## 2. The Economic Consequences of Conflicts

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### Key empirical findings on growth and output
- Conflicts imply a drop in real GDP per capita of 15 to 20 percent over five years compared with a no-conflict scenario.
- A simple comparison indicates real GDP growth is, on average, about 2.5 percentage points lower where there is conflict.
- When the onset of intense conflict episodes can be clearly identified:
  - The conflict’s effect on growth is most pronounced in the first year, then gradually declines.
  - Real GDP per capita is 12 percent lower five years after the onset of the conflict (panel analysis of identified episodes).
- An increase in the conflict-intensity measure from no conflict to the top quartile (29 conflict-related deaths per million people) is, on average, associated with a reduction in real GDP per capita growth of 3.2 percentage points a year.
- Onset of a high-intensity conflict (29 conflict-related deaths per million or 75th percentile) is estimated to lower output per capita by 5 percent in the first year, reaching about 7.5 percent after five years and remaining statistically significant.
- Counterfactual and synthetic control analyses:
  - At conflict onset (t = 1), the actual median growth rate plummets to minus 6 percent, compared with the projected growth rate of almost 1 percent—implying a decline in real GDP per capita of about 7 percent.
  - Five years after the conflict began, per capita GDP is, on average, 8 percent below its preconflict level compared with a projected increase of 7 percent, suggesting a decline in per capita GDP of about 15 percent as a result of the conflict.
  - Synthetic control analysis: five years into conflict the synthetic group saw an increase in per capita GDP of 12 percent on average, compared with a decline of 10 percent in the conflict cases.
  - Counterfactual analysis suggests real GDP per capita may be as much as 20 percent lower five years after the start of a conflict compared with a no-conflict scenario.

### Channels through which conflict reduces output
- Decreased investment, trade, and productivity.
- Specific quantitative channel impacts when conflict intensity rises from no conflict to the top quartile:
  - Lower real investment growth of 4.5 percentage points (partly driven by decline in private sector credit growth).
  - Export growth reduced by 5.5 percentage points.
  - Productivity growth reduced by 1.3 percentage points.
- Destruction of human and physical capital, including forced displacement and devastating effects on education and health care.
- Greater security concerns, disruption of trade routes, displacement of skilled labor, weakening of institutions, and increased economic and political uncertainty delay long-horizon investment.

### Spatial impact and local evidence
- Conflicts are often localized: conditional on a country being in conflict, on average only 40 percent of states within the country experience conflict-related deaths.
- Satellite-based night-light data show statistically significant local reductions in activity during conflicts.
- State-level econometric results:
  - Conflicts resulting in 100 fatalities (around the median of the state-level distribution) are associated with, on average, 17 percentage point lower growth in night-light activity, translating into about 6.5 percent lower real GDP growth at the state level (assuming an elasticity of 2.5 between night-light and GDP).
  - Spillover effects: 100 fatalities in neighboring states within 500 kilometers are associated with about a 2 percentage point reduction in growth; the effect is statistically insignificant for neighbors between 500 and 1,000 kms.
- Violence in economic/urban hubs has a more pronounced effect on growth than violence in the periphery.

### Fiscal and public finance consequences
- Revenue and composition:
  - Real tax revenues fall, on average, by over 10 percent in intensive conflict cases relative to no-conflict cases.
  - An increase in conflict intensity from no conflict to the top quartile is associated with a decline in total revenue of about 12 percent in real terms or about 2 percent as a share of GDP.
  - Increase in conflict intensity is associated with, on average, 9 percent higher real budgetary military spending (or about 0.6 percent of GDP).
  - Real capital expenditures decrease by about 9 percent.
  - Total public spending does not increase significantly during conflicts, implying a shift from capital expenditures toward military spending.
- Fiscal balance and debt:
  - The net effect of an increase in conflict intensity is an increase in the fiscal deficit of about 1.7 percent of GDP.
  - The ratio of public debt to GDP increases by an average of 9 percentage points during intense conflicts.
  - For intense-conflict episodes examined, public-debt-to-GDP increases 16 percentage points of GDP in the first two years, with the effect increasing to almost 20 percent of GDP by the fifth year.

