The Sudanese Banking System: Structural Imbalances and Prospects for Comprehensive Reform
By: Omer Sidahmed
Freelance Banking and Financial Expert
Introduction
The banking system plays a pivotal role in any economy, serving as the central mechanism for mobilizing savings and directing them toward investment and production. It also plays a critical part in formulating monetary policy and regulating capital circulation. In Sudan, however, this role has been systematically eroded over the past decades due to a series of enabling and experimental policies initiated in the 1980s. This deterioration worsened with the Islamization of the financial system, and then further deteriorated following the coup of October 25, 2021, reaching its nadir with the outbreak of war in April 2023. The war led to the destruction of banking infrastructure and pushed the Sudanese economy into a state of severe contraction, loss of confidence, and liquidity chaos.
This paper aims to provide a comprehensive analysis of the current state of Sudan's banking system by examining institutional, legal, and regulatory imbalances, followed by a full reform vision grounded in transparency, efficiency, and independence, while drawing on successful international experiences.
The Post-War Banking Reality: Unprecedented Collapse
Infrastructure Destruction and Asset Losses
Dozens of branches looted or destroyed, especially in the capital and conflict-affected states.
Loss of archives, client data, and collateral records.
Near-complete breakdown of electronic systems (including clearing and payments).
Over 6 foreign banks exited the Sudanese market.
Loss of Confidence and Liquidity
Mass withdrawal of deposits triggered liquidity pressures.
Suspension or freezing of most transactions.
Inability of banks to meet obligations; loan defaults increased.
The parallel market became the real hub for cash and foreign currency.
Monetary Policy Paralysis
The Central Bank of Sudan (CBOS) lost control over core functions like inflation targeting, liquidity management, and exchange rate stabilization due to:
Abandonment of traditional monetary tools (interest rate, reserve requirements, discount rate).
Excessive focus on Islamic tools like Shahama certificates, used to fund budget deficits rather than control liquidity.
CBOS mandated that banks hold at least 30% of their assets in these non-liquid instruments.
Weak interbank liquidity fund, forcing banks to borrow directly from CBOS under complex Islamic structures, creating conflicts of interest.
With no reserves and plummeting confidence, the exchange rate collapsed to nearly SDG 3,000 per USD.
Structural and Systemic Weaknesses in the Banking System
Regional Comparison
Sudan lags behind regional peers (Kenya, Egypt, Ethiopia, Rwanda) in capital adequacy, banking assets, and financial inclusion.
Bank assets: ≈$12 billion (only 20% of GDP) vs. Egypt's $470 billion (70%).
Financial inclusion: Only 7% of adults have bank accounts, vs. 83% in Kenya and 64% in Egypt.
Capital Inadequacy and Weak Governance
Most banks fail to meet Basel II, let alone Basel III.
Use of fictitious instruments to simulate capital.
Politically connected board members misused loans.
Focus on short-term consumption, not productive sectors.
Banks prefer risk-free Shahama investments over supporting industry/agriculture.
Financial Exclusion
Only 15% of Sudanese citizens have active accounts.
Most branches are in Khartoum; rural areas are largely excluded.
No tailored products for informal workers or rural populations.
Encourages cash-based informal economy, tax evasion, and money laundering.
A Bloated and Politicized Central Bank
17 general departments, 37 sub-departments, 18 regional branches.
Appointments based on loyalty, not merit.
Conflicting mandates, bureaucratic inertia, and disguised unemployment.
Deep state networks embedded in decision-making.
Monopolization of Islamic Banking
Absence of conventional windows discouraged foreign investors.
Legal ambiguity and conflicts between Sharia and financial oversight.
Undermined discipline and innovation in banking services.
Corruption and Political Capture
Systematic privatization of public banks without transparency.
Political elites and security agencies acquired stakes.
Banks used to fund militias and election campaigns.
Internal audits and compliance units weakened or neutralized.
70%+ of major bank defaults linked to politically connected figures.
III. Reforming the Banking System – A Comprehensive Roadmap
Reforming the Central Bank
Repeal 2002 CBOS Law and adopt a modern version ensuring independence.
