Sudan announces managed currency float to revive economy

FILE - In this July 24, 2011, file photo, Sudan's new currency sits behind a window at the central bank in Khartoum, Sudan. The country took the unprecedented but expected step of floating its currency Sunday, Feb. 21, 2021, meeting a major demand by international financial insinuations to help transitional authorities overhaul the battered economy. (AP Photo/Abd Raouf, File)
FILE - In this July 24, 2011, file photo, Sudan's new currency sits behind a window at the central bank in Khartoum, Sudan. The country took the unprecedented but expected step of floating its currency Sunday, Feb. 21, 2021, meeting a major demand by international financial insinuations to help transitional authorities overhaul the battered economy. (AP Photo/Abd Raouf, File) (Copyright 2021 The Associated Press. All rights reserved.)

CAIRO – Sudan announced a managed flotation of its currency on Sunday, in an unprecedented but expected step to meet a major demand by international financial institutions to help transitional authorities overhaul the battered economy.

The move is the boldest economic measure taken by the joint military-civilian government that has ruled the African country after a popular uprising. The revolt 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 sharp devaluation could provoke a popular backlash as the price of goods and services rise in response to the fall of the pound’s value and possible hike in the price of fuel and other essential goods. 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 U.S. dollar had been trading at over 350 pounds to the dollar on the black market, while its official rate was at 55 pounds to the dollar. Following the devaluation, local media reported banks were selling the dollar at an average of 375 pounds, and buying the U.S. 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 and the the Central Bank of Sudan said it will announce a daily flexible indicative rate in a “flexible managed float” that banks and other exchange bureaus are required to trade at within 5% above or below.

The managed floating system, that took effect Sunday, gives the central bank the option to set a rate based on the trading average, Al-Fatih Zayed al-Abidin, the central bank governor said in a news conference in Khartoum along with Finance Minister Gibril Ibrahim.

The move was part of measures the transitional government has embarked on in recent months to transform the country's economy and rejoin the international community after over two decades of isolation.

The Central Bank said its decision would help “normalization of ties with international and regional financial institutions and friendly countries to ensure the flow of grants and loans” into Sudan's economy.