## _cr10196

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---

### Executive summary — key challenges
- Chronic instability has hindered growth and poverty reduction; Chad remains among the poorest countries and has made little progress toward the Millennium Development Goals (MDGs).
- Security: the Darfur crisis and instability in the Central African Republic have driven about 300,000 refugees into Chad, adding to some 180,000 internally displaced persons. Legislative elections are scheduled for November 2010 and presidential elections for April 2011.
- Oil is temporary: production from the Doba basin is expected to diminish gradually until it becomes negligible by 2032.
- Fiscal management: the oil-revenue windfall has set public expenditure on an unsustainable path.
  - Annual public expenditure reached 46 percent of non-oil GDP in 2009.
  - The non-oil primary deficit reached 28 percent of non-oil GDP in 2009, far above the long-run sustainable level (estimated in the low single digits).
- Absorptive capacity, public financial management (PFM), and governance are strained by rapid increases in investment and recurrent costs, weak links between budgets and the PRS, limited role of line ministries in budget preparation, weak procurement practices, and frequent bypassing of normal budget procedures.
- Fund program performance has been weak; the Extended Credit Facility arrangement (February 2005–May 2008) expired without completion of any review. A Staff-Monitored Program (SMP) covering April–October 2009 went off-track because of large spending overruns.
- Financial sector is shallow: low monetization and small credit to the private sector constrain private sector development.
- Business environment: Chad ranks among the bottom 10 percent in international competitiveness and doing-business indicators.

### Recent economic developments (2008–09)
- Output and inflation:
  - Real GDP contracted by 2 percent in 2009 due to a sharp reduction in agricultural production (poor rainfall) and trend decrease of oil production.
  - Inflation rose from 8 percent on average in 2008 to 10 percent in 2009 but has started to wane after the fuel and food crisis.
- Food security:
  - Poor harvest could imply food shortages for up to 2 million people (18 percent of the population).
  - Need for additional food is estimated at between 80,000-100,000 metric tons; the government ordered 33,000 tons and planned to use a stock of 10,000 tons; World Food Program coordinating importation of 47,000 tons estimated cost $65 million, donor-financed.
- External and monetary developments:
  - Fall in oil prices induced a sharp increase of the current account deficit and deterioration of the overall balance.
  - Imputed gross official reserves reduced to 3 months of imports of goods and services, net of oil sector imports (imputed reserves in months: 2008: 4.9; 2009: 6.0; 2010 proj.: 7.0 in Text Table 4; other tables show variations).
  - Broad money contracted slightly in 2009; broad money (annual percentage change) shows 2009 Est.: -4.0 (Table 5/7 series).
- Fiscal 2009 developments:
  - Oil revenues fell from 38 percent of non-oil GDP in 2008 to 13 percent in 2009.
  - Expenditure increased from 43 percent of non-oil GDP in 2008 to 46 percent in 2009 and exceeded expenditure ceilings under both the initial budget and the August 2009 supplementary budget under the SMP.
  - The overall fiscal balance moved from a sizeable surplus (some 7 percent of non-oil GDP) in 2008 to a large deficit (about 21 percent of non-oil GDP) in 2009.
  - Financing included: depletion of oil savings held at the BEAC; increased borrowing from BEAC (including the counterpart of Chad’s new SDR allocation of SDR 44.2 million (CFA 32 billion or 1.4 percent of non-oil GDP) lent to the Government by BEAC); and significant increased foreign financing (mainly grants) for donor-implemented projects.
  - The non-oil primary balance improved marginally in 2009 (by less than 1 percent of non-oil GDP), helped by improvement in non-oil tax revenues.
- CEMAC convergence: compliance has deteriorated since 2007 because of worsening fiscal position and high inflation.

### Medium-term macroeconomic outlook and projections (selected figures preserved)
- Outlook drivers: expected rebound of agriculture; construction of a second oil project (about one third the size of the project initiated in 2003), an oil refinery, and a power plant; gradual recovery of oil prices; need for fiscal adjustment in response to financing constraints.
- Projections (Text Table 4; staff estimates/projected series):
  - Real GDP (annual percentage change): 2009 Est.: -0.4; 2010 Proj.: 1.6; 2011 Prog. Est.: -1.6; 2012: 4.3; 2013: 3.9.
  - Real Non-oil GDP (annual percentage change): 2009 Est.: 3.2; 2010 Proj.: 3.0; 2011 Prog. Est.: -0.5; 2012: 4.9; 2013: 5.5.
  - Consumer price index (average, annual percentage change): 2009 Est.: 8.3; 2010 Proj.: 4.0; 2011 Prog. Est.: 10.1; 2012: 6.0; 2013: 3.0.
  - Oil price, WEO assumptions (U.S. dollars/barrel): 2009 Est.: 97.05; 2010 Proj.: 52.06; 2011 Prog. Est.: 61.87; 2012: 78.38; 2013: 82.58.
  - Total revenue (percent of non-oil GDP): 2009 Est.: 48.6; 2010 Proj.: 15.9; 2011 Prog. Est.: 25.2; 2012: 37.2; 2013: 34.7.
  - Total expenditure (percent of non-oil GDP): 2009 Est.: 43.1; 2010 Proj.: 33.9; 2011 Prog. Est.: 46.1; 2012: 49.7; 2013: 36.3.
  - Non-oil primary balance (percent of non-oil GDP): 2009 Est.: -28.7; 2010 Proj.: -18.4; 2011 Prog. Est.: -28.0; 2012: -31.8; 2013: -17.7.
  - Overall fiscal balance (cash, percent of non-oil GDP): 2009 Est.: 6.7; 2010 Proj.: -18.6; 2011 Prog. Est.: -20.8; 2012: -10.6; 2013: -1.0.
  - Total public debt (percent of GDP): 2009 Est.: 23.6; 2010 Proj.: 27.1; 2011 Prog. Est.: 31.4; 2012: 34.2; 2013: 32.4.
  - Current account balance (percent of GDP): 2009 Est.: -13.7; 2010 Proj.: -25.2; 2011 Prog. Est.: -33.7; 2012: -33.1; 2013: -26.1.
  - Gross reserves (imputed, months of import of GNFS, excl. oil sector): 2009 Est.: 6.2; 2010 Proj.: 3.9; 2011 Prog. Est.: 3.1; 2012: 3.7; 2013: 4.9.

### Fiscal policy, oil resources, and public financial management
- Medium-term challenge: anchor fiscal policy in a medium-term framework to convert temporary oil revenues into sustainable improvements in human and physical capital and higher non-oil growth.
- Staff recommendation: pursue a fiscal adjustment strategy based on achieving a steady reduction of the non-oil primary deficit while focusing spending on priority areas; aim to reach the sustainable NOPB by about 2020 to build meaningful savings by the end of the oil period.
- Immediate actions:
  - In 2010, adopt a supplementary budget that accommodates under-funded priority spending while still targeting a significant reduction in the non-oil primary deficit.
  - Further adjustment will be needed in 2011 given financing constraints.
- Risks and financing constraints:
  - Financing options are limited due to near-exhaustion of oil savings and central bank statutory advances, underdevelopment of CEMAC financial markets, and absence of sustained external financing for budget support.
  - Two large recent loans increased debt vulnerabilities: a $300 million loan (grant element 15 percent) for budget support, and a guarantee of about €232 million on commercial terms to finance the government’s share (40 percent) of a new oil refinery.
- Public financial management reforms (selected measures):
  - Across-the-board improvement in PFM.
  - Preserve transparency of the interim petroleum revenue management mechanism and continue EITI implementation.
  - Improve non-oil tax revenue by expanding reforms at tax administration and simplifying tax and customs codes.
  - Align the budget with the PRS; improve investment preparation, monitoring, and resource allocation to health and education; tighten budget execution and procurement procedures.

### Debt sustainability, scenarios, and recommendations
- Baseline DSA central feature: steady decline of annual oil production over the next twenty years driven by depletion of the Doba oil field; total government revenue projected to decline from about 37 percent of non-oil GDP in 2010 to about 20 percent in 2030.
- Debt dynamics:
  - Current risk of debt distress: moderate, provided authorities adjust the fiscal stance to the decline in oil production.
  - If current policies were continued without adjustment, debt would increase steeply, leading to unmanageable debt and debt-service burden.
  - External public debt projected to rise from 24 percent of GDP in 2009 to 28 percent in 2011 given recent borrowing.
- Recent and projected borrowing (selected exact terms):
  - $300 million loan (3.6 percent of 2009 GDP) for budget support; grant element about 15 percent; 2 ½ years grace and 6 years maturity; disbursement assumed in 2010.
  - €232 million commercial loan to SHT (refinery) at LIBOR plus 3 percent; 5 years grace and 10 years maturity; disbursement in equal tranches in 2010 and 2011.
- Stress tests and sensitivity:
  - Most extreme shock: one-standard-deviation lower oil price in 2011–2012 would breach multiple debt-burden thresholds.
  - Alternative scenarios A1/A2 and bound tests B1–B6 show PV-of-debt-to-exports and PV-of-debt-to-revenue ratios can rise sharply under adverse shocks.
- Policy prescriptions on debt:
  - Adopt fiscal consolidation to steadily reduce the non-oil primary deficit.
  - Refrain from nonconcessional borrowing; prioritize concessional financing and limit new commercial obligations.
  - Progress toward HIPC/MDRI completion point would substantially reduce Chad’s debt vulnerabilities; MDRI could imply nominal debt reduction potentially over $1 billion and reduce debt service by about $40 million per year.

### Social, structural, and financial sector priorities
- Priority spending and PRSP alignment:
  - Increased military/security spending and weak budget procedures have reduced the share of domestically-financed spending aligned with PRS priorities.
  - PRS (adopted April 2008) emphasizes restoring security, fiscal sustainability, sound PFM, and high-quality spending to promote diversification and reduce poverty.
- Short-term humanitarian actions:
  - Use of government stock of 10,000 tons of food and order of about 33,000 tons of food at a cost of CFA 20 billion (about 0.8 percent of non-oil GDP) included in the 2010 supplementary budget.
  - World Food Program coordinating importation of 47,000 tons of food, estimated cost $65 million, to be financed by donors.
- Structural reforms and financial sector priorities:
  - Improve the judiciary to boost private sector confidence and facilitate financial sector development.
  - Cooperate with the regional bank supervisor to restructure a sizable bank with solvency problems; write off non-performing loans and recapitalize or wind down the bank in an orderly manner.
  - Reform state-owned cotton and utility companies: audit accounts and publish them.
  - Deepen the financial sector: credit to private sector is low (credit to private sector percent of broad money: 14.5; 5.3; 4.6; 3.6; 5.3; 3.0; 2.5; 2.5 in Table 7 series).
  - Improve business climate—infrastructure, higher education, health, governance, enforcement of contracts—to foster non-oil growth.

