Sudan has begun allowing private traders to export gold, a measure designed to crack down on smuggling and attract foreign currency into the country’s cash-strapped treasury.
Until now Sudan’s central bank has been the sole body legally allowed to buy and export gold and set up centers to buy the metal from small-scale miners.
Acting central bank governor Badr al-Din Abdel Rahim Ibrahim said on January 1 the bank would end its gold purchases entirely.
Last week, a little-known private company founded in 2015, al-Fakher, became the first to take advantage of the new regulations, exporting an initial 155 kg.
Any added revenue from the new system would help Sudan’s government cope with severe economic pressure as it tries to navigate a three-year political transition.
The government is serving under a military-civilian power-sharing deal struck after president Omar al-Bashir was ousted last year.
Sudan produced an estimated 93 tons of gold in 2018, Energy and Mining Minister Adil Ibrahim told Reuters in November, which would make it Africa’s third biggest producer after South Africa and Ghana, according to the US Geological Survey.
In new regulations circulated on January 1, the central bank said private mining companies could now export up to 70 per cent of their production provided they deposited proceeds in local banks. They had to sell the other 30 per cent to the central bank.
The companies would also have to sell any foreign currency they earned, unless used for their mining business, directly to the central bank at the official exchange rate, now 45 Sudanese pounds to the dollar. The black market rate is 88 pounds to the dollar.
Gold traders in Sudan welcomed the central bank’s move to open up exports but said the government-set exchange rate and the requirement to turn production over to the bank make the trade unattractive.
“We traders ask to be allowed to export the entire quantity of gold and refuse to give 30 per cent to the Central Bank of Sudan,” said Mohamed Tabidi, a prominent jeweller and one of Khartoum’s main gold dealers.
“We ask that the central bank deal with us according to the market price and via direct negotiations.” The official exchange rate was unrealistic, he said.
Before the new regulations, the central bank bought gold at a discount to the international price. As a result, an estimated 70-80% of it was smuggled abroad, according to government officials.
The smuggling has hurt. The government lost its main source of foreign exchange when South Sudan seceded from Sudan in 2011, taking most of the country’s oil with it.
Gold production in the north began soaring just as oil income fell off, but because so much was smuggled abroad, the state was deprived of foreign exchange.
The central bank has been printing Sudanese pounds equivalent to $200 million a month to buy and export gold to finance subsidised commodities, mainly fuel and wheat, the finance ministry said in a 2020 budget statement last week.
“This has led to the loss of control of the economy and the transformation of the economy into a state of explosive inflation and near freefall of the exchange rate in the parallel market,” it said.
Any company can export gold under the same conditions al-Fakher followed, finance minister Ibrahim Elbadawi told the Sudanese News Agency.
One banker said the new system could ultimately succeed. “If they stick to it without changing the rules every now and then, and the players are truly private sector, then yes, it will work.”
By The Eastafrica