## 1tcdea2019003

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### Non-oil Growth Impediments — Key Findings
- Context and recent developments:
  - Chad is ranked 186th on the Human Development Index in 2017.
  - Chad became an oil producer in the early 2000s; oil production and exports initially improved development indicators but gains were not permanent.
  - The increase in oil production did not translate into higher growth-enhancing public investment; the private sector became increasingly dependent on public expenditure and the non-oil sector more vulnerable to oil sector developments.
  - A World Bank study (“Escaping Chad’s Growth Labyrinth” (World Bank, 2018)) using the synthetic control method found that the increase in GDP per capita could not be sustained into permanent higher GDP per capita levels.
- 2014/2015 oil price shock impacts:
  - Considerable contraction in oil revenue between 2014 and 2016 and heavy external commercial debt service (primarily to Glencore) forced dramatic spending cuts.
  - Adjustment implied an almost 12 percentage points of non-oil GDP improvement in the non-oil primary deficit in two years.
  - Resulted in large domestic arrear accumulation and a vicious cycle of contraction in non-oil activity, non-oil revenue, and government spending.
- Stabilization signs:
  - After three years of contraction (2015–2017), non-oil growth returned to positive territory with modest growth in 2018.
  - Oil activity improved in 2018; Glencore debt service reduced following its restructuring which included features to accelerate and decelerate debt service depending on oil receipts.
- Recovery remains subdued:
  - Non-oil GDP is far from its pre-crisis level; Chad’s GDP growth performance lags peer countries.

### Crisis Legacies — Findings and Policy Priorities
- Major crisis legacies:
  - High domestic public debt; large stock of domestic arrears; fragile banking sector with deteriorated asset quality and liquidity stress.
- Public domestic debt dynamics:
  - Central bank financing through statutory and exceptional advances reached CEMAC regulatory limit of CFAF 420 billion in 2015.
  - Securitized debt on the regional market rose to CFAF 484 billion (10 percent of non-oil GDP) by end-2017.
- Interest and debt service burden:
  - Interest payment on domestic debt increased to about 14 percent and 9 percent of non-oil revenue and primary spending respectively in 2018.
- Domestic arrears:
  - Stock of arrears peaked in mid-2017 at around CFAF 270 billion or 5.6 percent of non-oil GDP.
  - Declined to about CFAF 160 billion at end-2018 (arrears recorded at the Treasury).
  - A more sizable stock of yet to be verified arrears (spending commitments by line ministries) has accumulated and is being audited.
- Banking sector stress:
  - Overdue loans increased from around 12 percent at end 2014 to around 31 percent at end 2018.
  - Banks’ refinancing at the BEAC increased from CFAF 10 billion in December 2014 to CFAF 160 billion in December 2018.
  - Credit and deposit growth: around 12 percent in 2014, then shrank in 2015, 2016 and 2017 before stabilizing in 2018.
- Economic and social consequences of arrears:
  - Arrears harmed private sector balance sheets, forced layoffs, stalled investment projects, and degraded trust in government.
  - Arrears to social sector ministries reduced the level and quality of social services.
- Policy priorities to address crisis legacies:
  - Reduce domestic debt.
    - Under the ECF arrangement, the government plans to gradually reduce the rollover rate of securitized debt, to 85 percent in 2019 (after 90 percent in 2018).
    - Improving non-oil revenue mobilization and channeling part of any exceptional budget receipts towards reducing domestic public debt would help support these efforts.
  - Repay domestic arrears.
    - Continue paying arrears on goods and services towards private sector as well as on transfers and subsidies towards social sector ministries.
    - Develop and implement a clear and transparent strategy for domestic arrears clearance as audited yet-to-be-recognized arrears are identified.
  - Address non-performing loans in the banking sector.
    - Adopt an action plan including: (i) increasing provisioning, (ii) facilitating extra-judicial resolution, (iii) creating an asset management company, and (iv) adopting restructuring plans.
    - Strategy choice depends on: size of NPLs, fiscal space, liquidity of the banking system, and availability of external financing.

### Long-Term Structural Weaknesses — Findings
- Core structural constraints on medium- and long-term growth:
  - Insufficient and poor-quality physical capital.
  - Low human capital.
  - Weak governance.
- Consequences:
  - These constraints drag on diversification and make non-oil growth prospects less favorable relative to peer countries in Sub-Saharan Africa.
  - Staff analysis indicates that addressing structural weaknesses would yield sizable and durable positive impacts on Chad’s economic prospects.

### Infrastructure and Physical Capital
- Key points:
  - Chad’s level of physical capital stock is very low compared to peer countries including landlocked countries and oil exporters.
  - The infrastructure gap narrowed since the early 2000s but remains significant compared to other African low-income countries.
  - Chad has some of the lowest scores in the world for investment and infrastructure quality (World Economic Forum indicator; IMF data on quality of investment).
- Service delivery indicators:
  - Less than 10 percent of the population has access to electricity.
  - 6.5 percent of the population has access to internet.
- Public investment:
  - Public investment was relatively high, notably in the 2000s as Chad started to produce and export oil, but public investment remains largely inefficient and the infrastructure gap persists.

### Human Capital
- Human Capital Index:
  - Chad’s Human Capital Index is the lowest in the world, indicating very weak health and education outcomes.
- Index components used:
  - Survival measured with the under-5 mortality rate.
  - Expected years of learning adjusted for quality.
  - Health measured with the rate of stunting of children under age 5 and the adult survival rate.

### Governance, Business Environment, and Growth Payoffs
- Business environment bottlenecks:
  - Paying taxes, starting a new business, getting electricity, trading across borders, and protecting minority investors.
- Estimated growth payoffs from governance and corruption improvements (tailored to Chad, using sub-Saharan Africa elasticities):
  - Increasing governance to the average of CEMAC countries could potentially raise GDP per capita growth in Chad by 0.6 percentage points.
  - Improving governance to the average of sub-Saharan Africa would have an impact of 2.3 percentage points.
  - Reducing corruption to the average of CEMAC countries could potentially raise GDP per capita growth in Chad by 0.6 percentage points (using either CCI or CPI).
  - Reducing corruption to the average of sub-Saharan Africa would have an average effect of about 2.1 percentage points.
- Reported elasticities:
  - Overall sample: Governance 0.036; Corruption -0.02*; CPI -0.012.
  - Sample for sub-Saharan Africa: Governance 0.087*; CCI -0.093*; CPI -0.09*.
  - Note: * indicates statistically significant at 10 percent significance level. WGI – World Governance Indicator, CCI – Control of Corruption, CPI– Corruptions Perceptions Index.

