Bank of Sudan issued a report illustrating the economic and fiscal performance for the second quarter of the current year that showed the failure of economic policies, adopted by the government at the start of the year, at achieving their goals. The report also revealed that curtailment of liquidity policy applied by the government last March had reverse effects over the economy and only exacerbated problems it was intended to solve.
The aforementioned policy was employed- according to the government- with the aim of controlling the exchange rate in the parallel market, absorbing money supply circulating out of the banking system and lowering inflation.
The report, which was released last week and obtained by Altaghyeer, also pointed out that money supply circulating in and out of banks surged from 77. 5 billion SDG in last March to 86 billion SDG in last July with an 8.5 billion increase. Instead of the intended reduction, the report also showed an increase in money supply circulating in public, as it was 75 billion SDG last March and soured to 82 billion in the last three months.
Economy professor at University of Khartoum Mohamed Aljak Ahmed criticized the liquidity curtailment policy and clarified that it heavily impacted the most vulnerable groups as he went on to say “the government always opts for costly solutions that burdens the ordinary citizen”. Additionally, Aljak described the economy as “on the brink of collapsing”.
The report also outlined the serious imbalance exposed by comparing cash circulating in public, and within the banking system (3.9 billion SDG), with that circulating outside the banking system, which reached up to 82 billion SDG by the end of last June.
Thousands of clients are currently suffering in their dealings with Sudanese banks as they were denied access to their cash deposits under the guise of lack of liquidity since last March, and banks went on to set a maximum withdrawal limit not exceeding 2000 SDG per client.
This measure led to the reluctance of clients depositing their savings as they fear they wouldn’t be able to retrieve them if they need to. These conditions created a sense of undermined confidence in Sudanese banks.
In the meantime inflation spiraled from 55.60% in March to 66.80% in July along with an increase in the exchange rate for the US dollar from 38 SDG/ $USD 1 to 41 SDG/ $USD 1.
Commercial banks tend to blame the current situation on the Central Bank as a manager of one of Faisal Islamic Bank’s branches told Altaghyeer , on the condition of anonymity, saying “ we didn’t receive a single pound from Bank of Sudan in three days, and we depend on cash deposits by clients, our bank representative would go to Bank of Sudan for three days and come back without a single penny”.
One of the most important observations in the report is the increase of money supply from 65 billion SDG in December 2017 to 86 billion SDG in July 2018, which is a 21 billion SDG increase in six months. According to economy expert Taha Hussien, who spoke to Altaghyeer, this increase is attributed to a number of reasons, among them is the government resorting to printing money in order to challenge the economic malaise and also Bank of Sudan’s step of printing money to purchase gold from companies and miners.