Gold last hope for Sudan to avert economic collapse

Wed Jul 18, 2012 10:46am EDT
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By Ulf Laessing

KHARTOUM (Reuters) - In his office in Khartoum's gold market, central bank sales agent Mohamed Adam sips tea and watches while his staff load bundles of cash worth tens of thousands of dollars from the safe into four boxes.

The government will use these piles of Sudanese pounds to purchase gold, which it plans to sell for the dollars needed to pay for imports of food and other essentials.

"We buy all gold from local traders and people who search for gold," Adam said. Outside his office, gold traders make deals in the busy market in a rundown downtown building, where paint is peeling from the walls.

Sudan is looking to expand gold mines and boost production of the metal to help keep the economy afloat.

Oil had been the main source of state revenues as well as the dollars needed to pay for imports, but Sudan lost three-quarters of its oil production when South Sudan split off last year.

A scarcity of dollars has driven the annual inflation rate to 37.2 percent in June, double the level of June 2011, and officials warn prices will rise further.

The country sits on what could be Africa's largest gold reserves, and the government has handed out exploration contracts to more than 600 mining firms to search for gold and other minerals.

Khartoum hopes to make up to $3 billion from gold exports this year, double the amount from last year. It made $603 million by the start of April, according to the latest official data.   Continued...

A local brings his gold for examination at a gold laboratory in the gold market in Khartoum July 15, 2012. REUTERS/Mohamed Nureldin Abdallah