KHARTOUM: Sudan's currency has fallen to a record low against the dollar on the black market as people rush to change savings into hard currency ahead of a lifting of fuel subsidies expected to drive up inflation, dealers said on Saturday.
There is little foreign trading in the Sudanese pound but the black market rate is a key indicator of the mood of the business elite and of ordinary people left weary by years of economic crises, ethnic conflicts and wars.
The rate is also watched by foreign firms such as cellphone operators Zain and MTN and by Gulf banks who sell products in pounds and then struggle to convert profits into dollars. Gulf investors also hold pound-denominated Islamic bonds sold by the central bank.
On Saturday, one dollar bought 7.8 pounds on the black market - which has become the business benchmark - compared to 7.3 a week ago, black market dealers said.
This is the lowest rate since the launch of the currency in 2007. The central bank rate is around 4.4.
The pound has more than halved in value since South Sudan seceded in 2011, taking with it three-quarters of the united country's oil output. Oil was the driver of the economy and source for dollars needed for imports.
"People are trying to move savings into dollars as they expect much higher inflation and worse economic situation after the lifting of the fuel subsidies," said a black market trader.
Finance Minister Ali Mahmoud said it was necessary to lift the subsidies because they cost the treasury 27.5 billion pounds ($3.5 billion based on the black market rate) this year.
"We sell fuel to the local refineries at $49 a barrel and cover the difference to the global market price," he said.
He gave no date at a news conference for the lifting but newspapers said this would happen in the next few days.
Sudan has sought to offset the loss of southern oil reserves by boosting gold sales, which make up almost 70 percent of exports. But a recent sharp fall of the global gold prices means 2013 revenues will be well below last year's $2.2 billion.
A financial source told Reuters the scarcity of dollars has become so bad that the government has started using up the general reserves of commercial banks, which are meant to be kept as deposits with the central bank.
"The central bank are forcing the banks to increase their reserves directly and indirectly to get their hand on some funds," said a banking source, declining to be named.
The lifting of subsidies is expected to fuel inflation because Sudan depends on foreign food imports, which are trucked for days from Port Sudan port across the vast country.
Annual Inflation stood at 23.8 percent in July, according to the latest data from the statistics office. But independent analysts say the figures has been kept low to appease an angry public. A rate at 50 percent or higher is more realistic.
Sudan had hoped for a fillip with the resumption of South Sudan's oil exports though Port Sudan after a 16 month shutdown for which Juba has to pay in dollars.
Oil is now flowing again but production volumes are 60,000 barrels a day lower than what the South used to pump as it proves a challenge to restart hundreds of wells.
Sudan avoided an "Arab Spring" that unseated rulers in nearby Egypt but soaring inflation has sparked small protests against President Omar Hassan al-Bashir, in power since 1989.
Comments
Comments are closed.