Sudan sharply devalues currency as economic crisis bites

An employee checks banknotes at a foreign currency brokerage office in Khartoum on October 7, 2018. (AFP)
Updated 07 October 2018
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Sudan sharply devalues currency as economic crisis bites

  • The central bank pegged the Sudanese pound at 47.5 against the dollar
  • The official rate was 28 to the dollar, while the currency had fallen to 45.50 on the black market last week

KHARTOUM: Sudan slashed the official value of its currency against the US dollar by more than half on Sunday, the third devaluation this year in the face of a mounting economic crisis.
The move came just weeks after President Omar Al-Bashir replaced the government over its failure to curb economic woes including soaring food prices.
The central bank pegged the Sudanese pound at 47.5 against the dollar. Previously, the official rate was 28 to the dollar, while the currency had fallen to 45.50 on the black market last week.
The central bank had said a committee would look into the acute shortage of foreign currency that has been weighing on the pound.
“The committee decided that today’s rate is 47.5 Sudanese pound to a dollar,” Abbas Abdallah, a committee member and head of the bankers’ union, told AFP.
“The committee will now announce the market rate daily.”
At the end of last year, the official rate stood at 6.7 pounds to the dollar.
It was unclear whether the latest devaluation was part of efforts to float the pound as recommended by the International Monetary Fund (IMF) to curb the wide gap between the official and unofficial exchange rates that had severely impacted Sudan’s economy.
“For a proper functioning of the currency market, the central bank needs to have good reserves of dollars as well as Sudanese pounds,” said a senior executive of a leading business group in Sudan.
“As for dollar reserves, everybody knows the situation faced by the bank.”
Sudan has struggled to boost its foreign currency reserves since the south split from the north in 2011, taking with it the bulk of the country’s oil revenues.
Traders expressed surprise at Sunday’s sharp devaluation but said the disparity between the official and unofficial markets would continue.
“This devaluation won’t have much of an impact as international banking transactions remain cumbersome,” said a black market trader on condition of anonymity.
But the IMF has pushed for unifying the exchange rates.
“A unified and market-determined exchange rate is key to further reducing external imbalances and boosting competitiveness, investment, growth and fiscal revenues,” the IMF said in December 2017.
Despite the IMF’s recommendation, Sudan has been wary of allowing the currency to float freely on the foreign exchange market, fearing that it might trigger unrest.
Protests erupted in January after the authorities cut wheat subsidies, but they were quickly curbed by security forces.
Food prices have since more than doubled on the back of surging inflation that stands at nearly 70 percent.
A much-awaited economic revival also failed to materialize after Washington lifted its decades-old sanctions in October 2017.
Washington has kept Sudan on its list of “state sponsors of terrorism,” which officials say makes international banks wary of doing business with Sudan — a key reason for the foreign currency crisis.
Sudan’s annual economic growth averaged over six percent during the decade to 2008, but it has since declined, with the crisis only growing since the secession of the south.
The economy grew 3.2 percent in 2017, according to the IMF.


South Korea downgrades Japan trade status as dispute deepens

Updated 18 September 2019

South Korea downgrades Japan trade status as dispute deepens

  • The change comes a week after South Korea initiated a complaint to the World Trade Organization
  • The new measures in effect mean it might take up to 15 days for South Korean companies to gain approvals to export sensitive materials to Japan

SEOUL, South Korea: South Korea on Wednesday dropped Japan from a list of countries receiving fast-track approvals in trade, a reaction to Tokyo’s decision to downgrade Seoul’s trade status amid a tense diplomatic dispute.
South Korea’ trade ministry said Japan’s removal from a 29-member “white list” of nations enjoying minimum trade restrictions went into effect as Seoul rearranged its export control system covering hundreds of sensitive materials that can be used for both civilian and military purposes.
The change comes a week after South Korea initiated a complaint to the World Trade Organization over a separate Japanese move to tighten export controls on key chemicals South Korean companies use to manufacture semiconductors and displays.
Seoul has accused Tokyo of weaponizing trade to retaliate against South Korean court rulings ordering Japanese companies to offer reparations to South Koreans forced into labor during World War II. Tokyo’s measures struck a nerve in South Korea, where many still resent Japan’s brutal colonial rule from 1910 to 1945.
According to South Korean trade ministry, the new measures in effect mean it might take up to 15 days for South Korean companies to gain approvals to export sensitive materials to Japan, compared to the five days or less it took under a simpler inspection process provided for favored trade partners.
Lee Ho-hyeon, a South Korean trade ministry official, said the change would affect about 100 local firms that export items such as telecommunications security equipment, semiconductor materials and chemical products to Japan. He said Seoul will work to minimize disruption to South Korean companies.
Japan for decades has enjoyed a huge trade surplus with South Korea, an economy that’s much more dependent on exports. Many major manufacturers heavily rely on parts and materials imported from Japan.
But the dispute is taking a toll. Exports to South Korea from Japan fell 9.4% last month, Japan’s Finance Ministry reported Wednesday.
The trade dispute between the neighbors erupted in July, when Japan imposed tighter export controls on three chemicals South Korean companies use to produce semiconductors and displays for smartphones and TVs, major export items for South Korea. It cited unspecified security concerns over Seoul’s export controls.
A few weeks later, Japan dropped South Korea from its own trade “white list,” triggered a full-blown diplomatic dispute that took relations between the US allies to their worst in decades.
The dispute has spilled over to security issues, with Seoul declaring it plans to terminate a bilateral military intelligence-sharing pact with Japan that symbolized the countries’ three-way security cooperation with the United States in the face of North Korea’s nuclear threat and China’s growing influence.
Following an angry reaction from Washington, Seoul later said it could reconsider its decision to end the military agreement, which remains in effect until November, if Japan relists South Korea as a favored trade partner.
Seoul announced its plans to downgrade Tokyo’s trade status in August before holding a 20-day period to gather opinions on the decision, during which the Japanese government voiced opposition to the move it described as “arbitrary and retaliatory,” Lee said.
He said Seoul needs to strengthen controls on shipments to a country that’s “hard to cooperate with” and fails to uphold “basic international principles” while managing export controls on sensitive materials.
South Korea previously divided its trade partners into two groups in managing export controls on sensitive materials. Following Wednesday’s change, South Korea now has an in-between bracket where it placed only Japan, which would mostly receive the same treatment in trade as the non-favored nations in what had been the second group.