The Role of Oil Revenues in Economic Development during the Period (2000-2012)
Professor Ahmed Magzoub Ahmed
The use of Sudanese oil revenues has been a topic of ongoing debate among political and economic elites. While some argue that oil revenues drove the development witnessed in the country between 2000 and 2011, others claim they were not utilized effectively in alignment with national priorities. Many of those commenting on this matter are influenced by pre-existing political positions or rely on unverified information rather than accurate performance data. Driven by such political motives, some have sought to discredit the previous government by denying any achievements related to the use of this resource for economic development.
The period from 2000 to 2012, which marked the oil extraction era, saw improved financial performance due to the contribution of oil revenues to the national budget. Agreements between the investing companies and the Sudanese government govern oil production in Sudan. These revenues are subject to production-sharing agreements managed on behalf of the government by the Sudanese Petroleum Corporation under the Ministry of Oil. Oil exports are conducted through open international tenders, with the government’s share of sales deposited into the Central Bank of Sudan. A portion of this revenue (initially 5%, later adjusted to 3%) is allocated to cover the operational costs of the Sudanese Petroleum Corporation and its investments in the oil sector.
The government invested heavily in oil infrastructure, including pipelines, export terminals, storage facilities, and refineries, incurring substantial costs. These investments represent invaluable infrastructure despite production peaking at just 500,000 barrels per day and averaging 300,000 barrels daily. Production eventually declined, reaching 100,000 barrels per day by late 2019 and currently standing at approximately 80,000 barrels.
During this period, the Sudanese economy achieved high growth rates, which regional and international financial institutions recognized. The growth peaked at 10.9% in 2007 and reached a low of 2.5% in 2011, the year of South Sudan’s secession. The average growth rate from 2000 to 2011 was 6.4%. This improvement was reflected in the increased annual government budgets and higher per capita income. Public spending saw annual increases, starting at 18.9% in 2000 and reaching 49% in 2004, fluctuating between 25% and 31% in 2005 and 2006, before slowing down after 2009.
From 2000 to 2006, total revenues amounted to 5,624 million dinars, with oil revenues accounting for 2,765 million dinars (49.2%). Total expenditures during this period were 6,342 million dinars, with 1,417 million dinars (22.3%) allocated to development. Development spending represented 51.2% of oil revenues, meaning over half of the oil income was directed toward development projects. Additionally, 80% of state allocations were spent on education, health, and water services, which fall under human development. During this period, total spending on development and human capital reached 2,701 million dinars, constituting 97.7% of oil revenues, demonstrating that all oil revenues were utilized for infrastructure and human development.
From 2007 to 2012, total revenues reached 124,408 million Sudanese pounds, with oil revenues contributing 52,781 million pounds (42.4%). Total expenditures were 160,507 million pounds, with 22,323 million pounds (13.9%) spent on development, accounting for 42.3% of oil revenues. It is worth noting that allocations to South Sudan following the Comprehensive Peace Agreement of 2005 were deducted from annual oil revenues, totalling 78,641 million pounds (148.7% of oil revenues) during this period.
This analysis compares spending on development and related areas (states and South Sudan) against oil revenues. It does not account for expenditures on salaries, state services, centralized expenses, or indirect societal development costs, such as foreign relations or security enhancements, which improved the investment environment and positioned Sudan among the leading investment destinations during this period.
(For further information, refer to my book The Sudanese Economy: Between Economic Theories and Political Choices.)