Sudan and the Politics of Debt

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Undoing a Revolution explores the history of sovereign debt in Sudan since independence in 1956. Sudan has successively embodied different extremes in the experience of postcolonial countries in the global economy, having received access to lavish credit lines from private lenders in the 1970s, only to be cut off and subjected to a financial embargo and sanctions from the 1980s and 1990s.

In the twenty-first century, Sudan’s sovereign debt and a regime of sanctions have remained tools with which Western governments have exacted rent payments and policy concessions from a country in crisis. The civil war that begun in 2023 has led to renewed interest in understanding the root causes of conflict in Sudan. In addition, this book explores the larger context in which such armed conflicts and political struggles have taken place, as Sudan suffers from the unequal rules that shape the distribution of wealth and power in the global economy.

1978: a turning point in Sudanese history

By the late 1970s, Sudan under President Jaafar Nimeiri (1969-85) was struggling to make interest payments on its debts and the country’s creditors were increasingly unwilling to rollover loans as they fell due. Sudan’s creditors forced Nimeiri to turn to the International Monetary Fund (IMF) for emergency financing. Credit from the IMF charged lower interest rates than loans raised through international markets, but it could only be accessed in exchange for a stringent schedule of policy reforms referred to as a Structural Adjustment Programme (SAPs).

As part of Sudan’s Structural Adjustment, the national currency was devalued by 13 percent against the US dollar. Until then, the Sudanese Pound had maintained the same fixed exchange rate with the dollar since the Sudanese Pound was established in 1957. Before that, the Egyptian Pound had been the official currency of the Anglo-Egyptian Condominium of Sudan (1899-1955) during which time it had held a continuous fixed exchange rate with sterling.

The 1978 devaluation consequently ended 80 years of currency stability in Sudan. Since that date, the Sudanese currency has been devalued on average by over 90 percent every decade. Under Nimeiri, multiple devaluations lowered the currency’s official value from $2.87 in 1978 to just $0.40 by 1985. A wealthy Sudanese with £S.100,000 in the bank owned the equivalent of $2,870,000 in 1978, but only $40,000 seven years later. As this example demonstrates, the new norm of continuous devaluation served to repeatedly wipe out wealth accumulated in Sudan and to introduce radical price uncertainty for investors, producers, and consumers in the Sudanese economy.

Devaluation was just one part of Sudan’s Structural Adjustment Programme. Austerity and privatisation served to dismantled earlier experiments with building a state-led socialist economy, and real salary reductions and subsidy removals led to waves of strikes and protests opposing the government’s policies.

Why go into debt?

Should fault for Sudan’s debts lie with the debtor? It is tempting to argue that Sudan in the 1970s became ‘overindebted’ as Nimeiri’s government took out too many loans while poorly managing the domestic economy. The only fault of creditors was possibly to lend too readily to a corrupt and incompetent regime.

Although accounts blaming the morals and competence of African governments are commonplace, the reality is that sovereign debt crises occurred across the postcolonial world in the late 1970s and early 1980s. Structural explanations for a global crisis of indebtedness must consequently be found.

In the early 1970s, banks lent readily to sovereign governments in a context of rapidly rising global prices. Moreover, President Nimeiri positioned his country as a key ally of the West in the Arab World and the Horn of Africa.[1] This meant then whenever Sudan appeared unlikely to pay its debts, the United States would intervene with generous credit lines or grants-in-aid. As a result, Sudan acquired the highest debt-to-GDP ratio anywhere in the world by the early 1980s.

However, conditions soon changed in the global economy. The 1973 oil price shock raised the cost of energy imports for Sudan as with many other countries in Africa, Asia, and Latin America. Then, the 1979 Volcker Shock raised interest rates on new loans. The result was a Third World Debt Crisis that came to a head in the 1980s.

Cutting Sudan off

In 1984, Sudan defaulted on loans to the IMF and the World Bank. International convention stipulated that countries should always repay these powerful multilateral creditors ahead of foreign governments or commercial banks, so Sudan’s default put a brake on further extend-and-pretend renegotiations with its creditors.

In 1985, Nimeiri implemented a final desperate round of austerity and devaluation following advice from USAID. It was speculated at the time that the United State no longer considered Nimeiri as a guarantor of stability and US interests in the region, and that it suspended aid and advocated unpopular austerity measures as a result. A popular uprising against austerity swept Nimeiri from office that year.

For the rest of the 1980s, successive governments in Khartoum hoped that loss of access to foreign lending would prove temporary. They continued to restructure the economy on IMF advice – devaluing the currency by 44 percent in 1987 – while the IMF prepared ‘shadow’ Standby Agreements that Sudan would access once it paid down its arrears.

In 1989, an Islamist government took power in Khartoum. Sudan’s hopes of re-entering the global financial system were scuppered as the US and other Western governments erected a wall of sanctions against the country beginning in 1993 in condemnation of the regime’s support for Islamic militant groups in the region. In one decade, Sudan had swung from receiving lavish lending as a strategic Western ally to being cast as a pariah and shut out from the global economy.

Debt and Sudanese politics

The nominally socialist government of Jaafar Nimeiri (1969-85) was replaced by a liberal parliamentary system with Sadiq al-Mahdi as Prime Minister (1986-89), which was followed in turn by a military Islamist regime under Umar al-Bashir (1989-2019). Despite this rich and turbulent political history, successive governments have followed remarkably similar economic policies, namely, to implement the most recent raft of IMF advice advocating privatisation and austerity in the hopes of regaining access to foreign aid, multilateral lending, and global markets.

Meanwhile, these policies have proved remarkably unsuccessful in achieving their stated objectives. Despite the national currency losing more than 90 percent of its value every decade, there has been no take-off of competitively priced exports, and Sudanese businesspeople will go to extreme length to remove their wealth outside of the country and the national currency. Furthermore, the large trading and financial monopolies that existed in the 1970s were replaced by the 2000s with an uncontrolled economy of smuggling seeking to evade both foreign sanctions and domestic taxation.

In 2017, President Umar al-Bashir began dismantling fuel and bread subsidies in a direct implementation of IMF advice. In an echo of 1985, this triggered mass uprisings and a revolution that drove the military leader from office in 2019. This opened a period of optimism in Sudan, as the military shared power with a civilian government with the stated aim of transitioning towards a democratic political system.

And yet, the civilian Prime Minister Abdalla Hamdok (2019-21) – himself a former economist from the UN Economic Commission for Africa – continued the same economic policies as his predecessor. He slashed spending, removed subsidies, and further devalued the currency. Whereas Western commentary and scholarship had decried the harsh and arbitrary nature of these policies under an Islamist military regime, they were celebrated as bold and necessary when carried out by an English-speaking technocrat.

Undoing a Revolution tries not to argue that the crisis and hardship caused by the economic consequences of Abdalla Hamdok directly led to the military coup in 2021 that ended Sudan’s faltering democratic transition, nor indeed the outbreak of civil war in 2023. However, Sudan’s poverty and its economic isolation are not the result solely of internal or arbitrary factors. Rather, they arise from external imposition through the unequal rules that shape global economic and financial markets and unilateral Western sanctions that have been wielded as acts of economic warfare.

This book will prove useful for those seeking to understand these structural factors shaping the place of Sudan and other postcolonial countries in the contemporary global economy.

By African Arguments