Residents stand outside an ATM in Khartoum, Sudan, November 8 2018. Picture: REUTERS/Mohamed nureldin abdallah
Residents stand outside an ATM in Khartoum, Sudan, November 8 2018. Picture: REUTERS/Mohamed nureldin abdallah

Many cash machines in the Sudanese capital of Khartoum have run out of banknotes as the government scrambles to prevent economic collapse with a sharp devaluation and emergency austerity measures.

Rising demand for cash due to inflation, lack of trust in the banking system and the central bank’s policy of restricting the money supply to protect the Sudanese pound have all contributed to a liquidity crunch that has worsened in the past 10 days pending new banknote deliveries.

The banknote shortage comes one month after authorities let the value of the pound slide from 29 pounds to the dollar to 47.5 pounds and announced measures to tighten spending.

“I move from place to place until I find a money changer with funds because a large number of the cash machines are empty,” said Ahmed Abdullah, a 42-year-old government employee. “Why are we suffering like this to get our money?”

Sudan has suffered from a lack of foreign currency since losing three-quarters of its oil output when the south of the country seceded in 2011. The lifting of two decades of US sanctions in October 2017 did not bring a hoped-for reprieve.

Rampant inflation, strict withdrawal limits and a currency crisis had already placed Sudan's economy in trouble before the latest liquidity crisis.

President Omar al-Bashir, who seized power in a coup in 1989 and whose governing party has said it will nominate him to run for re-election in 2020, has taken a series of steps to tackle the economic crisis in recent weeks.

A new central bank governor changed the system for setting the exchange rate and a new prime minister announced a 15-month economic reform plan.

Though the streets have been quiet after rare nationwide protests triggered by bread prices early in 2018, further price rises since October’s devaluation have triggered fresh grumbling.

Spot checks with traders and market vendors showed that over the past month the cost of a kilogram of flour has risen 20%, beef 30% and potatoes 50%. Sudan’s inflation stood at more than 68% in September, one of the world’s highest rates.

At the start of November the government bolstered flour subsidies to try to contain the impact on bread. A week ago, the prime minister tweeted that he had met the central bank governor to address the cash-machine problem, and was reassured over the supply of banknotes.

But an official at a commercial bank in Khartoum said the central bank was not injecting enough fresh currency, triggering the liquidity crunch and long queues at ATM machines.

Sudan imported one shipment of new banknotes in October, and three further shipments are due to arrive soon, a finance ministry source said, without giving further details.

Even after October’s  devaluation, the pound is still under pressure and the gap between the official and black-market rates has widened. On the black market, a dollar costs 52 pounds in sought-after cash and 58 pounds by cheque.

“We expect the price of the dollar to continue to rise,” one black-market currency trader said. “With the scarcity of foreign currency, the practice of dealing at the cheque price has become widespread.”

The body of banks and exchanges that has fixed the official rate daily since October strengthened the pound to 46.95 pounds days after the devaluation, but soon returned it to 47.5.

“The real exchange rate is the parallel market,” said University of Khartoum professor Mohammed al-Jak. “The exchange-rate mechanism should be based on supply and demand for it to have a true and realistic price, in line with the economic liberalisation.” 

 Reuters