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Sudan Pound plummets against US Dollar – market volatile

October 8 - 2018 KHARTOUM
File photo
File photo

On Sunday, the newly established Market Makers Committee appointed by the Sudanese government to determine foreign exchange rates announced the exchange rate of Sudanese Pound against the US Dollar at SDG 47.5. On the parallel market, traders reported ‘confusion’ and a high of SDG 51 for the greenback on the streets of Khartoum.

The committee said it would set the price daily at 7 am so that banks can work according to the exchange rate of the day. The new independent mechanism which includes bank managers, foreign exchange experts and economists, has been formed from outside the government to determine the exchange rate of the Sudanese Pound against foreign currencies.

The committee has been formed as part of a series of measures designed to address the current economic crisis in Sudan.

Parallel market traders said confusion and chaos prevailed in currency markets after the Market Makers’ mechanism set the Pound rate at 47.5 Pounds against the US Dollar.

The new exchange rate is intended to attract earnings and the savings of expatriates to the public treasury of the state.

‘Dollar could reach SDG100’

Prof Hamid Eltigani, Head of Public Policy and Administration at the American University in Cairo, predicts that the price for the Dollar will reach 100 Pounds.

He said in an interview with Radio Dabanga that “by forming a committee of market makers the government is hoping to provide a sufficient amount of Dollars to manage the affairs of the state, but the real problem is the scarcity of the Dollar which will continue to rise up to 100 Pounds”.

Prof Eltigani predicted the bankruptcy of Sudanese banks soon and that the matter is a matter of time.

He explained that “the people have lost confidence in the banking system and turned the economy into a monetary economy in which they prefer to keep their money in the form of Dollars or gold because of the continuous decrease in the price of the Sudanese Pound.”

According to Eltigani, the only solution to save money now is for the government to get a short-term loan to secure enough Dollars for a year or a year and a half, while at the same time, radically reforming the economy.

He, however, ruled out Sudan’s receiving a loan from the International Monetary Fund, friendly countries or Gulf States after Al Bashir had announced his intention to stay beyond 2020.

He said that the presence of more than one price for the Dollar in the system of one state is indicative of a big problem, where the official price of the Central Bank of Sudan is SDG6, the price of customs and government transactions SDG18, the price of the market makers SDG47 and the price of the black market at SDG 52 Pounds - a difference of 200 to 300 per cent.

Eltigani believes the consolidation of these many prices needs a loan that provides stability for some time, but obtaining such a loan requires a settlement with the international community; which entails that Al Bashir has to step down from power.

The CBoS has started printing a new denomination of currency. The initiative is aimed at solving the current liquidity crisis in the country, however critics question the wisdom of the move.

According to the official Sudan News Agency (SUNA), informed sources at the CBoS say that the 100-Pound denomination is now being printed. The CBoS source says a campaign will be organised to introduce the new denomination and its security features before it is put into circulation.

“The printing of the new currency denomination has positive effects in solving the problem of the cash shortage at the moment, but it needs close follow-up by the CBoS to the position of deposits and withdrawal of the amounts exceeding the need of the economy.”

Liquidity crisis

Sudan is suffering from a chronic lack of hard currency and cash, while exports remain low. High inflation figures caused a severe drop in purchasing power among the Sudanese since early January, after the government implemented major austerity measures.

The country also witnessed repeated fuel and wheat shortages. Several economists have warned for an economic collapse.

In a speech to the Parliament last week, President Omar Al Bashir said that Sudan has passed through a rise of prices and scarcity of liquidity, and will continue to do so in the future.

In a press statement following an emergency meeting with the cabinet on Thursday, President Mohamed El Zubeir announced new import and export measures, including cancellation of the ban on the import of 17 luxury goods.

Instead of concentrating on adjusting customs fees rates, the import “will be rationalised,” he said.

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