Institutional Behavior and the Path of Economic Collapse in Sudan: From a War Economy to the Deplet

04:17 AM September, 12 2026

Sudanese Online
حسن بشير محمد نور-Sudan
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By Professor Hassan Bashir Muhammad Nour

Since the outbreak of war in April 2023, the economic collapse in Sudan has no longer been merely a consequence of the destruction inflicted upon factories, farms, markets, and infrastructure. Physical destruction alone, regardless of its severity, does not explain the persistence and expansion of this deterioration. The decisive factor lies in how public institutions have managed resources, authority, and priorities, as well as their capacity to shield the civilian economy from turning into a funding source for conflict and societal depletion.
From the perspectives of public economics, governance, behavioral economics, and organizational theory, Sudan faces a profound institutional crisis. Official behavioral patterns have acted as a multiplier of the war’s impact rather than a tool to mitigate it.

From Crisis Management to Crisis Reproduction:

War inherently imposes extraordinary pressures on public finance, monetary policy, production, and basic services. Rational institutional response demands a temporary reprioritization that protects a baseline of productive capacity and essential services. However, when war-related expenditures become the permanent axis of resource allocation and civilian protection recedes, the state transitions from managing the crisis to reproducing it.
This creates a vicious cycle: declining production reduces state revenue, prompting institutions to raise levies and fees or rely on monetary financing. Consequently, prices rise, purchasing power erodes, investment drops, and the demand for extraordinary resources grows—forcing the economy to sustain war by consuming its own survival capacity.

Public Finance: Taxation Beyond Economic Capacity

The conflict has contracted the tax base, disrupted broad sectors of economic activity, and impaired trade. Under these conditions, the required response was to reform the fiscal system, equitably broaden the tax base, rationalize spending, and protect income-generating producers and enterprises.
Instead, the proliferation of taxes, levies, and redundant collection across administrative levels turns public finance into a direct burden on trade and production. Tax capacity refers not to the legal right to impose taxes, but to the economy’s actual ability to bear them without triggering business closures, production cuts, or capital flight into the informal sector.
Exceeding this capacity means higher nominal tax rates do not translate into higher revenues; they induce evasion, smuggling, market contraction, and price hikes. Imposing growing financial burdens without delivering corresponding public services erodes trust in the state and undermines voluntary compliance.
The situation worsens when spending channels lack transparency and oversight. Expenditures that absorb resources without maintaining water, electricity, roads, healthcare, education, and agriculture destroy the public capital needed for recovery.

Monetary Policy: Financing Conflict at the Expense of Stability

Monetary policy in wartime faces a dual challenge: funding urgent needs while preserving currency value, price stability, and the banking system. Excessive monetization of the deficit amidst contracting production inflates nominal liquidity without a corresponding rise in goods and services.
The resulting inflation and exchange rate depreciation erode incomes and savings, unfairly redistributing wealth. Fixed-income households and cash savers suffer most, while those holding real assets, foreign currency, or pricing power adapt more easily.
Unregulated wage disparities and arbitrary bonuses distort public sector labor dynamics, driving talent away and undermining service quality. When wages fail to match living costs, public employment shifts from service delivery to mere survival.

External Relations: Disruption of Trade and Export Channels

Economic performance is inseparable from political behavior and foreign policy. War requires external relations that safeguard trade, financing, and aid channels while minimizing the risk of isolation and sanctions.
Fragmented decision-making, conflicting political messaging, and poor economic coordination undermine international confidence and complicate commercial transactions. Tensions risk triggering sanctions whose indirect effects fall heavily on the civilian economy.
This disruption severely impacts exports like gold, livestock, and gum arabic. These sectors depend on structured institutions, reliable banking networks, transport, insurance, certification, and stable buyer relations. When these channels break down, the capacity to convert natural wealth into formal revenue vanishes. Gold cannot serve as a sustainable resource without oversight and anti-smuggling controls, nor can livestock and gum arabic achieve export potential if production and transport networks remain disrupted.

Agricultural Finance: Undermining Food Security

Agricultural finance is critical to economic and humanitarian stability. Agriculture relies on timely credit, inputs, irrigation, storage, transport, and risk management. When financial institutions pull back, input usage drops, cultivated areas shrink, and yields decline.
This shortage drives up food prices, lowers producer incomes, accelerates rural displacement, and deepens poverty. Poor households—who spend most of their income on food, bear the brunt of this contraction. Neglecting agricultural finance is not just a sector-specific shortfall; it is an institutional posture that threatens national food security and increases reliance on imports and aid.

Healthcare and Education: Loss of Human Capital

No economy can recover without preserving its human capital. Reduced health funding, supply chain breakdowns, facility destruction, and utility failures inflate medical costs, lower productivity, and drain household savings.
In education, damage extends beyond closed schools to accumulated learning loss, rising dropout rates, and child labor risks. Disruptions to higher education, along with the displacement of faculty and students, impair the knowledge production needed for reconstruction.
Decisions compelling universities to resume operations without ensuring basic safety, housing, water, electricity, or laboratory infrastructure highlight systematic decision-making flaws. While reopening institutions is a legitimate goal, policy implementation requires readiness assessments, risk classifications, quality baselines, and transitional alternatives.

Displacement and Return: Absence of Institutional Planning

With displaced and refugee populations estimated between 12 and 14 million, Sudan faces both a humanitarian crisis and a massive reallocation of labor, assets, and service demand.
Safe return cannot be achieved through administrative decrees alone. It requires security, demining, housing rehabilitation, restored utilities, access to documentation, employment, and freedom of movement. Returning displaced populations to areas lacking services and jobs risks reproducing displacement. Furthermore, severe inflation and eroded savings render return unsustainable without an economic framework centered on production and employment.

Corruption and Governance Deficits

Emergency spending, diminished oversight, restricted information access, and fragmented authority heighten corruption risks during wartime. Beyond embezzlement, corruption includes off-budget resource allocations, conflicts of interest, and preferential treatment in contracts and tax exemptions.

When emergency conditions permanently override standard regulations, exceptions become the norm. This erodes public trust, encourages tax evasion, expands the informal economy, and deepens inequality. From a behavioral standpoint, institutions signal social norms: if compliance is framed as optional and influence overrides competence, evasion becomes a standard defensive behavior for survival.

The Need for Structural Reform and a Political Path:

Sudan's primary challenge is not merely physical asset destruction, but the absence of a coherent framework for economic and institutional reform. Recovery requires fiscal reform, monetary stabilization, banking sector restoration, structured agricultural finance, public service rehabilitation, clear center-periphery arrangements, and enhanced transparency.
Institutional incentives must change. An agency rewarded solely on collection volume without regard to productive impact will continually raise levies. Institutional reform requires altering the rules governing decision-making, accountability, and information flow.
Achieving these reforms requires halting the war and opening an inclusive political process. Civilians and affected social groups must participate to establish clear rules for representation, negotiation, and oversight. Ceasing hostilities is both a humanitarian priority and an economic prerequisite for rebuilding institutional trust and halting resource depletion.

Conclusion:

Sudan’s trajectory since April 2023 demonstrates that economic collapse is not an automatic result of war alone, but a consequence of how power, resources, and priorities are managed. When resources fund conflict at the expense of production, levies exceed economic capacity, monetary expansion operates without a production base, and essential sector decisions ignore practical readiness, institutions actively multiply the crisis.
Sudan requires a fundamental shift in institutional behavior: moving from extraction to production, from control to service, from arbitrary exceptions to rule-based governance, and from short-term spending to long-term recovery investment. Rebuilding the country begins with constructing institutions capable of preventing future collapse.

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