Export instability and its impact on economic growth of the Sudan

Abstract

This study investigates the likely impacts of export instability on the economic growth of the Sudan. However, before considering that, it was necessary to examine the factors which can lead to instability and the theoretical arguments linking instability with growth. Our analysis suggested that instability in Sudan, has been high by international standards. In investigating the causes of this instability the contribution of major commodities and countries to the overall instability was calculated. Commodity concentration did not seem to be an important cause, while geographic concentration showed a marginal effect on instability. The analysis also showed that most of the variability in export earnings was attributable to quantity fluctuations which in turn was caused by fluctuations in yield. On studying the impact of this export instability on the internal economy, it was found that it had resulted in more than proportional fluctuations in critical economic variables, within the Sudan. There was evidence that this had adversely affected the rate of growth of both investment and GDP. To deal with this instability both national and international policies are possible. At the national level fiscal devices such as export taxes and counter cyclical expenditure policy seem to have reasonable chances of reducing instability in Sudan. Internationally, both bilateralism and foreign borrowing can achieve similar results. However, it is emphasized that the costs and benefits of such policies should be examined carefully before they are introduced. Show more