March currency review

The Central Bank of Sudan (CBOS) has effectively floated the pound. On 7 March it announced that it would halt its support for the local currency and allow commercial banks and bureaux de change to set exchange rates according to market sentiment. By 21 March the pound had lost 29% of its value, falling from the old, loosely-fixed rate of USD 1 / SDG 445 to SDG 629, although it has strengthened to SDG 574 since. Rates advertised by the Bank of Khartoum, which had matched the central bank rate up to 7 March, confirm the change, although the CBOS itself stopped publishing rates on its website on the date it announced the reform. It is unclear whether it has kept the old 'official' rate alongside, for essential imports or suchlike; reports make no mention of this, but it should be noted that OANDA, XE and all other major exchange-rate monitoring sites continue to publish the old rate of USD 1 / SDG 445, while international credit card companies also continue to apply it. Otherwise, the new, floating rate available at banks and bureaux will now be of major relevance for residents of Sudan, including expatriates working there.

The list of countries suffering serious economic fallout because of the Russian assault on Ukraine grows ever longer. There are those, such as Belarus and Tajikistan (see first table below), whose economies are so reliant on Russia that their currencies have slumped accordingly. Others depend on Russia and/or Ukraine for their wheat and other grains supply, the bulk of tourist visitors or their oil and gas imports. The war and sanctions imposed on the aggressor have paralysed trade and sent prices of energy, fuel, bread and other foods soaring in Egypt, Ghana, Kenya, Tunisia, Turkey and others, many of whose currencies are feeling the effects. Egypt is in particular difficulties and on 21 March devalued the local pound by 14% against the US dollar. Better news came yesterday for Egypt, though, as it received promises of USD 22 billion of emergency assistance from allies in the Middle East, which may stem the currency's slide.

The situation in Sri Lanka, which was already in crisis, has also worsened because of the fighting in Ukraine. Indeed, the Sri Lankan rupee was the world's weakest currency in March after the central bank there also devalued its currency.

It isn't often we see the Japanese yen among the weakest currencies, but it had its worst month for 16 years, falling 5% against the euro. Something has fundamentally changed for the yen, which for decades could be relied upon to attract investors during world crises because of its stability and persistently low inflation. It is no longer the safe-haven it was, and some analysts fear the yen could become locked in a downward spiral due to Japan's widening trade deficit (also partly caused by rocketing costs for energy imports). It doesn't help that the government and central bank seem to be working against each other, with the former taking steps to try to curb inflation, while the bank is still following its long-term strategy of loose monetary policy which aims to reinflate the economy! 

As for Russia and Ukraine themselves, their currencies have been remarkably resilient since falling sharply at the start of the war in February. Both countries have imposed harsh capital controls to stop funds fleeing abroad, while their central banks are using their foreign exchange reserves to artificially hold up currency values. Ukraine is being helped by other central banks around the world sympathetic to its cause, whereas Russia is largely going it alone. Both, however, are in danger of depleting their reserves and defaulting on foreign debts. Any such default would pile considerably more downward pressure on the currencies.

*Sayrafa rate

The currencies of Australia, Brazil, Chile, Colombia and South Africa all reaped the rewards of higher prices for their export commodities in March (see next table). So did the Angolan kwanza, whose relentless gains in the last few months mean that it has appreciated by some 33% against the euro since ECA's September 2021 Cost of Living Survey. In tandem with such high inflation, international staff working in the country are likely to see substantially increased indices come the March 2022 survey, which will be published in May.

In other news, Iran's parliament has reportedly abolished the 'official' exchange rate, long fixed at USD 1 / IRR 42 000. This rate has been unusable by all but importers of 'essential' foods and medicines (and corrupt regime insiders!) for a long time, so the change will have little real impact on expatriates in Iran. However, it will push up prices for a number of basic foodstuffs, adding to already-high inflation, and foreigners will not receive the compensatory e-vouchers promised to local nationals. The reform was to have taken effect on 21 March, although the central bank's website continues to advertise the supposedly-abandoned rate. The applicable exchange rate for global mobility teams and their international staff in Iran remains the 'open-market' rate (latest USD 1 / IRR 274 000).

Sierra Leone has redenominated the leone, wiping three zeroes from nominal values. The change was slated for 1 April, launching an open-ended transition period (minimum three months) during which both new and old leones will be in use (although online confirmation that the new notes and coins have actually been introduced is as yet undiscoverable, so they may have been delayed). The leone will also receive a new international currency code of SLE (replacing SLL), but only at the end of the hopefully successful transition.

Finally, here is this month's selected currency movements table: