Since April 15, 2023, the war in Sudan has devastated the country. The deadly contest is primarily driven by a hidden war economy which was planted under, and grew in strength during, the kleptocratic rule of the Bashir regime and continued after to capture the vital sectors of the national economy in the transitional period. In addition to the human cost, the war has devastated the country’s already fragile economy. In a series launched today, STPT examines the roots of the war economy and the consequences of the war on the sectors of the economy that the belligerents and their business networks and facilitators captured during the Bashir regime and held on to after its fall.
We begin this series with an analysis of the impact of the conflict on the banking sector. The paper recognizes that the primary objective should be the resumption of normal daily banking operations for customers needing access to their funds. The paper also acknowledges that these short-term interventions, while vital to redress the war’s impact, are insufficient to address the systemic weaknesses that affected the system even before the war. In this context, the paper emphasizes the importance of post-war reforms in rebuilding and revitalizing the banking sector. This involves addressing the damage caused by the conflict, restoring infrastructure, resolving non-performing loans, and ensuring the stability and reliance of the banking system.
The paper attempts to place immediate post-war measures against a backdrop of more comprehensive reforms needed to boost the resilience and effectiveness of the sector. The recommended reforms include developing electronic payment systems and promoting fintech-enabled financial inclusion. There is a need for a well-designed strategy for currency reform, given cross-country experiences, such as India, Thailand, and Saudi Arabia, to look at the optimal currency denomination, banknote exchange, security features, reducing the cost of printing banknotes, moving forward to new forms of money to better managing the informal economy and improve the implementation of monetary policy and ensures its transmission.
Read the full paper.