Oil and Agriculture in the Post - Separation Sudan

Abstract

The Comprehensive Peace Agreement (CPA), which was signed by the governmentof Sudan and the Sudanese People’s Liberation Movement (SPLM) ended more than20 years of civil war.According to the CPA,the Sudan’s government has 50% of theoil exploited from the wells existing in the south in addition to the oil produced fromthe northern wells. The latter representsabout 30% of the total oil productioninSudan.InJanuary 2011,the people in southern Sudan have voted for separationfrom the Sudan andin July 2011 the Republic of South Sudan was officiallyannounced as Africa’sneweststate.Now the CPA period is over and the southpossesses its entire production of oil,butneedto use the export infrastructure thatexists in the northtoexportit. For that the south need to pay fees and customsforwhich theexact amountsneedto be further negotiated. Sudan would lose a hugepart of its revenue from oil, which constituteda growing sharein its trade,government revenue and GDPduring the last decade.This papertriesto investigatetheconsequences of separation on the Sudan’s economy.A regional generalequilibrium model with Africa database of the Global Trade Analysis Project (GTAP)isapplied.Results show that the entire economy would be hitwhen a20% cut in oiloutputis simulated. The study introduces the non-oil exportsofthe agriculturalsector as an alternative to oil and recommends enhancing the efficiency inagriculture and promoting agricultural exportsto gradually bring the economy backon track.