Sudan's foreign debt a burdensome legacy
LONDON - The Sudanese government stepped up international efforts to find a solution to the mountain of debt that stands in the way of reviving the country’s economy.
The transitional government, which took office in August, is negotiating with creditors to ease Sudan’s foreign debt, which amounts to $62 billion, official data indicate.
Sudanese Finance Minister Ibrahim al-Badawi, meeting with International Monetary Fund (IMF) and World Bank officials, said US sanctions were behind Sudan’s difficulties in obtaining international financing. He highlighted “the importance of taking this matter seriously because of its impact on the sustainability of the desired democratic transition in the country.”
Badawi told Reuters that Sudan being removed from the US list of state sponsors of terrorism was “a matter of time.” He explained during a meeting hosted by the Council of the Atlantic Research Foundation that the listing paralysed the transitional government’s ability to access funding from the IMF and the World Bank.
Shortages of bread, fuel and medicine and rising prices of most other staples sparked protests that led to ousting of Sudanese President Omar al-Bashir in April and economic turmoil.
Badawi detailed plans to restructure the budget and cope with inflation but the moves would not affect subsidies on bread and fuel until June 2020. “The goal is to replace those subsidies with direct cash transfers to those in need,” Badawi said.
Badawi suggested the government would also invite up to 5 million Sudanese living abroad to make bank deposits in Sudan and support the central bank’s foreign currency reserves. He said that effort could generate $500 million. Sudan may also issue special investment bonds for citizens living abroad.
Sudanese officials and economists assert that foreign debt is hampering Khartoum’s access to international financial aid that the US economic blockade, in place since 1993 on charges of “terrorist acts, in addition to waging war in Darfur,” undermined Sudan’s access to aid.
International lenders have provided technical assistance in services but not needed financial aid.
Mohamed al-Faki, spokesman for Sudan’s Council of Sovereignty, said Sudan will not make concessions in exchange for being removed from the United States’ list of countries that it accuses of sponsoring terrorism.” The Anadolu Agency quoted Faki as saying: “We have not heard of any requirements from the US administration to remove Sudan from the list of state sponsors of terrorism.”
Sudanese Prime Minister Abdulla Hamdok said Sudan was negotiating with Washington to be removed from the list and that significant progress had been made. About two-and-a-half-years ago, Washington lifted some economic sanctions and a trade embargo imposed on Khartoum since 1997.
Sudan’s toughest immediate challenge is balancing its need for short-term financial assistance with the risk of borrowing at high cost.
Sudanese journalist Shadia Arabi said Sudan’s remaining on the list of countries sponsoring terrorism was a stumbling block to resolving the country’s foreign debt problem. She said Khartoum had fulfilled requirements to benefit from an agreement, known as the Heavily Indebted Poor Countries (HIPC) Initiative, among major international lenders to aid heavily indebted poor countries get a new start towards resolving their debts.
Arabi, quoted on the Trasol Press Centre website, said: “Sudan had achieved economic stability with the implementation of the policy of economic liberalisation during the years between 2000 and 2007 and these conditions qualify it to benefit from the HIPC initiative.”
Mohamed al-Jak, an economics professor at the University of Khartoum, also on Trasol, said repayment of Sudan’s external debt “is a complex and lengthy process, requiring careful calculations, especially in the current economic conditions.”
Sudan’s governments have made aggressive attempts to reform the exchange rate by devaluing the Sudanese currency to counter fluctuations on the official market. Financial authorities have written off about half of the value of the pound, indirectly confirming the exchange rates on the black market.
Experts said economic indicators are preventing the new Sudanese government from making a breakthrough on this issue. Sudan lost about 80% of its foreign currency revenues following the secession of South Sudan in 2011. By losing the south, the country lost three-quarters of its oil wells, accounting for 50% of revenues.
This article was originally published in The Arab Weekly.