Sudan is the largest country in Africa by land area, with rich natural resources and an estimated population of 42 million in 2010. It borders nine different countries and has a coast line of 500 miles on the Red Sea. Sudan has many different peoples, languages and cultures. Numerically no one group dominates, but in practice there is considerable inequality between a center, dominated by people from Khartoum and the North, particularly the villages along the Nile, and a far larger periphery.

Sudan’s 2005 Comprehensive Peace Agreement (CPA) opened an unprecedented window of opportunity to turn the devastation of years of war, displacement, and underdevelopment into a new era of peace and prosperity. It directly addressed the key causes of the conflict, and laid out the parties’ vision and commitment to accelerating development. The main provisions of the CPA include:

• The creation of a semi-autonomous region of Southern Sudan, within an overall federal structure, that also includes substantial transfers of powers from national to state level;
• Democratic elections nationwide in 2009, based on a new census and electoral roll;
• A referendum in the South in 2011, on whether the region should retain its semi-autonomous status, or progress to full independence;
• The establishment of a Government of National Unity (GoNU) for the country as a whole, and a Government of Southern Sudan (GoSS);
• A wealth sharing protocol, building on the emergence of oil as a major source of revenue;
• Two multi-donor trust funds (MDTFs), one for southern Sudan, and one for other areas of the country affected by the conflict, to finance reconstruction and development activities.

Implementation of the CPA has been uneven after initial progress in setting up the Government of National Unity (GoNU), the Government of Southern Sudan (GoSS) and the national and state assemblies. However overall, progress continues to be made, albeit at a much slower pace than was originally hoped. Contrastingly, continuing conflict in the West of Sudan (Darfur) has threatened stability and development for all of Sudan.

Key Political Developments

Southern Sudan Referendum
A referendum took place in Southern Sudan from January 9 to January 15, 2011, on whether the region should remain a part of Sudan or become independent. The referendum was one of the consequences of the 2005 Naivasha Agreement between the Khartoum central government and the Sudan People’s Liberation Movement (SPLM). A simultaneous referendum was supposed to be held in Abyei on whether to become part of Southern Sudan but it has been postponed due to conflict over demarcation and residency rights.
On February 7, 2011, the referendum commission published the final results, with 98.83 percent voting in favor of independence.  The predetermined date for the creation of an independent state is July 9, 2011.

2010 Elections
The 2010 Sudan elections were held from April 11 to April 15, 2010 (extended from the original end date of April 13). The elections entailed national presidential and parliamentary, the South Sudanese presidency, state governors, the southern parliament and state assemblies. The voter registration recorded 16,336,153 voters. Over 16,000 candidates entered the contest including nearly 1,400 as independents. A total of 72 political parties registered for the election but far fewer engaged in active campaigning, and the campaigns were dominated by the two ruling parties, the National Congress Party (NCP) and the Sudan People's Liberation Movement (SPLM). Most key opposition groups withdrew haphazardly few days before the elections.

In general, the voting period was relatively peaceful, with isolated incidents of violence and reports of harassment and intimidation in some locations in the country. In the immediate post-election period, there have been some disputes over election results which came strongly in favor of the two ruling parties, the NCP in the North, and the SPLM in the South. On April 26, President Bashir of the NCP was officially declared the winner after Sudan's election commission announced he received 6,901,694 votes, or 68.24 percent of the total valid votes. In Southern Sudan, the current President of the Government of Southern Sudan, Salva Kiir, was the winner with 2,616,613 votes or 92.99 percent of the total valid votes.