### Key reported statistics and fiscal indicators (selected exact figures)
- Non-oil basic fiscal balance (percent of non-oil GDP): 2004: -5.1; 2005: -6.7; 2006: -15.8; 2007: -22.7; 2008: -28.7; 2009 Est.: -28.0.
- CPI inflation (annual percentage change): 2004: ≤ 3-4.8; 2005: 3.7; 2006: 7.7; 2007: -7.4; 2008: 8.3; 2009 Est.: 10.1.
- Stock of public debt (percent of GDP): 2004: ≤ 70; 2005: 34.2; 2006: 33.6; 2007: 29.6; 2008: 26.0; 2009 Est.: 23.6; 2010 Est.: 31.4.
- Real GDP (annual percentage change, selected series): -0.4, 1.6, -1.6, 4.3, 3.9, 5.5, 4.2 (table series).
- Oil production (in million barrels, selected series): 46.6, 44.6, 43.6, 44.0, 43.0, 42.0, 40.0.
- Oil prices (WEO assumptions, U.S. dollars/barrel, selected): 97.0, 52.0, 61.8, 78.3, 82.5, 84.0, 85.5.
- Total revenue (percent of non-oil GDP, selected): 48.6, 15.9, 25.2, 37.2, 34.7, 33.5, 32.1.
- Total expenditure (percent of non-oil GDP, selected): 43.1, 33.9, 46.1, 49.7, 36.3, 33.9, 31.5.
- Non-oil primary balance (commitment basis, excl. grants, percent of non-oil GDP): -28.7, -18.4, -28.0, -31.8, -17.7, -14.8, -12.0.
- Overall fiscal balance (cash basis, excl. grants, percent of non-oil GDP): 6.7, -18.6, -20.8, -10.6, -1.0, -1.6, -0.7.
- Nominal GDP (in millions U.S. dollars, selected): 8,390, 6,299, 6,854, 7,978, 8,473, 9,109, 9,446.
- Fiscal table highlights (2009–2013, in billions of CFA francs, selected):
  - Revenue: 986.1 (2008), 343.3 (2009), 539.6 (2010 budget), 757.1 (2011 prog), 882.4 (2012), 897.5 (2013).
  - Oil revenue: 776.5 (2008), 93.3 (2009), 283.8 (2010 budget), 463.9 (2011 prog), 599.2 (2012), 563.2 (2013).
  - Non-oil revenue: 209.6 (2008), 250.0 (2009), 255.8 (2010 budget), 293.2 (2011 prog), 283.2 (2012), 334.3 (2013).
  - Total expenditure: 874.4 (2008), 731.9 (2009), 986.8 (2010 budget), 836.9 (2011 prog), 1,176.5 (2012), 940.3 (2013).
  - Current expenditure: 578.9 (2008), 497.6 (2009), 634.0 (2010 budget), 536.5 (2011 prog), 793.0 (2012), 583.8 (2013).
  - Investment expenditure: 295.6 (2008), 234.3 (2009), 352.8 (2010 budget), 300.4 (2011 prog), 383.5 (2012), 356.5 (2013).

### Program performance, data, and institutional issues
- SMP and program performance:
  - Performance under the 2009 SMP was mixed: some measures to resume normal budget procedures, but sizeable spending overruns on security and public investment pushed the SMP off track; planned review of the SMP was not completed.
  - Discussions on a SMP covering 2010 did not reach agreement on appropriate budgetary outlays; staff noted a SMP covering 2011 could be discussed next year with objectives to keep outlays within targets and execute non-security outlays in accordance with budget procedures.
- Data shortcomings:
  - Serious data shortcomings hamper surveillance—most serious in public finance data, the balance of payments, and national accounts.
  - National accounts methodology not current (SNA 1968); INSEED underfunded.
  - Monetary statistics cover central bank and commercial banks only; microfinance excluded.
  - BEAC currency circulation cross-border distortions noted (about 38 percent of BEAC banknotes issued in Chad circulate in Cameroon; Chad’s currency includes some 10 percent Cameroonian and 5 percent Central African Republic banknotes).
  - Staff recommended allocating more resources to statistical collection and analysis.
- Relations with Fund:
  - Membership and quota: Quota SDR 56.00; Fund holdings of currency 55.72; reserve position 0.28.
  - ECF Arrangements outstanding: 15.58 (27.82 percent of quota).
  - Safeguards assessment (BEAC) completed July 6, 2009; action plan adopted December 2009; special audits under way with delays.

### Staff appraisal and prioritized policy recommendations (summary)
- Fiscal policy must be tightened within a medium-term framework that accounts for the trend decline of oil production over the next 20 years; the non-oil primary deficit should be steadily reduced while prioritizing development and poverty-reducing spending.
- For 2010 the authorities should adopt a supplementary budget that substantially reduces the non-oil primary deficit while accommodating priority spending to limit the scale of adjustment needed in 2011.
- Preserve transparency of oil revenue and continue EITI implementation; expand tax administration reforms; align spending with the PRS; improve public investment planning and procurement; strengthen the judiciary; deepen the financial sector and address problem banks; reform state-owned cotton and utility companies.
- Avoid nonconcessional borrowing where possible; cautious use of recent large loans advised given rising debt vulnerabilities.
- Allocate increased resources to statistical collection and analysis; next Article IV consultation recommended on the 12-month cycle.

*Source: IMF staff report content from _cr10196 (IMF Country Report No. 09/206 and supplementary information).*

### Executive Summary ......................................................................................................

### Executive Summary

### Key Challenges
- Chronic instability has hindered growth and poverty reduction; Chad remains among the poorest countries and has made little progress toward the Millennium Development Goals (MDGs).
- Security: the Darfur crisis and instability in the Central African Republic have driven about 300,000 refugees into Chad, adding to some 180,000 internally displaced persons. Legislative elections are scheduled for November 2010 and presidential elections for April 2011.
- Oil is temporary: production from the Doba basin is expected to diminish gradually until it becomes negligible by 2032.
- Fiscal management: the oil-revenue windfall has set public expenditure on an unsustainable path.
  - Annual public expenditure reached 46 percent of non-oil GDP in 2009 (up from pre-oil levels).
  - The non-oil primary deficit reached 28 percent of non-oil GDP in 2009, far above the long-run sustainable level (estimated in the low single digits).
- Absorptive capacity, public financial management (PFM), and governance are strained by rapid increases in investment and recurrent costs, weak links between budgets and the PRS, limited role of line ministries in budget preparation, weak procurement practices, and frequent bypassing of normal budget procedures.
- Fund program performance has been weak; the Extended Credit Facility arrangement (February 2005–May 2008) expired without completion of any review. A Staff-Monitored Program (SMP) covering April–October 2009 went off-track because of large spending overruns.
- Financial sector is shallow: low monetization and small credit to the private sector constrain private sector development.
- Business environment: Chad ranks among the bottom 10 percent in international competitiveness and doing-business indicators.

### Recent Economic Developments
- Output and inflation:
  - Real GDP contracted by 2 percent in 2009 due to a sharp reduction in agricultural production (poor rainfall) and trend decrease of oil production.
  - Inflation rose from 8 percent on average in 2008 to 10 percent in 2009 but has started to wane after the fuel and food crisis.
- Food security:
  - Poor harvest could imply food shortages for up to 2 million people (18 percent of the population).
  - Need for additional food is estimated at between 80,000-100,000 metric tons; the government has begun meeting this with donor cooperation.
- Exchange rate and competitiveness:
  - The real effective exchange rate (REER) has appreciated over the past several years due to a strong euro and surging public spending; recent euro weakening and prospective fiscal adjustment are likely to yield real depreciation.
  - Conventional methodologies do not point to significant overvaluation vis-à-vis fundamentals.
- Fiscal developments in 2009:
  - Oil revenues fell sharply from 38 percent of non-oil GDP in 2008 to 13 percent in 2009 because of the drop in world oil prices and the advancement of oil tax payments from 2009 to 2008 as agreed with the oil consortium.
  - Expenditure increased from 43 percent of non-oil GDP in 2008 to 46 percent in 2009 and exceeded expenditure ceilings under both the initial budget and the August 2009 supplementary budget under the SMP.
  - The overall fiscal balance moved from a sizeable surplus (some 7 percent of non-oil GDP) in 2008 to a large deficit (about 21 percent of non-oil GDP) in 2009.
  - Financing of the 2009 deficit included: (i) depletion of oil savings held at the BEAC; (ii) increased borrowing from BEAC (including the counterpart of Chad’s new SDR allocation); and (iii) significant increased foreign financing (mainly grants) to finance donor-implemented projects.
  - Chad benefitted from an additional SDR allocation of SDR 44.2 million (CFA 32 billion or 1.4 percent of non-oil GDP); funding in this amount was then lent to the Government of Chad by BEAC.
  - The non-oil primary balance improved marginally in 2009 (by less than 1 percent of non-oil GDP), helped by improvement in non-oil tax revenues.
  - Alignment of spending with PRS priorities deteriorated in 2009 as security outlays increased.
- CEMAC convergence: Chad’s compliance with CEMAC macroeconomic convergence criteria has deteriorated since 2007 because of worsening fiscal position and high inflation.

### Fiscal Policy, Oil Resources, and Public Financial Management
- Medium-term challenge: anchor fiscal policy in a medium-term framework to convert temporary oil revenues into sustainable improvements in human and physical capital and higher non-oil growth.
- Staff recommendation: pursue a fiscal adjustment strategy based on achieving a steady reduction of the non-oil primary deficit while focusing spending on priority areas.
  - Absent fiscal adjustment, debt would rapidly reach unsustainable levels.
- Immediate actions:
  - In 2010, adopt a supplementary budget that accommodates under-funded priority spending while still targeting a significant reduction in the non-oil primary deficit.
  - Further adjustment will be needed in 2011 given financing constraints.
- PFM and governance reforms needed to transform oil resources into higher non-oil growth and lower poverty:
  - Across-the-board improvement in public financial management.
  - Improve functioning of the judicial system.
  - Strengthen the financial sector.
  - Reform state-owned cotton and utility companies.

### Social and Structural Priorities
- Priority spending: although some priority PRSP spending has been financed by oil revenue, increased military spending and weak budget procedures have reduced the share of domestically-financed spending aligned with PRS priorities.
- Poverty and MDGs: rapid progress is needed because oil revenue is temporary; PRS (adopted April 2008) emphasizes restoring security, fiscal sustainability, sound PFM, and high-quality spending to promote diversification and reduce poverty.

### Financial Sector and Business Environment
- Financial depth: broad money and credit to the private sector are low relative to African low-income country averages.
- Competitiveness: Chad ranks very low on infrastructure, higher education, health, governance, starting a business, and enforcing contracts; relatively better on macroeconomic stability and dealing with construction permits.

