January 28, 2011 / 5:58 AM / 6 years ago

Airlines feel bite of Sudan's forex restrictions

3 Min Read

<p>An Alitalia plane approaches to land at Fiumicino International Airport in Rome September 25, 2008.Max Rossi</p>

KHARTOUM (Reuters) - Foreign airlines are struggling to cope with currency restrictions in Sudan that prevent them repatriating their profits and analysts say they could eventually be forced to stop flying there if restrictions persist.

Sudan is deep in economic crisis, with inflation soaring after the central bank was forced to effectively devalue the Sudanese pound last year and introduced restrictions on moving foreign currency outside the country to battle forex shortages.

The Sudan manager of German airline Lufthansa, Hartmut Volz, told Reuters on Thursday the airline industry was being hit hard, with millions of dollars in revenue stuck inside Sudan.

"All airlines are facing the same problem," he said, adding Lufthansa would decide what to do with its Sudan operation -- a tiny portion of their global network -- in April.

"We are talking to the central bank and to our bank but there is no chance to get the money out at the time being," Volz said.

Emirates , the Arab world's largest carrier began to restrict ticket sales inside Sudan because of the forex shortages. Foreigners must now pay in hard currency or by credit card and Sudanese by credit card only, which will reduce traffic because few Sudanese have credit cards.

"Many airlines will have to close down (in Sudan) if this continues," said economist and former finance ministry official Hassan Satti. "The foreign currency situation is not going to improve." About a dozen foreign airlines fly to Sudan.

Sudanese law prevents airlines selling to nationals in foreign currency and U.S. sanctions imposed since 1997 stops credit card transactions, which leaves few options open to airlines other than to reduce or stop operations.

Emirates could not immediately comment, but one staffer told Reuters on Thursday their credit card transactions were being processed in Dubai to avoid the problem.

The U.S. embargo means few major foreign companies maintain a significant presence in Sudan, leaving airlines most affected by the banks' inability to change their Sudanese pounds into foreign currency for transfer abroad.

Under-Secretary of the Investment Ministry Awad al-Karim Balla said the measures had caused problems but they were temporary.

"We are cooperating with the (central) bank to make some solutions to this problem, and they promised to do so in the coming months," he said.

But airlines have not been given any date for an end to the restrictions to be able to plan around them.

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