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Assessment of effectiveness of Chinese aid in financing development in Sudan

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  • Nour, Samia Satti Osman Mohamed

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    (Faculty of Economic and Social Studies, Khartoum University, and UNU-MERIT)

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    Abstract

    This paper fills the gap in the Sudanese literature and discusses the effectiveness of Chinese aid for financing development in Sudan using new primary data at the micro level. We find that the Chinese share in total loans and grants offered to Sudan greatly increased from 17% in 1999 to 73% in 2007 out of total loans and grants offered to Sudan. We find that Chinese aid and loans to Sudan caused mixed positive-negative impacts. The positive impact is providing alternative complementary sources of finance to complement domestic capital and financing development projects. The negative impact is increasing Sudan's debts to China from 0.9% in 1999 to 13.45% in 2007 out of Sudan's total debts. We find that the effectiveness of Chinese aid to Sudan is undermined by offering aid tied to trade, FDI and importance of oil to the Chinese economy. We explain that despite the recent global economic crisis China has maintained offering tied aid to maintain its access to oil in Sudan. We find that despite a long period of economic sanctions, Sudan was able to grow thanks to the robust and increasing intensification of special economic relations with China which relaxed the development finance constraint. From the perspective of the new approaches to financing development our findings imply that even when a country is facing binding political and economic sanctions, it can still be able to finance a high growth strategy if it is endowed with natural resources and a partner that is in need for such resources.

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    File URL: http://www.merit.unu.edu/publications/wppdf/2011/wp2011-005.pdf
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    Bibliographic Info

    Paper provided by United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT) in its series MERIT Working Papers with number 005.

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    Date of creation: 2011
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    Handle: RePEc:unm:unumer:2011005

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    Keywords: finance; financial aid; eceonomic development; aid effectiveness; China; Sudan;

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    1. Griffin, Keith, 1970. "Foreign Capital, Domestic Savings and Economic Development," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 32(2), pages 99-112, May.
    2. Ali, A A G & Malwanda, C & Suliman, Y, 1999. "Official Development Assistance to Africa: An Overview," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 8(4), pages 504-27, December.
    3. Alberto Alesina & David Dollar, 1998. "Who Gives Foreign Aid to Whom and Why?," NBER Working Papers 6612, National Bureau of Economic Research, Inc.
    4. Mosley, Paul, 1980. "Aid, Savings and Growth Revisited," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 42(2), pages 79-95, May.
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