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Sudan announces managed currency floats to revive the economy

Cairo (AP) — Sudan manages its currency on Sunday in an unprecedented but anticipated step to meet the key demand of international financial institutions to help transition authorities help review the hit economy. Announced the levitation.

This move is the most daring economic step taken by a joint military and civilian government that ruled African nations after the mass uprising. The rebellion caused the military to overthrow the dictatorship Omar al-Bashir in April 2019. Since then, the country has been on a fragile path to democracy, with difficult economic challenges that represent a major threat to its transition.

A sharp devaluation can cause a backlash in popularity, as prices of goods and services rise in response to a possible fall in the value of the pound and a rise in prices of fuels and other necessities. In the capital, Khartoum and other parts of the country, there have already been sporadic protests over dire living conditions in the past few weeks.

The US dollar was trading on the black market for over £ 350 per dollar, but the official rate was £ 55 per dollar. After the devaluation, local media reported that banks were selling dollars for an average of £ 375 and buying US currency for an average of 390 to attract people trading in the informal currency market.

Sudan’s currency will fluctuate in response to supply and demand, and Sudan’s central bank has a flexible daily index rate with a “flexible managed float” that banks and other exchange rates need to trade within 5%. Announced that it will be announced. ..

The central bank’s governor, along with Finance Minister Jibril, said at a press conference in Hartum that the managed float system, which came into effect on Sunday, offers the central bank the option to set interest rates based on transaction averages. Ibrahim.

This move was part of the steps taken by the interim government in recent months to transform the country’s economy and rejoin the international community after more than 20 years of isolation.

The central bank said the decision would help “normalize relations between international and regional financial institutions and friendly countries to secure the flow of subsidies and loans” to the Sudanese economy.

“Our economy is in a situation where we can’t deal with it without making such a decision,” Ibrahim said. “It is in our interests, in the interests of the country, and in the interests of our citizens.”

Western governments welcomed the decision to release the exchange rate. The US Embassy in Khartoum welcomed the “courageous” move, paving the way for debt relief and significantly increasing the impact of international aid.

“This decision will also help Sudanese companies and attract international investment, because both domestic and foreign companies will no longer face difficulties in doing business in Sudan due to double exchange rates. Because there is no such thing. “

Volker Perthes, the UN mission in Sudan, also welcomed the levitation, saying, “It shows that the interim authorities have reached an agreement, made difficult decisions and can implement them.”

This move was a major request by the International Monetary Fund. Sudan needs to conclude a 12-month staff monitoring program with the IMF to win $ 70 billion in external debt relief. The program is scheduled to end in September.

The move on Sunday came after Prime Minister Abdullah Hamdok announced a cabinet reshuffle to add rebel ministers. The remodeling was part of a deal that the interim government made with the Rebel Alliance last year.

Over the years, Sudan has suffered from a variety of economic hardships, including huge budget deficits, widespread shortages of necessities, and soaring bread and other staple foods. The country’s annual inflation rate surged to over 300% last month. This is one of the highest rates in the world.

When the oil-rich South left after decades of war in 2011, the country fell into an economic crisis, accounting for more than half of its public income and 95% of its exports.

Sudan was also an international paria after being listed as a state sponsor of terrorism in the United States in the early 1990s. This largely excluded the country from the world economy and prevented it from receiving loans from international organizations such as the IMF.

Former President Donald Trump said after the interim government agreed to pay $ 335 million in compensation for the victims of an attack carried out by Osama Bin Laden’s Alcaida network while terrorist leaders lived in Sudan. Removed Sudan from the blacklist. The removal also motivated Sudan to normalize its relations with Israel.

Sudan announces managed currency floats to revive the economy

Source link Sudan announces managed currency floats to revive the economy

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