Al-Amawi: The establishment of two authorities will further weaken the economy

Khartoum Highlight- Economic Expert Abdel Azim Al-Amawi Reveals to “Khartoum Highlight” the Economic Impacts of the War
• The war erupted at the core of Sudan’s economic system, where most services and over three-quarters of industrial activity are concentrated in the capital, Khartoum.
• The Sudanese pound has lost 420% of its value against foreign currencies over 27 months.
• Current estimates on reconstruction costs are inaccurate; it is difficult to assess Sudan’s reconstruction needs before the war ends.

Al-Amawi announced that :
• Prolonged conflict will have catastrophic economic effects, as tax revenues represent 57% of total government income.
• Multiple central authorities will weaken the economy further, turning it into a war economy controlled by competing powers.
• The new reality will split exports: livestock and some crops in the west, minerals and other agricultural exports in the east.
• Gold accounts for about 41% of Sudanese exports, and revenues from it have become a target for both sides to finance the war.

Abdel Azim Al-Amawi , an economic expert, stated that a prolonged war would have catastrophic consequences on Sudan’s economy. This is because the state relies heavily on tax revenues, which make up 57% of total government income and about 7.1% of GDP. Al-Amawi revealed that Sudan’s economic capital is estimated at $600 billion, and the country has lost about 30% of this value so far, with losses continuing.

How Has the War Affected the Sudanese Pound’s Value Against Foreign Currencies?

Outbreak of war in Sudan has had a major impact on the overall economic situation. The effects worsened because the war started in the economic heart, where over three-quarters of industrial activity and banking services are centered in Khartoum. The closure of Khartoum Airport added to the crisis. Services sector accounts for 46.3% of GDP growth, and Khartoum is the backbone of this vital sector. For these reasons, the economic impact of the war has intensified. Exchange rates reflect a range of economic indicators. The Sudanese pound’s value has eroded, declining by 420% over the 27 months since the war began.

How Much Money Does Sudan Need to Rebuild Infrastructure If the War Ends Today?

Sudan’s economic capital is about $600 billion, with losses estimated at 30%, and continuing. However, no precise studies exist estimating reconstruction costs. Estimating these costs depends directly on stopping the war. After that, more realistic estimates can be made. Current figures circulating, such as the $300 billion suggested by the Minister of Urban Development, are rough approximations without verified sources. Therefore, it is difficult to estimate reconstruction needs before the war ends.

What Are the Economic Expectations if the War Continues?

A longer war will have catastrophic economic consequences. Sudan relies heavily on tax revenue, which makes up 57% of government income and about 7.1% of GDP. Continued conflict means direct declines in government revenue. This is just one aspect of the war’s impact on public finances. The war will also halt foreign aid and foreign direct investment inflows. The biggest risk is that the economy shifts into a war economy, with all resources directed toward military efforts. This will likely worsen currency depreciation and increase citizens’ difficulties accessing services due to government cuts in spending.

What Are the Economic Effects of the Parallel Government in RSF-Controlled Areas?

The existence of multiple central authorities in Sudan will have direct and indirect economic consequences. One direct effect is the division of government revenues. Each authority will control revenue sources in its area. Sudan’s economy is already weak and mismatched with its resources and population. Multiple competing central authorities will weaken the economy further and turn it into a war economy dominated by competing powers.

Is There an Expectation of a Parallel Central Bank? What Would Be the Impact?

If the situation of two governments within one country continues for long, it is unlikely that more than one central bank will emerge. Rather, an internationally supervised agreement may preserve sovereign institutions like the Central Bank, similar to Libya’s case. The governments may agree to restructure the central bank and its management and policies.

What Is Expected to Happen to Sudanese Exports in This New Reality?

This new reality will split exports between the two sides. For example, livestock and some crops will be controlled by the western side, while minerals and some agricultural exports will belong to the eastern side.

What Are Your Estimates of the Amount Spent Financing the War?

It is difficult to specify exact figures in Sudan’s war. Any estimate will be approximate. However, billions of Sudanese pounds have been wasted during these 27 months.

How Have the Warring Parties Used Gold Revenues to Finance the War? Are There Estimates?

Gold accounts for about 41% of Sudan’s exports. This revenue has become a target for both sides to finance the war. It is expected that over 30% of gold production is unaccounted for and outside official estimates, likely smuggled and used to fund the conflict. One side controls much of the remaining state apparatus in Port Sudan, likely using gold export revenues to finance the war.