KHARTOUM, 22 February 2021 – Sudan’s central bank on Sunday sharply devalued the country’s currency in an effort to arrest a galloping economic crisis and in hope of debt relief.
Under the devaluation, the government of Sudan abandons its longstanding fixed exchange rate in favor of a managed float as part of a reform program with the International Monetaary Fund (IMF).
The devalued exchange rate could force prices up, increasing risks that a devalued currency could inflame existing discontent over living costs that have led to street protests in recent days..
Sudan’s inflation rate topped 300 percent last month.
The new devaluted rate regime will “unify” official and black-market exchange rates with the central bank setting the indicative rate at 375 pounds to the dollar, from a previous official rate of 55 pounds.
The dollar was trading at between 350 and 400 Sudanese pounds on the black market last week.
The central bank will set a daily indicative rate in a “flexible managed float”, a circular sent to banks said.
Banks and exchange bureaus are required, under the new regime, to trade within 5 percent above or below that rate.
The circular also set a profit margin between buy and sell prices of no more than 0.5 percent.
Authorities would not control the rate, the central bank governor told reporters, though Finance Minister Jibril Ibrahim said unspecified foreign funds were on their way to Sudan and the central bank could intervene if needed.
Foreign donors, including notably the International Monetary Fund, has demanded devaluation as part of a package that could win debt relief for Khartoum.
Sunday’s move had been expected late last year under an IMF staff monitoring program that could lead to relief on Sudan’s estimated $60 billion in foreign debt.
The move was delayed several months as the country faced shortages of basic goods amidst skyrocketing inflation and a fragile political transition.
It comes less than two weeks after Prime Minister Abdalla Hamdok appointed a new government to add rebel group leaders who signed a peace deal in October, including Ibrahim.
Hamdok is serving under a joint military-civilian council that took power after the overthrow of veteran autocrat Omar al-Bashir in April 2019.