Waiting for lift-off: Sudan’s economy is in trouble, even without sanctions

America has lifted a trade embargo, but rapid growth will not be easy to attain

“THIS is the best you can find anywhere, and not just in Sudan,” says Ali Alsheikh, gesturing at the deep-green field behind him. His farm, which exports animal feed, belongs to DAL Group, Sudan’s largest conglomerate. Here, an hour’s drive south of the capital, Khartoum, one can glimpse a better economic future for Sudan: high-tech, capital-intensive and outward-looking.

On October 12th, as a reward for “positive actions” by Sudan’s government in thwarting terrorism and allowing aid to reach war victims, America lifted sanctions first imposed by Bill Clinton in 1997. These included a trade embargo, a freeze on state assets and curbs on financial institutions dealing with Sudan. Omar al-Bashir, Sudan’s president, is still wanted by the International Criminal Court on charges of genocide. But for most Sudanese this is a milestone. “The whole country issued a large sigh of relief,” says Ahmed Abdelatif, a businessman.

Sudan’s economy has done poorly since South Sudan seceded in 2011, taking with it 75% of the old nation’s oil reserves. Exports have slumped, inflation has soared—it is now nearly 35% (see chart)—and the economy contracted in 2011-2012. Foreign investment has been negligible and the currency is weak. The government says that it will recover without the burden of sanctions. A strengthening of Sudan’s pound since the lifting was announced suggests that some share its optimism.

Is this warranted? Sanctions undoubtedly held Sudan back, but for many years their impact was obscured by an oil boom. Growth averaged 5% from 2004 to 2008. “Up to 2010 we literally could not have cared less,” shrugs Mr Abdelatif. But in the past few years “America started playing very rough with us,” says Abdul-Rahim Hamdi, a former finance minister. Foreign banks stopped dealing with Sudan, locking the country out of the international financial system.

Since the lifting of sanctions was announced, local newspapers have reported a flurry of interest from foreign investors. Sudan Airways, the state-owned carrier, has announced plans to revive its moribund fleet now that it can buy spare parts from Boeing and Airbus.

But it will take much more to spark a real recovery. Investors are wary of Sudan’s corruption, multiple exchange rates and the difficulty of repatriating profits. Few foreign banks will return while it sits alongside Iran and Syria on America’s list of state sponsors of terrorism. And the government will have to find another scapegoat for the country’s poor economic performance. On October 9th the culture minister announced plans for a new museum in the capital. It will be dedicated, he said, to commemorating the damage wrought by 20 years of American sanctions.

This article appeared in the Middle East and Africa section of the print edition under the headline "Not much relief about the relief"