Sudan devalues its currency in bid to combat ailing economy

Sudanese Prime Minister Abdalla Hamdok | Photo: Reuters

Sudan announced a managed flotation of its currency on Sunday, in an unprecedented but expected step to meet a major demand by international financial institutions to help transitional authorities overhaul the battered economy.

The move is the boldest economic measure taken by the joint military-civilian government that has ruled the African country after a popular uprising. The revolt led to the military’s overthrow of autocrat Omar al-Bashir in April 2019. The country has since been on a fragile path to democracy with daunting economic challenges representing a major threat to that transition.

The sharp devaluation could provoke a popular backlash as the price of goods and services rise in response to the fall of the pound’s value and possible hike in the price of fuel and other essential goods. There were already sporadic protests over dire living conditions in the past couple of weeks in the capital, Khartoum and other parts of the country.

The U.S. dollar had been trading at over 350 pounds to the dollar on the black market, while its official rate was at 55 pounds to the dollar. Following the devaluation, local media reported banks were selling the dollar at an average of 375 pounds, and buying the U.S. currency for an average of 390, in an attempt to attract those trading in the unofficial currency market.

Sudan’s currency will now fluctuate according to supply and demand and the the Central Bank of Sudan said it will announce a daily flexible indicative rate in a “flexible managed float” that banks and other exchange bureaus are required to trade at within 5% above or below.

The managed floating system, that took effect Sunday, gives the central bank the option to set a rate based on the trading average, Al-Fatih Zayed al-Abidin, the central bank governor said in a news conference in Khartoum along with Finance Minister Gibril Ibrahim.

The move was part of measures the transitional government has embarked on in recent months to transform the country’s economy and rejoin the international community after over two decades of isolation.

The Central Bank said its decision would help “normalization of ties with international and regional financial institutions and friendly countries to ensure the flow of grants and loans” into Sudan’s economy.

“Our economy is in a situation that cannot be addressed without making such a decision,” Ibrahim said. “It is in our interest, in the interest of the country, and in the interest of the citizen.”

Western governments welcomed the decision to liberate the exchange rate. The U.S. Embassy in Khartoum welcomed the “courageous” move, saying it paves the way for debt relief and significantly increases the impact of international assistance.

“This decision will also help Sudanese companies and attract international investment as both local and foreign companies will no longer encounter difficulties doing business in Sudan because of the dual exchange rate,” it said.

Volker Perthes, the U.N. envoy for Sudan, also hailed the floatation, saying, “It demonstrates that the transitional authorities can reach consensus, take difficult decisions and carry them through.”

The move was a key demand by the International Monetary Fund. Sudan should conclude a 12-month Staff Monitoring Program with the IMF to win relief on its foreign debt, which is at $70 billion. That program is set to end in September.

Sunday’s move came after Prime Minister Abdalla Hamdok announced a Cabinet reshuffle to add rebel ministers. The reshuffle was part of a deal the transitional government struck last year with a rebel alliance.

Sudan has for years struggled with an array of economic woes, including a huge budget deficit and widespread shortages of essential goods and soaring prices of bread and other staples. The country’s annual inflation soared past 300% last month, one of the world’s highest rates.

Original ssource: AP

South Sudan secures $52m from IMF

International Monetary Fund |Photo: IMF
      By Anthony Kitimo

Nov 17, 2020 (Thessherald)–South Sudan has secured $52.3 million from the International Monetary Fund (IMF) to address its urgent balance of payments needs. This is the country’s first loan since joining IMF in 2012.

The loan has been granted after the Bank of South Sudan implemented IMF’s recommendations to record all oil exports and transactions under the Transitional Financial Agreement.

According to South Sudan’s IMF report on external sector statistics mission published in January, there was a need for essential economic policy-making by the authorities to meet the data needs of key stakeholders to assess the country’s external sector developments.

Announcing the loan approval under the Rapid Credit Facility, the IMF board, in a statement released on Thursday, said that the coronavirus pandemic and oil price shock created a severe economic disruption, leading to a sharp decline in South Sudan’s growth and reversing some early gains from political stability.

Before the pandemic, South Sudan had achieved significant progress due to improved political stability and an uptick in global oil prices. Economic growth rebounded, inflation declined, and the exchange rate stabilised.

Now, South Sudan’s economy is projected to contract 3.6 per cent in the financial year 2020/2021, about 10 percentage points below the pre-pandemic baseline.

IMF deputy managing director Mitsuhiro Furusawa said the organisation is committed to pursuing macroeconomic stability by implementing fiscal consolidation, limiting the use of monetary financing of the deficit and containing reliance on non-concessional debt.

Originally published by The East African

Gen. H. E. Dr. James Wani Igga and his new crisis management committee

Opinion | By Gatwech Ruei

August 26, 2020 (Thessherald)–As we know any economic crisis is as a result of the inflation rate. Or rising prices of goods and services, and it needs the government involvement to study the crisis then give recommendations to address the the causes of inflation.

But the big problem is, when you are beating around the bush, while you have a key solutionat hand will not help. If the government addresses the root causes of the conflict in Republic of South Sudan, the crisis management committee can succeed in their work. But the committee will fail for following reasons:

1- The Covid 19 is not the really cause of the inflation.

2- the communal fighting in the whole Country is not a cause of the inflation.

3- The current inflation is due to current political status quo and lack of vision by SPLM Leaders. 4- Delaying and rejecting the implementation of the peace agreement is a main cause of the inflation.

5- President Salva Kiir and his unwillingness to implement the peace agreement, will worsen the inflation even more and the crisis management committee will end up without any meaningful recommendations.

People of South Sudan should either accept the inflation as they accepted status quo and Coronavirus plus President Salva Kiir or the national conversation should consider the option to change Salva Kiir regime. People of South Sudan should know very well who is the common enemy to them.

I salute our people population in Maluth County in Upper Nile state for their peaceful demonstrations.

The crisis management committee is a deception by Government and will end up without good results like the Jongile committee and Tonj disarmament.

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