June 15, 2010

Economy- Is oil creating a spree?

A World Bank report challenges Sudan's spending over the past decade. Has the country gone on a spending spree that is wise?

Sudan must use its oil production, which has helped to quintuple the size of its economy in the past decade, to create more balanced and sustainable growth, the World Bank said.

With an independence referendum due in January in Southern Sudan, the source of most of the country’s oil, the government in Khartoum needs to invest in agriculture and other non-oil industries, and reduce the dominant role of the state, the bank said yesterday.

“While oil-led growth over the past 10 years has greatly improved the Sudanese economy, its sustainability is under threat,” the bank said in a statement announcing its latest Country Economic
Memorandum on Sudan.

Sudan’s rapid economic development has also created tensions that threaten to spark instability, the bank said. War has raged in the western region of Darfur for the past seven years after rebels took up arms, accusing the Khartoum government of neglecting the region.

“The unbalanced development of the country, with a large disparity between the center and periphery, remains a potential source for conflict and political instability,” the bank said.

President Umar Al Bashir’s government needs to allow a greater role for private companies and start “developing the agriculture sector as the next big alternative source of growth to the oil sector in the medium-term,” it said.

Economic Expansion
Sudan’s gross domestic product expanded to $53 billion in 2008 from $10 billion in 1999, the year oil exports started, the bank said. Annual per capita income increased to $532 in 2008 from $334 in 1999, it said.

“Oil wealth has enabled Sudan to roll-out a massive expansion of its physical and social infrastructure including a doubling of the road network and electricity generation,” the bank said.
About 70 percent of Sudan’s crude is pumped in the semi-autonomous region of Southern Sudan, central bank Governor Sabir Hassan said in a June 9 lecture in Khartoum.

Companies including China National Petroleum Corp., Malaysia’s Petroliam Nasional Bhd. and India’s Natural Gas Corp. pump the bulk of daily output of about 490,000 barrels. Sudan is sub-Saharan Africa’s third-biggest oil producer, according to the BP Statistical Review of World Energy.

“If Southern Sudan secedes, it could affect the economy negatively unless the government takes measures to counter it,” Hassan said.


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