The coup carried out by Sudanese army commander in October 2021 led to the freezing of debt forgiveness and reluctance by the international community in providing promised aid, and after more than 6 months, the country now faces the question of how to stabilize economically.
AlTaghyeer: Elfadil Ibrahim
In June last year, the World Bank and the International Monetary Fund decided that Sudan was eligible for external debt forgiveness under the Heavily Indebted Poor Countries (HIPC) program. Sudan had approval for $23.5 billion of its $55 billion debt to be cleared, making it country number 38 that receive debt forgiveness under the initiative.
Also during the past year, the Paris Club group announced the exemption of $14.1 billion of the group’s debts on Sudan, in addition to rescheduling the rest of the debt ($9.5 billion) until the point of completion is reached, with payment of debt services being halted during that period.
However, army commander Abdel Fattah al-Burhan undid all of that after creditor countries froze the exemption program, and the international community threatened to stop grants and aid in response to the coup d’etat carried by al-Burhan on October 25th of last year.
The World Bank gave Sudan until June 2022 to fix the political crisis and return to international civil transition, otherwise, the plan to forgive the country’s foreign debts, which exceed $50 billion, was going to be scrapped off.
Exemption Conditions, Reasons Behind the Coup
Former Sudanese Finance Minister Dr. Ibrahim al-Badawi called for thinking about the reasons for the coup and comparing them with the conditions set by the World Bank and the International Monetary Fund for debt relief after it, which included some decisions related to the internal situation.
According to al-Badawi, paragraph (26) of the structural reforms to be implemented for debt relief and the re-launch of development spending stipulated the need to combat corruption and improve governance (main priorities) in addition to the establishment of an independent anti-corruption commission and a new law for the same purpose.
Also, among the conditions agreed upon between Sudan, international financial institutions, and creditors was the full implementation of the law approved in 2020, which provides for the complete dismantling of former regime institutions and the submission of individuals accused of usurping public money to the courts, as well as publishing a list of state-owned security-sector controlled companies.
During a seminar broadcast on Facebook Live, al-Badawi stressed that one of the reasons for the military coup was the unwillingness of the putschists to continue with the institutional reform program, including the work of the Empowerment Removal Committee, which was supposed to be supported by a legal anti-corruption committee.
Al-Badawi said that the meeting that brought together the Executive Director of the World Bank with the Sudanese Prime Minister at the time, Dr. Abdallah Hamdok, revealed that Sudan would become one of the largest African countries to benefit from IMF and World Bank financial support post-rehabilitation, and pointed out that there was a plan to rehabilitate the infrastructure such as “airports, roads and railways” to link with neighboring countries, helping attract foreign investments.
Al-Badawi explained that the aid that was supposed to reach Sudan includes (2.5) billion dollars within two years for the budget, from which the International Monetary Fund pays 2 billion in support of the external balance, in addition to support from the partners “Berlin Conference” to support the activities of the transitional government in the amount of (1) billion $400 million, including $400 million from the World Bank, and the remainder of bilateral partnerships to finance the Family Support and Digital Transformation Program.
Before the coup, both the World Bank and the International Monetary Fund would provide $950 million in 2022, along with $700 million from the United States of America, as well as $1 billion from Sudan’s partners with United Nations organizations to support the population and agricultural census.
What Was Done
“We engaged in faster negotiations compared to other heavily indebted countries, and within two years, the debts would have been completely forgiven. Had it not been for the coup, the debt problem would have ended in 2023.”
He noted that there were measures taken to exempt 20 billion dollars in debt belonging to members of the Paris Club, and another 20 billion belonging to others outside the Paris Club.
Al-Badawi explained that there are 37 countries that have benefited from the debt relief, and that Sudan’s debts constituted about 40% of the total debts of those exempted countries.
“In general, debt forgiveness would not have happened without the Sudanese revolution. There was sympathy from the international community, and we succeeded in negotiating a major project,” al-Badawi said.
“If the coup is overthrown and the democratic constitutional path is returned, and if we agree on a national program, we will reach a great renaissance,” he concluded.
Economic expert Professor Ibrahim Onur considered that the issue of exempting Sudan’s foreign debt was an economic issue, not a political one, and accused Sudanese figures who were in power during the era of Prime Minister Dr. Abdullah Hamdok, seeking to politicize the issue, of putting pressure on the international community to link Sudan’s debt relief to the civilian government.
“We academics are with civil rule and democracy, but the undeniable truth is that debt forgiveness for Sudan is a file that has been completely politicized at a time when Sudan fulfilled the various exemption conditions as a debt-burdened country and implemented the conditions and policies of the Bank and the International Monetary Fund,” he said.
Onur stated that Sudan got rid of the US political sanctions that were standing in the way of debt forgiveness, and therefore there should not be new political obstacles, and that the World Bank and the IMF have forgiven many debts to non-democratic countries, and that these countries “implemented the technical conditions only and were exempted”, and so, he said, “linking the exemption to political decisions and situations is unfair.”
He considered that the exemption program, which began during the era of the government of Dr. Abdallah Hamdok must continue regardless of the type of rule in Sudan, and said: “But if a political settlement takes place and a civilian government comes, the chance of continuing the debt relief program will be greater.”
The economist Dr. Al-Fateh Othman Mahjoub however told AlTaghyeer that debt relief was in fact linked to politics, not the economy. He pointed out that Sudan, for political reasons, did not obtain debt forgiveness even though it had deserved it for more than twenty years.
He pointed out that the debt relief program was activated after the fall of al-Bashir’s rule and was suspended after the military coup that overthrew the civilian government, and therefore the decision to freeze debt relief was political par excellence and subject to the whims of the United States of America in the first place and then the European Union secondly.
Mahjoub warned against losing the gains made during the revolution government’s period regarding the debt relief and said that “Sudan is at a risk of losing all progress made in debt relief, or at least lose the final program for foreign debt relief, if the formation of a political consensus government was not achieved in a way that satisfies European Troika countries and the African Union.”
Mahjoub however is hopeful, and notes that, in theory, Sudan has not yet lost its opportunity to have its debts forgiven, though he remarked that said opportunity was severely under threat.
“The waiting period for Western countries will not be indefinite, especially since the World Bank has explicitly identified mid-June as the last opportunity to form a Sudanese political consensus government with civilian leadership and popular credibility for international financial institutions to complete the debt relief program.”
Economic analyst Dr. Muhammad Al-Nayer confirmed to AlTaghyeer that the indicators say that there are solutions on the horizon for an upcoming political agreement that leads to the formation of a technocratic government and a civilian prime minister and making international finance institutions once again reconsidering dealing with Khartoum.
He warned however of the possibility of Sudan retracting this prescription if these two institutions fail to fulfill their obligations, and said that international community trends negatively affect the Sudanese economy, especially in the issue of external debt.
“The government achieved 90% of what the IMF had stipulated,” al-Nayer added, saying that the international community had not fulfilled its promises to Sudan.