Sudan currency falls to historic low

2012-12-02 15:39

Khartoum - Sudan's currency dropped to a historic low against the dollar on the key black market and might take another hit as hopes for a quick resumption of South Sudanese oil exports fade, dealers said on Sunday.

The Sudanese pound has more than halved in value since South Sudan became independent in July 2011, taking with it three-quarters of the united country's oil output.

As well as being a major source of revenue for Sudan, oil also provided dollars needed for imports. A scarcity of hard currency drove up annual inflation to 45% in October.

The crisis was worsened by the shutdown of landlocked South Sudan's oil output in January during a row over how much the new nation should pay Khartoum to pipe crude to port using Sudanese infrastructure.

The former civil war foes agreed in September to resume oil exports but have been unable to agree on setting up a border security zone first - a preconditon for resuming oil flows.

The two are holding talks in Khartoum this week to end the stalemate but foreign currency traders said they had little hope the dollar scarcity in Sudan would improve anytime soon.

"There are no dollars in Khartoum and it's getting worse day by day," said a dealer on the black market, which has become the benchmark.

"You need dollar supplies now but it's absolutely unclear when oil exports will resume. It will come late, if at all."

On Sunday, a dollar bought 6.5 pounds on the black market compared with 6.3 a week ago. This is the lowest rate since the Sudanese pound was introduced in 2007 and also well below the official rate of around 4.4.

"I think by the end of the year the rate will be 7," said another dealer, echoing forecasts by other traders. "There is a widening gap between demand and supply of dollars," he said, declining to be identified.

Over the past few weeks, the central bank has tried to calm the situation by repeatedly saying it will supply the market with foreign currency.

But an executive at an import firm said: "It's almost impossible to make business in Sudan at the moment as the rate changes. I cannot make any calculations."

South Sudan was meant to resume oil production on November 15 with the first exports to hit markets by January.

But this schedule is no longer realistic after Juba postponed resumption of oil production last month, accusing Sudan of placing new obstacles in the way of the restart.

In July, Sudan's central bank devalued the pound, almost halving its value to try end a gap with the black market rate, but the spread has widened since.