What happened to debt forgiveness for Sudan? A cure for bad memory

23 March 2012

Debt relief has always been an area of Development Policy plagued by slow and very partial progress.

There are 40 countries that have been flagged by the World Bank and the IMF as heavily indebted. Most are in Sub-Sahara Africa and are highly export dependent with 50% of their population living under the $1 poverty line threshold

Thirty-two have completed the debt forgiveness HIPCI programme and have seen $29 billion in debt forgiven, four additional countries have yet to complete the process (with a forecasted value of debt forgiveness grants of $27 billion) and four other countries that would be eligiblestill haven't started the HIPCI reform programme.

Furthermore, many voices from civil society (as clearly pointed out by the Jubilee 2000 campaign for debt cancelation) still believe that many more countries need debt cancelation, but as of today the discussion to further this field of development policy is stagnant, and the prospects of in-full debt cancelation remain just a remote dream.

These countries’ debt originated mainly from citizen’s pressure to expand public expenditure and unnecessary and unjustified expenses of authoritarian and dictatorial rulers but also with a certain collaboration of official lenders, both western countries and International Financial Institutions. Furthermore debt has grown to correct external economic shocks, as these are export-dependent nations, and every time a crisis hits their commercial partners their incomes from trade fall steeply.

Unfortunately, due to their very high level of poverty and low economic development these countries cannot embrace periods of economic austerity, they do not attract foreign capital and certainly cannot obtain new loans to repay existing ones. In sum as these economies shrink so does the possibility they will be able to repay their debt.

The case of Sudan clearly exemplifies how slow and partial progress in debt relief has been. Its debt dynamics have been and are still discussed today, but not considered to their full level of importance. A brief history of Sudan’s national debt could be used as the perfect example of debt crises: the country received high levels of financial support from western countries during the cold war in the seventies; yet, in the 1980s a civil war erupts, three year later a drought strikes devastating exports forecasts and in 1984 the country declares debt default.

While part of the debt has been forgiven on a bilateral basis, a large portion of the debt still exists with no chances of repayment in the near future. In 2012 South Sudan became independent after a referendum. The new country was set to be born the poorest in the world and talks started in the developed world to discuss the possibility of forgiving the whole of the debt of South Sudan to give the South Sudanese a chance at development and poverty reduction.

Unfortunately, this plan has not gone past the “talks” phase: the United Kingdom has reiterated its commitment in helping South Sudan, Germany is just engaging in talks; meanwhile, all of the multilateral debt and all of the other countries are being forgotten.

We have already failed to make good on our first promise not to make South Sudan pay for debts that it didn’t contract and we are slowly forgetting about debt relief in other countries too. Too little is being done. Too little we care?

Paolo Morini

UCL - The School of Public Policy