Sudan's Banknote Replacement Triggers Off Economic Challenges

(MENAFN- Kuwait News Agency (KUNA)) News report by Mohammad Abdulaziz
KHARTOUM, Jan 6 (KUNA) -- The recent decision of the Central bank of Sudan (CBoS) to issue a new banknote of 1,000 Sudanese pounds minted in line with security standards, to be only traded in army-controlled areas, entails economic challenges involving goals and risks.
On December 10, the CBoS announced that its decision was part of its efforts to modernize the currency and improve the security standards used in printing money, which contributes to combating counterfeiting and enhancing confidence in the national currency.
It underlined that it came within the framework of its responsibilities to protect the national currency, stabilize its exchange rate, and help achieve the country's economic stability.
The Central Bank confirmed that the old banknotes would remain valid, and the process of replacing them would be carried out gradually according to a timetable in a bid to ensure a smooth transition process with no negative effects whatsoever on the transactions of individuals and institutions.
Sudan's Supreme Committee for Currency Replacement then extended the deadline for exchanging old banknotes by one week, ending on December 30.
The banknote replacement, due in effect in Sudanese army-controlled areas, rather than ones held by paramilitary forces, came after 80 percent of the monetary base was lost due to the looting of banks and people's reluctance to deal with banks since the outbreak of civil war.
Economists believe that the move entails major economic challenges, primarily inflation, closure of 70 percent of bank branches in conflict-hit areas and trading of 90 percent of cash money in non-banking transactions.
Speaking to KUNA, Haitham Fatehi, a Sudanese economist, said the banknote replacement, though late, has become an ineluctable request for restoring the northeast African country's economic equilibrium.
However, he expected that the current security challenges make it difficult for the central bank to put the decision in place, calling for finding innovative solutions in order to ensure the fulfillment of relevant goals.
He underlined that it is necessary to promote financial inclusion by means of monitoring the Sudanese pound online, thus contributing to drawing cash money to banks.
Fatehi also stressed the significance of providing a basket of world currencies as a coverage for the new pound with a view to ensuring the stability of its value farm from inflation and international currency volatility.
But, he raised some questions about the way of applying the new decision to unsecure and unstable areas, where counterfeiting is going rampant, urging the central bank to find a way out of this dilemma.
On his part, Al-Tejani Al-Tayeb said the problem is primarily due to the surplus liquidity resultant from government failure, rather than counterfeiting, as revenues have declined by 80 percent to 1.5 trillion pounds due to civil war.
He lashed out at the government for having raised spending to 30 trillion pounds, causing a deficit of 28.5 trillion pounds in 2023 and 52.3 trillion pounds in October 2024, not to mention lower development spending and higher military expenditure. This, he believed, has led to a total deficit of 105 trillion pounds.
He regarded the condition that banknote replacement should be done via bank accounts as being impractical owing to poor banking infrastructure since only 20 percent of bank branches is active in the targeted states.
This condition could negatively affect many citizens and pave the way for the black market to thrive, he said, regretting that lack of money transfer limits would spur further manipulation.
Rapping the recent banknote decision, Mohammad Al-Ameen, a Sudanese analyst, opined that the move could trigger off further splits and divides in the country as the monetary base in several areas like Darfur and Central Darfur will be excluded from the decision.
He warned that the partial banknote replacement could push paramilitary forces to mint a special currency or use old ones or even neighboring countries' banknotes, thus aggravating the already volatile situation in this Arab country.
The replacement decision is to be put in place only in seven out of 18 states since some areas are still controlled by paramilitary forces while other areas are the scene of continued infighting.
However, the Central Bank of Sudan (CBoS) defended the move by saying that putting the decision on the back burner in 11 states was an exceptional step towards carefully implementing the plan and preserving people's rights. (end)
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