KHARTOUM (Reuters) – Sudan’s central bank told banks and exchange bureaux on Monday to buy foreign currency at a premium of 16.29 percent, virtually matching the black market rate, as it seeks to counter a shortage of foreign currency caused by risks ahead of the country’s referendum in January.
Analysts said the government was effectively opting to temporarily devalue the Sudanese pound, betting that it would regain value once the January 9 referendum was over.
“This is an effective depreciation of the Sudanese pound,” a trader, who did not wish to be identified said.
The Sudanese pound, which is controlled by a managed float, has been under pressure because of speculation over the risk of a return to war and an economic shock ahead of the referendum, which analysts expect will result in independence for oil-producing south Sudan.
That has led to capital flight and prompted Sudanese to horde foreign currency and the central bank has been using the country’s reserves to support the pound in the official market.
“It seems to be saying that they won’t defend the indicative rate in the short term but they are hoping that after the referendum the risk premium will come back down and they can change this measure and come back down towards the indicative rate,” said Justin Alexander at the Economist Intelligence Unit.
“It seems to be an admission that the black market rate is a fair market rate,” Alexander said.
To try and stop capital flight, the bank has imposed restrictions on taking foreign currency out of the country, which has boosted trading in the black market.
Under its managed float system, Sudan calculates an indicative rate for the pound based on previous day transactions and intervenes in the market if the pound breaks away from a plus/minus 3 percent corridor from that rate.
“In order to attract more foreign currency into the official market … banks and exchange bureaux will buy foreign currency at a premium to be determined by the central bank,” the bank said in a statement on Monday, adding the initial premium would be 16.29 percent.
More than 90 percent of Sudan’s foreign currency revenues come from oil.
The indicative rate on Monday was 2.43 Sudanese pounds to the U.S. dollar, with the upper limit at 2.5. A 16.29 percent premium over the upper limit would equal 2.9 Sudanese pounds, equal to the black market trade against the dollar on Monday.
The central bank said the premium, which could be changed at any time by the bank, would be set over each bank’s own exchange rate.
The market was closed on Monday and the trader said it was unclear how the market would react on Tuesday.