The Dollar Is Not Defeating the Sudanese Pound — The War Economy Is Crushing It

The rising price of the US dollar in Sudan is no longer a passing piece of economic news. It has become part of everyday life. As the dollar rises, so do the prices of food, medicine, fuel, transport and production inputs. The purchasing power of wages and savings falls. Citizens, traders and importers then seek dollars once again to protect what remains of the value of their money, generating further demand for foreign currency. The economy thus becomes trapped in a vicious circle:

War weakens the pound → A weaker pound raises prices → Higher prices increase demand for foreign currency → Rising demand further weakens the pound.

The right question, therefore, is not simply: Why is the dollar rising? It is: Why is the Sudanese pound losing its capacity to defend its value? The answer, in my view, begins in one place: the war economy.

The Pound Is Not Fighting the Dollar — It Is Being Overwhelmed by the Burden of War

By mid-September 2026, the dollar had exceeded SDG 8,000 on the parallel market, reaching a new record, compared with around SDG 500 before the April 2023 war. Faced with figures of this magnitude, it is easy to focus the debate on currency speculators, foreign-exchange dealers, smuggling, weak regulation and government policy. All these factors matter. But they do not, by themselves, explain the crisis. A national currency is not merely a piece of paper issued by a central bank. Ultimately, it reflects the capacity of the economy behind it to produce, export, attract investment, generate foreign exchange, finance imports and sustain confidence in its future. When war destroys these capacities, currency depreciation becomes an expected economic consequence, not simply the result of speculation against the currency.

The World Bank estimated that Sudan's real GDP contracted by around 29.4 per cent in 2023 and a further 14 per cent in 2024, amid extensive destruction of productive capacity and severe disruption to agriculture, trade, services, industry and oil production. Government revenue also fell from around 10 per cent of GDP in 2022 to below 5 per cent in 2024–2025. These are not merely the background to the exchange-rate crisis. They are the exchange-rate crisis itself.

The War Economy Attacks the Pound from Both Sides

Without oversimplifying too far, the foreign-exchange market can be understood through two basic forces: the supply of foreign currency and the demand for it. War does something particularly destructive: it suppresses supply while simultaneously increasing demand. On the supply side, exportable production declines, supply chains are disrupted, businesses, markets and infrastructure are damaged, and the state's ability to channel export proceeds through the formal banking system weakens. On the demand side, the economy still needs to import food, medicine, fuel and production inputs, while the war itself generates additional demand for external resources, logistics, equipment and finance. The result is a brutal equation:

Fewer dollars entering the economy + more dollars demanded by the economy = continuous pressure on the Sudanese pound.

No administrative decree can repeal that equation.

When Foreign Currency Becomes a Store of Value

War has another effect that is no less damaging. When people lose confidence in the national currency's ability to preserve its value, demand for dollars is no longer confined to importers who need foreign exchange to finance goods. The dollar becomes a means of protecting savings against depreciation. Citizens seek dollars. Traders hold part of their working capital in dollars. Importers need dollars. Those able to move their savings into gold or foreign currency do so in anticipation of further depreciation. Foreign-exchange demand therefore shifts from being primarily transactional to becoming increasingly precautionary. Expectations of further depreciation generate additional demand for dollars; that additional demand, in turn, helps to produce the very depreciation people fear. This is more than speculation. It is a crisis of confidence in the future value of the national currency.

Gold: When Sudan Has Dollars, but the Dollars Do Not Reach the Economy

Here lies one of the great paradoxes of Sudan's war economy. Sudan is a major gold producer. Gold should therefore be one of the country's most important sources of foreign exchange and one of the foundations supporting its national currency. Yet the war economy can transform gold from a source of currency stability into a source of war finance.

The British Government, in the context of sanctions imposed in 2026 on networks associated with conflict gold, stated that Sudan's official gold exports were worth approximately US$1.5 billion in each of 2024 and 2025, while estimating that the true value of the sector was several times larger because billions of dollars' worth of gold were being smuggled through illicit channels. Credible studies have also linked the gold trade directly to the regional political economy of war, competition over resources and the financing of conflict actors.

The distinction between gold production and the national economic return from gold is therefore critical. Gold production can increase while the pound remains weak if a substantial proportion of that gold leaves the country outside formal channels and its proceeds do not become reserves, finance imports or support productive investment. This illustrates one of the central rules of a war economy: The problem is not always that a country lacks resources. The problem may be that the war economy disconnects those resources from the national economy.

Why Pursuing Currency Dealers Is Not Enough

The authorities can pursue speculators. Imports can be restricted. The central bank can inject foreign currency. Customs exchange rates can be changed, and controls on transfers can be tightened. Indeed, in June 2026, the Central Bank injected AED 400 million into commercial banks to finance imports and attempt to calm the foreign-exchange market. Yet the gap with the parallel market persisted. Such measures may be necessary for crisis management. But there is a fundamental difference between managing a crisis and removing its causes.