*Source: Executive Summary, _cr10196 - Executive Summary*

### 1. Defined in Table 3, footnote 3.

### _cr10196 - 1. Defined in Table 3, footnote 3.

### Recent Economic Developments (2002–10)
- Balance of payments weakened in 2009:
  - Fall in oil prices induced a sharp increase of the current account deficit and deterioration of the overall balance.
  - Imputed gross official reserves reduced to 3 months of imports of goods and services, net of oil sector imports.
- Broad money contracted slightly in 2009, reflecting part of the drop in economic activity.
- Financial sector vulnerabilities:
  - Banking sector limited exposure to international financial markets but subject to vulnerabilities from lack of depth, high credit concentration, fragile banks, insufficient on-site supervision, poor functioning of the judiciary, and underdevelopment of CEMAC financial markets.
- Public enterprises required budget transfers in 2009:
  - State-owned cotton company: budget transfers of 1.3 percent of non-oil GDP.
  - State water and electricity company: budget transfers of 0.8 percent of non-oil GDP.
- Key indicators and compliance (selected figures from Text Table 3 and surrounding commentary):
  - Non-oil basic fiscal balance (percent of non-oil GDP): 2004: -5.1; 2005: -6.7; 2006: -15.8; 2007: -22.7; 2008: -28.7; 2009 Est.: -28.0.
  - CPI inflation (annual percentage change): 2004: ≤ 3-4.8; 2005: 3.7; 2006: 7.7; 2007: -7.4; 2008: 8.3; 2009 Est.: 10.1.
  - Stock of public debt (percent of GDP): 2004: ≤ 70; 2005: 34.2; 2006: 33.6; 2007: 29.6; 2008: 26.0; 2009 Est.: 23.6; 2010 Est.: 31.4 (note: table spans years and entries).
  - Gross reserves (imputed, months of import of GNFS, excl. oil sector): 2008: 4.9; 2009: 6.0; 2010 proj.: 7.0 (Text Table 4).

### Inflation Determinants (Box 1)
- Historical and recent inflation dynamics:
  - Inflation averaged 5 percent per annum during 1983–2009, with sizeable year-to-year fluctuations.
  - Food prices have risen relative to non-food prices over the past three years.
- Main determinants of inflation:
  - Rainfall: affects domestic prices with a three quarter lag via agricultural output.
  - Public spending (since start of oil production in 2003): significant impact on inflation with a one quarter lag through demand pressures on nontradables.
  - Changes in trading partner prices and nominal effective exchange rate movements: passed through to domestic prices via imports with a one quarter lag.
- Recent trend:
  - Inflation started to decline after a sharp increase since mid-2007 driven by food prices; inflation projected to converge toward the CEMAC target of 3 percent in 2011 given improved agricultural production, new roads, and fiscal consolidation.

### Medium-Term Macroeconomic Outlook (Text Table 4 and ¶19–19)
- Outlook drivers:
  - Expected rebound of agriculture.
  - Construction of a second oil project (about one third the size of the project initiated in 2003), an oil refinery, and a power plant.
  - Gradual recovery of oil prices.
  - Need for fiscal adjustment in response to financing constraints.
- Projections and staff expectations (selected figures from Text Table 4):
  - Real GDP (annual percentage change): 2009 Est.: -0.4; 2010 Proj.: 1.6; 2011 Prog. Est.: -1.6; 2012: 4.3; 2013: 3.9.
  - Real Non-oil GDP (annual percentage change): 2009 Est.: 3.2; 2010 Proj.: 3.0; 2011 Prog. Est.: -0.5; 2012: 4.9; 2013: 5.5.
  - Consumer price index (average, annual percentage change): 2009 Est.: 8.3; 2010 Proj.: 4.0; 2011 Prog. Est.: 10.1; 2012: 6.0; 2013: 3.0.
  - Oil price, WEO assumptions (U.S. dollars/barrel): 2009 Est.: 97.05; 2010 Proj.: 52.06; 2011 Prog. Est.: 61.87; 2012: 78.38; 2013: 82.58.
  - Total revenue (percent of non-oil GDP): 2009 Est.: 48.6; 2010 Proj.: 15.9; 2011 Prog. Est.: 25.2; 2012: 37.2; 2013: 34.7.
  - Total expenditure (percent of non-oil GDP): 2009 Est.: 43.1; 2010 Proj.: 33.9; 2011 Prog. Est.: 46.1; 2012: 49.7; 2013: 36.3.
  - Non-oil primary balance (percent of non-oil GDP): 2009 Est.: -28.7; 2010 Proj.: -18.4; 2011 Prog. Est.: -28.0; 2012: -31.8; 2013: -17.7.
  - Overall fiscal balance (cash, percent of non-oil GDP): 2009 Est.: 6.7; 2010 Proj.: -18.6; 2011 Prog. Est.: -20.8; 2012: -10.6; 2013: -1.0.
  - Total public debt (percent of GDP): 2009 Est.: 23.6; 2010 Proj.: 27.1; 2011 Prog. Est.: 31.4; 2012: 34.2; 2013: 32.4.
  - Current account balance (percent of GDP): 2009 Est.: -13.7; 2010 Proj.: -25.2; 2011 Prog. Est.: -33.7; 2012: -33.1; 2013: -26.1.
  - Overall balance of payments (percent of GDP): 2009 Est.: 5.6; 2010 Proj.: -10.0; 2011 Prog. Est.: -10.8; 2012: -0.1; 2013: 1.9.
  - Gross reserves (imputed reserves, in months of import of GNFS, excl. oil sector): 2009 Est.: 6.2; 2010 Proj.: 3.9; 2011 Prog. Est.: 3.1; 2012: 3.7; 2013: 4.9.
- Staff and authorities views:
  - Staff: fiscal adjustment is needed starting in 2011 in response to financing constraints; a severe fiscal adjustment is looming if oil prices do not surge.
  - Authorities: more optimistic on medium-term outlook, expect improvement in security to boost non-oil activity and revenue, expect a decline in security spending, and argue for higher investment to meet development needs.

### Anchoring Fiscal Policy in a Medium-Term Framework (¶20–24)
- Long-term oil production and revenue outlook:
  - Annual production of the Doba oil field peaked in 2005 and is projected to decrease steadily over the next twenty years and become negligible after 2030.
  - Total government revenue projected to decline from about 37 percent of non-oil GDP in 2010 to about 20 percent in 2030 (based on current oil price assumptions in the WEO), even after feasible improvements in non-oil tax policy and revenue collection.
- Debt and financing constraints:
  - Financing options limited due to near-exhaustion of oil savings and central bank statutory advances, underdevelopment of CEMAC financial markets, and absence of sustained external financing for budget support.
  - If current spending maintained and additional financing secured, debt path would increase steeply, leading to unmanageable debt and debt-service burden (Box 3).
  - Recent increases in total public debt driven by two large external loans and credit from the regional central bank:
    - Authorities secured a $300 million loan with a grant element of 15 percent from an official creditor to finance the budget.
    - Authorities guaranteed a loan of about €232 million on commercial terms to finance the government’s share (40 percent) of a new oil refinery.
- Staff fiscal strategy recommendation:
  - Undertake fiscal adjustment to achieve a steady improvement in the non-oil primary balance (NOPB).
  - Reduce non-oil primary deficit to a sustainable level over the medium term, aiming to reach the sustainable NOPB by about 2020 to build meaningful savings by the end of the oil period.
  - Fiscal consolidation should prioritize spending in development priorities to avoid compromising development outcomes.

### 2010 Fiscal Policy and Supplementary Budget Debate (¶24 and Text Table 5)
- Consensus and differences:
  - Agreement on need for a supplementary budget to address under-funded priority outlays.
  - Agreement to accommodate spending pressures of about 4 percent of non-oil GDP.
  - Authorities sought additional spending of about 11 percent of non-oil GDP, much for security purposes; staff recommended a tighter fiscal stance to reduce the non-oil primary deficit and limit 2011 adjustment.
  - Authorities’ plan could be financed by using the full amount of the $300 million loan; staff advised caution.
- Fiscal operations selected figures (Text Table 5, all in percent of non-oil GDP unless otherwise indicated):
  - Revenue: 2009 Est.: 25.2; 2010 Budget: 31.4; 2010 Staff: 37.2; 2010 Auth. Proj.: 37.2; 2011 Proj.: 34.7.
    - Oil revenue: 2009 Est.: 13.2; 2010 Budget: 19.2; 2010 Staff: 25.3; 2010 Auth. Proj.: 25.3; 2011 Proj.: 21.8.
    - Non-oil revenue: 2009 Est.: 11.9; 2010 Budget: 12.2; 2010 Staff: 12.0; 2010 Auth. Proj.: 12.0; 2011 Proj.: 12.9.
  - Expenditure: 2009 Est.: 46.1; 2010 Budget: 34.7; 2010 Staff: 39.0; 2010 Auth. Proj.: 49.7; 2011 Proj.: 36.3.
    - Current expenditure: 2009 Est.: 29.6; 2010 Budget: 22.3; 2010 Staff: 24.7; 2010 Auth. Proj.: 33.5; 2011 Proj.: 22.6.
    - Investment expenditure: 2009 Est.: 16.5; 2010 Budget: 12.5; 2010 Staff: 14.3; 2010 Auth. Proj.: 16.2; 2011 Proj.: 13.8.
      - Domestically financed investment: 2009 Est.: 11.3; 2010 Budget: 9.1; 2010 Staff: 9.3; 2010 Auth. Proj.: 11.1; 2011 Proj.: 8.7.
      - Foreign financed investment: 2009 Est.: 5.2; 2010 Budget: 3.4; 2010 Staff: 5.1; 2010 Auth. Proj.: 5.1; 2011 Proj.: 5.1.
  - Non-oil primary balance: 2009 Est.: -28.0; 2010 Budget: -18.6; 2010 Staff: -21.4; 2010 Auth. Proj.: -31.8; 2011 Proj.: -17.7.
  - Overall balance (excl. grants, cash): 2009 Est.: -20.8; 2010 Budget: -3.8; 2010 Staff: -4.5; 2010 Auth. Proj.: -10.6; 2011 Proj.: -1.0.
  - Domestic financing: 2009 Est.: 15.4; 2010 Budget: -2.2; 2010 Staff: -0.7; 2010 Auth. Proj.: 1.0; 2011 Proj.: -2.7.
  - Foreign financing: 2009 Est.: 5.5; 2010 Budget: 6.0; 2010 Staff: 5.1; 2010 Auth. Proj.: 9.6; 2011 Proj.: 3.7.
  - Memorandum items:
    - Total military spending: 2009 Est.: 14.5; 2010 Budget: 7.9; 2010 Staff: 8.0; 2010 Auth. Proj.: 15.2; 2011 Proj.: 9.9.
    - Priority spending (percent of total expenditure excl. interest): 2009 Est.: 34.5; 2010 Budget: 44.2; 2010 Staff: 38.3; 2010 Auth. Proj.: 37.9.
    - Deposits in banks (mostly BEAC): 2009 Est.: 3.8; 2010 Budget: 1.0; 2010 Staff: 1.3; 2010 Auth. Proj.: 1.0; 2011 Proj.: 1.0.

