Debt relief for Sudan from The Netherlands: what next?

On 4 December 2013 the Dutch government decided to offer debt relief to Sudan, an extraordinarily misguided action, the more so since Sudan was the only country favored by such relief. The decision is bad for many reasons, but most conspicuously because of the encouragement it gives the present regime in Khartoum to believe that other nations and institutions will offer similar relief; indeed, according to some observers this was the thinking on the part of some in the Dutch parliament. The amount to be forgiven is relatively small— €150 million or about $US200 million—given the massive debt that has accrued largely under the National Islamic Front/National Congress Party (NIF/NCP) regime: some $45 billion, according to the IMF. Debt was only a fraction of this before the military coup that brought the NIF/NCP to power in 1989. And despite gross mismanagement of the economy, the regime now believes there is hope it will be given a lifeline by which to survive current civil unrest in the country.

Let’s be clear: There is simply no country in the world less deserving of debt relief than Sudan—not one. Coincidentally, two days earlier, Transparency International released the results of its Global Corruption Perceptions Index for 2013. Sudan ranked at 174 out of 177 countries surveyed, with only Afghanistan, North Korea and Somalia faring worse in the Index. Moreover, Sudan’s score actually declined this past year; there is absolutely no sign of improvement.

This is important because many of the reasons for Sudan’s external indebtedness derive from corruption, which takes various forms: the vast system of cronyism that provides political support to the regime; the illegal appropriation and sale of valuable farmland to foreign companies; the impunity afforded to the security services in extortion and asset-stripping of humanitarian organizations and “non-Arab” Sudanese; and the monumental graft that has defined the regime for more than two decades—all of these have compelled unneeded or misdirected borrowing. . Indeed, The Guardian (UK) reported in December 2010:

Omar al-Bashir, the Sudanese president, has siphoned as much as $9bn out of his impoverished country, and much of it may be stashed in London banks, according to secret U.S. diplomatic cables that recount conversations with the chief prosecutor of the International Criminal Court. (December 17, 2010)

$US9 billion is roughly 20 percent of Sudan’s total external debt. Moreover, President al-Bashir, as the Dutch government well knows, is also under indictment by the International Criminal Court for multiple charges of genocide and crimes against humanity in Darfur. And of course the ICC is based in The Hague, creating a grotesque incongruity in what emanates from The Netherlands concerning Sudan.

But economic issues here merge with the political in ways the Dutch parliament seems not to understand. A confluence of factors has made it impossible for the regime to balance its budget. In addition to the regime’s large-scale graft, it has engaged in wildly profligate military purchases, waged hugely expensive wars against the marginalized people of Sudan’s periphery, and failed badly in supporting the agricultural sector, which should be a mainstay of the economy. But it was the precipitous loss of revenues from oil extracted in now independent South Sudan that made the spending spree of the past fifteen years impossible to continue (crude exports from Port Sudan began in August 1999).

Or at least continue with anything like a reasonable monetary policy. A whole series of problems have compounded themselves by virtue of the inability of the regime to earn foreign exchange (Forex) with which to purchase products and services from abroad. This may sound abstract, but it becomes very concrete for the people of Sudan when the regime does not have the hard currency to pay for wheat imports used to make bread; shortages and long lines for bread were reported last week. And this comes on top of the huge inflationary spike caused by the regime’s September lifting of fuel subsidies—both for transportation and for cooking. Such a spike caused a large-scale uprising in a number of major cities and towns throughout Sudan, including Khartoum, Omdurman, Port Sudan, Atbara, Nyala, el-Obeid and others. The response of the regime was decisive and brutal: Amnesty International has determined that security forces and snipers were given “shoot to kill” orders when faced with thousands of demonstrators over the huge increase in fuel prices. More than 200 people were killed in Khartoum alone; many times that were wounded or killed in the country as a whole.

This is the regime to which the Dutch wish to extend debt relief?

And inflation will only increase as the cost of imports becomes stratospheric, the Sudanese Pound continues it precipitous decline (losing half its value so far this year alone), Forex is almost completely depleted, and to balance the budget the regime must print more money, since it has no further borrowing ability. This is a formula for explosive inflation, already running at an official rate of 40 percent annually, but at a rate of over 50 percent according to all economists who follow these issues. One estimate is as high as 70 percent, and this verges on hyperinflation.

Although not usually discussed, hyperinflation in Sudan would destroy the vestiges of the economy overnight. For this super-heated form of inflation feeds on itself, and the massive scramble for any hard currency or tangibles would quickly render the Pound worthless—completely worthless. Economic transactions of all forms would come to a halt; hoarding of food and other necessities would paralyze much economic activity; and most ominously, the army and security services could not be paid. This may result in a popular uprising—or a dismaying continuation of the “creeping military coup” that has been underway since 2011.

A regime that is broadly guilty of genocide in Darfur, the Nuba Mountains, and Blue Nile should not as a matter of principle be rewarded with debt relief until it ceases all atrocity crimes, crimes that continue to be reported daily from the ground. Several members of the regime have been indicted by the ICC, and more will certainly be if justice is ever rendered for the people of these brutalized regions. But there are also no compelling reasons for providing a bankrupt, corrupt, and massively self-enriching regime with any economic assistance. Humanitarian assistance, to be sure, but not the economic assistance that works only to help these cruel and vicious men survive in power.

This decision brings deep shame on The Netherlands, and suggests that much of the world has decided simply to give a pass to the genocidal counter-insurgency tactics used so relentlessly by the current regime for more than two decades.

This piece was first published in:

http://enoughproject.org/blogs/debt-relief-sudan-netherlands-what-next

*Eric Reeves is a professor at Smith College and author most recently of ‘Compromising With Evil: An archival history of greater Sudan, 2007 – 2012.’

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