Bank of Sudan chief sees 2007 growth up to 13 pct
Jan 10, 2007 (KHARTOUM) — Sudan hopes to achieve growth rates of up to 13 percent in 2007 as a new national currency integrates the northern and southern areas of the economy after a 2005 accord ended Africa’s longest civil war in the south.
In an interview on Wednesday, central bank governor Sabir Mohamed Hassan also said the currency’s appreciation against the dollar was worrying and the central bank was considering taking measures to address the rise.
“We are changing the currency and taking this opportunity to introduce currency reform into the system,” he said.
As from Wednesday the Sudanese pound will begin to replace the dinar, at a rate of 1 pound to 100 dinar.
“We will be integrating the economy of the south into the national economy…speeding up economic activity in the south and process of economic growth,” he added.
During the north-south civil war most of the south did not use the dinar, introduced in 1992, but used an older Sudanese currency or foreign currencies.
Sudan’s average growth rate over the past 10 years was 7 percent in real terms.
The central bank had predicted real growth of 10 percent in 2007, but Hassan said with the new currency growth in 2007 could reach the 13 percent forecast by the International Monetary Fund (IMF).
Hassan said growth was due to the liberalisation since 1996 of the former command economy and to the 330,000 barrels per day of crude oil which Sudan produces.
“Political stability and the right policies and oil coming on stream … have resulted in the introduction of huge FDI (foreign direct investment)”, he said.
Hassan said some economists warned the new currency may result in some price increases as traders round up prices.
“But I hope it will be only a one-round increase and not inflation in that sense.”
Sudan uses an Islamic banking system in the north so has no interest rates as such, but Hassan said the cost of finance would increase if inflation rose.
Inflation averaged at 8 percent in 2005 and 2006, but Hassan said in the last three months of 2006 there were some signs it was running as high as 10 percent.
This was countered by lower inflation at the beginning of the year.
“With the present coordination we have with the central bank and the ministry of finance we will maintain inflation in single digits and that is our objective and prediction (for 2007),” he said.
Hassan said about two years ago, on the recommendation of the IMF, the central bank stopped supporting the dollar in the market against the dinar by being the buyer of last resort.
Since then the dinar has appreciated from 260 to the dollar in 2004 to almost 200 to the dollar in 2006.
“The board of directors of the central bank are looking into the possibility of going back to the old policy of buyer of last resort,” he said.
Sudanese exporters have suffered with the appreciation of the dinar against the dollar but Hassan said they needed to become more efficient to compete in international markets.
But foreign investors were also concerned, Hassan said.
The governor said a huge drawback to Sudan’s growth was the external debt of around $27 billion.
Sudan has met all the IMF and World Bank requirements to qualify for debt relief as many developing countries have, but for political reasons no relief has come.
Almost 50 percent of Sudan’s external debt is accumulated interest or penalties and 90-95 percent of it is overdue.
Ongoing violence in Sudan’s western Darfur region and U.S. sanctions are seen as reasons why it has not been given debt relief.
“The debt size is actually depriving us from getting access to international financial markets… we are completely deprived of any concessional resources …either bilateral or from multilateral development institutions,” Hassan said.
($1 – 201 Sudanese dinar)
(Reuters)