If the economy continues to lose productive capacity, exceptional wartime demand persists, resources continue to be smuggled, investment remains weak and risks remain high, monetary intervention becomes rather like defending a dam while the water behind it continues to rise. It may delay failure. It may produce temporary stability. But it cannot, by itself, rebuild the economic foundations of the Sudanese pound.

War, Fiscal Deficits and Money

There is another critical transmission channel: public finance. War reduces the state's capacity to collect taxes and other revenues precisely when expenditure requirements are rising. According to the World Bank, government revenue fell below 5 per cent of GDP in 2024–2025. When the gap between revenue and expenditure widens in an economy with limited borrowing capacity, the risk of direct or indirect monetary financing increases. The World Bank recorded broad money growth of around 29 per cent in the first half of 2025, linking monetary expansion, together with foreign-exchange shortages, to continuing inflationary pressures and the widening parallel-market exchange-rate gap. Three processes therefore become interconnected:

War economy → Fiscal imbalance → Monetary and inflationary pressures → Exchange-rate depreciation.

Exchange-rate depreciation then raises the cost of government expenditure, imports and domestic prices, feeding back into the cycle.

The Pound as Victim — and as a Mechanism for Transmitting the Cost of War

This deserves particular attention. A falling pound is not simply a number displayed on a mobile phone screen. It is a mechanism through which the cost of war travels from the battlefield into every Sudanese household. A citizen who carries no weapon pays for the war when buying medicine. A worker pays when a month's salary can no longer cover a week's needs. A farmer pays through higher fuel, fertiliser and production costs. Factories pay through the cost of spare parts and raw materials. Students, patients, displaced people and pensioners all pay through declining purchasing power and reduced access to essential services. In this sense, the exchange rate is one of the most indiscriminate mechanisms through which war distributes suffering: The bullet may not reach every citizen, but the exchange rate does.

War Is Consuming the Economic Base That Could Save the Pound

More dangerously, continued war does not merely reduce the value of the pound today. It destroys the sources of its strength tomorrow. Every factory that closes represents lost future supply. Every farm that ceases production means fewer exports and greater dependence on imported food. Every company that leaves represents lost investment. Every skilled professional who emigrates takes with them part of the human capital required for recovery. Every road, power station, market or bank destroyed increases the eventual cost of reconstruction. And every smuggling network consolidated during war creates an economic interest in preserving the system that produced it. Here we reach the heart of the war economy: War does not merely consume economic resources; it reorganises the economy in ways that allow some actors to benefit from its continuation. Saving the pound therefore becomes part of a much larger undertaking: dismantling the war economy itself.

Would the Pound Recover as Soon as the War Ends?

No. It is important not to replace one illusion with another. A ceasefire would not restore the pound to its former value the following day. It would not instantly rebuild destroyed factories, replenish depleted reserves or restore lost confidence. Indeed, the immediate post-war period could itself generate substantial demand for foreign currency to finance reconstruction and long-deferred imports. But ending the war would change the direction of the economic forces acting upon the currency. Instead of destroying production, Sudan could begin restoring it. Instead of financing war, resources could be redirected towards reconstruction. Instead of capital flight, the country could begin attracting capital back. Instead of an economy of smuggling, trade could gradually return to regulated channels. And instead of international isolation, Sudan could begin restoring its relationships with international financial and development institutions, global markets and investors.

The World Bank itself has made clear that Sudan's path towards sustainable economic recovery depends on restoring peace and stability, followed by macroeconomic reform, investment in productive sectors, resumption of the debt-relief process, and strengthened agriculture and trade.

From a War Economy to a Peace Economy

Ending the fighting, however, is not enough. The guns may fall silent while the war economy survives. Gold and smuggling networks may remain intact. Companies and resources may continue operating beyond public oversight. Armed centres of economic power may survive. And the state may remain weak in the face of networks created and consolidated during the war. A ceasefire must therefore be followed by a deliberate transition from a war economy to a peace economy.

Such a transition requires a civilian state with legitimacy and institutions capable of unifying public finances and monetary policy, subjecting public resources to transparent governance, bringing military economic activities within an appropriate legal and institutional framework, combating smuggling, rebuilding the central bank and banking system, gradually unifying the foreign-exchange market, and restoring Sudanese confidence in their national currency. But it also requires something more: Sudan must reopen to the world.

Openness Is Not a Surrender of Sovereignty

Sudan's post-war economy will need the world. It will need investment, development finance, debt relief, technology, access to external markets, reconstruction of agricultural and industrial value chains, restored international banking relationships, and the mobilisation of Sudanese capital in the diaspora.

It will also need to transform its geographical location, agricultural and mineral resources, and human capital from objects of competition and conflict into foundations for shared interests with its regional and international partners. This brings us back to an argument I have advanced elsewhere: the re-engineering of interests.

