Improving Public Debt Management
In the OIC Member Countries
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4.1.8 Republic of the Sudan
A) Public Debt DynamicsBetween 2006 and 2011, the debttoGDP ratio of the Republic of the Sudan remained
relatively stable between 69% and 75% of GDP (see Figure 423). However, there was a sharp
increase in general government debt from 70.6% of GDP in 2011 to 94.2% of GDP in 2012,
some of which may be attributed to the secession of South Sudan in July 2011. As a result of
the secession, Sudan lost about 75% of its oil output and 60% of its fiscal revenue. Moreover,
the country had to struggle with expensive armed conflicts and increased security threats
(AEO 2012, IDA and IMF 2013a).
After the adoption of broad political and economic reforms (ADB 2014 p. IV), Sudan managed
to decrease its general government debt level steadily. In particular, a financial austerity
package, which was introduced in June 2012 and which contained expenditure cuts, tax
increases, and the reduction of subsidies on fuel, sugar and wheat, helped to achieve this
decline (UNDP 2014). In 2015, the debt level increased to 69% of GDP. The decline of the
general government debttoGDP ratio is estimated to continue towards 52.4% in 2017.
However, the expected decline in general government debt was less the result of strong efforts
to pay down debt, than rather the result of the substantially overvalued exchange rate and high
inflation (see also Figure 424), which inflates the Dollar value of GDP (EIU 2016). Thus, the
country's debt position remains critical, although the plain figures seem to signal an easing of
the general government debt situation at first sight. The EIU Credit Rating Agency rates
Sudan’s sovereign risk at the secondlowest rating C, indicating a weak capacity and
commitment to honor its obligations, and gives a negative outlook due to political instability
and the weakness of the Sudanese economy, which faces a transformation away from an oilbased economy towards a more diversified economic structure, including the promotion of
other natural resources and agriculture (UNDP 2014, EIU 2016).
Following the secession of South Sudan, the governments of Sudan and South Sudan agreed in
September 2012 to the socalled “zero option” solution, whereby Sudan would retain all the
external liabilities after the secession under the condition that the international creditors
make clear commitments with respect to debt relief measures (IMF 2012). Previously
determined to be settled in 2014, the two countries agreed to extend the deadline of this
solution until October 2016 (IMF 2014a). Although some countries, including France and the
Netherlands, announced their support of a debt relief program, Sudan has yet to seek the
support of more Paris Club Creditors, which represent an important amount of public debt
(UNDP 2014, EIU 2014). The IMF and the World Bank support the “zero option” solution and
consider Sudan currently as a PreDecisionPoint Country within the Heavily Indebted Poor
Countries Initiative (HIPC) (IMF 2014b, 2016b). Sudan made good progress in political and
economic reforms as it adopted the Interim Poverty Reduction Strategy Paper (IPRSP) and a
new Staff Monitored Program by the IMF (ADB 2014 p. IV). Moreover, Sudan has strengthened
its efforts with respect to payments to new creditors for project financing. However, the
general political requirements for a debt relief are still not met.