Sudan's currency hits low as oil row hits economy

KHARTOUM (Reuters) - Sudan's currency fell to a record low on the black market on Monday as people rushed to convert their savings into dollars, fearing a dispute with South Sudan over oil revenues could worsen the country's economic crisis.

Sudan's economy was thrown into turmoil when South Sudan declared independence in July under a 2005 peace deal, taking with it three-quarters of the oil production -- the lifeline of both economies.

The landlocked South needs to export its crude through northern pipelines but both sides have failed to agree on a transit fee. Last week, Juba shut down its oil output to protest against Khartoum seizing some of its oil.

Bilateral talks are due to resume this week but no compromise is in sight. Sudanese President Omar Hassan al-Bashir warned on Friday tensions could lead to war.

Bankers say the shutdown of the oil - by far the main foreign currency earner in both countries - would worsen a scarcity of dollars and drive up inflation. Oil made 90 percent of exports in the unified Sudan.

Black market traders said the Sudanese pound on Monday hit its lowest point against the dollar since the currency was launched in 2007.

A dollar bought 5.2 Sudanese pounds on Monday, compared to 3.3 in July, dealers said. The official rate is around 3.

Sudan has not seen the kind of "Arab spring" uprisings that rocked neighbours Egypt and Libya, but public anger is rising over high food inflation and unemployment. There have been small protests in Khartoum.

Demand for the dollar, and controls on the official exchange rate, have turned the black market rate into a benchmark. Even large companies have started trading money there, meeting dealers in derelict shops to dodge security.

Sudanese citizens, tired after years of wars, inflation and U.S. sanctions, said they are trying to shift savings into dollars, expecting the pound will lose further ground.

"I am transferring my salary and any savings I have into dollars to preserve the value," said a Sudanese man working in a telecom company who gave his name as Ahmed.

"I even try shifting small amounts. If I don't do this I lose and lose money," he said.

Bashir said on Friday the government wanted to erase the need of a black market by bringing back the rate to 3 by the end of the year as Sudan would attract more hard currency.

But several dealers at exchange bureaux and on the black market expected more pressure on the pound in coming weeks as demand dollars rose, far outstripping stocks. Sudan's central bank has not reveal the size of the country's hard currency reserves.

"There is a big scarcity of dollars," said one dealer.

DESERTED BANKS

In Khartoum's upmarket Afra shopping mall, four officially sanctioned exchange bureaux - which are forced by the central bank to offer the official rate - were deserted.

"We have no customers here, you can see this," said the head of a large exchange bureau, pointing to his empty shop.

"If I had dollars to change I would go to the black market too," he said, declining like others to be identified. "Exchange bureaux don't have enough dollars anyway."

The central bank has imposed restrictions on foreign companies exporting profits. Kuwaiti telecoms firm Zain has said its Sudan unit has been unable to repatriate any profits for four years.

Foreigners working in Sudan struggle to transfer salaries home, even if they are entitled to it.

"It's difficult," said a man from Liberia working for the United Nations, while standing in front of a closed money transfer firm.

"You come to an exchange bureau and they tell you 'We're not ready' or they only handle this until 09:30," he said.

At a foreign money transfer firm, a supervisor said staff was under central bank orders to allow Sudanese to transfer only $150 abroad a week.

"Foreigners need to go to special branches," he said.