Global Investment House – Sudan Economic & Strategic Outlook – Balance Of Payment
The year 2005 witnessed significant worsening in the current account which registered a deficit of US$2,955.0 against deficit of US$1,352.0mn in 2004. This deterioration came on the back of a trade deficit of US$1,121.0mn in 2005 against trade surplus of US$192.0mn in 2004. The current account was positively affected by the increased exports of petroleum (up by 35.0%), however, imports increased by 65.8% resulting in a trade deficit of US$1,121.0mn in 2005. The reason for increased import was buoyant economy on the back of increasing oil prices for last three years. We believe increase in demand was a good sign for the economy.
Services balance was also worsened to a net outflow of US$1,643mn in 2005 against a net outflow of US$1,020.0mn in 2004. In the end, current account deficit went up from 6.3% of GDP in 2004 to 10.7% of GDP in 2005. The economy kept the trend in 1H06 with increased exports (up by 10.5% Y-o-Y basis) to US$2,550.4mn and even more increased imports (up by 41.8%) to $3,474.4mn value that resulted in larger trade deficit of $924.0mn in 1H06 as compared to trade deficit of US$142.7mn in 1H05.
Current account deficit has been balanced by capital and financial account. The Capital and Financial account has been in surplus and it has been increasing since 2002. It stood at US$2,688mn in 2005 as compared to US$501mn in 2002, which means a rise of 5.3 times for the period. Rise came mainly on the back of increase in FDI & portfolio account US$2,355mn in 2005 vs. US$633mn in 2002.
The strong trend in capital inflows continued mainly in the form of foreign direct investment in industrial, telecommunications, transport, and banking sector allowing for a buildup of net international reserves from 1.9 months of imports at end-2004 to 2.6 months at end-2005.
FDI to the country has been increasing for last three years, which is a good sign for the long term growth of Sudanese economy. Capital and financial account is likely to see increased FDI in 2006. FDI and portfolio account has grown at CAGR of 55.0% for the period of 2002-05. FDI has been the main contributor to this. It stood at US$3.8bn in 2005 vs. US$1.8bn in 2003.
Sudan’s balance of payment improved from a negative of US$405mn in 2002 to US$114mn in 2004. It stood at US$48mn in 2005.
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