Working Papers

Sudan Debt Dynamics: Status Quo, Southern Secession, Debt Division, and Oil—A Financial Framework for the Future - Working Paper 233

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The people of Southern Sudan are scheduled to vote in a referendum on whether to remain unified withthe central government in Khartoum or break away to form a new, fully independent country. While theKhartoum government remains committed to a unified Sudan, all indications suggest that the SouthernSudanese will vote for secession by an overwhelming majority. Khartoum‘s willingness to accept the potentiallosses remains unclear. Many suspect that its ultimate actions will depend, at least in part, upon the resolutionof key outstanding issues, such as oil and debt.

This paper contributes to ongoing discussions about the role ofSudan‘s $35 billion in external debt obligations – both for a unified Sudan and a possible Southern secession.First, it examines Sudan‘s existing debt dynamics and the potential eligibility for traditional debt relief andmultilateral debt relief initiatives. Second, it outlines potential options for dividing Sudan‘s external debtobligations in the event of a Southern secession. Third, it estimates external indebtedness ratios under eachdebt division scenario and the potential relevance of traditional debt relief treatments. Lastly, the paper providesan indicative roadmap for clearing Sudan‘s loan arrears of $30 billion and potentially securing comprehensivedebt relief in the future.