1 Introduction

Global development continues to affect Africa’s quest for socio-economic progress. The COVID-19 pandemic, the Russia–Ukraine war, and recent global economic dynamics (interacting with national-level challenges) continue to erode socio-economic wellbeing in Africa, reversing decades of improvement.Footnote 1 Though Africa made a surprise and rapid recovery in 2021, with a growth rate of 4.7 percent, this recovery was slowed by the outbreak of the Russia–Ukraine war that (interacting with global economic trends, conflict and instability, and climate change) rendered recovery difficult while also fueling other macro-economic problems (IMF 2022a). At the start of the conflict, the prices of wheat, fertilizer, and energy increased by 28, 22, and 20 percent, respectively, while inflation rose by 40 percent (AfDB 2022). The increase in prices pushed an additional 15 million people into extreme poverty (Ibid.). It is estimated that about 140 million Africans face acute food insecurity that, if not given due attention, may aggravate social tension and conflict (AUDA-NEPAD 2022).

Although the need for greater spending for social protection remains high, African capacity to do so is constrained by limited fiscal space. The social spending needed to withstand the pandemic strained African countries’ fiscal positions, which were further constrained by the current global economic slowdown in advanced and middle-income economies and the associated financial tightening (IMF 2022a). African states have limited access to external finance. Even when it is available, they can only secure it at high interest rates. The result has been a further aggravation of Africa’s increasing debt problems, where close to half of African states are either in debt distress or at high risk of debt distress (Yohannes-Kassahun 2023). While the increasing uncertainty of the external environment is negatively affecting most African states, internal factors associated with socio-political conflict and climate change are becoming another set of growth-arresting and welfare-eroding challenges. Hence, recovery responses in Africa need to target both sources of external shocks and internal determinants of resilience.

To the extent that Africa’s problems have global roots, international actors often have a significant stake in helping Africa address its economic problems. International Financial Institutions (IFIs) are part of this ecosystem of international organizations and actors. The IFIs present themselves as key actors in helping Africa recover from external shocks and address internal sources of economic crisis and poverty. The International Monetary Fund (IMF), for example, claims that it made an emergency disbursement of 27 billion USD and allowed special drawing rights to another 23 billion US dollars for sub-Saharan African countries since the outbreak of the pandemic (IMF 2022a). It also introduced a new food shock window in its emergency lending facilities to support balance-of-payment problems arising from food price increases. Likewise, the World Bank (WB) also claims that it has made more than 200 billion USD available to help developing countries overcome the impact of the pandemic (WB 2022a).

More important, from the perspective of these authors, is the IFIs’ claim that they are strongly supporting internal solutions to socioeconomic problems by tailoring their support to the specific challenges of African countries, particularly those related to conflict and political unrest. As violence and insecurity increase, and as this puts the brakes on socioeconomic development in several African countries, a focus on fragility and conflict is indeed a welcome development. Almost half of the WB’s fragile and conflict-affected countries are in Africa (WB 2022b). If global trends and regional observations are any indication, the number of fragile and conflict-affected states (FCS) in Africa may increase. Violent conflict is at its highest in three decades, levels of forced displacement have peaked, and up to 30 African countries are at risk of experiencing election-related political unrest in 2023 and 2024 (WB 2020b). A focus on FCS is thus justified not only by their increasing number and Africa’s disproportionate share of FCS, but also by these states’ special development needs. The FCS share all the economic problems of low-income countries and have additional challenges; therefore, they require development support that caters to their unique circumstances.

In FCS, development actors must learn how to pursue their missions amidst insecurity and with the intent of helping to reduce political violence, whereas security interventions must be development-conscious. The WB and IMF have begun to accept not only the need to engage FCS, but also the need to involve them in ways that are different from the ways they engage non-FCS. They have been increasingly drawn into and have attempted to engage in situations of transition and recovery, usually having a role in and attempting to spearhead countries’ economic reconstruction and macro-economic policies. However, their engagement during periods of transition and post-conflict reconstruction has been dynamic and riddled with controversy, at least at the rhetorical level. While these institutions present themselves as adaptive enough to assist FCS countries, IFIs have arguably engaged in behavior that is conflict-exacerbating and welfare-eroding.

This paper revisits these debates considering the recent shifts in the strategies of the IFIs to deal with situations of fragility and conflict and recent developments in Africa using the cases of the Ethiopian Conflict and the transition in Sudan, which suffered conflict relapse in April 2023. The extent to which IFIs have shifted their strategies for enhancing peace and development is the core subject of this paper. Ethiopia and Sudan, located in a geopolitically influential region, commenced their transitions in 2018 and 2019, respectively, and their transition processes and challenges share similar features (Verjee 2021). Both countries also descended into war, which signifies the challenges of transition that fragile states in Africa face. According to the recent strategy of the WB, to which the IMF’s strategy has recently been aligned, in 2022, Ethiopia was a conflict-affected country, whereas Sudan was a fragile state. Examining the IFIs’ engagement in these two countries offers insights into the change and continuities in IFIs’ engagement with FCS. It also reveals the power dynamics involved in the relationships between IFIs and the political authorities of these states. The extent to which there is alignment between the development and transformation visions of IFIs with the societies of these states will also be an important issue of concern in this discussion.