### Prevalence, intensity, and trends in sub-Saharan Africa
- Number of conflict-ridden countries:
  - Averaged about 15 during 1990–99 (about 35 percent of the total number of countries in the region).
  - Dropped to nine during 2004–12, then reached a peak of 17 in 2016.
- Verified conflict-related deaths:
  - At least 825,000 in the 1990s (over two-thirds of global conflict deaths).
  - Fell to about 2,200 in 2010.
  - Since 2014, averaged about 14,000 a year (compared with an average of 82,000 in the 1990s).
- Top quartile for conflict intensity corresponds to about 29 conflict-related deaths per million.
- Since 2013, about four countries (on average) in the region have experienced intense conflict placing them in the top quartile (including Central African Republic, Democratic Republic of the Congo, South Sudan, and several Sahel countries).

### Geographic distribution, resource intensity, and types of conflict
- Regional conflict prevalence (percent of country-years in conflict):
  - Central Africa: Pre 2000 = 42.4; Post 2000 = 36.4
  - Eastern Africa: Pre 2000 = 35.2; Post 2000 = 27.4
  - Western Africa: Pre 2000 = 35.2; Post 2000 = 24.4
  - Southern Africa: Pre 2000 = 20.0; Post 2000 = 1.1
- Conflict prevalence by resource intensity (percent of country-years in conflict):
  - Oil exporters: Pre 2000 = 52.0; Post 2000 = 39.9
  - Other resource-intensive countries: Pre 2000 = 35.2; Post 2000 = 25.2
  - Non-resource-intensive countries: Pre 2000 = 29.3; Post 2000 = 20.5
- The Sahel has experienced a significant increase in violence in the post-2000 period, especially since 2010:
  - Sahel (Burkina Faso, Cameroon, Chad, Mali, Niger, Nigeria): the Lake Chad Basin accounted for 77 percent of all conflict-related deaths in the Sahel and about 40 percent of all conflict-related deaths in sub-Saharan Africa during 2010–17.
- Nature of conflicts:
  - Pre-2000: large-scale, state-based conflicts (e.g., Angola, Eritrea, Ethiopia, Sierra Leone) largely drove conflict-related deaths.
  - Post-2000: share of non-state-based conflict deaths (including conflicts between nongovernmental armed groups and terrorist attacks targeting civilians) has increased significantly.
  - Number of terrorist incidents has increased in the Sahel and elsewhere (Democratic Republic of the Congo, Kenya, Nigeria affected most). Note: Global Terrorism Database methodology changed in 2012; the period after 2012 uses a consistent methodology.

### Persistence and duration
- Median conflict duration in the region is about four years.
- Prolonged involvement examples:
  - Democratic Republic of the Congo: 29 years.
  - Nigeria: 27 years.
- Probability of exiting conflict increased from 20 percent in the pre-2000 period to about 24 percent afterward.
- The Sahel is an exception where conflicts have become substantially more persistent in the post-2000 years.

### Population displacement and humanitarian implications
- United Nations–recognized persons of concern from sub-Saharan African countries rose from fewer than 5 million in the 1980s to 18 million in 2017.
- As of 2017:
  - Close to 6 million refugees and 1 million asylum seekers originated in sub-Saharan Africa, with the majority resettling within the region.
  - Refugees constituted more than 3 percent of the population of Chad and Uganda in 2017.
- Internally displaced people (IDPs) rose from fewer than 2 million to 10 million over the past two decades:
  - Democratic Republic of the Congo: 4.4 million IDPs.
  - South Sudan: 1.9 million IDPs.
  - Nigeria: 1.7 million IDPs.

### Social costs and impacts on women and children
- Education and health:
  - Primary school enrollment rates are, on average, almost 13 percentage points lower for girls and 9 percentage points lower for boys in intense-conflict cases than in nonconflict cases.
  - Life expectancy is significantly lower during conflicts; maternal mortality and other health indicators deteriorate.
- Children:
  - Malnutrition rates are higher by approximately 8 percentage points for children in major-conflict countries compared with nonconflict countries.
  - Exposure to conflict has measurable long-term effects on height, cognitive performance, school enrollment, and lifetime earnings.
  - Surviving child soldiers in Uganda attended school for one year less than children who were not soldiers, with significant impact on earnings later in life.
- Women:
  - Women are more likely to experience gender-based violence during conflicts; trafficking is used as a tactic to subjugate civilian populations.
  - Insecurity often constrains movement of girls and women, limiting access to schools and employment.
  - Women in refugee camps are particularly vulnerable; one in six women in refugee camps and among irregular women migrants is a survivor of gender-based violence.

