Sudan Loses US Terror Tag

Sudan's removal from theUS state sponsors of terrorist list will not be pain-free.

When Sudan agreed last fall to pay $335 million to compensate families of US citizens killed in 1998 during al-Qaida bombings of American embassies in East Africa, it aimed to secure its delisting from the US government’s State Sponsors of Terrorism list. On December 14, the nation was officially delisted after 27 years.

It also assumed a significant financial burden for a developing country. “Most of that money was bought in the unofficial currency market, among many reasons for the severe depreciation of the currency over the past months,” says Magdi el-Gizouli, fellow at the Rift Valley Institute. “In essence, the government printed cheap Sudanese currency to buy increasingly expensive US dollars. That transferred the cost into people’s pockets, who had to watch as the value of their money eroded by the day.”

The $335 million could have been taken from elsewhere argues Stig Jarle Hansen, an associate professor at the Norwegian University of Life Sciences. “Also, the country might have borrowed from the private market.” But the Sudanese government cited other pressing concerns, including a shortage of foreign currency, high unemployment and basic needs.

Sudan’s foreign debt is estimated at $60 billion, or more than 60% of the country’s GDP. The country has endured over 60% inflation and will required $8 billion in foreign aid over the next two years to avert economic collapse, Prime Minister Abdalla Hamdok said in November.

But removal from the terrorist list opens doors to new business and new financing that could potentially help rebuild the war-torn nation. Or bring new risks.

“The Sudanese government accumulated most of these debts in the golden 1970s when Khartoum was a staunch Western ally,” says Magdi. The Northeastern African state, ravaged by years of civil war, corruption and mismanagement, was subsequently cut off from the international finance system. “Khartoum’s rulers would like a route back to that golden age. Whether the same route that led to the debt crisis will lead to the prosperity of the people is the question.”