Sudan central bank to switch trading from dollar to Euro next week
December 25, 2007 (KHARTOUM) — Sudan Central Bank is set to switch its foreign currency reserves from dollar to Euro next week to hedge the impact of US economic sanctions.
The central bank released a set of instructions on Monday outlining practical steps that will be taken to enforce the new policy of trading in Euro as well as recommendations to the business community.
The central bank notice advised the banks to inform their clients of the risks involved in keeping an account in US dollars.
However should the clients wish to keep their dollar accounts they are obliged to provide a written risk disclaimer acknowledging their understanding of the potential financial risks involved.
Last October Sudan’s central bank made a decision to convert all dollar reserves into Euro and other currencies by year end.
Hussein Yahya Jangoul, head of financial markets at Sudan’s central bank said at the time that the decision was taken to circumvent both current and future sanctions imposed by the US.
This is not the first time Sudan Central bank took such a decision. A similar decree was issued in 1997 following US sanctions imposed by former US president Bill Clinton. However the implementation of the decision has failed.
Sudan’s monetary authority said that banks should recommend that its clients who import or export goods to use the local currency of the country they are dealing in or a currency other than the US dollar.
The Central bank also authorized the local banks to meet any pending US dollar obligations in other currencies.
However the notice stressed that the process of switching from US dollars to other currencies is “optional” for local banks and that recommendations set forth are advisory in nature.
The decision by the government caused concern among some Sudanese businessmen who argued that the switch might increase risks rather than mitigate it.
Al-Ja’ali Tag Al-Sir, a Sudanese business man told Al-Sudani daily the Euro “is not a stable currency”.
“The proposal is not optional and we will be forced to change currencies” he added.
Another businessman Sadeeg Hadoob called for more discussion on the negative impact of the currency change.
“The Central bank issues decisions without consulting with business community. They have made similar moves before that hurt the private sector” Hadoob said.
The Washington Post quoting CIA officials earlier this year said that Khartoum established a committee to look into ways of making the economy less dependent on the US dollars. The committee concluded that the proposal is not feasible.
Last May the US slapped sanctions on 31 companies, including oil exporters, blocking them from US trade and financial dealings.
Sudanese officials dismissed sanctions saying that it will have little impact on their economy.
However several reports have indicated that the Sudanese economy is beginning to feel the effects of the US financial sanctions.
Abdel-Moniem Hassan Sayed, president of Al-Shamal Islamic bank in Sudan speaking to Al-Qabas daily from Kuwait last month said that the banking sector in the African nation is experiencing hardships as a result of US sanctions.
“Sudanese banks are suffering from endless US regulations on dollar transactions. We as a are going through extreme difficulties. Every day the umbrella of US sanctions and pertaining regulations keeps expanding” Sayed said.
British diplomats speaking to the Daily Telegraph said that they believe US sanctions have added pressure on Khartoum forcing it, among other things, to change position on the deployment of peacekeepers to Darfur.
The US Congress last week endorsed a divestment bill aimed at providing protection from lawsuit to State and local divestment efforts in Sudan. The bill is awaiting the signature of President Bush who received it last Friday.
The bill is likely to impact companies with dealings in Sudan particularly oil companies from China, Malaysia and India.
More than 200 000 people have been killed and some 2.5 million displaced in the four-year conflict in Darfur, an area the size of France.
(ST)