### Policy implications and recommendations
- Prevention and structural policies:
  - Preventing conflicts is critical—promote inclusive economic development and social cohesion to limit onset.
  - Address underlying economic and structural risk factors associated with higher likelihood of conflict, including low income levels, poor growth outcomes, weak state capacity, and inequality of opportunity (especially across ethnic, religious, and regional groups).
- Policies for countries in conflict:
  - Limit the loss of human and physical capital by protecting social and development spending.
  - Maintain well-functioning institutions to lessen long-term economic damage.
  - Use well-targeted and coordinated humanitarian aid and concessional financial assistance to provide relief and create room to respond to ravaging effects.
- Policies for host and neighboring countries:
  - Provide assistance to protect displaced populations and alleviate economic and social strains generated in host countries.
  - External assistance may be essential for countries suffering spillover effects to protect displaced populations and alleviate economic and social strains in host countries.
- Fiscal management:
  - Preserve fiscal space where possible given revenue losses and reallocation pressures from capital to military spending.
  - Support rapid restoration of investment and trade once conflicts subside to limit persistent output losses.

*Source: IMF staff calculations based on chapter "2. THE ECONOMIC CONSEQUENCES OF CONFLICTS".*

### 2. The Economic Consequences of Conflicts

### 2. The Economic Consequences of Conflicts

### Key empirical findings on growth and output
- Conflicts imply a drop in real GDP per capita of 15 to 20 percent over five years compared with a no-conflict scenario.
- A simple comparison indicates real GDP growth is, on average, about 2.5 percentage points lower where there is conflict.
- When the onset of intense conflict episodes can be clearly identified:
  - The conflict’s effect on growth is most pronounced in the first year, then gradually declines.
  - Real GDP per capita is 12 percent lower five years after the onset of the conflict (panel analysis of identified episodes).
- Satellite-based state-level night-lights data show a statistically significant reduction in night-light activity in sub-Saharan Africa during conflicts, indicating strong local impacts.
- State-level evidence indicates strong spillover effects: growth is lower in nearby regions, with the spillover effect being one-third of the effect in the home state.

### Channels through which conflict reduces output
- Decreased investment, trade, and productivity.
- Destruction of human and physical capital, including:
  - Forced displacement.
  - Devastating effects on education and health care.
- These factors combine to produce a persistent decline in productive capacity.

### Fiscal and public finance consequences
- Real tax revenues fall, on average, by over 10 percent in intensive conflict cases relative to no-conflict cases.
- On average, total public spending does not show a statistically strong change, but the composition shifts:
  - Spending tilts away from capital expenditures toward military spending.
- Fiscal balances deteriorate and there is a sharp increase in public debt over the conflict period.

### Prevalence, intensity, and trends of conflicts in sub-Saharan Africa
- The number of conflict-ridden countries averaged about 15 during 1990–99 (about 35 percent of the total number of countries in the region).
- The average number of countries in conflict dropped to nine during 2004–12, then reached a peak of 17 in 2016.
- Verified conflict-related deaths in the 1990s totaled at least 825,000 (over two-thirds of global conflict deaths).
- Conflict-related deaths in the region fell to about 2,200 in 2010.
- Since 2014, conflict-related deaths have averaged about 14,000 a year (compared with an average of 82,000 in the 1990s).
- The top quartile for conflict intensity corresponds to about 29 conflict-related deaths per million.
- Since 2013, about four countries (on average) in the region have experienced intense conflict placing them in the top quartile (including Central African Republic, Democratic Republic of the Congo, South Sudan, and several Sahel countries).

