World Bank re-engages with Sudan following arrears clearance

Khartoum could now be eligible for relief on its nearly $50 billion in external debt under the Enhanced Heavily Indebted Poor Countries programme.
Monday 29/03/2021
Sudanese premier Abdullah Hamdok’s, January meeting with US Treasury Secretary Steven Mnuchin paved the way for the key US $1.15 billion bridging loan. (AP)
Sudanese premier Abdullah Hamdok’s, January meeting with US Treasury Secretary Steven Mnuchin paved the way for the key US $1.15 billion bridging loan. (AP)

KHARTOUM - The World Bank will shortly begin the process of allocating some $2 billion in grants to Sudan, a bank official said, representing the country’s return to the international financial system after decades of isolation.

Priority areas for the funds will be defined following meetings early next month and allocations would take into account a peace deal signed last year, Ousmane Dione, World Bank country director for Sudan, said.

The peace agreement, signed between the transitional government and several of the groups that fought ousted president Omar Bashir across the country, entails extensive development spending.

In a statement on Friday, Sudan’s cabinet had highlighted agriculture, infrastructure, health and education as priority areas for investment.

“Making sure that those resources are being spent where they can contribute to reducing the gap between the centre and the periphery is extremely important,” Dione told Reuters in an interview on Saturday.

While Sudan’s government is expected to “take the driver’s seat” for those projects, they could include partnerships with the private sector where advantageous, he added.

The World Bank’s International Development Agency (IDA) committed on Friday to providing the $2 billion across the coming two years, purely in the form of grants.

The new funding was made possible by the clearance of Sudan’s arrears to the bank, which was facilitated by a $1.15 billion bridge loan from the United States, which the World Bank has repaid.

“What Sudan is currently liable for is to make sure the country doesn’t fall back into arrears to IDA,” said Dione, adding that the country carried no liability for the bridge loan. Some $215 million in direct budget support was allocated to Sudan to cushion the fiscal burden on government, he said.

The government ruling following Bashir’s ouster has made painful economic reforms including the reduction of energy subsidies and a currency devaluation, as the country implements an IMF-monitored programme amidst an economic crisis.

Under Bashir, Sudan’s ability to attract foreign lending and investment dried up and it accumulated external debt estimated at $50 billion by the IMF.

Sudan hopes to embark on a debt relief process in June.

United States confirmed on Friday that it has assisted Sudan with more than $1 billion to help clear arrears at the World Bank as it hailed reforms by the civilian-backed government.

Following the announcement, the Washington-based development lender and the IMF said in a joint statement that Sudan could now be eligible for relief on its nearly $50 billion in external debt under the Enhanced Heavily Indebted Poor Countries program.

“This is a breakthrough at a time when Sudan needs the world’s help to support its development progress,” World Bank President David Malpass said.

“The steps taken so far, including arrears clearance and exchange rate unification, will put Sudan on the path to substantial debt relief, economic revival and inclusive development.”