Macro-economic Background

A self-determination referendum was held on schedule from January 9 to January 15, 2011 with overwhelming results in favor of secession for the South finalized on February 7, 2011. The outcome of on-going negotiations will determine the post-CPA economic landscape. There are a number of key economic issues to be settled, most importantly the future treatment of oil assets (e.g., ownership, production arrangements with operators, transport of crude to refineries and export points in the North, marketing and sales, etc.). To date, the North and South have equally split the rents from oil wells in the South, as per the wealth sharing protocol of the CPA. Oil sector activity and government wealth sharing over the Interim Period have driven strong real GDP growth in the North, and accounts for over 98 percent of public revenues in the South. Thus significant adjustments on oil will have major economic implications for both sides. Other key issues under negotiation include the future treatment of external debt, currency, borders and water rights. The economic effects of secession would be transmitted largely through the fiscal and external accounts. With roughly 75 percent of GoNU oil revenues generated from southern oil production, there are expected negative fiscal and balance of payments implications of secession that will strain economic stability in the North. Growing political uncertainties in the run-up to the referendum have weakened the currency, with depleted reserves limiting the Central Bank’s ability to continue its past interventions.

Against the challenges of the political environment, real GDP growth is estimated at 4.7 percent in 2010, up slightly from 4.5 percent in 2009 reflecting a buoyant non-oil sector. Real non-oil growth for the year is estimated to be 5.2 percent, largely driven by agriculture and services. The Government of Southern Sudan drafted a Growth Strategy in early 2010 that details the path Southern Sudan would follow to move away from reliance on oil and the constraints that have to be addressed to promote growth in non-oil sectors. Average inflation for the year 2010 is estimated at 11.0 percent, driven in part by high food and housing prices. The current account deficit is estimated at 7.2 percent of GDP on a cash basis in 2010, with the value of oil exports rebounding in 2010 to nearly US$10 billion, after the dip to US$7 billion in 2009 due to the global economic downturn. The current account deficit is driven by high-value imports which are dominated by foreign machinery and equipment (often for oil production), manufactured goods, transport equipment and selected food items. Non-oil exports notched upwards to roughly US$750 million, but remain less than 10 percent of total exports. Foreign exchange controls on imports remained in place in 2010, and combined with currency depreciation kept import growth to 2 percent. Exchange rate pressures caused by political uncertainty and the potential negative economic impact of the referendum led to depreciation of the pound against the dollar by around 11 percent.

Sudan’s external debt stood at roughly US$36.8 billion at the end of 2010, of which US$30.8 billion is in arrears. Bilateral creditors account for 68 percent of obligations, split roughly equally between Paris Club and non-Paris Club bilateral. Multilaterals comprise 15 percent of the total, including US$1.45 billion to the World Bank and US$1.54 billion to the IMF. Private creditors account for US$5.9 billion. The debt burden continues to be a significant development constraint, as arrears to the World Bank and other development partners prevent normalized relations and constrain access to concessional financing. Thus, a solution to the debt problem can improve prospects for growth and poverty reduction.

 

The World Bank’s International Development Association (IDA) has no active lending portfolio in Sudan because of Sudan’s default on its financial obligations to IDA, which led to the suspension of disbursements in April 1993. The Bank began to reengage in Sudan in the early 2000s after an absence of nearly a decade. Normal financial support from IDA was, and remains, not possible due to Sudan’s outstanding arrears, accumulated since 1993 (some US$600 million). 

In 2004 to 2005, the Bank and United Nations co-led a Joint Assessment Mission (JAM) of Sudan’s recovery, reconstruction, and development needs. The JAM report informed a March 2005 Donor Conference in Oslo, at which US$4.5 billion was pledged to cover Sudan’s development and humanitarian needs from 2005 to 2008. It was also agreed that the Bank would administer the two Multi Donor Trust Funds (MDTFs) for National and South Sudan that were called for in the CPA. They were formally established after the Oslo donor conference in April 2005 with an initial contribution by donors of US$508 million, including a US$10 million contribution from the World Bank’s operational surplus.  Today, 34 projects have been prepared and approved for total commitment of US$752 million, out of which US$506million (US$153 million for the National and US$353 million for the South) have been disbursed.  In addition, the two MDTFs have leveraged an additional disbursement of US$396 million in counterpart funds from GoNU and GoSS.