This paper argues that the inner core of neo-liberal economic vision has animated the IFIs’ prescriptions to these countries, accompanied by a secondary focus on social safety nets. In Sudan, the IFI offered coordinated support for economic reform with some successes at directly targeting sources of fragility and conflict. In Ethiopia, such coordinated engagement was lacking, and reform measures did not directly target the sources of conflict. The cases demonstrate the importance of continuous and coordinated engagement in FCS in a way that acknowledges the nexus between security and development issues, especially during periods of critical juncture.

The paper is organized in six sections. The next section describes the evolution in IFIs’ engagement in FCS as outlined in these institutions’ policy documents and reports. This is followed, in section three, by a discussion of the controversies and observations of scholars on the IFIs’ engagement in FCS. The fourth section presents the IFIs’ engagement in Ethiopia and the fifth section scrutinizes the IFIs’ engagement in Sudan. Finally, section six offers some concluding observations along with some policy recommendations for China’s engagement in Africa on issues that emerge earlier in the discussion.

2 The IFIs’ description of their engagement in FCS

The IFIs argue that they are adaptive enough to changing circumstances and that their interventions are constantly updated, enabling them to effectively help countries recovering from conflict (WB 2020b). The WB, for example, argues that its engagement with conflicted-affected and fragile countries has evolved from a focus on post-conflict reconstruction to the entire spectrum of conflict, in line with its 2011 study of Conflict Security and Development and its 2018 Pathways for Peace Study jointly prepared with the UN (Ibid.). It claims that its new Fragile State Strategy (2020–2025) combines the former report’s emphasis on the link between security, justice, and development with the latter’s call for greater emphasis on conflict prevention. The WB claims that this new strategy introduced innovations in many dimensions of its thinking and operations. According to this new strategy, the WB now focuses on the full conflict spectrum by remaining engaged even in conflict situations to “preserve institutional capacity and human capital” and has increased the amount and type of support it offers fragile and conflict-affected states (Ibid). The strategy stipulates that the WB will support fragile and conflict-affected states by working on conflict prevention, supporting refugees and host communities, tackling gender-based violence, supporting countries in their transition to post-conflict states, and remaining engaged in conflict situations.

Similarly, the IMF claims that its priority and strongest commitment in supporting fragile and conflicted-affected states has been increasingly adapting as a result of its experiences, lessons learned, and new knowledge gained (IMF 2022b). Based on its work to identify drivers of fragility and conflict, the IMF asserts that it piloted country-engagement strategies and sought to gain a deeper understanding of states’ political and economic contexts. It claims to have integrated the IMF’s surveillance, capacity development, and lending practices; increased the amount and flexibility of concessional support offered to fragile and conflict-affected states; and established a new Resilience and Sustainability Trust Fund (RST) to address long-term structural challenges of low-income countries (Ibid.). According to the IMF, these measures culminated in the new IMF strategy for FCS introduced in 2022.

This new strategy, the IMF claimed, incorporated previous measures into a holistic and strategic guide thereby systematically tailoring its approaches in a way that “factors in the drivers of fragility, political economy dynamics, and specific constraints to reform in each country” (IMF 2022b, 1). The IMF claims to customize its engagement strategies for FCS and plans to expand partnerships to amplify its comparative advantage. It seeks to achieve this through context-sensitive surveillance and analytics, expanded field presence, and a flexibly designed lending arrangement, tailoring programs and terms to the fragility and conflict context (Ibid.). The WB and the IMF are therefore portraying their roles as highly relevant to the state and societies affected by fragility and conflict. Notwithstanding, the scholarly debate on the role of the IFIs in improving societal welfare and strengthening a growth-enhancing macroeconomic framework remains highly contentious.

3 Scholarly observations and debates

There are two aspects of the debates on IFIs’ engagement in low-income countries in general and FCS in particular that are of interest to this discussion. The first involves the foremost raison d’etre of the IFIs, whereas the second scrutinizes whether and how IFIs promote (in)security and (under)development. According to its underlying premise, the WB seeks to eradicate extreme poverty and promote shared prosperity. The IMF aims to ensure macroeconomic stability and lay the conditions for growth. However, the interests, motivations, and ideologies that inform the conduct of the two institutions and the social outcomes they seek (unsuccessfully, this paper argues) to produce are arguably different from those they publicly proclaim.

Some scholars argue that the IMF aims to tackle economic collapse by supporting countries that are experiencing serious foreign exchange and balance-of-payment problems (Vreeland 2003). From this perspective, borrowers sign up for IMF conditionalities, either because they wish to lock themselves into policy measures that might be unpopular, or they lack foreign exchange and have reduced foreign reserve (Ibid.). However, others argue that countries’ economic and political vulnerabilities are used by IFIs to institutionalize neoliberalism, regardless of the social and economic outcomes of their efforts. Elliot Dolan-Evans of Monash University, for example, argues that the WB uses situations of war as an opportunity to build neoliberal society through neoliberal acts of peacebuilding (Dolan-Evans 2022). While the IMF promotes austerity measures, such as currency devaluation, reductions in public spending, liberalization, and deregulation of the economy, the WB promotes the same liberal policy of greater privatization, competitiveness, and growth (Ibid.).

