Domestic Policies and Payments Problems of the Sudan, 1947-62

THIS PAPER is concerned with the interaction between domestic economic policies and external balance in the Sudan. Part I contains an analysis of balance of payments developments during the period 1947-62. Following a description of trends and structural relationships, the discussion is divided into three periods: 1947-51, characterized by a sharply rising trend of exports and imports; the 1952-56 export cycle; and the 1957-62 export cycle. Part II deals with monetary and fiscal developments as related to balance of payments problems. The policies adopted by the Sudanese authorities to attain domestic and external equilibrium are appraised in the light of payments developments.


THIS PAPER is concerned with the interaction between domestic economic policies and external balance in the Sudan. Part I contains an analysis of balance of payments developments during the period 1947-62. Following a description of trends and structural relationships, the discussion is divided into three periods: 1947-51, characterized by a sharply rising trend of exports and imports; the 1952-56 export cycle; and the 1957-62 export cycle. Part II deals with monetary and fiscal developments as related to balance of payments problems. The policies adopted by the Sudanese authorities to attain domestic and external equilibrium are appraised in the light of payments developments.

THIS PAPER is concerned with the interaction between domestic economic policies and external balance in the Sudan. Part I contains an analysis of balance of payments developments during the period 1947-62. Following a description of trends and structural relationships, the discussion is divided into three periods: 1947-51, characterized by a sharply rising trend of exports and imports; the 1952-56 export cycle; and the 1957-62 export cycle. Part II deals with monetary and fiscal developments as related to balance of payments problems. The policies adopted by the Sudanese authorities to attain domestic and external equilibrium are appraised in the light of payments developments.

I. Balance of Payments Developments


The structure of the Sudan’s balance of payments is heavily weighted with commodity trade, which accounts on average for well over 80 per cent of the Sudan’s current exchange receipts and payments. Other items of the current account are relatively less important. During 1947-62, earnings from services averaged about 9 per cent of exports, and expenditures on services were about 18 per cent of imports (Table 1). The balance on services account was negative in all years except 1952; in most years, the deficit ranged between LSd 2 million and LSd 5 million.1

Table 1.

Sudan: Balance of Payments on Goods and Services Account, Totals, 1947-62

(In millions of Sudanese pounds)

article image
Sources: International Monetary Fund, Balance of Payments Yearbooks.

As shown in Table 2 and Chart 1, the trend of the Sudan’s foreign trade has been sharply upward. Between 1947 and 1962, exports increased at a rate of about LSd 4.2 million a year while imports increased at the higher annual rate of LSd 4.7 million. The rate of increase in exports was considerably above that of imports during the period 1947-51; subsequently, the position was reversed.

Chart 1.
Chart 1.

Sudan: Balance of Trade, Annually, 1947-621

Citation: IMF Staff Papers 1964, 001; 10.5089/9781451956054.024.A005

1 Based on data in Table 2. Imports are c.i.f.; exports are mostly c.i.f.
Table 2.

Sudan: Balance of Trade, Annually, 1947-62 1

(In millions of sudanese pounds)

article image
Sources: International Monetary Fund, Balance of Payments Yearbooks.

Imports are c.i.f.; exports are mostly c.i.f.


It is also evident from Chart 1 that exports fluctuated considerably more than imports. Thus, the average annual deviation of exports from their trend values2 during this period was LSd 9.2 million, compared with LSd 7.7 million for imports. The maximum percentage deviation was 89 per cent for exports and 55 per cent for imports. Exports increased by as much as 119 per cent in one year (1951), and fell by 41 per cent in another (1952), compared with a maximum annual rise in imports of 47 per cent (1952) and a fall of 23 per cent (1958). Subject to a lag of approximately one year, imports have followed exports closely. The lag is, in fact, probably shorter than one year, but the assumption of a one-year lag was found to provide a good approximation. The correlation coefficient of the deviations of exports and imports from their respective trend values was +0.81 when imports were lagged by one year.3

The fluctuations in the trade balance appear large unless account is taken of this lag in imports, which is attributed to the close link between export earnings and government revenues, the delayed adjustment of government expenditures to changes in revenues, the lag in the distribution of income by cotton boards to tenants, and the usual expenditure lag by income earners. However, the effect of the last factor has diminished in recent years because of the growth in bank credit.

Between 1950 and 1958, the Sudan incurred small net deficits on transfer payments; they averaged about LSd 1 million a year. However, the position was reversed thereafter by the receipt of grants from the United States and payments of compensation by the United Arab Republic,4 and a net surplus of LSd 22.5 million was recorded during the four years 1959-62.

For the period 1947-62 as a whole, there was a net capital inflow on both private and official accounts, the former amounting to LSd 19.7 million and the latter to LSd 18.4 million. Until 1957, private capital movements were usually outward on account of increased holdings of Egyptian pounds by the public. However, the withdrawal in 1957 of LE 18.5 million of Egyptian notes and coins and the issuing of Sudanese currency reversed this trend. Official capital movements were also outward in each year of the period 1947-58, but during the following four years a net inflow of LSd 29.0 million was recorded. The net yearly figures in the various balance of payments accounts are shown in Table 3.

Table 3.

Sudan: Balance of Payments Data, Annually, 1947-62

(In millions of sudanese pounds)

article image
Sources: International Monetary Fund, Balance of Payments Yearbooks.

Minus sign indicates increase; plus sign indicates decrease. The difference between column 8 and columns (4 + 7) is due to errors and omissions.

“Capital movements” includes a credit item of LSd 18.5 million for the withdrawal of Egyptian pounds held by the public; “changes in monetary reserves” includes a corresponding debit item.

Includes LSd 3 million received from the United Arab Republic under the Nile Waters Agreement.

Includes LSd 4 million received from the United Arab Republic under the Nile Waters Agreement.


A significant change in the composition of imports occurred during this period. Imports of raw materials and capital goods taken together increased much faster than imports of consumer goods, especially after 1959. Between 1950 and 1962, the share of consumer goods in imports dropped from 69 per cent to 44 per cent, while the share of raw materials and capital goods increased from 31 per cent to 56 per cent. It would appear that the adjustment of raw materials and capital goods to cyclical movements was slower than the adjustment of consumer goods. Thus, while in 1953 imports of consumer goods declined by LSd 9.6 million (25 per cent), other imports declined by LSd 1.4 million (6 per cent). In the following year, imports of consumer goods increased slightly, while other imports declined by LSd 3.6 million (17 per cent). Differences in the lag were not so evident during the period of rising imports, but were again apparent in the downturn. Imports of consumer goods declined by LSd 12.6 million in 1958 (31 per cent) while other imports increased by LSd 4.5 million (16 per cent). In 1959, consumer goods increased by LSd 5.7 million (21 per cent) while other imports declined by LSd 8.0 million (25 per cent).

Analysis of exports in this and other sections of this paper is primarily in terms of cotton exports, because these have been by far the largest single export item and have accounted for much of the fluctuation in total exports.