Appoint the board via elected legislature.
Abolish subsidiaries and integrate roles.
Restore interest rate tools, open market operations, reserve requirements.
Reforming Commercial Banks
Increase minimum capital to meet Basel standards.
Merge small/dysfunctional banks.
Reclaim state stakes where privatization was illegal.
Re-establish sector-specific development banks.
Divest from stocks/real estate, focus on lending.
Legislative and Regulatory Reform
Consolidate laws (CBOS, AML, banking, e-transactions) into one act.
Replace annual circulars with 5-year manuals.
Enact explicit deposit protection law.
Establish independent financial oversight authority.
Digital Transformation and Financial Inclusion
Expand digital payment platforms via independent tech firms.
Mobile banking modeled on Kenya's M-Pesa.
Integrate civil and business registries for data access.
Reforming Microfinance and Consumer Lending
Merge all microfinance firms under one national entity.
End mandatory micro-lending by commercial banks.
Focus lending on productive sectors.
Post-War Reform – Priorities and Urgencies
Phase out Shahama and similar instruments.
Settle CBOS obligations to commercial banks.
Recover looted funds inside/outside Sudan.
Convene national financial reform conference before any economic summit.
Detailed Structural Reform Measures
Central Bank Reform
Downsize to 5–7 departments.
Merge parallel firms (e.g. Sudan Financial Services).
Train staff (CIB, Basel, AML, Sharia audits).
Link currency to real reserves (gold, FX).
Ensure reporting to Parliament, not Executive.
Commercial Bank Reform
Raise capital threshold to USD 50 million.
Consolidate banks to 10–12.
Enforce Basel III (8–10% capital adequacy).
Allocate 60%+ of loans to productive sectors.
Ban insider lending and speculative portfolios.
Legal and Regulatory Framework
Merge all banking laws into one.
Establish a National Banking Observatory.
Introduce Islamic + conventional windows for inclusivity.
Microfinance and Cooperatives
Merge 46 firms into one national institution.
Create 'People's Finance Bank' offering mobile services.
Link financing to local production units.
Create independent guarantee arm for non-traditional lending.
Digital Banking and Fintech
Digitize payments, integrate digital ID.
License digital banks for rural and diaspora markets.
Promote fintech partnerships.
Protect customer data and e-signatures.
Conclusion: Economic Sovereignty Begins with Banking Reform
Sudan cannot rebuild from war and economic collapse without a transparent, independent, and development-oriented banking system. Global history confirms that national recovery begins with reforming the central bank. The failure of money and loss of trust in banking are signs of state failure.
The proposed reforms are not optional—they are prerequisites for survival and recovery. Therefore, banking sector restructuring must be a central priority for any transitional or future government in Sudan.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Al Taghyeer
4 days ago
- Al Taghyeer
The Sudanese Banking System: Structural Imbalances and Prospects for Comprehensive Reform
The Sudanese Banking System: Structural Imbalances and Prospects for Comprehensive Reform By: Omer Sidahmed Freelance Banking and Financial Expert Introduction The banking system plays a pivotal role in any economy, serving as the central mechanism for mobilizing savings and directing them toward investment and production. It also plays a critical part in formulating monetary policy and regulating capital circulation. In Sudan, however, this role has been systematically eroded over the past decades due to a series of enabling and experimental policies initiated in the 1980s. This deterioration worsened with the Islamization of the financial system, and then further deteriorated following the coup of October 25, 2021, reaching its nadir with the outbreak of war in April 2023. The war led to the destruction of banking infrastructure and pushed the Sudanese economy into a state of severe contraction, loss of confidence, and liquidity chaos. This paper aims to provide a comprehensive analysis of the current state of Sudan's banking system by examining institutional, legal, and regulatory imbalances, followed by a full reform vision grounded in transparency, efficiency, and independence, while drawing on successful international experiences. The Post-War Banking Reality: Unprecedented Collapse Infrastructure Destruction and Asset Losses Dozens of branches looted or destroyed, especially in the capital and conflict-affected states. Loss of archives, client data, and collateral records. Near-complete breakdown of electronic systems (including clearing and payments). Over 6 foreign banks exited the Sudanese market. Loss of Confidence and Liquidity Mass withdrawal of deposits triggered liquidity pressures. Suspension or freezing of