The fate of Sudan’s foreign debt after the procedures of Al-Burhan and his companions..Question and answer

The steps taken after the overthrow of the Omar al-Bashir regime in Sudan - April 19, 2019 - were harsh on the social level, as the government of Abdullah Hamdok took difficult decisions, such as liberalizing the exchange rate, reducing or canceling subsidies in large proportions, which led to exceeding the inflation rate. The rate of 400%, and also worked to increase poverty rates.

And the observer of the Sudanese affairs, he hoped that the jurisprudence of the joint authority between Hamdok and the military would succeed, to save Sudan from poverty and debt, and to move towards a better economic situation, despite the harsh conditions of financial institutions, which did not take into account the economic and social conditions in Sudan.

But the army’s actions on October 25, 2021, represented a new page in the performance of the Sudanese economy, and raised many questions about files related to international institutions, and how will these files be dealt with?

On top of these files is the external debt file, whose value has been reduced by $23.5 billion, in exchange for an agenda that those in charge of governance in Sudan are committed to.

Usually such agreements include political and economic conditions, although the political conditions are not written and not declared, but international organizations usually have pressure papers that can obstruct any attempts to escape from them.

In these lines, we discuss the situation and future of Sudan's external debt after the recent events.

What is the fate of the Sudanese debt forgiveness?

There is something that everyone knows, from the dominance of America and the West over decision-making within the international financial institutions, and recently we found an escalation on the political side by America and others, for the return of the civilian component of power in Sudan, which was met with the release of some ministers and the ousted Prime Minister Abdullah Hamdok. However, it did not achieve the aspirations of America and others who demanded a change in the political situation in the country.

In the first reaction that could affect the economic level as a whole, and the debt file in particular, US aid to Sudan was frozen at about $700 million, and the World Bank announced the freezing of its aid to Sudan.

Hence, it is easy, if America and its partners adhere to the military commitment in Sudan, to deviate from the recent measures, to put pressure on forcefully by canceling the exemption that Sudan obtained for its foreign debts, but if America is not serious, the matter can proceed. On the same track with international institutions, implementing their agenda, and maintaining the exemption for foreign debts.

How big is Sudan's external debt?

The inability of Al-Bashir’s regime during his rule to pay the burdens of the external debt led to the accumulation of these debts over time, to increase the interest on the principal of the debt. According to the annual report of the Central Bank of Sudan for 2019, the total external debt amounted to $51.2 billion, of which $26.4 billion is delayed interest. That is, the interest on the debt is slightly more than the total value of the principal of the debt.

The World Bank database shows that the total value of Sudan's external debt amounted to $22.6 billion by the end of 2020, but this figure does not include the accrued debt interests.

During the negotiations of the Government of Sudan under Abdullah Hamdok, it was announced that Sudan’s total external debt amounted to about 56 billion dollars, and that the negotiations that concluded at the end of June 2021, for Sudan to benefit from the debt relief agreement for poor countries, succeeded in obtaining an exemption for its external debts. About $23.5 billion, through the Heavily Indebted Poor Countries Exemption Agreement, which is supervised by the World Bank and the International Fund.

What about the future of Sudan's debt situation?

The financial situation in Sudan does not qualify for a kind of dispensation of debts, whether domestic or foreign. In fact, the Paris Conference, which paved the way for dropping part of Sudan’s debts, was its mechanism for securing a loan to Sudan of about 1.6 billion dollars, to be paid to international institutions, so that it can return to dealing with Sudan .

Therefore, the mechanism of international institutions, as well as the government that the military is expected to install, will be to rely on borrowing from abroad, whether through IMF programs, development aid from the World Bank, or obtaining financing by borrowing from Gulf countries such as the UAE and Saudi Arabia, whether that is In the form of central bank deposits, oil aid, or direct loans.

But all of these paths are subject to the extent of the military’s response to the theses to get out of the repercussions of the October 25 measures, as well as the seriousness of America and international financial institutions in dealing with the military in light of their rejection of American demands.

What is the future of negotiations with international donors?

The future of negotiations with donors is linked to many political files, including Sudanese relations with Israel, and this file was led by Abdel Fattah al-Burhan, Commander-in-Chief of the Army, shortly after the overthrow of the Bashir regime, and several meetings took place between officials from the two countries.

As well as the extent of the consolidation of the relationship between Sudan and each of the UAE and Saudi Arabia, as they are among the countries that support the situation in Sudan, and the accounts in the end will be for those who can impose the fait accompli in light of achieving the political interests of America, as well as dealing with the agenda of international financial institutions.

It is expected that the military in Sudan will identify with these two matters, and thus negotiations will remain in the light of the economic agenda, and the passing of a road map that adopts parliamentary elections, drafting a constitution, and electing a president of the republic, regardless of the freedom and integrity of these various stages, and the international community will recognize the legitimacy of what a map will produce. The military’s path of institutions, and the evidence for this is that the military continues to change a large number of officials within all public institutions, and what applies to the future of negotiations applies to the flow of subsidies, grants and aid.

The economic activity witnessed a complete paralysis due to the popular activities rejecting the (European) measures of the army.

What is the nature of the economic situation in Sudan at the present time?

After the recent measures of the army, the economic activity witnessed a complete paralysis, due to the popular events, which many state institutions joined in, but after several days, the markets witnessed a decline in the prices of some few commodities such as sugar, and gasoline was well supplied, and there were no longer queues. In front of petrol stations.

Experts expect that with the reopening of Port Sudan Port, the market will witness the influx of many commodities, but the crisis of providing subsidized bread is still present, and the military authority has not resolved the crisis.

On the other hand, experts believe that the continuation of the military in power will prevent or at least delay the arrival of international aid and grants, and many social protection programs that were on the way to implementation.

The political scene is still stuck and ruling the fate of the economic situation in the country, for Hamdok and the civil forces adhere to the necessity of the return of civilian authority, in full, while the military is proceeding on the ground with changes in all centers of power at the political and economic level, and the promise of a technocratic government.

Thus, there will be a set of files pressing on the military, if they continue their position, and among these files, providing goods and services in acceptable quantities and prices, and arranging funding for the general budget to avoid more deficit, although some experts indicated that the government last month printed money to pay salaries, In addition, chronic issues such as unemployment, poverty, industrial modernization, and agricultural development await the military as challenges to the Sudanese street.

What is the status of Sudan in the global financial system?

After the negotiations that Hamdok’s government fought with international financial institutions, which culminated in reducing the value of Sudan’s external debt, as well as removing the name of Sudan from the list of countries supporting terrorism, by America in December 2020, the Central Bank of Sudan and the rest of the banking institutions deal with the financial system The central bank received many aids from financial institutions, and Sudanese banks received remittances from workers abroad.

So far, there has been no ban on the Sudanese Central Bank and the rest of the Sudanese banks, but if America escalates and restores the situation to what it was before December 2020, the banking system in Sudan will witness a state of paralysis again.