Sudan has long served as something of a byword for fiscal dysfunction. Official figures are murky, but the country’s external debt stock is estimated at around USD 60bn, over 200% of GDP, accrued mostly as President Omar Al-Bashir spent lavishly on the country’s security apparatus. Punishing international sanctions and economic mismanagement left few options to reduce this burden.
Almost two years after President Bashir was deposed, serious prospects for consolidation are on the horizon. In early May, bilateral debtors including France, Germany, Italy and Norway agreed to forgive outstanding obligations worth almost USD 7bn to support the country’s democratic transition. Saudi Arabia, owed around USD 6bn, has pledged to follow suit. After being removed from the US State Sponsors of Terrorism List, Sudan is also engaging with multilateral lenders for the first time in over 30 years. Bridging loans from both France and the US have paid arrears owed to the World Bank and the IMF, paving the way for Sudan to access the Highly Indebted Poor Countries relief programme.
Although this could be considered substantial progress, securing the relief offered so far is only half the battle. The bonhomie of European and Saudi creditors has not been matched by China, Japan, the UAE and Kuwait, who have, at best, offered restructuring on debts collectively thought to be worth over USD 17bn. Commercial creditors, who account for around 10% of external obligations, are even less receptive.
Meanwhile, fiscal pressures continue to accumulate. From 2021, the government is obliged to make yearly payments worth USD 750mn to insurgent groups under the Juba Peace Agreement. In tandem, revenue generation remains constrained by corruption, underdevelopment and enduring investor wariness. The precarious nature of the transition means political risk remains elevated; further civil strife would undermine consolidation efforts. While debt relief is undoubtedly a step in the right direction, hopes that it heralds Sudan’s fiscal rejuvenation are premature.
Photo Credit: againstthecompass
Although this could be considered substantial progress, securing the relief offered so far is only half the battle.