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Sudan has settled its debts with the World Bank after nearly three decades, moving the heavily indebted African country closer to a much-needed international debt-relief package, the World Bank and United States Treasury Department said on Friday.
World Bank President David Malpass said the move meant Sudan could now access nearly $2bn in grants from the Bank’s International Development Association (IDA). The Sudanese government said $635m would be immediately available for budget support and welfare spending.
Clearing the arrears, which date back to the years of former autocrat Omar al-Bashir and earlier, was made possible through a $1.15bn bridge loan from the United States government.
Sudan’s Finance Minister Jibril Ibrahim said clearance of the arrears would enable the country to secure financing from the World Bank Group and other multilateral institutions and move forward with transformative development projects.
“We are thankful to the US government for facilitating this clearance process, which also supports our drive towards more comprehensive debt relief,” Ibrahim said.
US Treasury Secretary Janet Yellen said Sudan deserved credit for implementing what she called a “robust economic reform programme” that underpins the country’s transition to democratic rule after three decades of international isolation.
“The United States is pleased to support these efforts today by helping Sudan clear its arrears to the World Bank,” she said in a statement. “It’s an action that will move Sudan one step closer to securing much-needed debt relief and help the nation reintegrate into the international financial community.”
Sudan’s civilian-led transitional government took power in April 2019 after the overthrow of al-Bashir, ending years of international isolation.
The country is seeking relief from some $56bn in external debt owed to international financial institutions, official bilateral creditors and commercial creditors.
About 85 percent of that is in arrears.
A source familiar with the matter said Sudan’s overall debt includes about $2.8bn owed to the World Bank, International Monetary Fund (IMF) and African Development Bank; $19bn owed to countries in the Paris Club of official bilateral creditors; $21bn to non-Paris Club members; and the rest to commercial creditors.
Sudan has made progress on a staff-monitored programme with the IMF, but its economy remains “extremely fragile” with inflation over 300 percent and shortages of basic goods, the IMF said this month.
The latest move brings Sudan closer to the first phase of a broader debt relief package under the Heavily Indebted Poor Countries (HIPC) initiative as early as mid-2021, one source familiar with the process told Reuters news agency.
The US loan announced on Friday had been in the works for months after the US removed Sudan from its “state sponsor of terrorism” list in late December.
Sudan fulfilled one of the main conditions demanded by international donors in February when it took steps to unify its official and black-market exchange rates.
“They have undertaken an enormous level of reform in a very short period of time,” said the source, noting that this included painful reforms such as ending fuel subsidies.
Electricity, fuel, and bread have become more expensive in recent months in Sudan, as shortages of commodities persist or worsen.
“This victory belongs to the Sudanese people who have shouldered the burden of the economic reforms, which have been made difficult by the COVID-19 pandemic,” Sudan’s cabinet said.