Sudan remains on track to receive HIPC debt relief

  • IMF secures further donor funding pledges at investment conference in Paris
  • Funding commitments to help Sudan reach HIPC decision point by end-June
  • But while positive for timeline, this does not change recovery prospects for commercial creditors
Sudan remains on track to receive HIPC debt relief

The IMF confirmed yesterday at an investment conference hosted by France that Sudan is on track to receive HIPC debt relief after donors pledged further financing to help the country clear its remaining multilateral arrears and meet other debt relief requirements. It comes as Sudan continues its path towards reintegration with the international community.

The IMF Managing Director Kristalina Georgieva, in her closing remarks to the conference, noted considerable progress on two of the last remaining milestones to reaching decision point, namely addressing a financing gap to clear Sudan's arrears to the IMF and to deliver the IMF's share of debt relief. After previously reported commitments from the US and UK governments to provide bridge loans to clear Sudan's other arrears to the World Bank and AFDB respectively, this left the IMF arrears as one of the last remaining, but biggest, challenges. Sudan's IMF arrears amount to US$1.4bn.

Georgieva noted that the financing gap has been filled with thanks to France and Saudi Arabia, along with other grants from the US, EU, Italy and Sweden. In particular, France has offered to provide a bridge loan to help clear Sudan’s IMF arrears (France has also agreed to cancel its US$5bn in arrears, according to media reports).

The funding commitments follow the IMF's board's approval of a financing plan on 10 May that it said will help mobilise the resources needed for the IMF to cover its share of debt relief to Sudan, but which required a broader effort from IMF member countries.

The IMF MD noted yesterday that the challenge now was to convert these funding pledges into formal commitments before the (self-imposed) deadline of 30 June. She stated that meeting this deadline will also allow Sudan to get the full benefit of the new SDR allocation (which we estimate to be worth US$858mn).

In addition, the IMF MD noted progress on other key milestones for reaching decision point in her opening remarks, namely (1) a track record of policy performance, with progress under the current staff monitored programme (SMP) looking likely to establish the minimum requirement of six months' satisfactory performance; (2) the authorities' production of a comprehensive poverty reduction strategy; and (3) significant progress on (official sector) debt reconciliation.

Clearing the IMF arrears, along with delivering the IMF's share of debt relief and securing financing assurances from a majority of creditors on providing debt relief, should help to pave the way for Sudan to reach HIPC decision point, at which time it will receive interim debt relief (flow relief), before it is able to receive final (stock) relief some time later (completion point).

We think Sudan stands a good chance of reaching decision point by end-June, as expected, given the progress so far and the strong commitment from the international community. However, while this is undeniably positive for the country, investors will remain disappointed by the larger-than-expected level of debt relief being targeted, as we have previously stated.

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