Besides the MDTFs, the Bank has scaled up its advisory and analytic work, including through a Public Expenditure Review; Country Economic Memorandum, and a variety of other studies. At the authorities’ request, the Bank has prepared a number of just-in-time policy notes. The International Finance Corporation (IFC) has provided technical assistance to help GoSS draft key legislation for private sector development. To help prepare for peace in Darfur, the Bank has worked with the African Development Bank and UN on a Darfur JAM, but this work is currently suspended because of security concerns.

The Bank opened a country office in Khartoum in 2005 and another office for Juba in 2006 to facilitate implementation of MDTF-South. Staffing levels in both locations reflect program needs.  A 2008 Interim Strategy Note (ISN) sets out the Bank’s plans to assist Sudan up to December 2009, and also describes the process for eventual IDA financial re-engagement. The ISN notes that a peaceful and modern Sudan requires tackle three interrelated challenges: (i) improving governance; (ii) increasing access to basic services; and (iii) ensuring sustainable, diversified, and pro-poor growth, with primary attention to war-affected and marginalized areas. To this end:

• Nationally, the Bank will focus on stabilizing peace, including through analytical work and policy dialogue regarding key provisions of the CPA.
• In the South, the main focus will continue to be on helping to build a competent, responsive and stable government, including by decentralizing service delivery to local level.
• In Darfur, the Bank will work with partners, as security allows, to assess development and recovery needs and to prepare programs to be implemented in the event of peace.

The Government of National Unity is in the process of starting the preparation of an Interim Poverty Reduction Strategy Paper (I-PRSP). The World Bank is preparing a road map for IDA re-engagement to Sudan over the medium to longer term that considers various post-referendum scenarios.  Following the outcome of the referendum, the Bank will prepare an appropriate strategy to support long term economic development.  The referendum on the self determination of the South is planned for January 2011.

 

Highlights of MDTF- South Sudan Achievements

Southern Sudan: In the social sectors,  47 buildings of the Juba referral and teaching hospital were refurbished to enable them to provide specialized treatment and support primary health facilities serving the dispersed population throughout the country: 1,000,000 long-lasting insecticidal nets, 10,000,000 water guard tablets, 250,000 diarrhea treatment kits and 250,000 artemisinin-based combination therapy medications to residents of areas at greatest risk to illnesses such as malaria, diarrhea and guinea worm infestation were distributed. 

Pharmaceuticals and medical supplies to over 500 local health facilities were provided. Clean water provided to over 600,000 residents of rural areas and small towns from boreholes drilled or rehabilitated veterinary services to the dispersed population of cattle keepers through mobile clinics acquired and equipped with MDTF-SS funds and the reestablishment of extension services for farmers and forestry workers.  In education: 10 schools have been rehabilitated or constructed, furnished and equipped; and nine County Education Centers have been constructed in seven states.  One million textbooks and 40,000 school kits were printed and delivered to 2,600 primary schools.  A new secondary school syllabus was developed and three phases of fast-track teacher training for 1,200 teachers were completed.

To enhance the capacity of the state, the program helped the Government of South Sudan to establish the fiduciary framework of regulations and practices in accounting, auditing and public sector procurement for GoSS; rehabilitate the water, sewerage, road and other basic services in Juba, the regional capital; a rehabilitate, furnish and equip the National Assembly, Presidential office and residential buildings and 20 Ministries. The equipment included Information Technology (IT) equipment and supplies that were networked between Ministries, satellite telephone systems, generators and vehicles for director level (90) and deputy director level (180); training civil service workers (1,700) and also community workers (more than 20,000); drafting nine laws; and provision of accounting. State Governors’ offices have been renovated and equipped, including the installation of communications equipment, generators, vehicles, office equipment and furniture.

Eight hundred fifty kilometers of roads have been repaired including a major road that takes only two and a half hours to journey compared to seven hours before rehabilitation.  Juba’s water system was rehabilitated and 416 out of 674 new boreholes were drilled in addition to the repair of 243 old boreholes. The project also trained trainers for community-based organization (CBO) partners. A financing agreement between the United Nations Children's Fund (UNICEF) and GoSS for construction of 257 new boreholes, rehabilitation of 60 existing boreholes, and construction of 10 small and medium piped water schemes is ongoing.  Of the US$517 million committed to projects, 68 percent of the amount has been disbursed.

