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Thursday, May 19, 2022

A new intervention in the foreign exchange market. Will the “Sudan Central” save the pound?

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On Thursday, the Central Bank of Sudan issued a statement on the government’s vision to correct structural imbalances in the Sudanese economy. Will it stop the collapse of the pound?

The Central Bank of Sudan declared that, starting today, it will intervene in the foreign exchange market to ensure the elimination of imbalances and unwanted changes and the restoration of stability.

He added, according to the statement, that in this sense a series of publications were issued that included the change in the methodology for handling the exchange rate, export operations, import and export of gold.

The Central Bank of Sudan announced the injection of amounts of foreign exchange in favor of commercial banks, to meet the needs of their foreign exchange clients for import purposes, according to the official Sudanese news agency “SUNA”.

He continued, “an urgent plan has also been drawn up to reduce the monetary excess, aimed at reducing inflation and stabilizing the exchange rate.”

He explained that the flexibility that the Central Bank of Sudan has pursued in managing foreign exchange policy since February 2021, in addition to other sources, has allowed it to build estimated and diversified foreign exchange reserves.

Fears are growing that Sudan will reach the stage of economic collapse with the continuing depreciation of the national currency (the pound), the unprecedented rise in commodity prices, and the effects of fuel price liberalization on productive sectors.

Following the announcement by the Central Bank of Sudan, on March 8, that the exchange rate of the Sudanese pound against the dollar would be liberalized, competition between local banks and the parallel market intensified in the race to control the market. exchange rate, with the high ratio of demand against supply and the existence of financial businesses that buy currencies with astronomical numbers.

New central bank policies are bearing fruit

For his part, an informed Sudanese source, who preferred not to be named, explained, according to the official news agency “SUNA”, that the policies followed by the Central Bank of Sudan during the last period began to bear fruit.

The source added: According to clear indicators, among them that the foreign exchange resources of the banks amounted to 65 million dollars, on March 13, and in one week they reached 102 million dollars.

He explained that the uses before the start of the new policies were $68 million, while now it reaches $96 million.

The source stressed that the bank will continue with its reform policies that seek to reduce inflation, encourage exports and the security and stability of the banking system.

foreign exchange record

Currency exchange rates rose in Sudan today, Thursday, setting records at banks, and the price of the dollar today in Sudan on the parallel “black” market reached about 690 pounds.

Simultaneously, commodity prices reached an all-time high, just days into the upcoming month of Ramadan, and it is feared that the deteriorating economic situation will increase the suffering of citizens.

For his part, Ayoub Abdel Hafeez, a Sudanese economic expert, said in an interview with Xinhua: “There are signs of an economic collapse looming on the horizon.”

He added: “The markets are witnessing economic stagnation in the face of a lack of purchasing power and the unprecedented increase in the prices of essential goods.”

He continued: “As the month of Ramadan approaches, there are real fears of rising prices, greed from traders, lack of liquidity and a collapse in the value of the national currency.”

With the increase in prices another problem arises, which is the lack of essential goods such as gas for cooking.

Juba will soon pay $3.2bn to Khartoum

For his part, said Dr. Chol Deng Tun Abel, executive director of the National Petroleum Corporation in South Sudan, said Thursday that his country is about to complete the payment of the amount owed to Khartoum, which amounts to 3.2 billion of dollars in financial support that was decided to be paid to support the economy of Sudan after the secession of his country, according to “SUNA”.

On the latest developments in the prospects for the development of technical cooperation in the oil field between Khartoum and Juba, Abel explained that since the secession of South Sudan from mother Sudan in 2011, his country has been using oil facilities in Sudan to process your oil. , transporting and exporting it through Sudanese ports on the Red Sea, with a pipeline length of 1.8 thousand kilometers.

According to Abel, South Sudan continued to pay 15 dollars for each barrel of oil exported through Sudanese ports as part of the material support that it was decided to pay to sustain the Sudanese economy after the separation of his country within 3.2 billion dollars, plus $9.1 per barrel constituting transit, processing and shipping fees for South Sudanese crude oil.

Timeline of Sudan’s economic reform plan

And the previous transitional government led by Abdullah Hamdok, which was formed in 2019, began to implement an economic reform plan under the supervision of the World Bank to obtain relief from Sudan’s foreign debt, which amounts to some 60 billion dollars. .

But that plan was upended following moves by Sudanese army chief Lieutenant General Abdel Fattah al-Burhan on October 25 to dissolve the government and impose a state of emergency.

The United States of America and international agencies have suspended hundreds of millions of dollars in aid to Sudan and stipulated the restoration of civilian rule.

Sudan’s debt relief process was halted under the International Monetary Fund’s Enhanced Initiative for Heavily Indebted Poor Countries (HIPC).

Washington quickly froze $700 million in emergency aid, while the $500 million in direct budget support expected at the end of November from development agencies was put on hold.

Another $150 million has not been obtained from the so-called Special Drawing Rights of the International Monetary Fund, which are used to reinforce official reserves.

Since the secession of South Sudan in 2011, Sudan has faced a serious economic crisis after losing two-thirds of its oil production.

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