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Sudan receives critical support from international partners yet problems remain

Sudan receives critical support from international partners yet problems remain

Though Sudan received critical support from over 40 international partners at last week’s donor conference, the breakthrough moment for prime minister Abdalla Hamdok represents just the first hurdle in the North African country’s bid to revive its economy. Report by Tom Collins. 

Since Abdalla Hamdok came to power on the back of last year’s popular revolution, the prime minister has been plagued by his inability to raise up to $10bn over the next two years to rebuild Sudan’s battered economy.

While Sudan remains on Washington’s state sponsor of terrorism list, the United States must vote against any multilateral lending programmes associated with the North African country.

This is a major stumbling block for an administration that is also battling forces loyal to former president Omar al-Bashir, a balance of payments crisis and one of Africa’s worst outbreaks of Covid-19.

Following seven ‘Friends of Sudan’ conferences, this looks to have changed as the North African country last Thursday secured $1.8bn in funding from a range of Western and Arab partners during a donor conference hosted remotely in Berlin.

The World Bank pledged $400m in grants while its president David Malpass said the lender had found four ways to support the country, even though “this is not a simple proposition because Sudan is in arrears to the Bank, and our rules don’t allow us to finance from our regular funding resources.”

The IMF announced it had reached a preliminary deal with Sudanese authorities, marking the first major re-engagement with the lender since Sudan’s voting rights were suspended in 1993 after it racked up enormous debt and failed to make payments.

“I think the conference gave confidence to the Bank and Fund to move forward aggressively and ambitiously to find creative ways to re-engage and support Sudan,” says Cameron Hudson, senior fellow at the Atlantic Council’s Africa Center.

“I have no doubt that Sudan will soon start on a new Staff Monitored Program with the IMF, which while not a funding mechanism, will help with the economic reform process domestically and pave the way for an eventual lending program, hopefully next year.”

However, the minor breakthrough is only the first step in Sudan’s precarious economic and political transition.

While Washington supports Sudan’s removal from the terrorism list, the issue has taken a backseat in the context of an upcoming election, Hudson says.

The two countries are also locked in dispute over Sudan’s alleged involvement in the 1998 embassy bombings in Kenya and Tanzania, which led the US Supreme Court in May to rule that Khartoum must pay $826m in damages out of a possible $4.3bn from an earlier ruling.

Yet even if the restrictions are lifted, Sudan holds more than $3bn in arrears to global lenders which must be dealt with before any programme can be arranged.

In a recent mission, the Fund cited numerous concerns including rampant inflation and debt to GDP standing at over 190%. 

Faced with “daunting social and economic challenges”, it expects Sudan’s economy to shrink by 8% this year, down from a contraction of 2.5% the year before.

To reduce fiscal and external deficits, it suggests increasing domestic revenue and reforming energy subsides – something which has previously sparked protests in Sudan and which may yet come to hinder talks with the IMF.

Tens of thousands of citizens took to the streets across multiple towns on Wednesday, demanding a swifter transition to civilian rule while protesting against frequent shortages of bread, medicine and fuel.

To ease the pressure and soften the impact of Covid-19 restrictions, the government has launched a “family assistance programme” which aims to provide 80% of the population with $5 per month at an estimated cost of $1.9bn.

While the donor conference is a boon for Hamdok, groups like the Sudanese Professionals Association which were at the forefront of the revolution are keen to see meaningful reforms despite delays from adversarial groups in the military, security forces and Islamist parties.

Saudi Arabia and the United Arab Emirates pledged noticeably less than most other parties despite having pumped $3bn into Sudan’s central bank in support of a military takeover after leading generals ousted Bashir in April last year.

“They appear less inclined to financially support the transition to civilian rule,” says Hudson.

“Furthermore, if Gulf states were to resolutely sour on Hamdok and his civilian government they are well-placed to finance and foment instability within Sudan through more targeted and direct support to security actors to ensure that they are not further marginalised by civilian leaders.”

 

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Written by Tom Collins

Tom Collins is a seasoned East Africa analyst reporting from Nairobi on everything from banking and finance right through to regional politics and trade. Stay up to date on regional developments by following @thomashcollins1

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