Sudan Crisis: Cash is as Important as Food

As the crisis in Sudan appears to be sliding inexorably towards civil war, the UN and its non-governmental partners are planning for a protracted humanitarian catastrophe. As is usual at the beginning of such disasters, the situation is fluid and uncertain. Aid stockpiles have been looted while hundreds of thousands have sought sanctuary in neighbouring countries, most of which are already facing their humanitarian crises. Hundreds of thousands more are displaced as they flee local violence. Widespread and potentially long-lasting food insecurity looms.

“Families across Sudan are running out of everything, including water, food, fuel and cashMoney in physical form such as banknotes and coins. More.”

Jan Egeland, Norwegian Refugee Council, 3 May 2023

The Central Bank is Unable to Distribute Cash

The UN-facilitated Cash Working Group for Sudan, temporarily based in Nairobi, Kenya, is considering its options: While there will be a short-term requirement for food aid, most of the response will likely involve cash transfers. But in what form? This is what we know at the moment:

• There is a liquidityDescribes the extent to which assets or rights can be converted into cash without causing a significant decrease in the asset’s price. Accordingly, liquidity is often inversely proportional to the profitability of the asset and involves the trade-off between the selling price and the time needed to convert it to cash. In finance, cash is considered the most liquid asset and cash is sometimes used as a synonym for liquidity (e.g. cash reserves; cash pooling…). More crisis. ATMs are empty, and bank branches are closed. The Central Bank of Sudan cannot distribute local currencyThe money used in a particular country at a particular time, like dollar, yen, euro, etc., consisting of banknotes and coins, that does not require endorsement as a medium of exchange. More by air or road from its Port Sudan and Omdurman cash centres.
• Mobile moneyFrom the Latin word moneta, nickname that was given by Romans to the goddess Juno because there was a minting workshop next to her temple. Money is any item that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular region, country or socio-economic context. Its onset dates back to the origins of humanity and its physical representation has taken on very varied forms until the appearance of metal coins. The banknote, a typical representati... More transfers from diaspora abroad, mainly through Zain, are partially functional across most of the country but are interrupted by power and internet outages.
• Electronic payments at point-of-sale, increasingly popular before the crisis, especially in Khartoum, no longer function.
• The people are demanding cash, not electronic transfers.
• The informal ‘hawala’ network is only working in certain areas. Commissions of 17% are not unusual.

“Traders will only accept cash. We can’t eat digital money!” – Internally Displaced Person, Port Sudan, 2 May 2023.

Physical Currency is Always Preferred

Evidence of cash transfers for social protection from Libya, Syria, Lebanon, Yemen and elsewhere in the region over the past decade has taught us the following:

1. Physical currency is always preferred. The last mile of digital transfers almost always ends with recipients cashing out the full transfer value at the earliest opportunity.
2. ATMs are the preferred cash-out option if their charges are deemed ‘fair’. Many reasons are mostly connected to perceptions of security, dignity, gender equity and conflict resolution with host communities.
3. Access to local currency (in this case, the Sudanese Pound) can be part of the peace-making process.
4. When international aid agencies are involved, recipients prefer $100 bills to hedge against inflation.
5. Local markets bounce back quickly if the warring parties can guarantee lines of credit, insurance and supply-chain security.

The aid community and its private sector counterparts must be ready for a rapid and sustainable escalation in cash assistanceThe term cash assistance refers to direct cash transfers to individuals, families and communities in need of humanitarian support in lieu of in-kind commodities or direct service delivery. The term can be used interchangeably with ‘cash-based interventions’ (CBI), ‘cash transfer programming’ (CTP), ‘cash and voucher assistance’ (CVA), and ‘cash-based programming (CBP)’. It does not include fund transfers from donors, payment of incentives to the staff of local authorities, paymen... More. Fintechs like Aidonics and Zain are already advertising the benefits of end-to-end electronic transfers. There will be a time to consider the costs and benefits of all options, but that time is not now. Neither consumers nor merchants are willing to trust electronic paymentA transfer of funds which discharges an obligation on the part of a payer vis-à-vis a payee. More systems in times of such political uncertainty.

As in the Syria crisis, international aid organisations planning for what happens next in Sudan should follow the example of Syria’s neighbouring countries by preparing to scale up cash distributions using pre-paid debit cards and ATMs. This will likely involve establishing an entirely new ‘ATM-based retail banking’ system across Sudan. Waiver of cross-border fees, reductions in interchange, interoperability and the daily setting of exchangeThe Eurosystem comprises the European Central Bank and the national central banks of those countries that have adopted the euro. More rates will also have to be high on the agenda.

In light of all this, the Cash Working Group for Sudan – like Cash Working Groups the world over – would benefit from independent advice from a former Central Banker who understands retail payments, cash managementManagement and control of cash in circulation. More for societies in crisis, and the Africa/Middle East payments environment. Volunteers should contact the author directly in the first instance.

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