Sudan closer to debt relief with U.S. loan to clear World Bank arrears

WASHINGTON/KHARTOUM (Reuters) – Sudan has settled its debts with the World Bank after nearly three decades, moving the heavily indebted African country closer to a much-needed international debt-relief package, the World Bank, U.S. Treasury, and IMF said on Friday.

World Bank President David Malpass attends the “1+6” Roundtable meeting at the Diaoyutai state guesthouse in Beijing, China November 21, 2019. REUTERS/Florence Lo
World Bank President David Malpass said the move meant Sudan could now access nearly $2 billion in grants from the Bank’s International Development Association (IDA).

Clearing the arrears, which date back to the years of ousted autocrat Omar al-Bashir and earlier, was made possible through a $1.15 billion bridge loan from the U.S. government.

Sudan’s Finance Minister Jibril Ibrahim said clearance of the arrears would enable the country to secure financing from the World Bank Group and other multilateral institutions and move forward with transformative development projects.

“We are thankful to the U.S. government for facilitating this clearance process, which also supports our drive towards more comprehensive debt relief,” Ibrahim said.

The Sudanese government said $215 million would be immediately available for much-needed budget support and $420 million for the Sudan Family Support Programme.

U.S. Treasury Secretary Janet Yellen said Sudan deserved credit for implementing what she called a “robust economic reform program”.

Friday’s arrears clearance was “an action that will move Sudan one step closer to securing 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 overthrow of Bashir, ending three decades of international isolation.

The country is seeking relief from some $56 billion in external debt owed to international financial institutions, official bilateral creditors, and commercial creditors.

About 85% of that is in arrears.

A source familiar with the matter said Sudan’s overall debt includes about $2.8 billion owed to the World Bank, International Monetary Fund, and African Development Bank (ADB); $19 billion owed to countries in the Paris Club of official bilateral creditors; $21 billion to non-Paris Club members; and the rest to commercial creditors.

Ibrahim said in a news conference that Sudan expected to clear its arrears to the ADB in April, with help from the United Kingdom, which committed to extending a bridge loan of 330 million pounds ($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 over 300% and shortages of basic goods, the IMF said this month.

The latest move brings Sudan closer to the first phase of a broader debt relief package under the Heavily Indebted Poor Countries (HIPC) initiative as early as mid-2021, said one source familiar with the process.

The IMF said in a statement on Friday that it considered Sudan eligible for the initiative, and Sudan mission head Carol Baker said preliminary estimates showed Sudan could reduce its debt down to $8 billion.

The IMF still needs to find financing to clear Sudan’s arrears to the Fund, Baker said.

The U.S. loan announced on Friday had been in the works for months after the United States removed Sudan from its state sponsors of terrorism list and the African nation announced it would normalize relations with Israel.

Sudan fulfilled one of the main conditions demanded by international donors in February when it took steps to unify its official and black-market exchange rates.

“They have undertaken an enormous level of reform in a very short period of time,” said the source, including painful reforms such as reducing energy subsidies.

Electricity, fuel, and bread have become more expensive in recent months in Sudan, as shortages of commodities persist or worsen.

“This victory belongs to the Sudanese people who have shouldered the burden of the economic reforms, which have been made difficult by the COVID-19 pandemic,” Sudan’s Cabinet said.


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