70 1.15opwod! 0.12 0.12 0.30 0.19 0.09 0.08 0.17)Sudan Railways - - 0.02 0.13 - 0.04 0.03) 3-14Other 3.37 1.98 2.55 2.10 1.85 1.89 2.49)

Counterpart funds 4-34 5.78 2.51 2.88 2.65 2.24 2.11 1.93Other items net 13.17 13.02 14.06 13.87 16.24 15.67 20.11I6

N Net of short-term credits from foreign commercial banks obtained in the name of the Government and public entities.4 Advances under Section 57 of the Bank of Sudan Act, government bonds held by the Bank of Sudan and commercial banks,

and Treasury bills held by commercial banks.4/ Short-term credits by foreign commercial banks insofar as the Sudanese pounid equivalent was credited to the Government's

account.A The Public Agricultural Production Corporation was set up toward the end of 1966/67 to supervise operations of all public

cotton schemes other than the Gezira; the Corporation's accounts were separated from the rest of the public sector in1968/69.

e/ Central Electricity and Water Corporation.v Bank of Sudani's holdings of non-interest bearing Treasury bills, Treasury-IfF position and countoritem to the Post Office

savings deposits.v Bank of Sudan's subscription to the capital of and advances to the specialized banks./ Includes deposits of the specialized banks with the Bank of Sudan and commercial banks.

I includes currency held by the Central Government./ Includes La 3.33 million representing liabilities to the EIF in tile SLt's account with the Bank of Sudan.

v Includes Ls 6.02 million representing liabilitics to the Bl' in the SDR's account with the Bank of Sudan.

Source: IfF' Reports and the Sank of Sudan

Table 6.2: AN-ALYSIS OF COIVVIERCIAL BAINKSi CREDIT TO TIE PRIVATE SECTOR, 1966-71(Ls million)

1966 1967 1968 1969 1970 1971June June June June June June

Short-term Credits 40.08 43.25 50.63 52.22 51.33 63.74

Export Financing 16.57 18.93 26.27 25.74 23.67 27.62

(a) Cotton (7.44) (7.91) t12.18' (13 61) (10.682 (11.07)(b) Other (9-13) (11.02) 614.09$ 612:135 (13.09) (16.55)

Import Financing 9.21 7.34 8-74 5.96 5.64 9.54

Industrial Enterprisesr_ 9.13 11.56 10.51 15.28 16.52 20.08

Other 5-17 5.40 5.10 5.24 5.60 6.50

Medium and Long-term Credits 7.60 8.80 9.84 8.91 8.98

Capital Investment 2.69 3.40 3.69 3.70 3.60 2.87

Otherk/ 4.91 5.40 6.15 5.21 5.48 6.52

Total 47.68 52-03 60.46 61.13 60.31 73-13

S/ Including import of equipment etc. by industrial enterprises.S/ Mostly short-term credits that have been consolidated.

Source: Bank of Sudan.

Table 6.3: COMMERCIAL BANKS' RESERVES, BORROWINGS AND LIQUIDITY POSITION, 1966-71(Ls million)

1966 1967 1968 1969 1970 1971June June June June June June

Cash Reserves / 7.4 5.7 5.9 5.1 5.2 6.0

Borrowing from Bank of Sudan 5l 6-9 10.5 12.4 9.2 13.3

Net Reserves (1-2) 2.1 -1.2 -4.6 -7.3 -4.0 -7.3

Net Foreign Liabilities 5.2 4.4 4.8 5.1 2.1 3.4

Total Deposit Liabilities 37.8 41.6 44.4 49.9 58.9 60.4

Cash Ratio (1:4)(in percent) (20) (14) (13) (10) (8.8) (9.9)

v Consisting of holdings of currency and deposits with the Bank of Sudan. In addition, since early1966 the banks have held Treasury Bills (Ls 9.5 million at the end of Sept.) against the pledgingof which they could readily borrow from the Bank of Sudan.

