Technical efficiency evaluation of Sudan's economy

Abstract

This paper aims to estimate the technical efficiency of Sudan's economy from 1960 to 2020 and explore the impact of economic policies on technical efficiency. It used stochastic frontier analysis and beta regression to estimate technical efficiency, the dependent variable that economic policy influences. The study preferred the Cobb-Douglas production function over the transcendental logarithmic production function (Translog). The first two years showed an upward technical efficiency trend, followed by a downward trend for 40 years. Following the 2005 signing of the peace deal that marked the end of the civil war, the technical efficiency trend rose, accompanied by oil exports. The technical efficiency differed from its optimal value by 20%. Policies pertaining to the economy that had an impact on technical efficiency included the devaluation of the currency rate, the increase in ordinary expenditures, indirect taxes, and the ratio of the balance of payments to the gross domestic product. Moreover, the elimination of trade barriers is of the utmost importance, and policymakers should be serious about enhancing the competitiveness and productivity of the economy. This may be accomplished by implementing tax reform and shifting the priorities of government expenditure, which will eventually result in the release of additional funds for development.