Country Report Sudan March 2011

Economic performance: Bank of Sudan eases foreign exchange restrictions

On February 27th the Bank of Sudan, announced that it was doubling the amount of hard currency Sudanese travelling overseas can buy and that it would allow withdrawals of hard currency from special accounts. This announcement apparently signals the central bank's belief that pressure on the Sudanese pound has eased slightly. This is plausible, following the successive steps taken by the authorities last year, which included allowing commercial foreign-exchange transactions to be made at a premium of 18.3% to the central bank's official rate, and the imposition of restrictions on some imports and increased duties on others. Nonetheless, even with the Southern Sudan referendum now past, Sudan still faces a difficult economic environment, with government revenue set to shrink after the secession of Southern Sudan, and little prospect of an upturn in investment.

The central bank may therefore soon make a further controlled depreciation of the Sudanese pound. Indeed, according to a Sudanese newspaper, Al Ray Al Aam, the authorities aim to unify the official and black-market exchange rates at a value of SP3:US$1. As of early March, the commercial exchange rate was around SP2.77:US$1. The national budget forecast an exchange rate of SP2.7:US$1. Meanwhile, inflation remains more or less under control. According to data released in February by the central bank, headline inflation rose from an average of around 10% in the period August to October 2010 to 15.4% in December and 16.7% in January, which is above the government's target of 10%. What the central bank measures as ''imported inflation'' rose over the same period from around 6% to 12%.

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