International Monetary Fund member countries have agreed to clear Sudan’s arrears to the institution, France’s president said on Monday, removing the final hurdle to the African nation getting wider relief on its external debt of at least $50 billion.
France will provide Sudan with a $1.5 billion bridge loan to facilitate the clearance, Emmanuel Macron said, at a summit in Paris to promote debt relief and investment in the African country, adding that his country was in favor of a full clearance of the $5 billion it is owed by Sudan.
The pledges made by member countries including the United States, Britain, and Saudi Arabia, allow the IMF to cover the arrears and repay the bridge loan, and would help broader economic reform efforts in Sudan, Macron said.
“The reduction of Sudan’s debt that we are going to soon initiate is a first result of these reforms, and this trajectory … should be consolidated, both economically and politically,” Macron said at the opening of the conference attended by officials from Egypt, Europe, the United States and international financial institutions.
Sudan is emerging from decades of economic sanctions and isolation under former President Omar al-Bashir, who was ousted by the military in April 2019 after an uprising.
A transitional government appointed under a military-civilian power sharing deal is trying to pull the country out of a deep economic crisis with inflation at over 300% and shortages of basic goods.
Sudan built up huge arrears on its debt, but has made rapid progress towards having much of it forgiven under the IMF and World Bank’s Highly Indebted Poor Countries (HIPC) scheme, allowing Sudan access to cheaper international financing.
Sudan recently cleared arrears to the World Bank and the African Development Bank with bridge loans from Western states. In order to move forward to a “decision point” that would unlock the HIPC process in June, it needed to clear its arrears to the IMF as well, a step Macron said has now been accomplished.
Key recent reforms under an IMF monitoring programme include cutting fuel subsidies and sharply devaluing the currency.
One of the Paris conference’s goals is to drum up interest in investment. Projects worth billions of dollars in energy, mining, infrastructure and agriculture would be on offer, said Khalid Omar Youssef, Sudan’s minister for cabinet affairs.
Enticing international banks after financial sector reforms is another key objective.
“Sudan is a very rich country, we don’t want handouts, we want investments,” said Prime Minister Abdalla Hamdok.
Other officials emphasized how economic reforms, a peace deal signed last year, and new banking and investment laws reduced the risks for foreign companies.
With Sudan’s arrears to multilateral lenders settled, it can now move forward to settling its $38 billion debt to bilateral creditors. Of Sudan’s bilateral debt, about half is with Paris Club members. Some 10-14% of its external debt is commercial debt, an unusually high proportion, an IMF official said.
France is Sudan’s largest Paris Club creditor, followed by Austria. The HIPC process operates by consensus whereby debt is restructured along similar terms for all creditors.
China, a major non-Paris Club creditor, has reduced and forgiven some debt and will push for the international community to do the same, said Hua Chunying, a foreign ministry spokeswoman.
Saudi Arabia, another big creditor, has also said it will press for a broad agreement on debt.