Delay in Completing Currency Change in Sudan: Economic Challenges and Negative Impacts

By Nazik Shamam

Ten months have passed since the Sudanese government launched its currency Change process, aimed at eliminating counterfeit currency that had proliferated during the war waged by the Rapid Support Forces (RSF) militias against the Sudanese Armed Forces (SAF) and civilians. The process has, however, only been implemented in eight out of eighteen states, raising questions about its intended outcomes and the economic and social impacts on various regions.

On December 10 of last year, the Sudanese government began replacing the 500-pound and 1,000-pound banknotes in some secured states, namely Red Sea, Kassala, Kordofan, River Nile, Shamalia, Sinnar, White Nile, and Blue Nile states.

The government stated that this move aimed to eliminate counterfeit currency that had circulated during the war. However, the process did not cover all states, raising questions about the consequences of the delay in implementing the currency Change in other states, particularly Khartoum and Gezira states.

– Protecting the National Currency

The Central Bank of Sudan announced that the currency Change aims to protect the national currency, stabilize its exchange rate, and address the negative effects of the ongoing war. This move came after widespread looting of the Central Bank of Sudan and the Sudan Currency Printing Press in Khartoum by the rebel Rapid Support Forces.
The SCB stated that it aims, through this measure, to strengthen the financial system and protect the national economy against the negative repercussions of the war.

– Not a Satisfactory Solution

A year after the currency Change was launched in Sudan, ten states are still using the old banknotes that were not subject to the replacement process.

These categories are now considered ineligible for the currency exchange in the states where the process has already taken place, posing significant challenges for citizens and the Sudanese economy.

A source at the Central Bank of Sudan (SCB) confirmed that the currency exchange process will cover all states. The source told (Sudanhorizon) that the SCB will begin the currency exchange in the remaining states in the coming period. However, the source did not specify the dates when the remaining states would begin the exchange process.

The delay was attributed to security concerns in some states, particularly those in the western region.

– New Distortions

Economic expert Ahmed Bin Omar believes that the ten-month delay in implementing the currency exchange in some areas, especially Gezira and Khartoum, has created two parallel monetary systems within the country, resulting in a dual currency system and opening the door to new distortions in the economy.

In a statement to (Sudanhorizon) Omar said that this delay has produced several negative effects, including an increase in currency exchange activities, liquidity shortages, and the risks of counterfeiting and the circulation of damaged or stolen currency.
He pointed out that these conditions have weakened public trust in monetary policies, especially with a large amount of cash circulating outside the banking system.

Bin Omar attributed the delay in the currency exchange to the political and military conflict that the country is experiencing, particularly after the army regained control of Khartoum and Gezira. He noted that the damage to the banking sector in Khartoum, which houses 46% of all bank branches in the country, requires significant preparation for the exchange process.

Bin Omar explained that the High Committee for Preparing the Environment for the Return of Citizens to Khartoum State, chaired by member of the Sovereign Council, Lieutenant General Ibrahim Gabir, is working to prepare the banking environment, and some banks have already begun operating within the state.

He emphasized that the currency exchange process requires securing transportation and distribution routes, as well as ensuring security in the affected areas, in addition to rehabilitating and upgrading the banks themselves.

-Absorbing the Old Currency
The economic expert stated that the government needs to absorb the old currency in some states as a source of funding to increase reserves before expanding the exchange process to other states such as Khartoum and Gezira.

He pointed out that the exchange process could contribute to mobilizing bank deposits, but it requires fully preparing Khartoum to resume a significant portion of its economic activity.
Ibn Omar concluded that the currency exchange process remains suspended until Khartoum is fully prepared to resume a substantial level of economic activity.

Decline in SDG Value
For his part, banking expert Dr. Omar Mahjoub Al-Hussain warned of the negative impacts of delaying the currency Change in some Sudanese states, particularly Khartoum, Gezira, Darfur, and Kordofan.

In a statement to “Sudanhorizon” Al-Hussain stated that currency exchange requires financial stability and sound fiscal policy. He explained that the circulation of banknotes of unknown origin, especially the 500 and 1000 Sudanese pound denominations, has led to an increase in the money supply and negative effects on price levels.

He emphasized that delaying the currency change in these states will result in continued price increases and a further decline in the value of the Sudanese pound against foreign currencies.

He noted that the large amount of cash circulating outside the banking system in these regions complicates the economic situation and affects the government’s ability to implement monetary policies. He added that the continued increase in the money supply due to counterfeit currency will further exacerbate the economic situation.

-Logistical Obstacles
Meanwhile, economic analyst Dr. Haitham Mohamed Fathi confirmed that the currency change process has not been implemented in some states because of logistical obstacles and the health crisis affecting Khartoum and the spread of epidemics and diseases across the country.

Fathi pointed out that most of the states where the currency change has not been implemented primarily use currencies other than the Sudanese pound, such as the US dollar or the currencies of neighboring countries, as these states are essentially outside the national economic system.

In his statement to “Sudanhorizon” he explained the delay in implementing the currency change in Khartoum by stating that it was the last state to be liberated from the control of the Rapid Support Forces militia.

He clarified that Khartoum, as the capital, requires new mechanisms for currency change to absorb the existing banknotes, confiscate them, and then introduce the new currency into circulation.

Fathi stated that the decision to implement currency change is a political one that requires allocating hundreds of millions of dollars to carry out.

-Combating Counterfeiting

He pointed out that the process is technically and administratively complex, especially given the current political, economic, and security situation in the country. Therefore, the time taken was not excessive considering the prevailing security and economic conditions.

Fathi explained that the decision was necessary and inevitable given the circumstances in Sudan, in order to eliminate counterfeiting and reduce the amount of cash circulated in the hands of individuals.

He stated that the objective of the process is to restore economic balance and channel funds into the legitimate financial system.
Fathi added: “Currency change requires accompanying measures to reduce the money supply in the economy and combat counterfeiting.”

He emphasized the need to promote electronic payments for goods and services, as well as to implement controls on the use of foreign currency.

The economic expert called for increasing the quantity of the new Sudanese currency banknotes in circulation to compensate for the loss of purchasing power suffered by consumers, thus preventing an economic recession.

Dr. Haitham Mohamed Fathi has meanwhile noted that the looting and theft that occurred at the beginning of the war in Khartoum, Sinnar, and AlGezira states led to the circulation of large quantities of currency of unknown origin and not conforming to the technical specifications of the Sudanese currency, in addition to the proliferation of counterfeit banknotes.

This situation led to a significant increase in the money supply, which negatively impacted price stability in the country.

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