By Toby Collins
July 12, 2011 (LONDON) – Both North and South Sudan have announced they will be introducing new currencies, now that they are separate states.
The president of South Sudan’s central bank, Elijah Malok, said that distribution of the South Sudan Pound will begin on July 19th at the latest. The president of Sudan, Omer Hassan al-Bashir announced that a new currency is forthcoming.
In his address, the Sudanese president said that the goal of this move is to disentangle the economy from South Sudan, confirming leaked reports to this effect.
North and South Sudan have used the Sudan Pound, one of which is worth $0.37. The reintroduction of the Sudan Pound used under British colonial rule, at an estimated cost of US$150 million, began in 2007, after 15 years of the Sudanese Dinar.
The Dinar was seen by some as representative of Arab hegemony in Sudan and dropped as a stipulation of the Comprehensive Peace Agreement (CPA), signed by North and South Sudan in 2005, ending more than two decades of civil war between the neighbours. The return to the Sudan Pound was resented by some in North Sudan.
In 1993 Sudan became the world’s biggest debtor to the World Bank and International Monetary Fund. It is US$40 billion in debt and subject to trade sanctions. Talk of removing North Sudan from the State Sponsors of Terrorism List, which entails US sanctions, with the successful secession of South Sudan, has become hushed as the atrocities in South Kordofan remain unabated.
The Sudanese Pound is not accepted in many places outside its borders.
In South Sudan much business is carried out in US$ and Kenyan Shillings, but a viable currency would be a great boost to the country’s attractiveness to investors and would boost the economy.
The South Sudan pound will be printed by the UK company, De La Rue, the world’s largest provider of currencies, which also prints the British Sterling. The UK government prevented the company from sending US$1.4 billion worth of currency to Libya in March this year.
The watermark on the notes depict John Garang, the founder of the resistance movement which has led to the independence of South Sudan.
The head of the South Sudan Central Bank said today that negotiations were to take place with North Sudan to redeem the value of the Sudanese Pounds, currently in circulation. The South Sudan Pound is expected to be of equal value to the Sudanese Pound.
If South Sudan floods the North Sudanese market with Sudanese Pounds, it could have a crippling effect on its economy.
North Sudan told the South of its plans to discontinue the Sudanese Pound after secession, in February of this year.
The Sudanese Pound has been dropping in value on the black markets of Khartoum.
The economies of North and South Sudan are inexorably linked by oil – the most important source of revenue for both states. The peace agreement they signed, ending for than two decades of civil war, in 2005, stipulated that oil revenues be split 50/50.
North Sudan’s economy is shrouded in uncertainty as it stands to lose billions of dollars generated by oil revenues. More than 70 percent of the 500,000 barrels of oil produced by what was the country of Sudan, are produced in South Sudan.
With the conclusion of the peace agreement by the secession of South Sudan, division of the revenue remains unresolved.
This year saw North Sudan’s parliament approving an austerity package which included cuts on subsidies for sugar and petro-products. As a result, prices of vital commodities soared and the public started to feel worsening economic conditions.
North Sudan also effectively devalued its currency to prevent it from sliding further against the dollar as inflation increased steadily in the run-up to South Sudan independence.
Bashir said that the austerity measures his government adopted were only “a precursor” to a three-year “emergency plan his government devised to counterbalance the budget deficit resulting from the loss of oil.”
He told legislators that his government would propose to them a bill on modifying the current budget in order to accommodate the changing circumstances.
However, he said that the new bill would not include any new taxes.
South Sudan has suggested that it may build an alternative pipeline to the coast of Kenya. This project will be very costly and time consuming, but having North Sudan within arms reach of the tap to South Sudan’s main source of income offers it what many Southern Sudanese view as dangerous leverage.