Sudan Gets Debt Relief and Additional Funding from the IMF

The East African state of Sudan received some beneficial news on Tuesday, 29 June, 2021 as their debt of over $56 billion was forgiven and they were aided with another sum of $2.5 billion to be paid over three years. This decision was taken as the IMF stated in view of the fact that the country had demonstrated a desire to engage in Macroeconomic reforms thus the IMF accepted the country into the Highly Indebted Poor countries Initiative which is a program led by the World Bank/IMF.

The forgiveness is set to ensure that Sudan’s debt will be initially reduced to $30 billion and then thereafter, it will further drop to $6 billion in a space of 3 years within which the country would have reached a irrevocable point of debt forgiveness. This decision was reached in a quicker fashion than usual as was described by analysts who opine that it is a show of goodwill to the country’ leaders who agreed to a power sharing arrangement despite the shaky security situation in the country. 

The country had been battered by sanctions and was isolated incredibly, this led to high levels of inflation which was already approaching 400%, devastating state of food security, scarcity of basic commodities and services and added to that was under a huge debt burden, which drew the attention of the International financial organisations to their aid. 

The new economic reforms undertaken by the country includes the removal of fuel subsidy, the devaluation of their exchange rate, derecognition of the country as a terrorist sponsor, this they achieved by repairing relations with Israel and committing to pay compensation to the victims of their attacks. The prime Minister was elated and stated that it was a memorable day, especially for the fact that their actions had been recognized and rewarded. 

Prior to the forgiveness, and just after the ousting of the former Sudan President Omar al-Bashir, the economy of Sudan was in such a state that only the arrears, accumulated and unpaid penalties accounted for over 80% of the country’s debt, the forgiveness of their debts has been extended to the Paris club who have not yet concluded on the amount of their debt that would be forgiven. 

The additional funding that would be received by the country, the sum of $2.5 billion is under what the IMF would term “extended credit facilities”, a terminology used to describe aids, grants and cheap loans. Out of the total sum, the IMF had doled out the sum of $1.4billion dollars which is expected to be used as part of the repayment plan for some of their loans. The IMF however acknowledges that the country needs about $7 billion over a period of two years in order to get stabilized. 

While it is expected that the reforms will cause some sacrifices to be made by the people of Sudan, the government may help reduce the pain by effectively communicating with the people and engaging with them so that they know that the required process is not an easy one but it definitely may yield to a positive outcome.

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