most transactions. Inability of banks to meet obligations; loan defaults increased. The parallel market became the real hub for cash and foreign currency. Monetary Policy Paralysis The Central Bank of Sudan (CBOS) lost control over core functions like inflation targeting, liquidity management, and exchange rate stabilization due to: Abandonment of traditional monetary tools (interest rate, reserve requirements, discount rate). Excessive focus on Islamic tools like Shahama certificates, used to fund budget deficits rather than control liquidity. CBOS mandated that banks hold at least 30% of their assets in these non-liquid instruments. Weak interbank liquidity fund, forcing banks to borrow directly from CBOS under complex Islamic structures, creating conflicts of interest. With no reserves and plummeting confidence, the exchange rate collapsed to nearly SDG 3,000 per USD. Structural and Systemic Weaknesses in the Banking System Regional Comparison Sudan lags behind regional peers (Kenya, Egypt, Ethiopia, Rwanda) in capital adequacy, banking assets, and financial inclusion. Bank assets: ≈$12 billion (only 20% of GDP) vs. Egypt's $470 billion (70%). Financial inclusion: Only 7% of adults have bank accounts, vs. 83% in Kenya and 64% in Egypt. Capital Inadequacy and Weak Governance Most banks fail to meet Basel II, let alone Basel III. Use of fictitious instruments to simulate capital. Politically connected board members misused loans. Focus on short-term consumption, not productive sectors. Banks prefer risk-free Shahama investments over supporting industry/agriculture. Financial Exclusion Only 15% of Sudanese citizens have active accounts. Most branches are in Khartoum; rural areas are largely excluded. No tailored products for informal workers or rural populations. Encourages cash-based informal economy, tax evasion, and money laundering. A Bloated and Politicized Central Bank 17 general departments, 37 sub-departments, 18 regional branches. Appointments based on loyalty, not merit. Conflicting mandates, bureaucratic inertia, and disguised unemployment. Deep state networks embedded in decision-making. Monopolization of Islamic Banking Absence of conventional windows discouraged foreign investors. Legal ambiguity and conflicts between Sharia and financial oversight. Undermined discipline and innovation in banking services. Corruption and Political Capture Systematic privatization of public banks without transparency. Political elites and security agencies acquired stakes. Banks used to fund militias and election campaigns. Internal audits and compliance units weakened or neutralized. 70%+ of major bank defaults linked to politically connected figures. III. Reforming the Banking System – A Comprehensive Roadmap Reforming the Central Bank Repeal 2002 CBOS Law and adopt a modern version ensuring independence. Appoint the board via elected legislature. Abolish subsidiaries and integrate roles. Restore interest rate tools, open market operations, reserve requirements. Reforming Commercial Banks Increase minimum capital to meet Basel standards. Merge small/dysfunctional banks. Reclaim state stakes where privatization was illegal. Re-establish sector-specific development banks. Divest from stocks/real estate, focus on lending. Legislative and Regulatory Reform Consolidate laws (CBOS, AML, banking, e-transactions) into one act. Replace annual circulars with 5-year manuals. Enact explicit deposit protection law. Establish independent financial oversight authority. Digital Transformation and Financial Inclusion Expand digital payment platforms via independent tech firms. Mobile banking modeled on Kenya's M-Pesa. Integrate civil and business registries for data access. Reforming Microfinance and Consumer Lending Merge all microfinance firms under one national entity. End mandatory micro-lending by commercial banks. Focus lending on productive sectors. Post-War Reform – Priorities and Urgencies Phase out Shahama and similar instruments. Settle CBOS obligations to commercial banks. Recover looted funds inside/outside Sudan. Convene national financial reform conference before any economic summit. Detailed Structural Reform Measures Central Bank Reform Downsize to 5–7 departments. Merge parallel firms (e.g. Sudan Financial Services). Train staff (CIB, Basel, AML, Sharia audits). Link currency to real reserves (gold, FX). Ensure reporting to Parliament, not Executive. Commercial Bank Reform Raise capital threshold to USD 50 million. Consolidate banks to 10–12. Enforce Basel III (8–10% capital adequacy). Allocate 60%+ of loans to productive sectors. Ban insider lending and speculative portfolios. Legal and Regulatory Framework Merge all banking laws into one. Establish a National Banking Observatory. Introduce Islamic + conventional windows for inclusivity. Microfinance and Cooperatives Merge 46 firms into one national