The IFIs’ recent emphasis on social spending and social inclusion garnered divergent scholarly arguments. Some scholars suggested that even if these issues are increasingly emphasized, the inner core remains liberal economic orthodoxy of privatization and liberalization where the aim is “neoliberalizing institutions, dismantle trade barriers, reduce labor protection and connect conflict affected states to global circuits of capital” (Ibid., 535). To this effect, state action tends to be redirected and even strengthened “in favour of the most globalized financial sector and the capitalist offensive against social and labour right” (Pereira 2016, 825). Theresa Reinold (2017) of Leiden University also argues that despite the IMF’s stated commitment to laying the foundation necessary for growth, social protection, and good governance, time and again staff on the ground prioritize macroeconomic stability. Between 2004 and 2007, the IMF, for instance, undertook only 29 Poverty and Social Impact Analysis (PSIA) engagements, whereas the WB conducted 150 PSIAs (Ibid.). The possibility of undertaking a PSIA is often determined by the preferences, motivations, and skills of mission chiefs and resident representatives (Ibid.). According to Kentikelenis et al. (2016), in 54% of the IMF lending operations in Sub-Saharan Africa, the social spending floor set by the IMF was not observed. This suggests that the IMF has given secondary status to social protections. Consequently, those needing the most social protection are the most affected by its austerity measures.

From the perspective of these scholars, the problem is the IMF’s prioritization of debt sustainability over social outcomes in the recipient countries when the two goals conflict. Emphasizing this, Eichengreen and Woods argue that what a country needs in order to enhance economic growth may be different from what it needs in order to exit the IMF program (Eichengreen and Woods 2016). Drawing from the critical political economy tradition, other scholars fundamentally challenge the philosophy on which the IFIs’ engagement in post-conflict countries is based. Cohn and Duncanson argue that the IFIs’ market-oriented approach considers human reproductive care and subsistence labor, as well as nature, as unimportant to the proper functioning of a market (Cohn and Duncanson 2020). Based on such flawed assumptions, IFIs equated post-war recovery with the return of GDP growth and integration into the world economy. Instead, recovery should have involved reconstruction, addressing new challenges created by the war (such as return of displaced persons, destruction of infrastructure, and disarmament, demobilization and reintegration of armed groups), and transforming the entire political economy of war (Ibid.). Others argue that the IFIs may not have sufficiently reflected on the possibilities of conflict and the trade-offs between these different goals (Flores and Nooruddin 2009).

The second strand of debates focuses on the effects of the measures pursued by the IFIs in FCS on peace and conflicts and the mechanisms that produced these outcomes. Some studies argue against the conflict-generating roles of these measures. According to Casper, leaders whose governments are subject to IMF conditionality are more exposed to coup d'état than those who are not (Casper 2017). IMF arrangements tend to reduce the rent-distributing capacity of leaders and therefore undermine the leader’s capacity to maintain the ruling coalition (support base) intact. Those members of the elite that are excluded from the rent-distribution processes therefore orchestrate a coup (Ibid.). Hartzell et al. (2010) likewise argue that the IMF-imposed structural adjustment program increases the risk of civil war because it creates losers and winners while at the same time undermining the state’s capacity to overcome distributional conflicts. They argue that escape from poverty and conflict would necessitate an alternative to the liberalization sponsored by the IMF. Dolan-Evans also argues that the WB interventions exacerbate injustice, inequality, and violence (Dolan-Evans 2022). Cohn and Duncanson likewise argue that the IFIs’ strategy of peace through resource extraction in post-conflict contexts neither recognizes what is needed “to address the destruction, disruption and distortions caused by war” nor supports “the transformation needed for sustainable peace” and instead leads to social and economic inequality – issues that are the drivers of war (Cohn and Duncanson 2009, 1215). Similarly, Reinsberg et al. (2022) argues that IMF programs often aggravate human insecurity by undermining the delivery of social services such as education, health, and clean water, and generating food insecurity.

While most of these sources highlight the unproductive role of the IFIs, there are a few scholars and studies that do not attribute blame to IFIs. Flores and Nooruddin argue that WB intervention had no correlation with conflict recurrence or economic recovery (Flores and Nooruddin 2009). Vadlamannati et al. (2014) argue that, with all other things remaining constant, IMF programs tend to promote ethnic peace. According to these authors, when a country has substantial ethnic fractionalization, IMF programs promote peace, but when there is polarization, they tend to aggravate conflict.

Thus, neither the security nor the welfare effect of IFI interventions is conclusively established. Controversies over the IFIs’ interests and agenda and borrowers’ agency also remain unsettled. Because most of these debates and controversies are based on IFIs’ past conduct, recent shifts in their strategy might not have been reflected in these debates. In addition, it is important to recognize the assumptions that underpin these controversies. Scholars often do not question what alternative exists other than those propounded by the IFIs. As Vadlamannati et al. (2014) suggest, any criticism of the IMF needs to consider the result of austerity happening by default, which usually is economic collapse. Hence, while the conflict-aggravating role of the IFI perpetrated in the name of promoting macroeconomic stability and economic growth indeed should be highlighted, the temptation to present borrowers as innocent victims, a portrayal that is apparent in the literature, needs to be avoided. Many of the post-adjustment economic and social problems might be as much the result of factors that lead to adjustment as they are the result of the adjustment per se. The next two sections reflect on these controversies and limitations in the context of the recent transitions and turmoil in Ethiopia and Sudan, respectively.