Post-war Sudan should neither confront the legitimate interests of others simply because they are external, nor allow its resources to become an extractive economy serving foreign interests or domestic armed networks. The objective should be to make peace more economically rewarding for all parties than war. That means moving from:

Gold that finances war → Gold that supports reserves and development.

Borders that facilitate smuggling → Borders that facilitate trade.

Resources contested by armed groups → Resources that attract productive investment.

External relations that manage conflict → External partnerships that build shared interests.

That is the essence of a peace economy.

A Civilian Transition Is Also an Economic Necessity

The civilian transition that follows the war should therefore not be viewed as a political demand detached from economics. Rebuilding confidence in the currency requires rebuilding confidence in the state. Investors need predictable rules. Banks need functioning institutions. Creditors need a government capable of making and honouring commitments. International partners need transparency. Citizens need confidence that public resources will not once again be diverted into financing a parallel war economy. The transition from war to institutional civilian government is therefore also a transition from an economy governed by armed power to an economy governed by the rule of law.

There Is No Monetary Solution to a War Economy

The customs exchange rate can be adjusted. Borrowed foreign-currency deposits can be injected into the market. Imports can be restricted. Speculators and smugglers can be pursued. Some of these policies may be necessary. But we should not ask a central bank to solve, through monetary policy, a crisis generated by a war that destroys the real economy every day. The problem is deeper than the price of the dollar. The war is continuously destroying the economic value that stands behind the Sudanese pound. The first genuine programme for exchange-rate stabilisation is therefore not a central-bank decree. It is: End the war.

Only then can fiscal, monetary and productive policies operate in an environment in which they have a reasonable prospect of succeeding. A strong currency is not created by administrative decree. It is built upon an economy that produces, a state that commands trust, and a peace that allows resources to create wealth instead of financing war. So, when we ask today, How do we save the Sudanese pound? perhaps we should begin with the prior question: How do we save the economy that gives the pound its value? The answer begins where Sudan's larger crisis began: End the war economy, so that Sudan's economy can begin again.

From Saving the Pound to Constructing Sudan

In the Theory of Constructing Sudan, which I have proposed as a framework for a realistic way out of Sudan's protracted crisis, the challenge is not merely to correct failed policies. It is to reconstruct the institutions, relationships and incentives that produce those policies and determine their outcomes. Seen from this perspective, the crisis of the Sudanese pound is not an isolated currency crisis, just as the war economy is not a temporary economic distortion that can simply be corrected through monetary measures once the guns fall silent. Both reflect a deeper crisis in the structure of the Sudanese state itself: a state that has yet to establish a legitimate monopoly over the use of force, effective institutional control over its resources, or the capacity to transform its national wealth into public value for its citizens. The transition from a war economy to a peace economy is therefore an integral part of Constructing Sudan. Just as constructing the state requires moving from multiple armed forces towards one professional national army, it also requires moving from multiple economies of armed power, gold, smuggling and privilege towards one national economy governed by transparent institutions and rules. Just as the process of construction returns arms to the authority of the state, it must return public resources to the state, politics to civilian institutions, markets to the rule of law, and Sudan's external relations from arenas of competition over its resources into networks of shared interests, investment and development. This reveals the organic relationship between peace, economics and legitimacy. There can be no sustainable peace while the war economy survives. There can be no stable currency without a productive economy. There can be no productive economy without trusted institutions. And there can be no trusted institutions without a state whose legitimacy derives from its citizens and whose affairs are governed by rules rather than the balance of armed power.

A post-war civilian transition is therefore not simply an arrangement determining who governs Sudan. It is part of reconstructing how Sudan is governed, how its resources are managed, how its wealth is created, and how its opportunities are distributed. The question of the Sudanese pound thus becomes part of a much larger question. The Theory of Constructing Sudan does not ask only: How do we restore the value of the currency? It asks: How do we construct the state and the economy that give the currency its value? The entire pathway can be expressed in one sequence:

End the war → Dismantle the war economy → Institutional civilian transition → Return national resources to the formal economy → Construct the state → Build a peace economy → Restore confidence and production → Reconnect Sudan with the world → Stabilise the Sudanese pound.

The ultimate objective, therefore, is neither to return the pound to some previous exchange rate nor to restore Sudan's economy to what it was before 15 April 2023. The pre-war economy itself contained structural distortions that contributed to the fragility of the state. Constructing Sudan means not rebuilding Sudan as it was but constructing Sudan as it ought to be. The recovery of the Sudanese pound would then cease to be an end in itself. It would become one of the indicators of the recovery of the Sudanese state. The pound cannot truly recover until Sudan restores the value of its state, its institutions, its productive economy, and the confidence of its citizens and the wider world.

melshibly@hotmail.com

Nottingham, 21 September 2026