Source: Bank of Sudan

Table 6.4: GROSS RESERVES AND NET FOREIGN ASSETS, 1963-1971(Ls million)

1963 1964 1965 1966 1967 1968 1969 1970 1971June June June June June June June June June

Monetary Authorities 7.8 26.3 19.7 11.3 6 -0.2 1.6 -18.2

Convertible Foreign Exchange '50,9 31.2 26.3 15.8 18.5 17.4 16.8 13,6 9.6Of which Currency Cover (16-5) (14.8) (13-1) (03-9) (15-3) (17.0) (16.8) (7.o0I/ (7.0)

t!et Bilateral Claims 5.9 7.9 5.2 8.3 8.1 3.0 0.2 2.6 -6.4

Net I.M.F. Position 0.5 -1.3 -5.2 -4.3 -11.8 -13.7 -13.9 -11.9 -7.4

Short-term Liabilities ofthe Public Sector vis-a-visForeign Commercial Banks - - - - _3,5 - - - -

Bank of Sudan Short-termLiabilities to Foreign Banks - - - - - -3.3 -2.7 -6.8

Liabilities Arising fromKuwait Loans - - - - - - - - -7.2

Commercial Banks -6.1 -7.8 -4.9 -5.2 -4.4 - -5.1 -2.1 -3.4

Assets 0.7 0.5 0.5 0.4 0.6 0.8 1.2 1.6 0.2

Liabilities -6.8 -8-3 -5.3 -5.5 -5.0 -5.5 -6.3 -3.7 -3.6

Net Foreign Assets -1.2 30.0 21.4 2.0 -5.3 -0-5 -21.6

a/ Article 32 of the Bank of Sudan Act was amended. The Bank is now obliged to maintain at all times gold and externalassets including SBR's of not less than the equivalent of Ls 7 million.

Source: IMF Reports and Bank of Sudan.

Table 7.1: COTTON PRODUCTION, 1965/66 - 1970/71(thousand bales)

Period ended June 30

1965/66 1966/67 1967/68 1968/69 1969/70 1970/71

Long and extra-long staple cotton 774 875 849 997 1,035 1,075

Sudan Gezira Board 514 668 622 757 750 782Private estates 231 187 208 221 23 -White Nile 29 19 19 19 18Malut - 1 - - 1 -

Agri-Reform Corporation - - - - 243 292

Medium-staple cotton (Acala) 38 74 140 154 164 189

Rhashm-el-Girba 24 53 104 122 138 140Tokar 5 13 14 9 3 17Zeidab 8 8 4 6 8Gash 1 1 - -

Guneid _ _ 13 19 17 24

Short-staple cotton 48 65 37 45 55 28

Nuba Mountains 44 58 29 37 46 25Gedaref 4 7 8 8 9 3

Total 860 1,013 1,026 1,196 1,254 1,292

Source: State Cotton Marketing Corporation.

Table 7.2: SUIMM:ARv 3? C0TP314 STATISTICS, 9Q65/66 - 1?0,,'7

(thousand bales)

1965/66 1966/67 1967/68 1968/69 1969/70 19 70/71

1. Stocks at Beginning of Period 778 B94 1,078 1,057a/ 1,12L 1,1 45

2. Production 860i 1,013 1,026 1193 1,254 1,292

3. Sales 68o 1,002 1,146 1,339 1,235 1,233

14. Exports 66o 759 9214 1,00D 1,201 1,197

5. Local TJse 814 70 72 122 32 82

6. Stocks at end of Period 894 1 078 1151.124 1,145 1,158

(1 + 2 - 14 - 5)of whlich:

Producers' 765 776 636 531 55° 613

Exporters' 129 302 473 593 595 545

a/ Stocks reduced by 52,000 bales, to correct a cumulative error in methodof computing the stocks.

Source: Bank of Sudan.

Table 7.3: AREA mIDE-R COTTON ANVD YIELD PER FEDDAIT, 1966/67-1970/71

(area in 1000 feddans, yield in large kantars cf 315pounds per feddan)

1966/67 1967/68 1968/69 1969/70 1970/71/Area Yield Area Yield Area Yield Area Yield Area Yield

