Sudan’s central bank announced it would sharply devalue the nation’s currency to access debt relief and escape the economic crisis. The central bank said it would launch a new regime tasked with unifying official and black-market exchange rates in Sudan. The move was a key reform the International Monetary Fund and foreign donors had demanded Sudan to receive financial assistance. But Sudan had delayed deciding for months as rapid inflation and shortages of basic goods complicated a fragile political transition.
Sudan Finally Devalues Currency
When the decision was made, Sudan’s central bank set the indicative rate at 375 pounds to the dollar. In Sudan, several commercial banking sources confirmed the details saying the new indicative had risen from a previous official rate of 55 pounds. This week the dollar traded at between 350 and 400 Sudanese pounds on the black market. This information aided the Sudanese central bank in setting the indicative rate. The bank, however, stated that it would set indicative rates daily in a flexible managed float. A circular sent to banks further revealed that all banking institutions and exchange bureaus would be required to trade within 5% above or below the rate set each day.
Moreover, the circular sent out also set a profit margin between buying and selling prices of no more than 0.5%. According to the central bank, authorities would not control the rate, but Sudan’s Finance Minister Jibril Ibrahim said the central bank could intervene if needed. The minister announced this decision as some unspecified foreign funds were on their way to Sudan, and maybe some intervention would be required.
Economic Crisis in Sudan
Apart from assisting with debt relief, the devaluation would help stabilize Sudan’s currency. Additionally, according to the central bank, it would reduce smuggling and attract remittances from Sudanese working overseas. Sudan has suffered a lot as it has been in international isolation for decades. The success of the central bank’s transition is a crucial undertaking that will bring stability to Sudan.
Last year Sudan saw shortages of bread, fuel, and electricity. The shortages led to the emergence of an economic crisis in the country. Because of this, an unusually violent mass protest broke out in Sudan. The annual inflation at the time had accelerated to more than 300%. This rate was one of the world’s highest ever seen.
Sudan’s government looked to control the country’s fuel problem by lifting most fuel subsidies. Through the move, the country would meet a key demand from lenders. Through the money they would get, they would acquire more fuel. A donor-supported family support program started to soften the blow of subsidy cuts was, however, delayed due to the exchange gap. But as the central bank now seems to have control of the situation, Sudan is set to revive its economy. Some economists, however, have argued that devaluation won’t produce the expected impact on inflation. They state the implications will be limited because all transactions were already being carried out at the black market rate.
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