The Economy and the Four Sources of Risk (1)

As I See 

Adel El-Baz

Last week, we had the opportunity to attend a special meeting with a group of generals. We came away reassured and exhilarated by the information we heard, and optimistic about the plans they are working on. The bottom line is that victory is closer than we expect, and the Sudanese people may soon hear the long-awaited melody of deliverance. May God make it a good outcome.

The briefings we received are reflected in developments we witness unfolding and progressing every day. Yet alongside them, a very different picture is emerging on the economic front, one marked by deep gloom. No one should assume that victory in the war means we are now safe from its economic repercussions.

(2)

In 1992, James Carville, the political adviser and campaign strategist for Bill Clinton, was struggling to figure out how to win the election and challenge George H. W. Bush, who had emerged victorious from the Gulf War. With the Cold War over, Bush appeared to have strengthened his role in leading the new international order. Yet millions of Americans were preoccupied with unemployment, recession, and the future of their jobs and incomes.

Carville understood that voters do not necessarily cast their ballots based on a president’s foreign policy achievements, but rather on what they experience in their daily lives. The economic situation was deteriorating, so he seized on that issue and coined the phrase that ultimately helped propel Clinton to a sweeping victory: “It’s the economy, stupid!”

History tells us that more than one president has won a war only to be brought down by the economy. Prominent examples include Winston Churchill and George H. W. Bush. Now, as we stand on the threshold of victory, God willing, warning signs of various economic risks are gathering on the horizon. These risks are intertwined and feed off one another, to the point where addressing any one of them becomes impossible without tackling the others. Together, they threaten the stability of the state and its governing institutions.

We will examine four variables at the heart of this interconnected web: the exchange rate, inflation, energy, and food. Each represents an independent source of risk, but their combined effects could turn the economic crisis into a comprehensive crisis affecting livelihoods, production, and public finances, threatening both the state’s ability to manage the economy and society’s capacity to endure.

(3)

The problem is that these variables do not move along parallel tracks; rather, they operate in an interconnected cycle. A rise in the dollar exchange rate increases fuel costs, higher fuel costs drive up the expenses of farming, transportation, and production, and rising food prices push inflation higher. Inflation, in turn, undermines confidence in the local currency and increases demand for dollars.

The crisis thus returns to its starting point, but at a much more dangerous level. For this reason, in each installment of this series on the four sources of risk, we will examine the different elements involved so that we can clearly understand the danger we face. I will begin with the exchange rate, which has become a decisive indicator of the extent of the economic deterioration confronting the country.

(4)

The exchange rate is not merely a figure announced by the central bank or traded in parallel markets. It is a fundamental measure of the Sudanese economy’s relationship with the outside world, particularly because most strategic imports—including fuel, wheat, medicine, and production inputs—come from abroad and must be paid for in foreign currencies. Demand for these currencies continues to grow.

Last year, the trade deficit reached $3.2069 billion. According to World Bank data, real gross domestic product contracted by approximately 29.4% in 2023, followed by a further contraction of 14% in 2024, before a partial recovery began in 2025. Government revenue also fell from approximately 10% of GDP in 2022 to less than 5% in both 2024 and 2025.

This situation has led to a sustained deterioration in the value of the national currency. However, the greatest danger lies not merely in the currency’s depreciation, but also in the persistent expectation that it will fall further. Such expectations prompt importers and traders to price goods based on anticipated future replacement costs. They also encourage citizens to convert their savings into foreign currencies or gold to protect their purchasing power.

As a result, exchange-rate depreciation shifts from being merely a symptom of economic imbalance to becoming a major cause of its further deterioration, drawing the country into a vicious cycle of declining living standards and weakening production. It is well known that any decline in the value of the Sudanese pound has an immediate and direct impact on the prices of all essential goods and services.

Consolidating and preserving military victory requires protecting the domestic front from economic collapse. The battle for military victory cannot be separated from the struggle for survival and a dignified life. A weakening national currency and continuously rising production and service costs are placing citizens under unprecedented pressure to make ends meet.

The continued deterioration of the exchange rate is a symptom of a deeper underlying problem. Treating that problem requires a comprehensive economic vision capable of managing resources effectively, achieving broad-based stability, and enabling the Sudanese people to reap the rewards of their resilience and celebrate the fruits of victory.