VZCZCXRO7661
PP RUEHROV
DE RUEHKH #2030 3551102
ZNR UUUUU ZZH
P 211102Z DEC 07
FM AMEMBASSY KHARTOUM
TO RUEHC/SECSTATE WASHDC PRIORITY 9602
INFO RUCNIAD/IGAD COLLECTIVE

UNCLAS KHARTOUM 002030 
 
SIPDIS 
 
DEPT FOR AF/SPG, EEB/IFD/ODF, EEB/IFD/OMA 
DEPT PLS PASS USAID FOR AFR/SUDAN 
DEPT PLS PASS TREASURY FOR OFFICE OF INTERNATIONAL AFFAIRS AND USED 
WORLD BANK 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958:  N/A 
TAGS: EFIN ECON EAID PGOV SU
SUBJECT: KHARTOUM CENTRAL BANK GRANTS THE SOUTH AUTHORITY TO 
ADMINISTER INDEPENDENT FINANCIAL SYSTEM 
 
 
¶1.  (U) On December 15 the Central Bank of Sudan (CBoS) Board of 
Directors approved the "Central Bank of Sudan Policies for the Year 
2008."  Inter alia, the "2008 Policies" document grants the Bank of 
Southern Sudan (BoSS) the authority needed to promulgate 
long-delayed independent financial regulations for the South.  "2008 
Policies" was drafted by BoSS staff with the assistance of 
USAID-funded technical advisors and submitted to the CBoS Board for 
approval. 
 
¶2.  (U) Under the Comprehensive Peace Agreement (CPA), Southern 
Sudan is authorized to develop its own interest-rate based financial 
system, separate from the Sharia-based system in the North.  The 
South's system is to be supervised by the BoSS, which operates as a 
branch of the CBoS in Khartoum, managing the interest rate-based 
system in the South.  (The Governor of the BoSS and two other 
Southerners sit on the Board of the CBoS.)  Under this "one country, 
two systems" arrangement, country-wide monetary policy is 
established by the CBoS Board in Khartoum, but implemented 
separately in North and South by the CBoS and the BoSS.  Likewise 
the two financial systems are to be supervised independently of each 
other. 
 
¶3.  (U) Approval of the "2008 Policies" provides the BoSS with full 
authority to perform the most critical functions to develop an 
interest-rate based financial system.  The "2008 Policies" document 
instructs the BoSS to adapt and use for Southern Sudan (1) 
prudential rules and regulations, and (2) monetary-policy 
instruments (e.g., open-market operations), with the rules and 
regulations required for their use.  This provides the BoSS with the 
authority needed to begin exercising its responsibilities to 
implement monetary policy and to supervise commercial banks. 
 
¶4.  (SBU) Comment:  The "2008 Policies" is a significant step 
towards permitting the BoSS to take on the functions of a standard 
central bank and achieve the goal of a market-based financial system 
independent of Khartoum.  Draft banking regulations, prepared with 
the assistance of USAID-funded technical advisors, have been on hold 
at the BoSS for some time pending CBoS authorization.  The way 
should now be clear for the BoSS to begin implementing monetary 
policy through conventional monetary-policy instruments, together 
with required rules and regulations. 
 
POWERS