Sudan Exchange Rate Analysis for June 2024

The Sudanese currency continued to lose its value against hard currencies, and we can analyze the matter in broad outlines according to the following:

Slight Increase in Exchange Rate:

- June experienced the smallest increase in the US dollar exchange rate.

- The difference between the rate at the beginning and the end of the month was 80 Sudanese pounds, a 4% change.

Impact of Eid al-Adha Remittances:

- The exchange rate decreased on the first day of Eid al-Adha due to high remittances from expatriates, dropping by 190 pounds, changing from 1920 to 1730,a peculiar phenomenon in the parallel market.

- The parallel market absorbed these remittances by lowering the price, only for it to rise again. Prices typically fluctuate around payday at the end of the month.

-The Saudi RIYAL is still the currency affected by expatriate remittances, while the DOLLAR and DIRHAM are the currencies most closely linked to trade exchanges.

Strategies of Commercial Banks:

- Commercial banks in Sudan strive to align the exchange rate with the parallel market.

- They aim to attract foreign currencies to weaken the parallel market, a challenging task as they experienced a loss of 574.27 pounds by the end of June. The gap between the official and parallel markets remains at 136.35 pounds (with the parallel market being higher).

Tactics of the Parallel Market:

- The parallel market creates fictitious demands in addition to the real demand to test the banks' ability to withstand shocks.

- Prices rise after these simulations, introducing more shocks to the exchange rate market.

- The parallel market operates effectively, as the government sometimes resorts to it to finance imports.

-The parallel market is still the most organized in providing the supply of foreign currency. The rate of change in the US dollar prices has also remained affected by some military requirements.

Government Confusion in Port Sudan:

- The government lifted the ban on some companies that do not repatriate export proceeds, despite uncertainties regarding the commitments to grant old and new export proceeds.

- This decision may activate export movement but will widen the gap in revenues linked to the exchange rate.

July Projections and Agricultural Demand:

- At the beginning of July, the dollar is approaching the 2000-pound barrier.

- Some traders have raised the price, but the majority remain below this rate.

- The need for agricultural and production inputs for the summer season will increase the demand for hard currency.

- Fuel constitutes the largest portion of imports, creating a significant market dominated by dollar mafias.

-Change in the price of the US dollar in the parallel market and the official market for the month until the beginning of July 2024

Military Impacts

- Military events in June affected the economic conditions, with the capitals of two states (West Kordofan - Sennar) falling.

- The continued loss of revenue will impact the exchange rate as the printing process to finance government and military expenditures continues.

Central Bank Performance and Policy Coordination:

- The Central Bank of Sudan needs more effective performance to influence monetary policies.

- The war has made coordination between the Ministry of Finance and the Central Bank inconsistent.

- The revenue crisis and adherence to a budget under military movements have become almost impossible.

Conclusion:

- The confusion over liquidity policies, loss of foreign exchange sources through international trade, and continued currency printing have contributed to Sudan losing its currency by 240% since the beginning of the war until today.

Author: Ahmed Ben Omer.

Data source: Official and parallel figures.

Date: 06/07/2024