South Sudan said on Wednesday it would speed up the introduction of its new currency, highlighting differences with its former civil war foe in tackling the economic fallout of the southern independence last month.
Last month, South Sudan began circulating its new pound after breaking away from the north under a 2005 peace deal, pegging it one-to-one with Sudan's existing pound . North Sudan also started launching its own new money.
Analysts say it is crucial for both countries to coordinate to avoid turmoil but so far no deal has been reached with the south over what to do with old pounds circulating there worth more than $700 million, according to the south.
“The time to exchange old Sudanese pounds is 45 days from 18th July until 1st September,” the southern central bank said in a statement run by the local press on Wednesday. It previously said the replacement would take up to three months.
The northern central bank meanwhile said banks would open once again over the Friday-Saturday weekend to allow citizens to get new notes to “speed up” the process.
On Saturday, a southern official said both sides had agreed to form a committee to conduct the replacement in a “transparent” manner. There has been no response from the north yet.
The northern central bank has said it is open to more talks, but that if they came to nothing it would speed up replacing the old currency which would become worthless in the South which would hit the new economy.
While the South would be hit if the old pound it had bought for dollars in the run-up to independence would be worthless, there is also a risk for the north: If the south tried exporting old notes back there it would add to inflationary pressures.
Some analysts say the north might use the fate of the old pounds in the south as bargain tool in the talks with the south over sharing oil revenues, the lifeline for both economies.
The south took 75 percent of the 500,000 barrels of day of oil production when it became independent but needs to pay for northern facilities to sell the oil. So far the two sides have not agreed on a transit pipeline fee after sharing revenues equally until now.
The old pound has been falling on the black market in Khartoum on fears that oil revenues and foreign currency inflows will fall. A dollar buys 3.4 pounds so far, well above the official rate of about 3, including a central bank incentive.
Apart from economic issues, the dividing countries have to fix their long border, end violence in some border areas, and find a solution for the contested Abyei region which straddles north and south. - Reuters