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Cablegate: Out with the Dinar, in with the Pound

VZCZCXYZ0009
PP RUEHWEB

DE RUEHKH #1049/01 1840909
ZNR UUUUU ZZH (CCY TEXT ADDDOEFF WSE8272)
P 030909Z JUL 07
FM AMEMBASSY KHARTOUM
TO SECSTATE WASHDC PRIORITY 7781

UNCLAS KHARTOUM 001049

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR AF/SPG, AF/EPS, EB/IFD, AND EB/ESC
DEPT PLS PASS USAID FOR AFR, AND ALSO PASS USAID

C O R R E C T E D C O P Y (TEXT)

E.O. 12958: N/A
TAGS: PREL PGOV EFIN ECON EAID SU
SUBJECT: OUT WITH THE DINAR, IN WITH THE POUND


1. (SBU) SUMMARY: On June 30, the Central Bank of Sudan came one
step closer to converting its currency, announcing that the dinar is
now invalid in commercial transactions. Although the general public
can still trade in dinars at banks until September 1 of this year,
vendors are no longer obligated to accept the dinar. While widely
regarded as a success, there have been a number of problems with the
currency upgrade, which include: long and restless lines at banks;
minor skirmishes between customers and shopkeepers who have refused
to accept the dinar; the presence of counterfeit pounds; and
vendors' acceptance of dinars and other regional currencies after
the 30th of June. Despite these problems, the currency upgrade
appears to be on track, and could represent one of the first and
most tangible accomplishments of the Comprehensive Peace Agreement
(CPA). More importantly, this one currency for all of Sudan carries
not only the symbolic power of money, but also embodies the unity of
Sudan. END SUMMARY.

2. (U) The Wealth Sharing Agreement of the CPA stipulates (Section
14.9) that the Central Bank of Sudan "...shall adopt a program to
issue a new currency as soon as is practical during the Interim
Period." The Republican Decree #275 of 2006 and Article 19 of the
charter of the Central Bank of Sudan provided further support for
implementing these changes. Since January of 2007, the Central Bank
of Sudan has gradually removed dinars from circulation and
introduced different denominations of the pound, beginning with one
and five pound notes and ending with the largest bills.

--------------
COUNTERFEITING
--------------

3. (U) During this vulnerable transition period, there have been
reports of attempts to counterfeit the pound. Being unfamiliar with
the new currency, vendors and consumers are particularly susceptible
to accept counterfeit bills. The Central Bank of Sudan has not
released estimates on the amount of counterfeited currency.
However, one article from the Sudan Tribune from April 2007 noted
that authorities in Rumbek, Marana, and other southern towns were
struggling to identify counterfeit dinars at trading stations, and
to a lesser extent new counterfeit pounds. Despite these reports,
according to experts from the International Monetary Fund, the new
currency is reasonably secure from counterfeiting. The bills
include the latest technology including two metallic security
threads in every bill, watermarks, and color shifting ink.

-------------------
POUNDINGS AND LINES
-------------------

4. (U) On the first and second of July, most Sudanese newspapers
carried stories about the June 30 cutoff for transactions of the
dinar. The Sudanese English language "The Citizen Times" reported
that fighting broke out in Bentiu when a vendor dutifully denied
pounds as legal tender. The same article also reported that several
hundred customers lined up outside the Bank of Southern Sudan on
Saturday, waiting to convert dinars and foreign currency for the new
Sudanese pound. Additionally, on June 19, the Arabic daily
Al-Sudani noted that many banks outside of Khartoum and Juba did not
receive a sufficient amount of new currency for the conversion.
Observers also noted that in addition to this shortage, the number
of citizens participating in the money exchange did not meet
expectations. The article urged the central bank to assume a more
proactive role in exchanging currency, adding that commercial banks
are not helping the effort.

------------------
DINARS STILL USED?
------------------

5. (U) Regardless of the June 30 cut-off date for the dinar, it
appears as though the notes are still being accepted as valid
currency in commercial transactions. Two and three days after the
cutoff, locally engaged staff reported witnessing and partaking in
transactions in dinars. Furthermore, the acting Assistant Governor
and Director for Administration and Finance for the Bank of Southern
Sudan, Mathian Ajing Jupur, warned the public against using dinars
on the black market. He added that some money changers have
attempted to profit from the confusion by providing a lower exchange
rate than the Central Bank of Sudan. In Southern Sudan, other
regional currencies such as the Kenyan and Ugandan shillings, the
Ethipian Birr, and the Eritrean Nagfa continue to be used.
---------------
SYMBOL OF UNITY
---------------
6. (U) From its initial project proposal at the Multi Donors Trust
Fund, the new Sudanese pound has been envisioned as a new symbol of
unity. The languages, art, and other elements included on the bills
were intended to reflect the cultural and geographic diversity of
Sudan. Containing architectural landmarks, industrial projects, and
nature scenes, the bills intentionally depict scenes from both the
north and the south. Most Sudanese have responded favorably to the
initiative, as many southern Sudanese harbored negative feelings
towards the northern centric and Arabic laden dinar. As Anthony
Lino Manrana, South Sudan's minister for commerce, trade and supply,
stated in an April 19 Sudan Tribune article, "We believe the dinar
does not represent the Sudanese people, it was forced on the people
of the south."

7. (U) Two more important dates for currency reform will follow.
On August 1, patrons will no longer be able to trade in currency
through commercial banks, restricted to replacing all currency at
the Central Bank of Sudan. On September 1 the dinar will no longer
be considered legal tender, null and void in all of Sudan. Dinar
coins will continue to be accepted until the end of 2007. COMMENT:
While there have been difficulties in this currency conversion,
overall the project remains largely on schedule and should be
celebrated as a step towards the further integration, development,
and stabilization of Sudan. END COMMENT.
FERNANDEZ

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