The Executive Board of the International Monetary Fund said in a statement that it had decided that Sudan had reached the point of taking the required decision in accordance with the Heavily Indebted Poor Countries Initiative, which means that it can start alleviating its debts, which amount to more than 56 billion dollars.
An IMF official said last month that a quarter of a century after the IMF and World Bank launched the initiative, Sudan has become the penultimate economy to pass this process, “the largest case ever by a large margin.”
The fund announced an extended credit facility for Sudan of $2.5 billion with a duration of 39 months, provided in the form of grants and low-interest loans.
By reaching the “decision-making point”, Sudan will see its external debt drop to about $30 billion in a relatively short period.
Carol Baker, head of the IMF mission to Sudan, said the debt will be reduced to six billion when Sudan achieves a comprehensive and irreversible debt reduction after an estimated three years, when it reaches the “replenishment point”.
Analysts say the decision was taken at an unprecedentedly rapid pace and is the result of an international show of goodwill toward the country’s civilian leaders and rapid and painful economic reforms.
“The journey to Sudan has been a long one, not over yet, but it is really important progress on the country’s path towards a more prosperous future,” said Ian Clark, partner at White & Case, a law firm that advises the government on debt restructuring through the initiative with financial advisor Lazard.
Sudan has suffered from decades of isolation and sanctions. During the economic crisis, Sudan witnessed inflation approaching 400 percent, shortages of basic goods and services, and declining food security.
Following the overthrow of Omar al-Bashir in April 2019, the military and civilians reached a shaky power-sharing agreement. Over the past year, the transitional government has implemented several major economic reforms, including the removal of fuel subsidies and a sharp devaluation of the currency under a much-needed debt relief program under the supervision of the International Monetary Fund.
Magdy Amin, a senior adviser to the Ministry of Finance, told Reuters before the decision that Sudan now needs to show the fund that it has achieved macroeconomic stability, is continuing to improve its institutions, and that it will use the money made available to it as a result of debt relief to reduce poverty. He added that Khartoum could not default on the remaining debts during that period.
Sudan’s debt burden is not less than 50 billion dollars. He owes 19 billion of them to the countries of the Paris Club, and the same amount to countries outside the club. The huge commercial debts amount to at least six billion dollars and the same to multinational organizations before the settlement of overdue debts this year.
The debt has not been fully settled and the previous interest due has not been calculated, meaning that the amount will be greater and some estimate it to be close to $60 billion.
Next month, the Paris Club will set the debt forgiveness rate, which is expected to be around 70 percent. Usually a similar agreement applies to other creditors.
The US Treasury said in a statement that the United States “is pleased to join other members of the Paris Club who will provide immediate and future waivers.”