Sudan announces currency devaluation to meet demand from major international financial institutions

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CAIRO – Sudan on Sunday announced a managed flotation of its currency, an unprecedented but expected step in response to a major demand from international financial institutions to help the transitional authorities rehabilitate the ailing economy.

The move is the boldest economic step taken by the military-civilian government that ruled the African country after a popular uprising. The revolt led to the military overthrow of autocrat Omar al-Bashir in April 2019. The country has since been on a fragile path to democracy with sizeable economic challenges posing a major threat to this transition.

The sharp devaluation could provoke a popular reaction as the prices of goods and services rise in response to the fall in the value of the pound and a possible rise in the price of fuel and other essential goods. There have already been sporadic protests against the dire living conditions over the past two weeks in the capital, Khartoum and other parts of the country.

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The US dollar traded at over 350 pounds to the dollar on the black market, while its official rate was 55 pounds to the dollar. After the devaluation, local media reported that banks were selling the dollar an average of 375 pounds and buying the US currency for an average of 390, with the aim of attracting those who trade in the unofficial currency market.

Sudanese currency will now fluctuate based on supply and demand and the Central Bank of Sudan has announced that it will announce a flexible daily indicative rate in a “flexible managed float” that banks and other exchange offices are required to keep. trade less than 5% above or below. .

The managed float system, which went into effect on Sunday, gives the central bank the ability to set a rate based on the average trade, Al-Fatih Zayed al-Abidin, the central bank governor said during a press conference in Khartoum with the Minister of Finance Gibril. Ibrahim.

The move was part of the measures taken by the transitional government in recent months to transform the country’s economy and join the international community after more than two decades of isolation.

Sudan announced on Sunday a managed IPO of its currency, an unprecedented but expected step in response to a major demand from international financial institutions to help transitional authorities rehabilitate the ailing economy. (AP Photo / Abd Raouf, F

The Central Bank said its move would help “normalize ties with international and regional financial institutions and friendly countries to ensure the flow of grants and loans” into the Sudanese economy.

“Our economy is in a situation that cannot be resolved without making such a decision,” Ibrahim said. “It is in our interest, in the interest of the country and in the interest of the citizen.”

Western governments hailed the decision to liberalize the exchange rate. The US Embassy in Khartoum hailed the “courageous” move, saying it paves the way for debt relief and dramatically increases the impact of international aid.

“This decision will also help Sudanese companies and attract international investment, as local and foreign companies will no longer have difficulty doing business in Sudan due to the double exchange rate,” he said.

Volker Perthes, the UN envoy for Sudan, also welcomed the launch, saying: “It shows that the transitional authorities can reach consensus, make difficult decisions and carry them through.”

This decision was a key request of the International Monetary Fund. Sudan is expected to enter into a 12-month staff surveillance program with the IMF to seek relief on its $ 70 billion external debt. This program is expected to end in September.

Sunday’s decision came after Prime Minister Abdalla Hamdok announced a cabinet reshuffle to add rebel ministers. The reshuffle was part of a deal the transitional government struck last year with a rebel alliance.

Sudan has struggled for years with a series of economic problems, including a huge budget deficit and widespread shortages of basic necessities and soaring prices for bread and other basic items. The country’s annual inflation exceeded 300% last month, one of the highest rates in the world.

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The country was plunged into economic crisis when the oil-rich south seceded in 2011 after decades of war, taking with it more than half of government revenues and 95% of exports.

Sudan was also an international outcast after being placed on the list of United States terror sponsors in the early 1990s. This largely excluded the country from the global economy and prevented it from receiving loans from institutions. international organizations like the IMF.

Former President Donald Trump removed Sudan from the blacklist after the transitional government agreed to pay $ 335 million in compensation to victims of attacks by Osama bin Laden’s al-Qaida network as the terrorist leader lived in Sudan. The withdrawal was also an incentive for Sudan to normalize its relations with Israel.


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