Sudan Consortium Paris, 9-10 March, 2006 Sudan: Unified New National Currency

Sudan ConsortiumParis, 9-10 March, 2006

Sudan:Unified New National

Currency

1- Why the introduction of the new national currency?

* A new unified currency represents an important symbol of national unity.

* The design will carry important messages necessary for peace and unity.

* Donors pledge to contribute in financing the new currency beside the government. * It is a joint project between southern and northern Sudan.

2 - Article 14-9 of the Wealth SharingAgreement:• Provided for the introduction of a new

currency during the interim period.• The design of the currency should

reflect the diversity of the country.• Recognized the foreign currencies in

southern Sudan beside the old Sudanese pound as legal tender until the introduction of the new currency.

3- Article 5 of the Implementation Modalities of the Wealth Sharing Agreement of the CPA stated that:

• committees are to be formed for (i) the currency design and (ii) assessment of currencies in the south;

• the source of finance is mainly donors;

• the responsibility of CBOS is the issuance of the new currency by finance from donors and the government.

4- Currency system in the southern Sudan* Multiple currencies co-circulating

- Kenyan Shilling zone – mainly south east;

- Ugandan Shilling zone – mainly south west;

- Ethiopian Birr zone – east;

- Pre-1992 Sudanese Pound zone;

- Sudanese Dinar zone;

- U.S. dollar in all of the south.

* Currency zones sometimes overlap.

5- Effects of the Multiple Currency System in southern Sudan:

* Now in Sudan, there are six currencies recognized as legal tender.* In the South, prices in the same town and village markets sometimes expressed in more than one currency as a medium of exchange.

* Very complex exchange rate system dominated by cross-rates facing normal people.

* Different functions of money are performed by different currencies.

* Daily economic activities and exchange rendered difficult and expensive.*Development of the south is impeded.

* Economic integration of all of Sudan is also impeded.

* Banknotes in circulation are highly mutilated.

* Market size squeezed.

* Counterfeiting of currency is a real threat.

* Confusion is mounting in people’s mind.

6- Steps taken since signing the CPA:

* Establishment of the Joint Technical Committee for the Design of the New Currency.

* Establishment of the Joint Technical Committee for the Assessment of Currencies in Southern Sudan.

* Currency workshop in Nairobi attended by the two Parties, IMF staff, and a Norwegian government representative.

* Agreement on the name Sudanese Pound.

* Design of the first two denominations with World Bank funding.

* Deciding on the parity and number of denominations of banknotes and coins.

* Printing and minting delayed waiting for finance.

7- The ten principles for the design of the new currency:

(i) Reflect hope and aspirations of the people of Sudan.

(ii) Reflect the peace vision.(iii) Reflect the Sudanese cultural

background.(iv) Reflect the unity of the country in its

diversity.

(v) Reflect the country’s industrial advancement.(vi) Reflect the country’s diverse national natural resources.(vii) Avoid showing religious symbols.(viii) Avoid showing ethnic symbols.(ix) Avoid showing associations to state-of-war and conflict.(x) Avoid showing any human figures.

8- Budget Estimates:

* Preliminary estimation is U.S.$100 million confirmed by the IMF technical assistance mission.

* Budgetary estimates cover:

- Designing;

- Printing and minting;

- Transportation, storage, distribution etc;

- Information campaign; and

- Other logistic expenses.

* The estimated foreign component of the budget (US$72 million) expected to be met by donors.

* The estimated local component of the budget (US$28 million) expected to be met by the Sudanese government.

9- The plan for the currency conversion

* Starts in the second half of 2006.

* Distribution will be all over the country with the bulk of the first batch to go to southern Sudan.

* Conversion of foreign currencies in southern Sudan and of the old Sudanese Pound will be immediate.

* The new Sudanese Pound will co-circulate with the Dinar for a suitable period to guarantee a smooth conversion.

* To start the conversion process, at least 50 percent of the banknotes and coins need to be available.

* The conversion will be in two phases: (i) during June-October 2006;

(ii) during the first half of 2007.

10- The importance of the project and the need for urgent funding: * Maintain the integrity of the CPA.* Reform the distorted monetary system in the country.* Enhance economic activity and development in southern Sudan and the whole country.

11- Finally, four more points: (i) Banknotes and coins will be produced utilizing domestic capacity. In that context, production materials and services will be acquired using World Bank procurement rules.

(ii) The entire currency exchange will be covered by accounting and auditing systems compliant with international standards. This will safeguard transparency and efficiency.

(iii) The CBOS requested the IMF for advice on the introduction of the new currency. The technical assistance report is in the process of finalization and will be shared with donors.

(iv) An evaluation of the entire currency exchange will be done for the purpose of knowledge-building internally and internationally.