Multi-Market Analysis of Sudan's Wheat Policies: Implications for Fiscal Deficits, Self-Sufficiency, and the External Balance

Highly subsidized bread prices financed partially through wheat aid and overvalued currency have stimulated rapid growth in wheat consumption in Sudan at the expense of other staple grains such as sorghum and millet. Inefficient production methods and the resultant low wheat yields have caused domestic supply to lag behind demand. Faced by serious foreign exchange shortages, severe internal and external imbalances, and reduced availability of food aid, Sudan could not sustain dependence on external sources to bridge the growing wheat gap. Given the political difficulties associated with managing demand, the government has chosen to promote local production. Research results showing high potential gains in wheat yield under improved crop management also contributed to the choice of the supply strategy. A dynamic multi-market model was developed and used to evaluate alternative supplypromoting and demand-control strategies. Competition with alternative productive uses of the country's scarce resources and substitution between wheat and other cereal grains in consumption were analysed. The impact of the various policies on net exports, food security, and the budget is measured and compared. Results of policy analysis indicate the significant contribution of production efficiency, reduced consumer subsidies, and elimination of relative price distortions to higher self-sufficiency and lower internal and external deficits.