Exports other than cotton have risen steadily since 1948, except in 1951, when they rose sharply above their trend value, and in 1958, when they dropped far below. On the other hand, the fluctuations in cotton exports have been quite pronounced. The share of cotton in total exports declined from 61 per cent in 1948 to 55 per cent in 1962, because other exports increased more rapidly. While the value of cotton exports rose by 175 per cent between 1948 and 1962, that of other exports went up by 250 per cent. This is partly explained by the fact that price movements affected cotton adversely in relation to other exports. The decline in the share of cotton would have been even greater had it not been for the completion of a major irrigation scheme in the Gezira area, which resulted in an increase of output.


It has been found convenient to divide the 16 years 1947-62 into three periods related to the fluctuations in export earnings: the export boom of 1947-51 and the export cycles of 1952-56 and 1957-62. The first period was marked by large surpluses in the balance of payments, resulting in a substantial accumulation of reserves. As shown in Table 4, this was also the pattern in each recovery phase of the two export cycles. In the declining phases, deficits on current account were recorded, and these were at a higher annual rate during the 1957-62 cycle. In recent years, the emergence of a net inflow of capital has had a considerable impact on movements in reserves.5

Table 4.

Sudan: Export Fluctuations and Balance of Payments Trends, 1947-62

(In millions of Sudanese pounds)

article image
Sources: International Monetary Fund, Balance of Payments Yearbooks.

Minus sign indicates increase, and no sign indicates decrease, in reserves.

The fluctuations in the over-all balance of payments were amplified during part of this period by the adoption of certain cotton-pricing policies in 1954. These policies were reversed in 1959 because of their adverse effects on balance of payments stability.

Export boom of 194.7-51

During the five-year period 1947-51, the Sudan experienced an unprecedented export boom, brought about by the rise in the value of cotton exports.6 Imports reacted slowly and, as shown in Table 3, the trade balance improved from a surplus of LSd 1.0 million in 1947 to LSd 38.0 million in 1951; trade surpluses during the five-year period totaled LSd 61.7 million. When allowance is made for the deficits on services and transfer payments, current account surpluses amounted to LSd 50.1 million.

Since the Egyptian pound was then the currency in circulation, the monetary expansion brought about by these surpluses was partly reflected in an increase in short-term assets of the private sector,7 totaling about LSd 9 million for the whole period; other private capital movements were negligible. On official account, there was some outflow of capital in the form of a reduction of long-term liabilities, by LSd 4.8 million. After allowance for all these movements, official exchange reserves increased by LSd 38.4 million during the period 1947-51. About two thirds of these reserves were in the form of sterling balances and short-term securities, and the remainder in long-term sterling securities.

Export cycle of 1952-56

The sharp rise in cotton prices in 1950-51 came to an end early in 1952,8 and was followed by a sharp decline in the 1952/53 season. In addition, the quantity of cotton exported dropped by 40 per cent in the calendar year 1952. The decline in cotton prices thus went hand in hand with a decline in the volume of exports, and the proceeds from cotton exports fell from LSd 47.5 million in 1951 to LSd 29.0 million in 1952. Total export proceeds dropped from LSd 79.6 million to LSd 46.7 million, while imports, influenced by higher incomes in earlier years, increased from LSd 41.6 million to LSd 61.2 million (Table 2).

There was a further, but smaller, decline in exports in 1953 and 1954. As this was more than offset by the decline in imports, the deficit in the trade balance fell from LSd 14.5 million in 1952 to LSd 6.6 million in 1954. This improvement, however, can be explained entirely by the improvement in the terms of trade, resulting from both the rise in export prices9 and the decline in import prices.

Cotton prices rose until January 1955; a period of relative stability at a slightly lower level then followed, but prices resumed their upward trend in March 1956, and rose by almost 50 per cent during the 12 months ended March 1957. Although prices averaged less in 1955 than in 1954, the volume of cotton exports increased by about 60 per cent. On the average, there was a 20 per cent rise in prices in 1956, together with a 20 per cent increase in the volume of exports; both factors accounted for the sharp rise of exports to LSd 71.7 million in 1956, from LSd 56.0 million in 1955 and LSd 40.9 million in 1954.

Despite the higher incomes realized from exports, and a rise in import prices, the value of imports failed to increase in the 1954-56 period because of the tightening of restrictions on imports (July 1955-September 1956) and the closing of the Suez Canal in November 1956; they averaged LSd 49.0 million during the three-year period. Thus, a marked improvement in the trade and over-all balance of payments position was achieved.

Export cycle of 1957-62

Imports rose sharply in 1957. The increase was from LSd 10.7 million during the last quarter of 1956 to LSd 13.4 million in the first quarter of 1957, LSd 17.7 million in the second quarter, and LSd 18.7 million in the third. For the year 1957 as a whole, imports increased to LSd 69.7 million, from LSd 48.2 million in 1956. On the other hand, there was a sharp decline in export proceeds in 1957. Cotton prices had passed their peak before the 1957 crop was available for export. From 77 U.S. cents a pound in March 1957, prices declined steadily to a low of 30 cents a pound in February 1959.10 The minimum reserve prices of the Gezira Board were, however, maintained relatively high, and a sharp decline in sales followed. The volume of cotton exports in 1957 dropped by more than 50 per cent. In the following year, the crop was the poorest on record,11 and sales remained low. During the two-year period 1957-58, the Sudan had trade deficits aggregating LSd 27.4 million and current account deficits of LSd 34.3 million. Capital inflows on private account, however, amounted to LSd 19.6 million (of which the withdrawal of Egyptian pounds from circulation accounted for LSd 18.5 million). Monetary reserves fell by LSd 17.6 million.

A number of measures (increase in interest rates, higher cash margins for documentary import credits, reduction in credit ceilings), combined with the reduction in incomes, produced a decline in imports from LSd 18.7 million in the third quarter of 1957 to LSd 12.0 million in the first quarter of 1958. In April 1958, the restrictive measures were intensified; nevertheless, in the months immediately following imports rose, and the figure for the second quarter of 1958 was a record quarterly total of LSd 22.8 million. A major factor in this increase was that an accelerated development program expanded government imports from LSd 5.3 million in the full year 1957 to LSd 15.6 million in 1958. On the other hand, imports for private use declined from LSd 62.6 million in 1957 to LSd 43.9 million in 1958.12

Receipts from exports rose sharply in 1959 and declined only slightly in the next two years, because of a drop in exports of cotton. In 1962, export receipts advanced considerably, primarily as a result of an increase in the volume of cotton exports. However, imports moved upward steadily after 1959. As a result, the trade balance changed from a credit of LSd 2.1 million in 1960 to debits of LSd 16.4 million in 1961 and LSd 6.9 million in 1962, the improvement in 1962 resulting from a proportionately larger increase in exports. But a sustained inflow of official capital and an improvement in net receipts from services and transfer payments produced favorable reserve movements. Reserves increased by LSd 26.7 million in 1959 and LSd 11.4 million in 1960; although small declines followed in the next two years, an over-all increase of LSd 31.1 million was achieved in the four-year period ended 1962.