### Financial Sector and Inclusion
- Financial sector status:
  - Underdeveloped; sector size remains small relative to SSA peers and limited ability to finance private sector activity.
- Financial inclusion indicators:
  - 9 percent of the population have a bank account.
  - Less than 5 percent of the population have ever contracted a credit.
- Microfinance and mobile payments:
  - Microfinance is at an early stage, provides limited credit to the economy, and faces difficulties with high NPLs.
  - Mobile payment is still under developed.

### Structure of the Economy and Diversification
- Export and revenue dependence:
  - Exports are largely dominated by oil (around 94 percent); very small shares for cotton, livestock, and other agri-products.
  - Government revenue is highly dependent on oil.
- Consequences:
  - Low diversification and dependence on oil revenues make the budget vulnerable to oil price volatility and contributed to a sharp fiscal consolidation during the 2014/15 oil price shock.
  - Chad’s GDP growth volatility is one of the highest in Sub-Saharan Africa.
- Policy priorities to diversify and unlock growth:
  - (i) Improve the business environment for non-oil private sector.
  - (ii) Enhance fiscal governance.
  - (iii) Deepen financial inclusion.
- Specific measures to improve private sector climate:
  - Streamline procedures for creation of small and medium size enterprises.
  - Facilitate access to financing for exporting companies to foster trade.
  - Modernize tax administration to reduce non-compliance and widen the tax base.
  - Reform regulation to facilitate investment in the electricity sector to increase access to reliable and affordable power supply.
- Fiscal governance recommendations:
  - Reduce budget dependence on oil revenues:
    - Strengthen non-oil revenue collection.
    - Use conservative oil price assumptions in the budget to accumulate fiscal buffers and enable more counter-cyclical fiscal policy.
  - Enhance public financial management:
    - Improve budget preparation and public debt management.
    - Strengthen reporting and monitoring of spending.
    - Curtail use of emergency spending procedures to avoid accumulation of domestic arrears.
  - Increase social and growth-enhancing expenditure:
    - Social spending in Chad totals 4.3 percent of GDP compared to 7.2 percent on average in low-income countries.
    - Increasing and improving the quality of social sector spending will help improve social conditions and human capital.
  - Improve government spending quality:
    - Strengthen public investment management with more transparent institutional arrangements at planning, allocating, and implementing stages.
- Financial inclusion measures:
  - Ensure financial stability and improve resilience:
    - Banks should publish audited financial statements.
    - Establish a credit bureau to help restore confidence.
  - Enhance regulatory system of MFIs and mobile banking:
    - Accelerate implementation of the 2017 regional regulation requiring first category MFIs to regroup under umbrella bodies to facilitate control and supervision.
    - Put in place a regulatory framework for mobile money that guarantees both stability and innovation while protecting consumers.
  - Promote financial education to reduce reliance on costly informal financial services and increase awareness of formal sector opportunities.

### Tax Revenue Performance, VAT, and PFM
- VAT and exemptions:
  - Revenue from the VAT stands at about 1 percent of non-oil GDP and is among the lowest in Africa.
  - A European Union financed audit (sample of 47) estimated the cost of exemptions for the Tax Directorate at about one percent of non-oil GDP in 2015.
  - Fund TA missions partially estimated shortfalls: CFAF 45 billion (about 1 percent of non-oil GDP) for the Tax Directorate in 2016 and CFAF 140 billion (2.7 percent of non-oil GDP) for the Customs Directorate in 2015.
- Drivers of weak VAT performance:
  - Weak VAT administration.
  - Large deficiencies in the VAT refund mechanism.
  - Exemptions on VAT.
  - Large size of the informal sector in Chad.
- Recent measures:
  - Widen the tax base and rationalize exemptions.
  - Better control the extension of exemptions and publish a list of all new exemptions regularly.
  - Set up a VAT refund mechanism and reduce VAT exemptions.
  - January 2018 introduction of payment of taxes through the banking system (“bancarisation des Recettes”) helped improve tax collection in the first half of 2018.
- Governance and tax potential:
  - Chad’s non-oil tax potential stands at about 10.5 percent of non-oil GDP.
  - Improving governance to the CEMAC average would increase tax potential to about 12 percent of non-oil GDP.
  - Improving governance to the sub-Saharan African average would increase tax potential to 12.5 percent of non-oil GDP.
- Public financial management (PFM) performance and issues:
  - According to the Public Expenditure and Financial Accountability (FEFA), Chad scores poorly with a D score on 31 indicators and a C score on four other indicators.
  - PFM marked by weak respect of the spending chain, excessive use of emergency spending procedures (DAO), weak cash management, accumulation of large amounts of arrears, and undermined effective budget implementation.
- Recommended PFM actions:
  - Prepare monthly cash flow projections in the context of the 2020 budget, updated on a semi-annual basis.
  - Add information on investment plans to the 2020 budget.
  - Initiate discussions on setting a single treasury account beginning with taking stock of all existing accounts in commercial banks.

### Oil Sector Oversight and Revenue Flows
- Importance of oil (2018):
  - Oil production accounted for about 20 percent of GDP (CFAF 1170 billion).
  - Oil exports were roughly 80 percent of exports.
  - Oil-related revenue made up about 45 percent of government revenues.
- Major actors and government participations:
  - Doba consortium led by Esso, CNPCI (largest producer), and Glencore.
  - SHT (Societe des Hydrocarbures du Tchad) manages government oil assets and set to increase its own production.
  - 2014 purchase of 25 percent in the Doba Consortium from Chevron.
  - 2014 government assumed 10 percent in CNPCI’s two producing fields.
- Legal regimes:
  - Concession regime and Production Sharing Contract (PSC) described.
- Glencore commercial debt and flows:
  - 2013: Government borrowed US$600 million for budget financing.
  - 2014: SHT borrowed US$1.356 billion (government guaranteed) to purchase 25 percent share in the Doba Consortium; debt collateralized by government oil and serviced through direct deduction from government-oil cargoes sold by Glencore.
- June 2018 Glencore debt restructuring outcomes:
  - Improved transparency on the contract and availability of more information on government oil revenues.
  - Under the new contract, oil export revenues received by the Treasury increased from 8 percent of gross revenues in 2017 to 43 percent in 2018.
  - Notable end-2018 figures: Total production: 43 million barrels; Net oil revenues: CFAF 265 billion; Escrow account at the Citi Bank: CFAF 69 billion; Glencore debt service: CFAF 70 billion; Transfer of net proceeds: CFAF 9 billion; Profit tax: CFAF 145 billion; Collected equity & RIK: 11 million barrels.
  - Distribution of government oil export revenues:
    - 2017 gross revenues: $277 million; shares: 24% Operating costs, 8% Amount to the Treasury, 36% Amortization of Glencore debt, 31% Interest on Glencore debt.
    - 2018 gross revenues: $465 million; shares: 26% Operating costs, 43% Amount to the Treasury, 19% Amortization of Glencore debt, 12% Interest on Glencore debt.
- Transparency progress and recommendations:
  - Ministry of Finance publishing quarterly notes on oil sector developments and revenues.
  - Adoption of a disclosure policy on oil contracts and licenses.
  - Ernest and Young appointed to monitor and calculate implementation of the 2018 Glencore debt contract.
  - EITI noted progress and encouraged publication of all revenues paid locally, transfers to local communities, and inclusion of all oil-related expenditures in the government budget. Next EITI assessment will start in November 2020.
  - Recommended to make the balance of the government offshore account more transparent and to reflect crude oil delivered from the SRN to the SNE in the budget as a subsidy with corresponding oil receipts reflected as government revenues.

