Assessment of the Impact of Oil: Opportunities and Challenges for Economic Development in Sudan

Abstract

This paper assesses the effect of oil on economic development in Sudan and discusses related opportunities and challenges. We provide a comprehensive analysis using the most recent secondary data, with a view to clarifying the positive and negative effects of oil on Sudan’s economic development. We support the view that oil has had a mixed blessing on the Sudanese economy, arguing that oil is an important resource, particularly in satisfying domestic consumption and the achievement of self sufficiency by increasing public sector revenues. Although oil has helped to improve economic performance in the country, we find that the recent dependence on oil may spark other problems because it is an exhaustible resource and the instability of oil prices in the international market could produce uncertainty in domestic growth. Moreover, the increasing dependence on oil raises the possibilities of a ‘Dutch Disease’ and a lack of diversification, which may aggravate challenges linked to the division of the country and the potential for conflict with newly independent Southern Sudan.