II. Monetary and Fiscal Policies and Payments Problems

Between 195013 and 1962, the money supply in the Sudan rose by 89 per cent. This followed from a steep rise in bank credit to the private sector and a moderate increase in net foreign assets, only partly offset by a net improvement in the position of the government sector and by a rise in time and savings deposits and in the capital accounts of the banking system (Table 5).

Table 5.

Sudan: Origin of the Money Supply, End of Year, 1950-62

(In millions of sudanese pounds)1

article image
Source: International Monetary Fund, International Financial Statistics.

Prior to 1958, in Egyptian pounds.

Including the claims on, and deposits of, the central, provisional, and local governments and official entities.

The impact on the money supply of the sharp fluctuations in the balance of payments has generally been neutralized by opposite changes in the fiscal position of the Government. Thus, between 1950 and 1960, while net foreign assets fluctuated between a minimum of LSd 21.1 million and a maximum of LSd 85.0 million, and net government deposits between LSd 8.3 million and LSd 49.4 million, the money supply fluctuated only within the range LSd 25.5 million to LSd 35.0 million.14 This pattern has been replaced in recent years by a steady growth of the money supply as a result of the rapid growth in bank credit. These developments are summarized in Table 5.

The major trends in public finances have been (1) a steep rise in domestic revenues and ordinary expenditures of the Government,15 (2) considerable fluctuations in the ordinary budget surpluses, super imposed upon a declining trend,16 (3) a sharp rise in development expenditures,17 and (4) the emergence of over-all deficits financed largely from external sources. Because of the sharp rise in development expenditures, the over-all budgetary position (treating foreign assistance as financing) has been in deficit each year since 1957/58, with the exception of 1959/60. This represents a departure from earlier years, when development expenditures played a relatively minor role and were financed wholly from ordinary budget surpluses.

The Sudan’s fiscal policy has been mostly directed toward contracting the demand for imports by raising taxes. Only in one major instance did the authorities introduce tax cuts to stimulate imports and to keep prices low. The Government has also at times restrained the upward trend in expenditures during periods when the balance of payments was in deficit. In this respect, however, it has been handicapped by an unusually long lag between balance of payments developments and the appropriate adjustment of government expenditures; such adjustment has become more complicated because of the steady growth of the share of development expenditures in total public expenditures.

The three main factors affecting monetary developments, namely, changes in foreign assets, the Government’s cash position, and bank credit to the private sector, are depicted in Chart 2. Only in 1954 did the foreign assets position and the Government’s net position move in the same direction. In all other years, they moved in opposite directions. Bank credit to the private sector increased in every year except 1956 and 1959.

Chart 2.
Chart 2.

Sudan: Origin of the Money, End of Year, 1950-621

Citation: IMF Staff Papers 1964, 001; 10.5089/9781451956054.024.A005

1 Based on data in Table 5.

In dealing with balance of payments fluctuations, the authorities are making increasing use of monetary measures. This is due partly to the rapid growth of bank credit to the private sector, which has become a factor of major importance; it grew from LSd 1.25 million (equivalent to 5 per cent of the money supply) at the end of 1950 to LSd 46.6 million (equivalent to 97 per cent of the money supply) at the end of 1962.

Monetary and fiscal developments during the 16 years 1947-62 may be divided into three periods, characterized by the types of policies being followed, even though some of these policies (especially import controls) have been in force with varying degrees of rigor throughout the whole postwar period. In the first phase, which lasted until 1954, the main emphasis was on direct import controls, and on taxation measures affecting especially imports. The second phase, which lasted until the end of 1958, was characterized by two important policies: (1) the pricing policy for cotton became more rigid when the reserve price system was adopted in May 1954; (2) there was increasing resort to monetary measures to counteract fluctuations in the balance of payments. The third phase was characterized by a flexible cotton-pricing policy and accelerated development activities based, to a considerable extent, on foreign financing. Since the reserve price system for cotton was modified early in 1959, the Sudanese authorities have been comparatively successful in disposing of the cotton crops with a smaller carry-over from one season to another. This achievement has had a significant impact on balance of payments and monetary stability.

To analyze the interaction between monetary and fiscal developments and the payments problems of the Sudan, a model developed by J. J. Polak18 has been used in this paper. The calculations are set forth in Table 6.19

Table 6.

Sudan: Balance of Payments, Income, Money, and Computation of Imports1

(In millions of sudanese pounds)

article image

See text, page 162, and footnote 18.

Average import propensity = 0.199. An average of 0.20 was used in this paper.

Average income velocity = 10.2. An average of 10.0 was used in this paper.

The surpluses and deficits of the balance of payments have been used for δR. The monetary statistics show slightly different amounts. Thus there is a small difference between δR and δD in this table and the changes in net foreign assets and domestic assets in Table 7 (p. 173).

The withdrawal of Egyptian pounds held by the public (LSd 18.5 million) has not been treated as private capital inflow, as is done in the balance of payments statistics.

First phase, 1947-54

The sharp rise in exports during the period 1947-51, and particularly in 1951, was quickly reflected in an increase in the Government’s cash balances; budgetary surpluses rose from LSd 3.5 million in 1948 to LSd 20.0 million in 1951/52. There was no corresponding rise in imports; although imports rose appreciably in 1951, a higher rate of increase was prevented by a large contraction of credit, amounting to LSd 24.5 million, and a small outflow of capital, totaling LSd 3.0 million.20 The rate of increase was also slowed down by the lag in disbursement of larger incomes by cotton boards to tenants and a continuation of the restrictive import policies adopted in 1947.21 This situation produced a sharp rise in the cost of living, and there were widespread demands for wage increases, culminating in strikes in the late months of 1951. Although the authorities had begun in 1949 to liberalize import policy, it was not until August 1951 that the restrictive import policy was completely reversed by the introduction of an Open General License (OGL) list covering practically all imports.

Export proceeds fell sharply in 1952, and there were further but smaller declines in 1953 and 1954; imports, however, rose sharply in 1952, and then declined moderately in 1953 and 1954. One of the factors accounting for these developments, i.e., the close link between export proceeds and government revenues, has already been noted. The Government’s domestic revenues declined between 1951/52 and 1952/53 by almost LSd 16 million (from LSd 46.2 million to LSd 30.3 million), while government ordinary and development expenditures increased by LSd 4.1 million. An over-all budgetary surplus of LSd 20.0 million in 1951/52 was thus eliminated in 1952/53.22 Official entities, consisting mainly of the cotton boards, also increased their cash balances in 1950/51 because of the lag in the disbursement of income to tenants, but in 1951/52 their payments exceeded their receipts. Furthermore, expansion of bank credit to the private sector, which until 1952 was relatively unimportant in domestic credit, assumed considerable importance in the years immediately following.23These factors contributed to reversing the impact of changes in domestic credit from a contraction of LSd 24.5 million in 1951 to expansions of LSd 13.8 million in 1952, LSd 5.2 million in 1953, and LSd 8.6 million in 1954. The demand for imports in 1952 was also influenced by the large export earnings of earlier years, especially those in 1951, which were not fully reflected in incomes until 1952; it was stimulated further by the introduction of the OGL list in August 1951.