institution. Create 'People's Finance Bank' offering mobile services. Link financing to local production units. Create independent guarantee arm for non-traditional lending. Digital Banking and Fintech Digitize payments, integrate digital ID. License digital banks for rural and diaspora markets. Promote fintech partnerships. Protect customer data and e-signatures. Conclusion: Economic Sovereignty Begins with Banking Reform Sudan cannot rebuild from war and economic collapse without a transparent, independent, and development-oriented banking system. Global history confirms that national recovery begins with reforming the central bank. The failure of money and loss of trust in banking are signs of state failure. The proposed reforms are not optional—they are prerequisites for survival and recovery. Therefore, banking sector restructuring must be a central priority for any transitional or future government in Sudan.
Al Taghyeer
08-07-2025
- Al Taghyeer
Severe Threats Facing the Summer Agricultural Season in Sudan
Severe Threats Facing the Summer Agricultural Season in Sudan By: Omer Sidahmed The Current State of Agriculture in Sudan Amid a Prolonged War Agriculture has long been the backbone of Sudan's economy, employing over 60% of the labor force and contributing around 40% of GDP during times of stability. However, as Sudan enters the third year of a devastating war that broke out in April 2023, the country's agricultural infrastructure and rural economy are nearing total collapse—posing a grave threat of widespread food and humanitarian crises. The conflict has displaced more than 10 million people, a large portion of whom are farmers and agricultural workers, according to estimates by the UNHCR. This mass displacement has emptied the fields of their productive labor, particularly in key agricultural states such as Gezira, White Nile, Gedaref, Blue Nile, and the Greater Kordofan region—formerly the heartland of both irrigated and rainfed farming in Sudan. The 2025 summer farming season has begun under the worst financial conditions in decades. Agricultural financing from the formal banking sector has dropped to less than 5% of total credit—compared to approximately 15% prior to the war. The Agricultural Bank of Sudan has shut down operations in several states, including White Nile, due to liquidity shortages and operational collapse. Farmers in Gezira and Gedaref report that the bank is requiring the repayment of pre-war debts as a condition for new loans—forcing many to abandon farming altogether. The fragility of the banking system further exacerbates this crisis. An estimated 90% of Sudan's money supply circulates outside the formal banking sector, while the informal economy accounts for approximately 85% of overall economic activity, according to the World Bank and IMF. It is worth noting that the relationship between banks and the agricultural sector was already strained prior to the war. Agriculture was considered high-risk, subject to complex loan requirements, and typically received no more than 10% of bank lending portfolios at best. The war has only deepened these structural flaws—leaving farmers to face climate volatility, rising input costs, and collapsing local markets without institutional support. As a result, more than 20 million Sudanese now face acute food insecurity, according to the June 2025 report by the World Food Programme (WFP). The United Nations has ranked Sudan among the top four countries suffering from severe malnutrition globally. International reports, such as Chatham House's 2024 study, suggest that this agricultural collapse is not solely due to war—but also to the absence of a national strategy that treats agriculture as a sovereign priority rather than a marginal sector. The Collapse of the Banking System and the Decline of Agricultural Finance Since the outbreak of war in April 2023, Sudan's banking crisis has worsened dramatically. Khartoum, home to nearly 70% of Sudanese bank branches and headquarters, became a central battleground—leading to widespread destruction of banking infrastructure, branch closures, and the shutdown of clearing systems, which have since been relocated to the administrative capital. Despite this move, the banking sector has remained largely unable to resume full operations nationwide due to the continued conflict. Banks have virtually withdrawn from key agricultural zones—particularly in Darfur, Kordofan, Blue Nile, White Nile, and Gezira—resulting in a massive funding vacuum across productive sectors. Public trust in the banking system has plummeted amid the absence of basic financial services. However, the war is not the only culprit behind this collapse. It has also exposed deeper structural weaknesses that had been festering for years. Sudan ranks among the world's lowest in financial inclusion indicators. The banking sector suffers from eroded