# 1. Introduction

Major shocks have repeatedly hit the Sudanese economy, sometimes with catastrophic results. The sources of these shocks have been varied, ranging from weather-related shocks such as droughts and floods to the global financial crisis and commodity price hikes. At the macroeconomic level, the prevalence of these shocks lowers economic growth and prolongs economic recovery. As shown in Negative shocks can aggravate poverty among Sudanese households. It is estimated that 36.1 percent of Sudanese were poor in 2014/15 (national poverty line), which is 13.5 percent based on the US$1.90 (in 2011 purchasing power parities [PPPs]) per person per day, extreme poverty, and a standard typical of low-income countries and 46.1 percent based on the US$3.20 (in 2011 PPPs) per person per day, moderate poverty, and a standard typical for lower-middle-income countries (World Bank, 2019). The majority of poor Sudanese households live in rural areas and 35.5 percent of them are poor. For most of these households, agriculture is their main source of livelihood, leaving them vulnerable to weather variations such as droughts and conflict that disrupts agricultural activity. The prevalence of negative shocks often leaves vulnerable households falling into or sliding deeper into poverty. Figure 2- panel a) shows significant decrease in real consumption per capita in Sudan in the years in which households were affected by floods/drought, civil conflict and/or price hikes. Furthermore, these effects tend to be heterogenous across the consumption distribution and across space. Panel b) shows that between 2009 and 2014, only the bottom-20 percent (particularly in rural Sudan) enjoyed a small increase in consumption per capita. The bottow-40 percent and top-60 percent experienced a decline of 0.1 and 1.7 percent in real consumption per capita over the same period- with a larger decline among urban households. Minimizing the effect of shocks on the welfare of Sudanese households requires building resilience and lowering vulnerability through effective social protection programs in particular and a stable and conducive macroeconomic environment in general.

Figure 1Prevalence of natural disasters such as floods or droughts, and other shocks such as civil conflict and price hikes appear to correlate with low growth rates of real gross domestic product (GDP). See Figure 1. The erratic rains of 2004, the combined effects of drought and civil insecurity in 2009, and late and sporadic rains in 2011 contributed to the decline in GDP growth rates between 2010- 2011 before reaching all-time low levels in 2012 after the secession of the South in 2011.

Negative shocks can aggravate poverty among Sudanese households. It is estimated that 36.1 percent of Sudanese were poor in 2014/15 (national poverty line), which is 13.5 percent based on the US$1.90 (in 2011 purchasing power parities [PPPs]) per person per day, extreme poverty, and a standard typical of low-income countries and 46.1 percent based on the US$3.20 (in 2011 PPPs) per person per day, moderate poverty, and a standard typical for lower-middle-income countries (World Bank, 2019). The majority of poor Sudanese households live in rural areas and 35.5 percent of them are poor. For most of these households, agriculture is their main source of livelihood, leaving them vulnerable to weather variations such as droughts and conflict that disrupts agricultural activity. The prevalence of negative shocks often leaves vulnerable households falling into or sliding deeper into poverty. Figure 2- panel a) shows significant decrease in real consumption per capita in Sudan in the years in which households were affected by floods/drought, civil conflict and/or price hikes. Furthermore, these effects tend to be heterogenous across the consumption distribution and across space. Panel b) shows that between 2009 and 2014, only the bottom-20 percent (particularly in rural Sudan) enjoyed a small increase in consumption per capita. The bottow-40 percent and top-60 percent experienced a decline of 0.1 and 1.7 percent in real consumption per capita over the same period- with a larger decline among urban households. Minimizing the effect of shocks on the welfare of Sudanese households requires building 2