Currency Replacement in Sudan: A Step at the Wrong Time?
Thanaa Abdeen
Sudan has embarked on a currency replacement process amidst widespread controversy and warnings that this step may deepen divisions in the country, particularly since areas controlled by the Rapid Support Forces (RSF) are excluded. The process began last Tuesday in only six out of Sudans 18 states, due to security considerations outlined by authorities in Port Sudan.
Details of the Process
The currency replacement operation has been initiated in Kassala, Blue Nile, Red Sea, River Nile, Gedaref, and Northern states. The Central Bank of Sudan introduced new denominations of 1,000 and 500 Sudanese pounds for immediate exchange through banks, emphasizing the need to conduct the process via bank accounts to ensure transparency.
The move has faced significant criticism from the RSF, which rejected the initiative, along with political and civil groups, most notably the Coordinating Body for Democratic Civil Forces "Taqaddum", which described it as entrenching divisions in the country. On the other hand, the Minister of Finance defended the decision, framing it as a tool to combat currency counterfeiting, promote financial inclusion, and redirect funds outside the banking system into formal channels. He also highlighted its role in fighting corruption and reducing printing costs.
Experts’ Perspective
Banking expert Dr. Luay Abdul Munim explained that the choice of the 1,000 and 500 denominations came after extensive studies, as these were the most affected by counterfeiting. He noted that the currency replacement would help mobilize cash within the banking system to fund development, expand the tax and zakat base, and dry up illicit currency trading. However, he stressed that such a step must be part of a comprehensive economic strategy.
Dr. Luay pointed to Russia’s experience in linking its currency to a specific value of gold to counter economic sanctions, suggesting Sudan adopt a similar approach. He also emphasized the need to develop banking products to enhance liquidity within the banking system.
The currency replacement faces major security challenges, as areas under rebel control continue to use old currency notes. The government has stated it will not impose hardship on citizens in these areas but aims to weaken the rebellion’s ability to exploit looted funds.
Challenges and Concerns
There are concerns that implementing the currency replacement in some states but not others could create confusion in cash transactions. The current security situation makes it difficult to achieve the operation’s goals fully, underscoring the need for unified monetary policies to avoid complications.
While the Sudanese government seeks to achieve financial and economic objectives through this currency replacement initiative, questions remain about the timing and its political and security implications. Will this process pave the way for broader reforms or add further complexities to Sudans already volatile landscape?
