Press Release / / 03.25.21

Report: Sudan Moves to Undercut the Black Market Economy

Report: Sudan Moves to Undercut the Black Market Economy

Managed Float of Sudanese Pound Offers Opportunities, Must Be Paired With Economic Reforms, Report Warns

March 25, 2021 (Washington, DC) – In February, the government of Sudan implemented a managed float of the Sudanese pound in an effort to align the country’s rate of exchange and help improve its dismal economic standing. A report published today by The Sentry reveals how undercutting the black market economy in Sudan, a country over $60 billion in debt, reverses a corrupt scheme that for decades has crippled Sudan’s economy and benefited Sudan’s elite at the expense of the public. The report further warns that broader economic and governance reforms must accompany the float of Sudan’s currency in order to create a stable and sustainable economy.

The disparity between the official and black market exchange rates has provided an avenue for corrupt businesses to take advantage of the system and channel illicit funds out of the country. It contributed to systems of abuse that have left the current civilian-led transitional government with little oversight of state-owned enterprises and control of only 18% of the nation’s public funds.

Suliman Baldo, author of the report and Senior Advisor at The Sentry, said: “The devaluation of the Sudanese pound by nearly 600% inflicted additional hardship on a population already reeling under the second highest inflation rate in the world. The Sudanese people have endured these hardships with the expectation that a healthier economy will ensure better standards of living and other development returns. It is time for the government to take control of public funds by ending the long-tolerated practice of state-owned enterprises keeping their revenues off-budget and by adopting other strategic approaches for mobilizing internal resources.”

John Prendergast, Co-Founder of The Sentry, said: “Alignment of the exchange rate will only be truly effective if it is accompanied by further measures to rid Sudan of the remnants of the kleptocratic Bashir regime. The civilian-led transitional government must counter the pervasive corruption that prevents it from delivering improvements in the daily lives of the Sudanese people. With support from the US, Europe, and other friends of Sudan, meaningful reforms are possible.”

Oliver Windridge, Senior Advisor at The Sentry, said: “The move by Sudan’s civilian-led transitional government to realign the exchange rate is welcome and necessary—another sign that Sudan is moving away from the kleptocratic regime of former President Omar al-Bashir. While the managed float may result in short-term challenges, it will increase international confidence in Sudan as a place to invest, which will only improve the Sudanese economy in the long run. In order to disrupt a system that under Bashir was designed to line the pockets of regime insiders, the exchange rate realignment must be followed by further economic reforms that seek to increase transparency and close loopholes for corruption.”

Report recommendations

The exchange rate policy is an essential and welcome reform, but must be followed by immediate steps to help Sudan move to stabilize its economy.

  • Strategically coordinate other economic policies to follow the exchange rate alignment and prevent an overshoot of the dollar price. Sudan should rationalize the country’s imports, eliminate tax exemptions for all parties including state-owned enterprises, strictly enforce a Treasury Single Account (TSA), stop printing money, and find creative ways to increase revenues.
  • Fight pervasive economic corruption within Sudan. By improving the efficacy of Sudan’s legal and regulatory regime for countering money laundering, terrorist financing, and illicit financial flows, the government could deliver on development outcomes and social services.
  • Ensure full compliance with Sudanese laws and implement heightened scrutiny. Donors, foreign investors, and banks should ascertain the beneficial ownership of potential clients and commercial and service partners. Banks and financial institutions should heighten due diligence for transactions involving Sudan, particularly those that involve oil or gold exports. The US could identify state-owned enterprises in Sudan that deny the treasury access to their books and proceeds as money-laundering risks.

Read the full briefing: https://thesentry.org/reports/sudans-exchange-rate/

 

For media inquiries or interview requests, please contact: Madeline Robinson, Communications Associate, mrobinson@thesentry.org

About The Sentry

The Sentry is an investigative and policy team that follows the dirty money connected to African war criminals and transnational war profiteers and seeks to shut those benefiting from violence out of the international financial system. By disrupting the cost-benefit calculations of those who hijack governments for self-enrichment, we seek to counter the main drivers of conflict and create new leverage for peace, human rights, and good governance. The Sentry is composed of financial investigators, international human rights lawyers, and regional experts, as well as former law enforcement agents, intelligence officers, policymakers, investigative journalists, and banking professionals. Co-founded by George Clooney and John Prendergast, The Sentry is a strategic partner of the Clooney Foundation for Justice.