Since southerners voted in January to split from the north in a referendum the pound has weakened steadily against the dollar on the black market in the south on worries it will be without value after independence on July 9.
Analysts warn if a new currency is issued without coordination with the north on the timing and exchange rate, the pound will continue to weaken in the south with inflationary pressures rising.
Elijah Malok, governor of the Bank of Southern Sudan, said the pound would be redeemed in the south once it was replaced by the new currency, which will be called the South Sudan Pound.
“We will change their pounds, they will take them over and we will give them the (new) South Sudan Pound, which is the same value so (southerners) don’t have to be worried,” Malok said.
“We will do it in the south,” he said, allaying fears among southerners who thought they may be forced to trade away their old pounds in the north and along the border.
No hard figures exist but some analysts estimate more than two billion pounds are currently in circulation across the underdeveloped south. Sudan’s central bank website does not give an overall figure for issued notes.
He declined to comment on foreign currency reserves of the southern central bank, saying only dryly: “I cannot tell you now but we are surviving.”
Malok also said he did not know the timeframe for the new currency as north and south have yet to agree on many economic and political details to ensure a smooth split.
Both parts of Sudan’s economy have been hit by rising inflation, a devalued currency, a scarcity of foreign currency and uncertainty over sharing of oil revenues.
While the south is home to 75 percent of Sudan’s oil production, it needs to northern pipelines and access to the Red Sea to sell the crude.
Malok also said the south planned to set up a stock market like in Khartoum but it would not happen anytime soon.
Malok put the current value of the pound was around 2.6 to the dollar, close to the official rate in the north but, this is way off black market rates in the dusty streets of Juba, the future southern capital.
Before the January vote, the dollar bought around 2.8 Sudanese pounds in Juba. In the last couple of months it has bought between 3.1 and 3.4 pounds, but some dealers will now offer more. Most restaurants now offer at least 3.
“We have too much (of the pound). They (the government) might buy it or they might not later on, we don’t know,” a street vendor said.
In March, the central bank governor of the still united Sudan quit without reason, adding to economic uncertainty.
Fadi Salim Al-Faqih, general manager of Bank of Khartoum, the biggest private bank, said a foreign currency scarcity has hit the economy but the central bank provides an incentive to buy and sell currency to match the black market rate.
“The exchange rate is more stable (in the north),” he said, adding: “The flows of foreign currency we see from the central bank are far more frequent and in more value,” he said, without specifying volumes.
But analysts say this measure is no help for an underdeveloped south in danger of becoming a failed state as few banks operate there.
North and south Sudan have fought for all but a few years between 1955 and 2005 over differences in ideology, ethnicity, religion and oil. The conflict cost at least two million lives.
