Who bears the bill for the economic war in Sudan?
Khartoum’s losses are equivalent to $2.5 billion in public revenues, $300 million in gold exports, and food allocations may reach $1.1 billion.
After the political process in Sudan reached the final stage and the final agreement was close to being signed between the military component in its two parts (the army and the Rapid Support Forces) and the civilian political forces, events erupted with the outbreak of war on April 15, 2023, blocking the way for a new beginning for Sudan and an address to the catastrophic conditions caused by the coup of 25 October 2023
The war caused the loss of Sudanese hopes to move forward towards democratic civil transformation and good governance, and doubled the bill for returning to the path of transition after the end of the war, as the war caused massive destruction in Khartoum, the capital of Sudan, and costly effects on the Sudanese economy after 52 days of war. The catastrophic economic effects of the war are expanding. in Sudan.
Public finances and weak revenue mobilization
Sudan is one of the weak countries in terms of the ratio of revenues to GDP, as it is considered one of the weakest in sub-Saharan African countries. Therefore, the Ministry of Finance relies on 90 percent of revenues on indirect taxes (customs duties on international trade, imports, and value-added taxes).
With the continuation of the war, the Ministry of Finance lost huge revenues due to the cessation of economic activity, which will exacerbate the situation of public finances. Before the war, revenue conditions were 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 Ministry of Finance expects public revenues to reach 12.4 percent. Of the gross domestic product, with estimates of 7.363 billion pounds ($1.27 billion), varying between tax revenues of 57 percent, in addition to 38 percent representing other revenues, while estimates of grants amounted to 5 percent in the 2023 budget (the year of war).
Those revenue estimates were before the start of the war, and by returning to the 2022 budget figures, we find that the expected initial estimates of revenues in the budget booklet were 3.4 trillion pounds ($5.9 billion), while the actual figures achieved from total revenues were 2.9 trillion pounds ($5 billion). With a performance rate of 85 percent, and in the year of war, budget estimates are difficult to achieve the same percentage. On the contrary, the gap between estimates and actual performance will widen by no less than 50 percent, in light of expectations indicating that Sudan may lose about $2.5 billion of its revenues allocated in this year. The budget due to the war is in relation to the great weight represented by the state of Khartoum in the map of economic activity and revenues.
War, the destruction of economic sectors and the loss of jobs
In addition, the war caused the destruction of the industrial zone in the city of Khartoum, as the city of Khartoum Bahri constitutes the heart of industry in Sudan, after this region was directly affected by the war, which prompted the closure of industrial facilities after widespread looting in this industrial city.
The Sudanese industrial sector accounts for about 21 percent of the gross domestic product, as Khartoum state hosts 85 percent of the industrial establishments in Sudan, which could lead to the destruction of the industrial sector, the contraction of economic growth and the loss of tens of thousands of jobs.
The matter did not stop at this point, but the war also disrupted preparation for the summer agricultural season, as the agricultural sector contributes about 32.7 percent of the country’s gross domestic product, and Sudan before the outbreak of the war was suffering from a decline in agricultural production in 2022, as grain production declined by 36 percent. Maize production amounted to 3.2 million tons, in addition to 900 thousand tons of millet (dukhan).
local production of grain
Sudan produced about 600 thousand tons of wheat (13 percent less than the average production in five years), and this wheat crop covers about 23 percent of the consumption need, as Sudan ranks fifth among the countries importing wheat globally from Russia, as it imports About 1.3 million tons annually, while Sudan’s annual need for grain is estimated at about 7.6 million tons, and that amount makes it not slip into the problems of food shortages and famine.
Those weak numbers of production and this gap were in the past year despite the cultivation of 31.7 million acres in the 2021-2022 season, as the gap was about 2.5 million tons of grain, and expectations indicate that this gap will widen as a result of three main reasons, which are the shrinkage of cultivated areas and the lack of availability Adequate funding due to the significant damage to the banking system in Khartoum state, while the third of these reasons is the lack of fuel and production inputs sufficient time before the start of the summer season, as the war broke out at a very critical time for the agricultural season.
Expectations indicate that Sudan’s need for imported grains may reach about 3.5 million tons, compared to 2022, when the cost of food imports reached $2.8 billion, and with the negative repercussions of the war, the food import bill is expected to rise by $1.1 billion, to record about $3.6 billion. One billion dollars in 2023 (estimates are likely to increase with the continuation and expansion of the war), due to the widening grain gap and the high cost of importing oils, sugar and mineral water.
Services sector
The services sector in Sudan constitutes about 46.3 percent, and Khartoum stands out as a machine for this sector, and with the continuation of the war, it caused an increase in the cost of imports, with the cost of shipping more than double, in addition to the high cost of financing commercial work, in addition to the closure of airspace and the destruction of Khartoum Airport, which was It has a direct impact on the air cargo sector and the loss of revenues of about 30 aircraft per day, in addition to the impact of the closure on Sudanese gold exports, which constitute about 46 percent of the total Sudanese exports in 2022.
In addition, measuring the economic cost is a complex matter linked to a lot of data that may not be available during the war. For example, in the Sudanese case, massive destruction occurred at Khartoum Airport, as well as damage to the industrial and retail sectors, in addition to the looting of warehouses, in addition to the loss of daily revenues as a result of the cessation of activity. The economy in the state of Khartoum and some cities in the state of Darfur, with the closure of banks in the capital, the cessation of work in the administrative apparatus of the state in Khartoum, and the disruption of the flow of services represent huge losses that are too early to measure.
This article gives general indications and estimates based on the comparison between pre-war figures and expectations of deterioration after the war, which is entering its second month.
