Macroeconomic Policies and Economic Performance in Sudan: An Analytical Review for the Period 1960-2006

Abstract

The principle objective of this thesis is to empirically evaluate the role of macroeconomic policies stance in explaining economic performance divergence in Sudan. It discusses the major elements of a policy framework that could be implemented to maintain a favorable environment for private investment and promote sustainable long-run economic performance. The methodological and analytical framework of this thesis is a kind of an econometric and an analytic approach for data processing. The key message is that Sudan’s economic performance experience is extremely varied and episodic. However, it has exhibited a strong economic performance since 1998, reaching the fastest average rate of growth it has seen for decades. The recent economic recovery is based, among other things, on an improved policy environment (stability) and policy outcomes (quality), which have created a low risk economic environment. This extensively documents that sound economic policies are a necessary step for macroeconomic stability, ultimately, attaining a considerable macroeconomic achievement by creating a more conducive environment for private sector investment decisions. However, good macroeconomic policies, while necessary, are not sufficient for outstanding economic performance. In this respect, the results of the empirical work offer the following elements of a policy framework that could be implemented to maintain macroeconomic stability and promote sustainable economic growth in Sudan. • To enhance the country’s growth performance, authorities should seek to boost the accumulation of physical capital. This emphasizes the need to undertake significant policy reforms to create a more favourable economic environment to private sector. • In support of these efforts, governments should focus on increasing basic infrastructure and social services, as well as promoting human resource and social development. This emphasizes the importance of the public budget allocations (how much is spent on what) as a key instrument to promote private investment and sustain stable economic performance. • Governments should also continue to implement sound macroeconomic policies in order to fully restore and consolidate macroeconomic stability, which would likely encourage private investment and help economic growth. • Trade liberalization can also help accelerate economic performance by strengthening the competitiveness of domestic producers and speeding up Sudan’s integration into the global economy. This emphasizes the role of export-led growth strategy, which largely depends on strengthening export’s infrastructure and building up knowledge acquisition and technological capabilities. • Financial sector reform can help to enhance growth by building an efficient financial sector, mobilizing domestic credit to private sector, and financing productive investments