Sudan banks’ crisis in the shadow of civil war

Ibrahim Onour
Professor of Economics
University of Khartoum

Since the 15th of April, 2023, Sudan’s warring factions, Sudan Armed Forces (SAF) and Rapid Support Forces (RSF), remain locked in deadly power struggle with no light at the end of the tunnel, so far. The bloody conflict has so far killed at least 12,000 person and displaced 7 million, 90 percent of whom are internally displaced, and the rest fled to neighboring countries. The epic center of the fighting between the two forces is the national capital city Khartoum, which was hosting the headquarters and a large number of branches of all commercial banks in the country. Three weaks ago the fighting expanded to the second largest city in the country, Wad Madani, in Gazera state, supposedly the new financial center in the country after the war in Khartoum. But unfortunately, the RSF captured the city and again looted all assets and destroyed all banks
in the city making the impact of the war on the banking sector even more catastrophic.

Since the banking sector is known to have high sensitivity to shocks emanating from wars and political struggles and other destabilizing factors, all banks incurred grave financial losses including distruction of their infrastructure for the first seven months of the war. Furthermore, the increasing political uncertainty in the country raised the fear of looming systemic banks failure fueled by the absence of banks’ deposit insurance by external international insurance companies that could have absorbed part of the losses via insurance compensation to the affected banks.Now technically speaking, all banks in Sudan, at the current time, deemed financially bankrupt because of their failure to pay back depositors their loss of deposits, which amount to US$ 675 million. The consequence of such a situation will be seen after the war in forms of bankruptcy declaration and in mergers and acquisitions of some banks by foreign institutions, which will hinder the rebuilding process after the war. To mitigate all these financial problems in the banking sector the central bank of Sudan need to assign experts committee to study the situation and find a feasible solution to the upcoming financial crisis in the country.