Thursday, August 26, 2010

Sudanese Monetary Policy

Sudan's Central Bank is now paying southern Sudan in local currency instead of international, reducing southern Sudan's ability to import.
The Minister of Finance in the South has publicly stated that “It is an attempt by the National Congress Party to stifle the southern Sudanese economy” (AFP). 
Roving Bandit, however, believes it may just be monetary economics at work: the Central Bank seems to have temporarily set up a fixed exchange rate that has grown more and more expensive to maintain. Abandoning sending foreign exchange to the south may be part of stabilizing the exchange rate. The evidence below:


I point out, however, that it could be the constellation of reasons that is important. If you want to weaken the South without looking bad, this is one way to do it, for example.

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