Sudan currency at new low ahead of oil deadline
LONDON – Sudan’s currency hit a new low on Tuesday, traders said, ahead of Khartoum’s deadline to shut a pipeline carrying South Sudanese oil worth billions of dollars to both impoverished nations. One United States dollar sold for 7.35 Sudanese pounds, black market traders said.
The pound has now lost about 46 percent of its value on the widely used black market since September 2011, after South Sudan separated earlier that year with most of the formerly united country’s oil production. The pipelines and the Red Sea export terminal remained in the north but a fee dispute led the South to shut its production early last year.
Khartoum and the South’s government in Juba reached a deal in March allowing the oil to flow again, as part of timetables to implement nine economic and security pacts. Then, in a surprise move, Khartoum last month gave companies 60 days to stop transporting oil from South Sudan after President Omar al-Bashir accused the Juba government of backing rebels in the north. Juba denies supporting the insurgents and in turn says Khartoum assists rebels on southern soil. Observers say both countries have engaged in the practice. On Monday the African Union and east African bloc, the Inter-Governmental Authority on Development, inaugurated a panel to probe allegations of rebel support by each side.
Regional nations also began determining the centreline of a demilitarised buffer zone that is to straddle the 2,000-kilometre (1,240-mile) undemarcated border between the two countries. While this process and the investigation of alleged rebel support take place, the AU and IGAD called on both states “to refrain from any unilateral action”, an AU statement said on Monday. Sudan’s Oil Minister Awad Ahmad al-Jaz on Tuesday confirmed the 60-day deadline unless South Sudan complies with all nine pacts which were confirmed in March and included the demilitarised zone designed to cut cross-border rebel support, the official SUNA news agency said. Sudan froze the nine agreements in June, blaming the South’s alleged support for cross-border insurgents.
“I think the reason for the pound’s fall is the decision to shut the pipeline,” one black market trader said, asking for anonymity. “There is a shortage of dollars in the market,” another trader said. South Sudan separated two years ago under a peace deal that ended a 22-year civil war. The split left Khartoum without most of its export earnings and half of its fiscal revenues, leaving the government searching for alternatives to oil revenue. Inflation, fuelled by the government’s printing of money, exceeded 40 percent earlier this year but moderated to 27 percent in June, according to official figures.
The International Monetary Fund estimated in May that Sudan’s economy would get a boost of about $1.5 billion in 2014 if the oil deal were implemented. South Sudan would gain billions of dollars in revenue from its oil exports. Sudan uses multiple official exchange rates, including a central rate for government transactions which on Tuesday stood at 4.3980-4.4200 for one US dollar, according to SUNA.