Sudan must reduce its dependency on oil revenues and step up investment in agriculture if it wants to keep its economy growing and avoid further conflict, a World Bank report says. The need to diversify is particularly intense in the country’s south ahead of a referendum in seven months’ time which could see the underdeveloped region split off as an independent country, the report said.
Sudan’s economy has thrived, thanks to oil exports and foreign investment from Asia and the Gulf over the past decade, although much of the wealth remains concentrated in Khartoum. There have been signs of declining outputs in some of its existing oilfields and unrest, particularly in the south, has hampered new exploration.
The country emerged from more than two decades of north- south civil war in 2005 with a peace deal that promised the referendum, due in January 2011. But slow development has added to unrest in the south and analysts have warned of a risk of a return to war if the south, which holds most of Sudan’s known oil reserves, votes to secede. The World Bank said oil had helped Sudan’s economy, measured in gross domestic product, grow fivefold from $10 billion in 1999 to $53 billion in 2008.
Sudan had also managed to double the size of its road network and electricity generation infrastructure. But that expansion — the longest growth spurt since the country’s independence in 1956 — was threatened by volatile oil prices, neglect of other sectors and the dominance of the public sector, said the report.
“While oil-led growth over the past 10 years has greatly improved the Sudanese economy, its sustainability is under threat,” said a statement announcing the publication of the bank’s latest Country Economic Memorandum on Sudan. “The unbalanced development of the country, with a large disparity between the centre and periphery remains a potential source for conflict and political instability,” it added.
The bank urged Sudan to do more to encourage private sector investment and develop agriculture “as the next big alternative source of growth to the oil sector in the medium-term”. South Sudan should exploit its fertile soil and develop low-skill, labour intensive sectors like farming and livestock to spread the wealth to more of its population, the report said. The south’s semi-autonomous government almost entirely depends on oil for revenue and imports most other commodities.