### Anti-corruption Framework
- National strategy:
  - Strengthening governance and rule of law is central to Chad’s National Development Plan (Vision 2030); second axis focuses on strengthening good governance and rule of law.
- Institutional framework:
  - Judiciary, Cour des Comptes, audit office in the Office of the President, and Agence Nationale d’Investigation Financière (ANIF).
  - ANIF enforces anti-corruption legislation on economic crimes.
  - Anti-corruption bodies face considerable resource and personnel constraints.
- International commitments and recommendations:
  - Chad ratified the United Nations Convention against Corruption (UNCAC) in 2017.
  - Recommended pragmatic strategy: focus initially on preventative measures and detection of laundering of proceeds abroad while building domestic investigative capacity.
  - Strengthen anti-corruption legal framework to criminalize all acts of corruption in line with the UNCAC, criminalize laundering of proceeds in line with FATF requirements, and avoid undue impediments to mutual legal assistance.
  - Requires adequate resources and skilled personnel for anti-corruption agencies.
- Asset declaration and AML/CFT:
  - Authorities working on an enforceable, transparent, and comprehensive asset disclosure system focusing on high-level officials; constitutional requirements exist for President and members of parliament.
  - FATF-relevant elements and regional context: Chad is a member of GABAC, assessed against the 2002 FATF standard, and is subject to regional AML/CFT legal framework and COBAC banking regulations.
  - AML/CFT framework needs rapid strengthening nationally and regionally, particularly risk-based supervision of the banking sector.

### Social Spending and Development Outcomes — Inventory and Findings
- Focus and context:
  - Health and education are the largest components of government social spending and most significant social spending items in the SDGs.
  - Contextual constraints include insecurity, limited state capacity, tense social situation, weak governance, sparse population, weak non-oil growth, high debt burden, and growing youth population.
  - Population expected to grow at an average of 3 percent per year.
- Development outcomes:
  - Real GDP per capita more than doubled between 2000 and 2014.
  - Poverty headcount declined from 55 percent in 2002 to 48 percent in 2011 (national poverty line).
  - Large oil price and security shocks beginning in 2014 led to a 15 percent decline in GDP per capita.
  - Human Development Index (UNDP): 0.299 (2000); 0.330 (2005); 0.371 (2010); 0.407 (2015); 0.404 (2017).
  - Life expectancy at birth: 47.6 (2000); 53.2 (2017).
  - Expected years of schooling: 4.9 (2000); 8.0 (2017).
  - Mean years of schooling: 1.4 (2000); 2.3 (2017).
  - GNI per capita (2011 PPP$): 980 (2000); 1,750 (2017).
  - Chad ranking: 186 out of 189 countries and territories.
- Health indicators:
  - Maternal mortality: 1,370 per 100,000 live births (2000) to 856 per 100,000 live births (2015).
  - Comparator maternal mortality: low-income countries average 479 per 100,000; sub-Saharan Africa 547 per 100,000.
  - SDG maternal mortality goal: less than 70 per 100,000 live births by 2030.
- Education indicators:
  - Primary school enrollment: 64 percent (2000) to 88 percent (2016).
  - Secondary school enrollment: 23 percent (Chad) vs about 40 percent (peer low-income countries and sub-Saharan Africa).
  - Girls-to-boys ratio in primary and secondary: 0.7 (Chad) vs 0.9 (peers).
  - Literacy rates (youth 15-24): male 40 percent; female 20 percent.
- Social spending composition:
  - Education and health comprise an average of 53 percent and 21 percent of total social spending respectively.
  - About 80 percent of total poverty-reducing social spending is in the form of wages.
- Health and education financing gaps:
  - Public health spending: 11 percent of total government spending (Chad) vs 14 percent (other low-income countries).
  - Per capita public health spending: $130 (PPP) in Chad vs $200 (other low-income countries).
  - Education spending: about 2.9 percent of GDP in Chad vs 4.3 percent in peer countries.
  - Teacher availability: 57 primary school students per teacher in Chad vs 38 in other low-income countries.

### Meeting the SDGs in Health and Education — Costing and Methodology
- Methodology overview:
  - Uses Fund staff methodology identifying main inputs and reference unit costs, with totals estimated to 2030 based on population and economic growth.
  - Reference inputs and unit costs based on the median for other low-income countries that perform well on SDGs.
  - Assumes re-allocation to increase efficiency; estimates are indicative minimums and may understate Chad-specific delivery costs.
- Health sector projected gaps and targets:
  - High-performing low-income countries: 9 doctors per 10,000 people vs 0.4 doctors per 10,000 in Chad (2018).
  - Other medical personnel: 42.6 per 10,000 (2030 estimate) vs 5.6 per 10,000 (2018 current).
  - Doctor wages (Percent of GDP per capita): 44.0 (2018 current) to 10.4 (2030 estimate).
  - Health spending (Percent of GDP): 4.9 (2018 current) to 10.9 (2030 estimate).
  - Public health spending: 1.9 (2018 current) to 5.6 (2030 estimate).
  - Private health spending: 3.0 (2018 current) to 5.2 (2030 estimate).
  - Per capita spending (USD 2018): 41.7 (2018 current) to 91.2 (2030 estimate).
- Education sector projected gaps and targets:
  - Students per teacher (Ratio): 45.9 (2018 current) to 15.1 (2030 estimate).
  - Teacher wages (Ratio to GDP per capita): 3.6 (2018 current) to 2.1 (2030 estimate).
  - Other current and capital spending (Percent of total spending): 53 (2018 current) to 55 (2030 estimate).
  - Education spending (Percent of GDP): 4.0 (2018 current) to 13.7 (2030 estimate).
  - Public education spending: 2.8 (2018 current) to 10.9 (2030 estimate).
  - Private education spending: 1.2 (2018 current) to 2.8 (2030 estimate).
  - Spending per student (USD 2018): 144 (2018 current) to 237 (2030 estimate).
- Assumptions and formulas (methodology excerpts):
  - Education formula: Total education spending = (AWAGE * TSR * ER * SAP) / (1 – y - z)
    - AWAGE: teacher salaries; TSR: teacher-to-student ratio; ER: enrollment rates; SAP: school-age population; y: share of noncompensatory current expenses; z: share of capital expenses.
    - Education target enrollment rates: 50 percent for preprimary and tertiary; 100 percent for primary and secondary.
  - Health formula: Total health spending = (DPR * pop * (1 + α/ρ) * DAWAGE) / (1 - x - y)
    - DAWAGE: doctor salaries; DPR: doctor density; pop: total population; ρ: ratio of doctors to all other health staff; α: ratio of all non-doctor wages to doctor wages; y: share of noncompensatory current expenses; x: share of capital expenses.
    - It is assumed that α = 0.5.
  - Income group mapping by GDP per capita: less than US$3,000; between US$3,000 and US$6,000; between US$6,000 and US$18,000.
  - High-performing thresholds:
    - SDG4 education index: above 80 (low-income), above 82 (middle-income), above 84 (high-income).
    - SDG3 health index: above 70 (lowest income), above 78 (median income), above 84 (highest income).
- Implications:
  - Population growth of 3 percent per year implies increased service demands: by 2030, an additional 1.7 million youth entering the education system and about 5 million people in need of health care services.
  - Efficiency gains alone will not be sufficient; additional financing sources needed: domestic revenue, international partners, and the private sector.

