A Joint World Bank Group and Sudan’s Ministry of Finance and Economic Planning Assessment on the Sudan (IPRSP)

Interim Poverty Reduction Strategy Paper. The importance of the IORSP that it is one of the basic conditions for foreign debt relief under the HIPC (Heavily Indebted Poor Countries) Initiative.
In 2012, the Government of Sudan adopted an Interim Poverty Reduction Strategy Paper (IPRSP) that was informed by the results of the 2009 National Baseline Household Survey (NBHS).strategy is clustered under four broad pillars: (i) promote economic growth and employment The
creation; (ii) develop human resources; (iii) reintegrate IDPs and other displaced populations; and (iv) strengthen governance and institutional capacity of the public sector.
The Government is formulating a full-fledged PRSP that draws on the new household survey expected to be completed by mid-2016. Prior to embarking on the PRSP, the Government in collaboration with the development partners decided to: (i) assess the status of implementation of
the IPRSP (2012–2014); (ii) analyze achievements and obstacles towards poverty reduction; and (iii) draw lessons learned to inform the preparation of the PRSP. This study is in fulfillment of these objectives.

Country Context

The IPRSP was carried out within a volatile situation with conflicts in some parts of the country, secession of South Sudan, negative external environment and unsustainable debt burden, economic and financial sanctions, and fragile relations with the international community. The country was severely affected by an economic shock created by the loss of oil due to secession of South Sudan with negative impacts on growth and economic stability.
The government however, was able to weather the economic shock through the painful adjustment measures in June 2012 and September 2013. Economic growth was restored to 3.7 percent in 2014. Inflation was drastically reduced from around 44.4 percent in December 2012 to 12.6 percent in December 2015. However, a high margin between the official and parallel exchange rate still prevails.

Pro-poor expenditures

The definition of pro-poor expenditures adopted in this study builds on the IPRSP policies for priority actions for growth and poverty reduction. The pro-poor sectors defined in the assessment are agriculture and infrastructure, education, health, water and social protection. Non-budgetary expenditures such as Zakat and Central Bank of Sudan microfinance scheme are integral part of pro-poor expenditures. Expenditures include both the federal and state levels. This definition is also in line with the pro-poor sectors definition utilized in many
Sub-Saharan African countries.
Identification of pro-poor expenditures is highly context dependent, and is most useful when country-driven, developed through a wide participatory discussion, and used as a means to help guide and track government efforts. This IPRSP status report is expected to motivate the Government to improve the definition of pro-poor expenditures that effectively captures and monitors expenditures directed to the poor through the PRSP.
The government pro-poor expenditures have increased since 2012. Pro-poor expenditures as percent of GDP reached 5 percent in 2014 compared to 4.2 percent in 2012. Both federal and state levels expenditures as share of GDP have increased. When non-budgetary pro-poor expenditures
(i.e., Zakat and microfinance) were included, pro-poor expenditures would increase from 4.6 percent of GDP in 2012 to 5.4 percent of GDP in 2014. These percentages do not include the expensive subsidies scheme.
Maintaining government pro-poor expenditures, hovering around 5 percent of GDP (or nearly half of total public expenditures) is a significant achievement given adverse conditions facing the Government. These conditions include sanctions, high external debt level and low level of external financing, and loss of 90 percent of exports and 55 percent of revenues as a result of the secession of South Sudan. Comparison with African countries that reached HIPC decision point shows the average for poverty reducing expenditures is 9 percent of GDP with wide variation, for example, Ethiopia (15 percent of GDP), Uganda (10 percent of GDP), Mozambique (16 percent of GDP) while Chad, Zambia and Sierra Leone have much lower ratios than the HIPC average (about 5 percent of GDP). Unlike Sudan, a substantial external financial assistance was behind these
figures for the above-mentioned HIPC countries. It will be extremely difficult for Sudan to effectively address poverty reduction without assistance from the international community.
Major steps required are lifting of the devastating US sanctions, resolving Sudan’s external debt and increasing development funding.
One of the basic features of pro-poor expenditures in Sudan is that 58 percent of pro-poor expenditures, on average, occur at the state level, where the responsibility of delivering basic services (including education, health and water) has been transferred to the state level. The economic
classification of current versus development expenditures shows that total pro-poor expenditures are dominated by current expenditures.
Current expenditures (wage and non-wage) amounted to 66 percent of the total during the period 2012–2014. Within current expenditures, wages constitute the largest share, about 50 percent, leaving only 16 percent for running expenses such as operations and maintenance and supplies.


