Foreign capital inflows and economic development: The experience of the Sudan 1958-1979

The thesis contributes to the empirical literature on foreign aid and economic development in developing countries by examining the experience of the Sudan over the period 1958 - 1979. After describing the size and structure of foreign inflows received by the Sudan, the concessional or grant element of contracted official loans is calculated. Then the excess cost of tying the assistance by end use and/or by source is quantified and related to the aid component of loans (or the benefit) in order to determine the value or net worth of the assistance. At the macrolevel, the analysis concentrates on the impact of capital imports to the Sudan on the rate of domestic saving, capital formation and the rate of economic growth. This is followed by an inquiry into the indebtedness of the Sudan and the repayments of current outstanding debt. An attempt is also made to compare the financing of economic development in the Sudan by means of aid and/or trade through their direct and indirect effects on the development process. The study shows that not only has the average grant element of the loans contracted by the Sudan been low but also the real worth has been negated by the high excess costs of tying. Furthermore, great proportions of the foreign resources have been used for consumption rather than investment which was biased towards infrastructure. Therefore, the contribution of the inflows to the rate of domestic saving and economic growth was negligible. Consequently, the Sudan faced a serious debt servicing problem which has so far led to one renegotiation.