### Conclusion
- Improving governance is central to Chad’s development and key to raising growth.
- Strengthening governance and reducing corruption through increased transparency and accountability presents an opportunity to support growth, generate revenues, and improve public resource allocation.
- The chapter focuses on tangible reforms in fiscal governance, oil sector oversight, and the anti-corruption framework.
- Sustained reform efforts will help create an environment that fosters private sector–led development and more sustainable and inclusive growth.

*Source: IMF staff chapter on Chad (Selected Issues Paper content).*

### References  _______________________________________________________________________________ 16

### References

### Figures and Tables Inventory
- Figures listed (with exact labels as in source):  
  - Background  
  - Non-oil GDP, 2014–19  
  - Stock of Domestic Arrears  
  - Crisis Legacies  
  - Non-oil GDP Growth, 2019–24  
  - Physical Capital  
  - Human Capital Index, 2018  
  - Business Climate  
  - Financial Inclusion Indicators  
  - Exports Diversification and Growth Volatility  
  - Indicators of Oil Dependence and Diversification  
  - Governance and Corruption Indicators  
  - Governance and Tax to GDP  Ratio  
  - Estimates of Chad’s Tax Potential  
  - Oil Revenue Flows, end-2018*  
  - Distribution of Government Government Oil Exports Revenues in 2017  
  - Distribution of Government Government Oil Exports Revenues in 2018  
  - GDP per Capita, PPP  
  - Maternal Mortality Ratio  
  - Literacy Rates, Adult and Youth  
  - Public Spending on Health and Education  
  - Doctor and Primary School Teacher Ratios

- Tables listed (with exact labels as in source):  
  - Human Development Index  
  - Costing Estimates for Meeting the SDGs in Health and Education

- Box listed:  
  - Estimated Impact on Growth of Enhancing Governance and Reducing Corruption

### Non-oil Growth Impediments — Key Findings
- Context and recent developments:
  - Chad is ranked 186th on the Human Development Index in 2017.  
  - Chad became an oil producer in the early 2000s; oil production and exports initially improved development indicators but gains were not permanent.  
  - The increase in oil production did not translate into higher growth-enhancing public investment; the private sector became increasingly dependent on public expenditure and the non-oil sector more vulnerable to oil sector developments.  
  - A World Bank study (“Escaping Chad’s Growth Labyrinth” (World Bank, 2018)) using the synthetic control method found that the increase in GDP per capita could not be sustained into permanent higher GDP per capita levels.
- 2014/2015 oil price shock impacts:
  - Considerable contraction in oil revenue between 2014 and 2016 and heavy external commercial debt service (primarily to Glencore) forced dramatic spending cuts.  
  - Adjustment implied an almost 12 percentage points of non-oil GDP improvement in the non-oil primary deficit in two years.  
  - Resulted in large domestic arrear accumulation and a vicious cycle of contraction in non-oil activity, non-oil revenue, and government spending.
- Stabilization signs:
  - After three years of contraction (2015–2017), non-oil growth returned to positive territory with modest growth in 2018.  
  - Oil activity improved in 2018; Glencore debt service reduced following its restructuring which included features to accelerate and decelerate debt service depending on oil receipts.
- Recovery remains subdued:
  - Non-oil GDP is far from its pre-crisis level; Chad’s GDP growth performance lags peer countries.

### Crisis Legacies — Findings and Policy Priorities
- Major crisis legacies:
  - High domestic public debt; large stock of domestic arrears; fragile banking sector with deteriorated asset quality and liquidity stress.
- Public domestic debt dynamics:
  - Central bank financing through statutory and exceptional advances reached CEMAC regulatory limit of CFAF 420 billion in 2015.  
  - Securitized debt on the regional market rose to CFAF 484 billion (10 percent of non-oil GDP) by end-2017.
- Interest and debt service burden:
  - Interest payment on domestic debt increased to about 14 percent and 9 percent of non-oil revenue and primary spending respectively in 2018.
- Domestic arrears:
  - Stock of arrears peaked in mid-2017 at around CFAF 270 billion or 5.6 percent of non-oil GDP.  
  - Declined to about CFAF 160 billion at end-2018 (arrears recorded at the Treasury).  
  - A more sizable stock of yet to be verified arrears (spending commitments by line ministries) has accumulated and is being audited.
- Banking sector stress:
  - Overdue loans increased from around 12 percent at end 2014 to around 31 percent at end 2018.  
  - Banks’ refinancing at the BEAC increased from CFAF 10 billion in December 2014 to CFAF 160 billion in December 2018.  
  - Credit and deposit growth: around 12 percent in 2014, then shrank in 2015, 2016 and 2017 before stabilizing in 2018.
- Economic and social consequences of arrears:
  - Arrears harmed private sector balance sheets, forced layoffs, stalled investment projects, and degraded trust in government.  
  - Arrears to social sector ministries reduced the level and quality of social services.
- Policy priorities to address crisis legacies (three areas of focus; exact wording preserved where applicable):
  - Reduce domestic debt.  
    - Under the ECF arrangement, the government plans to gradually reduce the rollover rate of securitized debt, to 85 percent in 2019 (after 90 percent in 2018).  
    - Improving non-oil revenue mobilization and channeling part of any exceptional budget receipts towards reducing domestic public debt would help support these efforts.
  - Repay domestic arrears.  
    - Continue paying arrears on goods and services towards private sector as well as on transfers and subsidies towards social sector ministries.  
    - Develop and implement a clear and transparent strategy for domestic arrears clearance as audited yet-to-be-recognized arrears are identified.
  - Address non-performing loans in the banking sector.  
    - Adopt an action plan including: (i) increasing provisioning, (ii) facilitating extra-judicial resolution, (iii) creating an asset management company, and (iv) adopting restructuring plans.  
    - Strategy choice depends on: size of NPLs, fiscal space, liquidity of the banking system, and availability of external financing.