4 The IFI and Ethiopia’s post-2018 transition

The Ethiopian government under the Ethiopian People Revolutionary Democratic Front (1991–2018) was highly resistant to aspects of the liberalization measures promoted by the IFIs. On many occasions, IFIs called for the devaluation of the currency, privatization of state-owned enterprises including the telecommunication and banking sector, liberalization of the financial sector, and privatization of land ownership, but the Ethiopian government implemented only some aspects of these suggestions and only at its own pace. Since the country was registering robust growth, and due to the geopolitical importance of Ethiopia, these behaviors of the regime did not cause relationships between the IFIs and the government to deteriorate. This suggests that although their continuous push for liberal economic paradigms confirms the assertion above that the IFIs promote, at their core, a liberal economic policy, there are limits to their agency. They generally accepted that the government had its own economic vision and ownership over the development assistance offered to it (Brown and Fisher 2020).

However, the government’s development approach was not without problems. The growth of the country was largely propelled by government investment in infrastructure and the activities of state-owned enterprises. State-owned enterprises and party-affiliated endowments were given priority over the private sector in many aspects of their operations, be it access to foreign exchange, land or credit (Clapham 2018). More worryingly, the government lost its ability to discriminate between state enterprises that were productive and those that were rent-seeking and wasteful. The result has been increasing debt because, in many cases, investments were not made based on adequate cost–benefit analysis (FDRE 2020). This was further compounded by widening balance-of-payment problems, as exports were not enough to cover imports (Ibid.). This rising demand for foreign currency in a crawling-peg foreign exchange regime led to a widening gap between the formal and parallel rate for foreign currencies.

Despite these economic problems, the consensus within the party was that this would be resolved within the developmental state model. However, with the rise of Abiy Ahmed and the subsequent tensions between his Prosperity Party and the TPLF, a critical juncture arose to revisit the model of development. The Abiy government and the IFIs began to develop closer ties. Though it is difficult to discern the agency that each possessed and exercised in these close relationships, both seem to have interpreted the critical events of the period as an opportunity to push their respective agendas. The IFIs seem to have viewed the situation as being ripe for steering the development agenda of the country away from developmentalism to the neoliberalism of most other African states. Abiy also seems to have needed their support to consolidate his power. He was quick to announce that he would push for privatization of state-owned enterprises, including the most profitable and globally reputed Ethiopian airlines (Maasho 2018). Through a heavy reliance on IFI and other multilateral advisors, the government came up with a “home grown” economic reform plan that, according to one observer, was no different from those found in IMF templates (Geda 2019). In addition to the financial supports of the IFIs discussed below, Western countries (pledged to) pump billions of dollars in support of this economic reform program. The fact that this liberalization was pushed without domestic consensus, even at least among the most powerful actors of the country, was ignored. This quest for privatization and liberalization further widened the disagreement between the TPLF and the government, which together with other factors eventually led to a full-blown war in November 2020.

4.1 IFIs engagement during the conflict

After the outbreak of the war and in lieu of its recent strategies, the WB continued to engage with the government of Ethiopia. While the WB’s engagement is based on the Country Partnership Framework discussed earlier, with the outbreak of the conflict, the WB claimed that it made some adjustments toward “people-centered” development (WB 2023). The WB also claimed that, in line with its FCS strategy, it remained engaged in Ethiopia during multiple periods of conflict, and that its support aimed to address sources of fragility and conflict in the country by focusing on basic human needs, health, food security, nutrition, and education (Ibid.). Indeed, as indicated in Table 1 below, the number of approved projects and the amount of money the WB invested in Ethiopia appears substantial even during the two-year conflict, compared with Ethiopia`s other sources of revenue.Footnote 2

Table 1 WB projects in Ethiopia
Full size table

However, neither the conflict status of Ethiopia nor the key aspects of the suggestions in the WB’s FCS strategy are correctly classified. To begin with, the WB`s classification of Ethiopia’s conflict status is inaccurate. According to the WB`s FCS strategy, FCS are first categorized as fragile, medium-intensity or high-intensity conflict countries. For the year 2020, Ethiopia was listed neither as a fragile nor as a conflict-affected country, probably because the Tigray war broke out after the WB had already classified countries for the year. For the year 2021, the WB classified Ethiopia as having medium-intensity conflict. The WB operationalized a medium-intensity conflict in two ways. First, a medium intensity conflict applies to a country if it fulfills the following three conditions: (1) it has more than 250 total conflict deaths, according to ACLED, and more than 150, according to UCDP; (2) these conflict death toll figures are relative to one or two per 100,000 people, according to ACLED, and 0.5 or one, according to UCDP; (3) the number of casualties increases at least by a 100 percent compared to the previous year. A medium-intensity conflict status is also applied to countries with the same absolute number of conflict deaths as above and between 2 and 10 conflict deaths per 100,000 people, according to ACLED, and between 1 and 10 conflict-deaths per 100,000 people, according to UCDP (WB 2020b). High-intensity conflicts, on the other hand, are defined as an absolute number of conflict deaths above 250 according to ACLED and 150 according to UCDP and above 10 per 100,000 people for both ACLED and UCDP (WB 2020b). Based on these measures, Ethiopia in 2021 would have been considered to have high-intensity conflict (where as many as 600,000 people were killed in the two-year war). Yet, the WB considered it a medium-intensity conflict. For the year 2022, the WB classified Ethiopia as a high-intensity conflict country.

