The central bank of Sudan has devalued its currency by 22.6% against the dollar.
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This is the second devaluation – with the first only taking place just over a year ago – and signals a continual struggle for the country to obtain hard currency.
In 2010, Sudan was one of the world’s fastest-growing economies, and its rapid development due to profits from oil was noted in The New York Times.
However, the African country’s economy has been in tumult since the South Sudan succession on the 9th of July 2011; which removed around three-quarters of its oil production.
With approximately 32 million inhabitants, the country’s low impact farming and food production cannot produce enough to feed its population, and oil was the source for the American dollars needed for imports such as food and other essential items.
Prices for the Sudanese pound started at 5.6871 for one dollar – previously set at 4.4 – central bank data on Reuters terminals stated last Monday.
In 2011, the official rate was approximately 3 pounds to the dollar.
The devaluation is part of a move by the central bank to bridge the ballooning gap between the recorded rates and the black market rate – where one dollar costs 7.8 pounds as firms importing goods struggle to obtain hard currency.
Worryingly, this black market rate, which captures a sizeable portion of the economy, is increasingly becoming the benchmark for both banks and businesses.
Lack of hard currency
Watched over by foreign firms such as cellphone operators and Gulf banks, many businesses across the country are reporting the difficultly of converting the local pounds earned into US dollars.
To this end, a major Sudanese airline has had to suspend operations recently – claiming that both American sanctions and the lack of hard currency available to foreign airlines is to blame.
Often taking a secretive approach, the central bank does not often announce these devaluations, and currently denies the hard currency shortage.
Initially, Sudan sought to offset the loss of South Sudan’s oil reserves by increasing gold sales, which made up almost 70% of exports.
Yet the recent devaluation of global gold prices means Sudan’s 2013 gold revenues will be well below 2012’s USD 2.2 billion.
In September, the Government lifted many fuel subsidies to combat a budget crisis, yet according to a Reuters’ source the scarcity of dollars became so bad the central bank was forced to use commercial bank’s general reserves for currency – typically reserved as deposits with the central bank.
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