Selling gold? Look no further than Khartoum

The most deep-pocketed shopper among the 150 or so boutiques in Khartoum’s gold district is the Sudanese central bank.

South Sudan split off from the country just over a year ago taking the bulk of the country’s oil revenue with it. The economy is now drained of dollars and inflation in northern Sudan is approaching 40%. GDP growth was in double digits five years ago. This year it is projected to shrink by some 7%.

FT.com (sub required) reports the way it works is that the reserve bank prints Sudanese pounds and then buys gold from traders at inflated or black-market currency rates. The bank then sells it for hard currency on the global market “at the much lower official exchange rates:”

The bank, which has an office and several agents in Khartoum’s gold market, buys nearly $200,000 worth of gold from shop owner Mahadi al Mansouri alone every week.

“If they don’t pay me this [black market] rate, I will sell it to someone else,” says Mr Mansouri, handling a grubby bowl of bangles beside a digital weighing machine.

[…]

The central bank’s lossmaking, inflationary gold trade highlights the desperate state of what one foreign official calls a “pretty thoroughly wrecked” economy. Its decision to become a gold trader was “politically motivated by the need for foreign exchange,” says Sabir Hassan, head of the ruling National Congress party’s economic team and former central bank governor.”