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Sudan devalues the pound - again

Last week Sudan's government announced that exchange rates would from Sunday be set daily by a new committee of bankers and traders. Yesterday, on their first day in the job, the setters effectively devalued the Sudanese pound by 39% against the US dollar.

The exchange rate had been fixed at USD 1 / SDG 29 since the last devaluation in February, but was moved on Sunday to USD 1 / SDG 47.5, weaker even than black-market rates of around SDG 45.

Crippling shortages of foreign exchange have caused difficulties for importers, who have had to resort to the black market to obtain hard currencies. Furthermore, already-rampant inflation has risen even higher (latest annual rate of 66.8%) and it has become increasingly hard for the central bank to withstand downward pressure on the pound to hold its overvaluation.

Authorities now hope the pound will stabilise, the black market will disappear and eventually inflation will fall. However, for all that to happen, the new exchange-rate setting body will have to make its decisions based on market forces rather than the political whim of the government, whose policies will need to inspire more confidence among investors than has generally been the case. It is not certain that all this is possible, but the devaluation is a good start. The downside will be a further rise in inflation in the short term. 

Please note that there remains another official exchange rate (used by importers of 'essential' foods and medicines) fixed at USD 1 / SDG 18. Although this rate is the one quoted by some FX websites, it is effectively meaningless as far as foreign assignees working in Sudan are concerned.

If you need assistance managing your international staff in Sudan, or anywhere else in the world, please get in touch.

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