The French President announced he would abandon the Sudanese debt of $5 billion. The announcement from Sudan’s 2nd largest creditor is the biggest step in a series a financial relief provided by western economies since the Sudanese democratic transition that started in 2019.
The International Conference to Support the Sudanese Transition was held in Paris on May 17, 2021. And it ended with the French President Emmanuel Macron relieving Khartoum of its debt of US $5 billion. “We are in favor of a pure and simple cancellation of our credit with Sudan”, Mr Macon said.
Sudan has been transitioning to a democratic country since 2019 and the destitution of the dictatorship led by Omar-al-Bashir. It removed the Shariah law, banned feminine genital mutilation. It recognized the State of Israel. It paid the United States US $335 million in compensation to the victims of the 1998 embassy bombing by Al Qaida. And in December 2020, the U.S. removed Sudan from the list of countries supporting terrorism and agreed to support Khartoum with its debt.
Because, along with a political transition, Sudan needs to rebuild its economy. The country has been in recession in the last 3 years with a rampant inflation and shortage of essential goods. The secession of South Sudan in 2005 stripped the country of most of its oil resources. Moreover, the recent civil war substantially dragged the country’s budget efforts.
The Paris Club is the first creditor to Sudan
Sudanese is crippled with an external debt of $60 billion, which is estimated to be 176% of the national gross domestic product. Only Greece and Japan are more indebted relatively to their economies. Moreover, the country has been suffering from not paying the debt it owned.
France confirmed it would provide a credit of $1.5 billion to settle arrears with the International Monetary Fund. On the same day, Germany said it would provide $110 million to settle IMF late payment fees, and that it would reduce its Sudanese debt by $440 million.
The Sudanese Prime Minister Abdallah Hamdok had already removed its debt towards the World Bank with the $1.15 billion-loan provided by the United States. It also contracted a credit from the United Kingdom, Ireland and Sweden of $425 million to settle the dispute with the African Development Bank.
Abdallah Hamdok worked on relieving the country from the loans from the multilateral financial institutions. Combined with solid economic reforms, the conditions were met for France to ease its debt burden. France’s move opens the door for other countries to work with the IMF and Sudan on its debt. The Paris Club, a group of 22 countries working on debt restructuring that include France, the US, the UK, Ireland, Sweden or Germany, still owns 38% of Sudanese debt.
As seen with the U.S., the debt relied is not purely at a loss for the countries that grant it. French industrial leaders plan to visit Sudan in order to study investment opportunities on the Sudanese soil.
Media sources and useful links:
- International Conference to Support the Sudanese Transition, Elysee Palace, May 2021, Free access