Impact of exchange rate reforms on Sudan's economy: Applied general equilibrium analysis

Abstract

Exchange rate is one of the major trade policy instruments used to correct current account deficit. This study used the standard computable general equilibrium (CGE) model developed by the International Food Policy Research Institute (IFPRI) to analyze the possible effects of exchange rate policy on the Sudanese economy. Sudan social accounting matrix (SAM) for year 2000 was used as a core database for the model. The results revealed that depreciation of exchange rate improved the GDP, due to improvement in the balance of trade, regardless of deterioration in total absorption level and agricultural exports benefits more from depreciation than the industrial sector. On the other hand, appreciation resulted in deterioration of gross domestic product (GDP) and improvement of private consumption. Finally, depreciation of the exchange rate had better implication on the economy as a whole and on the agricultural sector in particular, than appreciation of the exchange rate. Key words: Exchange rate, computable general equilibrium model, social accounting matrix.