Liberalization of Sudan Currency A Nightmare for Egyptian Traders
Author: almasryalyoum Posted May 31, 2012
The Sudanese government's decision to strengthen its currency against the dollar has caused Egyptian exports to Sudan to collapse due to severe inflation in their market and Sudanese importers' inability to ensure enough currency, exporters said. At the same time, Egyptian importers have said that this has helped lower import prices.
Mahmoud Hindi, head of the Egyptian-Sudanese Business Council, said that "the volume of trade exchange between the two countries is very small. It does not exceed 3 billion pounds per year, which is unequal to the magnitude of the political relationship between Egypt and Sudan."
He said that Sudan, ironically, prevented some 19 Egyptian commodities from entering its markets. Following an investigation, it turned out that Sudan did so because China is supplying the same goods at lower prices. Therefore, the business council is calling for support for goods that are exported to Khartoum, since it is the true gateway to Africa.
Notably, the Sudanese pound has risen in local exchange markets to 95 pennies (selling) and 120 pennies (buying) against the pound ever since the Sudanese government decided to allow the currency to float. Mohamed Miftah, an accountant at the Egyptian Company for Exchange, justified the decision based on the recent increase of demand for Sudanese currency by importers and speculators who expect its value increase again.
Hindi said that the business council is currently working with Sudan's companies to build a database within a formal framework that will guarantee the right to their dues at a later stage. The business council urged Egyptian banks to be more widespread in Sudan, as businessmen are unable to find banks where they can convert their money. Instead, they carry their money in bags when they return, he said.
The Central Bank of Sudan had floated the currency against the dollar, reaching 5.6 Sudanese pounds per dollar after it was traded in Khartoum banks for 2.7 Sudanese pounds.
Ahmed Saqr, a member of the Alexandria Chamber of Commerce and an exporter of juices, said that the liberalization of the Sudanese currency has caused a major collapse in Egyptian exports, exceeding 50%. Some companies have stopped supplying altogether due to severe inflation and the difficulty of ensuring foreign currency after the liberalization of the Sudanese pound.
Saqr said that North Sudan is not the only one affected by this crisis; Egyptian exports to South Sudan have also sharply declined due to the high inflation plaguing the south after the cessation of oil exports, political disputes and the wars between North and South Sudan. This prompted both Northern and Southern Sudanese importers to minimize their contracts and ask Egyptian exporters to reduce their prices.
He pointed out that exporters are currently unable to offer promotional discounts due to already-high production costs in Egypt.
Hasan Fendi, a board member of the Chamber of Food Industries and a candy exporter, voiced the same opinion. He said that contracts with Sudan had declined sharply over the last few months, and that most were accompanied by requests to lower prices to compensate for the losses that the liberalization of the currency caused for importers.
He added that Egyptian exporters have to launch a new marketing study for this issue, noting that exporters can reduce the weight of containers or use less-expensive packaging materials. This way, they can offer lower prices without risking a loss, while still maintaining a presence in this important market.
Hamdi al-Najjar, head of the General Division of Importers, said that despite the significant damage that Sudan has done to Egyptian exports, overall imports have boomed and there has been a significant price reduction because the local currency has lost its value. This should benefit importers and will lead to lower prices for imported goods.
However, Adel Abu Sareeh, a camel importer, said that the collapse of the Sudanese currency was at the root of a 1000-pound increase in the cost of importing camels, due to the difference between the sale price and purchase price when using Sudanese currency against the pound. In fact, the difference between the Sudanese and the Egyptian pounds rose by 20 in purchase transactions.
He explained that importers use Sudanese currency to buy camels. Thus, every time they buy Sudanese pounds to finalize a deal, they lose about 20 pounds. Moreover, they lose when they re-sell their surplus of Sudanese currency to the Bank of Egypt.
Read More: http://www.al-monitor.com/pulse/business/2012/05/exporters-floating-sudanese-poun.html