Opinion

The Economic Repercussions of War in Sudan

Amgad Fareid Eltayeb

(Refer to Arabic Version in Al Majalla Magazine)

Fighting between the Sudanese Army and the Rapid Support Forces (RSF) has caused unprecedented destruction in Khartoum and the rest of Sudan. In addition to the human cost, which included hundreds of civilian deaths, thousands of injuries, and millions of displaced persons and refugees, there were also victims and survivors of violations, including rape, physical assaults, torture, and detention on suspicion and based on identity under harsh and degrading conditions. Furthermore, the Rapid Support Forces militia committed large-scale ethnic cleansing in Darfur, particularly in West Darfur. Ultimately, Sudan became the world’s largest country in terms of displacement, with over 7 million civilians, 5.4 million of them displaced after the outbreak of war in mid-April.

Residents of the capital, Khartoum, which became a ghost city with more than two-thirds of its population displaced, has been subjected to widespread looting authored by the Rapid Support Forces. RSF militia members stormed the deserted houses, as owner had left because of the fighting. Frequently, houses were broken into in the presence of their owners, robbed at gunpoint, and their owners were forcefully evicted. Stories of the militia members occupying and staying in houses have become familiar tales of war scenes in Khartoum. The militia members brazenly videotaped and shared clips on social media, bragging about their stay in these residences and threatening the original owners never to see their properties again since they were unwilling to vacate. The Spartan soldiers hired by the militia, who do not really know why they were fighting, found the justification for their looting of people’s property, in the fallacy of the political adviser of the militia Yousif Izzat, about the termination of the 1956 State, the slogans of the former member of the Sovereign Council, Mohammed Hassan al-Ta’ishi, about ending historical imbalances in the composition of the Sudanese State, the papers of the former Minister of Justice, Nasredeen Abdul- Bari about the systems of governance and administration that are all being circulated at the political mobilization gatherings of the militia, and the slogans of building democracy and restoring civil rule that are being used in the militia’s attempts to make the alternative reality narrative, which aims at forcing people to deny what they witness in front of their own eyes, what they live through, and to live in the imaginable reality, where Hemaidti and his private army represent the legend of good, democracy, justice and peace.

One of the most significant adverse effects of the war, the consequences of which will last for a long time, is the economic damage inflicted on the country, in addition to the direct material damages caused by the destruction of infrastructure, buildings, businesses, industry, and housing, there is also damage to the national economy, which was hoped to embark on an arduous recovery journey, cut short by the coup d’état of 25 October 2021, and then completely destroyed by the outbreak of war in April 2023.

On 25 October 2021, the two generals colluded before battling over the spoil of their conspiracy to stop the transition and overthrow the Government of Prime Minister Abdulla Hamdouk. This coup at the time blocked the country’s path of debt reduction, which had plagued the national economy for decades, through the Heavily Indebted Poor Countries (HIPC) Debt reduction initiative. The Transitional Civilian Government had embarked on a bold and severe economic reform program, which had targeted economic stability through exchange rate standardization, reducing the budget deficit through the elimination of commodity subsidies to reduce inflation, implementing a social support program for low-income families affected by the reforms, and increasing efforts to support the agricultural sector to increase production. The Government was then confronted with substantial societal discontent due to the austerity measures necessitated by the implementation of this agenda. But its fruits were beginning to materialize as the exchange rate stabilizes dramatically. The considerable raise of salaries in public sector had assisted in reducing the burden of austerity measures on citizens, although not fully nullified them.

Economic reforms and collaborative efforts with the international community began to bear fruit in June 2021. The Executive Boards of the World Bank and the International Monetary Fund decided that Sudan had taken the necessary steps to start receiving debt relief assistance under the Heavily Indebted Poor Countries (HIPC) Initiative. Sudan has been the thirty-eighth country to arrive at this juncture since the launch of the HIPC Initiative, known as the HIPC decision point. Sudan’s debt interest arrears to the World Bank of $1.2 billion were resolved on 26 March 2021 through bridge funding provided in advance by the United States. Sudan’s debt arrears of $413 million owed to the African Development Bank were resolved on 12 May 2021 through bridge funding from the Government of the United Kingdom and contributions from Sweden and Ireland. Sudan’s debt arrears of $1.4 billion to the International Monetary Fund were resolved on 29 June 2021 with the assistance of bridge funding from the French Government. Paris Club creditors cancelled $14.1 billion of their debt to Sudan from a total of $23 billion (about 60 per cent). Negotiations by the Transitional Government, with the international community’s support, began in August 2021 to resolve $20 billion in debt owed to creditors outside the Paris Club. Unfortunately, the path of writing off debts and other economic reforms was disrupted by the coup d’état of the two generals on 25 October 2021.