Second, though the FCS requires the bank to do Risk and Resilience AssessmentsFootnote 3 and benchmark interventions based on that, available public sources indicate that this might not have been done. Probably due to this lack of Risk and Resilience Assessment, the WB assistance to the country focused on areas (basic human needs, health, food security, nutrition, and education) that have no direct bearing on the War between the Federal Government and the Tigrayan People Liberation Front. The conflict, both in Tigray and other parts of the country, has largely been due to power struggles and lack of consensus on the future direction of the country, which cannot simply be addressed by intervention in the aforementioned areas. Finally, although Ethiopia should have been supported under one of the three WB International Development Association (IDA) envelopes introduced for FCS countries that top up their regular performance-based contributions, it was not. Admittedly, the IDA allocates support under these envelopes if it believes that the authorities are committed to overcoming the sources of fragility and conflict. Since many of the Western states and the EU framed the Abiy regime as the main actor responsible for the war and the ensuing humanitarian crisis, the WB might have accepted these judgments and considered the authorities uncommitted to end the conflict.

The IMF was equally welcoming of the political and economic liberalization efforts of post-2018 Ethiopia. In 2019, the IMF offered its highest-ever loan of 2.9 billion USD for three years under its concessional Extended Credit Facility and non-concessional Extended Funding Facility. The government was expected to undertake a range of liberalization and reform measures usually suggested by the IMF across the developing world. Moreover, the IMF indicated that these economic reform measures would be achieved without compromising social protection for poverty reduction. One of the conditions of the concessional facility was reprofiling Ethiopia’s debt with creditors. As Ethiopia failed to secure agreement among its creditors on debt restructuring, the Extended Credit Facility was ended in September 2021 after the country withdrew USD 318.6 million (Fortune 2021). The IMF also offered the country, along with its deal for all other developing countries affected by the pandemic, a special drawing right to USD 406 million in August 2021. On the surface, the IMF seemed to continue treating the country the way it did all others, suggesting that it did not adjust its operations as a result of the conflict.

However, observers argue that the IMF’s refusal to negotiate a new arrangement was due to the economic and trade sanctions imposed by the US and that it is unlikely to resume negotiations until US sanction are lifted (IHS 2022). Indeed, Ethiopian government relations with Western states sharply deteriorated during the conflict. However, since the IMF is not ready to initiate any credit facility without the success of the G20 debt structuring framework, Western states can penalize the regime without needing a change in the IMF’s policy toward the country. Even with the signing of the peace agreement, the IMF reportedly sets the unification of the exchange rate regimes and agreement on the G20 debt restructuring framework as a prerequisite for signing new lending arrangements (Ashenafi 2023). The government already agreed earlier to a gradual process of depreciating the currency to manage the inflationary effect of the devaluation, even if the preference of the IMF was rapid and drastic devaluation (IMF 2020a). With the government bargaining power significantly weakened by its mounting financial needs, it might have little option but to subscribe to the IMF conditions. The country has external debt close to 30 billion USD, and debt servicing, which currently amounts to 2 billion USD per year, is expected to double in the coming years (Ibid.).

The economic literature on the effect of devaluation on economic growth and welfare outcomes in developing countries is inconclusive. According to some scholars, devaluation has no effect on economic output, whereas for others, the effect is dependent on the structure and size of the economy (Bouvet et al. 2022; Odionye and Chukwu 2021). Still others, based on export of agricultural products, argue that the effects of devaluation on agricultural export is both positive and significant (Yanikkaya 2013). Momodu and Akani (2016) argue that while devaluation promotes economic growth in the short term, its long-term effect is negative. Others argue that it is difficult to capture the economy-wide effects of devaluation while pointing to its potential contractionary effects. An Ethiopian analyst (Geda 2018) argues that in so far as the problems of the Ethiopian economy are structural, devaluation would not be a panacea. Rather, it would exacerbate the already double-digit inflation. Hence, even if devaluation has benefits, they would only be realized when combined with other measures and cannot simply be achieved with a “quick fix” approach. Unless significant foreign resources are injected into the economy, the inflationary effect of devaluation will happen. According to IHS (2022), a risk consulting company, Ethiopia needs at least 6 billion USD reserve to substantially devalue the currency without runaway inflation. Increasing the amount of reserve to this level requires billions of dollars, resources that are unlikely to materialize any time soon.

Even if this resource injection were to happen as a result of the IMF implementing its new fragility framework, reinstituting their previous support as part of the post-war reconstruction process and a completed debt restructuring agreement, the effect on the drivers of conflict may be insignificant. At the macro-level, such injection of resources would help the regime stabilize the macro-economy, which, only under certain circumstances, promotes welfare. Without such substantial resources, rising inflation would be the most likely outcome of the devaluation processes, with its multifaceted adverse effects.