### Geographic distribution and types of conflict
- Southern Africa has become relatively peaceful since the turn of the century; conflict remains widespread elsewhere.
- Conflict prevalence by region (percent of country-years in conflict):
  - Central Africa: Pre 2000 = 42.4; Post 2000 = 36.4
  - Eastern Africa: Pre 2000 = 35.2; Post 2000 = 27.4
  - Western Africa: Pre 2000 = 35.2; Post 2000 = 24.4
  - Southern Africa: Pre 2000 = 20.0; Post 2000 = 1.1
- Conflict prevalence by resource intensity (percent of country-years in conflict):
  - Oil exporters: Pre 2000 = 52.0; Post 2000 = 39.9
  - Other resource-intensive countries: Pre 2000 = 35.2; Post 2000 = 25.2
  - Non-resource-intensive countries: Pre 2000 = 29.3; Post 2000 = 20.5
- The Sahel region has experienced a significant increase in violence in the post-2000 period, especially since 2010.
  - In the Sahel (Burkina Faso, Cameroon, Chad, Mali, Niger, Nigeria), the Lake Chad Basin accounted for 77 percent of all conflict-related deaths in the Sahel and about 40 percent of all conflict-related deaths in sub-Saharan Africa during 2010–17.

- Nature of conflicts:
  - Large-scale, state-based conflicts (e.g., Angola, Eritrea, Ethiopia, Sierra Leone) largely drove conflict-related deaths in the pre-2000 period.
  - Since then, the share of non-state-based conflict deaths (including conflicts between nongovernmental armed groups and terrorist attacks targeting civilians) has increased significantly.
  - The number of terrorist incidents has increased in the Sahel and elsewhere (Democratic Republic of the Congo, Kenya, Nigeria affected most). Note: Global Terrorism Database methodology changed in 2012; the period after 2012 uses a consistent methodology.

### Persistence and duration
- Median conflict duration in the region is about four years.
- Some countries have prolonged involvement in conflict (Democratic Republic of the Congo: 29 years; Nigeria: 27 years).
- The probability of a country exiting conflict increased from 20 percent in the pre-2000 period to about 24 percent afterward.
- The Sahel is an exception where conflicts have become substantially more persistent in the post-2000 years.

### Population displacement and humanitarian implications
- United Nations–recognized persons of concern from sub-Saharan African countries rose from fewer than 5 million in the 1980s to 18 million in 2017.
- As of 2017:
  - Close to 6 million refugees and 1 million asylum seekers originated in sub-Saharan Africa, with the majority resettling within the region.
  - Refugees constituted more than 3 percent of the population of Chad and Uganda in 2017.
- Internally displaced people (IDPs) in the region rose from fewer than 2 million to 10 million over the past two decades.
  - Democratic Republic of the Congo: 4.4 million IDPs
  - South Sudan: 1.9 million IDPs
  - Nigeria: 1.7 million IDPs

### Policy implications and recommendations
- Preventing conflicts is critical—promote inclusive economic development and social cohesion to limit onset.
- For countries in conflict:
  - Focus on limiting the loss of human and physical capital by protecting social and developmental spending.
  - Try to maintain well-functioning institutions to lessen long-term economic damage.
  - Use well-targeted and coordinated humanitarian aid and concessional financial assistance to provide relief and create room to respond to ravaging effects.
- For host countries experiencing spillovers:
  - Provide assistance to protect displaced populations and alleviate economic and social strains generated in host countries.

*Prepared by a team led by Siddharth Kothari (with Xiangming Fang, Lisa Kolovich, Cameron McLoughlin, Monique Newiak, Rasmane Ouedraogo, Brooke Tenison, Jiaxiong Yao, and Mustafa Yenice) under the supervision of Mahvash Qureshi and David Robinson.*