### Long-Term Structural Weaknesses — Findings
- Core structural constraints on medium- and long-term growth:
  - Insufficient and poor-quality physical capital.  
  - Low human capital.  
  - Weak governance.  
- Consequences:
  - These constraints drag on diversification and make non-oil growth prospects less favorable relative to peer countries in Sub-Saharan Africa.  
  - Staff analysis indicates that addressing structural weaknesses would yield sizable and durable positive impacts on Chad’s economic prospects.

### Social Spending and Development Outcomes — Inventory (as presented)
- Topics and indicators included:
  - GDP per Capita, PPP  
  - Maternal Mortality Ratio  
  - Literacy Rates, Adult and Youth  
  - Public Spending on Health and Education  
  - Doctor and Primary School Teacher Ratios  
- Tables addressing:
  - Human Development Index  
  - Costing Estimates for Meeting the SDGs in Health and Education
- Annex:
  - Sustainable Development Goals and Methodology

*Prepared by Moez Ben Hassine and Samuel Delepierre; June 18, 2019.*

### 15.      Chad’s level and quality of infrastructure are among the lowest in the world. Despite

### Chad’s level and quality of infrastructure are among the lowest in the world. Despite

### Infrastructure and physical capital
- Chad’s level of physical capital stock is very low compared to peer countries including landlocked countries and oil exporters.
- The infrastructure gap narrowed since the early 2000s but remains significant compared to other African low-income countries.
- The low quality of physical capital stock aggravates the impact of the infrastructure gap; Chad has some of the lowest scores in the world for investment and infrastructure quality (World Economic Forum indicator; IMF data on quality of investment).
- Concrete service delivery indicators:
  - Less than 10 percent of the population has access to electricity.
  - 6.5 percent of the population has access to internet.
- Public investment was relatively high, notably in the 2000s as Chad started to produce and export oil, but public investment remains largely inefficient and the infrastructure gap persists.

### Human capital
- Chad’s Human Capital Index is the lowest in the world, indicating very weak health and education outcomes.
- The Human Capital Index components used:
  - Survival measured with the under-5 mortality rate.
  - Expected years of learning adjusted for quality.
  - Health measured with the rate of stunting of children under age 5 and the adult survival rate.

### Governance, business environment, and macro implications
- Chad scores poorly on governance, corruption, and business environment indicators.
- Specific business environment bottlenecks include: paying taxes, starting a new business, getting electricity, trading across borders, and protecting minority investors.
- IMF staff estimates of elasticity of per capita real growth indicate significant potential gains from improving governance and reducing corruption.
- Forum for the Recovery (private sector, 2018) identified fighting corruption as the first priority to support private sector role in economic recovery.
- Estimated growth payoffs (tailored to Chad, using sub-Saharan Africa elasticities):
  - Increasing governance to the average of CEMAC countries could potentially raise GDP per capita growth in Chad by 0.6 percentage points.
  - Improving governance to the average of sub-Saharan Africa would have an impact of 2.3 percentage points.
  - Reducing corruption to the average of CEMAC countries could potentially raise GDP per capita growth in Chad by 0.6 percentage points (using either CCI or CPI).
  - Reducing corruption to the average of sub-Saharan Africa would have an average effect of about 2.1 percentage points.
- Estimated elasticities (reported):
  - Overall sample: Governance 0.036; Corruption -0.02*; CPI -0.012.
  - Sample for sub-Saharan Africa: Governance 0.087*; CCI -0.093*; CPI -0.09*.
  - Note: * indicates statistically significant at 10 percent significance level. WGI – World Governance Indicator, CCI – Control of Corruption, CPI– Corruptions Perceptions Index.

### Financial sector and inclusion
- The financial sector is underdeveloped; despite rapid banking sector growth prior to the crisis, the sector’s size remains small relative to SSA peers and its ability to finance private sector activity is limited.
- Financial inclusion indicators:
  - 9 percent of the population have a bank account.
  - Less than 5 percent of the population have ever contracted a credit.
- Microfinance is at an early stage, provides limited credit to the economy, and faces difficulties with high NPLs.
- Mobile payment is still under developed.

### Structure of the economy and diversification
- Chad’s economy displays a low level of diversification; government revenue is highly dependent on oil.
- Exports are largely dominated by oil (around 94 percent); very small shares for cotton, livestock, and other agri-products.
- Low diversification and dependence on oil revenues make the budget vulnerable to oil price volatility and contributed to a sharp fiscal consolidation during the 2014/15 oil price shock.
- With low diversification, Chad’s GDP growth volatility is one of the highest in Sub-Saharan Africa.

### Policy priorities and reform recommendations to diversify the economy and unlock sustainable, inclusive growth
- Key areas to create conditions for productivity gains and diversification:
  - (i) Improve the business environment for non-oil private sector.
  - (ii) Enhance fiscal governance.
  - (iii) Deepen financial inclusion.
- Specific measures to improve private sector climate:
  - Streamline procedures for creation of small and medium size enterprises.
  - Facilitate access to financing for exporting companies to foster trade.
  - Modernize tax administration to reduce non-compliance and widen the tax base.
  - Reform regulation to facilitate investment in the electricity sector to increase access to reliable and affordable power supply.
- Fiscal governance recommendations:
  - Reducing budget dependence on oil revenues:
    - Strengthen non-oil revenue collection.
    - Use conservative oil price assumptions in the budget to accumulate fiscal buffers and enable more counter-cyclical fiscal policy.
  - Enhance public financial management:
    - Improve budget preparation and public debt management.
    - Strengthen reporting and monitoring of spending.
    - Curtail use of emergency spending procedures to avoid accumulation of domestic arrears.
  - Increase social and growth-enhancing expenditure:
    - Social spending in Chad totals 4.3 percent of GDP compared to 7.2 percent on average in low-income countries.
    - Increasing and improving the quality of social sector spending will help improve social conditions and human capital.
  - Improve government spending quality:
    - Strengthen public investment management with more transparent institutional arrangements at planning, allocating, and implementing stages.
- Financial inclusion measures:
  - Ensure financial stability and improve resilience:
    - Banks should publish audited financial statements.
    - Establish a credit bureau to help restore confidence.
  - Enhance regulatory system of MFIs and mobile banking:
    - Accelerate implementation of the 2017 regional regulation requiring first category MFIs to regroup under umbrella bodies to facilitate control and supervision.
    - Put in place a regulatory framework for mobile money that guarantees both stability and innovation while protecting consumers.
  - Promote financial education to reduce reliance on costly informal financial services and increase awareness of formal sector opportunities.

