The International Monetary Fund (IMF) has canceled over $56 billion in debt for Sudan and also approved the $2.5 billion in funding over three years for the East African country.
Aside from the funding, the IMF also accepted the East African country into the Highly Indebted Poor Countries (HIPC) initiative based on the country’s commitment to macroeconomic reforms.
It added that by accepting Sudan, the country can finally access debt forgiveness and new funds. Sudan is the penultimate candidate for the IMF-World Bank programme and by far the largest debt holder.
Confirming the development, IMF Mission Head, Carol Baker, said that the country’s external debt would be dropped to about $30 billion and the international body would also look for ways in supporting the country’s economic recovery.
“Now at the programme’s “decision point,” Sudan will see its external debt drop to about $30 billion relatively soon. It will then fall to $6 billion when Sudan achieves irrevocable debt relief after an estimated three years, at the “completion point,” she said.
Meanwhile, analysts said that the HIPC decision came unusually quickly, a product of international goodwill toward Sudan’s civilian leaders sharing power with the military during a fragile political transition and acknowledgment of rapid, painful economic reforms.
“It’s not over yet but this is a really significant milestone on the country’s path to a more prosperous future,” said Ian Clark, partner at legal firm White & Case, which is advising the government on debt restructuring through the HIPC with financial adviser Lazard.
Deepened by decades of isolation and sanctions, Sudan’s economic crisis includes inflation approaching 400%, shortages of basic goods and services and a spike in food insecurity. Recent economic reforms include the removal of fuel subsidies and a sharp exchange rate devaluation under an IMF-monitored programme required to enter HIPC.
Another condition for accessing HIPC was removal from the U.S. list of state sponsors of terrorism, achieved last year after Sudan agreed to provide compensation to victims of attacks and normalize relations with Israel.
“This is a big day for Sudan and reaffirms that all the efforts and sacrifices of the Sudanese people are recognized and rewarded,” Prime Minister Abdalla Hamdok said in a statement.