Highlights of MDTF- National Achievements

At the National level, the new national currency mandated by the CPA has been successfully introduced with support from MDTF-National. The National MDTF supported the successful conduct of the CPA-mandated National Census, which was a key precursor to the 2010 national elections. The census was completed in April 2008. The last census was held in 1993.

Other Achieved Results; In the face of challenging circumstances, important contributions are being made by the Trust Fund.  Highlights of results achieved include the following:

Expanding Access to Basic Services (Education, Health, Water and Electricity)

• Education- More boys and girls have improved access to education and more teachers are being trained.The MDTF-N has been instrumental in boosting school enrollment and in significantly increasing the number of desks, chairs, textbooks, and school kits available In targeted states of South Kordofan, Blue Nile, North Kordfan, and Kassala, student enrolment rose by 27 percent following the construction or rehabilitation of nearly 300 schools with about 1,800 classrooms and 133 teacher dormitories. More than 6,000 teachers were trained and in total more than 294,000 pupils benefited from MDTF-N interventions. For example, in Kassala State, student enrollment increased from 7,789 to 13,520 students in targeted communities of Gash, Hamashkoreib, Kassala, River Atbera, and Seteet, following the construction/rehabilitation of over 100 schools. These results will be supplemented by planned activities from the education components of other MDTF-N projects such as the Community Development Fund (CDF) and the Basic Education Project that are expected to be completed by June 2012.  For example, under the education project, the completion of the construction of over 200 class rooms in 25 schools and four teacher training institutes in targeted Northern states where enrollments are low (South Kordofan, Blue Nile, North Kordfan and Red Sea) would further help improve access to and quality of education.
• Health- More people have access to health experts and medical supplies.  Although during the last few years GoNU expenditures on public health programs have been supplemented by increasingly higher levels of State levels expenditures, access to health services remains low (40–50 percent of the population). But in Northern states areas targeted by MDTF-N programs (South Kordofan, Blue Nile, Kassala and Red Sea), access to, and use of heath facilities have improved noticeably.  Outpatient attendance has risen 26 percent and births attended by skilled health staff have increased by 14 percent, following the construction/rehabilitation of 105 health facilities, training  of some hundreds health professionals (midwifes, nurses, lab technicians) and provision of medical supplies.  For instance, CDF supported improved access to health services have benefited some 137,478 people in targeted communities in Kassala State where health facilities have been rehabilitated and constructed and medical supplies have been made available. The completion of the ongoing DHSDP activities, including the construction of four midwifery institutes and four rural hospitals in targeted states, would further contribute to improving access and quality of health services.
• Water- More people have access to clean and safe water.  Many Sudanese people rely on rivers, lakes, ponds, and wells in the absence of piped drinking water. A common component of many MDTF-N projects is addressing this issue. With more than US$8 million allocated to the sector, good progress is being made. A total of half a million  people were provided with clean water after 393 water points were constructed/rehabilitated and hand pump and yard operators were trained. In Blue Nile for instance, five new water yards have been constructed and improved water facilities have benefitted 100,000 school-age children.  In South Kordofan, more than 200 mechanics and operators have been trained to maintain the five new water yards constructed there.  In Kassala State, the construction of water stations, water tanks with taps, provision of hand pumps, have benefited a total of 126,571 people, including improving water facilities for 40,000 basic school-age children in Hamashkoreib and Seteet. Sanitation and hygiene messages are reaching more people. As part of the ongoing effort to promote improved water, sanitation, and hygiene, nearly 250 women’s and youth groups in South Kordofan have been trained to promote good practices throughout their communities in an attempt to reach at least 20,000 Sudanese. 
• Solar electrification is reaching more rural places/people, improving access to basic services.  Four states—South Kordofan, North Kordofan, Blue Nile and Kassala—are benefiting from the CDF’s Solar Electrification Program.  Solar electrification has allowed medical staff in targeted states to offer services at night and to provide power necessary for proper refrigeration and conservation of drugs and vaccines.  In addition, communities in targeted states, such as Abu-Hasheem, a rural village in Kassala State, have harnessed daytime sunlight to promote nighttime development.  Beneficiaries include students and teachers from the local primary school (Ahaza Primary School), allowing them to study and prepare lesson plans, respectively; and entrepreneurs resuming business activities at night. 