In view of the comfortable exchange position, the authorities in late 1951 and early 1952 were prepared to permit a substantial rise in imports even though exports had declined sharply in the fourth quarter of 1961 and continued low. It was soon realized, however, that the expansionary forces were stronger than had been anticipated, and it was feared that the exchange reserves might soon be depleted, thus jeopardizing the expanded development program drawn up in 1951. Consequently, in September 1952 the scope of the OGL list was considerably reduced, and special import restrictions were imposed on building materials and transport equipment, to dampen the residential construction boom that had been experienced since 1951. In 1953, however, the authorities decided to shift the weight of their restrictive policies to taxation measures. The OGL list in force prior to August 1951 was rapidly restored; and in 1954, it was extended to include— with certain minor exceptions—all imports from the sterling area. In January 1953, export duties on cotton were reduced sharply in an effort to promote exports, and in July ad valorem import duties were raised from 15 per cent to 25 per cent. The rates of import duties on certain items were raised again in 1954, and a tax on commercial incomes was introduced. This shift in policy was prompted by the deterioration in the Government’s fiscal position and its small deposits of domestic currency at a time when its foreign assets position remained high.

It was during this declining phase that the Sudan experienced an unprecedented expansion of bank credit to the private sector, amounting to LSd 18.9 million during the four years 1952-55. This expansion appears to have been caused by the increase in the number of banks operating in the Sudan,24 the strong demand for credit, the excess liquidity position of the banks, and the easy money policy of the National Bank of Egypt, Khartoum (NBEK), which maintained the rediscount rate at 3 per cent.25 At the end of 1951, when claims on the private sector amounted to only LSd 2.2 million,26 the cash reserves of all commercial banks amounted to LSd 5.6 million and their foreign assets to LSd 12.6 million, compared with foreign liabilities of LSd 1.3 million. By the end of 1955, their cash reserves had been reduced to LSd 1.3 million and foreign assets to LSd 4.5 million, while their foreign liabilities had been increased to LSd 8.6 million. In 1954, the banks resorted, for the first time, to borrowing from the NBEK; these borrowings amounted to LSd 1.7 million at the end of that year and to LSd 2.5 million at the end of 1955.

Second phase, 1955-58

The adoption in May 1954 of a new cotton marketing policy by the Gezira Board had a significant impact on the fluctuations in national product, disposable income, investment, and imports.27 The positive correlation between the movement of cotton prices and the volume of exports experienced during both the 1952-56 and the 1957-62 export cycles was responsible for amplifying fluctuations in export earnings. During 1955-58, increasing use was made of monetary measures to stabilize the country’s payments position.

The new cotton-pricing policy contributed to the decline in exports in 1954 and the substantial accumulation of cotton stocks. Imports were kept relatively high by the large expansion of credit, and the payments balance deteriorated. In July 1955, the OGL was canceled, and in November 1955 measures were adopted to restrain the credit expansion.

Quantitative credit restrictions were applied, with the voluntary agreement of the commercial banks. By the end of March 1956, advances in the “restricted categories”28 were to be reduced by 10 per cent of their level on May 31, 1955; and by the end of July 1956, they were to be reduced by another 10 per cent. These measures were, however, of limited usefulness, because the categories of credit covered accounted for a small percentage of total bank credit to the private sector, and the ability of banks to control the use of credit was limited.

The upturn in exports in 1955 and the export boom in 1956 again resulted in substantial improvement in the balance of payments and in the fiscal position of the Government. In 1956, the net cash position of the public sector improved by LSd 14.8 million, of which official entities accounted for LSd 7.4 million.29 There was a small decrease in credit to the private sector, and the expansionary effect of domestic credit declined from LSd 8.6 million in 1954 to only LSd 2.1 million in 1955; in 1956, it was contractionary to the extent of LSd 13.6 million. These changes were sufficient to offset much of the expansionary impact on the money supply of the increase in foreign assets. Responding to the improvement in the balance of payments, the authorities in September 1956 reintroduced the OGL on all items except 19, and, as a price control measure, banned the export of certain essential foodstuffs. They placed, however, greater reliance on fiscal and credit policies. Customs and excise taxes on a number of items were raised in June 1956, and the limit on bank advances in the restricted categories was maintained at 80 per cent of their level in May 1955.30

The liberalization of imports, combined with the effect of higher incomes earned in 1956 and with the need to rebuild inventories, led to a sharp rise in imports soon after the Suez Canal was reopened for traffic in mid-1957. Imports rose from LSd 57.0 million in 1956 to LSd 80.0 million in 1957, in part, perhaps, because the velocity of circulation of money rose as a result of increased activity related to the resumption of shipping through the Suez Canal and of the lifting of import controls late in 1956.

As in 1952, the authorities viewed the rise in imports in 1957 as a normal adjustment to the high incomes and exports in the preceding two years, and no measures were taken to curb the demand for imports until late in the year. A number of considerations favored this policy. A record cotton crop was being harvested in 1957, and, although cotton prices had fallen somewhat, they were still high. Exchange reserves had been built up in 1956 to an amount that the authorities considered rather on the high side. Furthermore, the withdrawal of Egyptian pounds from circulation, beginning in April 1957, was expected to result in some additions to free exchange reserves.31

But because of the sharp decline in exports,32 the deterioration in the balance of payments position in 1957 was greater than had been anticipated, and the authorities decided to curb the demand for imports. At first, they relied heavily on credit restrictions. In September 1957, the commercial banks agreed to reduce their advances for all purposes by 8 per cent within a period of six to nine months, and within this over-all ceiling to reduce their advances in the “restricted categories” by 33 per cent. The NBEK raised its discount rate by 1 per cent, to 4 per cent, and the banks were allowed to raise from 5.5 per cent to 6.5 per cent the minimum rate of interest which they charged. Cash margin requirements on documentary credits for imports were raised from 20 per cent to 33% per cent. These measures were effective in curtailing imports somewhat, and a considerable improvement in the trade position might have been achieved in 1958 had there not been a further sharp decline in exports resulting from a further decline in cotton prices and from the fact that, with the lowest yields on record, the 1958 cotton crop was poor. Consequently, in April 1958 the OGL was canceled and import restrictions were imposed, with a view to reducing commodity imports to an annual rate of LSd 40 million. Toward the same end, and with a view to balancing the budget, the Government increased customs duties and excise taxes on a wide range of items. Additional credit restrictions in the “restricted categories” were introduced in November.

