Let us suppose you have an itchy-fingered, rich and adversarial younger brother who stole some cows from the neighboring cattle camp. But instead of arbitrators admonishing and ordering him to pay retribution, they ask you—his god-fearing elder brother—to equally pay part of the fine. Is that in tenor with prescribed conduct of justice? I suppose not. Every law of nature suggests you should reject this fine-sharing proposition because your brother is better off and can single-handedly refund the stolen cows without making you suffer his consequences. After all, he has ‘made his bed, so must he lie on it.’
Analogously, the two brothers are Northern and Southern Sudan. By amassing the national resources of Sudan, the former enriched its material lot and discriminated against the latter in many ways. While Southern Sudan spoke out against the injustices, Northern Sudan shamelessly accumulated debts, procuring lethal arms to wage scorched earth policy against the injured. Metaphorically speaking, North had stolen the cows and it alone should pay them.
Sudan is currently at crossroads. Secession is looming large if our reading of the public opinion in the South is correct. Of course, the sad thing is that many thorny issues are still unsettled. These include Abyei Referendum law, popular consultation timeline, border demarcation, and formulae for sharing oil revenues, assets and national debts.
Given its history, Khartoum will drag its feet on reaching agreement on these issues. Nonetheless negotiations will come to pass, and when they do, Southern Sudan should demand, at the negotiating table, to pay no debts at all and if that is impossible, it should ask for smaller fraction. Alternatively, we can agree to pay our assigned share. But as soon the ink dried, we must turn to the international lenders to renegotiate the terms of the loan service, and if they do not budge, then we have recourse to repudiating such debts on the odious debt principle.
Debts are odious if:
(1) They did not improve the living conditions of those for whom they were borrowed. Except destruction, can Khartoum show anything in Southern Sudan as an outcome of these debts?
(2) They were borrowed on behalf of people who did not consent. In other words, debts created not in the interest of the state, are not an obligation of the state. They are a regime’s debts. That regime—National Islamic Front— which incurred these debts, must shoulder them.
(3) The creditors willingly made deals with the corrupt and anti-civilian government. They lent to the government of Sudan even though they knew the nature of the regime.
This approach, though radical, is not new. Some Latin American countries did it by intentionally defaulting in 1990s. The so-called Highly Indebted Poor Country (HIPC) initiative came out of the need for debt relief. Quite a number of Sub-Saharan African countries are beneficiaries of this program today. At the moment, Sudan is not part of the HIPC. Even the African Development Bank, the regional leading lender on the continent, now does not lend to Sudan.
For illustrative purpose, allow me to make the following simple assumptions. Sudan’s debts owed to international lenders are close to US$ 38 billion. Suppose Khartoum had its way and each takes half, Southern Sudan will walk out of negotiation table with US$ 19 billion of debts. In 2009, Southern Sudan public sector budget was $ 2 billion. Assume this budget figure remains constant for the next five years. Expressing the external debt as percentage of the annual budget, we arrive at 950%. This literally means, for every one dollar Southern Sudan government budgets for its day-to-day operations, it approximately owes ten dollars to its creditors. Our current tax base is shallow and has corrupt practice loopholes, while oil revenue accounts for 90% of the GDP, other non-oil revenue accounts for 10% of the GDP in the South.
If this formula were accepted, Southern Sudan will start its journey and development trajectory on wrong path. For many years to come, the new nation, if it ever becomes one, is going to tighten its belt and service debts. This means devoting little resources to other promising projects. What resources have we got other than oil revenues to service the debts? This debt overhang is harmful and unethical. It may, down the road, plunge us into external debt payment crisis, bankrupting our infant economy.
In closing, Southern Sudan will not be abusing the doctrine of odious debts. We have every proof to show the debts had ill-served the public interest and that the creditors were aware of this. If we accept to take some debts at the insistence of Khartoum, we should later refuse to pay because such debts were odious in the first place and there is no reason to a build a new nation on the mountain of illegitimate debts. Repudiating these debts is the surest way to alleviate the external debt burden on the new nation to be born. As for creditworthiness, some nations defied their creditors before and are now IMF darlings.