Armed conflict in Sudan wipes out progress on poverty and debt

Debt hopes dashed

Its large and unsustainable foreign debt burden was cut in the summer of 2021 from about $56 billion to $28 billion when Sudan became the 38th  beneficiary of the HIPC. It was the most substantial debt relief granted to an Arab and African nation under the scheme.

HIPC is a collaborative initiative established by the IMF, the World Bank, and some of the largest creditors in the world, led by the Paris Club. The goal is to reduce poverty via better economic growth after the costs of servicing debt are reduced.  

These objectives are aligned with the United Nations Sustainable Development Goals (SDGs) for 2030, which seek to halve global poverty by reducing the number of people living on $2.50 per day from 800 million to approximately 400 million.

At the same time as reducing poverty, the IMF has determined that political stability can be improved by debt forgiveness. In return for it, the Sudanese military pledged to hand back power to civilian institutions and reintroduce democratic governance. The vow allowed Sudan to qualify for the HIPC, with the IMF overseeing the implementation of reforms.

After Khartoum signed the Abraham Accords, this financial process gained some political momentum. It did not last.

The military coup in Khartoum in October 2021, complete with the arrest of Prime Minister Abdalla Hamdok and an internet shutdown, led to the partial suspension of credit and fiscal facilities worth up to 857 million in Special Drawing Rights at the IMF, a mechanism that allows countries to claim on currencies used by the organisation's members.

If not for the latest military intervention in Sudan's politics and governance, it would have had open access to such vital funds

Poverty entrenched by military conflicts

In mid-April, Sudan was once again hit by a coup, as a rift between two former allies escalated to armed conflict. The warring parties, the regular army and the paramilitary Rapid Support Forces, were two factions within the transitional government that ousted former President Omar al-Bashir, who had ruled the country with an iron fist for over two decades.

Although Sudan's debts were reduced by half and the country received around $2.5 billion in IMF aid, the situation for millions of Sudanese has not improved.

Poverty rates increased to over 56% of the population. Destitution and displacement were exacerbated by the Covid-19 pandemic, the Russia-Ukraine war, inflation, and a devaluation of the national currency.

The United Nations Office for the Coordination of Humanitarian Affairs (OCHA) has reported that 18 million people in Sudan are facing acute hunger and poverty due to drought, wars, and local conflicts. Nearly 16 million people require assistance, of which 12.5 million are specifically targeted for support in the areas of food, health, and education.

The cost of such aid for the current year stands at approximately $1.7 billion, spread across 254 initiatives.

OCHA further estimates that nearly one million people have fled to neighbouring countries to escape war, poverty, drought, and floods. Along with the explosive remnants of war, food security remains the primary challenge for Sudan.

Grain and food production

Last season's grain production fell short of 5 million tonnes, roughly 30% of the country's basic domestic needs, amid a global rise in wheat prices due to drought and the war in Ukraine.

With foreign exchange reserves depleted, procuring food through foreign trade will prove to be challenging, further exacerbating food, social, and health crises and ultimately leading to mass departure from war-torn areas.

Approximately 2.5 million displaced persons and one million refugees are living in inadequate conditions in Sudan. The number of individuals most vulnerable to these circumstances is estimated to be around 11.5 million, the majority being children and women.

The worst is yet to come

The IMF has anticipated that Sudan's economic growth will remain feeble -- at approximately 1.2% in 2023 -- due to conflicts and the impact of climate change. The growth rate stood at 0.5% in 2021, roughly 2% in 2022, and 3.5% in 2020. These figures rank among the lowest rates in both the Arab region and the African continent, and do not reflect the rapid population growth in rural areas.

Unfortunately, the security situation in Sudan is unlikely to contribute to alleviating its economic difficulties, given the military's continual hold on power, with only brief interludes of civil governance.

The economy's weak infrastructure and exports, coupled with soaring inflation and record-breaking price hikes of up to 368%, heightens the risk of famine, diseases, and epidemics like malaria and cholera. 

According to the Global Adaptation Index, Sudan is among the countries most vulnerable to climate change due to droughts, floods, and the unsustainable use of agricultural and water resources, ranking 174th out of 180 countries.

These challenges contribute to environmental damage and will exacerbate displacement and migration. According to a report by the World Bank, Sudan will require around $13 billion over the next decade to adapt to climate change in agriculture and cater to the freshwater needs of a growing population. 

Dead end

Sudan appears to have once again fallen into the same pattern that perpetuates its poverty. A relentless pursuit of power has led to clashes between the military and civilians, as well as infighting among different military factions. The Sudanese people and their most vulnerable groups continue to bear the brunt of these ongoing struggles.

The ruling authority has yet to meet the conditions set by global financial institutions to aid Sudan's transitional process, namely: achieving internal peace based on inclusion, regional equity, and justice; economic stabilisation through correcting the causes of current large macroeconomic imbalances, and building a foundation for future sustained inclusive growth, development, and poverty reduction.

Sudan must establish internal stability, and its friends-turned-foes need to reach an accord. But before all this, a mutual understanding is needed among the country's governing institutions.

Read more: UN envoy to Sudan optimistic about transition to civilian rule

These are essential conditions that Arab, African, and international mediators are striving to achieve as a prelude to lasting peace. Such peacetime would be preceded by the transfer of power to a civilian government and followed by economic and social revival.

Yet even the most optimistic analysts believe that Sudan lacks the necessary conditions for economic recovery and reform. The country is at risk of spiralling further into economic and political instability without a democratically elected civilian government – a structure that Arab military regimes rarely tolerate.