The Impact of the New Banknotes

Mohamed Abdalla

Since 2018 Sudan witnessed scarcity of liquidity, caused by the new financial policies adopted by the Central Bank of Sudan, which specified certain amount of money to be withdrawn from the banks, this policy has created a new economic issue, the circulation of money in banks is withdrawing, people don’t deposit their money in banks, also the inflation rate has been doubled, alongside the deterioration Sudan currency before the US dollar.
Recently the government has announced new banknotes of 100, 200 and 500 SDGs will be released, so how does it affect positively to solve the crisis of liquidity, economists and financial commentators have diagnosed the impact of the new currency on the inflation and the currency exchange rate.
The importance of issuing a new banknotes comes from the deterioration of SDG before US dollar, 50 SDG is the biggest currency, it equals nearly one dollar, some economists say, how does the economy go while the biggest banknote figure equals one dollar, ten years ago US$ 1 equals 25 SDG, now after the new 500 SDG currency the rate exchange will be US$ 10 for 500 SDG, the economic expert Abdallah Al-Ramadi who stated to Al Sayha newspaper has downplayed the importance issuing new banknotes, saying, the reasons that caused the liquidity scarcity is not justifiable, he added that the government can’t solve the problem unless it take it comprehensively, pointed out that both inflation and the deterioration of SDG value were considered as a main factors behind the uprising of prices.
Economically the required liquidity volume is 100 billion SDG, while the whole amount of circulated money is 400 SDG, commentators say, if the decision of money withdrawal restriction for limited time it can contribute to good results, the Central Bank of Sudan has cancelled the decision, but the clients lost confidence.
The undersecretary of banking science college Dr. Ali Khalid has recently reported to media that the new banknote will reduce the cost of printing new banknotes, inflation and money supply, but he assured that it doesn’t solve the liquidity crisis, pointing to the restoring of confidence as a major solution.
The economic expert, Mohamed Al Nair who was stated to Al Sayha informed that 90% of money is outside the banking system, the government pumped the new banknotes to solve the liquidity scarcity, he warns that new banknotes required high security measures to protect it from counterfeiting, the electronic payment system is required to end the scarcity problems, but it is so difficult to be applied throughout the whole country.
The only solution to the current financial crisis is to restore confidence between the banks and the clients; otherwise the new banknotes will not be an alternative.

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