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Sudan faces hard cash shortage before independence vote
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Nov 3, 2010 - 7:19:12 AM

Sudan faces hard cash shortage before independence vote

By Opheera McDoom

KHARTOUM (Reuters) - A shortage of foreign currency in Sudan ahead of an independence referendum in the south has left many banks unable to meet demand or provide importers with letters of credit, bankers and clients said on Wednesday.

Many Sudanese say they have moved money into foreign currency and stashed it at home ahead of a January 9 referendum in the south of Africa's biggest country on whether to secede.

They fear the Sudanese pound could dive if the oil-producing south votes for independence as expected. Sudan gets about 90 percent of its foreign currency from oil.

Central bank Governor Sabir Hassan confirmed there was a foreign currency shortage but said banks should manage their own hard cash rather than relying on what the central bank gave them.

"The problem of the lack of foreign currency is real ... it began with the global economic crisis in 2009," Hassan told Reuters.

Officials at three banks, who declined to be named, told Reuters that they were unable to give clients foreign currency.

A Bank of Khartoum official said they were giving out hard currency in "exceptional" cases but mostly could only provide Sudanese pounds.

"We are having to provide local currency for those transferring (money) from outside the country because there is not enough foreign currency here," the official told Reuters.

The Lebanese Byblos Bank in Khartoum denied any foreign currency problems, but four customers told Reuters they were denied both euros and U.S. dollars over the past four days.

SHORTAGES

An official at the National Bank of Abu Dhabi's Khartoum branch told Reuters they depended on hard currency provisions from the central bank and sometimes suffered shortages.

Governor Hassan has previously blamed the decline of the Sudanese pound against the dollar on speculation.

He said the central bank's policy of curtailing imports had helped ease the forex crisis.

The bank this year ordered banks to require 100 percent coverage for any letters of credit to import goods and last month raised taxes on non-essential imports.

But small to mid-level businessmen, who have profited from import-driven growth over the past few years, say this could bankrupt them.

Sudan has been devastated by decades of war and bad management.

"Now with the price you pay for hard currency and the extra taxes they have placed on imports, there is no profit left so we cannot work," said one importer of pharmaceuticals.

Businessmen said they are unable to obtain foreign currency other than in the black market where the price for the U.S. dollar and euro has soared.

On Wednesday the central bank said 2.36 Sudanese pounds would buy one dollar but on the black market it cost 3.1 pounds.

Sudan says it has a 2011 contingency budget in case the south secedes, but has declined to give details.