Sudan’s central bank might have to devalue the Sudanese pound against the dollar to overcome a large spread over the black market rate fuelled by a scarcity of foreign currency, said executives at the country’s biggest private bank.
The African country is fighting an economic crisis after South Sudan took most of the oil production when it became independent in July under a 2005 peace agreement.
Oil is the lifeline of both economies and a major source of foreign currency needed to pay for imports such as food and consumer goods. Annual inflation hit 19.8 percent in October, around double the level a year ago, Reuters reports.
The pound has dropped since July, with one dollar buying around 4.2 pounds on the black market on Tuesday after briefly fetching 4.5 or more in recent weeks. The official rate stands at about 3 pounds to the dollar.
As a result, some financing of trade, often done in cash, has been carried out via the black market, experts say.
“The pressure is there and it is increasing day by day. We are anticipating that the central bank will take a move to actually reduce the gap between the official and parallel rate,” said Fadi Salim Faqih, General Manager at Bank of Khartoum, Sudan’s biggest private lender.
“They need to further control the black market,” said Khaled Zada, in charge of treasury and foreign relations at the bank.
Central bank governor Mohamed Kheir al-Zubair said in a newspaper interview last month that he was unhappy with the gap between the official and black market rate.
Last November, the central bank tried to bridge the gap by offering an incentive for foreign currency exchange deals on top of the official rate, but the measure had little success.
Faqih said that despite negative headlines about an economic crisis, Sudan offered opportunities and investors were looking at the gold and agricultural sector which the government wants to expand.
“Sudan still has potential,” he said, but he added that there was a “wait-and-see mood” among clients and investors.
The government wants to launch an austerity programme and cut spending but it has not yet unveiled a budget for 2012.
The central bank has asked fellow Arab nations to deposit $4 billion at the central bank and commercial lenders to help the economy.