Sudan will allow foreign exchange bureaux and banks to trade dollars at a level close to the black market rate, effectively devaluing the pound, a senior banking official said on Friday.

Sudan's economy has been battered since the country lost three-quarters of its oil production to South Sudan when the latter became independent in July. Even though the pipelines are in Sudan, the two have been unable to agree on how much the South should pay to transport its oil.



South Sudan shut down its output of 350,000 barrels a day in January after Sudan started seizing oil for what the latter calls unpaid fees.



The loss of oil revenues, the main source of state income and dollar inflows, has hit the Sudanese pound hard. One dollar bought 5.5 pounds on the black market on Friday, way above the official rate of around 2.7. The rate hit 6.2 during a military confrontation with South Sudan last month.



To close the gap the central bank will allow foreign exchange bureaux and banks to use rates close to the black market, said Abdel-Moneim Nur al-Din, deputy head of Sudan's association of foreign exchange bureaux.



"From Monday on, foreign exchange bureaux can trade dollars at a rate of 5.2," he told Reuters, adding that banks could set a rate of 4.9.



"We expect the situation to stabilise. We have eight million Sudanese living abroad whose money goes to the black market. With the (new) rate we can attract Sudanese workers to send their money to families through banks and official organisations," he said.



He said the central bank, which could not be immediately reached for comment, had assured it would provide sufficient dollars supplies.



The central bank has for long time tried to clamp down on the black market which has become the unofficial benchmark for import firms and banks.



As a result of a dollar scarcity inflation shot up to 28.6 percent in April, more than triple the level of November 2010, as Sudan needs to import much of its needs.



Import firms have turned to the black market for dollars as banks and exchange offices struggle to meet supplies.



Nur al-Din said banks were allowed to trade dollars at 4.9 for letter of credits required by import firms. Essential goods such as wheat or medicine would be still guaranteed by the finance ministry at the official rate to keep prices down.



Deputy central bank governor Badr el-Din Mahmoud told al-Sudani newspaper he expected the currency situation to stabilise after the central bank managed to get new supplies. He did not elaborate.

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