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The International Monetary Fund approved a $2.5 billion extended credit line for Sudan to help the country rebuild its economy and reduce poverty.
The country will also receive debt relief amounting to $50bn under the enhanced Heavily Indebted Poor Countries initiative, the fund said in a statement on Tuesday.
“Sudan’s external public debt will be irrevocably reduced – through the HIPC debt relief and other debt relief initiatives anchored to the HIPC initiative by more than $50bn in net present value terms, representing over 90 per cent of Sudan’s total external debt, if it reaches the HIPC completion point in about three years’ time," the IMF said.
The executive boards of the World Bank’s International Development Association and the fund have both approved debt relief for the country.
“Today marks an important milestone that will enable Sudan to significantly reduce its debt burden. This is a potentially transformative outcome for a nation of 44 million people that has suffered conflict, instability and economic isolation for decades," said World Bank Group president David Malpass.
“The World Bank has been providing pre-arrears clearance grants to Sudan and supporting the Sudan Family Support Programme, and I am looking forward to further scaling up our engagement to improve the living conditions of the Sudanese people."
Altogether, Sudan’s external debt burden is expected to fall from about $56bn, or 163 per cent of the gross domestic product, at the end of 2020 to $6bn, or 14 per cent of GDP, once the completion point is reached and with the participation of all creditors, according to the IMF.
The country's economy is forecast to grow by 0.4 per cent this year after shrinking by 3.6 per cent in 2020, according to the fund.
The African country is undertaking a number of reforms including the removal of fuel subsidies and broadening its tax base to stabilise its economy and boost growth. Earlier this year, it devalued its currency among other measures to help attract investment and boost exports.
IMF managing director Kristalina Georgieva said strong policy commitments by Khartoum have improved governance and helped to strengthen public finances while channelling assistance to the most vulnerable and reducing distortions by moving to a market-determined exchange rate system.
“The authorities have also completed a Poverty Reduction Strategy Paper reflecting the shared view of key stakeholders on a national road map to alleviate poverty and identify priority sectors to achieve this objective,” she said.
Sudan’s economy contracted for a third consecutive year in 2020 and growth is expected to pick up gradually this year as economic stability is restored, according to the IMF.
The fiscal deficit has come down and is expected to narrow further in 2021 but inflation, which stood at 379 per cent in May, continues to remain very high, compared to a year ago.
“This decision is an important milestone that will support Sudan’s reform and development agenda and our efforts to move away from the past and foster better lives for our people,” said Sudanese Prime Minister Abdalla Hamdok.
Last year, the US removed Sudan from its state sponsors of terrorism list, paving the way for the country to receive financial assistance from the World Bank and the IMF.
Next month, a meeting of the Paris Club, an informal group of 22 government creditors, will meet to decide how much debt relief Sudan will get.