Estimation of the Investment Function in Sudan (1979-2008)

Most developing and underdeveloped countries beside Sudan suffer from low levels of income in addition to the low savings that are result from the lack of sophisticated savings channels. Hence, investments depend on the individuals' abilities on savings where they are major motivating vehicle for economic activity due to its direct correlation with capital accumulation process that increases the productive capacity for the national economy and help to create job opportunities and achieving economic development. Subsequently, the importance of the investment comes from the effective role that can be practiced on the national product. Currently, Sudan endures severe economic crisis which the degeneration of its economic sectors, subsequent deteriorating productivity and diminishing revenues specially after the secession of the Southern region and loss of more than 75% of oil resources. The needs for investments escalate to revive its ability to survive, without that can be mission impossible. This study aims at explaining the impact of influencing factors on the investment function in the Sudan. An econometric model is formulated, assuming that there is a causal relationship between investment and influential factors represented. The results show there is a positive relationship between investment and Gross Domestic Products (GDP), while there is a negative relationship between inflation rate and finance cost on investment. The study concluded that there is significant effect of the inflation rate and finance cost. However, there are other factors that may have negative impacts on investments which can vary from administrative complications to corruption that are rife and probably entrenched in the system. From the above mentioned results the study recommends that it is necessary to extend the analysis to include other variables with significant effect on investment such as imports, national income, and government expenditure to attain a model that can be used for investment anticipation in the coming years