Sudan conflict poses credit negative risk to neighboring countries, says Moody’s
If the ongoing conflict in Sudan continues for a prolonged period, it could pose a credit-negative risk to neighboring countries and multilateral development banks, warned Moody’s Investors Service.
The global rating agency said the conflict would have major economic consequences in the region, including negative impacts on MDBs and overall nonperforming loans.
“If the conflict descends into a prolonged civil war, destruction of social and physical infrastructure would have lasting economic consequences, weighing on MDB asset quality in Sudan, along with overall nonperforming loans and liquidity,” said Moody’s in a note released on Monday.
On April 15, a fight broke out between the army and paramilitary Rapid Support Forces in Khartoum, the capital city of Sudan.
The conflict derailed an internationally backed plan for a transition to civilian rule after the ousting in 2019 of Omar al Bashir, the Islamist president who had himself seized power in a 1989 coup.
“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,” added Moody’s.
The note warned that a probable spillover of the conflict to neighboring countries would trigger broader asset-quality concerns for MDBs with a higher concentration of loans in Chad, South Sudan, Ethiopia and Egypt.
Moody’s pointed out that Trade and Development Bank had loans worth $931 million in Sudan as of the end of December 2022, and 95 percent of this exposure is in the form of trade finance facilities previously used to fund food and fuel imports.
The report added that the Islamic Corp. for the Development of the Private Sector had an exposure to Sudan equal to 1.3 percent of total assets in the first quarter of 2023. However, it had already fully provisioned and significantly marked down its credit and equity exposures.
Islamic Development Bank, African Development Bank and International Development Association have exposures to Sudan of less than 1 percent of development-rated assets. The preferred creditor status means that, even if the exposure becomes nonperforming, the loans will not be written off and should be eventually repaid.
“If the conflict descends into a prolonged civil war, destruction of social and physical infrastructure would have lasting economic consequences, weighing on MDB asset quality in Sudan, along with overall nonperforming loans and liquidity,” said Moody’s in a note released on Monday.
On April 15, a fight broke out between the army and paramilitary Rapid Support Forces in Khartoum, the capital city of Sudan.
The conflict derailed an internationally backed plan for a transition to civilian rule after the ousting in 2019 of Omar al Bashir, the Islamist president who had himself seized power in a 1989 coup.
“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,” added Moody’s.
The note warned that a probable spillover of the conflict to neighboring countries would trigger broader asset-quality concerns for MDBs with a higher concentration of loans in Chad, South Sudan, Ethiopia and Egypt.
Moody’s pointed out that Trade and Development Bank had loans worth $931 million in Sudan as of the end of December 2022, and 95 percent of this exposure is in the form of trade finance facilities previously used to fund food and fuel imports.
The report added that the Islamic Corp. for the Development of the Private Sector had an exposure to Sudan equal to 1.3 percent of total assets in the first quarter of 2023. However, it had already fully provisioned and significantly marked down its credit and equity exposures.
Islamic Development Bank, African Development Bank and International Development Association have exposures to Sudan of less than 1 percent of development-rated assets. The preferred creditor status means that, even if the exposure becomes nonperforming, the loans will not be written off and should be eventually repaid.