My colleague Andrea and I stepped off the plane in Istanbul about 36 hours ago. We are here in the commercial capital of Turkey and one of the symbolic bridges between the East and the West to attend the World Bank and International Monetary Fund’s annual meetings.
As neither of us proclaims to have any ground-breaking advice for world leaders as they set out to rebuild the global financial and economic infrastructure after the so-called Great Recession, why are we here? Well, it’s certainly not to rub shoulders with U.S. Treasury Secretary Timothy Geithner, although we did see him and the American delegation up-close and personal today. Instead, we are here as always to try to focus the world’s attention on peacemaking in Sudan.
But what possible role can the gathered finance ministers and international economists play in influencing politics and negotiations in Sudan? In the next few days, I will write on how the Obama Administration and international community should condition debt relief to peace in Sudan; how accountability in Sudan’s oil sector can help avoid a return to civil war; and how the international community can help build responsible state-capacity in conflict-affected countries like Sudan.
Before I do, it’s necessary to set the stage. How in fact has Sudan been affected by the current global economic crisis? A recent IMF reports highlights in detail the immense and imminent economic challenges facing the Sudanese government. In short, the large drop in oil prices over the last year has sharply lowered government revenues – perhaps cutting government revenues up to 50%. The Sudanese central bank has compounded the problem by defending the exchange rate in order to prevent a rise in domestic food and import prices. This policy intervention drained Sudan of its foreign reserves which it had accumulated during the Khartoum-boom of the last decade. What’s more, the Sudanese government cannot access much emergency foreign capital because of its already precarious debt burden position – it owes international creditors over $34 billion.
The IMF has sought to help many fragile and vulnerable countries overcome similar shocks brought on by the financial crisis that began last September on Wall Street. Sudan has not been eligible for such relief because it currently owes the fund, World Bank, and African Development Bank almost $1.5 billion in arrears – this represent roughly 75% of all past due payments by member states to the IMF. So what will Khartoum do? They invited the IMF to put together a Staff Monitored Program to assist in reforming various macroeconomic policies. In committing to implementing IMF reforms, Khartoum also asked the IMF “to take concrete action on debt relief for Sudan.” They followed up this request this week by sending a delegation to Istanbul to lobby for such assistance.
