Sudan’s Economic Revival Gets a Boost as Debt Relief Beckons

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Sudan got assurances billions of dollars of external debt will be canceled after the clearing of its arrears with the International Monetary Fund, a boost for the impoverished African country emerging from decades of dictatorship.

France, Germany and Norway were among countries signaling their readiness to forgo repayment at a Monday conference in Paris that showcased Sudan’s return to the international community. Removing IMF arrears, facilitated by a $1.5 billion bridge loan from France, clears the way for Sudan to get relief from global creditors under the Highly Indebted Poor Countries initiative, or HIPC.

With conditions for debt relief fulfilled, “France calls on all Sudan’s bilateral creditors, regardless of whether they are members of the Paris Club, to take part from June in a coordinated and equitable manner in the process to help lighten Sudan’s debt burden,” President Emmanuel Macron said. The Paris Club is an informal group of 22 government creditors including the U.S., Brazil and Spain.

Sudan, where long-time ruler Omar al-Bashir was ousted in 2019 amid a popular uprising, is enacting sweeping reforms to turn around an economy wrecked by decades of corruption, mismanagement and sanctions. Prime Minister Abdalla Hamdok estimates total debt at $60 billion.

The country’s real gross domestic product contracted 3.6% in 2020, according to the IMF, while inflation is running at over 300%, piling pressure on a transitional government that’s an uneasy coalition of civilian and military figures.

Ready to Forgive

Macron said Monday evening that France was “in favor of canceling debt close to $5 billion.” Norway announced the cancellation of its bilateral debt in a statement, while Germany’s foreign minister tweeted that Berlin would waive debts of 360 million euros ($440 million).

Sudanese state TV reported Monday that Saudi Arabia had “affirmed its readiness” to forgive $4.5 billion in debts, without giving more details. Saudi Arabia’s state news agency said only that the kingdom is providing a $20 million grant to cover part of Sudan’s financing gap with the IMF.

Sudan’s other creditors include Kuwait and China, which has committed to $6.2 billion in loans to Sudan since 2000, according to Johns Hopkins University’s China Africa Research Initiative.

A group of creditors representing about half of Sudan’s $10 billion commercial debt will give its “fair share of debt relief” under the HIPC program as long as other creditors do the same, said Andreas Rialas with Argo Fund Ltd, the lead creditor of the so-called Sudan London Club that also includes Winterbrook Capital.

“Under HIPC most investors will forgive 85%-plus of all debt due to them, including London Club,” said Rialas, adding that commercial creditors include Middle East banks and emerging-markets investment managers.

“Sudan is moving in the right direction and even though these pledges of debt forgiveness sound impressive the real difference will be made by new funding as well as policies that will attract private investment.”

Officials from Sudan were also seeking international investment during the Paris event, including to rehabilitate the state shipping line and troubled national carrier Sudan Airways, according to a document shared with Bloomberg by the Finance Ministry.

The government is also seeking contractors and investment to build facilities such as about 6,000 kilometers (3,730 miles) of roads, two oil refineries and a new port at Suakin on the Red Sea, it showed.

Further support in Paris came via a World Bank pledge of $2 billion in grants within 10 months and $700 million in financing from the African Export-Import Bank for power and telecommunications projects.

©2021 Bloomberg L.P.

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