The Sudanese Banking Sector Under the Fire of the 15 April War: A Compound Collapse… and Conditional Recovery
Nu’man Yousif Mohammed
Since the first shot was fired in the war of 15 April 2023, the battleground has not been confined to streets and cities alone; it has extended to strike at the very heart of the national economy. The Sudanese banking sector has suffered near-total paralysis, pushing it into one of the most severe existential crises in its modern history.
Between the destruction of infrastructure, the erosion of monetary value, and the collapse of trust, the banking system now faces a challenge that demands far more than temporary economic “palliatives”; it requires a strategic vision capable of lifting it from the rubble.
The Earthquake of War: Physical and Financial Destruction
The war delivered a violent shock that shook the foundations of financial institutions. Its direct consequences can be summarised in several catastrophic developments.
Bank premises were subjected to widespread looting and destruction, rendering most of them inoperable. According to consistent press reports, between 70% and 85% of bank branches ceased operations, creating a severe liquidity crisis and a sharp disruption in financial services for citizens.
The damage was not limited to physical destruction. The national currency lost more than 80% of its value, eroding banks’ assets and weakening their lending capacity. With the collapse of productive activity, borrowers found themselves unable to repay loans, leading to a surge in non-performing loans and pushing some banks to the brink of bankruptcy.
This situation forced citizens into hoarding cash outside the banking system, further widening the trust deficit between the public and financial institutions.
Major Repercussions: The Expansion of the Shadow Economy
The impact on the banking sector cannot be separated from the broader economic collapse. Sudan has experienced a sharp economic contraction, marked by declining production and exports, which has paved the way for the expansion of the informal economy.
Parallel markets have grown at an alarming rate, undermining the formal system and making control over the money supply nearly impossible. This has coincided with soaring levels of inflation, unemployment, and poverty.
Post-Disaster Challenges
The sector now faces two sets of challenges:
1. Immediate challenges:
These include restoring minimum operational capacity, addressing the acute liquidity crisis, protecting remaining assets, and—most critically—beginning the long and difficult process of rebuilding customer trust, which has evaporated amid the sounds of war.
2. Structural challenges:
These require a comprehensive rebuilding of the sector, reforming legislative and regulatory frameworks to suit a post-conflict environment, and integrating the informal economy into the formal system through genuine digital transformation.
The Roadmap: From Stabilisation to Reconstruction
To emerge from this crisis, a series of essential measures must be undertaken:
In the short term:
Gradual reopening of bank branches in secure areas is necessary, alongside expanding digital banking services to overcome geographical constraints. Decisive intervention by the central bank is required to inject emergency liquidity, strengthen deposit guarantee mechanisms, and adopt exceptional measures to reschedule and refinance the debts of affected clients.
In the long term:
A comprehensive restructuring of the banking sector is unavoidable and may involve mergers, liquidations, or capital increases. Digital transformation must become a central pillar in building a more resilient, digitised economy, supported by international partnerships that attract funding and support reconstruction.
Future Scenarios: Between Recovery and Collapse
Analysts outline three potential scenarios for the future of Sudan’s banking sector:
Slow recovery scenario: In a prolonged “no war, no peace” situation, leaving the sector in a state of chronic weakness.
Complete collapse scenario: The worst-case outcome, arising from total institutional breakdown and economic state fragmentation.
Conditional recovery scenario: The most desirable outcome, contingent upon the cessation of war, the implementation of deep structural reforms, and the provision of strong and direct international support.
Conclusion
What the Sudanese banking sector faces today is not a passing crisis, but a profound test of the state’s ability to rebuild its economic foundations. Banks are not merely repositories of funds; they are the primary engine of any future growth.
Despite the bleak outlook, the war may also present an opportunity to establish a new banking sector built on transparency and financial inclusion—provided there is sufficient political will and a bold strategic vision.
Former Banker – Institutional Development Consultant
Shortlink: https://sudanhorizon.com/?p=12362