Frequently Asked Questions on Sudan

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The IMF and World Bank approved Sudan’s eligibility for debt relief under the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative on June 29, 2021.
A Debt Relief Analysis (DRA) based on estimated end-2020 data targets a reduction in Sudan’s public- and publicly-guaranteed external debt to the “150 percent of exports” threshold under HIPC.
Under the DRA scenario, assuming full application of debt relief and participation by all creditors, debt would be reduced from $56 billion to $6 billion at Completion Point in present value terms.
At Decision Point, assuming full application and creditor participation, Sudan’s debt is expected to decline from about $56 billion to $28 billion in present value terms; at Completion Point, debt is estimated to decline further to around $6 billion.

Decision Point requirements:
- establish a minimum six-month track record of satisfactory performance under an IMF Upper-Credit-Tranche quality program (in Sudan’s case, the UCT-quality Staff-Monitored Program (SMP));
- clear arrears to the World Bank, AfDB, and IMF, and agree to a strategy to clear arrears to other multilateral creditors;
- agree to a set of appropriate completion point triggers with IMF and IDA staff;
- adopt at least an interim Poverty Reduction Strategy.
Completion Point conditions:
- implement the floating Completion Point triggers, including satisfactory implementation of the full Poverty Reduction Strategy for at least one year;
- maintain a track record of satisfactory macroeconomic performance under the country’s Extended Credit Facility (ECF).

Sudan’s debt profile:
- debt standing at over 150 percent of GDP and over ten (10) times of exports.
- debt is mostly comprised of long-standing arrears.
- creditor composition: multilateral creditors 11 percent; Paris Club bilateral creditors 42 percent; non-Paris Club bilateral creditors 36 percent; commercial creditors 11 percent.
Under the HIPC framework, the target is to lower debt to 150 percent of exports to align debt with repayment capacity.
Comparability of treatment: all creditors are expected to apply the “common reduction factor” equally to their outstanding debt stock in providing relief; Sudan should not accept less favorable terms from any one creditor than others.

The new ECF will anchor policies and reforms between HIPC Decision Point and Completion Point.
Reform priorities in the ECF arrangement:
- fiscal stability through increased domestic revenue mobilization and reduced energy subsidies, and measures to strengthen the social safety net;
- supporting exchange rate flexibility and the adoption of a reserve money targeting regime;
- strengthening the financial sector by implementing a dual banking system and reforming the bank resolution regime;
- strengthening governance and transparency, especially in the SOE sector.
The ECF reforms have been closely coordinated with other donors and complement the proposed HIPC floating Completion Point (CP) triggers.

Growth and inflation:
- 2020 growth: contraction of -3.6 percent (third consecutive year of contraction).
- inflation rose to 379 percent y/y in May 2021 due to large monetization of the fiscal deficit and shortages of food and fuel.
- Growth is expected to pick up in 2021 with inflation falling as the fiscal deficit is reduced and higher grant financing lowers the need for monetization.
External shocks and COVID-19:
- the COVID-19 pandemic compounded challenges for the transitional government.
- official confirmed COVID cases: 34,889 with 2,600 deaths as of May 24.
- on May 18 the government suspended studies in all universities and schools for one month and banned certain mass gatherings due to an accelerating infection rate.
- 2020 also saw record flooding; despite this, the Sudanese economy held up better than the Middle East and North Africa region as a whole.

International community support:
- the IMF and World Bank support Sudan’s reintegration with the international financial community through the HIPC process, including a joint debt reconciliation exercise.
- the IMF supports the authorities’ policy agenda to achieve a satisfactory track record through the Staff-Monitored Program.
- the World Bank and African Development Bank (AfDB) supported development of a Poverty Reduction Strategy.
Arrears cleared:
- Sudan cleared its arrears to the World Bank on March 26;
- Sudan cleared its arrears to the African Development Bank on May 12;
- Sudan cleared its arrears to the IMF on June 29.
Several bilateral partners are also providing support.

Debt relief objective:
- debt relief aims to bring the level and repayment schedule of the debt to a sustainable level, with debt service payments consistent with Sudan’s limited payment capacity.
Debt service and financing implications:
- At Decision Point, Sudan’s stock of debt will decline but debt service payments will likely increase as Sudan resumes debt service payments.
- Reintegration with the international financing community and becoming current on debt service obligations will unlock concessional financing and grants from multilateral as well as bilateral donors.
- Sustained strong macroeconomic policies and improvements in the business climate can help attract foreign investment.