In the short term, there is little to show that the IFI measures and engagements are conflict-sensitive and contribute to addressing sources of conflict. Even with the WB, which the IMF also supported on social spending in the form of productive safety net programs, the positive contribution to social inclusion is affected by other measures. The removal of the fuel subsidy from those sections of society whose livelihoods are considered less affected by such a removal, in the presence of high inflation, could degrade the assets of this group and therefore this “less affected” group could eventually be no different than those considered to be vulnerable to the removal of the fuel subsidy. The level of poverty in the country, measured by the index of lower middle-income poverty rate ($3.65), for instance, is 65 percent of the population, which means an overwhelming number of people are surviving just above the poverty line who would easily be affected by small changes in income.

5 The IFIs and Sudan’s post-2019 transition

In Sudan, the IFIs did not have sufficient level of engagement before the advent of the 2019 revolution that ousted long-time dictator Omar Al-Bashir largely due to the accumulated arrears of the country under Bashir and the US designation of Sudan as “a state sponsor of terrorism”. Following the ouster of Bashir and the formation of a hybrid civil-military transitional government and its embrace of inclusive peace, economic reform for inclusive growth, and integrating Sudan with the international economic and political systems and processes, the IFIs framed the transition as a once-in-a generation opportunity for transforming Sudan into a democratic and prosperous country. Accordingly, they began to reflect on how they would engage Sudan and the transitional government to undertake macroeconomic reforms, address the debt arrears, and transition Sudan into a path of democracy and inclusive growth. By July 2020, the IMF commenced its staff monitored program of 2.9 billion USD. The Program sought to help Sudan to undertake several reforms necessary for its participation in the Highly Indebted Poor Country scheme (HIPC) by helping it undertake reform around fiscal policy, monetary policy, and structural and institutional reforms (IMF 2020b). When this program was introduced, Sudan was in unending economic crisis where a high level of fiscal deficit led to cycles of inflation, currency depreciation, and deficit financing through monetization (Ibid.).

Sudan under the IMF’s staff-monitored program agreed to liberalize the exchange rate, mobilize greater revenue, expand the social safety net, remove energy subsidies, and undertake structural reforms for inclusive growth and greater competitiveness (Ibid.). Accordingly, fuel subsidies were reduced from 10.5 percent of GDP in 2019 to 3.8 percent of GDP 2020. The price of electricity increased 500 percent, and the formal and parallel exchange rates were unified in February 2021 after a massive devaluation conducted as part of Sudan’s move to a market-determined exchange rate (IMF 2021a). By the end of 2020, Sudan had cleared the US “state sponsor of terrorism” designation, which in turn helped it clear some of its debt arrears, notably its arrears to the African Development Bank and the World Bank, thus helping it access the financial support of these institutions. The IMF recommended that the implementation of these measures should be condition-based rather than time bound. This involved laying the necessary monetary framework and strengthening the banking system and social safety nets before removing subsidies and initiating exchange rate reform. A strong campaign of communication to secure buy-in was needed before all these reforms (IMF 2020b). The IMF’s own report later indicated that this recommendation was not adhered to as other measures were implemented prior to and with little synchronization with expansion of social safety nets, which, as it acknowledged and recognized, generated social problems (IMF 2021a). Indeed, public protests of the subsidy removal were very common during this period.

These developments managed to transfer blame from the IMF to the Government of Sudan. The IMF made Sudan’s access to external resources conditional on undertaking the reforms indicated in the Staff Monitored Program (SMP) whereas some of the reforms, including the safety net program, would first require external resources. In the absence of the external resources, the best the Sudanese government could do was to implement those elements of the SMP that would not require substantial external funding and that would allow them to get the much-coveted external support, even if in the short-term that involved penalizing the population. At any rate, the IMF deemed this progress satisfactory, and Sudan reached the HIPC decision point by the end of June 2021. During this SMP, inflation remained high, reaching 412.75 percent in June 2021. The rate at which people were descending into poverty increased significantly. The expansion of social protection which started in February 2021 following the lifting of Sudan’s designation as a state sponsor of terrorism, and subsequent access to external resources was rolling slowly and proved not much effect on expanding economic hardship, which the authorities and the IFIs dubbed “adjustment pain.”

