Economic Expert: Printing Larger Denominations Would Have Been Better
Sudan Events – Rehab Abdullah
Economic expert Abu Ubaida Ahmed Saeed Mohamed stated that issuing new currency notes is an attempt by the Central Bank to curb inflation. However, he argued that inflation is a systemic issue rather than a mere phenomenon, stemming from imbalances in production, financial, economic, and monetary policies. He emphasized that printing new currency alone will not solve the problem.
Abu Ubaida acknowledged some benefits of printing new currency, such as integrating cash flow into the banking system. However, he noted its drawbacks, including signaling a depreciation of the national currency, which could prompt individuals and companies to convert their savings into foreign currencies, further devaluing the Sudanese pound. He added that the currency replacement process presents an opportunity to expand the tax base and strengthen anti-money laundering and counter-terrorism financing laws by linking customer balances to their sources of income. This would necessitate opening bank accounts for the replacement process, posing challenges in areas without banks or Central Bank branches.
Abu Ubaida highlighted the cost of printing new currency in foreign currency as a significant downside, particularly given Sudan’s wartime situation. He suggested that printing larger denominations from the outset would have been more cost-effective, as seen in West African countries with lower inflation rates. This approach could reduce future costs and facilitate bringing the entire monetary system under the banking system’s control.
He also pointed out the adverse effects of the ongoing war, such as heightened inflation rates driven by increased cash circulation, with 95% of money already outside the banking system before the war. The conflict, which began in April 2023, exacerbated inflation, counterfeiting, and theft of funds from citizens and banks in affected states.
