Policies and Problems of Formal Finance to The Public Agricultural Production Corporations in The Sudan

Abstract

This study was concerned about the effect of some of the government policies towards the financing of the public agricultural production corporations (P.A.P.Cs) and some other related problems. As a general objective, the study focused on the formal (government) financing of the (P.A.P.Cs.) with respect to their evolution and growth, the loan policies and lending procedures pursued and the problems associated with that. In early the fifties the working and marketing conditions of all the cotton growing enterprises (public and private) were quite favourable and encouraging. Towards the end of the fifties and throughout the sixties, the cotton marketing conditions witnessed frequent cycles of production and returns. Consequently, the financial conditions of the cotton schemes deteriorated and showed some symptoms of liquidity problems and budget deficits. Since the year 1970, the borrowing of the P.A.P.Cs. from the Bank of Sudan (B.O.S.) for the current budget showed continuous annual increases. Similarly, the reliance of the P.A.P.Cs. on the Ministry of Finance for financing the development budget showed successive increases during the period 1970-1985, where after, the financing of the P.A.P.Cs from the Ministry of Finance and the Central Bank of Sudan was stopped. The activities of both the formal financing institutions and the served P.A.P.Cs. have contraversing effects on the general performance of each, and at that time (the beginning of the ninety decade) the government came to adopt policies of economic and financial liberalization and the P.A.P.Cs were transferred to get their credit needs from the Commercial Banks. This study evaluated the credit policies and activities of the lending institutions concerning the credit needs of the P.A.P.Cs. and the effect of that on their production levels. Other related government fiscal, production and marketing policies were also investigated and their overall effects on the general performance of the P.A.P.Cs. and their financing bodies are evaluated. The study observed the high increases in the cost of production in the P.A.P.Cs. resulting from the unfavourably applied formal fiscal policies. The inflated production costs, insufficient and delayed loans delivery contributed negatively to the general performance of these corporations. The study recommended the necessity of adopting more effective credit policies to meet the total budgets requirements and allow for easy flow of credit for both the current and development budgets. To minimize the negative effects of the other government policies (fiscal, production and marketing policies), certain reform measures and recovery programmes were also recommended to include some improvements on the marketing systems and systems of partnerships. For the improvement of the general internal conditions of the P.A.P.Cs., factors like the administrative structure and management techniques and the legal aspects of these corporations were reviewed and their improvements were recommended. The study also identified some of the essential aspects which had not been intensively investigated in this research and they need further research work. Those include the study of the flow of credit within the microstructure of the P.A.P.Cs., an extended study on the issue of the cost structure and the costing systems of these corporations and a study of a prospective planning of the foreign exchange resources are required to secure the future viability of the P.A.P.Cs.