Supporting Sudan’s Banking Sector: What Should We Expect from the Government?

 

Rebuilding the banking system is a shared responsibility that requires economic stability, restored confidence, and an enabling environment for financing and investment.

Dr Marwa Qabbani

In a move reflecting the government’s interest in banking sector reform, Transitional Sovereignty Council member Lieutenant General Engineer Ibrahim Jaber chaired an expanded meeting with senior banking sector officials at the Central Bank of Sudan headquarters. The meeting was attended by Central Bank Governor Amna Mirghani Hassan Al-Tom and focused on the future of the banking sector and the requirements for its development and modernisation, particularly its technological and financial infrastructure.

The meeting’s main outcomes centred on achieving comprehensive digital transformation, accelerating the launch of the National Payments Switch, developing banking applications, and connecting banking systems to the “Baladna” platform. They also included strengthening banks’ capital bases by the end of 2026 and complying with anti-money laundering requirements and Basel standards. The meeting also addressed managing export proceeds and measures to prevent their diversion outside the country, directing banking resources toward financing production and exports, and tackling challenges related to bank deposits.

These priorities reflect an awareness of the banking sector’s importance in supporting economic recovery and rebuilding state institutions. However, achieving these objectives depends not only on decisions and directives, but also on the availability of government support and an economic and legislative environment that enables banks to implement them.

This raises the question: what should we expect from the government in terms of supporting the banking sector? Can banks alone bear the cost of recovery and reconstruction in an economy suffering from major structural imbalances and declining productive and investment activity?

The crisis facing Sudan’s banking sector is no longer confined to losses caused by the war or damage to buildings, branches, and banking systems. It has become part of a wider economic crisis affecting savings, liquidity, investment and public confidence in dealing with banks.

Banking sector reform does not begin with the banks themselves, but with reforming the economic environment in which they operate. Banks need monetary and financial stability, an encouraging investment climate, and customers who trust depositing their money and using formal banking channels.

The first thing expected of the government, therefore, is to control public expenditure, reduce the budget deficit, and limit reliance on bank financing to cover government spending, so banks’ resources are not depleted to finance the private sector. Addressing exchange-rate distortions and narrowing the gap between the official and parallel market rates are also essential to encouraging citizens, traders and expatriates to use official banking channels.

The war caused substantial damage to banking infrastructure. Rehabilitating branches, upgrading technological systems, securing data centres and developing communications networks now require substantial investment.

Establishing a national fund to rehabilitate the banking sector, with contributions from the government, banks, the private sector, and financing institutions, could therefore provide a practical mechanism to secure the funding and guarantees needed to rebuild banking infrastructure.

The expectation is not that the government should absorb all the banks’ losses, but rather that it should help create a financing environment that enables them to restore their operational capacity. The continued provision of banking services is a matter of national economic interest that extends beyond the banks themselves.

Restoring public confidence remains one of the greatest challenges facing the banking system. Citizens need reassurance that their money is safe and that they can withdraw funds, make transfers and access banking services without unnecessary complications.

This highlights the importance of strengthening the Deposit Guarantee Fund’s role, developing mechanisms to protect depositors, resolving issues related to accounts and balances, and improving the quality of banking services.

The government must also support policies that encourage the return of savings held outside the banking system by providing a stable economic environment and incentives for citizens to bring their money back into the banks.

One issue requiring urgent attention is reviewing government debts and outstanding obligations to banks, along with establishing a clear programme for settling them. Delays in meeting government financial commitments affect liquidity and limit banks’ ability to deploy resources to finance economic activities.

Rules should also be introduced to prevent the continued use of banks to finance the budget deficit, since the priority in the coming period must be to direct resources towards productive and investment sectors.

Digital transformation was one of the meeting’s most prominent outcomes, particularly the directive to accelerate the launch of the National Payments Switch, develop banking applications, and connect banking systems to the “Baladna” platform.

However, achieving comprehensive digital transformation requires more than upgrading banks’ systems. It also depends on stable telecommunications infrastructure, reliable electricity supplies, data centre development, stronger cybersecurity, and integrating government institutions into an electronic payments system.

