Fingers crossed Sudan's mammoth $60 billion external debt could be cleared by the end of this year by securing deals and relief packages during the 2-day conference that starts on Monday in Paris, Prime Minister Dr. Abdalla Hamdok told Agence France Presse (AFP), the French newswire last week. "We have already settled the World Bank arrears, those of the African Development Bank, and in Paris we will be settling the International Monetary Fund arrears," he said.
The US provided a $1.1 billion bridge loan to pay for the World Bank and clear Sudan's arrears, while Britain, Sweden and Ireland contributed jointly $425 million to clear those of the African Development Bank.
That optimism is justified given the fact that it is for the first time in Sudan history a leading player on the world stage like France is lending its diplomatic support for debt relief in appreciation for Sudan's peaceful revolution that has managed to topple the previous regime. The Paris conference stems from a promise by the French President Emmanuel Macron, who promised Hamdok back in 2019 to use his good offices with Washington to remove Sudan from the US List of States Sponsoring Terrorism (SST). Once that is cleared he promised that France will organize a conference to help Sudan in debt relief. However, whether Paris conference is going to deliver on those high hopes remains to be seen.
Based a breakdown list of the country's debt prepared by the Bank of Sudan back in 2019, around 22.8 percent of the debt is owed to regional, international financial institutions like the World Bank, the IMF and the Arab Monetary Fund, in addition to commercial banks. Another 31.6 percent is owed to Paris Club creditors, while 40 percent to non-Paris creditors and the remaining to suppliers facilities.
However, according to the March Sudan country by the Economist Intelligence Unit (EIU), the country may get up to $3 billion in debt relief throughout the second half of this year as well as next year. In the meantime, the accumulation of interest arrears on serviced debt, in addition to taking new loans will raise the external debt from $59.3 billion by the end of last year to $63.1 billion in 2022, the EIU forecasted. It noted that in the absence of a wider agreed upon debt relief program, bilateral relations with main western capitals, namely Washington will be a main driver for debt relief, which could be used to pressure Sudan to stick to its declared plan of conducting an election and ensure the democratic transformation. If that elections is viewed as fair and free that will the debt relief program.
The 2-day meetings could kick start serious and more confined talks on debt relief in a more detailed and professional way than the typical public statements aired during these conferences.
Paris conference is not restricted only to debt relief. Rather it is an opportunity to promote the country's huge investment potential. For that event the ministry of investment and international cooperation has been busy doing its home work by issuing a new version of the investment law that supposedly taking into consideration previous experiences, and more important come with a list of various projects that cover infrastructure as well agriculture, communications and digital transformation and so on, with representatives of the private sector attending as well with the hope of securing some memos of understanding with would be potential investors.
In fact Sudan currently represents a classic case of a country that is going through a period of suppressed demand given the fact that it has been treated politically as a pariah state, subjected to all sorts of economic sanctions at the time, and it has huge natural resources and a strategic geographical location that could enable it with proper infrastructure and good management to be a regional hub.
With the removal of Sudan from the US SST, Sudan is reconnecting with the international community and it is a matter of time for many to try and tap on this suppressed demand on various fields.
Though the GDP is expected to register a 2.8 percent growth this year according to EIU against a contraction of (-)8.7 percent last year, but the figure was amended from 3 percent GDP growth in last year's forecast, which may signal to some troubles down the road especially in the two areas of fiscal deficit and the hyper- inflation. The deficit is expected to improve from 10 percent of the GDP last year to 8.9 percent this year and with inflow of aid and grants may drop to 6.7 percent by 2025, yet still high and makes a burden on managing the economy. Equally the running inflation of an average of 250 percent continues to pose a serious problem facing attempts to attract foreign investments as well the political price. It was the economic hardship that pushed people to the streets to topple the previous regime in the first place.
Following the success of political change in country the international community through the Friends of Sudan, which almost reads like Who's Who in world stage, convened eight meetings in various capitals but produced little more than simple lip service. The Paris meeting will be yet another opportunity for the international community to show some solidarity with the Sudanese people in a more tangible way. After all most of the $60 billion debt is arrears accumulated over decades of Khartoum's inability to service its debt, and not the principal of the loans.
What is becoming crystal clear is that the economy is Achilles' heel, which will play a central role in enabling or failing the transitional period to conclude and culminate with an election that paves the way for democratic transformation.
At stake is not only Sudan's transition, but a potential to have a living example of a success story, where people can take their destiny into their own hands and that the international community, which highlights issues of human rights, democracy and enabling the poor is ready to help instead of lecturing only.