The government of Sudan is to completely liberalise the exchange rate of the Sudanese Pound (SDG) without the intervention of the Central Bank of Sudan (CBoS) determining foreign exchange rates, establishing the foreign exchange market. Experts predict this will lead to a further erosion of the value of the Pound.
El Sudani newspaper has reported that the decision will be passed at a meeting of the cabinet scheduled to be held in El Obeid, capital of North Kordofan on Sunday.
Economic expert Dr Sidgi Kaballo says that the complete liberalisation of the exchange rate will lead to a deterioration in the value of the Sudanese Pound to unprecedented rates in the coming days, a rise in inflation, commodity prices, and an increase in the cost of living.
He told Radio Dabanga: “These decisions mean the government is completely abandoning its responsibilities.” He said he expected the move to be “the beginning of a difficult period politically and economically, with widespread protests by different sectors”.
The government also decided to buy and sell export proceeds and foreign exchange resources to encourage exports at an exchange rate determined by market makers as independent entities.
However, Dr Kaballo described the move as wrong and considered it as the CBoS abandoning its control over the outcome of the exports.
He said that commercial banks cannot be entrusted with the wealth of the people, pointing out that they do not comply with any economic restrictions, evidenced by the liquidity crisis.
He said this would open the door wide to import of luxury goods, lack of medicines and rise of prices that will increase the severity of the suffocating economic crisis.
On the gold exports, the government announced that the CBoS will buy gold through agents without restrictions and that the purchase prices will be the price of the stock exchange according to the prevailing exchange rate that will allow agents to export part of their proceeds from gold.
Kaballo considered the decision as legalising the smuggling of gold and brokering through agents, which means handing over the country’s wealth to those he described as parasites.
He said that the decisions in the event of issuance would lead to the complete destruction of the economy.
Because of the liberalisation of the exchange rate, buying and selling operations have stopped for amounts of more than $5,000.
Foreign currency traders said that foreign exchange rates started to rise as the US Dollar purchase price in foreign markets has amounted to SDG 48, while the greenback is selling for SDG 48.2.
They expected the foreign currencies to rise during the coming period as the state revenues are limited.
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.”
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.
In a speech to the Parliament on Monday, 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.