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Sudan devalues currency to seek debt relief

February 21, 2021

The change is a key reform demanded by foreign donors and the International Monetary Fund (IMF). The country is hoping to overhaul its debt-laden, inflation-hit economy.

https://p.dw.com/p/3pf1a
A man counts money
Sudan's currency will now fluctuate instead of being fixed to the dollarImage: Hussein Malla/AP/picture alliance

Sudan devalued its currency Sunday, meeting a major demand by international financial institutions to overhaul its battered economy.

The change is a key reform demanded by foreign donors and the International Monetary Fund (IMF).

It was delayed for months as shortages of basic goods and rapid inflation complicated a fragile political transition.

The move is the boldest economic measure taken by the joint military-civilian government that has ruled the African country after a popular uprising.

Sudan has since been on a fragile path to democracy with daunting economic challenges representing a major threat to that transition.

The move could provoke a popular backlash as the price of goods and services rise in response to the fall of the pound’s value and a possible hike in the price of fuel and other essential goods.

There have already been sporadic protests over dire living conditions in the past couple of weeks in the capital, Khartoum and other parts of the country.

Sudanese pound to be set by market rates

The US dollar had been trading at over 350 Sudanese pounds to the dollar on the black market, while its official rate was at 55 pounds to the dollar.

Sudan’s currency will now fluctuate according to supply and demand, according to a statement by the Central Bank.

The bank said the move would help the "normalization of ties with international and regional financial institutions and friendly countries to ensure the flow of grants and loans."

“The decision is not a float, but a policy of flexible management,” said the central bank's governor, Mohamed al-Fatih Zainelabidine.

Sudan hopes to win relief on its foreign debt, which currently stands at $70 billion.

Last year the government lifted most fuel subsidies, meeting another key demand from lenders

Sunday’s move came after Prime Minister Abdalla Hamdok, a former respected UN economist, announced a Cabinet reshuffle to add rebel ministers. 

Sudan's Hamdok speaks with DW

The reshuffle was part of a deal the transitional government struck last year with a rebel alliance.

Sudan's economy under pressure

Sudan has for years struggled with an array of economic woes, including a huge budget deficit.

It has also faced widespread shortages of essential goods, as well as soaring prices of bread and other staples.

The country’s annual inflation soared past 300% last month, one of the world’s highest rates.

The country was plunged into an economic crisis when the oil-rich south seceded in 2011after decades of war.

It took with it more than half of public revenues and 95% of exports.

Since the overthrow of Bashir, the transitional government has been working to transform Sudan’s economic system and rejoin the international community after over two decades of isolation.

US ties with Sudan

Sudan was also an international pariah after it was placed on the United States’ list of state sponsors of terror early in the 1990s.

This largely shut the country out from the global economy and prevented it from receiving loans from international institutions like the IMF.

Former US President Donald Trump removed Sudan from the blacklist after the transitional government agreed to pay $335 million in compensation for victims of terror attacks.

Khartoum will pay damages to those hit by attacks carried out by Osama bin Laden’s al-Qaida network while the terror leader was living in Sudan.

The removal also was an incentive for Sudan to normalize ties with Israel.

jf/mm (AP, Reuters)