Economist and professor Hasan Bashir said in an interview with Radio Dabanga that the new measures issued by the Sudanese government and Central Bank of Sudan (CBoS) to “unify the Sudanese currency” will stabilise the exchange rate and encourage grants, loans, and emergency subsidies. At the same time, Professor Bashir and Professor Esam El Zein warned about increased poverty and inflation.
The government devalued the Sudanese Pound (SDG) on Sunday with immediate effect. The CBoS has “unified the currency” by setting the official exchange rate at the parallel market exchange rate.
At the parallel market, one US Dollar traded for an amount between SDG350 and SDG400 in the past weeks. The official CBoS exchange rate of the US Dollar has been increased from SDG55 to SDG375 for purchase and SDG376 for sale at commercial banks.
Professor Bashir said that he expects the exchange rate to stabilise in the first few days after the unification of the currency and for the Sudanese Pound to increase again in value after a week.
The measures were taken to halt the ongoing inflation and economic crises in Sudan. Last week, economic expert Sidgi Kaballo expected the US Dollar exchange rate to rise to SDG600 by May “unless the government takes urgent measures”. Last year, the Minister of Energy and Mining warned of the side effects of the continued fall of the Sudanese Pound against the Dollar and called it a “serious threat”.
Finance Minister Jibril Ibrahim said that adjusting the currency to the parallel market range will bring Sudan stability, stimulate remittances from Sudanese living abroad, and attract foreign investments.
The decision will also stimulate exports, help to receive revenues through official channels, and make sure Sudan can be included in the Debt Relief Under the Heavily Indebted Poor Countries (HIPC) Initiative, the minister added.
Professor Bashir explained that the lack of foreign exchange reserves, and of control over the institutions that trade in foreign exchange, may cause a race between the formal and the parallel market.
He also explained that the decision will lead to a rise in inflation rates and high prices, which will affect both production and consumption, producers and service providers.
He noted that poverty rates are much greater than the estimates presented by the Ministry of Finance and that ‘the poor’ include workers in state institutions and university professors.
The professor described the issues concerning the exchange rate as a “symptom of the disease of the Sudanese economy”.
He said that the main problems within the Sudanese economy include the structural imbalance within the economy, the weak competitiveness of exports, the weak private sector, and the comparatively high production costs.
He also noted other issues, including the fact that the government has a lack of jurisdiction on public funds and the spread of corruption. A result of the previous era of dictatorship.
Economist and professor of economics at El Mashreg University, Esam El Zein also highlighted the importance of unifying the currency yesterday, and that said that the banking sector should not compete with the parallel market. At the same time, he warned that the CBoS lacks foreign currency reserves.
He argued that the only way to stabilise the exchange rate is to build such currency reserves, cut spending on imports, and essentially reform the economy. He stressed the need for the government to become a seller of currencies instead of a buyer.
Professor El Zein further warned that the new measures will cause a decrease in the average income per capita in Sudan and will increase the number of poor people. It will also increase the cost of production, which will affect exports. He said that the sums allocated to support the poor were not sufficient for their needs.
President of the World Bank, David Malpass, has welcomed the decision of the Central Bank of Sudan to unify the currency and stabilise the exchange rate. In a tweet, he explained that the decision has several benefits for the people of Sudan, including minimising smuggling and stimulating financial transfer flows, support, and investments.
He further explained that the currency devaluation and the consequential stabilising of the exchange rate would enable progress regarding the settlement of Sudan’ arrears with the World Bank and securing financial aid and support.
In the interview, Professor Bashir stressed that the conditions set by international financial institutions were unfair. He expressed his hope that the government will reach an agreement with these institutions that will bring about financial aid and broad-based loans, similar to what happened in Egypt.