President Omar al-Bashir pointed out the success of economic measures that government has taken to reduce the price of the dollar. “Within two days the dollar fell 10 pounds and we will reduce it until the economists say enough”.
Meanwhile, security campaigns against currency traders in Khartoum continued as part of measures that led to the decline of the dollar in the parallel market after the dollar reached to 42 pounds at the end of last week.
The right price
Many may not realize that a drastic drop in the dollar will have a negative impact on Sudan’s exports, which requires prudent handling of the exchange rate so as not to disappoint.
The economist Adel Abdul Aziz said that the appropriate price for the Sudanese currency against foreign currency should be determined by an equation in which many variables are involved, the most important of which is the competitive value of Sudanese commodities in the countries receiving Sudanese exports, adding “It is very important for us not to put a price that causes the depression of Sudanese exports.
For his part, the professor of economics Mohamed al-Nayer said that according to the current conditions and data it is appropriate that the official exchange rate should not be less than 20-25 pounds according to arrangements that make it equivalent to the parallel market price in a way that is not needed.
However, traders in the parallel market are betting that the rise of the pound against the dollar will be temporary and will resume the decline again, especially after the Central Bank raised the indicative price of the dollar from 18 pounds to 30 pounds.
Professor of Economics Mohammed El-Nayer said, “The stability of the exchange rate is linked to the ability of the Central Bank to provide hard currency in different transactions, and indicates that the logical expectations were indicative of the central gradient in raising the indicative price, but jumped significantly from 18 pounds to 30 pounds, which should not happen only In case the central bank is able to meet the need of the market of hard currency.
He added “The central bank should at this stage reduce the indicative price to about EGP 25 and take a package of measures to reduce the price in parallel in the black market.
On the other hand, there are those who believe that the decline in the price of the dollar against the pound is mainly due to the recent security measures, as well as unspecified actions by banks to set up funds to withdraw liquidity in an attempt to control the banking system on the monetary bloc in an attempt to stabilize the exchange rate.
He said “Security measures will not be sustainable and the central bank should take advantage of the parallel market shock to increase foreign exchange flows,” he said. “Remedies must be policy while security measures are complementary.”
The main observation is that the actions taken recently by the central bank cannot be described as sustainable, especially since the economic crisis is the result of a number of reasons. First, the imbalance between production and consumption in the macro economy resulting from the continuous expansion through the state budget in non-growth More than 100% since the secession of the south and the extra-budgetary spending on the military and security aspects.
Long-term exchange rate stability is mainly linked to increased production, exports and inflow of foreign investment, which will not come overnight but calls for immediate action to bear fruit later on.
Says economist d. Adel Abdel Aziz The long-term stability of the exchange rate depends on the ability of the bank to control price ranges within the managed flexible exchange rate policy. This ability depends primarily on the amount of reserves owned by the Central Bank of Sudan. Reserves come from three sources first is export earnings, the second is migrant remittances, the third source is loans, grants.
For his part, the economic analyst d. Haytham Fathi said the stability of the exchange rate requires increasing the rate of economic growth, reducing the deficit of the budget and controlling inflation by adopting strict, continuous and constant measures, not circumstantial, reducing government spending and linking expenditures to results, as well as fighting poverty and unemployment by adopting social policies targeting the poor and the middle class To avoid protests in the event of crisis. ”
Fathi pointed out that the success of the experience of liberalization of the exchange rate in countries such as China and India was dependent on competitiveness in terms of production and export, which promotes external and domestic demand and attracts foreign investment due to the low local currency.
Mohammed al-Nayer said that the Sudanese economy will only be rehabilitated by four basic treatments, two of which are long-term, with a focus on vertical expansion, which will achieve two goals: first, reducing production costs (competitiveness and increasing exports); second, import substitution, Trade balance leading to lower prices.
Al-Nayer goes on to say that in the short term, stimulating expatriates and building trust to divert their savings through official channels could save $ 6 billion. “There is a free currency conversion, which is good but three years ago, “The government can build apartments in vital areas and sell them to expatriates in hard currency in installments for about 8-10 years. The contract will be delivered once the first installment is paid,” he said, adding that real incentives such as customs exemptions for car or other.