Central Bank Awakens, At Last!

Professor Ahmed Magzoub Ahmed

The Governor of the Central Bank of Sudan issued a statement canceling certain currency denominations from circulation due to threats to the country’s monetary situation. The Central Bank resorted to this 18 months after the economic and financial disaster unfolded, with looting and forgery affecting the national currency.
Here, we discuss the Central Bank as an institution that is a fundamental pillar in economic, financial, and banking activities. Where has it been during this period, filled with articles and warnings about the imminent economic risks caused by looting, pillaging, and the destruction of economic infrastructure by the rebels? These actions impacted the Central Bank itself, including its headquarters, branches, and banking systems. This was no secret; the rebellion documented it on video before even those loyal to the nation could record it.
I and others have written from the earliest days, urging the importance of economic solutions and timely corrective measures to mitigate negative impacts and avoid further harm.
On June 3, 2023, I wrote, “The economic file is inseparable from other files, as it is the fundamental base supporting the stability of security, humanitarian, media, and foreign affairs. I emphasized that addressing economic challenges would support the armed forces in liberating and securing the nation.”
I also proposed forming an economic task force comprising government and private sector experts to oversee various sectors, including:
Financial sector
Monetary and banking sector
Export (institutions, goods, procedures)
These task forces should issue necessary administrative and financial decisions to streamline economic procedures, mobilize resources, address priorities, and regulate these measures. With the Minister of Finance leading, the economic sector ministries should engage key personnel to execute an emergency program suitable to current security conditions.
The target institutions include the Ministry of Finance, Central Bank, Customs, Taxes, Agriculture, Minerals, Electricity, and Industry.
To empower the banking sector, I suggested:
Reforming the national payment systems and EBS systems
Enhancing internal banking systems, ensuring backup and secure information storage
Supporting banks to cover potential liquidity shortages by providing financing facilities
Addressing connectivity issues critical to financial technology
In a September 26, 2023 article, I discussed the reasons behind the Sudanese pound’s decline and the role of banking technology systems in facilitating account-to-account transfers, contributing to an unregulated parallel market outside Central Bank oversight. I argued that the core issue is not in financial technology itself but in the Central Bank’s policies governing inter-account transfers.
The extensive writings on the economy, institutions, and the Central Bank’s policies should have been enough to alert those in charge to take preventive and corrective measures. Yet, “you would have woken the living had you called,” but no one listens.
A pressing question arises: where were the previous and current leadership of the Central Bank during these developments? Were they asleep or in a daze, only to remember suddenly that funds had been stolen from banks and citizens? Everyone knows that even the Central Bank’s headquarters and branches, including its currency printing facilities, were looted. Did the Central Bank not know, while the public was aware, that the stolen banknotes were circulated without serial numbers or proper cutting?
However, it’s better late than never. This decision requires a range of measures. Changing and replacing currency is a coordinated process typically announced and implemented in normal conditions with a phased withdrawal of the old notes and the use of the new ones. In emergencies, immediate exchange follows the completion of the new currency’s printing and distribution. Delays might drive clients to take protective steps, like buying foreign currencies or commodities, thereby weakening the policy’s effectiveness and burdening others.
To support currency replacement goals, a robust media campaign is essential to maintain public confidence in the banking system, as a lack of trust could lead to withdrawals and reduced deposits. This points to the need for a well-crafted media strategy to reassure the public.
The statement mentioned unidentified currencies. The Central Bank should inform the public about the specific characteristics of these notes from unknown sources. This is as crucial as the cancellation and replacement procedures, allowing every citizen to review their currency holdings with knowledge of their source.
Other preparations should include guidelines for banks on handling such suspicious currency. It’s widely known that companies involved in currency printing and security feature production are identifiable, so why are we unable to trace those targeting us in this monetary conflict? Legal measures against counterfeiters are necessary to prevent similar actions with new currency issues.
Expanding financial technology, achieving financial inclusion, and encouraging electronic payment methods are the path out of this turmoil. Some denominations now cost more to print than their actual value. Therefore, digital financial expansion and decisive regulatory legislation are essential, pushing the public to adopt electronic payment methods. Financial technology costs have decreased; all that’s needed is firm decisions from the relevant authorities.
To be continued…