capital bases due to currency depreciation and the failure of the Central Bank of Sudan to enforce international standards such as Basel capital adequacy requirements or implement effective restructuring and governance programs. Banks and Agriculture: A Relationship of Caution, Not Investment The relationship between Sudanese banks and the agricultural sector reveals a glaring absence of a developmental vision. Both public and private banks continue to view agriculture as high-risk rather than as a strategic sector worthy of support and innovation. This is evident in the scarcity of seasonal credit, the imposition of complex collateral requirements, and the limited financial portfolios allocated to agriculture. In 2024, agricultural financing fell to less than 5% of total bank lending—down sharply from 15% before the war—deepening the crisis in the farming sector and worsening the country's food shortage. The Agricultural Bank: A Microcosm of State Failure in Supporting Agriculture The Agricultural Bank of Sudan was intended to be the state's primary financial arm in supporting farmers. In reality, it has become a paralyzed institution, reflecting the absence of political will to reform the sector. The bank suffers from: Severe liquidity shortages and an inability to direct resources into productive financing. Lack of transparency and recurring incidents of corruption in fund and inventory management. Political interference that has turned it into an administrative tool rather than a professional institution. No long-term institutional reform plans from the state. Farmers in Gezira and Gedaref have reported that the bank demanded repayment of old debts before issuing any new financing—leading to widespread abandonment of farming. Media reports have warned of critical delays in funding the summer farming season, threatening its viability. Some branches have witnessed public protests, and reports have emerged of fertilizer worth 11 billion Sudanese pounds going missing. Where Does the Problem Lie in Agricultural Financing? The root of the problem lies in the lack of an investment-oriented vision for agriculture. It is still treated as a risky sector rather than a productive, strategic one. The state has failed to develop a seasonal agricultural credit policy, and banks rely on short-term murabaha (cost-plus financing) structures that are poorly suited to agricultural cycles. Additionally, there is an absence of banking infrastructure in rural areas. Around 70% of bank branches are located in cities—or have become inoperative due to the war. Low financial inclusion and onerous collateral requirements pose serious barriers. Financial inclusion in Sudan is estimated at under 15%—one of the lowest rates globally—excluding most farmers from formal financial services. Perhaps the most striking symptom of dysfunction is the collapse of the Agricultural Bank itself, due to corruption, politicization, institutional failure, and poor resource allocation—all reflecting the state's lack of prioritization of this vital sector. Furthermore, there is a complete lack of integration between financing, production, and marketing—leaving farmers unprotected against market fluctuations and production risks. International Experiences in Agricultural Support Global experiences demonstrate that agriculture cannot thrive on market forces alone. Active state intervention is essential—as both a guarantor of food sovereignty and a facilitator of economic justice. United States: Despite its capitalist model, the U.S. Department of Agriculture offers extensive support programs for small and medium-scale farmers—including soft loans, storage facility financing, low-cost crop insurance, organic certification assistance, and direct-to-market programs such as 'Farm to School.' India: The Green Revolution was built on massive government support for fertilizers and seeds, guaranteed minimum crop prices, subsidized loans, and free extension services. Brazil: The PRONAF program successfully integrated family farming into the formal economy through subsidized loans, technical assistance, and climate risk coverage—doubling agricultural exports. Ethiopia: After the famine, Ethiopia rebuilt its rural sector through a national extension network, subsidized input distribution, and small-scale project financing—raising productivity by 7% annually between 2004 and 2014. Rwanda: The state made agriculture a pillar of post-war reconstruction—offering tax exemptions, subsidies covering up to 75% of input costs, and financing farmers through cooperative savings funds. Despite different contexts, these models share one common factor: proactive state involvement as a facilitator—not abandonment of agriculture. They show that when the farmer is seen as the cornerstone of national food security, supporting them becomes an investment in stability and growth—not