Sudan's central bank makes u-turn on gold exports [delayed]

Sudan's central bank makes u-turn on gold exports [delayed]

In a bid to shore up the government’s limited fiscal resources, the Central Bank of Sudan recently awarded private gold merchants’ greater autonomy to sell to overseas markets.

Until last month, Sudan’s Central Bank was the only formal channel for miners to export the precious metal. On January 1, however, acting Central Bank governor Badr al-Din Abdel Rahim ended the Bank’s monopoly on gold purchases and eased its grip on the country’s export market.

As Sudan attempts to navigate a complex military-civilian political transition, the government remains in desperate need of funds. Mr Rahim’s initiative is designed to shore up the country’s US dollar reserves and crack down on illegal smuggling.

Earlier this year, a government paper paved the way for mining companies to export up to 70 percent of their gold output, conditional on proceeds being deposited in local banks. The remaining 30 percent of foreign exchange earnings will need to be stored at the Central Bank.

While the industry response has been largely positive, many traders insist that the exchange rate used to buy foreign currency proceeds is undervalued (the black-market rate is currently two-times the official government rate).

Before the new law, Sudan’s Central Bank purchased gold from domestic companies at a steep discount. In response, merchants would frequently side-step customs regulations and smuggle gold outside of Sudan - Africa’s third largest gold producer.

After the secession of South Sudan in 2011, and with it the oil income that constituted the bulk of foreign exchange earnings, the spotlight shifted to gold. Indeed, gold production took off just as oil exports came of the boil. However, because so much gold was smuggled abroad, the state was deprived of these funds.

The Bank’s move will be welcomed by Sudan’s cash-strapped Treasury, keen to take advantage of the current gold price, around $1,550 an ounce. By liberalising the export market, the measure aims to provide desperately-needed funds to the crisis-struck nation.