### Policy Priorities and Recommendations (from policy discussions)
- Short-term measures for food shortages:
  - Use of government stock of 10,000 tons of food and order of about 33,000 tons of food at a cost of CFA 20 billion (about 0.8 percent of non-oil GDP) included in the 2010 supplementary budget.
  - World Food Program coordinating importation of 47,000 tons of food, estimated cost $65 million, to be financed by donors.
  - Need for further donor-assisted efforts to improve agricultural productivity over the medium term.
- Fiscal policy and public financial management:
  - Urgent need for fiscal consolidation to respond to projected steady decline in oil production and revenue.
  - Implement a medium-term fiscal adjustment to reduce the non-oil primary deficit to a sustainable level by about 2020.
  - Prioritize spending to protect development and poverty-reduction outcomes while building savings for the post-oil period.
  - Caution on incurring new debt; adopt a cautious approach given rising total public debt and limited financing options.
- Structural and sectoral reforms:
  - Improve public financial management to transform oil resources into higher non-oil growth and lower poverty.
  - Foster non-oil sector growth, including boosting agricultural productivity and facilitating trade through infrastructure (e.g., new roads).

*IMF staff report content as provided in the source PDF.*

### 25.      The staff and the authorities agreed that across-the-board improvement in

### _cr10196 - 25.      The staff and the authorities agreed that across-the-board improvement in

### Public financial management: findings and recommended reforms
- Across-the-board improvement in public financial management is needed.
- Preserve the exemplary transparency of the interim petroleum revenue management mechanism in tracking oil revenue once the authorities start receiving royalties in kind rather than cash.
- Continue actions to implement the Extractive Industry Transparency Initiative to help maintain revenue transparency.
- Improve non-oil tax revenue performance by expanding nascent reforms at the tax administration and simplifying the tax and customs codes.
- Enhance budget preparation by:
  - aligning the budget more closely with the PRS;
  - improving investment preparation and monitoring;
  - providing sufficient resources for current spending in health and education to make operational the many schools, hospitals, and health centers already built or under construction.
- Tighten budget execution by adhering to normal budget procedures, using competitive bidding, and regularly monitoring budget execution.

### Fostering non-oil sector growth: constraints and priorities
- Improving the environment for private business is essential for medium-term growth prospects.
- Improved security, if maintained, would provide a vital boost to business confidence.
- Staff called for government leadership and early actions in priority areas:
  - Improving the judiciary is essential for developing the financial sector and the non-oil economy; private sector representatives noted companies keep bank deposits at a minimum out of fear of asset seizures from frivolous lawsuits.
  - Cooperate closely with the regional bank supervisor to restructure a sizable bank that faces solvency problems: non-performing loans need to be written off and the bank recapitalized or wound down in an orderly manner.
  - Reform energy and cotton sector companies: first step—audit accounts of these and other state-owned companies and publish them to foster transparency and accountability.

### Relations with the Fund: program performance and data shortcomings
- Policy response to key issues raised in recent Article IV consultations has been limited; little progress on improving sustainability of fiscal policy, PFM, or quality of public spending.
- Performance under the 2009 SMP was mixed:
  - Authorities took some measures to resume normal budget procedures under the SMP, but sizeable spending overruns on security and public investment pushed the SMP well off track.
  - The planned review of the SMP was not completed.
- Discussions on a new SMP covering most of 2010 did not reach agreement on appropriate budgetary outlays; staff noted that a SMP covering 2011 could be discussed next year with key objectives to ensure budgetary outlays remain within targets and all non-security outlays are executed in accordance with budget procedures.
- Serious data shortcomings continue to hamper surveillance, most serious in public finance data, the balance of payments, and national accounts.
  - Authorities have been working with the Central African Regional Technical Assistance Center and the Fund’s Statistics Department to improve statistics.
  - Staff recommended allocating more resources to statistical collection and analysis.

### Staff appraisal: macroeconomic impact, sustainability, and policy priorities
- The global financial crisis affected Chad mainly through the decline in oil prices.
- The fiscal position deteriorated sharply in 2009 as the government increased spending levels in the face of a fall-off in oil revenues by depleting its oil savings and borrowing from the central bank.
- Prompt reaction to the pressing food shortage needs to be complemented by measures to increase agriculture productivity; authorities mobilized resources to import food but medium-term measures to improve agricultural yields are needed.
- The current fiscal stance is unsustainable:
  - In 2009, expenditure exceeded (by large margins) the expenditure ceilings under both the initial budget approved in December 2008 and the supplementary budget approved in August 2009.
  - Oil savings have vanished and public debt has increased significantly since 2008.
  - Two large non-concessional loans have increased debt vulnerabilities.
- Fiscal policy needs to be tightened within a medium-term framework that factors in the trend decline of oil production over the next 20 years.
  - The non-oil primary deficit should be steadily reduced while focusing spending on priority areas to allow accumulation of some savings before oil depletion.
  - Absent a fiscal adjustment, the debt would rapidly reach unsustainable levels.
- For 2010 the authorities should adopt a supplementary budget that substantially reduces the non-oil primary deficit while accommodating priority spending to limit the scale of adjustment needed in 2011.
- Improving public financial management is key to transforming oil resources into higher non-oil sector growth and lower poverty:
  - Preserve transparency of oil revenue;
  - Expand recent improvements in tax administration;
  - Align spending with the PRS;
  - Improve public investment planning and procurement.
- Acceleration of non-oil growth will require substantial improvements in the business climate:
  - Strengthen the judicial system;
  - Deepen the financial sector while addressing problem banks;
  - Reform state-owned cotton and utility companies.
- Staff recommends that the next Article IV consultation be held on the 12-month cycle.

### Key reported statistics and fiscal indicators (selected exact figures from source)
- GDP at constant prices (annual changes): -0.4, 1.6, -1.6, 4.3, 3.9, 5.5, 4.2 (years shown in table).
- Oil GDP (annual changes): -11.5, -3.4, -5.2, 2.1, -2.2, -7.5, -4.8.
- Non-oil GDP (annual changes): 3.2, 3.0, -0.5, 4.9, 5.5, 8.7, 6.0.
- Consumer price index (average): 8.3, 4.0, 10.1, 6.0, 3.0, 3.0, 3.0.
- Oil prices WEO assumptions (U.S. dollars/barrel): 97.0, 52.0, 61.8, 78.3, 82.5, 84.0, 85.5.
- Oil production (in million barrels): 46.6, 44.6, 43.6, 44.0, 43.0, 42.0, 40.0.
- Gross official reserves (imputed reserves, billions of US$): 1.3, ..., 0.6, 0.6, 0.7, 0.9, 1.1.
- Non-oil primary balance (commitment basis, excl. grants): -28.7, -18.4, -28.0, -31.8, -17.7, -14.8, -12.0 (in percent of non-oil GDP).
- Overall fiscal balance (cash basis, excl. grants): 6.7, -18.6, -20.8, -10.6, -1.0, -1.6, -0.7 (in percent of non-oil GDP).
- Total expenditure (in percent of non-oil GDP): 43.1, 33.9, 46.1, 49.7, 36.3, 33.9, 31.5.
- Revenue (in percent of non-oil GDP): 48.6, 15.9, 25.2, 37.2, 34.7, 33.5, 32.1.
- Nominal GDP (in millions U.S. dollars): 8,390, 6,299, 6,854, 7,978, 8,473, 9,109, 9,446.
- Nominal non-oil GDP (in billions of CFA francs): 2,030.5, 2,158.8, 2,141.8, 2,410.0, 2,369.5, 2,586.9, 2,937.2, 3,162.4.
- Fiscal table highlights (2009–2010 selected figures, in billions of CFA francs):
  - Revenue: 986.1 (2008), 343.3 (2009), 539.6 (2010 budget), 757.1 (2011 prog), 882.4 (2012), 897.5 (2013).
  - Oil revenue: 776.5 (2008), 93.3 (2009), 283.8 (2010 budget), 463.9 (2011 prog), 599.2 (2012), 563.2 (2013).
  - Non-oil revenue: 209.6 (2008), 250.0 (2009), 255.8 (2010 budget), 293.2 (2011 prog), 283.2 (2012), 334.3 (2013).
  - Total expenditure: 874.4 (2008), 731.9 (2009), 986.8 (2010 budget), 836.9 (2011 prog), 1,176.5 (2012), 940.3 (2013).
  - Current expenditure: 578.9 (2008), 497.6 (2009), 634.0 (2010 budget), 536.5 (2011 prog), 793.0 (2012), 583.8 (2013).
  - Investment expenditure: 295.6 (2008), 234.3 (2009), 352.8 (2010 budget), 300.4 (2011 prog), 383.5 (2012), 356.5 (2013).
  - Non-oil primary balance (excl. grants, commitment): -582.0, -398.2, -600.5, -447.8, -754.1, -457.9, -434.3, -380.2 (in CFAF billion).
  - Overall balance (excl. grants, commitment): 111.7, -388.6, -447.2, -79.8, -294.0, -42.8, -10.4, 17.2 (in CFAF billion).
  - Float: 115.9, 0.0, 84.8, 50.5, 153.9, 56.7, 59.3, 58.6 (in CFAF billion).
  - Variation of domestic arrears: -91.3, -12.4, -83.5, -62.1, -110.5, -38.5, -95.1, -97.8 (in CFAF billion).
- Trade and current account (selected figures, in millions of US$):
  - Current account, incl. official current transfers: -513.2, -795.1, -1,088.5, -1,244.2, -1,052.5, -324.8, -332.5 (years shown).
  - Exports, f.o.b.: 1,894.9, 1,143.9, 1,279.1, 1,565.0, 1,617.9, 1,606.7, 1,585.9.
  - Imports, f.o.b.: -884.9, -971.1, -1,198.9, -1,456.0, -1,245.1, -730.6, -756.4.
  - Net factor income: -744.2, -278.6, -337.4, -422.6, -432.2, -420.1, -405.7.
  - Financial and capital account: 668.5, 480.4, 739.6, 1,240.2, 1,127.5, 421.0, 407.2.
- Memorandum: Gross official reserves (imputed reserves, billions of US$): 1.3, ..., 0.6, 0.6, 0.7, 0.9, 1.1; In months of imports of goods and services: 3.4, 2.0, 1.3, 1.3, 2.4, 3.1, 3.6.