### 2.  THE ECONOMIC CONSEQUENCES OF CONFLICTS

### 2. THE ECONOMIC CONSEQUENCES OF CONFLICTS

### Empirical impact on growth
- An increase in the conflict-intensity measure from no conflict to the top quartile (29 conflict-related deaths per million people) is, on average, associated with a reduction in real GDP per capita growth of 3.2 percentage points a year.
- The negative effect stems mostly from more intense conflicts (those involving at least five conflict-related deaths per million people).
- Violence in economic/urban hubs has a more pronounced effect on growth than violence in the periphery.
- Both state and nonstate conflicts have a statistically strong impact on growth.
- The effect of conflicts on growth is conditional on macroeconomic characteristics at conflict onset:
  - Increase in conflict intensity is associated with about 1.5 percentage points lower growth in countries with relatively strong institutions (top quartile of the Institutional Quality Index) compared with 3 percentage points where institutions are weaker (bottom quartile).
  - A country with a negligible fiscal deficit experiences a growth decline of 2.4 percentage points as conflicts break out relative to a decline of 3.4 percentage points for countries with a fiscal deficit of 5 percent of GDP.
- The effects are dynamic, lasting at least five years after the onset of conflict:
  - Onset of a high-intensity conflict (29 conflict-related deaths per million or 75th percentile) is estimated to lower output per capita by 5 percent in the first year, reaching about 7.5 percent after five years and remaining statistically significant.

### Channels of disruption
- Investment and trade are significantly affected by conflict:
  - Increasing conflict intensity from no conflict to the top quartile is associated with lower real investment growth of 4.5 percentage points, driven partly by a decline in private sector credit growth.
  - Conflicts reduce export growth by 5.5 percentage points.
  - Conflicts reduce productivity growth by 1.3 percentage points.
- Contributing mechanisms include:
  - Greater security concerns that impede normal business operations.
  - Disruption of traditional trade routes.
  - Destruction of human capital and physical infrastructure.
  - Displacement of skilled labor.
  - Disruption and weakening of institutions.
  - Increased economic and political uncertainty, delaying long-horizon investment.

### Social well-being
- Conflicts destroy human capital, with measurable impacts on education and health:
  - Primary school enrollment rates are, on average, almost 13 percentage points lower for girls and 9 percentage points lower for boys in intense-conflict cases than in nonconflict cases.
  - Life expectancy is significantly lower during conflicts.
  - Other health indicators, such as maternal mortality, deteriorate during conflicts.
- Women and children are often disproportionately affected through higher malnourishment rates among children and increased gender-based violence, which reduces access to education and job opportunities.

### Permanent output losses
- Comparison of projected real GDP per capita before conflict with actual outcomes shows large, persistent losses:
  - At conflict onset (t = 1), the actual median growth rate plummets to minus 6 percent, compared with the projected growth rate of almost 1 percent—implying a decline in real GDP per capita of about 7 percent.
  - Five years after the conflict began, per capita GDP is, on average, 8 percent below its preconflict level compared with a projected increase of 7 percent, suggesting a decline in per capita GDP of about 15 percent as a result of the conflict.
- Synthetic control analysis yields similar results: five years into conflict the synthetic group saw an increase in per capita GDP of 12 percent on average, compared with a decline of 10 percent in the conflict cases.
- Counterfactual analysis in the chapter suggests real GDP per capita may be as much as 20 percent lower five years after the start of a conflict compared with a no-conflict scenario.

### Spatial impact of conflict
- Conflicts are often localized: conditional on a country being in conflict, on average only 40 percent of states within the country experience conflict-related deaths.
- Night-light data as a proxy for local economic activity show localized declines (example: northeast Nigeria after 2010 with Boko Haram insurgency).
- Econometric results at the state level:
  - Conflicts resulting in 100 fatalities (around the median of the state-level distribution) are associated with, on average, 17 percentage point lower growth in night-light activity, which translates into about 6.5 percent lower real GDP growth at the state level (assuming an elasticity of 2.5 between night-light and GDP).
  - Spillover effects: 100 fatalities in neighboring states within 500 kilometers are associated with about a 2 percentage point reduction in growth; the effect is statistically insignificant for neighbors more distant (between 500 and 1,000 kms).

### Fiscal implications of conflict
- Revenue effects:
  - An increase in conflict intensity from no conflict to the top quartile is associated with a decline in total revenue of about 12 percent in real terms or about 2 percent as a share of GDP.
- Expenditure composition:
  - Increase in conflict intensity is associated with, on average, 9 percent higher real budgetary military spending (or about 0.6 percent of GDP).
  - Real capital expenditures decrease by about 9 percent.
  - Total public spending does not increase significantly during conflicts, implying a shift from growth-friendly capital expenditures to military spending.
- Fiscal balance and debt:
  - The net effect of an increase in conflict intensity is an increase in the fiscal deficit of about 1.7 percent of GDP.
  - The ratio of public debt to GDP increases by an average of 9 percentage points during intense conflicts.
  - For intense-conflict episodes examined, public-debt-to-GDP increases 16 percentage points of GDP in the first two years, with the effect increasing to almost 20 percent of GDP by the fifth year.

