Warnings of Potentially Catastrophic Effects from Wage Increases
Banking expert Waleed Dalil has warned that the 2026 wage increases in Sudan, recently announced by the Ministry of Finance, could have a dual impact on the economy. While the move aims to improve purchasing power, it may also pose significant challenges to price stability and the state budget.
Dalil stressed that the increases could generate major economic consequences, particularly inflationary pressures. Injecting large liquidity into the economy—such as a 100% salary increase—is expected to raise demand for essential goods, potentially triggering a new inflationary wave if it is not accompanied by improvements in domestic production.
He also noted that the increases will create additional pressure on the state budget, pointing out that allocating 15 billion Sudanese pounds to finance salary and pension increases will likely widen the fiscal deficit.
Dalil added that the government is relying heavily on what it described as an “emergency budget,” which he referred to as a “miracle budget,” to cover these costs amid the ongoing war.
He further highlighted the potential impact on the labor market and the private sector, explaining that raising the minimum wage to 425,000 Sudanese pounds could place pressure on small businesses with low productivity, increasing their operating costs. The measure may also shift labor toward more stable sectors such as government institutions and security forces, which have received wage increases of 120%.
Dalil also warned of possible repercussions for the local currency, as some experts link wage increases to a potential depreciation of the Sudanese pound if the government resorts to financing the deficit through borrowing from the central bank.
To mitigate inflationary pressures, he said the government has moved to provide direct cash support to low-income families alongside the wage increases.
According to Dalil, financing these increases amid declining revenues remains the government’s greatest challenge. He explained that the 2026 financing strategy relies on several key approaches, including strengthening domestic revenues and reinforcing the Ministry of Finance’s authority over public funds.
He noted that the 2025/2026 Ministry of Finance circular places strict emphasis on the ministry’s control over all state financial resources and prevents government units from independently managing revenues, thereby consolidating liquidity to finance the first budget item (salaries).
The government also plans to collect overdue taxes and fees that were disrupted by security conditions in stable areas.
Dalil added that the government has described the 2026 budget as an “emergency budget,” in which development spending and non-urgent projects have been reduced, with most financial resources directed toward:
- Salaries and pensions
- The war effort and regular forces
- Health and education
The budget also partially depends on international grants and humanitarian assistance, which help cover relief and service expenditures and ease pressure on the public treasury, allowing more resources to be allocated to wages.
Despite the economic contraction, the Ministry of Finance has also introduced tax and customs reforms, adjusting certain tax brackets and customs duties at operating ports and airports—such as Port Sudan—to generate rapid cash inflows.
Dalil stressed that deficit financing through borrowing from the central bank remains an “emergency option” the government may resort to, either by printing money or borrowing, which explains economic concerns about rising inflation and the depreciation of the Sudanese pound against foreign currencies.
He also predicted increased reliance on gold exports and sovereign resources, particularly through official channels, to secure foreign currency for importing strategic goods and reduce the government’s need to rely on local liquidity in the parallel market.
The Ministry of Finance has issued an official circular approving salary and financial allowance increases for security and police forces, as well as for state employees and pensioners.
