Sudan Conflict Deals New Blow to Stagnant Economy

Sudanese residents shop in a bazaar in Khartoum, Sudan, May 4, 2019. REUTERS/Umit Bektas/File Photo
Sudanese residents shop in a bazaar in Khartoum, Sudan, May 4, 2019. REUTERS/Umit Bektas/File Photo
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Sudan Conflict Deals New Blow to Stagnant Economy

Sudanese residents shop in a bazaar in Khartoum, Sudan, May 4, 2019. REUTERS/Umit Bektas/File Photo
Sudanese residents shop in a bazaar in Khartoum, Sudan, May 4, 2019. REUTERS/Umit Bektas/File Photo

The conflict shaking Sudan has dealt a crippling blow to the heart of the country's economy in the capital Khartoum, as well as disrupting internal trade routes, threatening imports and triggering a cash crunch.

Across swathes of the capital factories, banks, shops and markets have been looted or damaged, power and water supplies have been failing, and residents have reported steep price rises and shortages of basic goods.

Even before the fighting between military factions broke out on April 15 Sudan's economy had been in deep stagnation following a crisis stretching back to the last years of Omar al-Bashir's rule and turmoil after his overthrow in 2019, Reuters said.

Tens of thousands have now fled the violence in Khartoum and its sister cities of Bahri and Omdurman, while millions more have sheltered at home as shelling and air strikes rattle across neighborhoods.

Transport of goods and people has slowed as troops and sometimes gangs roam the streets. Telecom networks have become unreliable and some say they have begun rationing food and water.

"We are afraid, and we are suffering from high prices, shortages, and lack of salaries. This is a war on the citizen," said Ismail Elhassan, an employee at one Khartoum business.

Sudan, already an important exporter of gum arabic, sesame, peanuts, and livestock, has the potential to be a major agricultural and livestock exporter and logistics hub.

But the economy has been held back by decades of sanctions and international isolation, as well as deep corruption. Most Sudanese have struggled with years of rampant inflation, sharp currency devaluations and sliding living standards. About a third of the 46 million population depends on humanitarian aid.

NO DRIVERS

The conflict has hampered trade flows in and out of the East African nation, since banking and customs procedures are centralized in Khartoum. While the country's main port on the Red Sea is operating, at least one big shipping company, Maersk, says it has stopped taking bookings until further notice.

Imports of wheat, key to Sudan's food security, are becoming more difficult, said one Khartoum-based trader. Imports of white goods such as refrigerators across the land border with Egypt, where tens of thousands of Sudanese have fled northwards, have also slowed, said Federation of Egyptian Chambers of Commerce secretary-general Alaa Ezz.

Michel Sidhom, a supply chain manager at a trading company operating in Egypt and Sudan, said its business in Sudan had "completely stopped" as exports of Egyptian fertilizers and flour, typically about 10,000 tons per month each, were halted.

Egypt, Sudan's second biggest destination for livestock, a key export, said it is looking to diversify its sources as a result of the unrest.

Sidhom says his company's traders in Sudan have left Khartoum, and no drivers are willing to risk transporting their goods to the capital city.

"They shut down and left Khartoum until further notice. Whoever stays in Khartoum stays in a battlefield," he said.

SCARCITY, HIGH PRICES

Shortages of items such as flour and vegetables have been reported in Khartoum along with price hikes. Long queues form in front of bakeries and supermarkets in the capital.

The price of one kilogram of lamb has jumped nearly 30% to 4,500 pounds ($7.52), according to a Reuters reporter, while the price of a kilogram of tomatoes doubled to 1,000 pounds ($1.67).

A supermarket owner in Omdurman blamed the inflation on soaring black market fuel prices. A gallon of scarce fuel can now cost as much as 40,000 pounds ($67), up from 2,000 pounds ($3.34).

Even in places where fighting has abated demand is low, said one Omdurman butcher. "Everyone's left," he said.

Sudan's pound has lost about 600% against the dollar since 2018, prompting many to save money in dollars.

Traders in Khartoum face a cash crunch, and people are increasingly dependent on an electronic wallet app known as Bankak, which often suffers outages, to pay bills.

