The Sudanese Pound — A Devaluation in the Shadow of Collapse

Summary

In February 2021 Sudan abandoned the fiction that its pound was worth what the state said it was worth, and devalued it by roughly five-sixths in a single decree. On 21 February 2021 the Central Bank of Sudan adopted what it called a flexible managed float, moving the official rate from a fixed 55 pounds to the dollar to an indicative rate of about 375 pounds — a devaluation of close to 580 percent that finally aligned the official rate with the parallel-market rate ordinary Sudanese had been paying for years. Annual inflation at the time stood around 304 percent in January and would average roughly 359 percent across 2021, among the highest rates in the world. This was not a textbook hyperinflation of the wheelbarrow-of-cash variety, but it was a severe, grinding monetary failure, and the verdict on the record is the dated devaluation that recognized it.

The mechanism began upstream, in 2011. When South Sudan voted to secede and became independent in July of that year, it took with it the great majority of the oil that had underwritten the Sudanese state. Khartoum lost an estimated three-quarters of its oil production — output fell from around half a million barrels a day toward a trickle — and with it the foreign exchange and fiscal revenue on which the government in Khartoum had come to depend. The fields lay mostly in the south; the pipelines and the debts stayed in the north. A petrostate woke up one morning without its petroleum.

What followed was the familiar arithmetic of a government that will not cut its spending and cannot raise its revenue. With oil money gone and access to international borrowing choked off by sanctions and arrears, the Bashir regime financed its deficits the only way left to it: by printing. The pound shed value steadily through the 2010s, the gap between the official rate and the street rate widened into a chasm, subsidies on bread and fuel devoured the budget, and prices accelerated. By 2018 the bread-price grievances that printing had stoked helped ignite the protests that, in April 2019, toppled Omar al-Bashir after three decades in power.

The February 2021 float was the transitional civilian-led government's attempt to stop the bleeding and to qualify for debt relief. It was a real, dated monetary act, and it did narrow the official-versus-parallel gap that had distorted the whole economy. But it arrived into a country already in deep distress, and the relief it promised did not hold: in October 2021 a military coup derailed the transition and froze the international support the reform was meant to unlock. The devaluation is the closed chapter this file records. The crisis it sat inside was not closed, and by 2023 had spiralled into open war.

Timeline

The Fuse: A Petrostate Loses Its Petroleum

Sudan's modern economy had been built, deliberately and recently, on oil. Production came online in the late 1990s, exports began in 1999, and within a decade crude had become the engine of growth, the source of most government revenue, and the country's overwhelming earner of foreign exchange. The trouble was geological and political at once: the great majority of the oilfields lay in the south, in the territory that would vote overwhelmingly for independence in the 2011 referendum that ended Africa's longest civil war.

Independence came in July 2011, and with it the bill. By the US Energy Information Administration's account, the secession left Sudan having lost 75 percent of its oil reserve fields; production that had run near half a million barrels a day for the unified country collapsed on the northern side to a fraction of that. The following year a dispute over pipeline transit fees — the south is landlocked and must export through northern pipelines — shut down much of the remaining flow. A government that had organized its finances around oil rents suddenly had to fund itself without them.

This is the resource curse in its withdrawal phase. The classic curse is what a commodity windfall does to a state: it lets the government stop taxing, hollows out other industries, and ties the budget to a price the state cannot control. Sudan had all of that. What independence added was the shock of the windfall vanishing while the habits it had created — a swollen state, subsidized bread and fuel, neglected non-oil sectors, a security budget that ate the rest — remained fully in place. The revenue was gone; the appetite was not.

The Spiral: Deficits Met by the Printing Press

A government in that position has three options: cut spending, raise revenue, or print. Sudan, isolated by US sanctions and burdened with arrears that locked it out of concessional borrowing, leaned hardest on the third. Through the 2010s the central bank financed the state's deficits by expanding the money supply, and the consequences moved through the economy in the textbook sequence. The pound depreciated; importers and savers fled to the dollar; a yawning gap opened between the official exchange rate the state insisted upon and the parallel rate the market actually used.

That gap was itself corrosive. With the official rate held artificially strong, anyone with access to it could buy cheap dollars and sell them dear, and scarce foreign exchange drained into arbitrage and smuggling rather than into the imports of fuel, wheat, and medicine the country needed. Shortages followed, queues lengthened, and prices climbed. By 2018 the price of bread had become a political detonator: subsidy cuts and inflation drove the protests that toppled Bashir in April 2019.

The arithmetic only worsened after the transition began, as global shocks and continued monetization pushed annual inflation past 200 percent in 2020 and beyond 300 percent by early 2021. It is worth being precise about scale, because the register of this file demands it: Sudan's was severe, triple-digit annual inflation — a currency losing the bulk of its value over a few years — not the monthly doublings of Zimbabwe or Hungary. The cruelty was no less real for ordinary holders. A teacher's salary, a trader's float, a pensioner's savings all bought a fraction by year's end of what they had bought at the start, and there was no indexed wage or dollar account to shelter most people from it.

The Five Factors

Aftermath

The float did not stabilize the pound, and the human ledger only worsened. Inflation that averaged around 359 percent in 2021 meant that wages, savings, and fixed incomes denominated in pounds bought steadily less; the people with the least access to dollars — pensioners, salaried workers, the rural poor — absorbed the loss most heavily. The debt relief the reform was designed to unlock was suspended after the October 2021 coup, leaving Sudan with the costs of devaluation and few of its intended benefits.

Then came the catastrophe that put monetary policy beyond the point of relevance. In April 2023 war broke out between the Sudanese army and the Rapid Support Forces, displacing millions, shattering the banking system, and tipping the country into one of the world's gravest humanitarian crises. The exchange rate continued to deteriorate, and the central bank issued ever-larger notes, but these are footnotes to a far darker story. This file closes only the narrow chapter it can honestly close: the dated 2021 devaluation that acknowledged a currency hollowed out by the loss of its oil and the printing that filled the gap. It makes no claim that Sudan's crisis is resolved. It plainly is not.

Lessons

References

• Sudan devalues currency in effort to access debt relief Al Jazeera
• Sudanese pound Wikipedia
• Background Reference: Sudan and South Sudan U.S. Energy Information Administration
• The Sudan devalues sharply the exchange rate FAO GIEWS
• Timeline: Sudan's political situation since al-Bashir's removal Al Jazeera