Sudan’s currency strengthened to 18.5 pounds to the dollar from 20.2 on the black market on Sunday, the first day of business since the United States lifted trade sanctions, raising a glimmer of hope for recovery in the war-torn country.
The decision to suspend 20-year sanctions and lift a trade embargo, unfreeze assets and remove financial restrictions came after a U.S. assessment that Sudan had made progress on counter terrorism cooperation and on long-raging internal conflicts such as in Darfur.
The announcement helped push Sudan’s pound currency to its strongest level on the black market since at least July, when it was sent reeling to around 21.5 pounds to the dollar after the United States postponed a final decision on the sanctions relief until October.
Sudan’s central bank has held the official exchange rate at 6.7 pounds to the dollar but currency is largely unavailable at that price.
As the pound has weakened over the past year in the import-dependent country, inflation has soared, hitting 34.61 percent in August year-on-year and compounding economic problems that began in 2011 when the south seceded, taking with it three-quarters of the country’s oil output.
“The lifting of sanctions is good news … but we want to see prices come down, because in the past the government has said that rising prices and reduced services were because of the economic blockade, but now there is no blockade,” said Nawal Ahmed, a 58-year-old government employee.
Prices have also been driven up by cuts in fuel and electricity subsidies the government imposed to save cash.
Currency traders said the stronger pound rate would be short-lived unless banks can start offering dollars again, which they saw as unlikely.
“If the banks don’t supply dollars we expect the price of the dollar to rise again … there’s a currency shortage in the market and we know that the government does not have enough hard currency,” one trader said.
Analysts and officials have said that Sudan must now carry out tough economic reforms such as floating its currency if it hopes to benefit from the sanctions relief and begin to attract badly needed new investment.
“Attracting foreign investment requires reforming the political and legal environment and fighting corruption and government bureaucracy,” said Mohammed al-Jack, professor of economics and political science at the University of Khartoum.
“Without clear financial policies, there will be no real and long-term improvement to the Sudanese pound exchange rate,” he said.