The Role of Central Banks in Economic Stability

Waleed Dalil

Wars and armed conflicts are among the most destructive events impacting national economies. Among these conflicts, the Sudanese war stands out as one of the most economically devastating, leading to the suspension and decline of the economic sector. The Sudanese economy has faced a sharp slowdown in growth rates, with industries, agriculture, trade, and investments severely affected. Additionally, Sudan’s economic infrastructure suffered significant damage during the war, leading to the collapse of labor sectors and worsening food security, which caused food prices to rise and limited access to basic resources.

100 branches of Sudanese banks were looted, stolen, or destroyed due to the war, with more than 38% of the stolen funds coming from Khartoum banks alone. The Sudanese Central Bank was also affected by these destructive actions, leading to a severe liquidity crisis. Many banks began to suffer from debt management problems after major companies that borrowed large sums were destroyed and looted, creating challenges for Sudanese banks in collecting these debts, which placed the sector on the brink of collapse.

The Collapse of the Sudanese Pound against the Dollar:

The Sudanese pound is under tremendous pressure in the black market, with the value of the dollar and other currencies continuing to rise against it due to the country’s difficult economic, political, and security conditions. The war in Sudan has caused the Sudanese pound to lose more than 50% of its value since April, with the dollar now trading at over 1000 Sudanese pounds compared to 600 pounds before the war. The parallel exchange market has seen significant fluctuations in foreign currency exchange rates due to increased demand for foreign currency to cover the needs of importers and citizens for basic goods and energy, while local production and exports have declined due to shortages of foreign currency reserves and a drop in export revenues and remittances. Furthermore, banking operations have been impacted by deteriorating security conditions in some areas, with some branches being looted and destroyed during the unrest.

Rising Unemployment Rate:

Unemployment rates have been significantly affected, with the unemployment rate in Sudan rising from 32.14% in 2022 to 47.2% in 2024, according to the International Monetary Fund’s statistics. According to a study by the American Food Policy Institute, it is expected that 5 million jobs will be lost in Sudan due to the war, meaning nearly half of the workforce has lost their jobs in various sectors. This situation is due to the closure of many companies and factories after they were looted and destroyed, leading to the dismissal of many workers. Many institutions have resorted to laying off employees permanently without paying their financial entitlements, while others have granted employees indefinite unpaid leave, resulting in the loss of around 100,000 jobs, including labor force categories.

Rising Inflation Rates:

Inflation rates in Sudan reached their highest levels, surpassing 300% in 2021, where it recorded 359.09%. However, the rate began to decline in 2022, reaching 138.81%. With the outbreak of war in Sudan, inflation rates rose again, according to the International Monetary Fund’s data, to 256.17%, reflecting a 117.4% increase. The government has not yet announced the current inflation rate, but it is expected to rise further due to the significant increase in prices.

The Role of Central Banks in Economic Stability

Central banks play a crucial role in maintaining economic stability, as they are responsible for setting and implementing a country’s monetary policies. These policies aim to achieve key economic objectives such as controlling inflation, promoting economic growth, and ensuring the stability of the financial system. By controlling the money supply and interest rates, central banks can direct the economy toward achieving these goals.