When Economies Bleed

The Sudan Civil War which broke out in April 2023 between the Sudanese Armed Forces and the Rapid Support Forces offers a clear example of how war destroys the economies of the modern world. Since the conflict has erupted, the economy of Sudan has shrunk by an estimated 50% of its pre-war dimensions; the incomes of households in both urban and rural regions have decreased by over 40%, and over 1.8 million individuals have been thrown into poverty. This crisis is representative of the larger trend of economic collapse that defines war-torn economies of all the world. At the point of eruption of conflict, the economy of the war-torn countries faces the shock at various channels simultaneously; the experience of Sudan shows that this can be a devastating effect. The war also uprooted key production in the agricultural, industrial manufacturing and mining industries, cut trade by closing ports, destroyed exports especially gold and livestock, and caused enormous job destruction. Inflation on basic commodities in the area began to rise by 4060 per cent in just two months of the conflict in June 2023. Food and fuel prices and bottled water prices soared, 13 per cent of the food-processing companies went out of business on a long-term basis and 53 per cent in the short term.  

The sector that suffered most was the industrial sector which was highly concentrated in Khartoum where the fighting was intense. In the case of a long conflict, the industrial sector was estimated to reduce by more than 70 per cent, as opposed to 21 per cent reduction in agriculture and 49 per cent reduction in services. This economic concentration also resulted in the economic dead zone of entire cities overnight as factories shut down, supply chains discontinued, and workers lost their jobs. The economies afflicted by a war are subjected to a patterned demolition of the physical infrastructure, which is the foundation of contemporary economic activity. In Sudan, water and electrical systems, transportation systems, and health facilities were destroyed by the conflict. The Khartoum Water Authority witnessed the important water facilities being occupied by the warring communities, which disrupted access to the most vital services to millions. Port activities were frozen thereby shaking imports and exports. Equipment and capital goods were also systematically looted or destroyed so that even in case of the cessation of fighting, the reestablishment of production facilities was virtually impossible. The case of Ukraine provides similar evidence to this trend. By March 2025, Ukraine experienced an estimated damage of infrastructure to the tune of approximately 63 billion dollars, and the greater economic damage is estimated at between 543-600 billion dollars. As in the case of Sudan, power plants in Ukraine were also targeted and 30 per cent of the power generation capacity was destroyed leading to enormous blackouts.  

Economies affected by war lose jobs at catastrophic rates. In the worst case scenario in Sudan, about half of the total number of workers 5.2m people can lose their jobs. It was estimated that the industrial sector would lose more than 80 per cent of the jobs. The loss of work places is not restricted to the unskilled workers but Sudanese workers of all education levels, including uneducated labourers and tertiary educated workers have lost their jobs. The flight crisis adds to job losses. Over three million people were displaced in Sudan, of which almost a million had fled to the neighbouring countries. Recent studies on Ukraine have also found out that forced migration in the face of invasion raised the unemployment rate by 7.5 percentage points, with the recently displaced Ukrainians reporting 24 per cent unemployment rate in contrast to 13 per cent displaced earlier. Dislocated populations not only lose direct income but also social contacts, family businesses and access to credit that makes them able to participate in the economy. The result of this is an explosion of poverty in war torn economies as a direct effect of these employment and infrastructure shocks. In Sudan, with the conflict persisting till 2023, poverty rate was estimated to rise by 4.5 percentage points in the country, with 1.8 million more people in poverty. The increase was even higher in rural locations -5.9 percent points versus 3.8 percent points in urban locations. The lowest quintile of households experienced an equal decrease in income as the more affluent groups, and in other words, war is undermining the purchasing power of the most inept at recovering its losses.  

This trend is observed to be constant in conflict regions all over the world. A study by the United Nations Development Programme established that 455 million out of the 1.1 billion poor people in the world reside in states that are in conflict of violence. The levels of poverty in conflict affected countries are almost three times more than those of the peaceful countries with more than one out of three individuals living below poverty line in the countries at war compared to one out of every nine in the stable countries. Importantly, the most conflict-prone nations are least likely to quicken the process of poverty reduction, and it continues to cycle the deprivation between generations. When populations are in need of food production systems, war destroys them. During conflict, agricultural production is limited in Sudan in various ways and includes shortages of seeds, fuel, fertilisers and finance, absence of security allowing the farmers to access their fields and looting of storage facilities. Even in the most favourable case with a prompt end of fighting, there is a severe limitation on agricultural recovery caused by permanent lack of inputs and destruction of infrastructure. These are not limited to transnational effects and limited humanitarian issues. In July 2023, more than 6 million Sudanese were internally displaced and food supplies were in critical shortage. The World Food Programme reported that more than half of the Sudan population was food insecure. This agrarian meltdown results in humanitarian crises which do not end when the military war is over and still years of investment is required to restore productive capacity.  

Economies that suffer as a result of war encounter a fiscal crunch in which the military spending shoots up, while the revenues plunge at the same time. In Sudan, the government incomes decreased because of the cessation of production and the trade, but military expenditure on the war grew significantly. This pushed crowding out of the social spending, essential services were underfunded at a time when they were most desperately needed. Compensation of employees in the government sector, 30 per cent of government expenditure prior to the war, remained unpaid over months. The reduction in the fiscal space reduced expenditure on education and health, which initiated long-term human-capital decadence. War-torn economies are devastated by post-conflict debt repayments. War torn economies who are seeking reconstruction loans are highly likely to be subjected to austerity measures by the international financial institutions before they are allowed to spend on their social expenditure and on the development investment. This brings on a paradox; the countries that are in most need of investment are the ones that are under persistent pressure to cut on the government spending to slow down the recovery aspects at a time when the speed in building up the place is the most important. The economic crisis in Sudan shows the process of how war can ruin the modern economies. Economies that are torn by war do not just reduce in size in a proportionate manner; they degenerate in structure. The manufacturing ability is ruined, people are displaced, institutions are ruined, and hope in economic systems is erased.

Sudan's projected 48 percent contraction in GDP, coupled with the loss of 5.2 million jobs and the impoverishment of 1.8 million additional people, demonstrates that economic recovery from conflict cannot be merely technical—it must be transformative, addressing both physical reconstruction and the institutional foundations that enable sustainable development. The path from warfare to economic recovery remains steep and uncertain, requiring not only massive financial investment but fundamental rebuilding of the social fabric that underpins functioning economies.