Press Release: IMF Completes Fifth Review Under Chad's PRGF Arrangement and Approves US$7 Million Disbursement
July 22, 2003
The Executive Board of the International Monetary Fund (IMF) today completed the fifth review of Chad's economic performance under a Poverty Reduction and Growth Facility (PRGF) arrangement. As a result, Chad will be able to draw an amount equivalent to SDR 5.2 million (about US$7 million) under the arrangement.
The Board also granted waivers for Chad's nonobservance of performance criteria pertaining to the adoption by the Council of Ministers of a customs administration action plan and the non-accumulation of new external payments arrears. The Board also approved Chad's requests to extend the period of the arrangement until January 6, 2004 from December 6, 2003 as well as for additional interim assistance under the enhanced Initiative for Heavily Indebted Poor Countries (HIPC).
The three-year PRGF arrangement for Chad was approved on January 7, 2000 (see Press Release No. 00/1) for an amount equivalent to SDR 36.4 million (about US$50 million). This amount was augmented to an amount equivalent to SDR 47.6 million (about US$66 million) on January 16, 2002. So far, Chad has drawn an amount equivalent to SDR 37.20 million (about US$52 million).
The PRGF is the IMF's concessional facility for low-income countries. PRGF-supported programs are 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 PRGF-supported programs are consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty. PRGF loans carry an annual interest rate of 0.5 percent and are repayable over 10 years with a 5 ½-year grace period on principal payments.
In commenting on the Board's discussion on Chad, Shigemitsu Sugisaki, Deputy Managing Director and Acting Chair, stated:
"Chad's economic performance was broadly satisfactory in 2002. GDP growth was strong as a result of accelerated investment in the oil sector, but inflationary pressures have emerged, which had a negative impact on external competitiveness. Care should also be taken to avoid over-dependence on oil wealth. More generally, the updated macroeconomic framework of the Poverty Reduction Strategy Paper should guide economic policy.
"Chad would be advised not to relax its tax revenue enhancement efforts because of the imminence of oil revenue. Steadfast implementation of identified measures would help ensure long-run fiscal sustainability. Particularly important would be rapid and full implementation of the customs action plan and measures to curtail tax exemptions.
"Another priority area of reform is the composition of government spending. Achievement of the envisaged catch-up of spending in priority sectors in 2003 will require timely implementation of identified measures and reallocation of resources to address institutional weaknesses and capacity problems.
"Transparency has improved, and further steps to enhance governance would be welcome. In particular, the authorities are encouraged to discontinue the practice of direct awarding and fractioning of contracts, fully implement the recommendations of the various Supreme Court audits, and adopt an appropriate new procurement code.
"The government has decided to adopt a comprehensive set of modalities to ensure proper use of future oil revenue. Timely completion of all supporting legislation will be important, as oil revenue will begin accruing to Chad in the third quarter of 2003. Pressing on with the cotton sector reform is also essential.
"To ensure early fulfillment of HIPC Initiative completion point conditions, measures are needed urgently to improve budget execution in health and education, deliver basic infrastructure in rural areas, and complete governance reforms," Mr. Sugisaki said.