The black market has become distorted, as relatives abroad seek to sell dollars for Bankak transfers, while those in the country seek dollars for safe keeping.

Currency traders offer dollars at rates as high as 700 pounds ($1.17), while buying at as little as 300 pounds ($0.5014), with prices varying widely as transport and communication becomes more difficult.

Sudan's central bank on Sunday said banks outside the capital were carrying out withdrawal and deposit transactions. Within Khartoum, the army and RSF have accused each other of looting banks. The head of one Khartoum bank said he was trying to temporarily move the bank's headquarters outside the capital.

Another executive said that in years of economic reforms, coups, and protests, "this is the biggest challenge to face the banking system, and threatens an almost complete shutdown," he said.

In the city of Atbara, north-east of Khartoum, crowds of people were seen outside of banks, some of which had imposed withdrawal limits.

"My cash has run out because I haven't received my salary and the banking apps don't work," said Elhassan, speaking from Khartoum.



Dollar Recovers as Trump Proposes Canada, Mexico Tariffs

US Dollar and Euro banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
US Dollar and Euro banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
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Dollar Recovers as Trump Proposes Canada, Mexico Tariffs

US Dollar and Euro banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
US Dollar and Euro banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

The US dollar rose on Tuesday, recovering from its biggest daily percentage drop in 14 months after President Donald Trump suggested the US could impose tariffs on Canada and Mexico by Feb. 1, countering expectations he might take a gradual approach.

Trump told reporters he was thinking about implementing tariffs of around 25% on imports from Canada and Mexico at the start of February over illegal immigrants and fentanyl crossing into the country. He also raised the possibility of a universal tariff but said the US was "not ready" for that yet.

The dollar fell sharply on Monday after Trump's first day in office passed with no specific plans on tariffs and officials said any new taxes would be imposed in a measured way, a major relief for trade-exposed currencies, Reuters reported.

"What you're seeing here, too, is just how crowded long dollar positioning is, so all you need is some ambiguity on the tariff front, and you get these kind of moves," said Erik Bregar, director, FX & precious metals risk management, at Silver Gold Bull in Toronto.

"The bigger outside moves are going to come now if we see some deals happening, some stuff being negotiated and some of this fear getting priced out. The dollar positioning is long enough that you're going to see some smart people trying to bet on a turn."

The dollar index, which measures the dollar against a basket of currencies, rose 0.32% to 108.33 after dropping 1.24% on Monday. It was up as much as 0.68% earlier in the session.

The euro was down 0.22% at $1.0391. The EU is also seen as a likely target for Trump's tariff policies. Sterling weakened 0.26% to $1.2291.

Talking to reporters on Monday, Trump said he would remedy the trade imbalance either through tariffs or by Europe buying more US oil and gas.

A subsequent trade memo directed agencies to investigate and remedy persistent trade deficits. Analysts at Jefferies said the memo should be seen as a "blueprint for what to expect next on tariffs," and April 1 will be an important date as the agency reports are due by that date.

The Canadian dollar weakened 0.8% versus the greenback to C$1.44 per dollar while the Mexican peso was down 0.86% versus the dollar at 20.698.

The inauguration speech focused on emergencies in immigration and energy and a more expansionist foreign policy, including a pledge to take back the Panama Canal.

In his first term in office, Trump had a history of announcing imminent plans for policy proposals, including on healthcare and infrastructure, only for nothing to take shape.

Against the Japanese yen, the dollar weakened 0.11% to 155.42.

The yen has strengthened against the dollar in three of the last four sessions, supported by growing expectations the Bank of Japan will raise interest rates on Friday.

Japan's top currency diplomat Atsushi Mimura said on Tuesday at a Reuters NEXT Newsmaker event that a weak yen would increase inflation by boosting import costs. Mimura said the government and the central bank were communicating closely every day through various channels.

Markets are pricing an 86.2% chance of a quarter-point increase.

The dollar strengthened 0.23% against the offshore Chinese yuan to 7.278. Trump has threatened China with tariffs of up to 60% but did not detail any plans on Monday.

Beijing later set a stronger fix for the yuan, suggesting it was still inclined to take steps to prop up the currency.