Sudan conflict will have 'big impact' on economy and may affect neighbours, IMF says

Outbreak of fighting has derailed fund's efforts to help steer the country out of crisis

Sudanese citizens wait with luggage to be processed for evacuation. Reuters

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The military conflict raging in Sudan will have huge consequences for the Sudanese people and the country’s economy, and could affect its neighbours if it drags on, the International Monetary Fund has said.

The Washington-based fund’s efforts to help steer Sudan's economy out of crisis with a $65 billion debt relief programme, the biggest in IMF’s history, have been derailed by the violence, Jihad Azour, director of its Middle East and Central Asia Department, said on Wednesday.

“This is one of those cases where conflict is limiting or reducing the capacity of people,” Mr Azour told a press conference in Dubai.

“The big impact is going to be on Sudan, on the Sudanese economy and the Sudanese people,” he told a panel discussion to unveil the IMF’s Regional Economic Outlook for the Middle East and North Africa.

“We were expecting that with the needed reforms, the economy of Sudan would recover and we would address the challenges [facing] its population.

“Unfortunately, political developments and recent security issues are preventing that.”

Sudan was plunged into a deeper economic and humanitarian crisis in April after deadly street battles erupted in Khartoum between the army and the paramilitary Rapid Support Forces that are vying for control of the country.

Army chief Gen Abdel Fattah Al Burhan and his former deputy Gen Mohamed Dagalo, who heads the RSF, have turned a dispute over the future of the paramilitary into street warfare.

Sudan's economy was reeling even before the latest conflict. It relied heavily on the international community for funding, and was hit hard by a 2021 military takeover that halted a transition to democracy.

Major economic backers led by the US and the World Bank suspended debt forgiveness and aid worth billions of dollars.

The country is facing its worst economic crisis and is edging closer to the international isolation it suffered for most of the 29-year rule of Omar Al Bashir, who was overthrown in 2019.

The situation has caused worldwide concern about the fate of the impoverished country of 44 million, as well as the safety of foreigners stranded there.

Foreign citizens and diplomats from countries such as the US, UK, Germany, Spain and Jordan have left Sudan and efforts are under way for more evacuations to neighbouring countries and other nations in the GCC.

As the human toll rises, Sudanese civilians are also fleeing the country and the flow of refugees is on the rise.

About 330,000 Sudanese have been internally displaced by the war, while the violence has so far forced 100,000 people to flee across the border, the UN has said.

However, the number of refugees is expected to rise further. The city of Port Sudan, on the eastern Red Sea coast, has become an evacuation hub with thousands desperately waiting to board ferries or planes leaving for Jeddah.

Many are walking hundreds of kilometres to Sudan’s borders.

According to Egyptian authorities, 40,000 Sudanese have crossed into the country since the beginning of the conflict.

Mr Azour said it was difficult to assess the impact of the crisis on neighbouring countries at this stage.

“This will all depend on the extent of the conflict and if the conflict will remain limited [in scale],” he said.

“What you can see so far is that there is an additional flow to neighbouring countries in terms of refugees.”

There are also “additional risks and uncertainties” that could affect the countries bordering Sudan, he added.

Last month, Moody’s Investors Service said the crisis, which has killed more than 400 people, will have negative credit implications for Sudan’s neighbours and multilateral development banks that have funding exposures to the African nation and the broader region.

“The fighting has caused significant damage to major infrastructure in Khartoum, such as the international airport, hospitals and schools and has forced most economic activity and government business to halt as civilians shelter in their homes,” Moody’s analysts, led by John Walsh, said in their April 25 report.

“If the conflict descends into a prolonged civil war, destruction of social and physical infrastructure would have lasting economic consequences for Sudan.”

Mr Azour, who called for immediate dialogue to resolve the situation, said the crisis also has a “huge human cost”. The IMF is in talks with UN agencies and others to help in relief efforts.

The IMF will observe the situation and assess how “things are evolving and what are the risks to neighbouring countries and try to help those who could be affected”, Mr Azour added.

The UN, which appealed for $1.75 billion in aid for Sudan on Tuesday, said it is $1.5 billion short of its target.

“The $1.75 billion joint appeal for Sudan in 2024 is only 14 per cent funded,” Jens Laerke, the UN humanitarian agency's spokesman, said in Geneva. “In other words [it is] facing a funding gap of $1.5 billion.”