Sudan is attempting to control the exchange rates to tame rising fuel and commodity prices, by floating the Sudanese pound through harmonising rates for banks and forex bureaus, allowing them to set prices and buy and sell currencies without the intervention of the central bank.
The price of the dollar has risen highest this year and this week saw the pound hit 600 to the dollar, just two days after liberalisation of the exchange rate in commercial banks.
The new monetary policy measures were announced on Monday by the Sudan Central Bank, and authorities are hoping that harmonising the rates will tame what they call decisive “sabotaging of the national economy” through speculation of the dollar.
Hussein Yahya Jangoul, director of the Sudan Central Bank said in a press statement that this measure “is within the framework of integrated and sustainable reform monetary policies that will be issued successively aimed at stabilising the exchange rate and increasing the ability of the banking system to attract resources.”
While he argued that this will stablise banking and eventually help stabilise prices of commodities, some experts said the decision is a “double-edged sword” that could lead to besieging the parallel market for currencies and others argues that it may lead to a complete collapse of the Sudanese pound if the central bank does not build reasonable reserves of foreign exchange and gold.
Ahmed Khalil, a Sudanese economist told The EastAfrican the measures could also lead to a "sinking" and an imminent collapse of the Sudanese pound.
“This is considered a double-edged sword due to the lack of sufficient reserves of foreign currencies, to face the repercussions of the flotation,” he said on Thursday.
“The decision to float the currency is a dangerous and will lead to further collapse of the Sudanese pound against foreign currencies. This is in addition to inflation that has made the pound lose value.”
Following the coup, the junta found it hard to export gold and precious minerals that are major revenue earners, exacerbating their smuggling.
In addition, some critical lenders who had returned after Sudan normalised ties with the US have since suspended their engagements. The World Bank and Western donors like the US have delayed their aid and lending programmes.
Al-Fadil Ibrahim, a Sudanese economist, believes that “the liberalisation approved by the first transitional government was through a specific time matrix in exchange for external support to absorb its effects and there is a social support programme,” he told The EastAfrican.
“Al-Fadil warned that prices of goods will record large leaps, until those programmes and goodwill resumes, and that this will hurt everyone. This is in addition to the uncertainty created by the Russian invasion of Ukraine, both of which had been key sources of Sudan’s wheat imports.