*Source: IMF staff chapter on Chad (Selected Issues Paper content).*

### 8.      Tax revenue performance is hampered by widespread exemptions and weak VAT

### 8.      Tax revenue performance is hampered by widespread exemptions and weak VAT collection

### Tax revenue performance and VAT
- Revenue from the VAT stands at about 1 percent of non-oil GDP and is among the lowest in Africa.
- Cost of exemptions:
  - A European Union financed audit based on a sample of 47 (out of a total of 150–250) “conventions d’établissement” estimated the cost of exemptions for the Tax Directorate at about one percent of non-oil GDP in 2015.
  - Fund TA missions partially estimated shortfalls: CFAF 45 billion (about 1 percent of non-oil GDP) for the Tax Directorate in 2016 and CFAF 140 billion (2.7 percent of non-oil GDP) for the Customs Directorate in 2015.
- Drivers of weak VAT performance:
  - Weak VAT administration.
  - Large deficiencies in the VAT refund mechanism.
  - Exemptions on VAT.
  - Large size of the informal sector in Chad.
- Recent measures to improve non-oil revenue mobilization:
  - Widen the tax base and rationalize exemptions.
  - Better control the extension of exemptions and publish a list of all new exemptions regularly.
  - Set up a VAT refund mechanism and reduce VAT exemptions.
  - In January 2018, introduction of payment of taxes through the banking system (“bancarisation des Recettes”) which helped improve tax collection in the first half of 2018.

### Governance and tax potential
- Cross-country analysis shows a positive correlation between governance level and non-oil revenue to GDP ratio.
- Current estimates of tax potential:
  - Chad’s non-oil tax potential stands at about 10.5 percent of non-oil GDP.
  - Improving governance to the CEMAC average would increase tax potential to about 12 percent of non-oil GDP.
  - Improving governance to the sub-Saharan African average would increase tax potential to 12.5 percent of non-oil GDP.

### Public financial management (PFM)
- PFM performance:
  - According to the Public Expenditure and Financial Accountability (FEFA), Chad scores poorly with a D score on 31 indicators and a C score on four other indicators.
  - PFM marked by weak respect of the spending chain, excessive use of emergency spending procedures (DAO), weak cash management, accumulation of large amounts of arrears, and undermined effective budget implementation.
- Ongoing issues and needed actions:
  - Use of emergency spending procedures has not been significantly contained and domestic arrears accumulation continues.
  - Delays in completion of audit of domestic arrears and development of a clearance strategy are holding back economic recovery.
  - Weak cash management and use of multiple accounts at banks undermine budget execution.
- Recommended actions (efforts should concentrate on):
  - Preparing monthly cash flow projections in the context of the 2020 budget, updated on a semi-annual basis.
  - Adding information on investment plans to the 2020 budget.
  - Initiating discussions on setting a single treasury account beginning with taking stock of all existing accounts in commercial banks.

### Oil sector oversight
- Importance of the oil sector (2018):
  - Oil production accounted for about 20 percent of GDP (CFAF 1170 billion).
  - Oil exports were roughly 80 percent of exports.
  - Oil-related revenue made up about 45 percent of government revenues.
- Major oil actors:
  - Doba consortium led by Esso (oldest, since 2004), CNPCI (largest producer), and Glencore.
  - SHT (Societe des Hydrocarbures du Tchad) is the public enterprise managing government oil assets and set to increase its own production.
- Government participations:
  - 2014 purchase of 25 percent in the Doba Consortium from Chevron.
  - 2014 government assumed 10 percent in CNPCI’s two producing fields.
- Dual legal regimes:
  - Concession regime: government cedes ownership rights; company pays royalties and profit tax.
  - Production Sharing Contract (PSC): government retains rights; company is contractor rewarded with a share of oil after expense reimbursement.
- Oversight bodies:
  - Ministry of Petroleum and Energy; “Le Collège de Contrôle et de Surveillance des Recettes Pétrolière”; SHT.
- Glencore commercial debt and revenue flows:
  - 2013: Government borrowed US$600 million for budget financing.
  - 2014: SHT borrowed US$1.356 billion (government guaranteed) to purchase 25 percent share in the Doba Consortium; debt collateralized by government oil and serviced through direct deduction from government-oil cargoes sold by Glencore.
- June 2018 Glencore debt restructuring:
  - Improved transparency on the contract and availability of more information on government oil revenues.
  - Under the agreement, government oil (royalties in kind and equity collected by SHT) is used for domestic consumption and exports:
    - Up to 4 million barrels sold to the national refinery (SRN) at a fixed price ($46.85). Revenue to SHT from the sale is first available for the electricity company (SNE) to buy refined oil from SRN as an off-budget operation; remaining amount goes to the Treasury. SRN, 60 percent owned by CNPC, compensates the government for 60 percent of the difference between international prices and the fixed price.
    - Remaining government oil delivered to Glencore for sale at the international market. Net oil proceeds after Glencore debt payment are deposited in a government offshore account. Ministry of Finance is responsible for transferring net oil proceeds to the Treasury account at the BEAC, but there is uncertainty on the periodicity of transfers and timely availability of account balance information.
  - Under the new contract, oil export revenues received by the Treasury increased from 8 percent of gross revenues in 2017 to 43 percent in 2018.
  - Notable figures in end-2018 flow diagram:
    - Total production: 43 million barrels.
    - Net oil revenues: CFAF 265 billion.
    - Escrow account at the Citi Bank: CFAF 69 billion.
    - Glencore debt service: CFAF 70 billion.
    - Transfer of net proceeds: CFAF 9 billion.
    - Profit tax: CFAF 145 billion.
    - Collected equity & RIK: 11 million barrels.
  - Distribution of government oil export revenues:
    - 2017 gross revenues: $277 million; shares: 24% Operating costs, 8% Amount to the Treasury, 36% Amortization of Glencore debt, 31% Interest on Glencore debt.
    - 2018 gross revenues: $465 million; shares: 26% Operating costs, 43% Amount to the Treasury, 19% Amortization of Glencore debt, 12% Interest on Glencore debt.
- Transparency progress:
  - Ministry of Finance publishing quarterly notes on oil sector developments and revenues.
  - Adoption of a disclosure policy on oil contracts and licenses.
  - Ernest and Young appointed to monitor and calculate implementation of the 2018 Glencore debt contract.
  - EITI noted progress and encouraged publication of all revenues paid locally, transfers to local communities, and inclusion of all oil-related expenditures in the government budget. Next EITI assessment will start in November 2020.
- Recommended transparency improvements:
  - Make the balance of the government offshore account more transparent to allow reflection in the Treasury balance sheet and define and implement a transfer mechanism.
  - Transparently reflect crude oil delivered from the SRN to the SNE in the budget as a subsidy to the electricity company, with corresponding oil receipts reflected as government revenues.

