The Determinants Factors of Balance of Payments: An Investigation from Sudan through the Period 1980-2016

Abstract

This paper investigates the determinants of Sudan balance of payments using annual data on balance of payments (BOP), foreign debt (ED), exchange rate (EX), inflation (INF), gross domestic product (GDP) during the period (1980 - 2016). The paper elaborates the problem regarding the impact of foreign debt on the balance of payments. The paper built on the fundamental assumption that the foreign debt linked to a positive relationship with the balance of payments by running VECM Approach. Results of the study indicate that there is a direct correlation between the balance of payments and foreign debt, and an inverse relationship between the balance of payments and all of the inflation, gross domestic product and exchange rate during the forementioned period. The paper recommends that Sudan should not totally dependes on foreign aid in solving its economic problems which entails to transfer big amount of the national product to meet the commitments towards those foreign countries, the need for coordination between macroeconomic policies and domestic economic policies in order to increase output domestic product, economic policies are functioning to reduce the ratio of foreign debt and the reduction of inflation and bring about stability in the exchange rate which leads to improving the balance of payments to be adopted by Sudan.