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The primary factor impacting Sudan and its currency the Sudanese dinar is the issue of national security as Sudan remains in a 4 year old state of emergency. The net impact of Sudan's civil war has resulted in approximately 2 million people killed with another 4 million being displaced for Sudan's 38.1 million people. In 1997, the United States imposed economic sanctions on northern Sudan as these sanctions currently remain in place. In 1998, the U.S. then accused Sudan of supporting and being a sponsor of international terrorism along with the human rights abuses by the Khartoum government against some of its citizens. Accordingly, the United States fired missiles at a Sudan pharmaceutical factory in Khartoum in response to this war on terrorism as the Americans alleged the factory was producing biological weapons.

On December 20, 2003, peace talks in Kenya between the rebels in the Christian & animist south representing the Sudan's People Liberation Army (SPLA) and the northern Islamic government based in Khartoum have resulted in a historic peace agreement providing for oil profit sharing for both parties. The ruling government located in the capital city of Khartoum has been accused by the United Nations of using helicopter gunships, bombers and artillery against unarmed civilians in order to clear the south-central oilfields for exploration. It is this oil production that began in 1999 in southern Sudan that has provided Sudan with its first trade surplus in the fourth quarter of 1999 which has stabilized the exchange rate for the Sudanese dinar.

POLITICS: President Lt. Gen Umar Hassan Ahmed al-Bashir is in power since 1993 (re-elected in 1996 and in December 2000) of the National Congress Party (NCP) formerly known as the National Islamic Front. NCP is an authoritarian regime consisting of a hybrid of military elite and Arabic northern Islamic leaders since they took over power of Sudan in a 1989 coup. The conflict revolves around several issues including ownership and royaly payments for the nation's oil wealth but also around the Islamic governments imposition of Islamic Law on the Christian and animist south in 1983, hence war broke out. International observers have alleged that this Islamic government has violated human rights which include genocide, forced religious conversion on non-Muslims, forced labor and enslavement against those living in the south. In 1999, consolidation of political power for President al-Bashir took place with the removal of hard line Islamic parliamentary speaker Hassan Turabi is positive for Sudan as al-Bashir wishes to develop good working relations with the world community rather than to promote an isolated Islamic view held by Turabi. Arabic however does remain as the official language for Sudan. In year 2002, peace talks arrived to a cease fire agreement between the government and SPLA southern rebels. Military governments favoring Islamic ideology have ruled Sudan since achieving independence from the United Kingdom and Egypt in 1956.

ECONOMY: improving with the implementation of IMF macro-economic reforms since 1997 as the overall economy is moving forward and advancing with trade slowly being freed up. Financial sanctions by the United Nations have been lifted, although the United States considers Sudan a state sponsor for international terrorism which have led to a degree of isolation for Sudan along with a US economic blockade that remains since implementation in 1997. In QTR4 1999 - 2000, the initial oil revenues took Sudan to a balance of trade surplus after many years of deficit. Large inward and outward capital flows with oil industries monies going abroad to Western oil conglomerates in payroll. Convesely, Sudan has received large monies for FDI into capital investment into the oil industry coupled with remittances from Sudanese citizens working abroad. Sudan enjoys close economic ties with China and Malaysia with their investment in Sudan's oil industry. Finally, Sudan is applying for World Trade Organization membership of which it hopes to secure by year 2008-09.

Oil - Petroleum Industry
The development of oil fields mostly located in south-central Sudan is a key economic policy for future prosperity for Sudan. Oil from southern wells started to flow in the summer 1999 with the government earning $220 million USD a year from this initial production and price level. Unfortunately, some of the oil money in 1999 was being diverted to military hardware (ie. T-55 tanks) by the government in Khartoum. The petroleum industry remains vastly underexplored. The completion of the oil pipeline from Muglad Basin to Port Sudan on the Red Sea was an important economic achievement for Sudan. Oil production is at 209,000 b/p/d (2001) and domestic consumpiton at only 50,000 b/p/d (2001). This represents over $6 billion USD in oil revenue plus natural gas production with 80 percent of the proceeds going to the government in Khartoum before the peace agreement in principle was reached in December 2003 with rumours of a 50/50 split in profits. Available for export is approximately 150,000 b/p/d of crude petroleum with China being a big buyer of Sudanese oil. Natural gas reserves are in the area of 100 billion cubic metres.

Economic Statistics
GDP (2002) as measured by purchasing power parity came in at $52.9 billion USD with equivalent GDP/Capita at $1,400 USD. At market prices, GDP is at $12.5 billion USD (2002), GDP/Capita is at $328 USD (2002). GDP growth 1995-02 has averaged a buoyant 5.0 percent, year 2003 forecasted at 5.8 percent. Year 2003 inflation at 7 percent, year 2002 at 9.2 percent, 2001 at 6 percent, 1999 at 16 percent, 1996 at 130 percent. Exports were are at $1.8 billion USD (2002) with China also a buyer of Sudanese agricultural products with corresponding imports valued at $1.5 billion USD (2002) with Sudan buying many manufactured goods from China. Current account deficit at 7.7 percent of GDP projected for 2003 with large capital imports to fund development of Sudan's domestic oil industry. Fiscal deficit has been steady at 1 percent of GDP. Agriculture employs 80 percent of the workforce. Foreign debt is at $15.8 billion USD for year 2002. Unemployment is at 19 percent with 30 percent of the workforce employed by the government and the majority of 65 percent relying on subsistence and agriculture.

