Sudan floats ‘gold Sukuk’ to ease liquidity crunch

Sudan has begun marketing a SDG3 billion (US$165.37 million) ‘gold Sukuk’ facility to support its weakened pound, undermined by a shortage of foreign currencies and its unraveling economy, which is struggling to recover from 20 years of US sanctions that ended in October last year. MARC ROUSSOT has the story.

A total of three million securities worth SDG1,000 (US$55.12) each will be sold to both retail and wholesale investors until the 31st October, Sudan News Agency reported without specifying the tenor of the Sukuk Zahab — Zahab means gold in Arabic. IFN understands that this would be the first time Sudan floats such a paper. Sudan Financial Services Company, 99% owned by the Central Bank of Sudan and 1% by the Ministry of Finance, will manage the transaction.

The proceeds will be utilized to purchase gold mined in the country, explained Khamis Abu Amer, the general manager of Sudan Financial Services Company. The precious metal will then be sold to international investors and the hard currencies obtained from the trade will help Sudan swell the empty coffers of its apex bank.

Since the beginning of the year, Sudan’s foreign exchange reserves crisis has been deepening, leading President Omar Al-Bashir’s administration to take drastic measures from devaluation to daily withdrawal limits.

Sudan’s downfall is a direct consequence of the independence of its former nemesis, South Sudan, back in 2011, which deprived the northeast African country from two-thirds of its oil reserves, its main stream of foreign currencies. In 2016, crude petroleum represented 11% of Sudan’s exports while it was 82% in 2011, according to the United Nations International Trade Statistics Database.

To offset the damage inflicted by the loss of its oil exports, Sudan embarked on a gold rush, increasing its exports of the precious metal from 33.7 tonnes in 2011 to 105 tonnes last year, and is targeting 140 tonnes in 2018. In 2016, gold constituted 57% of Sudan’s exports, up from only 7.3% in 2011.

The collapse of Sudan’s economy also sparked a recent cabinet reshuffle and the removal of Mohamed Othman Rukabi from his positon as the finance minister. Mohamed had reportedly announced in April the issuance by the end of the year of a maiden international Sukuk facility worth nearly US$1 billion whose funds would be utilized to finance the country’s budget.

This article first appeared in IFN Volume 15 Issue 42 on the 17th of October 2018