### Anti-corruption framework
- National context:
  - Strengthening governance and rule of law is central to Chad’s National Development Plan (Vision 2030). Second axis of Vision 2030 focuses on strengthening good governance and rule of law via promoting performance in public administration, promoting good economic governance, strengthening democratic culture, and strengthening security.
- Institutional framework and capacity constraints:
  - Institutions include the judiciary, Cour des Comptes (with Supreme Court), an audit office in the Office of the President, and Agence Nationale d’Investigation Financière (ANIF).
  - ANIF enforces anti-corruption legislation on economic crimes (active and passive bribery, embezzlement, influence peddling, money laundering).
  - Anti-corruption bodies face considerable resource and personnel constraints.
- UNCAC and implementation:
  - Chad ratified the United Nations Convention against Corruption (UNCAC) in 2017.
  - Recommended pragmatic strategy: focus initially on preventative measures and detection of laundering of proceeds abroad while building domestic investigative capacity.
  - Strengthen anti-corruption legal framework to ensure:
    - (i) all acts of corruption criminalized in line with the UNCAC;
    - (ii) laundering of proceeds of these acts criminalized in line with the requirements of the Financial Action Task Force (FATF);
    - (iii) no undue impediments to mutual legal assistance in cross-border cases.
  - Requires adequate resources and skilled personnel for anti-corruption agencies.
- Asset declaration framework:
  - Authorities working on an enforceable, transparent, and comprehensive asset disclosure system focusing on high-level officials.
  - Constitution requires President and members of parliament (articles 72 and 104) to declare their assets when entering office; focus now on implementing legislation and a well-equipped agency for reporting, assessment, and enforcement.
- AML/CFT strengthening:
  - FATF-relevant elements: enhanced due diligence for domestic politically-exposed persons (PEPs); reporting by financial institutions when they suspect funds are proceeds of criminal activity.
  - Chad is a member of GABAC and has been assessed against the 2002 FATF standard; has yet to be assessed against the revised standard.
  - As a CEMAC member, Chad is subject to regional AML/CFT legal framework and COBAC banking regulations.
  - The AML/CFT framework needs rapid strengthening nationally and regionally, particularly risk-based supervision of the banking sector to ensure implementation of anti-corruption related measures.

### Conclusion
- Improving governance is central to Chad’s development and key to raising growth.
- Strengthening governance and reducing corruption through increased transparency and accountability presents an opportunity to support growth, generate revenues, and improve public resource allocation.
- The paper focuses on tangible reforms in fiscal governance, oil sector oversight, and the anti-corruption framework.
- Sustained reform efforts will help create an environment that fosters private sector–led development and more sustainable and inclusive growth.

*Source: IMF Country Report excerpt (chapter 8).*

### References

### 1tcdea2019003 - References

### Introduction
- Focus: health and education spending in Chad as largest components of government social spending and most significant social spending items in the Sustainable Development Goals (SDGs).
- Contextual constraints: insecurity, limited state capacity, tense social situation, weak governance, sparsely populated territory, weak non-oil economic growth, high debt burden, and a growing youth population.
- Demographic projection: population expected to grow at an average of 3 percent per year.
- Objective: overview of development outcomes, level and distribution of social spending, and estimated costs of meeting the SDGs for health and education.

### Development Outcomes in Chad
- Income and poverty:
  - Real GDP per capita more than doubled between 2000 and 2014.
  - Poverty headcount declined from 55 percent in 2002 to 48 percent in 2011 (national poverty line).
  - Large oil price and security shocks beginning in 2014 led to a 15 percent decline in GDP per capita; economic activity has stabilized and per capita growth is recovering.
- Human Development Index (HDI) trends (UNDP):
  - HDI value: 0.299 (2000); 0.330 (2005); 0.371 (2010); 0.407 (2015); 0.404 (2017).
  - Life expectancy at birth: 47.6 (2000); 53.2 (2017).
  - Expected years of schooling: 4.9 (2000); 8.0 (2017).
  - Mean years of schooling: 1.4 (2000); 2.3 (2017).
  - GNI per capita (2011 PPP$): 980 (2000); 1,750 (2017).
  - Chad ranking: 186 out of 189 countries and territories.
- Health outcomes:
  - Maternal mortality: 1,370 per 100,000 live births (2000) to 856 per 100,000 live births (2015).
  - Comparators: low-income countries average maternal mortality 479 per 100,000; sub-Saharan Africa 547 per 100,000.
  - SDG maternal mortality goal: less than 70 per 100,000 live births by 2030.
- Education outcomes:
  - Primary school enrollment: 64 percent (2000) to 88 percent (2016); comparator close to 100 percent gross enrollment.
  - Secondary school enrollment: 23 percent (Chad) vs about 40 percent (peer low-income countries and sub-Saharan Africa).
  - Girls-to-boys ratio in primary and secondary: 0.7 (Chad) vs 0.9 (peers).
  - Literacy rates (youth 15-24): male 40 percent; female 20 percent.

### Social Spending in Chad
- Definition: poverty-reducing social spending includes education, health, gender, early childhood protection, agriculture, environment, water and sanitation, and training and job promotion (ministries listed in footnote).
- Composition:
  - Education and health comprise an average of 53 percent and 21 percent of total social spending respectively.
  - About 80 percent of total poverty-reducing social spending is in the form of wages.
- Health financing and resources:
  - Public health spending: 11 percent of total government spending (Chad) vs 14 percent (other low-income countries).
  - Per capita public health spending: $130 (PPP) in Chad vs $200 (other low-income countries).
  - Medical personnel per capita: fewer doctors and other physical resources per capita compared with peers.
- Education financing and resources:
  - Education spending: about 2.9 percent of GDP in Chad vs 4.3 percent in peer countries.
  - Teacher availability: 57 primary school students per teacher in Chad vs 38 in other low-income countries.