*Source: IMF staff report content provided in the supplied document excerpt.*

### 1. IMF Country Report No. 09/206; Chad--Staff-Monitored Program--Staff Report.

### IMF Country Report No. 09/206; Chad--Staff-Monitored Program--Staff Report

### Balance of Payments and Monetary Aggregates (Table 5: Chad: Balance of Payments, 2008-13)
- Net foreign assets (in billions of CFA francs): 622.4 (2008), 308.6 (2009), 275.8 (2010 proj.), 272.5 (2011 prog.), 354.6 (2012), 454.7 (2013), 533.4 (2014)
  - Central bank: 613.9; 299.2; 264.9; 261.0; 336.0; 432.2; 506.9
  - Commercial banks: 8.5; 9.4; 10.9; 11.6; 18.7; 22.6; 26.5
- Net domestic assets: -126.3; 228.6; 200.2; 298.8; 269.1; 253.4; 229.0
- Domestic credit: -74.0; 309.8; 267.8; 366.3; 339.8; 326.8; 304.4
  - Claims on the government (net): -252.0; 121.0; 63.7; 140.5; 93.3; 46.9; 3.0
  - Treasury (net): -225.2; 162.7; 87.9; 164.6; 117.4; 71.0; 27.1
  - Banking sector: -244.4; 147.5; 74.1; 154.4; 109.6; 64.4; 21.6
  - Central bank: -242.7; 149.2; 89.6; 169.4; 124.6; 79.4; 36.6
  - Commercial banks: -2.3; -2.3; -16.2; -15.7; -15.7; -15.7; -15.7
  - CCP: 0.6; 0.6; 0.7; 0.7; 0.7; 0.7; 0.7
  - Fund position: 19.2; 15.2; 13.7; 10.2; 7.8; 6.6; 5.5
  - Other non-treasury: -26.7; -41.7; -24.1; -24.1; -24.1; -24.1; -24.1
- Credit to the economy: 178.0; 188.9; 204.1; 225.8; 246.5; 279.9; 301.4
- Other items (net): -52.3; -81.2; -67.6; -67.5; -70.7; -73.4; -75.3
- Money and quasi money: 496.1; 537.1; 476.0; 571.3; 623.7; 708.1; 762.4
  - Currency outside banks: 313.1; 286.0; 280.1; 298.5; 319.6; 355.8; 375.4
  - Demand deposits: 153.1; 199.8; 162.9; 215.4; 238.2; 274.0; 298.8
  - Time and savings deposits: 29.9; 51.3; 33.1; 57.4; 65.8; 78.3; 88.1
- Memorandum items:
  - Broad money (annual percentage change): 24.7; 8.3; -4.0; 20.0; 9.2; 13.5; 7.7
  - Velocity (non-oil GDP): 4.1; 4.0; 4.5; 4.1; 4.1; 4.1; 4.1
  - Velocity (total GDP): 7.5; 5.9; 6.8; 6.6; 6.5; 6.2; 6.0
  - Net claims of the banking system on the government (flows): -149.7; 372.9; 315.7; 76.8; -47.2; -46.4; -43.9

- Note: CFAF 14.2 billion discrepancy with fiscal accounts corresponds to accumulation of government deposits in commercial banks not recorded in central government fiscal operations.

### Monetary Survey and Financial Soundness (Table 6 & Table 7)
- Monetary/Banking indicators (selected years and ratios):
  - Capital/assets (unweighted, Tier 1 capital): 9.4; 11.0; 8.3; 8.3; 9.7; 13.5; 16.5 (2003–2009 series)
  - Gross Non Performing Loans/Gross banking loans: 17.4; 15.5; 12.9; 12.4; 11.6; 8.7; 10.9
  - Net Non Performing Loans/Gross banking loans (net of provisions): 3.9; 2.0; 2.1; 2.3; 1.5; 2.4; 3.4
  - Return on assets: 2.3; 0.0; 2.0; 1.5; 1.9; 2.6; 1.5
  - Return on equity: 24.8; 0.2; 24.5; 18.7; 13.0; 18.9; 9.3
  - Liquid assets/total assets (core liquid assets): 23.2; 28.5; 26.3; 38.3; 44.6; 30.9; 28.7
  - Liquid assets/demand deposits: 65.7; 74.8; 75.8; 78.9; 108.2; 72.0; 70.1
  - Number of banks: 6; 7; 7; 7; 7; 7; 8
- Financial soundness (Table 7, selected indicators and projections):
  - GDP at constant prices (annual % change): -0.4; -1.6; 4.3; 3.9; 5.5; 4.2; 2.6; 2.7 (2008–2015 series)
  - Oil GDP (annual % change): -11.5; -5.2; 2.1; -2.2; -7.5; -4.8; -4.0; -4.2
  - Non-oil GDP (annual % change): 3.2; -0.5; 4.9; 5.5; 8.7; 6.0; 3.9; 3.9
  - Consumer price index (average): 8.3; 10.1; 6.0; 3.0; 3.0; 3.0; 3.0; 3.0
  - WEO oil price assumptions (U.S. dollars/barrel): 97.0; 61.8; 78.3; 82.5; 84.0; 85.5; 87.0; 88.8
  - Chadian price (U.S. dollars/barrel): 82.3; 51.8; 68.3; 72.5; 74.0; 75.5; 77.0; 78.8
  - Oil production (million barrels): 46.6; 43.6; 44.0; 43.0; 42.0; 40.0; 38.4; 36.9
  - Net foreign assets of the banking system (changes as percent of broad money): 51.1; -69.9; -0.7; 14.4; 16.1; 11.1; 16.1; 13.3
  - Net domestic assets: -26.4; 65.8; 20.7; -5.2; -2.5; -3.4; -9.8; 0.4
  - Credit to private sector (percent of broad money): 14.5; 5.3; 4.6; 3.6; 5.3; 3.0; 2.5; 2.5
  - Broad money (annual % change): 24.7; -4.0; 20.0; 9.2; 13.5; 7.7; 6.4; 6.4

### External Sector and Reserves (Table 7)
- Exports, f.o.b. (annual % change): 7.4; -31.2; 21.2; 3.4; -0.5; -1.1; -0.2; -0.2
- Imports, f.o.b. (annual % change): 7.0; 20.6; 14.1; -5.6; -29.5; 0.5; -0.9; 2.9
- Current account, including official current transfers (in percent of GDP): -13.7; -33.7; -33.1; -26.1; -7.4; -7.3; -6.5; -7.0
- Overall balance of payments (in percent of GDP): 5.6; -10.8; -0.1; 1.9; 2.2; 1.6; 2.5; 2.1
- Gross official reserves (imputed reserves, billions of US$): 1.3; 0.6; 0.6; 0.7; 0.9; 1.1; 1.3; 1.6
  - In months of imports of goods and services: 3.4; 1.3; 1.3; 2.4; 3.1; 3.6; 4.3; 5.0
  - Excluding oil-sector imports: 6.2; 3.1; 3.7; 4.9; 6.0; 7.0; 8.0; 9.0
- External debt (in percent of GDP): 20.9; 23.7; 27.4; 27.8; 26.0; 24.4; 23.0; 21.6
- NPV of external debt (in percent of exports of goods and services): 24.2; 44.7; 52.3; 57.1; 58.3; 57.8; 56.7; 55.5

### Government Finance and Fiscal Indicators (Table 7)
- Revenue (in percent of GDP): 48.6; 25.2; 37.2; 34.7; 33.5; 32.1; 30.4; 29.6
  - Of which: non-oil revenue: 10.3; 11.9; 12.0; 12.9; 13.5; 14.0; 14.4; 14.8
- Total expenditure (in percent of GDP): 43.1; 46.1; 49.7; 36.3; 33.9; 31.5; 30.9; 32.5
  - Current expenditure: 28.5; 29.6; 33.5; 22.6; 21.8; 21.4; 19.9; 20.3
  - Capital expenditure: 14.6; 16.5; 16.2; 13.8; 12.1; 10.2; 11.1; 12.2
- Non-oil primary balance (commitment basis, excl. grants, percent of non-oil GDP): -28.7; -28.0; -31.8; -17.7; -14.8; -12.0; -11.1; -12.4
- Overall fiscal balance (cash basis, excl. grants, percent of GDP): 6.7; -20.8; -10.6; -1.0; -1.6; -0.7; -1.6; -2.8
- Total debt (in percent of GDP, central government): 23.6; 31.4; 34.2; 32.4; 28.9; 25.8; 23.2; 21.6

### Investment, Savings, and Output (Table 7)
- Gross investment (percent of GDP): 24.8; 33.9; 36.8; 34.7; 18.6; 18.3; 17.7; 16.5
  - Government investment (percent of GDP): 7.9; 10.9; 10.2; 8.8; 8.1; 7.1; 7.9; 8.9
  - Private sector investment (percent of GDP): 16.0; 21.8; 25.6; 24.9; 9.7; 10.4; 9.0; 6.9
    - Of which: oil sector (percent of GDP): 12.2; 14.9; 24.0; 17.1; 5.7; 5.5; 5.2; 5.0
- Gross national savings (percent of GDP): 11.1; 0.1; 3.7; 8.6; 11.2; 11.0; 11.1; 9.4
- Nominal GDP (in CFA francs, billions): 3,740; 3,228; 3,758; 4,032; 4,361; 4,551; 4,729; 4,922
- Nominal non-oil GDP (in CFA francs, billions): 2,030; 2,142; 2,369; 2,587; 2,937; 3,162; 3,363; 3,578
- Nominal GDP (in millions U.S. dollars): 8,390; 6,854; 7,978; 8,473; 9,109; 9,446; 9,753; 10,088

### Millennium Development Goals (Table 9; selected indicators, 1990–2008)
- Employment to population ratio, 15+, total (%): 67.0 (1990), 68.0 (1995), 68.0 (2000), 70.0 (2005), 70.0 (2008), 64.0 (2008 SSA comparator)
- Primary completion rate, total (% of relevant age group): 16.0 (1990), 14.0 (1995), 22.0 (2000), 32.0 (2005), 32.0 (2008), 62.0 (2008 SSA comparator)
- Immunization, measles (% of children ages 12-23 months): 32.0; 26.0; 28.0; 23.0; 23.0; 72.0
- Mortality rate, infant (per 1,000 live births): 120.0; 120.0; 122.0; 124.0; 124.0; 86.0
- Mortality rate, under-5 (per 1,000): 201.0; 202.0; 205.0; 209.0; 209.0; 144.0
- Improved water source (% of population with access): 24.0; 34.0; 48.0; 48.0; 58.0
- Mobile cellular subscriptions (per 100 people): 0.0; 0.0; 0.0; 0.2; 17.0; 33.0; 3.0

