With some 2.5 million square kilometers, Sudan is the largest country in Africa, with a population estimated at 38.6 million in 2007. It borders nine countries and reflects the religious, ethnic and cultural diversity of the region. Arabic, the official language, is spoken by some 60 per cent of the population. Sudan has been involved in one of Africa's longest-running conflicts since it became independent in 1956 and at the centre of it all has been widespread poverty, regional inequalities and disparities and competition for scarce natural resources. It was the signing of the Comprehensive Peace Agreement (CPA) in January 2005 that brought to an end more than two decades of hostilities between the North and South. The CPA paved the way for the establishment of the Government of National Unity (GNU) and the Government of South Sudan (GOSS) to form a Confederation system for governance under the ‘one country, two systems’. The CPA is based on a vision of wealth and power sharing that seeks equity, guarantees political rights and civil liberties, aims to prevent political and economical monopoly, and provides for a reformed and fully developed system of governance in which all Sudanese are equal. Administratively, sixteen states constitute the North, which includes the three Darfur states. The other 10 states constitute the South.

With almost three and a half years since the signing of the CPA, the country is still slowly transitioning from managing conflict to pursuing pro-poor development. Significant political, economic and social challenges remain, including a successful resolution of the conflict in Darfur and in other regions which are considered central to improving the security, humanitarian situation, and the success of the recovery and development efforts in all parts of the country. Despite the persistent real GDP growth, poverty remains widespread and deep and the inequality levels seem to be increasing. Although a lot of efforts have been made towards institutions building and capacity development in an attempt to accelerate the delivery of the peace dividends, translating this peace into tangible poverty reduction outcomes is proving to be a challenge. According to the 2005 Human Development Index, Sudan was ranked low at 147th out of 177 countries. Gender base inequalities in wages, employment and decision making also continue to be issues of concern. The average national enrolment rate in primary education is, for example, 58 percent but drops to below 20 percent in several parts of country. The average infant mortality rate, put at 105 per 1000 live births in 2000, masks deep regional disparities, not least in war affected areas, in Darfur and elsewhere. The country has over 4 million internally displaced people. The maternal mortality ratio averages 1,107 deaths per 100,000 live births, with Southern Sudan having the highest maternal mortality ratio in the world (2,037 deaths per 100,000 live births). With national elections in 2009, the planned referendum in 2011 on self-determination for Southern Sudan and the ongoing efforts for peace in Darfur, Sudan still has its best chance for sustainable peace and human development.

Potentially among the most economically viable states in Africa, Sudan has oil, water and minerals at its disposal. The performance of the economy at a macro level has been impressive, fuelled by oil exports and Foreign Direct Investment, with the economy growing at an annual rate of 6 to 8 percent. But this growth has not been broad enough to address poverty and narrow these regional disparities, particularly in Southern Sudan where 90% of the population live below poverty line. The increase in oil production has however brought with it macroeconomic management challenges with increased pressures toward internal and external imbalances and has also diverted focus from the non-oil sectors. The implementation of the CPA has also meant new spending, thus increasing fiscal pressures and widening of the fiscal deficit.  The economy is at serious risk of overheating due to overly generous fiscal stimulus and rising prices. Public financial management has also become a challenge at all levels of government, especially at the state and local level and the Government is undertaking measures to improve these PFM issues as well as improve transparency. Because of the rising world food prices, inflation rate is also projected to jump to a double digit level, from 7% in 2007 to 16% in 2008. A number of short-term policy measures have been implemented to reduce inflation, including removal of import duties and administrative fees for cereals. Domestic fuel prices remained well below world prices due to lack of any revision of domestic prices for the last two years. The authorities also struggled to manage falling reserves and a depreciating exchange rate. Sudan has debt overhang problem with most of its debt ratios remaining above the indicative thresholds for sustainability. Although Sudan has been attracting FDIs and private capital flows, its access to concessional loans has been very limited largely because of the arrears situation with the main creditors including the Bank.

Sudan and the International Community

In the 1970s and early 1980s, Sudan was a major beneficiary of development assistance, which reached about USD 1.9 billion in 1985. Since the early 1990s when the country started accumulating arrears, many donors suspended their financial assistance. With donor assistance falling to about USD 50 million by the late 1990s, the international community radically shifted its support toward humanitarian objectives. In September 2001, the UN lifted the sanctions imposed on Sudan following the ratification by the country of relevant anti-terrorism conventions. At the Sudan Donor's Conference in Oslo in April 2005, the international community pledged support in the order of 4.6 billion USD for 2005 -2007 on the basis of the framework defined by the Joint Assessment Mission. The third Sudan Consortium convened in Oslo on May 6-7 2008 to review progress on CPA implementation and JAM commitments for the first phase (2005-2007) through the Multi-Donor Trust Fund (MDTF) and agree on the priorities for 2008-2011.

African Development Bank Initiatives

The Bank Group started its lending operations in Sudan in 1971. To date, the Bank has approved 32 operations with a cumulative amount net of cancellation of UA 291.5 million. The Bank suspended its lending operations in Sudan since 1993 due to arrears and as such its interventions in Sudan are limited.  The last Country Dialogue Paper (CDP) to be approved by the Boards of ADB Group was the 2006-2007 CDP, which was approved in July 2006. The CDP aimed at stabilizing the arrears due to the Bank Group, helping the country to clear the arrears through concerted efforts involving all the country’s creditors, restoring the country’s external debt sustainability, and preparing ground for resumption of normal operations. The only on-going operation that was approved under this CDP is the Capacity Building for Poverty Reduction and Good Governance Project, which is a UA 9.62 million (USD 14.53 million) grant approved on 7 February 2007. Currently, the country’s arrears with the Bank stand at UA142.2 million. The Bank will be updating the Country Dialogue Paper in early 2009, which will also try to come up with an arrears clearance framework that would be discussed and agreed with the Government.

Other on-going non-lending activities in Sudan include the Emergency Assistance to fight the Avian Flu approved in June 2006, the technical assistance to the Ministry of Finance and the Southern Sudan Centre for Census, Statistics and Evaluation financed under the Nordic Governance Trust Fund. The Bank is also providing technical support to the GOSS in the area of Public Financial Management, with specific focus on tax harmonization issues. The Bank was also fully involved in the Darfur Joint Assessment Mission (D-JAM) as co-lead of the Core team with the World Bank and the UN. The security situation in Darfur has constrained the D-JAM process. The assessment teams were not able to access large areas of Darfur, nor were they able to consult widely amongst the Darfur population. Whereas the original planning of the D-JAM foresaw a finalization of the process and a pledging conference in September/October 2006, this did not materialize.