Sudanese banks unable to provide hard currency for clients: report

November 3, 2010 (KHARTOUM) – Local and foreign banks in Sudan are facing the daily challenge of providing their clients with hard currency despite a recent move by the central bank to inject forex to halt deterioration of the Sudanese pound.

On Wednesday the central bank said 2.36 Sudanese pounds would buy one dollar but on the black market it cost 3.1 pounds.

Officials at three banks, who declined to be named, told Reuters that they were unable to give clients foreign currency.

A Bank of Khartoum official said they were giving out hard currency in “exceptional” cases but mostly could only provide Sudanese pounds.

“We are having to provide local currency for those transferring (money) from outside the country because there is not enough foreign currency here,” the official told Reuters.

The Lebanese Byblos Bank in Khartoum denied any foreign currency problems, but four of its customers told Reuters they were denied both Euros and U.S. dollars over the past four days.

Sudanese authorities blamed the crisis on unfounded rumors that the economy would collapse following the likely breakup of Sudan into North and South.

Southerners across the country and abroad will choose next January whether to split Africa’s largest country or remain in a united Sudan. Most observers expect an overwhelming majority of Southerners voting in favor of secession.

The separation of Sudan into a two states will deny the North billions of dollars in revenue generating from vast oilfields in the south of the country. Currently the North and the South are splitting the proceeds of crude in accordance with the peace accord.

Many Sudanese say they have moved money into foreign currency and stashed it at home ahead of the independence vote.

Central bank Governor Sabir Mohamed Al-Hassan confirmed there was a foreign currency shortage but said banks should manage their own hard cash rather than relying on what the central bank gave them.

“The problem of the lack of foreign currency is real … it began with the global economic crisis in 2009,” Hassan told Reuters.

The Sudanese finance and national economy minister introduced a set of measures last September that bans certain imports while increasing tax and duties on others to reduce the outflow of hard currency.

An official at the National Bank of Abu Dhabi’s Khartoum branch told Reuters they depended on hard currency provisions from the central bank and sometimes suffered shortages.

In a report released last August, the International Monetary Fund (IMF) stressed the urgency of rebuilding Sudan’s sharply declining reserves of foreign currency and undertake further measures to keep borrowing under control.

The IMF report showed a sharp decline n reserves held by the Sudan central bank from $1.58 billion in 2006 to $390 million in 2009 which is estimated to cover a little over two weeks of imports.

The central bank this year ordered banks to require 100 percent coverage for any letters of credit to import goods and last month raised taxes on non-essential imports.

But small to mid-level businessmen, who have profited from import-driven growth over the past few years, say this could bankrupt them.

“Now with the price you pay for hard currency and the extra taxes they have placed on imports, there is no profit left so we cannot work,” said one importer of pharmaceuticals.

Businessmen said they are unable to obtain foreign currency other than in the black market where the price for the U.S. dollar and euro has soared.

(ST)