VZCZCXYZ0000
PP RUEHWEB

DE RUEHKH #0975/01 1711428
ZNR UUUUU ZZH
P 201428Z JUN 07
FM AMEMBASSY KHARTOUM
TO SECSTATE WASHDC PRIORITY 7669

UNCLAS KHARTOUM 000975 
 
SIPDIS 
 
DEPT FOR AF/SPG, AF/EPS, EB/IFD, AND EB/ESC 
DEPT PLS PASS USAID FOR AFR, AND ALSO PASS USAID 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958:  N/A 
TAGS: PREL PGOV EFIN ECON EAID SU
SUBJECT:  Confusion and Criticism Follow Further Changes to Foreign 
Currency Laws 
 
REF: KHARTOUM 902 
 
¶1.  (U) SUMMARY:  On May 29, in an action widely understood as a 
measure designed to prevent capital flight following tightened U.S. 
sanctions, the Foreign Exchange Administration of the Central Bank 
of Sudan announced an amendment to its foreign exchange regulations 
(reftel).  After widespread criticism of this amendment, the law was 
further altered on June 10, reducing the prepayment margin on 
imports and adding further clarification to the law.  Critical 
newspaper editorials and public debates followed this June 10 
change.  Some commentators have boldly argued that the ruling party 
and political elite imposed these changes to defend their economic 
interests and ultimately prevent political opposition.  Less extreme 
though more prevalent, most analysts view the volatile foreign 
currency laws as a direct reaction to tightened U.S. sanctions.  END 
SUMMARY. 
 
¶2.  (U) Following widespread criticism of the Foreign Currency 
Amendment, the Central Bank of Sudan (CBoS) published another change 
to its foreign currency law on June 10.  While upholding most of the 
previous changes, the memorandum describes a reduction in the 
prepayment margin on imports from 50 percent to 15 percent for 
industrial and agricultural materials.  The prepayment margin for 
other import goods will remain at 50 percent of their value. 
Furthermore, the law clarified that all commercial banks must 
provide the Foreign Exchange Administration with monthly reports 
detailing their imports operations.  The law upholds the previous 
amendment which puts limitations on transferring foreign currency to 
accounts abroad. 
 
¶3.  (U) Abbas Hassan Ahmed, in a June 17 editorial in the Sudanese 
Arabic daily newspaper "Al-Soudani," criticizes the changes to 
foreign currency law.  Acknowledging that the law may combat money 
laundering, Ahmed argues that the changes will negatively affect the 
most important areas of the economy.  Ahmed contends that there is a 
direct relationship between the tightened U.S. sanctions and the 
changes.  Ahmed believes that this round of sanctions differs 
substantially from those in the past because most of the companies 
on the new list have a direct connection to the ruling party and/or 
the National Intelligence and Security Service (NISS).  According to 
Ahmed, these sanctioned companies benefit from interaction with the 
American financial system and will be hurt by the sanctions.  He 
believes that the government changed the foreign currency law to 
choke any competition, prevent an economic opposition bloc that 
might be able to access foreign currency, and combat any rising 
internal economic power.  Ahmed states that since these changes 
occurred, the value of Sudanese currency has dropped and a black 
market for foreign currency has already emerged. 
 
¶4.  (U) Records of the debates in public meetings also illustrate 
the confusion surrounding the foreign currency law.  On June 10, 
Saud al Brier, the President of the Sudanese Businessmen and 
Employers Federation, met with Dr. Sabir M. Hassan, Governor of the 
Central Bank of Sudan (CBOS) and submitted a public memorandum 
criticizing the recent foreign exchange regulations regarding 
imports. 
 
¶5.  (U)  On June 16, the Banks Association held a public forum about 
the new foreign exchange regulations, convened by Dr. Hassan.  Also 
in attendance were bank managers, businessmen, and university 
students.  Hatim Abdalla El-Zubair, Secretary General of the Banks 
Association, opened the session saying that the forum will help 
address the ambiguity that resulted from the changes. 
 
¶6.  (U)  Dr. Sabir M. Hassan, Governor of the CBOS, first stated 
that the amendment does not rule out foreign exchange altogether. 
He compared the amendments to traffic laws which allow for the 
freedom of movement within certain parameters. He stated that the 
Central Bank made the changes to reduce dependency on imports and 
combat money laundering activities. 
 
¶7.  (U) Many participants in the forum reportedly asked Dr. Hassan 
why the new foreign exchange regulations immediately followed 
tightened U.S. sanctions on Sudan.  He responded that the 
regulations had no relation to the sanctions.  He also dismissed the 
efficacy of any new restriction put on Sudan, saying that Sudan has 
become accustomed to living in this state.  Hashim Hago, President 
of the Sudanese Businessmen and Employers Federation, criticized the 
new regulations and stated that they will only result in further 
confusion. 
 
¶8.  (SBU)  COMMENT:  The additional changes to foreign currency 
laws, the public debates, and editorials that followed demonstrate 
widespread confusion and disapproval of the amendments.  According 
to the reports, most observers see a connection between the foreign 
currency laws and tightened U.S. economic sanctions.  Others view 
the foreign currency amendments not only as directly related to U.S. 
sanctions, but also as a move designed to hinder real competition to 
the businesses of the ruling elite.  END COMMENT. 
 
 
FERNANDEZ