World Bank, Sudan seen resuming relations within yr

By Katie Nguyen

NAIROBI, March 9 (Reuters) – The World Bank is expected to normalise relations with heavily indebted Sudan within a year, the lender’s new director for Africa’s biggest country said on Wednesday.

Ishac Diwan said Britain had taken the lead in normalising relations with Sudan, which fell out of favour with international lenders when it failed to honour debt repayments.

“Sudan has been outside the international financial community for about 20 years now and so, there are arrears to the international community, to the private sector, to financial institutions, to countries — and all this needs to be sorted out before Sudan can borrow again,” Diwan told Reuters in an interview.

“I would expect this to happen within a year.”

Diwan was speaking on the sidelines of the launch of Sudan’s six-year plan for rebuilding the war-shattered country ahead of a meeting of donor nations in Norway next month.

According to the plan, Sudan will need $7.8 billion between July 2005 and the end of 2007 to build roads and railways, establish healthcare and schools in areas devastated by 21 years of civil war in the oil-producing south.

However, the country is expected to appeal only for $2.66 billion at the Oslo meeting planned for April 11-12 and provide the rest through oil revenues from the 320,000 barrels per day it currently produces.

Some rights activists argue that donor money and the right to borrow from global lenders like the World Bank should be withheld from Sudan unless the Khartoum government does more to resolve the crisis in the western region of Darfur, where fighting between rebels and government-allied militia has killed an estimated 70,000 people since early 2003.

In the south, more than two million people have been killed and four million displaced by 21 years of war between southern rebels and Khartoum in a conflict complicated by oil and ethnicity.

OIL WEALTH

The World Bank reopened its Sudan office in January after a more than 10-year absence, anticipating the country’s huge reconstruction efforts following a January 9 peace deal struck between the Khartoum government and rebels in the south.

Sudan had amassed about $25 billion in debt which needed to be reduced to $5-$6 billion before it could resume relations with the World Bank, said Diwan, who is based in the Ethiopian capital Addis Adaba.

The Bank has said previously that Sudan would qualify for debt relief under the Heavily Indebted Poor Countries Initiative.

However, the Bank was already involved in Sudan, giving technical advice on wealth-sharing in the recent peace process, and would manage foreign donations in a trust fund.

“The risk in a post conflict country where donors were not engaged is to have a donor circus — all donors coming at the same time, looking for projects, planting their flags — it could be a mess,” Diwan said.

“The multi-donor trust fund is the instrument to do that (coordination),” he added.

Under the peace deal, a national government of unity will split Sudan’s oil wealth 50-50 between the north and south.

Diwan said oil revenue would catapault the south’s annual per capita income to around $200-$300. Aid agencies previously reported per capita income of $90 a year.

“South Sudan will become the richest government in East Africa. It will be three times richer than Kenya,” Diwan said.

He said southern leaders were aware of the ‘oil curse’ and were establishing financial controls to prevent corruption.