The measures adopted succeeded in reducing the rate of expansion of bank credit to the private sector from nearly LSd 5 million in 1957 to about LSd 0.5 million in 1958, and the latter was more than fully offset by the increase in private time deposits. On the other hand, the Government’s net fiscal position deteriorated sharply both in 1957 and 1958, and the official entities had substantial deficits, especially in the earlier year. Combined, these factors resulted in a net expansion of domestic credit of LSd 21.3 million in 1957 and of LSd 16.9 million in 1958. In 1957, the sharp decline in exports contributed to a trade deficit33 of LSd 21.7 million, but since much of this deficit was covered by net capital receipts of LSd 17.3 million, arising largely from the currency settlement with the United Arab Republic, the decline in foreign exchange reserves amounted only to LSd 4.4 million. In 1958, however, the capital accounts were almost balanced, and the larger expansion of credit resulted in a decline of LSd 13.2 million in foreign reserves.

A problem that began to assume major importance during this period was the quality and distribution of the country’s foreign exchange reserves. Part of these reserves were held by official entities and were therefore not available to the monetary authorities. While the currency settlement with the United Arab Republic resulted in a substantial addition to total reserves, it resulted in a relatively small addition to free reserves. Thus, of LSd 19.5 million in sterling assets received from the United Arab Republic, only LSd 3.3 million became freely available to finance payments deficits.34 Another LSd 10.5 million was received in Egyptian pounds, but the use of this amount was restricted to purchases of goods of U.A.R. origin and to certain capital payments, and the total amount to be used was not to exceed LSd 2 million annually.

Third phase, 1959-62

The deterioration in exports was finally reversed in 1959 after the authorities had decided, early that year, to abandon the cotton-pricing policy of the Gezira Board. Imports—under the impact of the restrictive policies adopted in 1957 and 1958 and of a contraction of LSd 26.2 million in domestic credit in 1959—continued to decline, despite the surplus of LSd 3.0 million in the capital account, compared with a deficit of LSd 0.3 million in 1958. A cautious policy for the relaxation of import and credit restrictions was therefore initiated as soon as the payments position showed signs of improvement early in 1959. In March 1959, 15 items were added to the OGL list; by July 1960, a new list was issued, containing 298 items; and a month later 20 more items were added. The ceiling on bank advances in the “restricted categories” was raised in stages from LSd 3.3 million to LSd 6.3 million. In an effort to lower the prices of essential items and to stimulate private investment, some reductions in excise taxes, which were expected to cost the Government LSd 1.5 million in revenue annually, were made in July 1960.35 The improvement in economic conditions resulted in a rise in the domestic revenues from LSd 42 million in 1958/59 to LSd 67.5 million in 1959/60. Since much of this improvement had not been expected when the 1959/60 budget was drawn up, and ordinary and development expenditures were maintained at the same level as in 1958/59, the result was an over-all budgetary surplus of LSd 10.2 million in 1959/60, compared with a deficit of LSd 14.5 million in 1958/59. The net cash position of the Government improved by LSd 18.8 million in 1959. Also, there was an increase of LSd 2.5 million in the cash position of official entitites, and a decline of LSd 2.6 million in credit to the private sector. The contraction of total domestic assets nearly offset the increase in foreign assets, and the money supply increased by only LSd 0.5 million in 1959.

While the money supply thus showed little change in 1959, bank liquidity rose rapidly. During the first nine months of the year, the cash holdings (currency plus deposits in the central bank) of commercial banks rose from LSd 4.4 million to LSd 15.6 million, while foreign liabilities and credit from the Bank of Sudan were reduced by LSd 2.7 million and LSd 0.7 million, respectively. The fact that commercial banks were in a liquid position was a factor in the credit rise which began in September 1959 and continued into 1960; credit to the private sector rose from LSd 22.3 million in September 1959 to LSd 36.8 million in June 1960. Although by then the cash holdings of the banks had been reduced to LSd 8.7 million, they still were comparatively large.

When a seasonal decline in advances to the private sector during the third quarter of 1960 resulted in an addition of LSd 2.7 million to the cash holdings of the commercial banks, the Bank of Sudan decided to reduce these reserves by absorbing part of the deposits of the Cotton Boards.36 This was the first time that the monetary authorities had attempted to influence directly the reserve positions of commercial banks.37 Inasmuch as this decision resulted in a reduction of the deposits of official entities with commercial banks, from LSd 14.8 million in September 1960 to LSd 6.2 million in September 1961, it achieved its immediate objective. During the same period, however, the Bank of Sudan permitted its advances to commercial banks to increase by LSd 6.1 million, thus offsetting much of the contractionary impact of the shift in reserves. The increase in central bank credit is explained in part by the fact that in April 1961 the Bank of Sudan decided to accept, as collateral, paper originating in the export of Sudanese produce other than cotton, whereas in the past advances had been made only against foreign securities and cotton in warehouses. To provide credit facilities for the exports, the aggregate ceilings of advances to all commercial banks were raised from LSd 8 million to LSd 17 million. In November 1961, similar credit facilities were extended to promissory notes of certain industrial customers. Since the rediscount rate of the Bank was higher than the rate paid by the banks to official entities, the net effect of these measures was to increase the cost of funds to the banks, and possibly to increase interest rates in general. On the other hand, the substitution of central bank credit for deposits of official entities may have been expansionary for two reasons. First, the higher cost of funds was probably an incentive for banks to reduce their cash reserve ratios; this ratio for all banks fell from about 42 per cent in December 1960 to 35 per cent in December 1961.38 Second, whereas the deposits of official entities were concentrated mostly in a few of the more conservative banks, central bank advances tended to be more evenly distributed among the banks operating in the Sudan. The redistribution of loanable funds from banks that normally maintain high cash reserve ratios to banks that maintain low ratios amounted to a reduction in the average cash reserve ratio of all banks.

An appreciable rise in bank credit to the private sector did, in fact, take place in 1960 and 1961, and continued into 1962. The rise was from LSd 24.0 million at the end of 1959 to LSd 34.8 million at the end of 1960, LSd 38.9 million at the end of 1961, and LSd 46.6 million at the end of 1962.

In 1960, an improvement in the position of the public sector more than offset the expansion of bank credit and produced a decline of LSd 9.2 million in total domestic credit. As a result, a sharp increase in foreign assets resulted in a monetary expansion of no more than 7 per cent. In 1961, however, both the Government and official entities incurred cash deficits and, although the rate of bank credit expansion was considerably reduced, there was a total credit expansion of LSd 10.0 million. Since this was not completely offset by a reduction of foreign exchange reserves, the rate of monetary expansion increased to 19 per cent. A similar pattern prevailed in 1962. There was a substantial expansion of credit to the Government and the private sector, only partly offset by an increase in time and savings deposits and other liabilities of the banking system and a reduction of foreign assets. The money supply increased by about 16 per cent.

