Country Report Sudan Sudan at a glance: 2007-08 OVERVIEW Although the Economist Intelligence Unit expects the 2005 north-south Comprehensive Peace Agreement to survive over the outlook period, serious concerns persist over questions of implementation. Arguments over issues such as the sharing of oil revenue, boundary delineations and the role of militias will result in rising tension. Both northern and southern leaders will be increasingly preoccupied with securing their core bases of support in preparation for national elections, due in 2009. In Darfur we expect ongoing inter-factional fighting, insecurity and population displacement, as pro- government forces confront those rebels who reject the May 2006 Darfur Peace Agreement. There is little prospect that the planned "hybrid" UN-African Union (AU) peacekeeping force, which the UN hopes will take over from the existing undermanned and under-funded AU mission in Darfur, will be allowed sufficient troops and operational independence to make a difference to the situation on the ground. Further oil output rises, combined with growing domestic demand, will keep real GDP growth strong over the outlook period. However, the current account will record large deficits, as increasing oil earnings are more than offset by growth in import spending. Key changes from last month Political outlook • Our political outlook is unchanged. Increasing international pressure is unlikely to result in a lasting solution to the humanitarian crisis in Darfur. Economic policy outlook • Our economic policy outlook is unchanged. Economic forecast • Following the publication of new trade figures by the Bank of Sudan (the central bank), we have made a small downward revision to our projections for Sudan!s current-account deficit, which we expect to average around 12% of GDP over the outlook period. March 2007 The Economist Intelligence Unit 26 Red Lion Square London WC1R 4HQ United Kingdom The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For 60 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. 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Sudan 1 Contents Sudan 3 Summary 4 Political structure 5 Economic structure 5 Annual indicators 6 Quarterly indicators 7 Outlook for 2007-08 7 Political outlook 8 Economic policy outlook 9 Economic forecast 12 The political scene 19 Economic policy 24 The domestic economy 24 Economic trends 25 Oil and gas 28 Infrastructure 29 Agriculture 31 Financial and other services 32 Foreign trade and payments List of tables 9 International assumptions summary 11 Forecast summary 20 State budget 32 Trade account 33 Current account, Jan-Sep 33 Official reserves List of figures 12 Gross domestic product 12 Consumer price inflation Country Report March 2007 www.eiu.com © The Economist Intelligence Unit Limited 2007 Sudan 3 Sudan March 2007 Summary Outlook for 2007-08 Although the 2005 north-south Comprehensive Peace Agreement (CPA) should survive over the outlook period, arguments over the sharing of oil revenue, boundary delineations and the role of militias will result in rising tension. Both northern and southern leaders will be increasingly concerned with securing their core bases of support in preparation for national elections, due in 2009. In Darfur there will be ongoing violence, as pro-government forces confront the rebels. There is little prospect that the planned "hybrid" UN-African Union (AU) peacekeeping force will be allowed sufficient troops and operational independence to improve the situation on the ground. Further oil output rises, together with growing domestic demand, will keep real GDP growth strong in 2007-08, although the current account will record widening deficits. The political scene The Sudanese government has retreated from its apparent agreement to allow a three-phase transition to a AU-UN mission in Darfur, although some progress has been made on the first two phases. Prosecutors at the International Criminal Court have named two suspects blamed for human rights abuses in Darfur. Opposition parties have protested against the passing of a new political parties law. The president and first vice-president have traded accusations over the responsibility for slow implementation of the CPA. Economic policy The 2007 state budget, forecasting a widening fiscal deficit, has been approved by the National Assembly. The 2007 budget of the Government of Southern Sudan (GOSS) has allocated 36% of funds to the Sudan People!s Liberation Army. The Sudanese pound has been launched as the new national currency. The domestic economy The dinar has slowed its rate of appreciation against the US dollar. Inflation averaged around 7% in 2006. The GOSS has continued to assert its right to award oil exploration concessions in the south. Sudan has applied to join OPEC. Sudan and China have signed a US$1.2bn contract for the upgrading of the railway between Khartoum and Port Sudan. International agencies have forecast a good harvest in 2007. The government has moved forward with its plan to restructure and develop the banking sector. Foreign trade and payments The Bank of Sudan (the central bank) has reported that the trade account recorded a small surplus in the third quarter of 2006. The current-account deficit widened strongly in the first nine months of 2006, to almost US$2bn. Foreign-currency reserves declined sharply in 2006, by 11% year on year. Editors: Laura James (editor); Robert Powell (consulting editor) Editorial closing date: March 6th 2007 All queries: Tel: (44.20) 7576 8000 E-mail: [email protected] Next report: Full schedule on www.eiu.com/schedule Country Report March 2007 www.eiu.com © The Economist Intelligence Unit Limited 2007 4 Sudan Political structure Official name Republic of Sudan Legal system Sharia (Islamic) law is applicable in the north of the country in both civil and criminal cases. However, under the 2005 constitution, Southern Sudan is exempt, with its own, separate judiciary. A constitutional court has been created to monitor and protect the implementation of the constitution National legislature Bicameral parliament, which after 2009 will be made up of a wholly-elected 450-member National Assembly and a Council of States, composed of two representatives from each state. The current National Assembly is wholly appointed, however, according to the power-sharing quotas agreed under the 2005 Comprehensive Peace Agreement National elections December 2000 (presidential and parliamentary); next elections due by 2009 Head of state Lieutenant-General Omar Hassan Ahmed al-Beshir, who took office following a 1989 coup and was sworn in as president in October 1993; elected in March 1996 for a five-year term; re-elected in December 2000 National government The Council of Ministers, appointed by the president in consultation with the first vice- president and the second vice-president Main political parties National unity government consisting primarily of the National Congress (NC; up until 1998 the National Islamic Front) and the Sudan People!s Liberation Movement (SPLM), with some representation from the National Democratic Alliance (NDA)"an umbrella group consisting of 13 parties. The Democratic Unionist Party (DUP), the Umma Party and the Popular Congress are leading northern opposition groups. The Beja Congress is an opposition movement in the east of the country, and the Sudan Liberation Movement (SLM) and the Justice and Equality Movement (JEM)