Sudan’s division is no longer confined to geography, administration and public services. It has begun to touch one of the state’s most sensitive institutions. New 1,000- and 500-pound banknotes, issued by the Central Bank of Sudan in May 2022, have been observed circulating in areas controlled by the Rapid Support Forces, raising questions about the future of the national currency's unity and the central bank’s ability to maintain authority over the country’s cash supply. The RSF-aligned government, based in Nyala, has allowed the circulation of banknotes bearing the signature of former Central Bank of Sudan governor Hussein Yahia Jangol after reappointing him to the same post as governor of what it calls a parallel central bank. The Nyala government has banned other denominations bearing the signature of Burai al-Siddiq, who succeeded Jangol at the central bank. Meanwhile, Mohamed Hasan al-Taishi, prime minister of the parallel government, has announced monetary and banking policies that he said are aimed at building an integrated financial system. Asharq Al-Awsat has learned from a source whose identity has not been definitively established that the circulation of new banknotes in RSF-controlled areas is not the first such case. It remains unclear whether the notes had been stored previously or were newly printed. Bankers and economists say the danger lies not in the banknote itself, but in the authority controlling its issuance and circulation, and in the possible impact on the effectiveness of economic policy, confidence in the national currency and the stability of the financial system. Experts say the effectiveness of monetary policy depends mainly on the Central Bank of Sudan’s ability to exercise authority over the money supply, manage liquidity, ease pressure on the foreign exchange market, control inflation and support exchange-rate stability. If cash circulates outside that authority, measuring the money supply becomes more complicated. It also weakens the monetary authorities’ ability to fight inflation, manage liquidity, contain pressure on the exchange rate, maintain price stability and protect the financial system. According to data released by the Central Bank of Sudan in April, money supply growth stood at 27.3%, reflecting challenges in liquidity management, especially given the exceptional conditions the country faces. Experts say the circulation of banknotes in RSF-controlled areas further complicates measuring the money supply, particularly the component of currency circulating outside the banking system. It also reduces the accuracy of monetary indicators and weakens the design and implementation of monetary policy, leading to lower confidence in the national currency and limiting the ability of institutions to enforce economic policies uniformly across the country. According to the Central Bank of Sudan’s economic and financial review issued last December, currency held by the public accounted for about 97.4% of total currency in circulation, compared with only 2.6% held by commercial banks. This high level of cash circulating outside the banking system points to the spread of direct cash transactions, limiting the banking sector’s ability to mobilize savings and making liquidity management more difficult. Experts say any additional circulation of cash outside the central bank’s authority would deepen economic imbalances and obstruct the management of the money supply and the stability of the monetary and financial systems. Informal economy Recent studies indicate that Sudan’s informal economy accounts for about 60% of economic activity, a high level that limits the effectiveness of policy and weakens the state’s ability to measure and manage it. Sudan’s economy still relies heavily on cash transactions compared with electronic payment methods. Despite recent developments in banking applications, financial inclusion and banking penetration remain below the required level. This strengthens the parallel economy and limits the efficiency of economic policies and their development into a “real” economy. From the perspective of experts and bankers, the scenario of Sudan moving toward two banking systems appears technically and institutionally unlikely in the near term. Establishing an independent banking system requires more than issuing banknotes. It requires a central bank capable of carrying out its core functions, including managing monetary policy, operating payment and settlement systems, supervising and regulating banks, managing reserves and establishing banking relationships with foreign correspondent banks. These requirements are difficult to meet under current conditions. Financial bodies have warned that the continuation of the conflict could lead to the emergence of a parallel financial network carrying out banking functions informally, especially money transfers, cash movement and local trade financing. Two central banks Some countries that have suffered prolonged conflicts, such as Somalia, have seen the significant development of private money transfer networks that have effectively performed part of the banking system’s functions, while remaining outside the official regulatory framework. In Sudan’s case, the expansion of such channels could reduce the role of the formal banking sector. Although Sudan does not yet have a parallel central bank exercising full institutional functions, as is the case in eastern Libya, this may depend on how long the conflict continues. Sudan could gradually move closer to the Libyan model, with the Sudanese pound remaining one national currency legally, while multiple banknote issues circulate, acceptance levels vary from one region to another and partial cash markets emerge. Sudanese authorities had previously ruled out the possibility that the RSF would print a new currency through companies or in countries subject to the global banking system. Former Finance Minister Ibrahim Elbadawi told Asharq Al-Awsat that what happened was natural and expected, given the continuation of a fierce war for more than three years. Elbadawi said the larger dilemma was the “insistence on war,” despite the difficulty of either side achieving a “decisive victory.” He added: “Most civil conflicts end in political settlements, and this is especially true of the Sudanese war.” Tasis Prime Minister Mohamed Hasan al-Taishi said in press remarks that his government was moving ahead with monetary and banking policies to build an integrated financial system. He did not comment directly on reports about the introduction of new banknotes in Nyala. Taishi said citizens in areas administered by his government had faced difficulties obtaining banking services and making money transfers due to conditions imposed by the war and institutional divisions. The man leading the RSF-aligned government and the Tasis alliance renewed accusations against the army-led government, saying it had targeted citizens in areas under his control by “changing the currency,” draining markets of cash and using liquidity as a pressure card and a tool of war. He said that all matters related to currency printing fall under the authority of the monetary authorities and relevant technical bodies. Any arrangements related to cash management or liquidity provision, he said, are carried out in accordance with carefully studied technical plans aimed at maintaining economic stability and meeting the needs of citizens and markets. Taishi announced last May the creation of a “Transitional Currency Council,” defining its role as regulating monetary and banking affairs, managing currency circulation, supervising currency replacement programs and granting banking licenses in coordination with the governor of the Central Bank of Sudan in Nyala. In recent months, the Tasis government established Future Bank, the first commercial bank to offer several banking services, including foreign currency transfers. After the war broke out between the Sudanese army and the RSF in April 2023, banks went completely out of service in the western region of Darfur. This led to a severe liquidity shortage in markets and the deterioration of banknotes in circulation, while the Sudanese government continued to tighten controls at crossings to prevent any new currency from entering those areas.
