The US Dollar rate recorded a new high at the end of the week’s trading on Thursday, reaching more than SDG400. The continuing increase of forex rates in Sudan was expected, says economist Hasan Bashir. On Wednesday, the Ministry of Finance signed two deals with the African Bank to support economic and financial reforms in Sudan.
In the past two weeks, the official Dollar price rose with 12 Pound, an increase formerly only witnessed at the parallel forex market in Khartoum. The parallel market lost much of its significance on February 21, when the government devalued the Sudanese Pound with immediate effect. The official US Dollar price rose from SDG55 to SDG375.
The price of the US Dollar increased with one Pound from Wednesday to Thursday to SDG400.21 for purchase and 402.21 for sale.
Hasan Bashir, Professor of Economics at El Nilein University in Khartoum, said in an interview with Radio Dabanga yesterday that the continuous increase in foreign exchange rates is no surprise. “The decision to raise the Dollar price to the parallel market level was wrong. The idea of combating the parallel forex market rates is the same methodology as the one used by the former regime, and has shown it does not work,” he said. “As long as the banks are short of foreign currencies, the rates will continue to rise.”
He described the measures taken by the government to limit the increase in the foreign exchange rate as “futile”. It will make the situation worse, he said. “An increase in the exchange rate leads to higher inflation, a decrease in the purchasing power, and an increase in poverty rates.”
According to Bashir, “the continuously increasing exchange rates are a symptom of a structural imbalance in the Sudanese economy, represented by a deficit in the balance of payments and a lack of competitiveness concerning the exports. And this leads to a scarcity of foreign currency in the treasury”.
The economist called on the government “to check the sources of foreign currencies at companies [affiliated with the former regime] that were investigated by the Empowerment Removal Committee*, and the military companies handed to the government”. The large amounts of foreign currencies circulating in the illegal trade of gold and other commodities should be addressed as well.
Bashir added that the political changes, brought about by the Juba Peace Agreement, signed by the government and a number of rebel movements in October 3 last year, did not have any positive impact on the Sudanese economy so far. “On the contrary, it caused an increase in the exchange rates.”
On February 22, Professor Bashir welcomed the unification of the official and parallel market forex rates, saying the measure would stabilise the exchange rates and encourage grants, loans, and emergency subsidies. At the same time, however, he warned about increased inflation and poverty in the country.
On Wednesday, the Central Bank of Sudan (CBoS) increased the ceiling of the amount allowed for travel from $100 to $2000 or its equivalent in other currencies.
In addition, foreigners residing in Sudan are now allowed to change money. The decisions come within the framework of the bank's injection of foreign currency in an attempt to control the escalating dollar rate at the parallel market.
According to a circular issued on Wednesday, the CBoS also allows banks to use foreign currencies within 72 hours following purchase “for permissible purposes, including the import of strategic and essential goods, travelling abroad, as well as study”.
On April 25, the Sudan News Agency (SUNA) cited the deputy director of the CBoS, saying that the bank has “sufficient foreign currency reserves to meet the needs for urgent strategic commodities, within the framework of the exchange rate unification policy, recently implemented”.
Deputy director Mohamed Ahmed Bushra pointed out to the Council of Ministers that the bank would begin to provide foreign currencies to commercial banks.
In early May, the Ministry of Finance signed two deals with the African Bank, concerning a bridge loan amounting to $425 million dollars to pay debt arrears to the African Development Bank between the Ministry of Finance and the African Development Bank, and a grant of $207 million to support economic and financial reforms in Sudan.
The agreements were signed by the Minister of Finance, Jibril Ibrahim, and the Regional Director of the African Development Bank for East Africa, Nnenna Nwabufo.
In a press statement, Nwabufo said that the deals will enable the bank to do more for the economy in Sudan, especially as the Sudanese government has begun implementing economic reform measures with the support of the International Monetary Fund.
* The Empowerment Removal Committee, officially called the Empowerment Elimination, Anti-Corruption, and Funds Recovery Committee was established by the new government in 2019 to purge Sudan of the remnants of the Al Bashir regime. Empowerment (tamkin) is the term with which the ousted government of Omar Al Bashir supported its affiliates in state affairs by granting them far-going privileges, including government functions and the setting-up of various companies.