Long and Extra-long Staples 775 4.2 783 3.6 774 4.6 '4-9 818 5.1

Sudan Gezira Board 542 4.6 553 4.2 574 4.9 578 5.0 588 5.6

White Nile Schemes Board "' 16 4.6 16 3.3 16 4.9 8 44- -

Private Pump Schemes 217 3.2 214 3.4 184 4.1 40 2.7 - -

Agricultural Reform - - - - - - 189 4.9 230 4.9

Medium Staples (Acala) 81 3X 158 2.5 139 2.9 137 4.2 179 3.1

Khashm El Girba 53 3.6 71 4.9 92 4.8 102 4.8 197 4-5

Tokar Delta 18 2.4 58 0.5 25 1.6 12 o.8 48 1.3

Gash Delta2I" 3 o.6 10 0.3 1 1.0 1 1.7 - -

Guneid Extension - - 12 3.8_ 14 5.0 15 3.7 15 6.2

Zeidab Scheme 7 3.9 7 3.5 7 2.2 7 2.9 8 3.2

Others - - - - - - - - 1 1.4

Short Staples 301 0.9 181 0.8 247 0.8 296 0.8 201 0.7

Nuba Mountains 269 0.9 142 0.8 208 0.8 227 0.9 177 0.7

Gadaref Area 30 o.8 37 0.9 35 1.0 64 0.5 21 0.7

OthersA 2 1.0 2 0.7 4 0.7 5 0.7 3 -

Total 1,158 3-3 1,122 3.3 1,160 3.8 1,258 3.8 1,198 4-3

a/ Estimated in Sept. 1971/ Including the Melut Scheme.

j Administered by the Gezira Board./ Mostly Abu-Habil Scheme.

Source: Ministry of Agriculture

Table 7.): AREA AND OUTPUT OF MAIN CROPS, 1960/61 - 1970/71(area in 0OO's feddans; output in 0 0 0 's metric tons)

1960/61 1961/62 1962/63 1963/64 1964/65 1965/66 1966/67 1967/68 1968/69 1969/70 1970/71

DuraArea 3,067 3,516 3,517 3,254 3,157 3,199 3,182 4,437 2,780 3,353 4,698Output 1,051 1,h34 1,266 1,334 1,138 1,094 850 1,777 710 1,362 1,529

SorghumArea 932 759 1,066 1,410 1,426 1,447 1,297 1,464 1,516 1,458 1,731Output 226 205 291 373 353 253 252 341 278 383 460

GroundnutsArea 470 272 694 847 778 935 926 855 782 939 903Output 192 140 229 289 280 304 314 291 197 381 351

SesameArea 694 981 766 1,184 1,116 947 925 1,225 1,090 1,303 1,773Outpu. 127 332 142 174 183 160 .'1134 161 122 201 282

M-2aizeArea 93 40 79 78 79 41 40 90 64 102 87Output 31 7 16 26 26 12 11 20 15 32 23

WheatArea. 39 41 54 56 135 136 173 264 296 282 294Output 26 29 31 37 56 69 78 111 152 150 135

Source: Ministry of Agriculture

Table 7.5 : DISTRIBUTION OF STUDENTS, 1964/65 - 1Q69/70

LEVEL 196h/65 1965/66 1966/67 1967/68 1968/69 1969/70

All Levels 555,997 533,993 601,630 656,984 751,373 812,183

Kindergarden 2,082 2,o57 3,0o6 9,950 12,221 15,885

Elementary h53,199 42h,677 h71,488 493,556 572,623 610,798

Intermediate 68,681 71,213 89,485 109,070 121,702 13h,385

Post-Intermediate and Secondary 25,295 28,162 29,115 33,855 33,912 39,282

Higher Education 6,740 7,88h 8,h96 10,553 10,915 11,833

Source: Statistical Abstract, 1970

Table 8.1: COST OF LIVING INDEX, 1961-71

Average for Lower-salaried Higher-salariedperiod Sudanese officials Sudanese officials

Base: January 1951 = 100

1961 158.3 157.L

1962 159.4 160.0

1963 167.5 163.

1964 17T.0 168.7

1965 169.8 165.7

1966 172.7 167.6

1967 191.9 180.0

1968 172.5 170.6

1969 194.2 201.0

1970 Base: January 1970 = 100

1st. Quarter 101.1 101.0

2nd. Quarter 106.8 105.0

3rd. Quarter 116.0 112.8

4th. Quarter 103.2 103.1

1971

1st. Quarter 102.5 102.0

2nd. Quarter 10606 105.8

3rd. Quarter -! 120.3 116.5

a/ Average July - August, only.