In view of the increasing liberalization of import policy, the high rate of monetary expansion appears, on the whole, to reflect an increase in the demand for liquid funds by the private sector. However, some rise in domestic prices resulted. During the two years 1960/61 and 1961/62, the growth in gross domestic product (GDP) amounted to 14 per cent (Table 7), compared with a monetary expansion of 27 per cent. Furthermore, an extension of the money-using sectors of the economy is indicated by the higher rate of growth of the modern sectors, compared with the traditional sectors, in the national income estimates,39 and by the higher rate of growth of imports and credits compared with that of GDP.


Few countries have experienced as sharp fluctuations in their foreign trade as did the Sudan between 1947 and 1962. From less than LSd 17 million in 1947, exports rose to nearly LSd 80 million in 1951 (increasing by almost 120 per cent in 1951 alone) and then declined by more than 40 per cent in 1952. The swings in other years in the 1950’s were also wide. Lagging by approximately one year, imports fluctuated considerably, but they were generally more stable than exports. These fluctuations were experienced while the trend of both exports and imports was upward. For the period as a whole, exports rose by about 370 per cent. Imports rose at an even faster pace, being about 440 per cent higher in 1962 than in 1947.

Table 7.

Sudan: Gross Domestic Product, Consumption, and Investment, Fiscal Years 1955/56-1961/621

article image
Source: Ministry of Finance and Economics, Economic Survey, 1962.

Fiscal year ends June 30.


Including official entities.

It was inevitable that such large fluctuations in foreign trade should have important repercussions on domestic stability. Fluctuations in the trade balance resulted in sharp variations in the exchange reserves and in the fiscal position of the Government. Despite these sharp fluctuations, the rate of growth of the economy was highly satisfactory, as is indicated by the growth in exports, imports, money supply, and GDP (estimates for the last being available since 1955/56 only). During the six fiscal years 1955/56 to 1961/62, a rate of growth in GDP of approximately 7 per cent per annum was achieved, in the face of a decline of about one third in the price of long-staple cotton, the country’s major export. Resources permitting a high rate of growth were generated by the Government’s willingness to raise tax revenues and by the favorable investment climate created by sound fiscal and monetary policies. Through such policies, the Sudanese authorities were fairly successful in avoiding the dangers of inflation in an economy which was subject to wide fluctuations, and in liberalizing restrictions on trade and payments.

Developments since 1959 indicate that the pattern in this recovery phase has been different from that in earlier periods, when high receipts from exports were accompanied by government cash surpluses and a building up of reserves. In the 1959-62 phase, particularly after 1960, the Government ran a deficit, while there was a considerable increase in bank credit to the private sector. Moreover, exchange reserves declined, as noted above. Hence, it might be expected that any considerable shortfall in export receipts in the future would lead to a substantial reduction of reserves, unless in the meantime there were a tightening of fiscal and monetary policies. Also, maintenance of a relatively liberal exchange system might be placed in jeopardy. Although the reserve position at the end of 1962 was relatively strong,40 part of the increase between 1958 and 1960 represented prepayments received for development expenditures to be incurred at a later date.41 A review of developments during the period 1947-62 shows, however, that the Government reacted promptly whenever an excessive loss of reserves was threatened, enforcing import restrictions as a last resort.

Politiques intérieures et problèmes de paiements du Soudan, 1947-62


Peu de pays ont subi des fluctuations aussi marquées de leur commerce extérieur que le Soudan entre 1946 et 1962. Le chiffre des exportations est passé de moins de 17 millions de livres soudanaises en 1947 (1 livre = 2,87 dollars des Etats-Unis) à près de 80 millions de livres en 1951 (accusant une augmentation de près de 120 pour-cent pour la seule année 1951), puis a diminué de plus de 40 pour-cent en 1952. Les fluctuations enregistrées au cours des années 1953-1959 ont également été importantes. Avec un retard d’environ un an sur les exportations, les importations ont, elles aussi, accusé des fluctuations considérables, mais elles se sont montrées en général plus stables que les exportations. Ces fluctuations ont eu lieu alors que la tendance était à la hausse tant pour les exportations que pour les importations. Pour l’ensemble de cette période, les exportations ont augmenté d’environ 370 pour-cent. Les importations ont progressé encore plus rapidement, le chiffre de 1962 dépassant d’environ 440 pour-cent celui de 1947.

Il était inévitable que des fluctuations aussi importantes du commerce extérieur aient de profondes répercussions sur la stabilité intérieure. Les fluctuations de la balance commerciale ont entraîné des variations prononcées des réserves de change et de la situation financière de l’Etat. En dépit de ces fluctuations considérables, le taux de croissance de l’économie a été très satisfaisant, comme le traduit l’augmentation des exportations, des importations, des disponibilités monétaires et du produit intérieur brut (on ne dispose d’évaluations de ce dernier élément que depuis 1955/56). Au cours des six exercices financiers de 1955/56 à 1961/62 (l’exercice financier se termine le 30 juin), le produit intérieur brut a atteint un taux de croissance d’environ 7 pour-cent par an, en dépit d’une baisse d’environ un tiers du prix du coton à fibres longues, qui constitue la principale exportation du pays. Les ressources qui ont permis un taux élevé de croissance ont eu pour origine d’une part la décision prise par le gouvernement d’augmenter les impôts et d’autre part le climat favorable aux investissements créé par de saines mesures financières et monétaires. Grâce à l’adoption de ces mesures, les autorités soudanaises ont assez bien réussi à éviter les dangers d’inflation dans une économie pourtant sujette à d’importantes fluctuations, et ont pu assouplir les restrictions de commerce et des paiements.

Políticas internas y problemas de pagos del Sudán durante el periodo 1947-1962


Pocos países han experimentado fluctuaciones en su comercio exterior tan pronunciadas como las del Sudán durante el periodo 1947-1962. Las exportaciones, que en 1947 fueron de menos de 17 millones de libras sudanesas (LSd 1,00 = US$2,87), aumentaron hasta alcanzar casi LSd 80 millones en 1951 (habiendo aumentado en casi un 120 por ciento tan sólo en 1951) y luego bajaron en más del 40 por ciento en 1952. Las fluctuaciones registradas durante otros años de la década de los cincuenta fueron también agudas. Las importaciones, que llevaban aproximadamente un año de rezago, fluctuaron considerablemente aunque tuvieron, por/lo general, mayor estabilidad que las exportaciones. Esas fluctuaciones ocurrieron en época en la cual tanto las exportaciones como las importaciones mostraban una tendencia ascendente. El aumento observado en las exportaciones durante todo el periodo fue de alrededor del 370 por ciento. Las importaciones se elevaron a un ritmo aún más acelerado, y las de 1962 superaron aproximadamente en un 440 por ciento a las de 1957.