Rehabilitating Infrastructure

• Transport network and capacity- Improved functioning of the transport network and enhanced capacity of the transport institutions. Sudan’s transport network is sparse, and existing infrastructure has been damaged particularly in war-affected areas. Thanks to MDTF-N noteworthy achievements, 446 kilometers of rail line have been rehabilitated thereby re-linking the North and the South after two decades of interruption due to civil conflict. Commercial train services have commenced on the line and the travel volume (freight) is expected to reach 650,000 tons per year from less than 100,000 tons annually prior to the rehabilitation. The MDTF-Nconstruction/rehabilitation of three roads (205 km), including the Damazin Roseris Road (79 kilometers) in Blue Nile State and the Hamashkoreib- Gadamia Road (82 km), across Kassala and Red Sea States scheduled to be completed by June 2011, with the view to further reduce travel time and cost, improve access to roads, and connect producers and consumers in targeted states. In terms of institution building, the MDTF-N supported National Emergency Transport Rehabilitation Project (NETREP) is providing technical support to help improve the operational capacity of the National Highway Authority (NHA), the Sudan Railway Corporation, and other transport agencies, all of which are key elements of the upcoming national transport strategy.

Promoting Rural and Private Sector Development

• Private Sector Development-The ongoing MDTF-N Microfinance-Private Sector Development project is encouraging the role of the private sector by improving access to finance and promotion of private investment.  It is expected that the project will provide improved access to finance for tens of thousands of small entrepreneurs nationwide, thus contributing to diversifying sources of economic growth and generating employment growth. A draft microfinance regulatory and policy framework was finalized and the Sudan Microfinance Fund registered. Following the development of the policy framework, five microfinance institutions were licensed; 10,000 accounts were opened; and about 48,000 people benefited from the microfinance institutions.  For example, in the Eastern states of Red Sea and Kassala, the project provides technical assistance (US$360,000) and loans /equity investment (US$1.5 million) in support to two microfinance institutions:  Port Sudan Association for Small Enterprise Development (targeting 226 small entrepreneurs) and Kassala Social Development Fund (with a target of 3,000 clients). 
• Rural Development and Poverty Alleviation- Several MDTF-N projects are targeting rural development and poverty alleviation in a number of Northern states, including the Livestock Production and Marketing Pilot Project; the Gum Arabic project; and components of the Abyei, South Kordofan, and Blue Nile projects.  The livestock project for example, is introducing promising interventions to enhance animal production and marketing in selected rain-fed areas of Central Sudan (e.g. North Kordofan, Blue Nile, Sennar, and White Nile states). The newly approved Gum Arabic project aims at improving income of small-scale gum Arabic producers through enhancement of farm productivity and marketing efficiency. Through active mobilization and intensive awareness rising across 90 pastoral communities in the targeted states, the livestock project succeeded in helping organize 79 rural communities into “development committees”, trained them on business management and microfinance issues. Once formally registered, these groups can submit project proposals on livestock production and marketing activities. The sub-grants received by the development committees operate as revolving seed fund within the committee that would finance subsequent projects agreed upon by the committee members. The Gum Arabic project mobilized 80 Gum Arabic Producers’ Associations (GAPAs) in the four targeted states of Blue Nile, South Kordofan, Sinnar, and North Kordofan. The project operates in close coordination with the microfinance project which provided intensive training for selected GAPAs. Some 120 sub-project proposals have been submitted by the GAPAs which are at final stages of review. The rehabilitation activities for the auction markets are in the final stages of procurement and should be operational towards the end of this harvest season (March-May 2011). 
• Income earning skills- More people are acquiring productive and income earning skills. MDTF‑N projects have provided beneficiaries with training and supplies on a variety of technical and income earning skills. Examples include introduction of improved technologies to farmers and provision of agricultural hand tools covering nearly 1,000 households, training to households on traditional cheese making, distribution of dozens of sewing machines, training of blacksmiths on construction and maintenance of oxen carts, and introduction of gardening fundamentals to school children. 

