§ The Duke of Montrose
asked Her Majesty's Government:
What conditions would need to be met, beyond the cessation of hostile activities, in order for the Government to press for the implementation of the heavily indebted poor countries debt relief process for the Sudan. [HL3161]
§ Baroness Amos
To be eligible for the heavily indebted poor countries (HIPC) initiative a country must be eligible only for highly concessional assistance from the International Development Association (IDA)—the part of the World Bank that lends on highly concessional terms—and from the International Monetary Fund (IMF)'s poverty reduction and growth facility. Countries with an income per capita of 865 dollars or less are currently eligible. They must face an unsustainable debt situation even after the full application of traditional debt relief mechanisms (such as application of Naples terms under the Paris Club agreement). To enter the initiative, the eligible country must be in peace, have an established record of good macroeconomic management; and have a policy performance record with the World Bank and IMF.
A framework peace agreement was signed in Nairobi by the Government of Sudan and the Sudan Peoples' Liberation Movement on 5 June 2004, bringing closer an end to the country's 21-year civil war between north and south. Any formal steps on normalising financial relations with the international community will not take place until a comprehensive 75WA peace agreement has been finalised. Furthermore, the international community will find it hard to move forward on debt relief for Sudan while there is conflict in Darfur, western Sudan.
Once a comprehensive peace agreement is in place, Sudan will have to negotiate a rights accumulation programme (RAP) with the IMF. This will allow them to establish a record of good macroeconomic management and a policy performance record with the World Bank and IMF. The duration of the RAP will have to be negotiated with the final decision resting with the executive board of the IMF. Following the RAP it is expected that Sudan will clear its arrears to the IMF and World Bank, which would allow those institutions to have normal lending programmes with Sudan. Before Sudan can enter the HIPC initiative, it will also have to reach agreements with its other creditors to repay or reschedule its arreas. In particular it will have to come to agreement with Paris Club creditors.
Sudan is also required to prepare an interim poverty reduction strategy paper (i-PRSP) before it reaches HIPC decision point and begins to receive interim debt relief. A draft i-PRSP is under preparation by the Government of Sudan but it does not as yet include the needs of southern Sudan.
While it is difficult to estimate precisely when decision point for Sudan will be, it is unlikely that it could be reached much before end 2005. However, G8 leaders agreed last week to work to extend the HIPC sunset clause beyond December 2004 by two years. This should allow eligible HIPC countries—including those emerging from conflict such as Sudan—to benefit from HIPC debt relief, once they have met the criteria. Completion point of the HIPC initiative (at which debt relief is provided irrevocably) could occur within two to four years of decision point.