The Sudanese advisor points out that the dollar exchange rate in the parallel market is close to the official one
5/2/2024
Today, Thursday, Adviser to the Prime Minister for Financial Affairs, Mazhar Muhammad Saleh, explained the dangers of the exchange rate fluctuations if demands to float the dinar are met, stressing that the dollar exchange rate in the parallel market is gradually approaching the official one.
Saleh explained that calls for floating the dinar to end the gap between the official exchange rate and the parallel market may be possible in an economy in which the free market alone influences the movement of the balance of payments.
He pointed out that the monetary authority alone is the main source of supply of foreign currency that meets the desired demand for foreign exchange in the money market, indicating that the floating scenario means in all cases adopting the prevailing exchange rate in the parallel market in order to achieve the goal of stability and balance in the official exchange rate.
Saleh warned that floating the dinar would mean the withdrawal of the monetary authority from being a primary central supplier of foreign currency, which would lead to the dominance of limited supply forces of foreign exchange in the parallel market. He stressed that this scenario might create a wave of inflationary expectations, which would force monetary policy. To intervene with foreign reserves to impose a state of stability in the general level of prices.
He pointed out that the difference between the exchange rate in the parallel market and the official one currently came as a result of the inability of the authority’s monetary reserves to bring the two prices closer together, warning that the new exchange rate resulting from the flotation may cause a wave of inflationary expectations, which makes monetary policy intervene with foreign reserves to preserve On price stability. LINK
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