* The Bank of Sudan has an enviable task *
Mahjoub Mohammed Saleh
Friday, 21 September 2018
The new ministry has settled in the government chairs in Sudan, after the newspapers showed a follow-up of news by the commissioning, who apologized, and those who entered the formation, and those who came out of it. Things are now back to normal. People woke up to face the same crisis they had been experiencing since the beginning of this year. With the continued increase in inflation, rising prices, suffering in the necessities of life, they originally did not expect a solution to their problems between day and night,
They recently noticed that the Hamas prime minister for the hourly performance account had retreated, began talking about weeks to resolve the liquidity issue, or to identify policies and mechanisms for buying gold, which the ministry appears to be betting on, to address the balance of payments deficit, estimated at five billion, Between the value of our exports and the value of imports, and the government is still talking about 120 tons, although there is no accurate census of the production of civil mining, and the government when you expect the Bank of Sudan to address the problem of buying gold and the problem of liquidity in weeks to assume responsibility seems overstretched, not because of poor performance , But because these issues overlap And, in some respects intersecting and conflicting.
The Bank of Sudan's earlier rush to buy gold has had disastrous consequences for the economy. In order to save money to buy gold, the Bank of Sudan has started printing currency and paying it to the market, so that the currency has risen from 67 billion pounds at the end of last year to 88 billion by the end of June, Bank statistics, most of the increase has gone to buy gold,
So what was the result?
The result was a sharp increase in inflation, which according to the latest statistics reached the end of July about 68%, which is more than three times the rate announced by the budget at the beginning of the year (19.5%).
Thus, the gold obtained did not solve the problem, but compounded it, and now the Bank of Sudan wants to return to buy gold after he absorbed the lesson of the previous experience, and does not intend to print more money to buy gold, but wants to take advantage of real resources, Now heading to one of two options:
The first is that banks build up their surpluses from a portfolio where they buy gold, or issue bonds bought by people with their savings. The bank uses the proceeds to buy gold. In both cases, real money is invested instead of printing the currency,
The second solution - the issuance of sukuk - assumes that people have savings that remain and that they are willing to offer them to the state in exchange for guaranteed annual profit. We suspect both assumptions. People have lent the state through the previously issued and still existing instruments of debt Internal level should raise concern, and with the current distrust, surpluses will rush towards the dollar as a repository of value or saving
Gold is very different from oil: oil is owned by the government, and its proceeds go to it. Gold is the property of the metal, it has nothing to do with the government, and what is important is its foreign exchange earnings to cover the balance of payments gap. Of its price is in line with the value adopted by the government for foreign currencies, especially the dollar,
But the dollar and foreign currencies in Sudan now have two prices: the official indicative price, which is around 30 pounds, and the parallel market price, which is about 50 percent higher. Which price will the government adopt to buy gold?
If you adopt the indicative price, you will not find between the two minerals to sell them, and will become «smuggling» is their preferred means, either if the Bank of Sudan for the parallel price, it becomes like speculators in the dollar, it will raise the price
Or will the Bank of Sudan resort to full float, rather than the current floating flotation? Will the strategy of price consolidation be adopted? And how is that done
All of these questions will not be resolved until after the Bank of Sudan completes the study of alternatives available to it,
The study may be prolonged,
Because any director tends to resort to the bank has its pros and cons,
And its implications for other issues
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