Sudan approaches debt relief with US credit to meet World Bank arrears
WASHINGTON / KHARTOUM (Reuters) – Sudan has paid off its debts to the World Bank after nearly three decades, bringing the heavily indebted African country closer to a much-needed international debt relief package, the World Bank, the U.S. Treasury Department and the IMF said on Friday With .
World Bank President David Malpass said the move means Sudan can now access nearly $ 2 billion in grants from the bank’s International Development Association (IDA).
The settlement of arrears, which date back to the years of overthrown autocrat Omar al-Bashir and earlier, was made possible by a US government bridging loan of $ 1.15 billion.
Sudan’s finance minister Jibril Ibrahim said clearing the arrears would allow the country to secure funding from the World Bank Group and other multilateral institutions and move forward with transformative development projects.
“We are grateful to the US government for making this clearance process easier, which also supports our efforts to achieve broader debt relief,” said Ibrahim.
The Sudanese government said $ 215 million would be available immediately for much-needed budget support and $ 420 million for the Sudan Family Support Program.
US Treasury Secretary Janet Yellen said Sudan deserves credit for implementing a “robust economic reform program”.
The payment of arrears on Friday was “a move that will bring Sudan one step closer to much-needed debt relief and help the nation reintegrate into the international financial community,” she said in a statement.
Sudan’s civilian-led transitional government took power in April 2019 after the fall of Bashir, ending three decades of international isolation.
The country is seeking relief from around $ 56 billion in foreign debt to international financial institutions, official bilateral creditors, and commercial creditors.
About 85% of them are in arrears.
A source familiar with the matter said Sudan’s total debt is approximately $ 2.8 billion to the World Bank, the International Monetary Fund and the African Development Bank (ADB); $ 19 billion debt to countries belonging to the Paris Club of Official Bilateral Creditors; $ 21 billion for non-Paris club members; and the rest to commercial creditors.
Ibrahim said in a press conference that Sudan expects to settle its arrears with the ADB in April with the help of the UK, which signed up to extend a bridging loan of £ 330 million ($ 455 million) earlier this year.
Sudan has made progress on a staff-monitored program with the IMF, but its economy remains “extremely fragile,” with inflation above 300% and a shortage of basic goods, the IMF said this month.
The latest move will bring Sudan closer to the first phase of a broader debt relief package under the Highly Indebted Poor Countries Initiative (HIPC) as early as mid-2021, a source familiar with the process said.
The IMF said in a statement Friday that it was considering Sudan for the initiative, and Sudan’s mission chief Carol Baker said preliminary estimates showed Sudan could reduce its debt to $ 8 billion.
The IMF has yet to find funding to pay off Sudan’s arrears with the fund, Baker said.
The U.S. loan announced on Friday was in the works for months after the United States removed Sudan from its list of state-sponsored terrorists and the African nation announced it would normalize relations with Israel.
Sudan met one of the key conditions demanded by international donors in February when it took steps to harmonize its official exchange rates and the black market rate.
“They have done tremendous levels of reform in a very short space of time,” said the source, including painful reforms like reducing energy subsidies.
Electricity, fuel and bread have all become more expensive in Sudan in recent months as raw material shortages persist or worsen.
“This victory belongs to the Sudanese people, who have carried the burden of economic reforms made difficult by the COVID-19 pandemic,” said the Sudanese cabinet.
Reporting by Andrea Shalal in Washington, Nafisa Eltahir and Khalid Abdelaziz in Khartoum and Nadine Awadalla in Cairo; Writing from Andrea Shalal and Nafisa Eltahir; Editing by Grant McCool, Richard Pullin, Hugh Lawson, and Paul Simao