ANALYSIS

Two exchange rates in Sudan, one shopping basket

The spread between the official and the market rate is now a household number, not a monetary one.

Shops and parked cars on a commercial street in Omdurman, Sudan
Photo: Noory Taha / Wikimedia Commons (CC BY-SA 4.0)

When an official rate and a market rate diverge, the difference stops being a monetary statistic and becomes a household one. Importers buy currency where they can find it, and the price of flour, fuel and medicine follows that rate rather than the published one.

The gap also decides who gets access. Allocation at the official rate is a subsidy to whoever receives it, and the wider the spread, the larger the prize for being on the list.

Remittances complicate the picture in both directions. They bring in hard currency that the formal system does not capture, and they set an informal reference price that competes with the official one.

Any narrowing is worth reading carefully. Convergence achieved by devaluing the official rate is not the same as convergence achieved by supply reaching the market, though the two look identical in a single monthly print.

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