Lual Deng, economic advisor to the Sudanese People's Liberation Movement

Discussant: Maude Svensson, Senior Economist, World Bank

Moderator: Ambassador Donald Norland, former Ambassador to Chad, Botswana, Lesotho and Swaziland

In a presentation at the Wilson Center Africa Program, Lual Deng, a senior economic advisor to the Sudanese People's Liberation Movement (SPLM), shared his assessment of the economic challenges that will face the Sudan after a comprehensive peace agreement is signed between the SPLM and the Sudanese Government, ending more than two decades of war in that country.

After introductory remarks from Ambassador Donald Norland, who noted that this meeting was one of the few opportunities to focus on the economic, rather than political, implications of Sudan's crises, Deng detailed the economic challenges that a new Sudan would be forced to overcome, should the agreed-upon North-South peace deal come into effect. Deng observed that, from an economic perspective, relations between Northern and Southern Sudan were really a "tale of two cities," posing serious challenges to their eventual integration.

Deng highlighted the vast inequalities that have been wrought through years of violence and underdevelopment in the South, which has destroyed physical infrastructure and undermined the human capacity necessary for economic growth. He argued that underdevelopment had been systematic and historic, noting that there had never been a square foot of asphalt in all of southern Sudan, outside of three main oil towns. By contrast, Northern Sudan is growing at an annual rate of 7%. Furthermore, because of religious and ideological divisions, the peace agreement puts forth a "one bank, two windows" system, which will divide the Central Bank of Sudan into two distinct units—an Islamic banking system for the Northern portion of the country, and a conventional banking system in the South, to be known as the Bank of Southern Sudan.

In Deng's view, however, reconciling the North/South divide was only one of many economic crises facing the Sudan. According to Deng, there are a number of other peripheral regions in the North that are also in need of economic growth and integration, as evidenced by the catastrophic events in Darfur.

Nonetheless, Deng argued, encouraging growth in the South was a first step to economic parity throughout the country. He outlined the constructive actions that would need to be taken by the Bank of Southern Sudan (BoSS) to stimulate growth. The BoSS would need to provide the capital to transform the political and military components of the SPLM into corresponding peacetime organs. It would also need to invest in rebuilding physical and social infrastructure to allow the region to move forward. Furthermore, the Bank of Southern Sudan would need to redevelop the South's agricultural base, which is highly dependent on the transportation network, so that crops may be brought to market efficiently. According to Deng, while the SPLM recognizes the value of oil revenue in the South in and of itself, it intends to reinvest most of this revenue in agriculture, both as a means of distributing the oil wealth throughout the population and enabling further economic expansion.

One provision of the proposed North-South agreement is a Government of National Unity in Khartoum that would be drawn from both the SPLM and the present government. Deng argued that this body would need to take responsibility for eradicating the root causes of economic inequality throughout the country, not only between the North and South, but in other neglected areas, including Darfur. The Unity Government would also oversee the demilitarization of Sudanese political culture and make institutions more inclusive.

He closed by saying that it would take a great deal of investment for Sudan to meet the UN's Millennium Development Goals, especially in the South. If any progress is to be made, according to Deng, it will require an expansionary fiscal policy in the South—and throughout Sudan, due to the mandate for a uniform fiscal policy. This runs contrary to IMF recommendations for the country. Nonetheless, Deng declared that if an expansionary policy is not pursued, or if the leadership of the Central Bank of Sudan and the Bank of Southern Sudan are unable or unwilling to meet the challenges outlined above, it is highly likely that the country will slip back into civil war.

Maude Svensson, Senior Economist with the World Bank, followed with comments that focused on the economic plight of Southern Sudan. In her opinion, the per capita GDP of Southern Sudan was between $86 and $100 a year, which places it among the world's poorest regions. Furthermore, recent data documents that the income gap between North and South has been progressively expanding since independence.

Nonetheless, Svensson argued, there were important rays of hope to be noted. It was remarkable, for example, that the SPLM and the Government had begun joint talks on poverty reduction strategies, even before they had put a comprehensive peace deal in place. She also highlighted several cases of existing infrastructure that might serve as the basis for future development. Two examples she cited were a private commercial bank, with three branches, that operates in the absence of a central bank, and an elaborate cattle market in the city of Rumbek that provides significant mercantile opportunity. She also observed that cross-border trade between Uganda, the Democratic Republic of the Congo and Southern Sudan appeared to be growing considerably.

Mike Jobbins, Africa Program Assistant, ext. 4158
Howard Wolpe, Director