Banking expert warns of 'dollarization' of Sudan economy

Banking expert Omar Sidamat has warned of the dangers of using the US dollar and other foreign currencies as a substitute for the Sudanese pound following the spread of counterfeit notes in many areas. Country. He told Radio Tabanga yesterday that 97 percent of Sudan's economic activities are outside the jurisdiction of the Ministry of Finance.

Last week, North Kordofan security officials seized a large number of counterfeit 500 pound notes in the city market of El Obeid, the state capital.

In an interview with Radio Dabanga reporter Sulaiman Sari yesterday, Sidahmad, who served as director of Abu Dhabi Bank and Export Development Bank, explained that „circulation of fake Sudanese banknotes is not new” in the country.

“After the revolution of December 2018, a money laundering gang was arrested. Their photographs were published in the news, but as usual, in such cases, the deep level was not investigated and no conclusion was reached,” he said. „Given the current situation, counterfeit banknotes have become a common occurrence in all cities of Sudan – as a result of the chaos in the country.”

Following the outbreak of fighting between the Rapid Support Forces (RSF) and the Sudan Armed Forces (SAF) in mid-April last year, “RSF paramilitaries attacked the national currency printing press and took away the never-before-seen ready-made rolls. No serial number or signature, which means they have no value.

Out of control

He said, “97 percent of economic activities in Sudan are outside the jurisdiction of the Ministry of Finance.

„The real problem is not counterfeiting, but the complex economic situation associated with the fact that 97 percent of money is outside the control of banks, and therefore the state cannot control the volume of this mass.”

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After lengthy deliberations by a panel of economists, „we came to the conclusion that the volume of money is equal to 900 trillion pounds, a very large amount, of which only three percent is in the banking system”.

'Dollarization can be seen as the ultimate collapse of the Sudanese pound, and its disastrous consequences will be immeasurable.' – Banking expert Umar Sidamath

He said, “The money supply is in the hands of households, firms and traders. There are even people who have designed strong rooms inside their homes.

“People have lost confidence in the banking system, its digital applications and the inability to quickly return to their services. This is what keeps people stuck in dealing with cash.

A banking expert has warned of the dangers of 'dollarization' of the Sudanese economy. „This happens when people use dollars and other foreign currencies after losing confidence in the national currency as a result of rampant counterfeiting. Dollarization is also likely to occur as a result of the fall of the national currency against the dollar's rising value every day,” he explained.

„Dollarization can be seen as the ultimate collapse of the Sudanese pound, and its disastrous consequences will be immeasurable.”

collapsed

Sidahmad added: “When we say the banking system has 'collapsed', we are comparing war conditions and the delay in banks resuming their operations. Most banks do not adhere to disaster response requirements, including necessary precautions such as operating electronic banking from secure alternate locations, outside the capital or Sudan, or maintaining backup servers.

„Markets were hit hard after vandalism hit banks' main websites, particularly crop and gold markets and other markets where large amounts of money are traded.”

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He questioned the willingness and ability of the Central Bank of Sudan and other banks to provide an electronic alternative to transactions in light of the shutdown of communication networks operating at a quarter of their capacity, for the same reason banks did not comply. The requirements for rapid recovery from disasters.

'Economical Cooking'

He said one of the recipes for solving the crisis in the banking system, which is the entry point for solving Sudan's economic crisis, is conditional currency exchange done according to known standards and regulations.

„The most important criteria for currency conversion is a government and governing body with respectable political authorities and high-level monetary authorities who are not subject to interference. Therefore, currency conversion is an inappropriate measure in a wartime situation,” he said.

„The basic cure for the problem of worthless or fake currency notes should consist of mergers or liquidation of banks, leaving three or four big banks out of the current 41 banks,” the banker believes. These big banks will definitely have huge financial capabilities and will be able to deal with international banks.

Already before the outbreak of war last year, Sudan's economy was in dire straits. In February 2021, the low-income country was in the midst of economic and political transition. Prime Minister Abdallah Hamdok's Khartoum government effectively pegged the pound and pegged the official and parallel exchange rates in an effort to curb rising inflation and attract foreign investors.

According to a Dutch report published at the time, 13.5 percent of people in Sudan lived in extreme poverty (less than US$1.90 per day) and 46 percent in moderate poverty (less than US$3.20 per day) in 2014. It was still significantly higher in rural areas, but has risen sharply in urban areas in recent years, the report said. For example, in Khartoum state, extreme poverty rose from 3.3 percent in 2009 to 9.4 percent in 2014.

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