### Program Performance, Indicative Targets, and Structural Benchmarks (Tables 10–11)
- Indicative and performance outcomes (select items and status, April–October 2009):
  - Non-oil primary fiscal balance, floor: -236.8 (status: Not met for periods shown)
  - Net claims of the banking system on the government, ceiling: 189.0; 178.3; 208.6 (status: Not met)
  - Civilian expenditures executed through exceptional budget procedure ("DAO"), ceiling: 70.0; ... ; 68.7 (status: Met)
  - Accumulation of domestic payment arrears by the government, ceiling: 0.0 (status: Met)
  - Government's contracting or guaranteeing of new nonconcessional external debt, ceiling: 0.0 (status: Met or Not met depending on item; reference made to a € 232 million loan guarantee and a US$ 300 million loan in memorandum)
- Memorandum items (oil revenue components, in billions of CFA francs): Total oil revenue: 87.4; 98.2; 89.2; 180.3; 93.3; 283.8 (selected entries)
  - Corporate Income Tax (IS): 7.5; 18.3; 8.5; 94.9; 9.5; 193.5
  - Royalties and dividends: 76.6; 76.6; 76.6; 82.2; 76.6; 87.0
  - Other oil revenue: 3.3; 3.3; 4.1; 3.3; 7.2; 3.3
- Prior actions and structural benchmarks (April–October 2009):
  - Submission to Parliament of a draft 2009 supplementary budget consistent with the macroeconomic framework agreed with Fund staff: Met
  - Adoption of a Communication by the Council of Ministers recalling the need to respect budgetary procedures: June 30, 2009 — Met
  - Publication of a circular limiting categories of expenditure executable via DAO: June 30, 2009 — Met
  - Submission to Parliament of a draft 2010 budget consistent with the macroeconomic framework agreed with Fund staff: October 31, 2009 — Met

### Relations with the Fund — Informational Annex (as of April 30, 2010)
- Membership Status: Joined July 10, 1963; Article VIII
- Quota and holdings:
  - Quota: SDR 56.00 (100.00 percent)
  - Fund holdings of currency: 55.72 (99.50 percent)
  - Reserve Position: 0.28 (0.50 percent)
- SDR Department:
  - Net cumulative allocation: 53.62 (100.00 percent)
  - Holdings: 2.80 (5.22 percent)
- Outstanding Purchases and Loans:
  - ECF Arrangements outstanding: 15.58 (27.82 percent of quota)
- Latest financial arrangements (selected):
  - ECF, Feb 16, 2005–May 31, 2008: Amount Approved (SDR Million) 25.20; Amount Drawn 4.20
  - ECF, Jan 07, 2000–Jan 06, 2004: Amount Approved 47.60; Amount Drawn 42.40
  - ECF, Sep 01, 1995–Apr 30, 1999: Amount Approved 49.56; Amount Drawn 49.56
- Projected payments to Fund (SDR Million):
  - Principal: 4.68 (2010); 5.08 (2011); 2.68 (2012); 1.88 (2013); 0.84 (2014)
  - Charges/Interest: 0.10; 0.14; 0.15; 0.14; 0.14
  - Total (per year): 4.78; 5.22; 2.83; 2.02; 0.98
- HIPC Initiative:
  - Decision point date: May 2001
  - Assistance committed by all creditors (US$ Million): 170.00
  - IMF assistance (US$ million): 18.00 (SDR equivalent 14.25)
  - Assistance disbursed to the member (SDR Million): 8.55 (interim assistance)
- Safeguards assessment (BEAC):
  - Most recent safeguards assessment completed July 6, 2009; findings indicate limited implementation of previous recommendations on financial reporting, internal audit, and internal control; action plan adopted December 2009; special audits under way with delays in conducting audits and implementing the action plan.
- Exchange rate arrangement:
  - The CFA franc is common to BEAC members; pegged to the euro since January 1, 1999 at EUR 1 = CFAF 655.97. Historical devaluation effective January 12, 1994 from F 1 = CFAF 50 to F 1 = CFAF 100.
- Article IV Consultations: Chad is on the 12-month cycle; next consultation expected by June 2011.
- Technical assistance (selected missions and timing):
  - STA Balance of Payments: May 2010
  - MCM (AFRITAC) Public debt: May 2010
  - FAD Tax policy review: April–May 2010
  - FAD (AFRITAC) Tax and custom administration: March–April 2010
  - STA (AFRITAC) National accounts: March 2010
  - Additional missions listed for 2007–2010 across STA, FAD, MCM, and AFRITAC.
- FSAP and ROSC participation:
  - ROSC Data Module mission: May 26–June 8, 2005
  - Regional FSAP for CEMAC countries: January 30–February 9, 2006
- Resident Representative: Mr. Karangwa (since November 2007)

*Sources: Chadian authorities; and IMF staff estimates and projections (IMF Country Report No. 09/206; Chad—Staff-Monitored Program—Staff Report).*

### 1. Presentation of an Interim Strategy Note

### 1. Presentation of an Interim Strategy Note

### Fund and Bank Program Activities and Timeline
- Presentation of an Interim Strategy Note (ISN) to the WB Board: June 2010.
- Ongoing activities:
  - Technical assistance for budget management, including review of budget execution and alignment with PRSP in 2006-09: Ongoing.
  - Capacity building in public expenditure management: Ongoing.
  - Assistance in strengthening capacities and institutions at the local level under the Local Development Program Support Project, the Urban Development Project, the Education Sector Reform project, and the Second Population and AIDS Project: Ongoing.
- Regional study:
  - A regional study on stabilization and recovery for the war-affected border areas between Chad, Sudan/Darfur, and the Central African Republic: TBD.

### Fund Work Program (next 18 months)
- Consultations and missions:
  - 2010 Article IV Consultation: March 2010; June 2010: Board conclusion of 2010 Article IV consultation.
  - Possible staff visit to advise on the elaboration of the 2011 budget: September 2010; September 2010.
  - 2011 Article IV Consultation: March 2011; June 2011: Board conclusion of 2011 Article IV consultation.
- Technical assistance:
  - Tax policy review, including forecasting of taxes paid by the oil sector: April-May 2010; June 2010.
  - Public finance management: FY2011; FY2011.
  - Statistics: external sector (BOP and debt) and national Accounts (update of the base year and CPI): FY2011; FY2011.

### Requests for Work Program Inputs (Fund ↔ Bank)
- Fund request to Bank:
  - Comments on the composition of the 2011 budget: Sept. 2010; Sept. 2010.
  - Assessing consistency of sectoral priority action plans, annual budget, and medium term expenditure frameworks (if available) with the Poverty Reduction Strategy Paper (PRSP): Sept. 2010; Sept. 2010.
- Bank request to Fund:
  - Macroeconomic projections and analyses for 2011 and the medium-term: Sept, 2010.
  - Information on nonconcessional financing of budget and projects: Ongoing.

### Agreement on Joint Products and Missions
- Joint products and timing:
  - Joint Staff Advisory Note on PRSP: May 2010.
  - Joint Bank-Fund Debt Sustainability Assessment: March 2010; June 2010.
  - FSAP: FY2011; FY2011.

### Statistical Issues — Assessment (As of May 19, 2010)
- General assessment:
  - "Data has serious shortcomings that significantly hamper surveillance." Shortcomings most serious in government finance, balance of payments, and national accounts.
  - 2007 ROSC found the statistical system weak with shortages of financial and human resources.
  - Specific ROSC weaknesses: weak source data for national accounts; insufficient coverage of government finance and monetary statistics; inadequate sectoral classification of public entities in all datasets; absence of dissemination of government finance statistics by the Ministry of Economy and Finance; limited data and metadata accessibility.
  - Chad participates in the GDDS since 2002, but its metadata needs to be updated.
- National Accounts:
  - Methodology not current (SNA 1968).
  - Compilation weak due to inadequate funding for INSEED.
  - Dissemination could be improved by more timely releases and more detailed information.
- Price statistics:
  - New Harmonized Consumer Price Index (IHPC) covering the capital city replaced the old CPI in January 2008.
  - Significant work still needed to improve reliability of the IHPC; a short-term program was agreed with INSEED (Central-AFRITAC mission August 2008).
- Government finance statistics:
  - A working group prepares quarterly Tableau des opérations financières de l’État (TOFE) and monthly debt statistics mainly for the Fund-supported program, based on disparate sources.
  - Only an annual TOFE is disseminated.
  - Chad has not resumed reporting detailed data for publication in the Government Finance Statistics Yearbook.
  - Annual fiscal data through 2001 have been reported and are included in IFS, but significant discrepancies between the deficit and total financing exist.
- Monetary statistics:
  - Institutional coverage limited to the central bank and commercial banks; microfinance corporations are not covered.
  - Monetary and fiscal indicators on net credit to government cannot be easily reconciled due to differences in institutional coverage and grouping.
  - Large cross-border movements of BEAC-issued banknotes affect accuracy: about 38 percent of banknotes issued in Chad by the BEAC national directorate circulate in Cameroon; currency in circulation in Chad includes some 10 percent of banknotes from Cameroon and 5 percent of banknotes from the Central African Republic.
  - The BEAC has yet to submit test data using standardized report forms.
- Balance of payments:
  - Poor quality likely related to staffing and resource inadequacies.
  - Foreign trade data compiled by INSEED from customs declarations are often unreliable, suffer coverage problems, and are inconsistent with national accounts.
  - Exports data are estimated based on data provided by ministries.
  - STA recommended tighter coordination among the CEMAC, INSEED, and other agencies.

