Sudan to Receive Debt Relief Under the HIPC Initiative

IMF News, June 29, 2021

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The Executive Boards of the World Bank's International Development Association (IDA) and the International Monetary Fund (IMF) determined that Sudan has taken the necessary steps to begin receiving debt relief under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative.
Sudan is the 38th country to reach this milestone, known as the HIPC Decision Point.
Debt relief will free up resources to tackle poverty and improve social conditions as Sudan progresses toward peace, stability, and development after more than 30 years of isolation from the international financial system.
The World Bank and the IMF will continue providing technical assistance and policy guidance, including in the context of the new, 39-month IMF financial arrangement.

At the start of the HIPC process, Sudan's total public- and publicly guaranteed external debt was estimated at US$56.2 billion in NPV terms.
Application of traditional debt relief mechanisms reduces this debt to US$30.9 billion.
Additional debt relief under the enhanced HIPC Initiative is estimated at US$23.3 billion in NPV terms.
- Of the US$23.3 billion in NPV terms:
- US$4.6 billion is projected to be provided by official multilateral creditors.
- US$17.0 billion is projected to be provided by bilateral creditors.
- US$1.7 billion is projected to be provided by commercial creditors.
Altogether, Sudan’s external debt burden is expected to fall from about US$56 billion (163 percent of GDP) in NPV terms as of end-2020 to US$6 billion (14 percent of GDP) once the Completion Point is reached and with the participation of all creditors.
Paris Club creditors have provided financing assurances for interim debt relief to Sudan.
The IMF Executive Board approved interim debt relief assistance on debt service falling due to the IMF in the period between the HIPC Decision and Completion Points.
At the HIPC Completion Point, Sudan’s current debt due to the IMF will be paid with the proceeds of voluntary financial contributions that have been received from over 100 IMF members, including many low-income countries.

MDRI debt relief from IDA and the African Development Bank would cancel all remaining claims at the Completion Point.
Sudan will receive additional debt relief under the MDRI from the World Bank Group and the AfDB Group.
Sudan is not eligible for MDRI debt relief from the IMF because Sudan does not have any outstanding MDRI-eligible loans from the IMF.
Sudan is expected to be considered by the IMF for “beyond HIPC” debt relief, as was done in the case of Liberia and Somalia, which would amount to 100 percent debt relief on eligible debt from the IMF.

Arrears to IDA were cleared on March 26, 2021 through bridge financing provided by the United States, reimbursed with the proceeds of a Development Policy Grant primarily funded from IDA’s Arrears Clearance Set Aside in IDA19.
Arrears to the African Development Bank Group were cleared on May 12, 2021 through bridge financing provided by the government of the United Kingdom and contributions from Sweden and Ireland. The bridge loan from the UK was reimbursed via the proceeds of a Policy Based Operation Grant.
Arrears to the IMF were cleared on June 29, 2021 with the assistance of bridge financing from the government of France, which the authorities reimbursed using front-loaded access under the new IMF financial arrangement.

The World Bank has unlocked substantial project financing through IDA, which will provide nearly US$2 billion in grants for poverty reduction and sustainable economic recovery.
IDA financing priorities include:
- enhancing competitiveness, transparency and accountability;
- increasing investment in irrigation and agriculture to support sustainable livelihoods;
- supporting access to energy, water, health, and education;
- creating jobs; and
- creating entrepreneurship opportunities for women and youth.

Sudan is committed to:
- strengthening macroeconomic stability;
- implementing policies to reduce poverty; and
- putting in place a set of reforms focused on fiscal sustainability, exchange rate flexibility, expanding the social safety net, strengthening the financial sector, and improving governance and transparency.
These reforms are intended to enable Sudan to reach the HIPC Completion Point in about three years’ time.
The World Bank and the IMF will continue working together to provide the technical assistance and policy guidance needed by the authorities to achieve these goals.

The leaderships of the World Bank Group and the International Monetary Fund expressed gratitude to their member countries of all regions and income levels, in particular Canada, France, Italy, Malta, Saudi Arabia, Sweden, Switzerland, the United Kingdom, and the United States, together with the European Commission, whose interventions and additional grants helped catalyze international support and raise the necessary financial resources to help Sudan reach the Decision Point.
Additional contributors named include Austria, Denmark, Germany, the Netherlands, Norway, Portugal, Spain, and Turkey.

Sudan is the 38th HIPC Decision Point country.
Population referenced: 44 million people.
Total external debt at start of HIPC process: US$56.2 billion (NPV terms).
After traditional mechanisms: US$30.9 billion (NPV terms).
Enhanced HIPC additional relief: US$23.3 billion (NPV terms).
- Official multilateral: US$4.6 billion.
- Bilateral: US$17.0 billion.
- Commercial: US$1.7 billion.
Expected external debt after Completion Point: US$6 billion (14 percent of GDP).
External debt as of end-2020: about US$56 billion (163 percent of GDP).
IDA grants unlocked: nearly US$2 billion.
Arrears clearance dates:
- IDA: March 26, 2021.
- African Development Bank Group: May 12, 2021.
- IMF: June 29, 2021.
IDA and IMF Executive Boards met on June 28, 2021; the IMF Executive Board’s decisions became effective on June 29, 2021.
IMF financial arrangement duration referenced: 39-month IMF financial arrangement.
Timeframe to Completion Point estimate: about three years’ time.

Press Release No. 21/199 — International Monetary Fund