- Sudan is approaching a key milestone for securing relief that could allow it to clear nearly all of its estimated $50 billion in external debt. Subject to meeting the requirements of the Heavily Indebted Poor Countries (HIPC) initiative, it could reach that milestone as early as June.
- Securing that relief could be transformative for a nation of 44 million people that has suffered conflict, instability, and economic isolation for decades. Today, Sudan’s per capita income is just $590 a year, making it one of the world’s poorest countries.
- This week, the World Bank and the IMF notified their Boards that a preliminary assessment indicates that Sudan is close to meeting the criteria for HIPC debt relief. Since it was launched in 1996, HIPC has delivered more than $100 billion in relief to 37 countries.
- Sudan would become the 38th –and largest—country to qualify for HIPC relief, once it fulfills the HIPC Initiative requirements, including:
- Prepare a poverty reduction strategy. Sudan’s Poverty Reduction Strategy Paper is expected to be finalized by end-April 2021.
- Establish a satisfactory six-month track record of performance under the current IMF Staff-Monitored Program which involves strict standards. Sudan will meet that threshold on the basis of its performance in the six months through March 2021.
- Clear arrears to the International Development Association (IDA), the IMF and the African Development Bank (AfDB) and clear or have a plan for clearing arrears to other external creditors. The clearance of IDA arrears is an important step towards meeting this requirement.
- Agree on the reforms necessary to reach a “Completion Point” under HIPC.
- Today, Sudan has a once-in-a-generation window of opportunity to put itself on a path of economic and social renewal.
- Since 2019, it has established a transitional government with a mandate to carry out sweeping reforms to reverse decades of economic, social, and political decline.
- Sudan’s transition process is one of the most promising recent developments for the advancement of peace and economic transformation in the Horn of Africa.
- These achievements have been aided significantly by the efforts of the World Bank and the IMF. In the coming months, the Bank and the IMF will work closely together to support Sudan put its economy on a sound footing for sustainable growth and prosperity.
WHAT IS HIPC?
IN 1996, the World Bank and the International Monetary Fund (IMF) launched the Heavily Indebted Poor Countries (HIPC) Initiative as a framework for comprehensive debt relief to eligible countries.
The HIPC Initiative was adopted recognizing that the unsustainable external debt burden faced by some of the poorest countries was a source of slow economic growth and persistent poverty.
The program was designed to ensure that the poorest countries in the world that meet HIPC’s eligibility requirements are not overwhelmed by unmanageable debt burdens. It reduces the debt of eligible countries meeting strict criteria.
The HIPC and related Multilateral Debt Relief Initiative (MDRI) programs have relieved 37 participating countries more than $100 billion in debt.
Thirty-one of these have been in Africa.
Sudan is one of just two remaining potentially eligible countries (the other is Eritrea) that have yet to start the HIPC debt relief process.