Obama Proposes Aid to South Sudan and Debt Relief to Khartoum

Obama 2013 budget presentation

The United States President Barack Obama’s 2013 budget proposal, released on Monday incorporated the possibility of relieving Sudan’s entire debt owed to it if certain conditions are met.

“The FY 2013 budget includes $250 million for the debt restructuring account to meet potential U.S. bilateral debt relief commitments under the Heavily Indebted Poor Country (HIPC) framework,” read the U.S. Department of State appendix attached to the 2013 budget.

“Specifically, Treasury anticipates that Sudan could become eligible and reach HIPC decision point in FY 2013”.

The Sudanese government has been intensively pressing the international community to have its external debt canceled as a reward for letting South Sudan secede peacefully last July after recognizing the referendum results conducted in early 2011.

But many countries, particularly in the western world, want Khartoum to make progress on post-secession issues and resolving separate conflicts in Darfur, Blue Nile and South Kordofan.

Sudan’s sense of urgency on the debt issue is compounded by the loss of 75% of the country’s oil reserves that existed when the south was part of the country.

“The $250 million request reflects the estimated budget cost for forgiving 100 percent of Sudan’s outstanding debt to the United States (currently $2.4 billion)” Obama said in his annual budget message to Congress.

However, the U.S. administration reiterated that conditions remain attached to any debt cancellation given to Sudan.

“Prior to obligating funds for HIPC treatment of Sudan’s debt, the U.S. will require progress on various fronts that we have identified as pre-conditions for any U.S. support for debt relief, including fulfillment of the agreement reached by the governments of Sudan and South Sudan under the Comprehensive Peace Agreement”.

“The obligation of funds will also depend on Sudan’s ability to meet current legislative requirements tied to HIPC debt relief including determinations on human rights and state sponsorship of terrorism”.

Should Sudan not satisfy the requirements, the U.S. Treasury requested that Congress approve “transfer authority that would enable the Department to use these funds to help meet other international commitments if it is determined that Sudan is not likely to reach HIPC decision point by the end of FY 2014”.

Last year, the U.S. Assistant Secretary of African Affairs Johnnie Carson said that debt relief is not a simple procedure and will require extensive work.

Carson stated that the first step to tackle this matter is for the North and South to agree on how to allocate the external debt among them “then complex international contacts will commence” adding that this will take years.

Most of Sudan’s debt dates back to the days of late president Ga’afar Nimeiri. It grew from $9 billion in 1985 to $37.8 billion. The majority of it is owed to the Arab Gulf States of Saudi Arabia and Kuwait.


A copy of US President Barack Obama’s FY2013 Budget after it was delivered to Congress February 13, 2012 on Capitol HIll in Washington, DC.

In the proposed budget, South Sudan will benefit from $2.7 billion allocated “to help strengthen and stabilize developing countries and countries in transition from conflict”.

“This includes investing in building governing capacity, reform, and conflict mitigation in recently independent South Sudan”.

The funding will specifically be used to “increase agricultural productivity, expand educational opportunities especially for girls, strengthen democratic institutions and the rule of law, and enhance the capacity of the Federal Legislative Assembly to conduct oversight over government revenues and expenditures”.

But as with Sudan, the aid is contingent upon good governance practices by Juba.

The U.S. Secretary of state will be required to report to Congress detailing the extent by which South Sudan government is “supporting freedom of expression, the establishment of democratic institutions including an independent judiciary, parliament, and security forces that are accountable to civilian authority” and “investigating and punishing members of security forces who have violated human rights”.

Furthermore, the U.S. will seek to obtain “regular audits of the financial accounts of the Government of South Sudan to ensure transparency and accountability of funds, including revenues from the extraction of oil and gas, and the timely, public disclosure of such audits”.

The U.S. Secretary of State shall avail technical help to Juba in conducting such audits “by providing technical assistance to enhance the capacity of the National Auditor Chamber to carry out its responsibilities, and shall submit a report….detailing the steps that will be taken by the Government of South Sudan, which are additional to those taken in the previous fiscal year, to improve resource management and ensure transparency and accountability of funds”.

Last month, South Sudan’s parliament deliberated on ways to address corruption after the Public Accounts Committee presented its work finding that over $1 billion was unaccounted for over the years.