POSITIVE: development of large scale hydroelectric power plants financed by Chinese & Malaysian's as they have major oil & gas interests. A total of over $4 billion USD by international consortium of companies has been invested to develop Sudan's rich energy resources which have included the 1610 kilometre oil pipeline from the oil fields north of Bentiu to Port Sudan on the Red Sea. Increased telecommunications growth including cell phone usage. CONCERN: adverse weather patterns including floods and clean water shortages at times, life expectancy is only 57 years, 2.6 percent adult AIDS rate, only a 61 percent literacy rate.

BANKING SYSTEM: the Central Bank of Sudan is responsible for the management of the Sudanese dinar. Islamic banks are prevalent in Sudan following their ideology of profit-sharing rather than charging interest. Banking system restructuring for Sudan took began in 2001 with policies of bank reforms and goals for stability. The net result has been positive with non-performing loans falling to 14 percent of the lending portfolio. Gross foreign reserves are growing with June 2003 at $425 million USD equivalent to 1.8 months of imports. The banking system has much work ahead including development of capital markets, very little international bank lending is in process.

REGIONAL ANALYSIS: Libya, Egypt, Ethiopia, Kenya, Uganda, Chad, C.A.R, Congo -DRC, Eritrea, Red Sea, Nile River
Sudan accuses Eritrea of supporting Sudanese rebel groups. The region is home to much instability as rebel forces from Uganda, Somalia and Ethiopia have been tied to the Sudanese conflict in one form or another. More trade is now prevalent in Eastern and Southern Africa. Libya has recently announced halting of its weapons of mass destruction programs and allowing for international inspections as negotiated with the United States and the United Kingdom. This is indeed bullish economically for both Libya and Sudan over the long term.

KNOWLEDGE: the civil war appears to be getting closer to being final with compromises from both sides in oil profit sharing along with the south gaining greater autonomy with exemption from Islamic laws from the north. This mandate may help to restore IMF funding and increase its co-operation for assistance. However, other risks are prevalent which may derail this peace agreement between the government and the southern SPLA rebels. Another potential explosive situation that is taking place is in western Sudan in the Darfur region with increased regional and ethnic tensions. In the Darfur region, rebels representing the Sudan Liberation Army (SLA) and another rebel movement known as 'Justice and Equality' are fighting for the so-called injustices and marginalization that they have been subjected too. This conflict although much smaller has displaced 600,000 people. Outstanding questions and difficulties remain unresolved in this dispute.

The potential for a large peace dividend for Sudan will increase foreign donor activity to help rebuild the destroyed infrastructure and to make a move to begin to lower national poverty levels. Some of the estimated $50 billion USD in oil & natural gas reserves may provide for a higher standard of living (health, education, agriculture, economic development, etc.) providing that a competent government provides for long term peace and a responsible distribution of wealth. Sudan is rich in other natural resources including copper, zinc, iron with potential development being beneficial for Sudan considering its warm relationship with China and other Asian countries including Malaysia whom maybe important buyers in the coming commodities boom projected for the next 10 years. If a world perception of stability and peace takes hold, Sudan holds great potential in an exciting tourism industry with many great venues for travellers to visit such as the pyramids located just north of Khartoum, the Blue and White Nile River, the British archietecture inside Khartoum coupled with the Catholic Churches within the city itself.

ISO Symbol 'SDD', Sudanese dinar. At time of review on December 20, 2003, the Sudanese dinar had an exchange value of 258.21 SDD to 1 US-dollar ('USD'). Sudan follows a managed floating exchange rate regime with broad money targetting which was implemented in 2002. The official exchange valuations for the dinar are in a trading band of 257 to 265 SDD to 1 USD. With new oil wealth production beginning in 1999, Sudan implemented a new currency the Sudanese dinar introduced on July 31, 1999 to replace the former Sudanase pound on a consolidation of 10 pounds to 1 new dinar. The defunct Sudanese pound is no longer in use. Sudan has an official exchange rate and a black market rate where reports have the premium to the official rate at upwards of 5,000 percent although BI.C has not confirmed this suggestion for exchange. It has been reported that Sudan has finally achieved relative exchange rate stability since year 2001. At present, there are currency controls in place although restrictions have been removed for current account transactions as Sudan is cautiously opening up and freeing its economy. It is illegal to import and export Sudanese dinars coupled with severe penalties in place for changing money on the black market. Currency must be exchanged at official bureaus or banks as receipts should be kept for proof of exchange. Some credit cards are accepted including American Express and Mastercard.

CURRENCY HISTORY: historical market valuations for the former Sudanese pound include: January 1999 at 2,760 SDD to buy 1 EUR (Euroland euro), December 1998 at 2,298 SDD to buy 1 USD, January 1998 at 1,724 SDD to 1 USD, year 1997 at 1,612, 1996 at 1,250, January 1995 at 424, 1994 at 289, 1993 at 97 and year 1992 at 15. Previous to year 1995, the Sudanese pound was revalued several times. Sudan has had a history of extreme debasement during the civil war with roll backs of 10 to 1 quite common. This history of being a dangerous currency may continue again if peace cannot be sustained amongst all regions of Sudan.

CURRENCY FORECAST: with the horizon looking somewhat positive for increased national security throughout much of Sudan including the oil rich southern regions, BI.C forecasts a more steadier future for the Sudanese dinar unlike its predecessor, the Sudanese pound.
Future oil wealth income will allow monies to be redirected toward needed social programs including education, health, etc. thus providing for a more stable and wealthier Sudan and currency over the long term. Sudan has enormous great potential with its rich natural resources along with its good relationship with China and other Asian nations provide Sudan an important huge market to sell its commodity resources going forward.
UPDATED: December 20, 2003

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