This was not the only economic loss that Sudan suffered due to the coup d’état. Also, the United States suspended its Congressional grant to Sudan in the amount of $700 million, approved at the end of 2020. In addition, they suspended their annual supply of 350,000 metric tons of wheat to the Sudan, worth about $125 million. Sudan also lost an estimated $500 million budget support grant from the World Bank that was approved for the 2022 budget. Sudan was also awaiting approval of an additional $500 million grant for projects in energy, food security and natural resource management by the end of December 2021. Moreover, all payments due to the then World Bank projects in the Sudan amounting to another $760 million have been suspended. Furthermore, Sudan lost a grant of $2 billion from the International Development Agency (IDA) in its procedural plan as part of the 2019 round of funding that was supposed to be transferred to the Sudanese Government in February 2022. This amount was reallocated to other countries on the International Development Agency (IDA) waiting list by June 2022.

In addition, since the decision of the Sudanese Government to unify the exchange rate in February 2021, financial flows of foreign currencies have begun through the formal banking system. This included remittances from Sudanese expatriate’s eager to support the Civilian Transitional Government. Between February 2021 and October 2021, Sudan received approximately $1.2 billion in net foreign inflows of expatriate remittances. If this trend had continued without the coup, annual flows of hard currency would have reached $2 billion under the most conservative estimates. In summary, the foolishness of the coup carried out by the two generals before they fought over its spoils cost Sudan and the Sudanese approximately $9 billion.
The effect of this foolishness extended and multiplied when war broke out between the two generals. After the Sudanese were waiting and disagreeing about the directions and dividends of the economic reform measures, they became now displaced by the war within their country and in neighbouring countries. International relief agencies have estimated the necessary budget to provide relief to the Sudanese in the midst of this humanitarian catastrophe since the outbreak of the war at approximately $2.6 billion. Still, only $841 million has been available so far. That passion and international rush to support Sudan and the Sudanese after the victory of their valiant peaceful revolution in April 2019 dwindled drastically , and only one-third of what is needed to provide relief to Sudanese civilians amid this damned war is now available.
The Sudanese pound has experienced a significant depreciation since the commencement of the fighting on 15 April. Its current real market value is more than 830 pounds per US dollar, about double its pre-coup value on 25 October 2021. The size of the economy has contracted by 50% compared to its pre-war state. The mean household income in both urban and rural regions experienced a decline of 40% in comparison to the pre-war period. Additionally, the disbursement of salaries to public sector employees was delayed by four months. The scarcity of goods and services has resulted in a concerning and progressively challenging expansion of the war economy and parallel and informal markets, which may persist even in the case of stopping the war.
Over two-thirds (66%) of the nation’s food enterprises and factories have ceased operations, while another one-fifth (20%) are now working at much-diminished capacities. Several prominent private economic entities, including DAL, Haggar, and Salih Abdul Rahman Yaqoub, have recently made public announcements regarding the cessation of their operations within the country. This was accompanied by a rapid increase in unemployment rates overnight. Approximately 50.3 per cent of the Sudanese workforce experienced job loss. A total of 20.4 per cent of those employed in the agricultural sector lost their jobs. 81.3 per cent of those working in the industrial sector lost their jobs. And nearly half, specifically 47.9 percent of individuals employed in the service sector, lost their jobs.
According to estimations, the economic ramifications of the war in Sudan from its commencement until today have reached $10 billion. This encompasses assessments of overall economic damage, the decline in productivity, and the destruction of physical infrastructure. The provided estimation does not encompass the costs incurred by citizens due to personal losses, nor does it account for the detrimental effects on the banking system. It is anticipated that this cost will increase to $15 billion if the war continues until the end of the year.
According to the most cautious predictions, there will be a 48 per cent fall in the Gross Domestic Product (GDP). The projected losses in the agriculture sector are estimated to be 21 per cent, while the industrial sector is expected to have a significant decline of 70 per cent, while the services sector is anticipated to face a substantial reduction of 49 per cent. The gold mining sector, which accounts for 15 per cent of the GDP, is anticipated to incur a loss of $2 billion in the current year. However, due to the widespread corruption and the limited or ineffective presence of the state apparatus in various regions of the country, this situation will encourage gold adventurers and crisis merchants to exploit Sudan’s resources further. These actors may engage in such plundering either on their own or with the backing of one of the two battling factions.
Cost estimates and reports on the current war in the Sudan continue to worsen an already awful situation. To get a sense of the magnitude of the tragedy, however, it is sufficient to note that experts put the total cost – direct and indirect – of the ongoing war in the Sudan at around $100 million daily.
The unrelenting pursuit of partisan or personal political ambitions by certain actors, armed with firearms or driven by an unquenchable desire for power, will only intensify the country’s already combustible state of warfare. It will eventually be in vain to continue this war, entwined with the schemes of political power in its ceaseless quest for dominance. And even if any succeeded, the ensuing sovereignty would amount to a shaky dominion over the remaining ashes and rubble.

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