After reaching the HIPC decision point, Sudan was offered and promised relief from its debt to the effect that it signed another Extended Credit Agreement with the IMF. The agreement sought to consolidate what the IMF called “macroeconomic gains” of the previous period, while recognizing that macroeconomic problems may continue due to the fragility of the reform processes. Under this arrangement, Sudan agreed to undertake critical reforms that, among others, would target state-owned enterprises and the governance of the security sector, which eventually seems to have motivated the October coup (discussed later). Under this Extended Credit Agreement, Sudan, among others, agreed to increase resource mobilization, further reduce subsidies, strengthen social safety nets and the financial system, and improve the governance and transparency of state-owned enterprises (IMF 2021b). Of these measures, the last one appears to be critical in shaping subsequent events in the country in general and the behavior of the military particularly. According to the preliminary findings of a Governance Diagnostic, state-owned enterprises (especially those in the defense sector) lack fiscal transparency. Their procurement systems lacked independence of regulation and monitoring, and their data were seriously flawed (Ibid.). Other governance issues identified include opaque natural resource governance, multiple tax incentives, opaque anticorruption legal frameworks, and lack of independence of the judiciary. This next phase of the reform process was therefore to upend the security capture of the state, which the WB Risk and Resilience Assessment identified as one of the drivers of fragility and conflict in Sudan (WB 2020a). Anticipation of this, as noted below, appears to be a factor in the October 2021 coup and the subsequent military confrontation, which began in April 2023, between the Sudanese Army, led by Al-Burhan, and the Rapid Support Forces, led by Hamdan Dagalo.

The IMF’s SMP, signed in July 2020, was followed by the WB strategy of re-engagement note, produced in September 2020. Conscious of its strategy on fragility, the WB is more forthright on the identification of the sources of Sudan’s fragility and conflict. Drawing from its Risk and Resilience Assessment, it identified exclusionary governance by elite collusion, dysfunctional and elite-captured economy, regional imbalances and exclusions, and weak institutional capacity as the main structural drivers of fragility (Ibid.). It underscored that the reform process in Sudan needed to wean “Sudan’s security entities from their non-transparent income streams,” including their large presence “in sectors related to oil, gum Arabic sesame, weapons, fuel, wheat, telecommunications, banking, real estate, and gold, in addition to a wide array of consumer goods” (Ibid., 7). To this effect, the Bank sought to achieve two critical objectives: helping Sudan clear its debt arrears to enable it to benefit from the Bank’s Fragility strategy, and contributing to the re-establishment of the social contract, by facilitating inclusion and citizen engagement. To realize these objectives, the WB proposed to undertake several activities, including providing technical assistance, conducting analytical and diagnostic work, designing and gathering resources for the Sudan’s Family Support Program, promoting economic opportunities, improving service delivery, and building state capacity. If Sudan’s progress in achieving many of the IMF conditions under situations of adversity is a criterion for the WB’s success, one would argue that the WB’s support has indeed been critical. Once Sudan was cleared from IDA arrears, it was able to get financial support under the WB’s “Fragility Envelope.” It was able to access resources through the envelope’s Turn Around Allocation (TAA), complementing its normal Performance Based Allocation and benefiting from the Bank’s 2 billion USD allocated to “consolidate peace, unlock the country’s productive potential, shore up the private sector, and contribute to the WB twin goals” (WB 2021).

Before the full implementation of the IMF’s extended credit facility and the Bank’s support program, the Sovereign Council of Sudan led by the military removed the civilian leadership of the country in October 2021 and reversed some of the measures introduced under the transitional government. Among others, the military disbanded the committee established to reclaim public assets, appointed Al-Bashir-era figures (who are mostly Islamist by orientation) to the judiciary and the security apparatus, and appointed Al-Burhan allies into the sovereign council (US 2022). Subsequent events indicate that these moves to consolidate power by Al-Burhan generated fear and insecurity on the part of Hamdan Dagalo, who was leading the Rapid Support Paramilitary Force. The IFIs and donors responded to the coup by suspending all financial assistance and the support pledged to the regime. Accordingly, more than 4.5 billion USD in support was suspended, and the Paris club suspended its discussion of Sudan’s debt relief amounting to 19 billion USD. While recognizing that the junta would not be directly affected by these measures, the US, which pressured the IFIs to suspend their assistance, reasoned that “if the economy collapses because of this major shock due to the withholding of this large-scale amount of assistance, it will engulf their [the military] commercial interests as well” (US 2022).

Due to these measures, Sudan’s currency significantly depreciated, and the balance-of-payment problem worsened. The situation was worsened by the Russia-Ukraine war. On the social side of it, poverty was projected to increase from 18.4 percent in 2014 to 29.1 percent in 2022, and 39 percent of the population was projected to be food insecure by fall 2022 (WB 2022c). Citizens complained that living conditions for many Sudanese reached a “humiliating” level, where humanitarian actors regretted having to make “heart-wrenching decisions” of whom to support and whom to leave (Dabagna 2022). The assistance-pause, as consequential as it was for the people, seemed to have achieved the intended effect of forcing the military junta to negotiate on the conditions on which it would abdicate power for civilian leadership. A framework agreement on the formation of a civilian government was signed in December 2022, and a final agreement was planned to be signed in April 2023 after addressing, among others, the two critical issues of transitional justice and security sector reform. However, the security sector reform measure of merging the Sudan Armed Forces and the paramilitary Rapid Support Force under one unified army and the time frame in which this should be realized proved to be a source of disagreement between Al-Burhan and Dagalo. The former wanted a quick integration of the RSF to the army while the latter wanted to have more autonomy for some time to come. This disagreement led to the April 2023 military confrontation that has yet to be resolved, and the final agreement remains unsigned.