Institutional Development and Capacity Building

• Institutional development and capacity building is being enhanced.  Domestic training of 862 staff at federal and state level on a range of topics that included project design, formulation of feasibility studies, procurement and financial management, and monitoring and evaluation was supported by TAF.   International training was provided to 21 federal and state government officials. In addition, other MDTF-N projects such as BEP, DHSDP and CDF supported the training of thousands of teachers and health professionals, and state government officials within Sudan. Under the Judiciary project, about 145 judges nationwide were trained and four courthouses were constructed in South Kordofan, Blue Nile, Kassala and River Nile states, contributing to increased access to judiciary services.
• Community development is on the rise. A strong social capital within communities at states and localities levels is critical to foster projects’ performance and sustainability particularly at the local level.  MDTF-N supported projects such as the CDF have further empowered local communities to develop and consolidate their capacities to address delivery of basic services. In Blue Nile State, for example, several locality development conferences have been organized, and many community development committees have been formed, and selected members trained on issues ranging from fund management to project planning and bookkeeping.  With these communities gaining knowledge of, and becoming empowered actors in development, there is greater scope to strengthen bottom-up accountability systems and ensure project sustainability.
• Technical Studies -MDTF-N supported studies have informed policy decisions and formulation of strategies in key sectors. These include, capacity building on development planning and management in targeted states, inventory and review of key issues pertaining to the promotion of semi-mechanization of agriculture, and the decentralization of health service delivery.

Economic Policy and Information

• Accomplishment of Two CPA Pillars-The introduction of a new currency and the population census, two key milestone provisions of the CPA, were successfully completed. These two MDTF-N supported projects did achieve their intended objectives of economic consolidation and providing reliable and accurate demographic and economic data, and their results were considered satisfactory.

Since the World Bank re-engagement to Sudan in 2004, partnership has been the cornerstone of the Bank strategy.  Donors came together to assist the GoSS to manage the impact of the international financial crisis.  Another example is the collaboration between the United Nations Development Programme (UNDP) and the World Bank to create a broader donor forum, the Inter-Donor Coordination Forum, to extend the partnership. The compact helped GoSS adhere to expenditure discipline, governance, and non-oil growth and in return, donors increased funding through the MDTF vehicle.  The Joint Assessment Mission (JAM) which produced the “Framework for Sustained Peace, Development and Poverty Eradication” in Sudan was a result of partnership with the government, UN, other donors, and the Word Bank.  The establishment of the MDTFs created a governance structure which called for the close collaboration with the government, the donors and the civil society.

The key objective of establishing a pooled donor fund was to simplify flows of external financing and facilitate aid management.  This effective donor coordination within the context of broader aid management structures allowed all the donors and partners to reduce transaction/duplication costs, provide consistent policy advice, provide common fora for dialogue with Sudan.  For example, the Sudan Consortium provided a forum for all development partners to review the progress of the CPA implementation and delivery of JAM commitments.  It is also an occasion to agree on the recovery and development priorities.

The Bank administers each MDTF under the guidance of an Oversight Committee (OC), on which the relevant government and donor representatives sit and for which the UN is an observer.  In partnership with each OC, a variety of objectives have been sought, including delivering quick and visible results for people, while also contributing to sustainable government capacity.  Further, on account of their presence in Sudan special provisions were made for the UN agencies and non-governmental organizations (NGOs) to undertake implementation on the basis of sole-source selections and for UN agencies to use their own fiduciary procedures, providing humanitarian assistance. Fifteen donors including the World Bank had contributed US$797 million to the two Sudan multi-donor trust funds.