Sudan’s Shadow Economy Expands Amid War and State Collapse

Since the outbreak of civil war in April 2023, Sudan has witnessed an alarming rise in the influence of its shadow (parallel) economy, driven by the breakdown of state institutions, the collapse of the formal banking sector, and widespread disruption to official supply chains. This environment has enabled illicit networks and unregulated trade to thrive, deepening the country’s economic and humanitarian crisis.

Collapse of State Institutions and Market Chaos

Most government institutions in the capital Khartoum and other conflict zones have ceased to function, including the Central Bank and key ministries such as finance and trade. This has left a vacuum in regulatory oversight, leading to rampant smuggling and the emergence of parallel markets that dictate prices of goods, fuel, and currency.

Militias Seize Control of Key Economic Resources

Armed groups — particularly the Sudanese Armed Forces (SAF) and the Rapid Support Forces (RSF) — have taken advantage of institutional collapse to seize control over vital economic assets. These include gold mines, fuel distribution routes, and trade checkpoints. Each faction now manages its own informal economy, leveraging it to fund operations and gain political leverage.

Impact on Ordinary Citizens

The unchecked expansion of the parallel economy has led to skyrocketing inflation, currency devaluation, and the destabilization of prices for basic goods. It has also undermined public trust in formal institutions, with many Sudanese now relying on informal networks for everything from remittances to food supply — compounding the hardship faced by millions.

Calls for Legal and Structural Reform

Economists and legal experts are urging the creation of an emergency regulatory framework to prepare for post-conflict reconstruction. This includes revising mining and cross-border trade laws, expanding banking services to better integrate the informal sector, and enhancing judicial mechanisms to combat corruption and economic exploitation. Digital legal tools and real-time oversight have also been recommended to curb the influence of smuggling networks.

The Way Forward

The continued expansion of Sudan’s shadow economy poses a significant threat to the country’s stability and long-term recovery. Without decisive action to reestablish rule of law and rebuild state institutions, Sudan risks entrenching a war economy that will be difficult to reverse. International support and coordinated reform efforts will be crucial in restoring economic order and guiding Sudan toward peace and reconstruction.