July 17, 2011 (KHARTOUM) – The Central Bank of Sudan (CBoS) threatened that it is prepared to engage in what it described as a "currency war" with newly established Republic of South Sudan (RoSS) should both countries not reach an agreement on issues related to circulation of the retired Sudanese pound.
- Sudan’s Central Bank Deputy Governor Badr Al-Deen Mahmood holds up the new Sudanese currency during a news conference at the Central Bank headquarters in Khartoum July 16, 2011 (Reuters)
Sudan will launch its new currency later this month which appeared to be in response to RoSS announcement that it plans to start distributing the South Sudan Pound on the week of July 18th .
Officials in Khartoum appeared furious with RoSS’s move arguing that the latter has reneged on an understanding that both countries will maintain monetary unity for an interim period following the breakup of the country which took place over a week ago.
CBoS governor Mohamed Khair al-Zubeir emphasized that Sudan wants to cooperate with RoSS in collecting the old version of the pound circulated in the South which he estimated to be equivalent to $700 million.
The deputy CBoS governor Badr Al-Deen Mahmood was quoted by the pro-government Sudan Vision newspaper as warning of a "currency war" should RoSS engages in "foot dragging" with regard to withdrawing the old Sudanese pound from circulation in the new state.
"We do not want to engage in a war of currencies, but if the south wants so [be it]," he said. "We have no interest of occurring bewilderment to the economy of both countries".
CBoS governor Al-Zubeir said that RoSS wants to replace the old Sudanese pound circulated in the south only through exchanging it with foreign currency or commercial trade between the two countries.
Ibrahim Ghandour, a senior official with the ruling National Congress Party (NCP) in Sudan, accused the Sudan People Liberation Movement (SPLM) of working secretly to undermine the Sudanese economy.
"The agreement was for this currency [old Sudanese pound] to continue in circulation between six months and one year but we knew that the SPLM was printing its new currency secretly as part of a plot to sabotage the Sudanese economy even though we were genuine without [intention of] conspiracy," Ghandour said.
"They [SPLM] didn’t want anyone to know so that they are not surprised with a new pound and an old one circulated in the markets causing prices to rise" he added.
CBoS governor has revealed that Sudan has already created a new second edition of the currency in several colors to hedge the risks associated with the circulation of the old Sudanese pound in the South.
He added that Sudan has good experience in currency replacement suggesting that the transition will be a smooth one.
The Sudanese pound replaced the dinar in 2007, but its value has plummeted in recent months due to political uncertainty, a surge in food prices and weak state finances.
The old currency has been falling on the black market in Khartoum for weeks as economists say foreign currency inflows needed for imports will decline alongside falling oil revenues.
The south took about 75% of Sudan’s 500,000 barrel-a-day oil reserves with it when it left.