By G9ija

The government has already lifted state subsidies on fuel and signed a peace deal with some rebel groups last October, in the hope of reducing defence spending.

However, Sudanese analysts said the floatation was unlikely to bring the government the results it is looking for, warning that instead, it could send inflation to new highs.

Annual inflation was already running to more than 300 per cent in January, compounding the country’s economic woes.

“The state of the economy is very fragile and the floatation is fraught with risks,” said one analyst, Abdul Qassim Ibrahim, explaining that Sudan had very limited resources at hand to defend the pound against the dollar, including low productivity in almost all sectors.

“The floatation of the pound, while allowing commercial banks to trade in the dollar, will cause a surge in demand for foreign currencies that the government cannot satisfy,” he said.

Another analyst, Hamza Awadallah, echoed the same sentiment.

“Where will the government find foreign currency in amounts sufficient to meet demand defend the pound?” he said. “It has two options, both of which are inadequate: exports and foreign loans.”

Sudan was removed from the US list of state sponsors of terrorism in December, a move that paves the way for the country to engage with the International Monetary Fund and other agencies to provide much-needed access to external funding. However, tangible results have yet to emerge and Khartoum has been hit in recent weeks by street demonstrations protesting acute bread and fuel shortages. Annual inflation soared to 304 per cent earlier this month, among the highest in the world.

Sudan’s economy had been shrinking for two years even before last year’s Covid-19 pandemic, with the IMF estimating gross domestic product last year would contract by 8.4 per cent – the biggest annual contraction since 2011 when the secession of South Sudan took away most of its oil revenue. The fund is forecasting a gradual recovery, with growth of 0.8 per cent this year and 1.4 per cent in 2022.

The devaluation also comes during a delicate transitional phase in Sudan, since the removal of longtime dictator Omar Al Bashir in April 2019. The current administration brings together military and pro-democracy groups behind the uprising against the former leader’s 29-year rule.

Sunday’s move came two weeks after Mr Hamdok, the prime minister, reshuffled his cabinet to include representatives of rebel groups with whom the government signed a peace deal in October. A prominent rebel leader from the Darfur region, Jibril Ibrahim, was named as the country’s new finance minister.