Era inevitable que esas fluctuaciones tan ingentes en el comercio exterior repercutiesen gravemente sobre la estabilidad interna. Las fluctuaciones experimentadas en la balanza comercial produjeron cambios bruscos en las reservas cambiarías y en la posición financiera del gobierno. A pesar de esas agudas fluctuaciones, la tasa de crecimiento de la economía resultó altamente satisfactoria, conforme lo indica el incremento habido en las exportaciones, en las importaciones, en el medio circulante y en el producto interno bruto (sobre el cual sólo existen cálculos aproximados a partir de 1955/1956). Durante los seis años fiscales comprendidos entre 1955/1956 y 1961/1962 (el año fiscal termina el 30 de junio) la tasa de crecimiento del producto interno bruto alcanzada fue más o menos del 7 por ciento anualmente, a pesar de que el precio del algodón de fibra larga, que es el principal producto de exportación, bajó aproximadamente en una tercera parte. La buena disposición por parte del gobierno a aumentar los ingresos tributarios y el clima propicio para las inversiones provocado por sanas políticas fiscales y monetarias engendraron recursos que a su vez posibilitaron una elevada tasa de crecimiento. Mediante semejantes políticas las autoridades sudanesas lograron bastante éxito en eludir los peligros de una inflación para una economía que estaba sujeta a fluctuaciones agudas, y también en liberalizar las restricciones sobre el comercio y los pagos.

In the tables throughout this issue, and in the English text of the papers

  • Dots (…) indicate that data are not available;

  • A dash (—) indicates that the figure is zero or less than half the final digit shown, or that the item does not exist;

  • A single dot (.) indicates decimals;

  • A comma (,) separates thousands and millions;

  • “Billion” means a thousand million;

  • A hyphen (−) is used between years or months (e.g., 1955-58 or January-October) to indicate a total of the years or months inclusive of the beginning and ending years or months;

  • A stroke (/) is used between years (e.g., 1962/63) to indicate a fiscal year or a crop year.

A New Publication by the Fund

International Monetary Problems, 1957-63 Selected Speeches of Per Jacobsson

This is a collection of 24 speeches delivered by Mr. Jacobsson while he was Managing Director of the Fund. The volume includes his six addresses to the Board of Governors of the Fund, presenting the Annual Reports of the Executive Directors, and his yearly speeches to the Economic and Social Council of the United Nations. They therefore enable the reader to re-create the changing economic environment of the years 1957-63 as they appeared to an exceptionally acute observer with unusual facilities for seeing behind the scenes. Pp. xiv + 368. Price: $2.50

Other Monographs Published by the Fund

Central Banking Legislation

A collection of central bank, monetary, and banking laws. This publication contains the complete texts, in English, of central banking and monetary laws of 21 countries. It also contains summaries of general banking laws and selected provisions of these laws which are of special significance in the relationship of the central bank to the banking sector. The statutes and related materials were selected by Hans Aufricht of the Fund’s Legal Department. Pp. xxii + 1012. Price: $10.00.

The Fund Agreement in the Courts

Contains a series of papers discussing cases, considered by international and national courts, in which the Articles of Agreement of the International Monetary Fund have had a bearing on issues before the courts. The papers, by Joseph Gold, General Counsel of the Fund, were first published in Staff Papers. Pp. xiv + 159. Price: $3.50.

Other Publications by the Fund

International Financial Statistics, monthly, and annual supplement: $10.00 a volume.

Balance of Payments Yearbook, issued monthly in loose-leaf sections: $7.50 a volume.

Available free of charge: Annual Reports of the Executive Directors; Summary Proceedings of the Annual Meetings; Annual Reports on Exchange Restrictions; International Financial News Survey (weekly); Selected Decisions of the Executive Directors; By-Laws and Rules and Regulations; Schedule of Par Values.

* * * * *

Subscriptions are quoted in U.S. dollars; schedules of equivalents in other currencies will be furnished on request.

The Secretary

International Monetary Fund

19th and H Streets, N.W., Washington, D.C. 20431


Mr. Mahhouk, of the staff of the Kuwait Fund for Arab Development, is a graduate of the American University of Beirut. He was formerly an economist in the Middle Eastern Department of the International Monetary Fund, a member of the faculty of the University of Beirut, and on the staff of the United Nations Relief and Works Agency for Palestine Refugees in the Near East.

Mr. Drees, economist in the Middle Eastern Department, is a graduate of the University of Cologne. He was formerly assistant at the Finanzwissenschaftliches Forschungsinstitut of that University.


LSd 1 = US$2.87. The Egyptian pound was the currency in circulation up to 1957 when the Sudanese pound was issued. Since the Sudanese currency was issued at par with the Egyptian pound, the Sudanese pound is used throughout the paper.


Calculated by the least-squares method.


The correlation coefficient was +0.18 for unlagged imports. The regression equation of exports and lagged imports, both as defined by J. J. Polak (see below, p. 162, fn. 18), was Mt = 10.3 + 0.89 Xt−, where Mt is imports in period t, and Xt− is exports in period (t−1). Where only commodity imports and exports were included, the regression equation was Mt = 18.6 + 0.66 Xt−. The difference between the two equations is due primarily to aid-financed imports, for which adjustment is made in the first equation but not in the second.


In compensation for the flooding of Wadi Haifa by the High Dam, the United Arab Republic agreed to pay to the Sudan LE 15 million, of which the first installment of LE 3 million was paid in January 1960, and three installments of LE 4 million each were paid in January 1961, January 1962, and February 1963.


In this paper, the term “current account” includes goods, services, and transfer payments. Capital movements are defined to include all private capital plus official long-term liabilities. All other capital movements are included with changes in monetary reserves.


The quantity of cotton exports was almost doubled between 1947 and 1951, and prices more than doubled. The rise in world cotton prices was partly due to the devaluation of sterling in 1949, but most of the increase took place in 1950 and 1951 as a result of the Korean war boom.


Holdings of Egyptian pounds were classified as short-term foreign assets.


From a peak of 136 U.S. cents a pound in January 1952, the price of G4S (Gezira Grade 4 Sakel) in Liverpool declined steadily to 44 U.S. cents a pound in August 1953, a decline of 68 per cent. Average prices of G4S declined from 89 U.S. cents a pound during the 1951/52 season (August 1 to July 31) to 48 U.S. cents a pound in 1952/53, and then rose to approximately 52 U.S. cents in 1953/54.


On the average, cotton export prices were 26 per cent higher in 1954 than in 1953. The volume of cotton exports from the Sudan, however, declined somewhat in 1954 although world demand for long-staple cotton was brisk and prices were rising sharply. The cotton authorities then felt that, in view of sharply rising prices, it would be desirable to ration Sudanese cotton; therefore, limited amounts were offered for sale until such time as the full increase in demand, which they anticipated, was reflected in higher prices. Consequently, in May 1954 the system of sales by private contract was replaced by the system of auctioning cotton with minimum reserve prices.


For Sudan Gezira Grade 5 Sakel.


In yield per acre.


These data are derived from customs statistics, which differ somewhat from the exchange control data used elsewhere in this paper.


