Sudan receives debt relief approval

Friday July 02 2021
Abdalla Hamdok.

Sudan's Prime Minister Abdalla Hamdok. PHOTO | EBRAHIM HAMID | AFP


Sudan has obtained the much-needed debt relief from the International Monetary Fund which will see part of its $60 billion debt settled and Khartoum allowed back into borrowing eligibility. 

The move announced by the IMF under the ‘decision point’ step means Sudan has become the 38th country in the world to obtain debt relief under a scheme known as Heavily Indebted Poor Countries Initiative [HIPC] by the IMF and the World Bank.

Khartoum qualified for $23.5 billion debt relief initially and could qualify for more if it follows all the conditions IMF has set.

The scheme is often granted to poor countries to enable them sustain debt while providing crucial services to the public.

External debt, for Sudan, had been major obstacle to reviving the economy. The transitional government led by Prime Minister Abdalla Hamdok had inherited run-down sectors from the regime of Omar al-Bashir who was ousted in April 2019.

Under sanctions from the US as a state sponsor of terrorism, the debt had piled and Sudan was unable to borrow or attract any investors. Last December, Washington lifted those sanctions. But debt became the next hurdle.


Dr Hamdok, in a speech on Wednesday, told the country that the achievement on debt relief was a big step for Khartoum.

“Allow me in this speech to show that what this government inherited is a structural defect in the macro economy, represented in a large budget deficit which forced borrowing from banks at least 200 billion [Sudanese] pounds ($444 million) per year,” he told the country in a televised speech.

Hamdok said “a fundamental imbalance in the exchange rate and its diversity” had made trade balances worse, and a mounting, unserviced debt did not help.

“The government worked to completely remove these distortions with legislative and legal reforms, which helped remove Sudan from the list of countries sponsoring terrorism, the integration of Sudan into the international community and our relations became normal with the countries of the world after we were isolated.”

Sudan worked had to make changes demanded by IMF in six months. Those included regulations that will shield the Sudanese pound from black market rates, a uniform exchange rate and controversial rules that would gradually remove subsidies.

The IMF had earlier approved a $2.5 billion loan for Sudan. But the joyful news was not shared by ordinary citizens. As reports trickled in, some cities saw public protests against plans to remove subsidies on bread and fuel.

For years, Sudan footed the bill of the actual cost of basic commodities to shield the public from fluctuating exchange rates. It was meant to keep prices low. But Sudanese government officials themselves admitted the subsidies were benefiting bulk importers more than consumers. When the IMF came in, it demanded that Sudan sets up policies that will stabilise revenue collection, fight corruption and remove freebies.

“This first reflects the seriousness of the government, which has developed an integrated reform programme that includes a strategy to reduce poverty,” Hamdok said.

After the Decision Point, Sudan should expect most of its debt forgiven within a year. In return, Sudan will immediately receive funding worth $100 million towards combating Covid-19. 

But it must now work towards the Completion Point, which the IMF will use to determine if Khartoum has done everything to qualify for total relief. After that, Sudan will qualify for as much as $50 billion in debt relief.