News Brief: IMF Completes First Review of Chad under PRGF-Supported Program and Approves US$13.7 Million Disbursement
July 25, 2000
The Executive Board of the International Monetary Fund (IMF) today completed its first review of Chad's first annual arrangement under the Poverty Reduction and Growth Facility (PRGF)1 (see Press Release 00/1). The completion of this review enables the release of a further SDR 5.2 million (about US$6.9 million), bringing total disbursements under the three-year program to SDR 10.4 million (about US$13.7 million).
Following the Executive Board discussion, Stanley Fischer, First Deputy Managing Director and Acting Chairman, made the following statement:
"The authorities are to be commended for Chad's broadly satisfactory economic performance and record of policy implementation during the first half of the first annual arrangement supported by the Poverty Reduction and Growth Facility (PRGF). Although the public finance situation deteriorated in late 1999, this largely reflected the adverse impact of the energy crisis in the first half of that year. Despite the recurrence of the crisis at the beginning of 2000, the authorities have maintained a prudent fiscal stance.
"However, the impact of the energy crisis on economic activity and government revenue poses risks to the continued implementation of the program. The midterm review of the first annual arrangement has underscored the importance of implementing promptly the planned measures to strengthen domestic revenue mobilization, particularly in the area of customs. While the authorities have maintained control over total expenditures, it is important that critical outlays in the priority social sectors and for public investment be protected in the face of cash-flow difficulties. In this context, the treasury cash-flow plan assumes paramount importance.
"The authorities have also made progress in implementing structural reforms, particularly in privatization. It is important that the momentum of structural reform be maintained, particularly in the cotton sector, where there have been some delays, and in the civil service and judicial sectors. The authorities should also press ahead with the capacity-building program, both to ensure the proper management of future oil revenues, and to strengthen transparency and governance. The recent adoption of anti-corruption legislation is a laudable step in this direction.
"Reducing Chad's deeply entrenched poverty is rightly the focal point of government policy. It requires consolidating gains made over the past few years, as well as reducing the economy's vulnerability to external shocks. The authorities have steadily increased real spending in the social sectors and have already prepared sectoral strategies in the priority areas. These will now be integrated into the overall poverty reduction strategy, and used as the basis for defining priority actions. However, to improve the targeting and efficiency of public spending, it is important that the planned public expenditure review be launched as soon as possible.
"Given its immense development requirements, Chad needs the assistance that is available under the enhanced HIPC Initiative. The Poverty Reduction Strategy Paper (PRSP) under preparation will play a key role in ensuring that this assistance, and other available resources, are used effectively to reduce poverty. In this context, the authorities are to be commended for the decision to use the unanticipated revenues from the oil consortium, as well as the bulk of future oil revenues, to accelerate economic and social development and poverty reduction," Mr. Fischer said.
1 On November 22, 1999, the IMF's concessional facility for low-income countries, the Enhanced Structural Adjustment Facility (ESAF), was renamed the Poverty Reduction and Growth Facility (PRGF), and its purposes were redefined. It is intended that PRGF-supported programs will in time be based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners, and articulated in a poverty reduction strategy paper (PRSP). This is intended to ensure that each PRGF-supported program is consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty. PRGF loans carry an interest rate of 0.5 percent a year, and are repayable over 10 years with a 5 ½ year grace period on principal payments.