Sudan Scrambles to Control Currency Games
By: May Ali
Published Wednesday, February 29, 2012
Travel exchange and other US dollar speculation schemes are rife in Sudan after oil revenues were slashed following the secession of the south, prompting Khartoum to kick back with more restrictions.
Khartoum – Muhannad was thrilled by the phone call he received one morning a couple of months ago. His uncle Ibrahim offered to treat him and four friends to a holiday in Addis Ababa, the capital of neighboring Ethiopia, over the new year’s break.
At first, Muhannad thought it was a joke, though he knew his well-off uncle could afford such a trip. He owns an automobile spare parts store in Khartoum, and supplements his income by trading in hard currency. In other words, he is trading in US dollars. The black market for the greenback has thrived since the south seceded last year, stripping Sudan of most of its oil revenues and its main source of foreign exchange. This prompted the government to impose strict currency controls.
Muhannad called his friends, and told them to fetch their passports so he could pass them on to his relative. The paperwork was duly done, and the group spent an enjoyable three days in the beautiful “flower,” Addis Ababa, returning full of gratitude to the man who had funded their vacation.
But the thanks were really due the other way round. Ibrahim’s uncle had used his friends to increase his trading profits. He made twice as much out of their trip as it cost him.
Since the value of the dollar began rising sharply on the black market late last year, Sudanese have invented a new form of foreign currency trading whose key tool is human beings. They are dispatched abroad in groups of up to 20 people, though numbers vary depending on the resources available to the operation’s financier, who pays for their travel and accommodation, usually for three days.
Currency dealer Issam Ahmad, who organizes trips by groups of his relatives to Cairo, explained how the operation works:
Under the new controls, the Central Bank allows Sudanese traveling abroad to exchange a limited amount of Sudanese pounds into hard currency at the official rate of 2.8 pounds to the dollar. This must be done in the airport departure lounge before boarding an outbound flight. Up to a maximum value of US$1,000 is allowed to be exchanged per ticket-holder. Thus, the dollars acquired through official channels are sold back, after the travelers return, on the black market at a rate of some 5.4 Sudanese pounds per dollar. With the black market dollar rate constantly fluctuating, this is clearly a profitable enterprise.
However, this trick of the foreign currency exchange trade has encountered some difficulties lately.
As result of the fall in the value of the local currency, airlines have raised their ticket prices, especially to neighboring Egypt and Ethiopia, the traders’ two favorite destinations.
The government has also taken measures to inhibit the practice. The Central Bank decided to reduce to US$500 the amount of foreign currency which could be taken out by travelers heading for Arab and African countries – where the majority of Sudanese tourists go.
The finance ministry also announced the implementation of additional controls designed to prevent the acquisition of foreign currency at the official rate for the purpose of currency speculation. If patients need medical treatment abroad, the money required now has to be wired to the relevant Sudanese Embassy, which will pass it on to the hospital concerned. The same applies to students studying abroad – their fees now have to be transferred directly to their universities.
A government official told Al-Akhbar, that the authorities might be forced to abandon their efforts to shore up the currency altogether if the economy continues to deteriorate as a result of the South Sudan government’s decision to halt oil exports.
The controls that followed compounded the severity of the foreign currency shortage. Alaedin Muhammad recalls that the supply all but dried up, and small operators like himself could only obtain dollars from returning expatriates.
When they do have some to exchange, explains Said, who says he is sent dollars by relatives who live abroad, they go to central Khartoum where a number of foreign exchange traders operate in the open. Plainclothes police from “Economic Security” are also out in numbers. They often try to entrap the dealers but they are usually smart enough to tell them apart from genuine customers, Said says.
If a trader is found and arrested, all the money they have with them is confiscated and they are sent to court.
The foreign currency squeeze meanwhile continues to worsen. The black market price of the dollar dipped briefly last week on reports that Qatar had agreed to provide Sudan with a loan of US$2 billion, only to rise again when the government issued a denial.
The authorities have been seeking alternative sources of hard currency, now that southern oil no longer flows through northern pipelines.
Gold-mining is now seen as a potential salvation for the national treasury.
Central Bank chief Muhammad Saber Hassan recently said that gold was currently a key revenue provider. He told a ruling party gathering in Khartoum that five tons of gold worth US$250 had been acquired and sold since the beginning of 2012, and that income from gold sales could total US$2.5 billion by year’s end.
This article is an edited translation from the Arabic Edition.