Sudan looking to drop currency peg to the US dollar: official
May 4, 2010 (KHARTOUM) — The governor of Sudan’s central bank Saber Mohamed Al-Hassan today disclosed that his country is seeking to drop the pound’s peg to the US dollar and replace it with a basket of international currencies particularly from countries that have large trade volumes with Sudan.
When asked about the timing of the change he said: “Towards the end of the year, the last quarter more probably.”
Sudan runs a so-called managed float system where the central bank calculates an indicative rate based on previous day transactions and intervenes on the market if quotes break away from a plus/minus 3 percent corridor around that rate
“Our economy is in a stage of development, we have a lot of rigidities so we do not really target a very low level of inflation,” Al-Hassan said in Bahrain, where he was attending a finance conference. “Unfortunately, it is a bit higher than what we want to see now.”
He further said that the bank wanted to bring annual inflation to 7-9 percent, from around 12 percent in April.
“We work on all fronts, we are tightening monetary policy,” he said. “Besides monetary policy we are also trying to make sure that the fiscal policy is also supportive. Government access to bank financing should be minimal if not zero.”
Prices rose due to a mix of imported inflation, fuelled by a weaker currency, and expansionary monetary policy to counter the effects of the global downturn and credit crisis, he said.
Last year the International Monetary Fund (IMF) released a report saying that Sudan had a sharp drop in foreign exchange reserves across the years from $2 billion in mid-2008 to $300 million in March 2009, which covers only 2 weeks of imports for the East African nation.
The IMF said this was caused by the fall in oil prices, which is Sudan’s main export, and the “heavy” intervention by the central bank to sustain the exchange rate.
The fast depletion in foreign reserves has prompted Sudan’s central bank last month to impose a cap on the amount of hard currency available to individuals travelling abroad.
Sudan refuses to disclose its foreign currency exchange reserves. The country’s financial system is largely based on Islamic law, which makes the central bank use a range of tools such as proxies for interest rates, Islamic bonds, open market operations and deposits in commercial banks to conduct its monetary policy.
Hassan also said both north and south would have to keep the pound for some time if the referendum, planned for early next year, results in secession of the oil-producing southern part.
“The necessary logistics require a minimum period of six months to one year because it is not easy to issue a new currency,” Hassan said.
Sudan’s referendum is following a 2005 peace deal that ended two decades of north-south civil war, which badly damaged its economy. The deal brought in foreign investors and powered the economy to growth rates averaging 9 percent a year.
Analysts have warned conflict could flare up again if preparations for the plebiscite falter.
The governor also said the country should aim to resolve its $34 billion foreign debt ahead of the vote to smooth the possible separation.
The IMF report last year said that Sudan’s debt to have increased by a stunning $15 billion in 2000 to about $34 billion due to a “further buildup of arrears to Paris Club and non-Paris Club creditors….and new drawings from Arab multilateral and bilateral creditors, as well as from China and India”.
Sudan informed the IMF that it in light of Sudan’s difficult foreign exchange position their debt repayments to the fund will be at $10 million for 2009 compared to a total of $50 million in 2007 & 2008.
The tense relations between Sudan and the West have prevented the former from receiving debt forgiveness and cancellation offers.
(ST)
Dinka Boy
Sudan looking to drop currency peg to the US dollar: official
Mr Hassan,
The economy of Sudan in general has been evolving for years while the majority of Sudanese were excluded in the budget.
This time, the government of Sudan and you as the governor of Central Bank need to understand that the economy of country will not survive if the country put their interest on few currencies.
We know that China is the most and widely choice of your likes because of the exchange that NCP/North want in term of weapons,but not in the term of economics development.
The china currency(Yen) or British Euro and pound are not that stronger than dollars inorder for you to shift from dallar to yen.
Yes, we South Sudanese know that the government spend is huge especially in term of weapons that are only base in the North because of them to destroy the South and the others marginalized peoeple in the Sudan.
Sudan is not interesting for development. The north disclosed this not in a full scale but to make the economics of the country private to them( North) and that is why the NCP want to controlled the interest rate so that they single out other bussiness partners like USA which might be the best partners than China.
Furthermore, the financial system of Sudan is not largely based on islamic law.
Please, you are mileading the nation. What do you mean when you said that the financial sytem is base o islamic law? that is completely baseless.
Oil must be sold out to those countries that we will get affordable margin ,bu not on the weapon relationships status that the North have been engaging for decades against the others in the Sudan.
I recommended that the Sudan need to sell their oil or any other wares to those countries with the intention of making profit. I know that China is hust interesting to exchange favor base on weapons;therefore, i don,t support them to be the trade partners. Yes, USA, British ,and many others who want only to trade not on weapons.
I also want you Northers to know that you are making bussiness in the absence of other Sudanese;therefore, latter there is no way that you will attempt to think of debt sharing because of your are the only negotiators/sellers.
Thanks
American Missile.
Sudan looking to drop currency peg to the US dollar: official
Dear reader
The disclosed of AL-Hassan about dropping currency to US Dollar is another vilotation of CPA,Since the border has not yet been agreed,nothing like talking about a new money than the Border.
Referendum should be held first,therefore whoever want to change his or her currency note into foreign dollar,it is up to you that country.
I disagree with that suggestion or disclosure.
Big no to that.