Sudan took the unprecedented but expected step of floating its currency Sunday, meeting a major demand by international financial institutions to help transitional authorities overhaul the battered economy.
The flotation 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 flotation 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 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.
Sudan´s currency will now fluctuate according to supply and demand, 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 stabilize the country´s economy.
The Central Bank said the flotation 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.
The U.S. Embassy in Khartoum welcomed the “courageous” move, saying it paves the way for debt relief and significantly increases the impact of international assistance.
“This decision will also help Sudanese companies and attract international investment as both local and foreign companies will no longer encounter difficulties doing business in Sudan because of the dual exchange rate,” it said.
The move was a key demand by the International Monetary Fund, which set last September as a deadline for the government to move to a “unified market-clearing exchange rate.” Sudan should conclude a 12-month Staff Monitoring Program with the IMF to win relief on its foreign debt, which is at $70 billion. The IMF was expected to brief its board on Sudan’s measures in March.
Sunday’s move came after Prime Minister Abdalla Hamdok, a former respected U.N. economist, announced a Cabinet reshuffle to add rebel ministers. The reshuffle was part of a deal the transitional government struck last year with a rebel alliance.