October 18, 2012 (KHARTOUM) – The Sudanese minister of finance and national economy, Ali Mahmoud Abdel Rasoul, said on Thursday that the cooperation agreement his country signed with South Sudan last month is already creating “international acceptance” to write off Khartoum’s hefty external debt.
- FILE PHOTO - Sudan finance minister Ali Mahmoud Abdel Rasoul (GETTY)
Abdel Rasoul told Sudan’s official news agency (SUNA) upon his return to Khartoum airport from a trip to Japan, where he led Sudan’s delegation to the annual meeting of the International Monetary Fund (IMF) and the World Bank in Tokyo, that “a great degree of international acceptance” to cancel the country’s external debt has transpired due to the signing of the cooperation agreement with South Sudan on 27 September.
He further claimed that their pursuit is assisted by the fact that Sudan has met all the technical standards of eligibility for debt relief as attested by the IMF and the World Bank.
The cooperation agreement was signed together with seven other agreements covering a host of post-secession issues between Sudan and South Sudan, including oil, border security and economic issues despite failure to settle the fate of disputed border regions.
Among the deals signed is the Agreement on Certain Economic Matters, which stipulates that Khartoum shall retain external debt liabilities incurred before the secession of South Sudan on the condition that the two states jointly seek to secure “firm commitment” from international creditors to provide comprehensive relief of Sudan’s external debt of about $40 billion. If efforts to secure debt relief fail, the two countries would enter into new negotiations to share the liability.
The minister said that the cooperation agreement has in fact already improved the atmosphere of negotiations between Sudan and the IMF and World Bank over debt relief.
He went on to point out that the agreement on certain economic matter provides for commitment by Sudan and South Sudan to conduct joint outreach activities for the relief of the former’s external debt.
According to the minister, this commitment has already been demonstrated when the delegations of Sudan and South Sudan at the IMF/World Bank annual meeting both demanded removal of Sudan external debt.
The minister added that the two countries are intensifying their efforts to secure debt relief in order to avoid the “lengthy and arduous” process of debt apportionment.
South Sudan insisted in the past that it will not split up the external debt with Sudan saying that the loans taken by Khartoum were used primarily towards financing military efforts during the north-south civil war.
The debt problem is aggravating Sudan’s economic situation which has been deteriorating since South Sudan declared independence in July 2011, taking with it about 75% of the country’s oil output. The loss of oil revenue severely curtailed Sudan’s foreign currency inflows putting pressure on the Sudanese pound and pushing inflation rates even higher.
According to figures released by the IMF last month, Sudan’s external debt is expected to hit an all-time high of $43.7 billion in 2012 and $45.6 billion in 2013. The latter represents 83% of Sudan’s 2011 GDP, which was $55.1 billion.
The IMF also urged Sudan to “step up their dialogue with creditors and donors to garner support for debt relief"
Around three quarters of Sudan’s external debt are owed to the Paris Club of creditor nations and other non-member states. The remaining balance is equally divided between commercial banks and international and regional financial bodies.
Several countries such as United States, United Kingdom and Germany expressed readiness to offer debt relief but political conditions attached will likely slow down the materialization of the pledges.
This year Sudan announced that China - a major investor in oil, construction and other sectors of the Sudanese economy - had agreed to extend Sudan’s debt maturity by an extra five years in light of the loss of revenues.