Economist: ‘Sudanese have lost confidence in banks’

Leading economist Dr Sidgi Kaballo asserts that the ongoing liquidity crisis in Sudan stems from lack of confidence in the banking system and poor treasury cash-flow management.

Sudan’s Minister of International Cooperation, Idris Suleiman, has remarked that one of the causes of the liquidity crisis in the country is that 90 per cent of the cash mass is being circulated outside the banking system.

However, Dr Kaballo questions this figure. Kaballo explains that the localities, the states, and the centre, receive their levies and royalties in cash rather than cheques, which means a flow of liquidity into the state treasury, however the state pays the salaries of workers in cheques through banks.

Speaking to Radio Dabanga, Kaballo attributed the liquidity crisis in banks to poor management pursued by the banking system. “The first reason is the failure of banks to maintain liquid assets at a certain rate and the second reason is the lack of confidence in the banking system which prompts customers not to save their money in banks,” he said.

The Minister of International Cooperation Idris Suleiman has expressed concern at the emergence of what he called “the liquidity trade and interest transactions taking advantage of the liquidity crisis”.

However, Kaballo said that “the liquidity trade, which the minister considers a kind of usury, is carried out by the National Congress Party traders who have the liquidity now. The liquidity trade contributes to the further deterioration of the Sudanese Pound (SDG).

Management

“Good bank management requires that some assets be liquidated in order to meet the demand for cash by selling semi-liquid assets of bonds and savings rather than to print currency without balance as the government did.”

Minister Suleiman considers the emergence of the parallel economy in gold, the US Dollar (USD), and the British Pound (GBP) as one of Sudan’s biggest economic problems. Kaballo asserts however that printing currency to buy gold is not harmful to the economy and is a perfectly sound procedure, but the question is how to dispose of the produced gold.

Kaballo believes that either the gold produced is smuggled or its revenues from hard currency do not return to the treasury to support the currency or productive activities for the economy.

He said that the state in its current form is not qualified to manage the country’s wealth for the benefit of the people.

Chronic cash shortage

The shortage of cash is now chronic in Sudan. The run-up to Eid El Adha last month saw rushes on banks. The capital Khartoum and its suburbs saw early morning crowds to get a little of their savings to cover their Eid needs to no avail. A bank source said there were no funds in the coffers of the Bank of Sudan to be disbursed to banks to meet customers’ demands.

As reported by Radio Dabanga on August 16, the Central Bank of Sudan (CBoS) issued an oral order to banks reducing the amount of cash withdrawals to customers from SDG 2,000 (*$70) to SDG 1,000 ($35).

* Based on the indicative US Dollar rate quoted by the Central Bank of Sudan (CboS)