VZCZCXRO6145
PP RUEHROV
DE RUEHKH #0477/01 0860742
ZNR UUUUU ZZH
P 270742Z MAR 07
FM AMEMBASSY KHARTOUM
TO RUEHC/SECSTATE WASHDC PRIORITY 6610
INFO RUCNIAD/IGAD COLLECTIVE

UNCLAS SECTION 01 OF 02 KHARTOUM 000477 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR AF/SPG, AF/EPS, EB/IFD, AND EB/ESC 
DEPT PLS PASS USAID FOR AFR, AND ALSO PASS USAID 
 
E.O. 12958:  N/A 
TAGS: PREL PGOV EFIN ECON EAID SU
SUBJECT: MARCH 22 MEETING OF THE AEC WEALTH SHARING WORKING GROUP 
 
 
¶1. Summary: The March 22 meeting of the Wealth Sharing working group 
of the AEC focused on the introduction of the new currency, which 
has been one of the relative success stories in the CPA. The 
Governor of the Central Bank used the meeting to complain of slow 
delivery of donor support for the CPA-mandated project. It was 
agreed that the Ministry of Finance should be invited to meet with 
the working group in May to discuss the implementation of the new 
fiscal federalism model. End Summary. 
 
¶2. A meeting of the Assessment and Evaluation Commission Working 
Group on Wealth Sharing was held on March 22. The meeting was 
chaired by the U.S. Charge d'Affaires and was attended by 
representatives from Italy, Kenya, NCP, Norway, U.K., U.S. and 
observers from EC, and the UN. The invited speaker was Governor of 
the Central Bank, Dr. Sabir Hassan, who delivered a presentation on 
the implementation of the new currency, the Sudanese Pound. 
 
¶3. Dr Hassan described the currency project as one of cooperation 
between the GNU and the GOSS, with the Central Bank as the lead 
agency.  He noted that legally the Bank of Southern Sudan is a 
branch of the Central Bank and is not a separate entity.  The new 
currency was designed jointly by Northerners and Southerners.  The 
World Bank and Norway provided assistance with the funding for the 
design aspect of the project. 
 
¶4. The Governor noted that the budget for the currency exchange 
program is $150 million, with most donor funding channeled through 
two Multi Donor Trust Funds. He stressed that there had been delays 
in the project caused by shortfall in financing from international 
donors.  To resolve this delay, the bank drew on the Oil Revenue 
Stabilization Account (ORSA). The arrangements for the procurement 
of paper, ink and other materials had followed World Bank 
procedures.  The printing of the currency and minting of coins was 
done in Sudan. Distribution of the new currency commenced January 9, 
2007, the second anniversary of the signing of the CPA. 
 
¶5. The Dinar and the new Pound will co-circulate until June 30, 
¶2007. After June 30, the Dinar can be exchanged at commercial banks 
for one month. After August, the Dinar can only be converted at the 
Central Bank. The Governor expects that, by the end of May, 90 
percent of the Dinar notes in circulation in the North will have 
been withdrawn. In the South, the situation is more complex as there 
is less coverage by the commercial banks. 
 
¶6. The Governor flagged three specific challenges ahead.  First, the 
financing to be provided by the international community for the 
project needs to be speeded up.  Secondly, the security situation in 
the South needs to be addressed; while security is primarily the 
responsibility of the government, the bank will have to incur some 
expenses as well.  Finally, there is a need for an ongoing awareness 
campaign for the new currency. 
 
¶7.  In the question and answer session following the presentation, 
the Governor returned to the theme of the delays in disbursements of 
donor contributions. He stated that while the cost of the currency 
exchange was initially an argument against the project, the 
political decision had been made to adopt a new currency and the 
international community had agreed to share the cost.  Delays in 
international support had caused the GNU to draw funds from the ORSA 
to move forward. This loan from ORSA funds should be repaid.  The 
Governor also noted that security concerns had caused some delays in 
the conversion in the South. 
 
¶8. The Governor concluded his remarks by stressing that the lack of 
a common currency in the South has been a major problem.  The 
economy of the South is based on barter.  The monetary economy is 
fragmented.  Resolving this is a major breakthrough for the South 
and will be a stimulus to economic activity and will allow citizens 
there to buy sell and transact business to the benefit of all. 
 
¶9. Under Any Other Business, the NCP representative suggested that 
the Minister of Finance be invited to meet with the Working Group at 
the meeting scheduled for May 3 in order to discuss the 
implementation of the recommendations made by the FFAMC for the new 
fiscal federal system. There was consensus with this suggestion. 
 
¶10. Comment: Following up on the meeting, on March 23, econoff met 
with the Norwegian official who has followed the currency issue most 
closely, Endre Stiansen. Stiansen arranged a conference call with 
Ake Lonnberg of the IMF in Washington to discuss the status of IMF 
and World Bank actions.  Lonneberg confirmed that a final draft of 
the IMF appraisal had been sent to Governor Sabir earlier in March 
and the IMF is awaiting the Governor's reply. Lonneberg has been in 
touch with the World Bank and confirmed that the World Bank is in 
discussions with the Central Bank of Sudan to finalize the budget 
for the project. The World Bank has also requested that an 
international audit firm be appointed for the project (the Sudan 
affiliate of Ernst and Young is being considered) and the IBRD has 
also asked for further details about the plan for the conversion of 
the currencies in the South.  A consultant from the IBRD, paid for 
 
KHARTOUM 00000477  002 OF 002 
 
 
by Norway, will be coming out to Sudan soon to offer assistance to 
the Bank of Sudan with these items. End Comment. 
 
Hume