### Data Standards, Reporting, and Timeliness (As of May 19, 2010)
- Participant in the IMF’s General Data Dissemination System since September 24, 2002.
- Data ROSC published on August 2007.
- Reporting to STA (optional): Only international liquidity, monetary statistics, GDP, and prices are currently reported to STA for publication in the International Financial Statistics.
- Selected data frequencies and latest observations (as reported):
  - Exchange Rates: Daily; Date of latest observation: (not specified) — Frequency of Data: Daily — Frequency of Reporting: M — Frequency of Publication: M.
  - International Reserve Assets and Reserve Liabilities of the Monetary Authorities: Date of latest observation 12/2009; Date received 03/2010; Frequency of Data: M; Frequency of Reporting: M; Frequency of Publication: M.
  - Reserve/Base Money: 12/2009; 03/2010; M; M; M. Quality assessments: LO, LNO, LNO, LO.
  - Broad Money: 12/2009; 03/2010; M; QM; M.
  - Central Bank Balance Sheet: 12/2009; 03/2010; M; M; M.
  - Consolidated Balance Sheet of the Banking System: 12/2009; 03/2010; M; M; M.
  - Interest Rates: Date received 03/2009 and 04/2009; Frequency of Data: MI; Frequency of Reporting: QM; Frequency of Publication: M.
  - Consumer Price Index: 01/2010; 03/2010; M; M; M.
  - Revenue, Expenditure, Balance and Composition of Financing — General Government: 03/2009; 04/2009; Q; Q; Q. Quality/coverage notes: LO, LNO, LO, LO and O, LO, LO, LO, NO.
  - Revenue, Expenditure, Balance and Composition of Financing — Central Government: 03/2009; 04/2009; Q; Q; Q.
  - Stocks of Central Government and Central Government-Guaranteed Debt: 12/2008; 04/2009; Q; Q; Q.
  - External Current Account Balance: 2007; 04/2009; A; A; A. Quality assessments: O, O, O, LO and LO, LO, O, O, O.
  - Exports and Imports of Goods and Services: 2007; 04/2009; A; A; A.
  - GDP/GNP: 2008; 04/2009; A; A; A. Quality assessments: LNO, LO, LNO, LO and LNO, LNO, LNO, LNO.
  - Gross External Debt: 12/2008; 04/2009; Bi-M; Bi-M; Bi-M.
  - International Investment Position: NA; NA; NA; NA; NA.

### Joint Fund–Bank Debt Sustainability Analysis (Approved June 1, 2010)
- Overall assessment:
  - "Chad’s risk of debt distress remains moderate provided that the authorities adjust the fiscal stance to the decline in oil production."
  - "If current policies were continued, the resulting debt path would increase steeply, leading to an unmanageable debt and debt-service burden."
  - Compared to last year’s DSA, debt vulnerabilities have increased because the authorities used central bank financing and contracted two large nonconcessional external loans.
- Background — Recent Developments in Public External Debt:
  - External debt stock evolution (Text Table 1, billions of CFA francs and percent of GDP), selected entries:
    - Total external debt (billions of CFA francs): 2001: 794.7; 2002: 786.6; 2003: 736.9; 2004: 797.2; 2005: 898.9; 2006: 896.2; 2007: 794.0; 2008: 782.3; 2009: 764.6.
    - Total external debt (percent of GDP): 2001: 63.4; 2002: 56.8; 2003: 46.3; 2004: 34.2; 2005: 29.0; 2006: 27.2; 2007: 23.6; 2008: 20.9; 2009: 23.7.
    - Multilateral (billions of CFA francs): 2001: 678.1; 2002: 687.7; 2003: 652.5; 2004: 715.3; 2005: 810.2; 2006: 805.5; 2007: 718.6; 2008: 706.6; 2009: 688.6.
    - IMF (billions of CFA francs): 2001: 65.3; 2002: 67.3; 2003: 57.0; 2004: 47.7; 2005: 47.5; 2006: 37.4; 2007: 25.4; 2008: 19.0; 2009: 12.9.
    - World Bank/IDA (billions of CFA francs): 2001: 380.6; 2002: 398.3; 2003: 394.0; 2004: 444.5; 2005: 507.8; 2006: 486.1; 2007: 453.4; 2008: 422.0; 2009: 408.0.
    - African Development Fund/Bank (billions of CFA francs): 2001: 182.8; 2002: 169.8; 2003: 159.9; 2004: 168.5; 2005: 179.8; 2006: 205.8; 2007: 173.7; 2008: 182.4; 2009: 187.2.
    - Bilateral (billions of CFA francs): 2001: 116.2; 2002: 98.6; 2003: 84.1; 2004: 81.9; 2005: 88.8; 2006: 90.7; 2007: 75.4; 2008: 75.7; 2009: 76.0.
    - Paris Club official debt (billions of CFA francs): 2001: 30.2; 2002: 25.8; 2003: 24.0; 2004: 25.2; 2005: 24.3; 2006: 23.2; 2007: 23.6; 2008: 19.2; 2009: 17.9.
    - Non-Paris Club official debt (billions of CFA francs): 2001: 86.1; 2002: 72.7; 2003: 60.1; 2004: 56.7; 2005: 64.4; 2006: 67.5; 2007: 51.8; 2008: 56.5; 2009: 58.0.
    - China, People's Republic (billions of CFA francs): 2001: 28.6; 2002: 25.4; 2003: 22.0; 2004: 13.6; 2005: 15.4; 2006: 13.9; 2007: -; 2008: 3.5; 2009: 10.3.
    - Taiwan, Province of China (billions of CFA francs): 2001: 29.2; 2002: 25.0; 2003: 20.8; 2004: 19.2; 2005: 20.8; 2006: 16.2; 2007: 15.0; 2008: 15.1; 2009: 13.8.
    - Saudi Arabia (billions of CFA francs): 2001: 10.4; 2002: 9.3; 2003: 6.2; 2004: 15.2; 2005: 16.9; 2006: 14.4; 2007: 11.4; 2008: 7.8; 2009: 6.6.
    - Kuwait (billions of CFA francs): 2001: 15.3; 2002: 12.9; 2003: 11.0; 2004: 8.6; 2005: 11.2; 2006: 11.7; 2007: 10.8; 2008: 10.2; 2009: 8.4.
  - Text Table 1 source: Chadian authorities and selected creditors.
- Background — Recent Developments in Public Domestic Debt:
  - Public domestic debt stock at year-end (Text Table 2, billions of CFA francs and percent of GDP), selected entries:
    - Total public domestic debt (billions of CFA francs): 2005: 142.1; 2006: 79.2; 2007: 79.1; 2008: 100.6; 2009: 249.7.
    - Total public domestic debt (percent of GDP): 2005: 4.6; 2006: 2.4; 2007: 2.4; 2008: 2.7; 2009: 7.7.
    - Central Bank Statutory Advances (billions of CFA francs): 2005: 38.3; 2006: -; 2007: 17.8; 2008: 21.7; 2009: 141.7.
    - Rescheduled debts (billions of CFA francs): 2005: 31.1; 2006: 39.5; 2007: 16.2; 2008: 25.4; 2009: 52.2.
    - Treasury arrears (billions of CFA francs): 2005: 34.1; 2006: 24.8; 2007: 26.1; 2008: 41.1; 2009: 25.7.
    - Legal commitments (billions of CFA francs): 2005: 38.6; 2006: 14.0; 2007: 18.1; 2008: 11.5; 2009: 29.3.
    - Savings Bonds (billions of CFA francs): 2005: -; 2006: 0.9; 2007: 0.9; 2008: 0.9; 2009: 0.9.
  - Text Table 2 source: Chadian authorities.
  - Public domestic debt estimated at about CFA 250 billion (7.7 percent of GDP) at end-2009.
  - Components include central bank statutory advances (avances statutaires); treasury arrears (arriérés comptables); rescheduled debt (dettes conventionnées); legal payment obligations (engagements juridiques); and one small public borrowing.
  - Authorities view settlement of verified arrears and debts as an opportunity to improve public sector credit standing and increase private sector confidence.
- Status of Debt Relief Initiatives:
  - Chad has not reached the completion point under the Enhanced HIPC Initiative due to poor macroeconomic policy performance and limited progress on other triggers.
  - The 2005 PRGF expired in 2008 without any reviews being concluded.
  - Subsequent Staff-Monitored Programs (SMP) efforts were derailed by fiscal slippages.
  - Progress towards other completion point triggers has been slow, or early gains have been followed by subsequent deterioration.

*International Development Association and International Monetary Fund — CHAD: Joint Fund-Bank Debt Sustainability Analysis (Approved June 1, 2010).*

### 5.      Meeting the conditions for debt relief under the Enhanced HIPC Initiative and

### 5.      Meeting the conditions for debt relief under the Enhanced HIPC Initiative and

### Impact of HIPC and MDRI debt relief
- MDRI relief would cover the full stock of debt owed to three multilateral creditors (IDA, IMF, and the African Development Fund (AfDF)) that remains after Enhanced HIPC relief on disbursements before end-2004 in the case of IMF and AfDF, and before end-2003 in the case of IDA.
- In nominal terms, this could total over $1 billion and would imply a reduction in debt service of about $40 million per year.

### Debt burden thresholds under the Debt Sustainability Framework (DSF)
- Chad is classified as a weak policy performer for the purpose of debt burden thresholds under the DSF:
  - Country Policy and Institutional Assessment (CPIA) average 2006-08: 2.62 (scale 1 to 6).
  - CPIA trend: declined from 2.88 in 2005 to 2.53 in 2008.
- Corresponding external public debt burden thresholds for "Weak Policy Performers" are:
  - Present value of external debt in percent of: GDP 30; Exports 100; Revenue 200
  - External debt service in percent of: Exports 15; Revenue 25

### Baseline scenario and macroeconomic assumptions
- Central feature: steady decline of annual oil production over the next twenty years driven by depletion of the Doba oil field.
  - Doba peak production: 61 million barrels in 2004.
  - Long-term oil export projections based on gradual depletion; output set to decline steadily to a negligible level beyond 2030.
- Price and quality assumptions:
  - Chad’s oil sells at a discount, usually of $10-15 per barrel relative to the international reference price.
  - Medium term (to 2015): Chadian price assumed to grow at same rate as IMF WEO assumptions; longer term (2015 to 2030): at the growth rate of IEA reference price.
- Second oil field and refinery:
  - Second field about one third the size of Doba; modest output intended to supply joint-venture refinery in N’djamena once refinery and pipeline completed in 2012.
  - Projected to reduce imports of refined petroleum products, but not to increase oil exports or fiscal revenues materially.
- Fiscal and financing assumptions:
  - Dwindling oil revenues drive steady decline of total government revenue from 37 percent of non-oil GDP in 2010 to 20 percent in 2030.
  - Authorities assumed to adjust primarily by restraining expenditure and increasing non-oil revenue via tax policy and revenue administration reforms.
  - Savings at the central bank are practically exhausted; central bank statutory advance ceilings are declining gradually; central bank window will close in 2014.
  - External financing identified mainly for project loans; sustained external finance otherwise limited.
- Macroeconomic Box highlights:
  - Non-oil growth rises short term due to construction of second oil field, refinery, new power plant, and road projects; thereafter returns to pre-oil trend.
  - Inflation moderates to stabilize consistent with CEMAC convergence criterion maximum 3 percent per year.
  - Current account remains in significant deficit until pipeline and refinery operational in 2012.
  - External financing consists of project loans from IDA, AfDB, other multilaterals, Paris Club and non-Paris Club lenders; share of concessional new borrowing declines over 20-year horizon.