a fiscal burden. Gold as a Sovereign Resource to Support Agriculture Sudan produces over 100 metric tons of gold annually (around 3.2 million ounces). At a price of $2,000 per ounce, this could yield up to $6.4 billion annually. However, at least 70% of this gold is smuggled—resulting in the loss of more than $4 billion in potential national revenue each year. If just 30–40% of these revenues were allocated to agriculture—via the creation of a sovereign fund dedicated to the sector—it could transform Sudan's economic landscape and help restore food production capacity. Conclusion What threatens Sudanese agriculture is not just war—but the absence of a developmental vision, the collapse of the banking system, and the farmer's exclusion from financing and institutional support. Genuine economic recovery cannot be achieved without addressing these structural failures and channeling sovereign resources—such as gold—toward production, not war. July 2025
Al Taghyeer
16-06-2025
- Al Taghyeer
Sudanese Gum Arabic: The Impact of War and the Challenges of Value Addition
Sudanese Gum Arabic: The Impact of War and the Challenges of Value Addition By: Omer Sidahmed Gum Arabic: A Strategic and Economic Resource in Sudan Gum Arabic is one of Sudan's most significant natural resources and a major contributor to both the national economy and international trade. Sudan holds a leading global position in the production of this strategic botanical commodity, accounting for 70–80% of the world's supply. It is primarily derived from two types of acacia trees: Acacia senegal (Hashab) and Acacia seyal (Talh), which thrive in the low-rainfall savannah belt that spans Kordofan, Darfur, Gedaref, and parts of the Blue Nile and Sennar states. The gum Arabic industry directly or indirectly supports over five million households, serving as a vital lifeline for rural communities, especially in impoverished and fragile areas. This sector encompasses the entire value chain—from harvesting to export. Before the war, Sudan's annual gum Arabic production ranged between 60,000 and 80,000 metric tons, with more than 90% exported globally. This made Sudan the world's largest supplier. The raw market value ranged from $120 to $180 million annually, but this figure could rise significantly if the gum were processed into final industrial products. These products include food emulsifiers, dietary supplements, cosmetics, and pharmaceuticals, and their global market value could exceed $600 million annually—highlighting the vast untapped economic potential of this vital sector. Economic and Social Importance of Gum Arabic Gum Arabic's international importance lies in its unique chemical and physical properties, which make it an essential binding and stabilizing agent in a wide array of industries. It is used in soft drinks, confectionery, emulsions, pharmaceutical products, cosmetics, textiles, printing, and other advanced industrial applications. Used in over 1,000 commercial products worldwide, gum Arabic enjoys steady and increasing global demand. Locally, the sector significantly contributes to foreign currency reserves and income stability for farmers and rural communities, underscoring its strategic economic and social value for Sudan. The Sector Before the War: Missed Opportunities Before the conflict, gum Arabic was Sudan's third-largest foreign currency earner after gold and oilseeds. According to Sudan's Ministry of Trade, exports generated between $110 and $150 million annually and provided both seasonal and permanent employment for small producers, contributing to social stability in rural areas. Efforts were made to develop the sector through improved tree varieties, incentives to prevent deforestation, and local manufacturing initiatives. However, these efforts remained limited due to poor infrastructure and a lack of strategic vision for maximizing economic returns. Challenges to Value Addition in the Gum Arabic Sector Despite its economic significance, Sudan faces real obstacles in achieving value addition for gum Arabic. Prior to the war, the raw production value ranged from $120 to $180 million annually, but if processed into final products, the potential market value could range from $600 to $800 million—exposing a massive revenue gap. A key barrier is the high cost of domestic taxes and fees, which can reach 825,000 Sudanese pounds per ton. In contrast, neighboring countries like Chad and Niger charge as little as $1 per ton. This disparity discourages formal exports and pushes many exporters toward smuggling, costing the government hundreds of millions of dollars annually. For example, exporting 60,000 tons of raw gum at an average price of $3,000 per ton yields $180 million. If the same amount were processed into final goods selling at $10,000 per ton, revenues would reach $600 million—a direct annual loss of $420 million due