Latest news with #CentralBankofSudan
Al Taghyeer
06-08-2025
- Business
- 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.
The Star
11-06-2025
- Business
- The Star
Sudanese pound hits record low against USD: currency traders
KHARTOUM, June 11 (Xinhua) -- Sudanese pound has fallen to a record low, with the U.S. dollar trading at 2,760 pounds in the parallel market, according to currency traders on Wednesday. The official exchange rate set by the Central Bank of Sudan stands at 2,100 pounds per dollar. Foreign exchange traders described the current spike in foreign currency demand as "an all-time high that underscores the deep economic toll of the ongoing war." Sudanese economic expert Ayoub Abdul Hafeez, speaking to Xinhua, said that the pound's decline is likely to continue, driven by the ongoing civil conflict, unstable economic policies, falling remittances, and weakened exports. Since the outbreak of the conflict, Sudan's exchange rates have seen extreme volatility, with the dollar soaring from 560 to a record high, an increase of more than 391 percent in just over two years. On Tuesday, the World Bank issued a report on Sudan, revealing that the Sudanese economy contracted by an additional 13.5 percent in 2024, after shrinking by nearly one-third in 2023. It also pointed out that extreme poverty, defined as living on less than 2.15 dollars per day, rose to 71 percent of the population, more than doubling from 33 percent in 2022. Unemployment also surged, reaching 47 percent, according to the report. The report concluded that Sudan's economy is unlikely to return to pre-war levels before at least 2031 and stressed that any sustainable recovery would depend on ending the conflict and implementing broad structural reforms. Sudan remains gripped by the conflict between the Sudanese Armed Forces and the paramilitary Rapid Support Forces, which erupted in April 2023. The fighting has killed tens of thousands of people and displaced millions, both internally and across borders, deepening the country's humanitarian crisis.
Sky News
22-03-2025
- Politics
- Sky News
Sudan's military retakes more key government buildings in capital as it consolidates gains
Sudan's military has consolidated its gains in the capital, taking more key government buildings a day after it seized control of the presidential palace. The ongoing conflict in Sudan erupted in April 2023 when a power struggle between the leaders of the military and the Rapid Support Forces (RSF) boiled over into open fighting in Khartoum and other cities. At the start of the war, the RSF took over multiple government and military buildings in the capital, including the Republican Palace and the headquarters of the state television. The force also occupied people's houses. Brigadier General Nabil Abdullah, a spokesperson for the Sudanese military, said troops have now expelled the Rapid Support Forces (RSF) from the headquarters of the Central Bank of Sudan and other government and educational buildings in the area. The military also retook the headquarters of the National Intelligence Service and Corinthia Hotel in central Khartoum. Hundreds of RSF fighters were killed as they tried to flee the city, while Lieutenant Colonel Hassan Ibrahim, from the military's media office, was also killed in the attack, the military said. The RSF has not yet commented. A drone attack on the palace on Friday - believed to have been launched by the RSF - killed two journalists and a driver with Sudanese state television, according to the ministry of information. 1:07 On Friday, social media videos showed military soldiers inside the palace. A Sudanese military officer wearing a captain's epaulettes made the announcement in a video and confirmed the troops were inside the compound. The Republican Palace was the seat of government before the war began, but now appears to be partly in ruins. The military is now likely to try to retake the Khartoum International Airport, only a short distance from the palace, which has been held by the RSF since the start of the war, with video showing soldiers on a road leading to the airport. The war has killed more than 28,000 people - although other estimates suggest this is higher - forced millions to flee their homes and left some families desperately resorting to eating grass to survive, with famine sweeping through parts of the country. The fighting has resulted in atrocities including mass rape and ethnically motivated killings, with war crimes and crimes against humanity taking place, according to the United Nations and international rights groups.
