Sudanese central bank increases liquidity supply as signs of crisis grow

Sudan’s central bank has liberalised the country’s foreign exchange regime and started printing larger-denomination banknotes amid signs of a growing economic crisis.

The Central Bank of Sudan’s recently appointed governor Mohammed Al-Zubair announced on October 13 that it would increase supply of local currency to banks to allow them to buy foreign currency. Al-Zubair told local bankers there would be a large increase in the supply of Sudanese pounds, the official Sudanese news agency Suna said.

The news comes after the central bank announced on October 3 it would start issuing banknotes denominated in 100 Sudanese pounds for the first time.

Journalists based in Sudan have said that local banks are struggling to meet consumers’ demand for currency. A report in the Arab publication Asharq Al-Awsat on October 14 said that bank customers could withdraw only 2,000 Sudanese pounds daily. Many residents in the Sudanese capital Khartoum were spending hours every day queuing to withdraw cash from banks, the publication said.

Local banking sources quoted by Reuters have said that the official exchange rate used by the country’s banks reached 47.5 Sudanese pounds to the dollar following the central bank’s announcement.

The black market exchange rate in Khartoum was only slightly higher, with pounds being sold at 49 to the dollar, Reuters reported. The agency also reported that the central bank and local commercial banks had set up teams to adjust the exchange rate on a daily basis.

Sudan’s authorities devalued the currency on February 1. But observers of the Sudanese economy have consistently said that the official exchange rate remained significantly higher than the black market rate.

Sudan’s official year-on-year inflation rate reached 68.64% in September, but some unofficial estimates put the real figure considerably higher.

The “troubled currencies” project led by Steve Hanke of Johns Hopkins University uses black market exchange rate figures to calculate inflation rates in countries where official data may not be accurate. Hanke estimated Sudan’s year-on-year inflation rate at 122% in January, when official figures put it at 52.4%.

Al-Zubair was re-appointed governor of the CBOS by Sudanese president Omar al-Bashir on September 16. His reappointment followed the death of his predecessor Hazem Abdelqader from a heart attack in June while on an official visit to Turkey. Al-Zubair previously served as CBOS governor from March 2011 to December 2013.

Sudan’s Islamist government is struggling to cope with several major economic problems. These include US sanctions and a series of civil wars, as well as its own limited capacity.

Sudan also lost most of its oil reserves following the independence of South Sudan in 2011. The International Monetary Fund’s executive board warned in December 2017 that Sudan had “high and unsustainable” levels of private and public debt.