IMF and World Bank Consider Sudan Eligible for Assistance Under the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative
Washington: The Executive Boards of the World Bank and International Monetary Fund (IMF) met on March 23 and 26, respectively, to consider Sudan’s eligibility for debt relief under the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative. The Executive Boards commended the authorities’ sustained commitment to economic and institutional reforms under challenging circumstances and agreed that Sudan could be eligible for assistance under the Enhanced HIPC Initiative based on the preliminary assessment. This assessment is an important step towards forgiveness by all creditors of most of Sudan’s total external debt, which was estimated at US$49.8 billion at the end of 2019.
Following the IMF Executive Board discussion on March 26, 2020, Kristalina Georgieva, Managing Director and Chair, said: “Today’s agreement by the IMF Executive Board that Sudan can be eligible for debt relief under the Enhanced HIPC Initiative marks a historic moment. It provides a clear acknowledgement of Sudan’s sustained implementation of key economic and financial reforms under its staff-monitored program with the IMF. Helping Sudan achieve debt relief and unlock access to the needed resources to increase growth and reduce poverty is a key priority for the IMF and we look forward to continued cooperation with the authorities as we work toward the HIPC Decision Point. I would like to thank all of our members for their support in this endeavor.”
Following the World Bank Executive Board discussion on Sudan on March 23, 2021, David Malpass, World Bank Group President, said: “This is a breakthrough at a time when Sudan needs the world’s help to support its development progress. The steps taken so far, including arrears clearance and exchange rate unification, will put Sudan on the path to substantial debt relief, economic revival, and inclusive development. I congratulate Sudan’s government for its commitment to reform and look forward to opportunities for greater World Bank Group support to the Sudanese people.”
Prime Minister Abdalla Hamdok of Sudan said: “The agreement by the IMF and World Bank Executive Boards that Sudan can be eligible for debt relief under the HIPC Initiative is an important and welcome step towards resuming support from international financing institutions. This is a strong recognition by the international community of Sudan’s remarkable progress on economic reforms that pave the way to sustainable poverty reduction and economic growth. We look forward to our partners’ continued support to reach the HIPC decision point by end of June.”
The HIPC Initiative Process for Sudan
The HIPC Initiative HIPC is a two-step milestone-based framework. The formal start of the HIPC process is known as the Decision Point, and the culmination is the Completion Point. In order the reach the Decision Point all of the following conditions must be met: Sudan must establish a minimum six-month track record of satisfactory performance under the current IMF Staff-Monitored Program (SMP); the authorities will need to either clear their arrears to multilateral creditors or agree on a strategy to clear them; agreement must be reached on the reforms that Sudan will need to implement in order to reach the Completion Point—the floating Completion Point triggers—which take into account the views expressed by the Executive Boards; and financing assurances to provide HIPC debt relief at Completion Point must be provided by creditors.
Prompt action on these items could result in Sudan reaching the Decision Point by end-June 2021. Once Sudan has reached the Completion Point, it would qualify for irrevocable debt relief under the HIPC Initiative, and for debt relief under the Multilateral Debt Relief Initiative (MDRI) from the World Bank’s IDA and the African Development Fund (AfDF), together with beyond-HIPC assistance from the IMF. Paris Club creditors are also expected to provide further beyond-HIPC assistance at the Completion Point.
The HIPC Initiative
The HIPC Initiative is a framework, created by the IMF and World Bank, in which all creditors, including multilateral creditors, provide debt relief to the world’s poorest and most heavily indebted countries, thereby reducing the constraints on economic growth and poverty reduction imposed by the debt-service burden. To date, 36 countries have reached both their Decision Points and Completion Points under the Enhanced HIPC initiative. Learn more about the HIPC initiative process here: https://www.worldbank.org/en/topic/debt/brief/hipc