Source: Department of Statistics

Table 8.2: COTTON EXPCRT PRICES, 1964/65 - 1970/71(Per Bale)

Price Per Bale

Fiscal Year (F.O.B. in Sudanese Pounds)

1964/65 55 91965/66 35.51966/67 45I1967/68 47 .1968/6q 52. h1969/70 53.21970/71 53.7

1968/69

July - September 07.9October - December h9.6January - March 54.3April - June 57.9

1969/70

July - September 54.0October - December 5L.7January - March 52.7April - June 51.2

1970/71

July - September 52.1October - December 54.3January - June 5h.2July - September 5. 0o

Source: Bank of Sudan

Table 9.1: `1ISSION PROJECTION OF MERCHANDISE EXPORTS, 1975

Commodity Annual Average (Actual) 1975 Estimate1966-1970

Quantity Price Value Quantity Price ValueG000 tons Ls/ton Ls Million '000 tons Ls/ton Ls Million

Cotton (all types) 179 271 148.5 228 257 58.5

Groundnuts 89 67 6.o 220 614 114.1

Sesame Seed 85 76 6.5 100 73 7.3

Gum 50 162 8.1 50 160 80O

Others - - 15.1 - - 26.6

Total 814.1 118.7

Source: Volume III - Annex 2.

Table 902: 1[SSIONi ESTDIATE OF IMERCHANDISE TI9PORTS, 1972/,3-1974/75

(Ls Million)

Annual Average Estimate Cumulative

1966/67-1970/712 1972/73 1273/74 1974/75 1273-192747

Consumer Goods ! 8 55 57 59 171

Intermediate Goods b/ 3 38 ho 41 119

Capital Goods c/ 13 35 35 35 105

Total 9, 128 132 135 395

a./ A growth rate of 4.0 percent is assumed for projections.

b/ A growth rate of 3.0 percent is assu.med for projections.

c/ Estimate is based on the mission's projection of the feasible level of 'investment.

Table 9.3: MISSION ESTIMATES OF CENTRAL GOVWThMENT REVNUE, 197b/75

(Base Year) Growth RateActual Projection Percent

1970/71 197L/75 1970/71 -1974/75

I. Taxes on Income and Profits _/ 15.1 26.0 1b.6

:T. Taxes on Production and Consumption b/ 5.0 61.0 7.9

III. Taxes on International Trade c/ 59.5 68.o 3._

Import duties 51.b 55.o 1.8Export duties and royalties 8.1 10.0 5.b

TV. Stamp Duty, Fees and Charges 9.8 1).0 9.3

V. Proprietary Receipts 23.5 2).0 0.5

Gezira Board 12.? d/ 9.0 3.6Profits and dividents 11.2 15.0 7.5

VI, Other Revenue 11.5 15.0 6.9

TOTAL REVENUE 16)4.) 205.0 5.7

a! This high growth rate takes into account the special effort which the Government. isundertaking to improve the administration and the collection of direct taxes.

b/ This item covers excise and consumption taxes as well as sugar monopoly profits. Theprojection growth ra-te takes into account the efforts being made to expand this sourceof revenue. However, sugar monopoly profits are a function of the world market pricefor the imported sugar as well as the cost of production of locally produced sugar. Asharp rise in either may require the Government to raise the price of sugar in orderto maintain the growth of this component of Government revenue.

c/ The low growth of this item reflects the expected change in the composition of importswhich will result in a higher proportion of capital goods many of which are exemptfrom duties. Export duties are estimated to maintain their present ratio to theprojected level of exports.

d./ This item included a payment of Ls ).5 million of arrears and thus the projection baseis Ls 7.8 million.

Trr>5WZ ;0 .'i: ISS PROI2FtOJ >!2 'PIOUS oW GOSS SURŽUCT SURPLUS QY PUOF IC ITERPRTSES 1a71/72-1,717/75

(L.s Million)

Tentative Forecasts_ _ _1971/72

1971/72 1972/73 1973/74 1974/75 -1974/75

"Traditional" Public Enterprises 7.9 10.5 12. _ 1L.1 ____

Of which:

Sudan Railways £/ 4.7 5.7 6.3 7.0 23.7

CEWC 2 5.0 6.1 17.),

Sudan Airways - -

Sudan Shipping Line e 0.7 1.0 1.0 1.0 3.7

Agricultural Enterprises 0.0 -2.0 -1.0 0.0 -3.0of which:

Gezira Board -5.0 - - -5.0

PAPC - -2.0 -1.0 - -3.0

ARC 5.0 - - 5.0

TOTAL 7.9 8.5 11.3 IL.1 bi.8

a/ The IPC (IDC) and the GTC have been excluded for lack of information.bi On an accrual basis.

c/ For existing organization. Forecasts on basis of separate organizations for port, railwaysand steamers are given in the Transport Annex.

d/ Break-even assumption on current account for forecast.e/ Based on calendar year financial results.f/ Cash surpluses (+) of managing boards.

Source: Public Enterprises Annex (Volume TI - Annex i).