### Conclusion and policy-relevant implications
- Conflicts in sub-Saharan Africa impose large economic costs on affected countries and neighboring states; costs scale with conflict intensity and persistence.
- More intense conflicts lead to greater destruction of human and physical capital and larger, more persistent reductions in investment, trade, and productivity.
- Conflicts erode fiscal capacity through lower revenue, reallocation from capital to military spending, higher deficits, and rising public debt—further jeopardizing socioeconomic stability and increasing the risk of prolonged conflict.
- The magnitude and persistence of losses underscore the importance of policies that prevent escalation of violence, protect human capital and infrastructure, preserve fiscal space, and support rapid restoration of investment and trade once conflicts subside.

*Source: IMF staff calculations based on chapter "2. THE ECONOMIC CONSEQUENCES OF CONFLICTS".*

### 1. Tax Revenue

### 1. Tax Revenue

### Effect of Conflict Intensity on Fiscal Variables
- Figure 2.24 reports the effect of different conflict intensity levels on real growth of selected fiscal variables for Sub-Saharan Africa.  
- Notes: Quartiles are based on the world distribution of conflict-related deaths as a share of population (among countries with at least one death). Bars indicate difference relative to no conflict case. Based on results from Annex Table 2.15, columns 1, 3, and 4. ***, **, and * indicate statistical significance at the 1, 5, and 10 percent level, respectively. The variables are adjusted for inflation.

### Impact on Debt-to-GDP
- Figure 2.25 shows the impact on Debt-to-GDP ratio of increase in conflict intensity.  
- Note: Based on increase in conflict intensity from no conflict to the 75th percentile. See Annex Table 2.16 for details. ***, **, and * indicate statistical significance at the 1, 5, and 10 percent level, respectively. HIPC = Heavily Indebted Poor Country, MDRI = Multilateral Debt Relief Initiative.
- Figure 2.26 shows the cumulative change in Debt-to-GDP ratio during conflict episodes, plotted by years since start of conflict episode. (Starting years of conflict episodes are defined based on Online Annex Table 2.9.)

### Human Costs: Women and Children (Box 2.1)
- Children:
  - Malnutrition rates are higher by approximately 8 percentage points for children in major-conflict countries compared with nonconflict countries.
  - Exposure to conflict has been shown to affect children’s height in Burundi, Côte d’Ivoire, and Nigeria (studies cited).
  - Long-term effects of malnutrition include lower cognitive performance, school enrollment, and lifetime earnings.
  - Surviving child soldiers: in Uganda they were found to attend school for one year less than children who were not soldiers, with a significant impact on earnings later in life.
- Women:
  - Women are more likely to experience gender-based violence during conflicts; trafficking is used as a tactic to subjugate civilian populations.
  - Insecurity often constrains movement of girls and women, limiting access to schools and employment.
  - Women in refugee camps are particularly vulnerable to displacement.
  - One in six women in refugee camps and among irregular women migrants is a survivor of gender-based violence.

### Policy Implications and Recommendations
- Preventing conflicts is imperative given the large economic and human costs.
- Address underlying economic and structural risk factors associated with higher likelihood of conflict, including:
  - Low income levels
  - Poor growth outcomes
  - Weak state capacity
  - Inequality of opportunity, especially across ethnic, religious, and regional groups
- For countries in conflict, focus on limiting loss of human and physical capital by:
  - Protecting social and development spending
  - Maintaining well-functioning institutions to lessen long-term economic effects of conflict
- Given fiscal pressures, well-targeted and coordinated humanitarian aid and concessional external assistance can help create room to respond to conflicts’ ravaging effects.
- External assistance may be essential for countries suffering spillover effects of conflicts to:
  - Protect displaced populations
  - Alleviate economic and social strains in host countries

*Source: IMF staff calculations and Box 2.1 text from chapter "The Economic Consequences of Conflicts" in Regional Economic Outlook: Sub‑Saharan Africa.*

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_Source: https://www.imf.org/-/media/files/publications/reo/afr/2019/april/english/ch2.pdf_