Real Overvaluation, Terms of Trade Shocks and the Cost to Agriculture: in Sub-Saharan Africa: The Case of the Sudan

Starting from the premise that agriculture should play a pivotal role in the process of structural transformation and economic development in Sub-Saharan Africa; and taking the case of the Sudan, an African country with a sizeable agricultural economy, this paper addresses two inter-related issues in this regard. The first is the extent to which policy induced distortions influence the structure of incentives for agriculture where direct distortions induced by policies deployed directly on agriculture are distinguished from indirect ones caused by policies directed at the macroeconomic management of the economy. Second, the consequences for the growth of agriculture of these distortions given other growth fundamentals. Our analysis strongly supports the predictions of the endogenous growth model a la Easterly (1990), which calls for economic distortions to have deleterious effects on growth.