Towards debt cancellation: what to do after the coup?
The coup led by the commander of the Sudanese army in October 2021 led to the freezing of debt forgiveness and the reluctance of the international community to provide the promised aid, and after more than 6 months, the country is now confronted with the question of economic stabilization.
Al Taghyeer: Elfadil Ibrahim
In June last year, the World Bank and the International Monetary Fund decided that Sudan was eligible for cancellation of foreign debt under the Heavily Indebted Poor Countries (HIPC) program. Sudan has been granted permission to write off $23.5 billion of its $55 billion debt, making it the number 38 country to receive debt forgiveness under the initiative.
Also during the past year, the Paris Club group announced waiving $14.1 billion of the group’s debts to Sudan, in addition to rescheduling the rest of the debt ($9.5 billion) until the completion point is reached, payment debt services being interrupted during this period.
However, army commander Abdel Fattah al-Burhan called it all off after creditor countries froze the exemption program, and the international community threatened to stop grants and aid in response to the coup. state led by al-Burhan on October 25.and from last year.
The World Bank has given Sudan until June 2022 to resolve the political crisis and return to international civilian transition, failing which the plan to cancel the country’s external debts, which exceeds $50 billion, would be abandoned.
Conditions of exemption, reasons for the coup
Former Sudanese Finance Minister Dr Ibrahim al-Badawi called for reflecting on the reasons for the coup and comparing them to the conditions set by the World Bank and International Monetary Fund for debt relief after the latter, which included certain decisions related to the internal situation. .
According to al-Badawi, paragraph (26) of the structural reforms to be implemented for debt relief and the revival of development expenditure stipulated the need to fight corruption and improve governance (main priorities) in plus the establishment of an independent anti-corruption commission and a new law for the same purpose.
Furthermore, among the conditions agreed between Sudan, international financial institutions and creditors was the full implementation of the law approved in 2020, which provides for the complete dismantling of the institutions of the old regime and the submission of individuals accused of usurpation of public money in the courts. , as well as the publication of a list of public companies controlled by the security sector.
In a seminar broadcast on Facebook Live, al-Badawi pointed out that one of the reasons for the military coup was the putschists’ reluctance to continue the institutional reform agenda, including the work of the Committee for the Suppression of empowerment, which was supposed to be backed by a statutory anti-corruption commission.
Al-Badawi said that the meeting which brought together the Executive Director of the World Bank with the Sudanese Prime Minister at the time, Dr. Abdallah Hamdok, revealed that Sudan would become one of the largest African countries to benefit from the financial aid from the IMF and the World Bank. support post-rehabilitation, and pointed out that there is a plan to rehabilitate infrastructure such as “airports, roads and railways” to connect neighboring countries, helping to attract foreign investment.
Al-Badawi explained that the aid that was to reach Sudan includes (2.5) billion dollars within two years for the budget, from which the International Monetary Fund disburses 2 billion in support of the external balance, in plus the support of the “Berlin Conference” partners to support the activities of the transitional government to the tune of (1) billion 400 million dollars, including 400 million dollars from the World Bank, and the rest of the bilateral partnerships to finance the family support and digital transformation program.
Prior to the coup, the World Bank and International Monetary Fund would provide $950 million in 2022, as well as 700 million United States dollarsas well as $1 billion from Sudan’s partners with UN organizations to support the population and agriculture census.
What was done
“We engaged in faster negotiations compared to other heavily indebted countries, and within two years the debts would have been completely cancelled. Without the coup, the debt problem would have ended in 2023.”
He noted that steps had been taken to exempt $20 billion in debt belonging to Paris Club members and an additional $20 billion belonging to others outside the Paris Club.
Al-Badawi explained that there are 37 countries that have benefited from the debt relief, and that Sudan’s debts constitute about 40% of the total debts of these exempted countries.
“In general, debt cancellation would not have happened without the Sudanese revolution. There was sympathy from the international community and we managed to negotiate a major project,” al-Badawi said.
“If the coup is overthrown and the democratic constitutional path is restored, and if we agree on a national program, we will achieve a great renaissance,” he concluded.
The economic expert, Professor Ibrahim Onur, considered that the issue of the exemption of the external debt of Sudan was an economic and not a political issue, and accused the Sudanese figures who were in power at the time of the Prime Minister Dr. Abdullah Hamdok, seeking to politicize the issue, to pressure the international community to link Sudan’s debt relief to civilian government.
“We academics are pro-civil state and pro-democracy, but the undeniable truth is that Sudan’s debt cancellation is an issue that was thoroughly politicized at a time when Sudan was fulfilling the various conditions of exemption as an indebted country and was implementing the conditions and policies of the Bank and the International Monetary Fund,” he said.
Onur said that Sudan got rid of US political sanctions that stood in the way of debt cancellation, so there should be no new political obstacles, and that the World Bank and IMF canceled many debts to non-democratic countries, and that these countries “have only implemented the technical conditions and been exempted”, and therefore, he said, “link the exemption to decisions and situations policies is unfair”.
He believed that the exemption program, which started during the time of the government of Dr Abdallah Hamdok, must continue regardless of the type of regime in Sudan, and said: “But if a political settlement takes place and that a civilian government arrives, the chance of continuing the debt relief program will be greater.
Economist Dr Al-Fateh Othman Mahjoub however said AlTaghyeer that debt relief was actually about politics, not economics. He underlined that Sudan, for political reasons, did not obtain the cancellation of its debt whereas it had deserved it for more than twenty years.
He pointed out that the debt relief program was activated after the fall of the al-Bashir regime and was suspended after the military coup that overthrew the civilian government, and that the decision to freeze the Debt relief was therefore political par excellence and subject to the whims of the United States of America first, then the European Union.
Mahjoub warned against losing the gains made during the period of the revolutionary government on debt relief and said that “Sudan risks losing all the progress made in debt relief, or at least to lose the final program of external debt relief, if the formation of a government of political consensus has not been reached in a way that satisfies the European countries of the troika and the African Union.
Mahjoub is hopeful, however, and notes that in theory, Sudan has not yet lost the opportunity to get its debts forgiven, although he pointed out that this opportunity is in serious jeopardy.
“The waiting period for Western countries will not be indefinite, especially since the World Bank has explicitly identified mid-June as the last opportunity to form a Sudanese political consensus government with civilian leadership and popular credibility. for international financial institutions to complete the debt relief program.”
Economic analyst Dr Muhammad Al-Nayer confirmed AlTaghyeer that the indicators indicate that there are solutions on the horizon for an upcoming political agreement that will lead to the formation of a technocratic government and a civilian Prime Minister and will force the international financial institutions to reconsider their relations with Khartoum.
However, he warned against the possibility for Sudan to renege on this prescription if these two institutions do not fulfill their obligations, and stated that the tendencies of the international community negatively affect the Sudanese economy, in particular with regard to the issue of foreign debt.
“The government has achieved 90% of what the IMF stipulated,” al-Nayer added, saying the international community had failed to deliver on its promises to Sudan.