Sudan has taken the unprecedented but expected step of floating its currency, meeting a major demand by international financial institutions to help overhaul the battered economy.
The flotation, which sharply devalues the currency, is the boldest economic measure taken by the joint military-civilian government that has ruled the African country after a popular uprising.
The uprising led to the military’s overthrow of autocrat Omar al-Bashir in April 2019. The country has since been on a fragile path to democracy with daunting economic challenges representing a major threat to that transition.
The flotation could provoke a popular backlash as the price of goods and services rise in response to the sharp fall of the Sudanese pound’s value.
There were already sporadic protests over dire living conditions in the past couple of weeks in the capital Khartoum and other parts of the country.
The currency had been trading at over 350 Sudanese pounds to the US dollar on the black market, while its official rate was at 55 pounds to the dollar.
Following the flotation, local media reported banks were selling the US dollar at an average of 375 Sudanese pounds, and buying the US currency for an average of 390, in an attempt to attract those trading in the unofficial currency market.
Sudan’s currency will now fluctuate according to supply and demand rather than being fixed, according to a statement by the Central Bank of Sudan. It said the flotation is part of measures the transitional government has embarked on to help stabilise the country’s economy.
The Central Bank said it will announce a daily flexible indicative rate that banks and other exchange bureaus are required to trade at within 5 per cent above or below.
The flotation would help “normalisation of ties with international and regional financial institutions and friendly countries to ensure the flow of grants and loans” into Sudan’s economy, the Central Bank said.
“Our economy is in a situation that cannot be addressed without making such a decision,” Finance Minister Gibril Ibrahim said.
“It is in our interest, in the interest of the country, and in the interest of the citizen.”
The move was a key demand by the International Monetary Fund.
Sudan has for years struggled with an array of economic woes, including a huge budget deficit and widespread shortages of essential goods and soaring prices of bread and other staples.
The country’s annual inflation soared past 300 per cent last month, one of the world’s highest rates.
The country was plunged into an economic crisis when the oil-rich south seceded in 2011 after decades of war, taking with it more than half of public revenues and 95 per cent of exports.
Since the overthrow of al-Bashir, the transitional government has been working to transform Sudan’s economic system and rejoin the international community after over two decades of isolation.