Sudanese pound falls in north

KHARTOUM: The Sudanese pound fell on the key black market in the north as demand for dollars rose after the oil-rich south became independent despite the central bank saying it would secure supplies, dealers said on Sunday.

On Saturday, South Sudan become independent after voting for a split in a referendum under a 2005 peace agreement that ended decades of civil war.

With the secession north Sudan where 80 percent of the 40 million Sudanese live lost 75 percent of the African country's oil production of 500,000 barrels a day located in the south. Oil is the lifeblood for both economies.

The south will need northern refineries and its port for years, but economists expect northern oil revenues to gradually fall below the current 50-50 split. This will make it harder to obtain foreign currency to buy food supplies and other imports.

On Sunday, black market traders in the northern capital Khartoum said the dollar was buying between 3.47 and 3.55 pounds after 3.44 last week. The official rate is about 2.7, an improvement compared to 2.9 cited a few weeks ago.

"It's difficult to get dollars," said one dealer. Another trader said: "It's very hard to get dollars in large amounts."

The central bank in Khartoum said the situation had improved after had supplied the market "in the past period" with foreign currency and would continue to do so.

"The central bank will keep supplying banks with necessary foreign currency in the future period," it said in a statement, adding that fears over the secession were no longer weighing.

Gold and other non-oil exports were at reassuring levels, it said.

Hit by a US trade embargo and violence in several parts of the vast country, Sudan has been struggling with high inflation, unemployment and a dependence on oil.

The southern central bank has said it wants to introduce a new currency and will redeem the old pound but has given no time frame or any procedures.

Analysts warn if a new currency is issued without coordination with Khartoum on the timing and exchange rate, the pound will continue to weaken in the south with inflationary pressures rising.

No hard figures exist but some analysts estimate more than two billion pounds are currently in circulation.

In November, Sudan effectively devalued the currency to erode the black market and pump more liquidity into the financial system. As result, annual inflation almost doubled to almost 17 percent in June, while the black market is active as ever.

Demand for dollars is especially high in summer when many Sudanese travel abroad.

Copyright Reuters, 2011