Oil crisis and the potential role of agriculture in the post-separation of Sudan

Abstract

The Comprehensive Peace Agreement (CPA) signed by the Government of the Republic of Sudan (hereafter,the Sudan) and the Sudanese People's Liberation Movement ended more than 20 years of civil war. Accordingto the CPA, in addition to the oil produced from northern wells, which represents about 30% of the total oilproduction in Sudan, Sudan's Government receives 50% of the oil exploited from wells of the southern part ofcountry. In January 2011, the people in southern Sudan voted for separation from Sudan and in July 2011, theRepublic of South Sudan was officially announced as Africa's newest state. Now, South Sudan possesses itsentire oil production, yet it needs to pay a negotiated amount of fees and customs to utilize the exportinfrastructure of the Sudan so that its oil can be exported. The independence of South Sudan created a huge lossin oil revenue for the Sudan since oil revenue constituted a growing share in its trade, government revenue, andGDP during the last decade. This paper investigates the consequences of the independence of South Sudan onSudan's economy using a Computable General Equilibrium model. Results show that the entire economy wouldbe greatly affected by the applied scenarios as represented by GDP, Households welfare, domestic productionand trade. The study introduces non-oil agricultural exports as an alternative to oil and recommends enhancingagricultural efficiency and promoting agricultural exports to gradually recover the economy.