Agriculture and related infrastructure

All indicators derived from the 2009 National Baseline Household Survey point to the importance of agriculture to poverty in Sudan. About 57.6 percent of the households below the poverty line live in the rural areas which are dominated by agriculture as the main source of livelihood.
The share of agriculture and related infrastructure out of total public expenditures consistently increased from 6.5 percent in 2011 to 8.2 percent in 2014.
The increase in agriculture and agriculture related expenditures is mainly due to the Government’s investments in infrastructure such as dams and roads, indicating the high priority accorded by the Government to infrastructure investments. However, if agriculture spending is considered in a narrower context (i.e., less infrastructure spending), the public expenditure in agriculture as a ratio to the total public expenditure is 2.2 percent over the same period, which is disappointing given the role that has to be played by the agriculture sector in poverty reduction.
Several measures identified by the IPRSP to develop agriculture were implemented. Beside the huge investments in infrastructure, particularly roads and water harvesting in rain fed areas, considerable efforts were made in the livestock sector. Investment in this sector included the successful health program of vaccination and inspection for livestock exports of sheep and investments in quarantines that resulted in remarkable recovery of live animal’s exports.
Suitable policies in the Identification of pro-poor expenditures is highly context dependent, and is most useful when country-driven, developed through a wide participatory discussion, and used as a means to help guide and track government efforts. This IPRSP status report is expected to motivate the Government to improve the definition of pro-poor expenditures that effectively captures and monitors expenditures directed to the poor through the PRSP.
The government pro-poor expenditures have increased since 2012. Pro-poor expenditures as percent of GDP reached 5 percent in 2014 compared to 4.2 percent in 2012. Both federal and state levels expenditures as share of GDP have increased. When non-budgetary pro-poor expenditures
(i.e., Zakat and microfinance) were included, pro-poor expenditures would increase from 4.6 percent of GDP in 2012 to 5.4 percent of GDP in 2014. These percentages do not include the expensive subsidies scheme.
Maintaining government pro-poor expenditures, hovering around 5 percent of GDP (or nearly half of total public expenditures) is a significant achievement given adverse conditions facing the Government. These conditions include sanctions, high external debt level and low level of external financing, and loss of 90 percent of exports and 55 percent of revenues as a result of the secession of South Sudan. Comparison with African countries that reached HIPC decision point shows the average for poverty reducing expenditures is 9 percent of GDP with wide variation, for example, Ethiopia (15 percent of GDP), Uganda (10 percent of GDP), Mozambique (16 percent of GDP) while Chad, Zambia and Sierra Leone have much lower ratios than the HIPC average (about 5 percent of GDP). Unlike Sudan, a substantial external financial assistance was behind these
figures for the above-mentioned HIPC countries. It will be extremely difficult for Sudan to effectively address poverty reduction without assistance from the international community.
Major steps required are lifting of the devastating US sanctions, resolving Sudan’s external debt and increasing development funding.
One of the basic features of pro-poor expenditures in Sudan is that 58 percent of pro-poor expenditures, on average, occur at the state level, where the responsibility of delivering basic services (including education, health and water) has been transferred to the state level. The economic
classification of current versus development expenditures shows that total pro-poor expenditures are dominated by current expenditures. Current expenditures (wage and non-wage) amounted to 66 percent of the total during the period 2012–2014.
Within current expenditures, wages constitute the largest share, about 50 percent, leaving only 16 percent for running expenses such as operations and maintenance and supplies.

