Sudan

Key messages on Sudan—Enhanced Heavily Indebted Poor Countries Initiative

In recognition of the commendable progress Sudan has made in establishing a track record of economic reform, on June 29, the Executive Boards of the World Bank and International Monetary Fund (IMF) approved Sudan’s eligibility for debt relief under the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative and welcomed the authorities’ sustained commitment to economic and institutional reforms under challenging circumstances. Sudan is the 38th country to reach this milestone, known as the HIPC Decision Point.

With the support of the international community, Sudan has been pursuing a transformational reform agenda focused on: (i) achieving internal peace based on inclusion, regional equity, and justice; (ii) removing economic distortions and stabilizing the economy, and (iii) building a foundation for future sustained inclusive growth, development, and poverty reduction. In support of its home-grown reform agenda, in June 2020, the transitional government requested a Staff Monitored Program (SMP) with the IMF. Under the program, Sudan has built a strong track record of reforms—such as the reduction of retail gasoline and diesel subsidies and the move to a market-determined exchange rate, as well as measures to strengthen governance and provide further social assistance through the Sudan Family Support Program.

Given the country’s fragile economic situation and large financing needs, regaining access to resources from multilateral institutions will be a critical step in further supporting the government’s agenda of improving economic and social welfare throughout the country.

In light of its large and unsustainable debt burden, Sudan was deemed eligible for debt relief under the Enhanced Heavily Indebted Poor Countries (HIPC) initiative as indicated by the preliminary debt relief analysis (DRA).  And on June 28, 2021, the Executive Boards of the IMF and World Bank approved debt relief for Sudan under this initiative—immediately reducing the country’s debt from about US$56 billion to US$28 billion.

This important milestone, known as the Decision Point, is the first formal step in the HIPC process and means that Sudan has established a strong track record of economic reforms, is committed to reducing widespread poverty, and has cleared its arrears to the International Development Association (IDA) (US$1.1 bn), to the African Development Bank (US$400 million) (March 2021) and to the IMF (US$1.4 billion) in June 2021.

Reaching the Decision Point also means that a new Extended Credit Facility (ECF) arrangement will be in place to anchor the authorities’ policies and reforms between the Decision Point and the Completion Point, at which time Sudan’s pre-Decision Point debt to the IMF would be cancelled. These combined efforts serve as an important step toward forgiveness by all creditors of much of Sudan’s total public- and publicly-guaranteed external debt, which was estimated at US$56 billion at the end of 2020.

If Sudan continues its steadfast commitment to economic reforms, the country has the potential to reach the Completion Point by June 2024, which could drop Sudan’s debt by US$50 billion to about US$6 billion. This can be accomplished once Sudan implements the floating Completion Point triggers (including satisfactory implementation of their full Poverty Reduction Strategy for at least one year) and maintains a track record of satisfactory macroeconomic performance under the Extended Credit Facility arrangement. As such, it will be important to make sustained progress over the coming months, and for donors and the international community to provide Sudan with sufficient support to facilitate its transition to a stronger, more inclusive economy that benefits the Sudanese people.

Key questions on Sudan

The last Article IV Executive Board Consultation was on February 21, 2020. Listed below are items related to Sudan.