Use the links above to see all the cross-references and mentions relevant market systems and market-based programming (MBP) across all the sections.

Additional background

Marketplaces and market systems Despite an immediate contraction of exchanges due to the conflict, there is also suggestive evidence of increasing market functionality, albeit partial and variable over time and by locations. This will be confirmed through market analysis (Type 1). Where marketplaces are not yet fully functional and / or where market systems have been durably affected by the crisis, the question remains of whether these deficiencies can still be supported temporarily. Targeted supply-side interventions could contribute to restore sufficient marketplace functionality to enable the use of CVA. Where there is no exchange happening at all or very limited market functionality in systems that are critical to the humanitarian response, there will be a need for more in-depth market systems analysis (Type 2). This will uncover alternative response options in terms of longer term work in support of restoring or changing exchange dynamics for specific systems of goods and services.

Beyond market use, we have also identified opportunities for market systems support (and possibly systems change, down the line).

<aside> 💡 What are humanitarian needs? Fundamentally, humanitarian needs are the needs that people are not able to meet on their own in a self-reliant manner during a crisis. This can be either because individuals are affected by the crisis and/or because the local systems they usually rely on are themselves affected by the crisis. In ‘normal’ times, people typically meet their own needs more or less efficiently through local systems, such as local market systems, social protection systems, public services, etc. In practice, humanitarian needs are sometimes related to how specific population groups become de facto less self-reliant in times of crisis (such as displaced populations, for example). But more often than not, they are also related to the dysfunction of one or several key local systems such as food systems, water systems, etc (including the financial system!) When crises disrupt local market systems, people cannot meet their needs by themselves anymore, or they have to use what we call negative coping strategies to continue to do so.

It is important to undertake a problem analysis as a whole, looking at individual or household-level needs as well as system-level considerations about what is functional or not.

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Marketplaces functionality

The fact that local marketplaces are regaining functionality is a good indicator of the general resilience of the economy to the conflict. In the immediate term, most exchanges are still on hold for security reasons, with large access constraints for both goods and people to physical marketplaces. But since June, there is already suggestive evidence that most markets remain operational, though to a more limited extent than usual (in terms of volumes exchanged and hours of operation). This is even the case in Khartoum. Overall, this suggests that the situation is likely to 'normalise' at least partially [1].

There is also indicative evidence that informal marketplaces have actually been thriving since the conflict, which raises separate concerns. These marketplaces, known as Dagalo markets, are used to exchange goods, predominantly NFIs and in particular stolen items. In the past few months, they have been used to pass stocks of goods looted from houses and stores. The RSF typically runs Dagalo markets to fund their activities. Yet despite the political connotations and illegitimate origins of their merchandise, these markets seem to attract more and more customers through significantly lower prices. With high inflation, there is a higher risk of them being used increasingly, in which case the practice might pose protection concerns worthy of humanitarian attention [1].

Critical market systems

Productive systems We can use some GDP loss estimations to identify the most affected sectors of the economy. Available projections suggest that Sudan had already lost at least 1/5 of expected GDP by September and that the loss will add up to 1/2 by the end of 2023. At the sectoral level the losses will be 1/5, 7/10, and 1/2 of revenues respectively in agriculture, industry, and services. Part of the reason why the number is low in agriculture has to do with the fact that a large part of the production in the sector is informal, so it is typically discounted in GDP projections [203]. See Background for more details about the structure of the real economy

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food systems The economic dynamics of the current crisis are likely to affect the agricultural value chains and related food systems the most [18]. In short, food consumption systems will be affected on the demand side because people don't have money to buy food (and to a lesser extent because it is difficult to transport food items to markets). Food production systems will be affected on the supply side due to the lost planting season. Therefore, we can anticipate both short-term and long-term problems and risks of high food insecurity. This year, there were low imports at a key moment of the planting season, resulting in a scarcity of agricultural inputs (seeds, fertilizers, pesticides, etc.). As a result, these inputs were more expensive than usual. Additionally, market disruptions in Khartoum (the largest market for domestic production) have also reduced farmers' access to cash. The majority of them depend on the sale of previous harvests to buy agricultural inputs (seeds, fertilizers, and pesticides) for the new planting season. As a result, there will be no planting for this year or very little, which will affect food availability in the future [88] [89].

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Public systems In the short term, there will continue to be limited functionality of public systems due to low supplies caused by the combination of inflation and liquidity constraints. Currency depreciation will also result in a lack of regular public expenditures in the medium term. These will have especially an impact on healthcare, water and sanitation services, and education services, as they are more decentralised. It will also likely lead to additional or more sustained shutdowns due to unpaid staff and other running costs even when the security situations would have allowed these services to resume operations. If the economic situation further deteriorates into a spiral in inflation and depreciation, there will also be less long-term investments in public infrastructures, causing the capital infrastructure to deteriorate in the long term. This will result eventually in complete, durable failure of some services due to a lack of maintenance and repairs in the infrastructures. Highly populated, underserved communities will likely be hit particularly hard by the lack of functionality of public services.

Cross-cutting support systems Restoring functionality of non-industry specific support systems will be key in the short and medium term because they affect a lot of different areas of life. One sector that is key to the functioning of the rest of the economy is of course the financial sector, as it is transversal to all economic activity. The rapid recovery of the financial sector is likely an essential pre-condition to the recovery of any productive sector in Sudan. See Situation Analysis for our detailed analysis of both how it is particularly affected by the crisis but also its high potential for development pre-conflict (including in terms of employment creation).

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