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The Controversy of Exchange Rate Devaluation in Sudan: An Economy‐wide General Equilibrium Assessment
Author(s) -
Siddig Khalid H.A.
Publication year - 2012
Publication title -
african development review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.654
H-Index - 32
eISSN - 1467-8268
pISSN - 1017-6772
DOI - 10.1111/j.1467-8268.2012.00320.x
Subject(s) - exchange rate , economics , computable general equilibrium , exchange rate flexibility , depreciation (economics) , pound (networking) , devaluation , currency , international economics , float (project management) , flexibility (engineering) , exchange rate regime , monetary economics , macroeconomics , market economy , management , capital formation , financial capital , world wide web , computer science , human capital
: The International Monetary Fund (IMF) has worked with Sudan since 1997 to implement a managed float exchange rate. The IMF sees exchange rate flexibility as key to safeguard and rebuild foreign exchange reserves and essential to meet the international reserve target in Sudan. However, authorities in Sudan are concerned about the inflationary pressures that exchange rate flexibility may cause. A review of the literature reflects huge ambiguity about the outcome of exchange rate policies in Sudan. This calls for additional empirical investigations. This paper applies a computable general equilibrium (CGE) model to investigate the possible effects of devaluing the currently overvalued Sudanese pound, by simulating a depreciation of the Sudanese pound by 5 per cent, 10 per cent and 15 per cent. Based on the results, the study recommends that additional flexibility of the Sudanese exchange rate regime as suggested by the IMF be carefully considered if such flexibility devalues the Sudanese pound.