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POUND HITS RECORD LOW

Sudan bans unofficial currency dealing

Khartoum , December 26, 2012

 

Sudan's central bank banned unofficial currency dealing after the Sudanese pound fell to a record low on the black market on Tuesday, a drop likely to add pressure on the government to raise state salaries.
 
Traders said the drop was the result of importers struggling to obtain foreign hard currency. The central bank blamed dealers who it said were linking the pound rate to gold prices.
 
"It is almost impossible to get dollars in Khartoum and it is getting worse," said one black market trader. "The mood is very bad."
 
There is little foreign or official trading in the Sudanese pound and the black market rate is an indicator of the mood of the business community and ordinary people tired by years of economic crises and ethnic conflict.
 
Sudan has not seen an Arab Spring uprising like its neighbours Egypt and Libya but the government faces dissent over spiralling inflation caused by the loss of three quarters of its oil production when South Sudan seceded in July 2011.
 
Oil was not only the main source for state revenues but also for dollars needed to fund imports as Sudan produces little. Annual inflation hit 46.5 percent in November, triple the 15 percent in June 2011, the last data before southern secession.
 
The black market rate is watched by foreign firms which sell products in pounds but struggle to convert profits into dollars.
 
Among those companies are mobile service providers Zain and MTN and Gulf banks such as Dubai Islamic Bank.
 
On Tuesday, a dollar bought up to 7.1 pounds, breaching 7 for the first time. Last week, the rate on the parallel market, which has become the benchmark, was around 6.9. At the time of secession it was 3.3.
 
By contrast, the official rate stands at around 4.4 but has little value as the central bank and commercial lenders are unable to produce as many dollars through official channels as importers need, according to traders.
 
WAGE PRESSURE
 
To offset the loss of oil, the government has been boosting gold exports and trying to buy up locally-produced gold - often above the market price, according to industry sources, a practice that fuels inflation.
 
Central bank Deputy Governor Mahmoud el-Din Badr told the state-linked Sudanese Media Center (SMC) website that the bank had banned unofficial currency trading and would report anyone flouting the ban to the authorities.
 
Two black market traders told Reuters that the authorities had launched the crackdown and arrested several dealers. But traders doubted the central bank would be able to enforce the ban as it would not solve dollar scarcity.
 
The opposition has been unable to mobilize mass protests against veteran President Omar Hassan al-Bashir but the pound's slide has sparked calls even from inside his ruling party to increase salaries in the public sector, where most people work.
 
Analysts say such a move would further fuel inflation and weaken the pound as the central bank would have to print yet more money.
 
Trade unions also called on the government to increase the minimum salary, state news agency SUNA said.
 
South Sudan was supposed to pay Khartoum to pipe crude exports through Sudan, but the new nation shut down its entire 350,000-barrel-per-day output in January in a row over fees.
 
The two signed a series of deals in September to restart exports, but disagreements over how to implement them have delayed the resumption.
 
The two countries held talks this month but have yet to agree on how to set up a border security zone, a move needed to restart the oil exports. More talks are due in mid-January. - Reuters



Tags: Currency | Pound | sudan |

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