Industrial development finance in Sudan: an empirical investigation, 1990 – 2013

Abstract

Finance is an instrument for accelerating economic growth and for stimulating development. As the case in many other Arab and African countries, lack of adequate finance is the major obstacle to development in Sudan. This study aimed at examining the impact of domestic and foreign finance allocated to industry, together with power generation and inflation rate, on industrial development in Sudan during the period 1990–2013. The importance of the study stems from the fact that finance is a key factor in any development and that industrialization is a main driver of economic growth. The results obtained by applying the Ordinary Least Squares technique to the log linear form of the model signify that each of the explanatory variables is statistically significantly at 1% level. Inflation deters industrial development, while the other regressors impact positively. In particular, industrial value-added as percentage of gross domestic product is found to be more responsive to changes in Foreign Direct Investment followed by inflation, domestic finance, and lastly power generation. The study recommends attraction of more Foreign Direct Investment, curbing inflation to reduce the cost of doing business, raising more real domestic financial resources, improving resource management, and enhancing the quality of industrial products to international standards as key to facilitate economic growth in the Sudan. Human capacity building for industrialization is also highly recommended.

Keywords: Sudan, industrial development, finance, power generation, inflation