All indicators derived from the 2009 National Baseline Household Survey point to the importance of agriculture to poverty in Sudan. About 57.6 percent of the households below the poverty line live in the rural areas which are dominated by agriculture as the main source of livelihood.
The share of agriculture and related infrastructure out of total public expenditures consistently increased from 6.5 percent in 2011 to 8.2 percent in 2014.
The increase in agriculture and agriculture related expenditures is mainly due to the Government’s investments in infrastructure such as dams and roads, indicating the high priority accorded by the Government to infrastructure investments. However, if agriculture spending is considered in a narrower context (i.e., less infrastructure spending), the public expenditure in agriculture as a ratio to the total public expenditure is 2.2 percent over the same period, which is disappointing given the role that has to be played by the agriculture sector in poverty reduction.
Several measures identified by the IPRSP to develop agriculture were implemented.
Beside the huge investments in infrastructure, particularly roads and water harvesting in rain fed areas, considerable efforts were made in the livestock sector. Investment in this sector included the successful health program of vaccination and inspection for livestock exports of sheep and investments in quarantines that resulted in remarkable recovery of live animal’s exports. Suitable policies in the area of liberalizing and investments in the Gum Arabic and oilseeds led to increased production and exports of those commodities. Investments in technological improvement—genetically modified cotton—resulted in the recovery for cotton.
These efforts had positive results on agriculture production. Output and yields started to recover particularly oil seeds and cotton. A positive achievement in the agriculture sector is the clear rising trend in yields and quantities exported. The rising trend is also driven by the livestock sector, which shows a remarkable recovery with virtually no exports in 2008 that grew to a multimillion business and earned about US$682 million in 2013, compared to total agriculture exports of US$1,626. Cotton production and yields have recovered over the past years, after a number of years with declining yield and production. Gum Arabic production has also shown a remarkable recovery, but there is considerable scope to expand production. Sesame yields slightly improved during the review period.
Market access for agriculture improved as investments in infrastructure increased. Sudan invested heavily in roads construction during 2012–2014, with noticeable achievements. In the period 2012–2014 around 1,262 km of roads or about 20 percent of the network were added to the road network, bringing the total paved roads network in 2014 to 8,706 km. The distribution of the new roads constructed gave due consideration to the regional balance.
The outcome of the increased production had positive impacts on food security. It has enhanced one pillar of the food security situation in the country, which is food availability. However, the stability of food supply was affected by the increase in prices in the first half of 2012, when average cereal prices were about two to three times their level in 2008. On the other hand, unemployment also has negative impacts on accessibility. Unemployment rate, which was around 14.8 percent in 2009 as estimated by the Central Bureau of Statistics increased to 18.8 percent in
2013, as noted by the Ministry of Manpower based on a survey in collaboration with the International Labor Organization. In conflict affected areas, food security was adversely influenced by the increase in displacement.
Despite agricultural progress several challenges remain. Sudan is producing far below its potential.
Total area under irrigation declined to about 2 million feddan compared to a potential of 4.7 million feddan. Irrigation intensity of Gezira Scheme is currently around 37 percent from a level of 75 percent in the 1970s. Current cotton production is 130,000 bales whereas its production had
reached 1,300,000 bales in mid-seventies. Sesame production is one fifth of the level attained in the early 1960s. Irrigation schemes still suffer from poor management and lack of institutional reforms, which have been the main reasons behind the deterioration of production and productivity in the irrigated sector.
Agricultural productivity is still extremely low. Sudan is not investing well in research or in use of fertilizers and has weak extension services. Expenditures on research during the IPRSP period are about 0.08 percent of agriculture GDP. Brazil invests in research 1.8 percent of agriculture
GDP, China 0.5, and India 0.4. Yields of cereals in Brazil are 4826 kg per hectare, 5891 kg per hectare in China and 3889 kg per hectare in India, while in Sudan they are only 589 kg per hectare.