DETERMINANTS OF SAVING RATE IN SUDAN: An Empirical Investigation (1990-2013)

Abstract

Saving is considered as an important source of financing investment in any country, and a tool for achieving macroeconomic stabilization. The Sudan economy witnessed a number of difficulties over time such as supply rigidities, internal and external imbalances, higher inflation rates, which all contributed in a way or another to low saving rate in the country. This paper aimed at examining the determinants of saving rate in Sudan during the period (1990-2013) taking into consideration real disposable income, real deposit rate, and age dependency ratio as explanatory variables. The OLS technique is adopted for conducting the regression analysis. The main results obtained signify that age dependency ratio reduces the saving rate, while real deposit rate and real disposable income impact positively. Each of the explanatory variables is statistically significant at 1% level. The saving rate in Sudan during the period under study is found to be more responsive to age dependency ratio followed by real deposit rate, and lastly real disposable income. The study recommends increasing social security networks particularly for children and elderly people, besides encouraging saving awareness in both the private and public sectors, improving resource management, and curbing inflation rate to promote real deposit rates. It is highly recommended to reform the banking system to attract savings. Sudan should also focus more on policies that increase economic activity in the country - particularly in the productive sectors of agriculture and industry, in order to enhance real disposable incomes.