Have Sudan’s measures against counterfeit currency backfired with a hidden agenda?

Sudan’s Central Bank and the government have issued warnings against the purchase of foreign currency, particularly U.S. dollars, on the black market after unknown quantities of counterfeit notes were discovered in circulation.

According to an official statement, amounts of proficiently forged dollars were brought into the country by organised crime gangs in possession of advanced technical capabilities in counterfeiting operations in some African countries.”

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A source close to the issue said crime gangs entering Sudan amid unrest in neighbouring countries have deceived a number of Sudanese citizens who lost money after trading their cash for proficiently forged currency.

The neighbouring countries were not mentioned by name, but the same source reported that 17 suspects who were members of these groups will stand trial.
 
A day later, the Sudanese Media Center issued a statement by Othman Adam Ibraheem, commissioner of the Basinda border locality in Al-Qadarif State, adjacent to Ethiopia.  Ibraheem said  a number of preventive measures were in place to prevent the smuggling of counterfeit currency into Sudan.

Since Ethiopia is the only country that shares a border with both Sudan and South Sudan, this suggests the procedure introduced by the commissioner of Basinda may be aimed at blocking entry points for currency used in the south, with the intent to transform it into free currency rather than blocking counterfeit money from circulating.   

This move could be a bid to increase economic pressure on South Sudan.

The nature of such a statement issued by a media agency close to security authorities suggests a formal acknowledgment that fake U.S. dollars on the market will have several consequences in undermining confidence in transactions involving the sale and purchase of U.S. dollars.

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But a closer look reveals that while officials acknowledged the existence of counterfeit currency, their statement had the effect of reassuring currency traders at banks and exchange offices that the current phenomenon is limited to the black market.

Detecting counterfeit currency from time to time is considered normal,” said a Sudanese official who requested anonymity, because Sudanese citizens bring fake money into the country from abroad, which they only discover when they make bank deposits or try to sell it on the black market.”

This source links the latest developments to the emergence of some groups operating in a southern African country. These groups offered traders double their money, taking $1,000 in genuine currency in exchange for 2,000 counterfeit U.S. dollars.
 
Still, the black market may not be affected since most of the buyers are currency traders, while ordinary citizens prefer to use exchange offices, even if it means standing in long lines for better rates, the source added.
 
He also named two key aspects regarding the counterfeiting racket: most of the fake money is printed as $100 bills; and counterfeit notes are not circulated in packs, but rather inserted among genuine bills in packs of $1,000 to $3,000.

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Sudanese authorities are attempting to weaken the black market by undermining confidence in its currency traders.

Khartoum has approved new rules to regulate foreign currency circulation and transactions, including the penalty of imprisonment for individuals operating outside official channels. The main objective is to undermine the black market and prevent the continuous rise in the price of the U.S. dollar.

But ground indicators may yield different results due to conflicts and sudden changes in economic management. While the national budget previously outlawed the import of luxury commodities to limit the growing demand of the dollar, the new trend is to increase overall revenues by relaxing the prohibition of luxury goods after customs revenues dropped by 15% during the prohibition period.
 
This trend should diminish gaps in the state budget after the loss of oil revenues brought about by the south’s secession in July. At the same time, it could increase demand for the dollar and revive the black market in case the Central Bank of Sudan and the banking sector refuse to grant financial credit to traders who want to bring in high-end imports.

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According to an economist who spoke on condition of anonymity, Sudan’s economic institutions seem to operate against their own interests at times. He quoted a radio statement by al-Nour Abd al-Salam Al-Hilu, the Central Bank’s assistant governor, who predicted that the dollar would soon trade at five Sudanese pounds.
 
U.S. dollar prices on the black market had already increased from 3.5 to 3.9 Sudanese pounds, with some traders saying they could not get the quantities they needed due to a shortage in supply.

The dollar price boom has also been linked to the fact that southern Sudanese employees, dismissed from their civil service positions in Khartoum as a result of new citizenship laws, transferred their wages and savings into free currency before relocating to South Sudan.

Under new currency regulations, citizens with Sudanese passports may not obtain foreign currency until three months after their last trip out of the country. Foreign nationals are restricted to sending remittances once a month, and Sudanese citizens’ money transfers to other countries are limited to $1,000 for medical treatments or education.

The head office of the Central Bank of Sudan

This has left some companies and entities engaged in free currency contracts with little choice but to buy dollars on the black market, which is the only available alternative.

We were informed of this decision one month ago,” a bank teller said. It seems the authorities didn’t want to announce it officially, but I can assure you, the measure is in effect.”
 
An article about the decision published in the daily Al-Sahafa included a denial by bank administrators that the regulation exists.

But an employee at a Khartoum currency exchange office confirmed he and his colleagues received these verbal, unwritten instructions from the Central Bank over a month ago.

It seems they didn’t wish to publicise it officially, but I assure you the decision has been issued and is currently in force,” he said.