to the absence of value-added industries. On the international market, raw gum sells for $2,500 to $3,800 per ton, depending on quality. After processing, its value increases to $8,000–$12,000 per ton—four times higher. This places Sudan in a dire economic situation, losing at least $400 to $600 million annually by exporting raw gum instead of processing it locally. Applications of Gum Arabic and Strategic Opportunities Processed gum Arabic is used across many industries, particularly: – Soft drinks, as a stabilizing agent – Pharmaceuticals, as a binder – Cosmetics, as a moisturizer – Food products, as a thickener and texture enhancer Major companies such as Coca-Cola, Pepsi, Nestlé, and Unilever are among the top importers, reinforcing Sudan's strategic position in global supply chains—if this potential is effectively harnessed. However, this strategic position is threatened by: – Declining international trust in Sudanese production and export systems – Lack of global quality and certification standards – Inadequate industrial infrastructure – Ongoing economic recession – Widespread smuggling Additionally, domestic prices for gum have fallen below 15,000 Sudanese pounds per quintal, discouraging producers and leading to declining productivity—a warning sign of further deterioration without urgent reform. The War's Impact on the Gum Arabic Sector The war that erupted in April 2023 between the Sudanese Armed Forces and the Rapid Support Forces has devastated Sudan's gum Arabic sector. Conflict expanded into key production areas such as Khartoum, Darfur, and Kordofan, which are critical to gum Arabic harvesting. Violence and insecurity displaced hundreds of thousands and damaged gum farms, transport routes, and storage infrastructure. Under these conditions, gum harvesting has become extremely dangerous. Violence, looting, and militia extortion forced many producers to halt activities or resort to cross-border smuggling as a survival strategy. According to FAO and WFP, production during the 2023/2024 season dropped to under 40,000 tons—down from a pre-war average of 80,000–100,000 tons. Over 40% of production is now smuggled into countries like Chad, South Sudan, and Senegal, where it is re-exported under other national brands. This not only deprives Sudan of revenue but also damages its reputation and reduces access to foreign currency. Moreover, reports indicate that militias are exploiting gum revenues by taxing local producers or seizing control of transportation and marketing networks. Supply chains have collapsed, and both domestic and international companies have exited the market, causing official export levels to plummet. Impact on Rural Communities The crisis has had a direct and devastating impact on millions of Sudanese rural families who depend on gum Arabic as their primary or sole source of income. As production and legal export opportunities dwindle, producers face reduced economic returns and limited livelihood alternatives. Without effective government support in financing, training, or infrastructure, most producers rely on traditional, low-yield practices, increasing sectoral fragility and undermining its resilience to economic and security shocks. These conditions exacerbate rural poverty and marginalization, driving migration and increased involvement in informal and unsafe activities such as smuggling. Solutions and Future Prospects Addressing the challenges facing the gum Arabic sector requires a comprehensive approach starting with an end to the war and reconstruction of the value chain. Priorities include: – Immediate ceasefire and durable peace – Ensuring security in production zones and supporting the return of displaced persons – Investing in local manufacturing and value-added industries – Combating smuggling and improving oversight – Empowering producers and supporting rural communities Analytical Conclusion The war has revealed deep structural deficiencies within the gum Arabic sector and exposed the fragility of its institutional and technical management systems. Sudan must move beyond raw exports and develop value-added industries to create jobs, increase revenues, and strengthen its global competitiveness. This crisis is a crucial test of Sudan's ability to manage its vital resources for sustainable development. Gum Arabic remains one of Sudan's most important strategic assets—not only for its economic and industrial value but also for its potential to rebuild rural communities and support national recovery. Failure to add value to gum Arabic represents a major missed opportunity. Transforming this sector is not optional; it is a national, economic, and environmental imperative. Restoring Sudan's leadership as a trusted gum Arabic supplier requires ending the war, achieving lasting peace, initiating deep economic reforms, and establishing inclusive, sustainable development.
