Who bears the bill for the economic war in Sudan?

The war in Sudan is causing severe economic hardship for many. (Photo by Adobe).

The war in Sudan is inflicting significant hardships on civilians and on the economy. Ahmed Abdel-Rahman explains.

Khartoum, the capital of Sudan, has losses amounting to USD2.5 billion in public revenues, only $300 million in gold exports, compared to $2.5 billion in 2021 and food allocations may reach USD1.1 billion.

After the political process in Sudan ended with the signing of the agreement between the military component in its two parts (the army and the Rapid Support Forces (RSF)) and the civilian political forces, events erupted with the outbreak of war on April 15, 2023. These events blocked the way for a new beginning for Sudan. It also highlighted the catastrophic conditions caused by the military coup of October 25, 2021.

The war has resulted in the loss of hope for many Sudanese. It highlights the difficulty in moving towards a civil democratic transition and the bill for returning to normality after the end of the war has doubled. The war has caused massive destruction in Khartoum, and a hefty toll on the Sudanese economy. After more than two months of war, the disastrous economic effects in Sudan are getting worse.

Public finances and weak revenues

Sudan is one of the weakest countries in the world in terms of the ratio of revenues to GDP and is among the weakest countries in sub-Saharan Africa. That is why the Ministry of Finance gets 90 per cent of its revenues from indirect taxes. These include customs duties on international trade, imports, and value-added taxes.

With the continuation of the war, the Ministry of Finance has lost significant revenues because economic activity has stopped, exacerbated by the deterioration of public finances. Before the war, the revenue situation was bad and it was unable to pay wages and salaries at the beginning of this year. According to estimates and figures for the 2023 budget, the year the war started, the Ministry of Finance expects public revenues to reach 12.4 per cent of GDP, with estimates of 7.4 billion Egyptian pounds (USD1.27 billion). This varies between tax revenues of 57 per cent, and 38 per cent from other revenues. 

The destruction of economic sectors and the loss of jobs

The war caused the destruction of the industrial area in the city of Khartoum, which prompted the closure of industrial facilities after widespread looting.

The proportion the Sudanese industrial sector contributes to GDP is about 21 per cent. The state of Khartoum hosts 85 per cent of the industrial establishments in Sudan and its destruction has led to the contraction of economic growth and the loss of tens of thousands of jobs.

The war has also disrupted preparation for the summer agricultural season. The agricultural sector contributes about 32.7 per cent to the country's GDP. However, before the outbreak of the war, in 2022, Sudan was suffering from a decline in agricultural production. The total cereal production for the 2022 agricultural season amounted to about 5.1 million metric tons, which is about 36 per cent less than the production in 2021, or 8.1 million metric tons. Maize production reached 3.2 million tons in 2022 compared with 4.2 tons in 2021.

Local production of grain

Sudan produced about 600,000 tons of wheat  or 13 per cent less than the average production over a five-year period. This wheat crop covers only about 23 per cent of the country's consumption needs. Sudan ranks fifth among the world's wheat importers from Russia, importing about 1.3 million tons annually. Sudan's annual requirement for grain is estimated to be at about 7.6 million-tons, but that quantity means it does not slip into food shortages and famine.

Despite the cultivation of 31.7 million acres of grain, in 2021-2022 the gap was about 2.5 million tons of grain. Expectations indicate that this gap will widen for three main reasons:  the shrinking of the amount of cultivated areas; the lack of sufficient financing due to the hefty damage done to the banking system in Khartoum; and the lack of fuel and production inputs.

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Saturday, 30 September 2023