### Recent and projected borrowing, debt accumulation, and terms
- Short-term debt increase driven by two large non-concessional external loans:
  - Official creditor: $300 million (3.6 percent of 2009 GDP) for budget support; grant element about 15 percent; 2 ½ years grace and 6 years maturity. Disbursement of entire budget support loan assumed in 2010.
  - Commercial creditor to SHT (refinery): €232 million (4.1 percent of 2009 GDP) at LIBOR plus 3 percent; 5 years grace and 10 years maturity. Disbursement in equal tranches in 2010 and 2011.
- External public debt projected to rise from 24 percent of GDP in 2009 to 28 percent in 2011 (Table 1a).
- These loans reduce the average grant element of external borrowing in the short term and create sizeable debt service pressure in the medium term.
- New borrowing composition expected: IDA, AfDB, other multilateral lenders, Paris Club and non Paris Club lenders; concessional terms declining over time.

### Debt sustainability analysis — External debt
- Continuation of current policies would quickly bring external PPG debt burden above DSF thresholds (Historical scenario and Alternative Scenario A1).
- Under baseline (fiscal tightening matching oil revenue decline), external debt remains below thresholds through projection period.
- Sensitivity to shocks:
  - Most extreme shock (one-standard-deviation lower oil price leading to drop in export growth in 2011-12) would breach three indicative debt burden thresholds.
  - Shock to net non-debt creating flows (B4 Bound Test) results in breaches of three out of five thresholds, including a liquidity indicator, as PV of debt service-to-export ratio rises in the last decade.

### Debt sustainability analysis — Public debt (including domestic)
- Inclusion of domestic debt does not materially alter assessment; limited size of domestic debt and assumed fiscal adjustment mean public debt analysis parallels external debt analysis.
- Historical financing behavior and projections:
  - 2009 response to sharp oil revenue reduction: accommodated by running large primary deficit about 10 percent of GDP (Table 1b), financed by withdrawing equivalent of 7 percent of GDP from oil savings and using central bank statutory advances equivalent of 4 percent of GDP.
  - 2010 expected primary deficit: 4.9 percent of GDP, financed by drawing down a nonconcessional budget support loan.
- If authorities secure financing to maintain current spending, debt path would increase steeply, leading to unmanageable debt and debt-service burden (Fixed Primary Balance Scenario and Alternative Scenario A2).
- Temporary shock to real GDP growth in 2011-2012 would also impair public debt sustainability (Most Extreme Shock and Bound Test B1).

### Authorities’ views
- Authorities more optimistic than staff on medium-term fiscal outlook and ability to raise additional debt.
- Expectations include:
  - Improvement in security situation boosting non-oil activity and revenue, and allowing decline of security spending.
  - Higher-than-projected oil prices improving outlook.
  - Discovery of new oil fields and other natural resources improving public revenue in the medium term.
  - View that DSF debt burden thresholds applicable to Chad are too low given pressing investment needs.

### Main differences from the 2008 Low-Income Country DSA
- 2010 DSA projections start from a higher initial debt burden than anticipated in the 2008 DSA due to higher-than-expected primary spending financed by domestic borrowing.
- Extension of high spending into 2010 financed by nonconcessional external budget support was not foreseen in 2008 DSA.
- Both DSAs hinge on trend decline in oil production and revenue and fiscal adjustment.
- 2010 DSA features a different mix and terms of external financing implying stronger amortization pressures in the medium term and a declining average grant element throughout the projection period.

### Debt distress classification and conclusions
- Vulnerabilities have increased compared to prior DSA because authorities used central bank financing and contracted two large non-concessional external loans, leading to a sharp increase in debt over the next two years before amortization.
- These loans make Chad’s debt dynamics more vulnerable to shocks by bringing debt and debt service burdens closer to thresholds in the short term.
- Current risk of debt distress: moderate, provided authorities adjust the fiscal stance to the decline in oil production.
- If current policies were continued without adjustment, debt would increase steeply, leading to unmanageable debt and debt-service burden.
- The more rapid increase of debt ratios than projected in the previous DSA is a cause for concern.

*Source: _cr10196 - 5.      Meeting the conditions for debt relief under the Enhanced HIPC Initiative and*

### 20.      Progress toward the HIPC completion point would substantially reduce Chad’s

### _cr10196 - 20.      Progress toward the HIPC completion point would substantially reduce Chad’s

### Debt vulnerabilities and HIPC/MDRI impact
- Progress toward the HIPC completion point would substantially reduce Chad’s debt vulnerabilities, as HIPC and MDRI debt relief would cut external debt in half.
- All of Chad's external debt is public (noted in framework tables).

### Key debt indicators and projections (selected figures preserved exactly as in source)
- PV of PPG external debt: 18.8, 22.9, 24.1, 22.7, 21.3, 20.1, 18.8, 13.7, 10.8 (selected years shown in Table 1a).
- In percent of exports (PV of PPG external debt): 44.7, 52.3, 57.1, 58.3, 57.8, 56.7, 55.5, 55.6, 87.4 (selected years).
- In percent of government revenues (PV of PPG external debt): 112.7, 97.6, 108.4, 100.4, 95.6, 92.9, 87.7, 66.2, 54.0 (selected years).
- Debt service-to-exports ratio (in percent): 1.5, 3.5, 2.8, 3.1, 3.0, 3.4, 5.7, 6.0, 6.1, 6.7, 9.7.
- PPG debt service-to-revenue ratio (in percent): 3.5, 7.1, 7.1, 5.7, 5.7, 5.8, 9.4, 9.8, 9.6, 7.9, 6.0.
- Total gross financing need (Billions of U.S. dollars): 0.1, 0.1, 1.2, 0.9, 0.4, 0.3, 0.3, 0.3, 0.3, 0.5, 0.9.
- Non-interest current account deficit that stabilizes debt ratio: 14.0, 16.2, 30.6, 29.2, 25.5, 9.0, 8.6, 7.7, 8.1, 8.4, 7.0.

### Stress tests, scenarios, and sensitivity analyses
- The most extreme stress test is a shock to export growth proportional to a one-standard-deviation lower oil price in 2011 and 2012.
- Alternative scenarios and bound tests presented include:
  - A1. Key variables at their historical averages in 2010-2030.
  - A2. New public sector loans on less favorable terms in 2010-2030.
  - B1. Real GDP growth at historical average minus one standard deviation in 2011-2012.
  - B2. Export value growth at baseline minus a one-standard-deviation lower oil price in 2011-2012.
  - B3. US dollar GDP deflator at historical average minus one standard deviation in 2011-2012.
  - B4. Net non-debt creating flows at historical average minus one standard deviation in 2011-2012.
  - B5. Combination of B1-B4 using one-half standard deviation shocks.
  - B6. One-time 30 percent nominal depreciation relative to the baseline in 2011.
- Sensitivity outcomes (selected): PV of debt-to-exports and PV of debt-to-revenue ratios can rise sharply under B2 (lower oil price) and B4 (lower non-debt creating flows), with PV of debt-to-exports reaching values like 260–310 in certain years under stress tests (Tables 2a/2b).

### Fiscal and macro policy recommendations (Executive Board and staff)
- Tighten fiscal policy within a medium-term framework that factors in the trend decline of oil production over the next 20 years.
- Steadily reduce the non-oil primary deficit while focusing spending on priority areas.
- Adopt a supplementary budget for 2010 aligned with fiscal adjustment needs.
- Refrain from nonconcessional borrowing.
- Improve public financial management: preserve transparency of oil revenue, implement the Extractive Industry Transparency Initiative (EITI), expand tax administration improvements, align spending with the Poverty Reduction Strategy, and improve public investment planning and procurement.
- Allocate sufficient resources to statistical collection and analysis to address shortcomings in macroeconomic statistics.
- Take early action to improve the judicial system, deepen the financial sector, ensure compliance of banks with prudential guidelines, and reform state-owned cotton and utility companies to improve competitiveness and reduce fiscal burden.

### Immediate humanitarian and short-term policy actions
- The bad harvest in 2009 could imply food shortages for up to 2 million people (18 percent of the population).
- The need for additional food is estimated at between 80,000 and 100,000 metric tons; the government ordered 33,000 tons and planned to use a stock of 10,000 tons (order cost amounts to nearly 1 percent of non-oil GDP).
- Staff later learned tenders covering some 20,000 tons of food were allowed to lapse, posing a threat to food relief efforts.
- Directors urged prompt further action to fill the food shortfall to avoid famine and recommended efforts to improve agricultural productivity.
- Authorities planned a supplementary budget for 2010 to finance immediate outlays (food, security, elections, infrastructure, arrears).

### Medium-term challenges and structural reforms
- Trend decline in oil resources will require significant fiscal policy adjustment; authorities urged to factor expected oil-price developments, discovery of new oil fields, and security improvements into medium-term planning.
- Address limited absorptive capacity via donor technical assistance to design a multi-year investment framework and improve public financial management.
- Strengthen cooperation with regional banking supervisory body COBAC to tackle bank solvency problems.
- Structural priorities: enhance security, strengthen judiciary, resolve issues in energy and cotton sectors, deepen financial sector, and improve business climate to promote private-sector non-oil growth.

### Selected economic indicators, 2008–12 (as presented)
- Real GDP (annual percentage change): -0.4, -1.6, 4.3, 3.9, 5.5 (2008–2012 sequence).
- Oil GDP: -11.5, -5.2, 2.1, -2.2, -7.5.
- Non-oil GDP: 3.2, -0.5, 4.9, 5.5, 8.7.
- Consumer price index (average): 8.3, 10.1, 6.0, 3.0, 3.0.
- Oil production (in million barrels): 46.6, 43.6, 44.0, 43.0, 42.0.
- Broad money: 24.7, -4.0, 20.0, 9.2, 13.5.
- Exports, f.o.b.: 7.4, -31.2, 21.2, 3.4, -0.5.
- Imports, f.o.b.: 7.0, 20.6, 14.1, -5.6, -29.5.
- Current account (in percent of GDP): -13.7, -33.7, -33.1, -26.1, -7.4.
- Total revenue (Percent of non-oil GDP): 48.6, 25.2, 37.2, 34.7, 33.5.
- Total expenditure (Percent of non-oil GDP): 43.1, 46.1, 49.7, 36.3, 33.9.
- Non-oil primary balance: -28.7, -28.0, -31.8, -17.7, -14.8.
- Overall fiscal balance: 6.7, -20.8, -10.6, -1.0, -1.6.
- Nominal GDP (Billions of CFAF): 3,740, 3,228, 3,758, 4,032, 4,361.
- Nominal non-oil GDP (Billions of CFAF): 2,030, 2,142, 2,369, 2,587, 2,937.

*Source: IMF Staff Report for the 2010 Article IV Consultation—Supplementary Information; Public Information Notice No. 10/77; Executive Board summary and supporting tables (June 16, 2010; June 21, 2010).*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2010/_cr10196.pdf_