IMF Managing Director Christine Lagarde Approves a Staff-Monitored Program for ChadPress Release No. 13/335
September 9, 2013
Ms. Christine Lagarde, Managing Director of the International Monetary Fund (IMF), has approved a Staff-Monitored Program (SMP) for Chad, covering the period April-December 2013. An SMP is an informal agreement between country authorities and Fund staff to monitor the implementation of the authorities’ economic program. SMPs do not entail financial assistance or endorsement by the IMF Executive Board.
Macroeconomic performance was strong in 2012, but there are challenges to the outlook for 2013 and over the medium-term. The economy grew by close to 9 percent in 2012, supported by a bumper harvest. Real GDP growth is projected to decelerate to 3.9 percent in 2013 due in part to a return to trend of agricultural production. The inflation rate, which varies with climatic conditions given the high share of food items in the consumption basket, fell to 2.1 percent in December 2012 and is expected to stand at 5 percent at the end of 2013. Budget execution continued to improve in 2012. The non-oil primary deficit (NOPD) fell to 19.2 percent of non-oil GDP in 2012. In spite of a decline in oil revenue, the overall fiscal balance recorded a surplus of 2.8 percent of non-oil GDP on a cash basis. The external current account (including official transfers) deteriorated slightly to a deficit of 1.4 percent of GDP, while reserve coverage is estimated to have improved to 2.6 months of imports.
The main objectives of the SMP are to sustain the recent improvements in macroeconomic outcomes, while advancing public financial management reforms and the implementation of Chad’s new Poverty Reduction Strategy. As reflected in the revised 2013 budget approved by the National Assembly in July, despite increased expenditures related to the uncertain security situation in the region, a further fall in the non-oil primary deficit (NOPD) is envisaged during 2013 to 18.1 percent of non-oil GDP. However, a projected decline in oil revenues will weaken the overall fiscal and external positions. Fiscal structural reforms in coming months will focus on strengthening budget execution and transparency by restricting the use of emergency spending procedures and strengthening treasury functions and public debt management capacity. Debt sustainability remains a concern, pending the resolution of renegotiations underway on a large nonconcessional facility from the Eximbank of China.
IMF staff will closely work with the authorities to monitor progress in the implementation of their economic program through quantitative targets and structural benchmarks. In addition, the IMF is stepping up the provision of technical assistance to support Chad’s efforts to further strengthen capacity in the key macroeconomic institutions. Successful implementation of the SMP would be indicative of the authorities’ capacity to establish a policy track record of economic management and could help foster closer linkages with the international community.