Sudan_Economic_Brief-Dec_2011.pdf

1 Sudan Country Economic Brief – December 2011 The World Bank – Africa Region I. Secession affects Sudan’s macroeconomic stability Negotiations on post-CPA arrangements are not yet concluded and Sudan starts to feel the impact of the protracted negotiations with the South on oil revenue. Negotiations were scheduled to resume under the AUHIP, chaired by Pres. Mbeki, in November based on a proposal by the AUHIP for transitional financing arrangements between the two parties. But negotiations collapsed again in the last week of November, still leaving the urgent need to find an agreement. In the meantime, Sudan imposed a measure on South Sudanese oil exports through its export channels. While the measure was originally announced as a stop of exports for oil from South Sudan, the government clarified that oil is flowing but Sudan takes a share of 23 percent (‘in-kind’) from all South Sudanese oil volumes going through Port Sudan. This measure is expected to be in place until a deal on transit fees is reached as part of the post- CPA negotiations as according to Sudan South Sudan has not settled transit fees on oil exports for the period between July 9 and the end of October 2011. It remains unclear how the decision will affect the overall negotiations and prospects to be concluded in the so-called package deal. At the same time there is concern that protracted negotiations and conflict in bordering states may affect the debt relief process under the zero option. Following the secession, Sudan is now experiencing a significant loss in oil revenue and exports. Since July 9, 2011 Sudan is no longer receiving any oil revenue share from Southern oil fields, which previously accounted for around 75 percent of Sudan’s total oil production during the CPA period. The loss of the oil production has already brought with it a significant adverse impact on Sudan’s economic growth – largely through weakened government consumption and investment as well