In general, the IFIs’ engagement in Sudan, which has been coordinated with other actors, appears to be largely effective. They acknowledged and sought to deal with the main drivers of conflict in the country and did not shy away from using financially punitive measures when necessary. The WB’s new strategy of helping countries transition out of fragility is interpreted in such a way that assistance will resume when authorities are ready to cooperate and disengage when they backtrack from their commitments and promises. Though the current military confrontation might be taken as a sign of the risks involved in pressuring countries to undertake difficult reforms, this reform was necessary (in the view of many Sudanese) to steer the country towards civilian rule. The main problem with the IFIs’ engagement in Sudan rather has been the IFIs’ less than full commitment for the social support program, which in one way or the other might have generated conflict. Given that Sudan’s 2019 revolution was initially a response to increases in the price of bread, there is no assurance that economic hardship will not trigger similar incidents in the future. Public protests of the civilian government on economic grounds were apparent even before it was ousted by the military, and this hardship could transform the current military confrontation into a civil war, or worse, giving rise to new extremist groups. Though the Sudan’s Family Support Program was meant to offset this, the process was slowed and was not paced with other reform measures, which confirms the widespread claim that the IFIs consider social protections as a secondary issue.

6 Conclusions

Although some shifts are noticeable, policies pursued by the IFIs in fragile and conflict-affected states appear mostly unchanged in recent years. The unique nature of FCS contexts is recognized, and some adjustments in the budgetary envelope and the modalities of delivery are suggested, but the generally recommended policy measures are those that tighten monetary regulation, limit government expenditure, and mobilize resources (no matter that fragile and conflict contexts have little room for such measures), and liberalize the exchange rate, which amounts to devaluation. These measures are assumed to lead to macroeconomic stability, which, it is argued, lays the groundwork for inclusive growth that relies on the private sector. While social spending and addressing the needs of the most vulnerable are recognized and included in the IFIs’ programming in principle, satisfactory progress on this dimension does not appear to be mandatory for taking the IFIs’ recipient countries to the next level. Yet the very failure to address the real-life impact on ordinary people and particularly vulnerable groups, drives negative responses from the population and can drive governments into further instability. Understandably, the WB increased the resources it allocated for FCS and continued to engage in situations of conflict. However, there is variation in the extent to which its measures contributed to addressing the drivers of conflict and fragility. In Ethiopia, there is little direct connection between the causes of the conflict and the development interventions of the WB, whereas in Sudan, the Bank attempted to situate its intervention considering the key drivers of fragility and conflict.

This paper is not meant to be representative of all FCS in Africa. However, if the IFIs’ behavior is variegated in countries as geopolitically important as Ethiopia and Sudan, it may act similarly in other FCS countries. Hence, it remains to be seen whether the IMF’s recently introduced Fragility Strategy will bring about different outcomes. While the IFIs’ role in situations of conflict and fragility is less than ideal, the root issue is the problematic conduct of governments that led their countries to situations of conflict and fragility. This raises important questions about early intervention to prevent the escalation of conflict into large-scale violence, an issue that the United Nations has been grappling with through its Sustaining Peace agenda. More remains to be done to connect various international intervention frameworks to bring value to the lives of real people in conflict-affected contexts.

What policy recommendations for China’s engagement with African countries emerge from this article’s discussion of the IFIs’ involvement in Ethiopia and Sudan in the last 4 years? We would offer three observations and lessons for China in this regard. China has, for a long time, been engaged in countries that the IFIs consider fragile and conflict affected. The IFIs’ acknowledgement of the need to remain engaged, even in difficult environments, could be taken as a testimony to the fact that China’s engagement in Africa is based on justifiable premises. Moreover, due to this long engagement, China would already have developed the experience and know-how on the challenges and opportunities for peace in such situations. China, therefore, can at the very least avoid doing harm to these states based on its know-how and experience in the past decades.

Second, while China needs to continue its engagement in many countries labelled FCS, increasing integration of development and security concerns may serve to strengthen these engagements. China’s vision for peace in Africa is widely presented as development-oriented, where success in the development arena contributes to peace and stability. In general, development contributes to peace, but development cooperation alone may not be enough to prevent crisis during periods of transition. As the Ethiopian case shows, such conflict reverses many of the gains that may emerge from previous development-oriented cooperation. Consequently, China may want to consider active political engagement during critical junctures to preserve development gains and the peace arising therefrom. China’s recent appointment of Special Envoy for the Horn of Africa is relevant in this regard and greater institutionalization of this by, for example, establishing a strengthened and qualified technical support team might be needed. Other cooperation arrangements, such as China’s security agreement with the Ethiopian government on the protection of projects sponsored under the Belt and Road Initiative, might also need to go beyond agreement on technical support to targeting the deeper sources of insecurity that threaten these projects.

Third, in the economic arena, the past development gains of African states in general and fragile and conflict-affected ones in particular, are being undermined by Africa’s increasing indebtedness. In this regard, China can offer support by helping to expedite the G20 debt restructuring framework. There is concern that the G20 framework is slow and less responsive to the urgency of supporting African states’ debt problems. Concern is also mounting that the process might become a hostage in geopolitical rivalries and tensions (Mint 2023). As geopolitical rivalry and competition increase, the temptation to focus on short-term gains might be strong, which China needs to resist. By doing so, China could help prevent global strategic rivalries and competition from playing out at the expense of weak and poor countries in Africa.