Oil crisis and the potential role of agriculture in the post-separation of Sudan

The Comprehensive Peace Agreement (CPA) signed by the Government of the Republic of Sudan (hereafter, the Sudan) and the Sudanese People's Liberation Movement ended more than 20 years of civil war. According to the CPA, in addition to the oil produced from northern wells, which represents about 30% of the total oil production in Sudan, Sudan's Government receives 50% of the oil exploited from wells of the southern part of country. In January 2011, the people in southern Sudan voted for separation from Sudan and in July 2011, the Republic of South Sudan was officially announced as Africa's newest state. Now, South Sudan possesses its entire oil production, yet it needs to pay a negotiated amount of fees and customs to utilize the export infrastructure of the Sudan so that its oil can be exported. The independence of South Sudan created a huge loss in oil revenue for the Sudan since oil revenue constituted a growing share in its trade, government revenue, and GDP during the last decade. This paper investigates the consequences of the independence of South Sudan on Sudan's economy using a Computable General Equilibrium model. Results show that the entire economy would be greatly affected by the applied scenarios as represented by GDP, Households welfare, domestic production and trade. The study introduces non-oil agricultural exports as an alternative to oil and recommends enhancing agricultural efficiency and promoting agricultural exports to gradually recover the economy.