Sudanese Banks: from the Ruins of War to Prospects of Reform

By: Muhannad Awad Mahmoud

Since the outbreak of war in Sudan, Sudanese banks—especially in Khartoum State—have shifted from being a main pillar of the economy to a sector teetering on the brink of collapse. This decline is due to the massive destruction caused by the war, whether from direct shelling or widespread looting and theft by mercenaries from the Rapid Support Forces (RSF).

Banks did not only lose their headquarters and fixed assets; they also lost most of their market value due to damage to data centers, buildings, equipment, vehicles, and more. Furthermore, most insurance contracts became useless, having expired and never covering war risks in the first place. This deprived both banks and their clients of any real compensation.

The damage was not limited to banks’ fixed assets alone; it also extended to the private sector financed by these banks. Thousands of properties, factories, and farms—serving as primary collateral for loans—were destroyed. Their rehabilitation now requires billions of pounds, while these guarantees have practically lost their value amid the sharp depreciation of the Sudanese currency. The exchange rate of the US dollar surged from about 580 pounds before the war to around 2,750 pounds today—a deterioration of over 374%. Meanwhile, unofficial estimates place the inflation rate at over 400% annually, eroding the purchasing power of citizens and depositors alike.

This dire situation directly accelerated the flight of Sudanese capital, much of which had already exited before the war, with the pace increasing afterward amid uncertainty and the loss of real legal safeguards.

Moreover, before the war, most economic activity was heavily concentrated in Khartoum State, while bank branches in other states remained less active in terms of transaction volume and profits, despite a network of branches spread across Sudan. As Khartoum gradually regains a degree of stability, some banks are expected to return to their premises. However, the concentration of banking activity in the capital alone remains a major risk—one the war has starkly exposed.

Economists estimate that Sudanese banks’ combined capital before the war ranged between USD 1.5 billion and 2 billion at nominal value based on the exchange rate at the time. However, with the widespread destruction of fixed assets and collateral, coupled with an exchange rate collapse exceeding 374%, banks have effectively lost a significant portion of their purchasing power and capital strength. Realistic estimates suggest that actual capital capacity today may not exceed USD 300–500 million after accounting for damages and losses. This figure is extremely small compared to the size of Sudan’s economy and the requirements for reconstruction, productive activity financing, and export support—making capital recapitalization an urgent, non-negotiable priority.

In this context, attracting foreign banks that once operated in Sudan—such as Qatar National Bank, Byblos Bank, National Bank of Egypt, Al Salam Bank, among others—is not a mere option but a national necessity. Their return would inject additional capital and advanced operational expertise into the system, restore confidence in sector stability, attract remittances from Sudanese expatriates, and finance the major projects needed for Sudan’s next phase of rebuilding.

From a technical perspective, merging small and struggling banks is a globally proven solution for overcoming major banking crises. Consolidation strengthens capital resilience, reduces operating costs, and enhances risk management efficiency. This is a solution supported by data and experience:

United States (2008 Financial Crisis): A series of major mergers saved the sector from collapse—JPMorgan Chase acquired Bear Stearns and Washington Mutual; Bank of America bought Merrill Lynch; Wells Fargo absorbed Wachovia.

Malaysia (late 1990s Asian crisis): Over 50 banks and financial firms were merged into strong entities like Maybank and CIMB Group.

Rwanda (post-genocide): The government supported mergers to strengthen the sector, with Bank of Kigali absorbing smaller, near-insolvent entities and financing the reconstruction of productive sectors.

Greece (Eurozone crisis): Alpha Bank merged with Emporiki Bank; Piraeus Bank acquired ATEbank and others; National Bank of Greece consolidated subsidiaries.

Germany: Commerzbank acquired Dresdner Bank to form a stronger institution.

Spain: Traditional savings banks (Cajas) were consolidated into larger groups such as Bankia and CaixaBank, safeguarding liquidity and depositor trust.

These models confirm that mergers are not just emergency measures but sound economic policy, provided there is a minimum capital threshold and clear legal frameworks to protect depositors’ funds and ensure transparency in valuations.

However, mergers alone are insufficient. Sudan’s economy needs a strategic shift in financing toward real productive sectors—agriculture, industry, and mining—which generate added value, create sustainable jobs, and reduce dependence on foreign currency. Export financing should also be prioritized to ensure steady foreign exchange inflows and relieve pressure on the exchange rate. In contrast, financing purely consumptive trade—especially unnecessary imports—drains resources and builds no productive base.

This approach is supported by economic literature, endogenous growth theories, and experiences of post-conflict countries like Rwanda and Angola, which restructured their banking sectors to focus loans on production and exports rather than consumer trade. This strategy successfully revived real economic sectors, reduced unemployment, stabilized currencies, restored confidence in the banking system, attracted foreign investment, and accelerated reconstruction—unlike economies that remained dependent on short-term trade finance.

In conclusion, reforming Sudan’s banking system requires an integrated plan that starts with setting a clear minimum capital threshold, encouraging mergers of struggling institutions, rebuilding legal guarantees, incentivizing financing for productive sectors and exports, and restoring confidence by attracting foreign banks.

Saving what remains of Sudanese funds and preserving what remains of public trust demands genuine willpower and bold decisions based on scientific lessons and global experiences. Otherwise, the hemorrhage will continue—and the cost for all of us will be multiplied in the future.

Shortlink: https://sudanhorizon.com/?p=6515