### Meeting the Sustainable Development Goals in Health and Education
- Methodology overview:
  - Uses Fund staff methodology identifying main inputs and reference unit costs, with totals estimated to 2030 based on population and economic growth.
  - Reference inputs and unit costs based on the median for other low-income countries that perform well on SDGs.
  - Assumes re-allocation to increase efficiency; estimates are indicative minimums and may understate Chad-specific delivery costs (landlocked, dispersed population, security challenges).
- Key projected input gaps and required scaling:
  - Health sector reference ratios:
    - High-performing low-income countries: 9 doctors per 10,000 people vs 0.4 doctors per 10,000 in Chad (2018).
    - Other medical personnel: 42.6 per 10,000 (2030 estimate) vs 5.6 per 10,000 (2018 current).
    - Doctor wages (Percent of GDP per capita): 44.0 (2018 current) to 10.4 (2030 estimate).
    - Other current and capital spending (Percent of total spending): 70.9 (2018) to 70.9 (2030 estimate).
  - Health spending results:
    - Health spending (Percent of GDP): 4.9 (2018 current) to 10.9 (2030 estimate).
    - Public health spending: 1.9 (2018 current) to 5.6 (2030 estimate).
    - Private health spending: 3.0 (2018 current) to 5.2 (2030 estimate).
    - Per capita spending (USD 2018): 41.7 (2018 current) to 91.2 (2030 estimate).
  - Education sector reference ratios:
    - Students per teacher (Ratio): 45.9 (2018 current) to 15.1 (2030 estimate).
    - Teacher wages (Ratio to GDP per capita): 3.6 (2018 current) to 2.1 (2030 estimate).
    - Other current and capital spending (Percent of total spending): 53 (2018 current) to 55 (2030 estimate).
  - Education spending results:
    - Education spending (Percent of GDP): 4.0 (2018 current) to 13.7 (2030 estimate).
    - Public education spending: 2.8 (2018 current) to 10.9 (2030 estimate).
    - Private education spending: 1.2 (2018 current) to 2.8 (2030 estimate).
    - Spending per student (USD 2018): 144 (2018 current) to 237 (2030 estimate).

### Conclusion
- Scaling up and efficiency:
  - Raising outcomes requires dedicating more public resources to health and education and ensuring efficient allocation of those resources.
  - Population growth of 3 percent per year implies increased service demands: by 2030, an additional 1.7 million youth entering the education system and about 5 million people in need of health care services.
- Financing implications:
  - Efficiency gains alone will not be sufficient.
  - Additional financing sources needed: domestic revenue, international partners, and the private sector.

### Annex: Sustainable Development Goals and Methodology (Selected SDG Targets for Health)
- SDG 3: Ensure healthy lives and promote well-being for all at all ages.
- Goal 3 Targets excerpted:
  - 3.1 By 2030, reduce the global maternal mortality ratio to less than 70 per 100,000 live births.
  - 3.2 By 2030, end preventable deaths of newborns and children under 5 years of age, with all countries aiming to reduce neonatal mortality to at least as low as 12 per 1,000 live births and under-5 mortality to at least as low as 25 per 1,000 live births.
  - 3.3 By 2030, end the epidemics of AIDS, tuberculosis, malaria and neglected tropical diseases and combat hepatitis, water-borne diseases and other communicable diseases.
  - 3.4 By 2030, reduce by one third premature mortality from non-communicable diseases through prevention and treatment and promote mental health and well-being.
  - 3.5 Strengthen the prevention and treatment of substance abuse, including narcotic drug abuse and harmful use of alcohol.
  - 3.6 By 2020, halve the number of global deaths and injuries from road traffic accidents.
  - 3.7 By 2030, ensure universal access to sexual and reproductive health-care services, including for family planning, information and education, and the integration of reproductive health into national strategies and programmes.

*Prepared by Preya Sharma; source: IMF staff chapter "Social Spending and Development Outcomes in Chad."*

### 3.8 Achieve universal health coverage, including financial risk protection, access to quality essential

### 3.8 Achieve universal health coverage, including financial risk protection, access to quality essential health-care services and access to safe, effective, quality and affordable essential medicines and vaccines for all.

### SDG targets referenced
- 3.8 Achieve universal health coverage, including financial risk protection, access to quality essential health-care services and access to safe, effective, quality and affordable essential medicines and vaccines for all.
- 3.9 By 2030, substantially reduce the number of deaths and illnesses from hazardous chemicals and air, water and soil pollution and contamination.
- Sustainable Development Goal 4 (Quality Education) targets 4.1–4.7 are listed as context for education costing assumptions used in parallel health and education costing work.

### Education costing methodology (summary of approach and assumptions)
- Formula:
  - Total education spending = (AWAGE * TSR * ER * SAP) / (1 – y - z)
- Definition of parameters (as used in the methodology):
  - AWAGE: teacher salaries
  - TSR: teacher-to-student ratio
  - ER: enrollment rates
  - SAP: school-age population
  - y: share of noncompensatory current expenses
  - z: share of capital expenses
- Benchmarking and targets:
  - The methodology sets values for TSR, AWAGE, y, and z at the median values observed today in countries with high education outcomes, separately by income group.
  - For 2030 projections the assumptions include full enrollment for at least 2 years of preprimary and tertiary education and 12 years of primary and secondary education.
  - Target enrollment rates: 50 percent for preprimary and tertiary and 100 percent for primary and secondary.
- Income group mapping for benchmarks:
  - Three groups by GDP per capita: less than US$3,000; between US$3,000 and US$6,000; and between US$6,000 and US$18,000.
- High-performing country thresholds for education (SDG4 education index):
  - Above 80 in the low-income group
  - Above 82 in the middle-income group
  - Above 84 in the high-income group

### Health costing methodology (formula, inputs, benchmarking)
- Formula:
  - Total health spending = (DPR * pop * (1 + α/ρ) * DAWAGE) / (1 - x   - y)
- Definition of parameters:
  - DAWAGE: doctor salaries
  - DPR: doctor density
  - pop: total population
  - ρ: ratio of doctors to all other health staff
  - α: ratio of all non-doctor wages to doctor wages
  - y: share of noncompensatory current expenses
  - x: share of capital expenses
- Assumptions and parameter derivation:
  - Number of doctors and other medical personnel derived using DPR, pop, and ρ.
  - The derivation of benchmarks for DAWAGE, DPR, and ρ is done separately by income group, setting their values at the median observed today in countries with high health outcomes.
  - It is assumed that the ratio of all non-doctor wage to doctor wage is 0.5.
  - Shares of capital (x) and other current spending (y) in total spending are imputed using World Bank regional and income group averages.
- Income group mapping and high-performing thresholds for health (SDG3 health index):
  - Countries are grouped into three income groups using the same income ranges as education (less than US$3,000; between US$3,000 and US$6,000; and between US$6,000 and US$18,000).
  - High performing countries defined as:
    - SDG3 health index above 70 in the lowest income group
    - Above 78 in the median income group
    - Above 84 in the highest income group

### Key numeric parameters and targets (explicit values preserved)
- Education target enrollment rates: 50 percent for preprimary and tertiary; 100 percent for primary and secondary.
- Preprimary and tertiary full enrollment assumed for at least 2 years; 12 years assumed for primary and secondary.
- Income groups by GDP per capita: less than US$3,000; between US$3,000 and US$6,000; between US$6,000 and US$18,000.
- Ratio of all non-doctor wage to doctor wage (α): 0.5.
- High-performing SDG4 thresholds: above 80 (low-income), above 82 (middle-income), above 84 (high-income).
- High-performing SDG3 thresholds: above 70 (lowest income), above 78 (median income), above 84 (highest income).

*Source: IMF country report section on SDG costing methodology (education and health).*

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_Source: https://www.imf.org/-/media/files/publications/cr/2019/1tcdea2019003.pdf_