Sudan central bank aims for dollar-free system

September 25, 2007 (KHARTOUM) — Sudan’s central bank will stop trading in U.S. dollars and move its reserves into euros and other currencies to minimise the risk of U.S. sanctions against the growing economy, a bank official said.

Hussein Yahya Jangoul, head of financial markets at Sudan’s central bank, told Reuters by the end of the year the Bnk of Sudan hoped to be free of U.S. dollars.

“The central bank has to respond for the sake of minimising the risk of this embargo so transactions with the outside world should be shifted from U.S. dollars to other currencies,” he said.

“Hopefully that will be by the end of this year,” Jangoul added.

Sudan’s central bank began diversifying its reserves into euros and pounds sterling in 2003, he said, but a majority of the reserves were still in U.S. dollars.

He could not say exactly how much the reserves were, but another official said reserves covered three months of imports.

Jangoul said the Bank of Sudan had issued recommendations to commercial banks, government departments and private businesses to move their transactions abroad and balances to currencies other than U.S. dollars.

He said the dominant currency was likely to emerge as the euro.

Washington imposed sanctions on Sudan in 1997 accusing Khartoum of aiding “terrorism.” Earlier this year it strengthened those sanctions because of ongoing conflict in Sudan’s western region of Darfur.

Sudan is a cash economy because of sanctions, and the embargo means credit cards are not used either. Cash transfers to Sudan are difficult and are often stopped.

“There’s a risk in continuing to use dollars in transactions,” he said.

“The U.S. embargo can stop the transaction at any time since it’s in U.S. dollars and the banks or private sector is going to lose that money,” he added.

He said all banks would be likely to switch away from all dollar transactions.

“The central bank is not going to provide U.S. dollars to commercial banks because the central bank itself has no U.S. dollars.”

Jangoul said that Sudan was going to try to adopt the currency of the country it is trading with, especially in the Gulf and Saudi Arabia, Sudan’s big trading partners.

In Asia, transactions woud be done in euros or pounds sterling while in Europe euros will be used.

(Reuters)