Currency slides, prices jump as Sudan grapples with sanction decision


By Khalid AbdelazizKHARTOUM, July 20 (Reuters) - Sudan's struggling economy
took another hit this week after the United States postponed a
decision on lifting sanctions, causing the Sudanese currency to
slide, prices to rise and businesses to halt sales.
    The United States last week postponed for three months a
decision on whether to permanently lift 20-year economic
sanctions that have hobbled the Sudan's economy and cut it off
from the global banking system [nL8N1K256J].
    Businessmen in Khartoum said the postponement dealt another
blow to an economy that's been in turmoil since 2011, when the
south seceded and took with it three-quarters of Sudan's oil
output, the main source of foreign currency and state income.
    The Sudanese pound lost over 13 percent of its value against
the dollar on the unofficial market just over the past week,
dropping to 21.5 pounds from 19. A severe shortage of hard
currency has for months forced businesses to resort to the black
market to get the dollars they need to import.
    "The import companies we deal with said the extension of
sanctions has increased the price of the dollar, and most food
items like canned food, sugar, flour, cooking oils and biscuits
come from outside Sudan," said Mohamed Abdallah, the owner of a
supermarket in central Khartoum where tomatoes have jumped to 30
pounds from 20 the week before.
    The import-dependent country had an annual inflation rate of
32.63 percent by May, after the pound weakened by over 50
percent against the dollar in the past year. Prices have also
been driven up by cuts in fuel and electricity subsidies as the
government tries to save cash  [nL5N1FK3VQ].
    Some businessmen said they stopped making sales altogether
this week, unable to price goods that could rapidly grow more
expensive should the dollar price continue its rapid ascent.
    "There is a state of utter confusion. We don't know whether
to stop selling products or to continue... it's difficult to set
prices," said the manager of a company that imports electrical
equipment who declined to be named.
    "It's better to keep the goods in storage than sell at
prices that could make us a loss, because we import all our
goods from abroad and are buying hard currency on the black
market," said an official at a pharmaceutical company.

    Sudan argues that it has complied with a list of U.S.
demands required to secure permanent sanctions relief. The list
includes resolving internal military conflicts in areas such as
war-torn Darfur, cooperating on counter-terrorism and improving
access to humanitarian aid [nL8N1K24VP].
    President Omar al-Bashir froze the work of a committee
formed with the United States to negotiate sanctions relief just
after the U.S. postponement, deepening uncertainty over whether
the penalties would be lifted in three months. [nL8N1K34PL]
    Many in Sudan's business community said they were optimistic
about the prospects for permanent relief, a measure they said
would attract new investors. As it is, those investors are
sitting on the sidelines waiting for a final decision that would
enable Sudan to secure new markets for its goods, potentially
netting it badly needed hard currency.
    "The extension of sanctions is a huge blow. We were
expecting them to be lifted, and it comes at a critical time
when the export season for our agricultural crops is about to
begin ... their continuation means we can't reach new markets,"
said the owner of an agricultural export company.
    Others have turned their blame on the government.
    "We are facing a disaster and are being hit with losses and
the government is not interested in anything except collecting
taxes," said Abdullah, the supermarket owner.

 (Reporting by Khalid Abdelaziz; Writing by Eric Knecht; editing
by Patrick Markey, Larry King)
 ((; +20 2 2394 8102; Reuters


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