Sudan

Decision report - Sudan debt management capacity building project

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Decision

The Secretary of State for International Development agreed on 4 April 2005 that he is content for DFID to proceed with Phase 1 of this capacity building project, but re-emphasised that the UK will not assist with the debt relief process itself until there is a substantial improvement in the situation in Darfur. Her Majesty's Ambassador in Khartoum will deliver this message to the Sudanese authorities at a senior level.

The Secretary of State noted that the debt management capacity building project is designed with trigger points between Phases 1, 2 and 3. Phases 2 and 3 will not commence without the Secretary of State's further consent.

This decision means that Phase 1 of the project will commence following signature of a contract with Crown Agents. Work should begin under this project by the of end April/early May 2005.

Information

There are two elements to the UK's proposed debt support for Sudan. The main element is that of chairing a debt support group, with the aim of creditors agreeing a way forward on Sudan's massive debt burden. The second, supporting element, is a capacity building project within the Central Bank of Sudan (CBOS) and, to a lesser extent, the Ministry of Finance, to enable officials to engage in international negotiations when the time is right, and, later, to improve their debt management structures.

The Secretary of State agreed in October to move ahead with tendering the debt management capacity building project, but asked that he be consulted again once the tender exercise was completed. He wished to take the decision on whether to commence project activities. Subsequently he agreed in December to tell the Government of Sudan that we could not proceed in assisting them with the debt relief process, principally through chairing a support group, until the situation in Darfur had improved significantly. We had previously said we would provide this assistance once a Comprehensive Peace Agreement had been signed. The Secretary of State delivered this message at the signing of the Comprehensive Peace Agreement in Nairobi in January and the message was also conveyed very clearly at official level to the Government of Sudan. We have also made our position clear to other donors and the International Financial Institutions.

We have now completed the tender process and Crown Agents have been selected. We are currently finalising commercial details of their proposal. The Director of the External Debt Unit from the CBOS was involved in the tender process and attended presentations by a number of bidders in London. We have made clear to Crown Agents and the CBOS the need for further approval before we can proceed.

The project is designed in 3 phases with trigger points to move to the second and third phases. The first phase, which will last for 6 months, is essentially to provide an international expert to work with the Government of Sudan External Debt Unit to improve their ability to prepare for debt negotiations with the Paris Club, non Paris Club creditors, the IFIs and commercial creditors. As Sudan has been isolated for many years, only the head of the unit has any experience of previous Paris Club negotiations and this experience is from 20 years ago. The second and third phases will concentrate on improving debt management structures to enhance prospects for maintaining a sustainable debt burden in the long term.

The situation in Darfur continues to be difficult and problems remain with access for humanitarian efforts and general insecurity. However, it appears that the Government of Sudan is, at least to some extent, taking forward the commitment made to the Secretary of State, and to the Foreign Secretary, in mid-February, to engage urgently and constructively to reach a solution in Darfur. First Vice President Taha is spending a considerable proportion of his time on the issue; and since the start of February the Government of Sudan does seem to be engaging more constructively than before, including through showing restraint on rebel provocation to an extent (although recent events in Jebel Moon are worrying); withdrawing Antonovs from the area and not using helicopter gunships to mount attacks; and engaging with the AU on their organised withdrawal to pre-December 8th positions.