The Sudanese pound strengthened on the black market on Wednesday on optimism that oil supplies from South Sudan could resume following a peace deal between the warring sides in the country, and some traders expected a further improvement. The pound was trading at 41 to the US dollar on the black market on Wednesday, strengthening from about 47.5 last week, traders said. The official exchange rate was unchanged at 28.148 Sudanese pounds, moving in a band between 27.0221 and 29.2793.
The end of conflict in South Sudan's civil war, following a peace deal brokered by Khartoum, is expected to boost production of oil that is shipped north and refined in Sudan and which is a key source of currency. Hard currency remains scarce in the formal banking system, for now however, forcing importers to resort to an increasingly expensive black market.
The Sudanese government rejected an IMF suggestion that it float its currency late last year. It instead made two steep devaluations and imposed restrictions on dollar deposits in an attempt to curb black market activity. The Sudanese pound has weakened around 100 percent on the black market since last October when the United States lifted sanctions which had been in place for 20 years.
That move was expected to boost the country's ailing economy but has so far provided little relief. Traders said the stronger pound is also the result of restrictions placed on withdrawing cash earlier this year, a measure intended to dry up liquidity that was moving to the black market but which has led to long queues at ATM's stocked with limited amounts of cash. Sudan's economy has been struggling since the south seceded in 2011, taking with it three-quarters of its oil output, and despite winning relief from US sanctions last year, foreign investors have hesitated to return to the long-isolated country.