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The diagnostic of the current situation is that, as long as things continue in their current trajectory, humanitarians will be operating within a weak but partially functioning formal financial system within a largely informal economy. The focus should be on adapting to high, and possibly fast inflation. Depreciation driven by nominal inflation and multiple exchange rates will increase the complexity of operating in Sudan. Liquidity challenges in both SDG and USD are also stemming from both temporary and longer term sources, and will have to be managed accordingly.
The prognostic is that things could get (a lot) worse in the short and medium term, and that humanitarians should prepare for highly likely devaluations (though low impact on humanitarian operations per se), also for a somewhat likely devolving of the situation into inflation / deprecation spirals if the authorities are not careful with their use of monetary and fiscal policy. A scenario of true hyperinflation with a generalised collapse of the formal financial system although extreme is not completely unlikely, given the loss of confidence in the economy. Finally, the dollarization of the economy is not likely, but while there are no signs of it as of yet it is not entirely impossible.
See Situation Analysis for the full diagnostic of the current situation and the risks foreseen in the short & medium term
Image: The macro and meso-level analysis has shaped the findings into two groupings relevant for humanitarians supporting Sudan. Each with 4 problems containing 1-5 specific actions (24 actions in total).
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In Sudan, there is a history of loops between inflation (driven by government subsidies to imports) and exchange rates. However, with the conflict that started in April 2023, the most visible and immediate change in the economy is related to the availability, circulation and access to currency. Therefore, key recommendations are provided for how to deal with 1. high inflation, 2. depreciation and multiple exchange rates, 3. liquidity constraints, and a 4. weak formal financial sector.
Key preparedness actions are provided for risks of 5. devaluation, 6. inflation/depreciation spirals, 7. hyperinflation, and 8. dollarization.
See Situation Analysis > Macro-level analysis for the full diagnostic of risks in the short & medium term