Recalling the “Unmanageable” Crisis of the 1980s
Sudanese leaders lead the world in their skill in handling simultaneous internal and external crises. In 1984, Sudan set a world record for the number of times its official debt was rescheduled (eight). Each time the Paris Club of official creditors met, they acknowledged that Sudan had been unable to meet the economic policy conditionalities imposed at the previous meeting, and pay the arrears that were due, but found a reason for keeping Sudan within the elastic rules of international finance. But when it came to Sudan’s request for a ninth bailout and rescheduling, it had become such a persistent non-performer, the amounts needed to bail it out had become so big, and it had run up so much arrears of debt to the IMF (which is not allowed to deal officially with a defaulter), that the Sword of Damocles fell.
In March 1986, the IMF suspended Sudan, the first time it had ever taken this Draconian step. Everyone expected that this would spell complete financial ruin for the country, that its official development assistance would also be frozen and that its public finances would simply grind to a halt. Certainly, Sudan’s economic crisis deepened. But, as described by the historian of Sudan’s economy and aid during this period, Richard Brown, Sudan somehow “managed the unmanageable”. (The account is found in Brown’s, Public Debt and Private Wealth: Debt, Capital Flight and the IMF in Sudan.)
But that crisis management came at a high price for Sudanese. The financial squeeze of those years was a major factor in starting the war and in how the war was fought. In particular, lacking the funds needed to pay for a regular army campaign, the government turned to the militia strategy, with disastrous consequences. (An outline of the story is told in African Rights’ Food and Power in Sudan, chapter 5.)
Within a year, the IMF had realized that Sudan’s strategy was simply to fail to pay its debt obligations and allow the arrears to mount, and ignore the fact that the country was technically bankrupt. Given a choice between meeting an international obligation and maintaining some essential government services and functions, the government chose the latter. And when Sudan defied the international norm, first the donors and then the IMF were forced to adjust their business practices to deal with it. The IMF created the innovation of a “shadow programme” to continue to deal with Sudan, while pretending that it was not in official negotiations. This continued until the IMF changed its statutes to allow it to deal with the increasing number of chronic defaulters around the world.
Fiscal crisis is closely correlated with political crisis in Sudan. The budget presented to the National Assembly tomorrow is based on revenue projections for 2009 amounting to just 47% of 2008. This means that Sudan is facing a very difficult year.
But the main lesson to be learned today is that international institutions and mechanisms, such as the IMF and ICC, rely on countries playing the rules of the game. If they refuse to play, then there is rather little that can be done to force them to do so, and often the internationals have to accommodate to intractable local realities rather than the other way around.