The government therefore has a responsibility to support this direction by extending electronic collection and payment systems, connecting government institutions to banks, and expanding the use of electronic wallets, banking agents and mobile payments.

The launch of the National Payments Switch and the expansion of interbank connectivity will also help facilitate transfers, reduce reliance on cash and broaden financial inclusion. More importantly, the government must set an example by using digital services to pay salaries, collect fees, and settle financial obligations through electronic channels.

Another important issue discussed at the meeting was managing export proceeds and preventing their diversion outside the country. This matter is directly linked to foreign-currency availability, exchange-market stability, and the state’s ability to finance its import requirements.

However, addressing this issue should not be limited to regulatory measures. It also requires creating an environment that encourages exporters, simplifying export procedures, ensuring the swift processing of transfers and banking transactions, and providing incentives to encourage the repatriation of export proceeds through official channels.

At the same time, directing banking resources towards financing production for export is an important step towards increasing output and generating foreign currency.

Sudan needs to restart its factories, expand cultivated areas, develop its livestock sector, and invest in energy, transport and infrastructure. All these sectors require sustainable bank financing.

The government must therefore provide the guarantees needed to reduce financing risks, simplify investment procedures and ensure that productive projects have access to essential services. This would encourage banks to finance the private sector and small and medium-sized enterprises.

The success of financing should not be measured solely by the volume of money disbursed by banks, but by their ability to turn that money into production, employment opportunities, exports and foreign-currency earnings.

Remittances from Sudanese nationals abroad represent one of the most important resources that could help support the banking sector and increase foreign-currency availability. However, attracting these remittances requires policies that make the banking system more appealing. These should include competitive banking incentives, easier access to account-opening services from abroad, improved digital applications, and suitable savings and investment products.

The government should also adopt a national programme, in coordination with the Central Bank of Sudan, commercial banks and the Expatriates Affairs Regulatory Authority, to attract savings and direct part of them towards productive projects and reconstruction.

As the Central Bank of Sudan moves towards restructuring the banking system and strengthening banks’ capital bases by the end of 2026, regulatory measures should account for the differing circumstances of individual banks and the extent of the damage they sustained during the war.

Increasing capital and encouraging mergers between banks can be useful reform tools, but they are not the ultimate objective. The real aim is to build strong banks capable of surviving, competing, managing risks and providing reliable services.

Attracting foreign investment and establishing partnerships with regional financial institutions could also bring in capital, expertise and new technologies, helping to develop banking services and restore international relationships.

The meeting between state leaders and banking sector officials represents an important step toward making reform one of the country’s national priorities. However, the real challenge begins at implementation. Directives on digital transformation, strengthening capital, financing production and recovering export proceeds all require an implementation programme that clearly defines responsibilities, resources, timelines and performance indicators.

The current phase therefore calls for a joint mechanism that brings together the Ministry of Finance, the Central Bank of Sudan, the Union of Banks, representatives of bank owners, and the private sector. Its task would be to oversee the implementation of a programme to rebuild the banking system.

The government is responsible for economic stability, creating an enabling investment environment and settling its financial obligations. The Central Bank is responsible for monetary policy, supervision and banking stability. Bank owners and their management teams, meanwhile, are responsible for improving performance, strengthening governance and increasing efficiency.

Supporting Sudan’s banking sector does not mean that the government should absorb banks’ losses or take over their management. Rather, it means providing the conditions that enable them to recover and grow. Banking reform cannot succeed in isolation from wider economic reform, just as reconstruction cannot be achieved without a banking system capable of mobilising savings, providing finance and facilitating investment and trade.

What is required today is a transition from addressing the consequences of war to building a modern, effective banking system that restores public confidence, attracts expatriates’ savings, supports production, and contributes to reconstruction.

The banking sector is not merely a financial intermediary; it is an essential partner in building the economy. No national vision for economic recovery will be complete unless banking reform and support for the sector are placed at the forefront of the country’s priorities.

Dr Marwa Qabbani is an expert in strategic planning and digital transformation.

Shortlink: https://sudanhorizon.com/?p=19918