Sudan to split creating two new currencies

Khartoum — The financial authorities in North Sudan told their Southern counterparts that they will discontinue use of the pound after the semi-autonomous region officially becomes an independent state.
Ninety-nine percent of Southern voters in the country and abroad decided that they want to separate from the North as part of the self-determination right afforded to them in the 2005 Comprehensive Peace Agreement (CPA).
The new state however, will not come into existence officially and legally until the end of the interim period on July 9th.

 

The ruling National Congress Party (NCP) and the Sudan People Liberation Movement (SPLM) are negotiating post-referendum arrangements such as the status of Abyei, border demarcation, national debt, citizenship, oil sharing, water and international agreements.
One of the technical details discussed between the two sides is the future of the Sudanese pound as a currency used in the South. It is during these talks that North Sudan disclosed its intention to do away with the national currency.
"We are negotiating on how we phase out the Sudanese pound in the south, because the north has decided to have nothing to do with the pound," Elijah Malok, the head of the Bank of Southern Sudan which is currently linked to the Khartoum-based Central Bank of Sudan, told reporters.

 

"As soon as the whistle is blown for the independence of southern Sudan, they [the north] will forget the pound, and therefore the negotiations are going on how you redeem it or how you bring it back to the coffers of the Bank of Southern Sudan," Malok added.
No one from the Central Bank of Sudan in the north was immediately available to comment on the statement.
A diplomatic source confirmed to Reuters that the north had threatened making the potentially disruptive move of introducing its own currency during negotiations, but added it was just a tactic to win concessions from the south ahead of secession.
"It's more a threat ... It's not a serious option at the moment but it could become one," said the source.
Malok himself later qualified his comments in an interview with Reuters saying the north had not made a final decision on bringing in the currency.

"Those are the indications that are coming out of the negotiations. There is a possibility of them introducing their own currency but nothing is definite at this moment," he told Reuters.
Malok said the south was also considering introducing its own currency after independence - southern officials have earlier said they might make the change months after separation. Malok's comments on Tuesday were the first suggestion the north might try to preempt the move with its own new currency.
The Southern official, who is also the deputy governor of the Central Bank of Sudan, said the north might revert to the country's previous currency the dinar.
"The pound in fact was imposed on them. They ([he north] had the dinar and I am sure they are still keeping it in their coffers," he said. Under 2005 peace deal, Sudan agreed to drop the dinar -seen as a symbol of Arab countries - and revert to the Sudanese pound which was the currency after British colonial rule.

Analysts estimate the reintroduction of the pound in 2007 cost Sudan around $150 million, an expense the north could not afford given its current economic crisis.
The governor of Sudan's Central Bank Sabir Mohamed Al-Hassan said in an interview last week that South Sudan refused to heed to advices by experts and consultants to form a "monetary unity" with the North.
Al-Hassan said that the North will work on retrieving any quantity of Sudanese pound circulating in the South once the latter introduces its own currency.
He estimated that 10% of the monetary supply is in the South.
Sudan is facing a severe economic crisis manifested in lack of hard currency, erosion in value of the pound and soaring inflation rates.

Late last year the government introduced an austerity package which involved reducing subsidies on sugar and petroleum products, curbing imports of many goods and cutting the pay of Sudanese officials.

A privatization process is also underway to get rid of state-owned firms to reduce expenditure.
The North blamed the deteriorating economic situation on speculation related to impact of the South's secession and the global rise in the price of food products.
Sudan produces some 500,000 barrels per day of oil, but only 100,000-110,000 bpd are from wells in the north. The economy is dependent on oil for some 45 percent of its budget and most of its foreign currency revenues.
It is not clear what is the formula for oil wealth sharing following the South's secession but will likely be less than the 50-50 split currently in place under the CPA.