Assessment of the impacts of oil: Opportunities and challenges for economic development in Sudan

This paper provides an assessment of the impacts of oil and discusses the opportunities and challenges for enhancing economic development in Sudan. One advantage of our analysis in this paper is that we provide a more comprehensive analysis using the most recent secondary data to discuss the positive and negative impacts of oil for enhancing economic development in Sudan. We explain that the various positive impacts of oil and the opportunities for enhancing development in Sudan's economy include the impacts of oil in satisfying domestic consumption and achievement of self sufficiency, increasing government and public revenues, rapid and impressive economic growth as measured by the growth in the GDP and its composition and structure, increasing foreign direct investment (FDI) and increasing the volume of foreign trade as measured by the volume and structure of exports. We find that while oil has recently contributed to the improvement of economic performance in the country, the recent heavy dependence on it, may lead to negative impacts and serious challenges for the Sudan since oil is an exhaustible resource and because of the instability of oil prices in the international market the revenue from oil is uncertain and volatile and may lead to instability of economic growth. Moreover, the increasing dependence on oil leads to increasing debate for and against the incidence of the Dutch Disease in Sudan economy, the lack of diversification and the challenges related to potential north-south conflict and division of the country.

Keywords: Oil economy, oil impacts, economic development, Sudan

JEL classification: O10, O11, Q30, Q32, Q40, Q43