Debt and financial management
The sustainable management of Sudan’s sovereign debt burden, which amounts to between $50 billion and $60 billion,14 is central to any long-term economic reform strategy. In the short term, resuming serious dialogue with the World Bank and the IMF will be critical to building confidence with the international community and unlocking long-term external support, including through the Heavily Indebted Poor Country (HIPC) initiative. Sudan’s previous government attempted 14 IMF staff-monitored programmes, none of which made significant progress, suggesting the need for a new approach on both sides and for a reframing of the conversation surrounding debt relief.
Sudan’s debt burden is currently a ‘phantom debt’, which the former government had not been servicing: the Bashir regime had instead focused on seeking short-term capital inflows – from non-concessional finance from Chinese and Gulf Arab lenders to off-budget gold exports – which have contributed to increased indebtedness, rising inflation and currency devaluation. Sudan’s debt needs first to be accurately calculated. The difficulties in obtaining an accurate assessment of debt are compounded by Sudan’s multiple exchange rates, which obscure its true extent. Debt relief and reaching agreement with diverse creditors is likely to be a protracted process. Sudan must balance the need for short-term assistance with the enduring risks of continued high-cost borrowing.
In order to better support the new government, international financing must be more coordinated, must flow through transparent mechanisms, and must be conditional on specific reforms. Innovation by international financial institutions will be required in order to end the current stalemate, whether through specific portfolio operations in agriculture and industry, or via routes – such as the African Development Bank’s (AfDB) Transitional Support Facility – that have not been affected by sanctions. International lenders will need to restructure non-concessional debt, and Sudan would benefit from capacity support in public financial management.
14 African Development Bank (2019), African Economic Outlook 2019, p. 178, https://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/2019AEO/AEO_2019-EN.pdf (accessed 11 Aug. 2019).