April 14, 2012 / 12:27 PM / 7 years ago

Sudan pound hits low after south takes oilfield

KHARTOUM (Reuters) - The Sudanese pound has hit a historic low on the black market as people rush to move savings into dollars, fearing an economic crisis will deepen after South Sudan seized a vital oilfield, money traders said on Saturday.

Sudan has been gripped by economic crisis since South Sudan seceded in July, taking with it three quarters of the formerly united country’s oil output, and local people find it hard to buy foreign currency legitimately.

The loss of oil revenue has driven up the cost of imports and fuelled food inflation.

In a shock to many Sudanese, South Sudan’s army seized the Heglig oil field on Tuesday as fighting in the poorly-defined border area escalated. Juba said on Saturday it had repulsed an attempt by Sudan to retake Heglig.

Money traders said the seizure had prompted many people to buy dollars, fearing foreign currency might become even more scarce if the government has to import more fuel.

Heglig used to produce about half of the country’s roughly 115,000 barrels a day of oil output but production there has stopped because of the fighting, officials say.

On Saturday, one U.S. dollar bought 6.1 pounds on the black market, a historic low since the Sudanese pound was introduced in 2007, the traders said. Last week the greenback fetched about 5.6 pounds. The official rate has remained about the same, at around 3 pounds to the dollar.

“There are no dollars in the market,” one trader said. “There is no one in the market who will sell you dollars.”

Some banks give limited amounts of foreign currency at the official rate in certain circumstances such as for travel and for business purposes, but it can be a complicated and lengthy process.

This means many Sudanese people and businesses rely on the black market to get dollars. Money traders often operate in normal shops, using a business such as a clothing store or a supermarket to give an official cover for the black market trade.

A Sudanese businessman, who asked not to be named, said on Saturday his mobile phone import business was suffering because he could not find enough dollars to keep it going.

“There is no way for me to do my business. There is no way to get dollars anywhere,” he said.

Landlocked South Sudan had already shut down its own roughly 350,000 barrels-per-day oil production in January in a row with Khartoum over how much it should pay to export via pipelines and other northern infrastructure to a terminal at Port Sudan.

The border fighting has dampened hopes that the two sides will soon reach an agreement on oil payments and other disputed issues through African Union-brokered talks. Khartoum said it was pulling out of the negotiations on Wednesday.

Reporting by Khalid Abdelaziz; Writing by Alexander Dziadosz; Editing by Ruth Pitchford

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