Monetary statistics are not available for the period prior to 1950. Moreover, the series available for the period before 1957 are less reliable than later ones, because the amount of Egyptian currency in circulation in the Sudan prior to the issuance of the Sudanese pound could be estimated only roughly. Also, reporting forms for banks were not standardized until 1957.


End-of-year figures only.


During the period 1948 to 1961/62, government domestic revenues increased from LSd 15.7 million to LSd 68.7 million, while current expenditures increased from LSd 10.3 million to LSd 60.6 million. For 1948 and 1949, the fiscal year covers 12 months ended December 31; for 1950/51, 18 months ended June 30: for 1951/52-1961/62, 12 months ended June 30.


Ordinary budget surpluses, averaging LSd 11 million a year, were realized in each year during this period. The range of fluctuation was from LSd 0.6 million in 1958/59 to LSd 24.7 million in 1951/52.


From LSd 1.9 million in 1948 to LSd 23.5 million in 1961/62 in absolute amount, and from 16 per cent to 28 per cent of total government expenditure.


See J. J. Polak, “Monetary Analysis of Income Formation and Payments Problems,” Staff Papers, Vol. VI (1957-58), pp. 1-50, and J. J. Polak and Lorette Boissonneault, “Monetary Analysis of Income and Imports and Its Statistical Application,” Staff Papers, Vol. VII (1959-60), pp. 349-415.


In this section, terms such as “imports,” “exports,” “domestic credit,” and “capital movements” are used as defined by Polak in the articles cited above. Briefly, import payments are defined to include commodity imports, most service payments, and private transfer payments minus drawings on project loans. Export receipts include commodity exports, receipts from private transfer payments, net investment income, and receipts from other services. Changes in reserves are a composite of the movement of monetary assets, monetary gold, and monetary liabilities. Domestic credit is the change in the money supply (defined as the sum of currency in circulation plus private demand deposits) minus the change in net foreign exchange reserves. Capital movements are defined as imports minus exports plus changes in net reserves.


For the definition of these terms, see footnote 19.


Import duties had also been raised from 10 per cent to 15 per cent ad valorem, with larger increases on certain items.


Budgets were balanced throughout the declining phase of the export cycle. In fact, during the three years 1952/53-1954/55, when cotton exports were declining, over-all budgetary surpluses totaling LSd 0.4 million were realized. In the face of steadily rising ordinary and development expenditures, large budgetary deficits would have been incurred had the Government not resorted to raising tax rates, especially on imports at the end of 1952 and in July of each following year through 1956.


Only three banks operated in the Sudan, and these pursued generally conservative credit policies. The three banks were the National Bank of Egypt, Khartoum, which was also the Government’s bank; Barclays Bank D.C.O., which was the main depository of the Sudan Gezira Board; and the Ottoman Bank.


Two new banks (Crédit Lyonnais and Bank Misr) started operating in 1953, raising to five the number of banks in the Sudan. Since then, three more banks have opened offices: the Arab Bank (1956), the State Bank of Ethiopia (1958), and the Sudan Commercial Bank (1960).


The NBEK terminated its activities in the Sudan when the Bank of Sudan began operating in February 1960.


This figure does not include small advances (LSd 0.11 million at the end of 1951) by the NBEK to the private sector.


The cotton-pricing system adopted by the Gezira Board replaced sales by private contract by auctions conducted in Khartoum five days a week. Minimum reserve prices were fixed and announced by the Board. At first, the reserve prices were not declared, but as it was not difficult for buyers to find out these prices by starting with very low bids which were raised gradually, the Gezira Board began to announce a list of prices in advance. The unusually slow movement of the crop in 1958 induced the authorities to require private growers not to sell below minimum reserve prices, fixed in line with those of the Gezira Board. In 1959, however, this restriction on private growers was lifted and the Gezira Board, while continuing to sell cotton at auctions, abandoned its rigid pricing policy in favor of a more flexible one. In defense of its pricing policies in 1958, the Gezira Board maintained that its reserve prices were in line with international quoted prices, but that bilateral arrangements entered into by competing exporters of long staples placed the Sudan at considerable disadvantage.


These included credit for imports, retail trade, and personal use.


The Cotton Boards, of which the Gezira Board was by far the largest single entity, account for most of the deposits of official entities.


Capital movements changed from an inflow of LSd 1.3 million in 1955 to an outflow of LSd 2.9 million in 1956.


Sterling securities with a face value of LSd 19.5 million were transferred by the United Arab Republic to the Sudan as part of the currency settlement. Of this total, LSd 12.6 million was turned over to the Sudan Currency Board as part of the currency coverage. Because the currency law of 1956 required the securities held by the Currency Board to be entirely short-term, it became necessary to reshuffle the portfolio handed over by the United Arab Republic. Interest rates in London were high at the time, and the effect of the reshuffle, which included the sale of a substantial portion of the securities to meet the payments deficit, was a loss of LSd 3.6 million. Thus, the net addition to the free exchange reserves of the Sudan was approximately LSd 3.3 million.


Less than 50 per cent of the 1957 cotton crop was exported.


The excess of imports over exports as defined in Polak’s model. See footnote 19, page 162.


See footnote 31.


Import duties and excise taxes had been raised in July 1959 to provide additional revenues for financing development. These measures were expected to generate LSd 3.5 million a year in revenues.


This was done at first on an ad hoc basis; but subsequently the policy of shifting most of the deposits of the cotton Boards from the commercial banks to the Bank of Sudan was formalized, and a formula was worked out in February 1961 under which the Gezira Board transferred to the Bank of Sudan time deposits and any current deposits in excess of those made during the preceding two months.


Some years earlier, ceilings had been applied by the NBEK on its advances to the various banks, but these had invariably been fixed so high that their effectiveness as an instrument of credit policy was greatly diminished.


Ratio of cash to total private deposit liabilities.


The modern sector is defined as that part of the economy in which modern techniques are applied and modern types of investment goods are used. See Sudan Ministry of Finance and Economics, Economic Survey, 1962.


At the end of 1962 the foreign assets of the Bank of Sudan amounted to LSd 55 million. However, in 1963, they declined by LSd 13 million.


Until the end of 1962, the Sudan had received from the United Arab Republic LSd 11 million in compensation for the resettlement of the Wadi Haifa population out of a promised total of LSd 15 million. The Sudanese Government has estimated the total cost of the project at LSd 20 million and the direct foreign exchange cost at more than LSd 12 million. Hence, about 80 per cent of the foreign exchange received from the U.A.R. is earmarked for the resettlement. It is assumed that total expenditure on the scheme up to the end of 1962 amounted to LSd 1.7 million, of which about LSd 1 million was in foreign exchange. Thus, about LSd 8 million (80 per cent of LSd 11 million minus LSd 1 million) of foreign exchange should be deducted to arrive at a more meaningful picture of the movement of foreign assets during the period 1959-62.

IMF Staff papers: Volume 11 No. 1
Author: International Monetary Fund. Research Dept.