Sudan, South Sudan plan new currencies after split (Reuters)

KHARTOUM/JUBA (Reuters) ? Sudan's president on Tuesday said the country would launch a new currency, a day after newly independent South Sudan confirmed it would do the same, as both states worked to disentangle their economies after the split.

South Sudan declared independence from the rest of the country on Saturday at the climax of a 2005 peace deal that ended decades of civil war with the Khartoum government.

Analysts said it was crucial the two countries coordinated their currency launches closely, to avoid future disputes between the two former foes.

But South Sudan's Central Bank Governor Elijah Malok told Reuters he had not been informed about Bashir's plan - and the key issue was how the south would now redeem up to 2 billion old Sudanese pounds still circulating in its economy.

Sudan President Omar Hassan al-Bashir on Tuesday told the Khartoum parliament he would bring in a raft of austerity measures to compensate for the loss of southern oil.

The south took about 75 percent of the country's 500,000 barrel-a-day oil reserves with it when it left. Oil is vital to both economies.

"The package of the economic measures includes issuing a new currency in the coming days," Bashir said, without giving further details.

On Monday, South Sudan's finance minister said it would start circulating its previously announced new South Sudan pound next week - much earlier than expected - pegging it at a one-to-one value with the existing Sudan pound.

South Sudan's central bank governor Malok had said it would take up to three months to replace the Sudan pound with the new southern currency.

Malok did not give a date when the south might remove the peg with the existing north Sudan pound and take more control over its economic destiny.

After Bashir's announcement, Malok told Reuters he had no information on the Khartoum decision. "It will not change our plans. The matter is what to do with our old currency," he said.

ECONOMIC PATH

Sudan and South Sudan's economies are likely to remain closely tied together in the coming years - the south has most of the oil, but currently depends on the north's pipelines and port to get it to market.

But their economic paths will likely diverge. Without its southern oil reserves, Khartoum says it will have to diversify its economy into agriculture, gold and other industries. It is still under crippling U.S. trade sanctions and saddled with a near $40 billion national debt.

Economic analyst Abda al-Mahdi told Reuters the introduction of a northern currency could have a disruptive impact on the south. "It can have an impact but there is still time. A currency will not be introduced overnight ... It will be gradually exchanged. The threat can be reduced greatly."

Mahdi said Bashir's announcement looked like a defensive move, reacting to the south's own currency plans.

"The north is launching its own currency to safeguard its interests after the south said it would start its currency. The question is what happens to the (Sudan) pounds after the south withdraws the notes circulating there. The worst thing would be if the south throws them back into the market in the north."

The Sudan pound has been falling on the black market in Khartoum for weeks as economists say foreign currency inflows needed for imports will decline alongside falling oil revenues.

Khartoum and Juba still have to agree on a range of issues such as handling oil revenues, assets and debt as well as ending violence in parts of their poorly defined border.

The Khartoum government fought southern rebels for all but a few years from the 1950s up to the 2005 accord in civil wars fueled by ethnicity, perceived repression of the south, religion and oil.

The conflicts killed an estimated 2 million people and forced 4 million to flee, destabilizing much of the surrounding region.

Khartoum agreed to drop its dinar currency under the 2005 deal and revert to the Sudanese pound, the currency under British colonial rule. Many in the north resented the switch.

(Additional reporting by Alex Dziadosz in Juba; Writing by Andrew Heavens; Editing by Alison Williams)

Source: http://us.rd.yahoo.com/dailynews/rss/economy/*http%3A//news.yahoo.com/s/nm/20110712/ts_nm/us_sudan

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