IMF Reaches Staff-Level Agreement with Chad on a Four-Year Program Under Extended Credit Facility (ECF) and Extended Fund Facility (EFF)

IMF News, January 27, 2021

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IMF staff completed policy discussions on a new medium-term program that could be supported by IMF resources of about $560 million under the Extended Credit Facility (ECF) and the Extended Fund Facility (EFF).
This agreement is subject to the approval of the IMF Executive Board and receipt of the necessary financing assurances.
The program aims to anchor the government’s policy and reform efforts, bolster the country’s response to the pandemic, and lay the foundation for a green and inclusive economic recovery and restoring debt sustainability.

Chad faces combined shocks from the Covid-19 pandemic, terms of trade, climate change, and heightened regional insecurity.
Lower oil prices and oil production, and domestic containment measures are weighing on the outlook and causing significant adverse economic and social effects.
Key 2020 indicators cited:
- Non-oil activity is expected to contract by 1.7 percent.
- Oil output is estimated to have grown at a subdued pace (2.4 percent).
- Average annual inflation picked up to 4.5 percent from negative levels in 2019.
The two disbursements under the Rapid Credit Facility (RCF) in April and July contributed to closing the 2020 external financing gap, although substantial fiscal and external financing needs remain over the medium term.

The home-grown program supported by the IMF will focus on advancing the authorities’ structural reform agenda to support inclusive growth and poverty reduction, address fragilities, and restore debt sustainability via growth-friendly fiscal consolidation and an ambitious debt restructuring.
Program reform areas include:
- Increasing non-oil revenue.
- Allocating adequate resources to social sectors and public investment.
- Strengthening the banking sector.
- Promoting access to cheaper and green energy.
- Improving governance, debt transparency, and the business climate.
Authorities renewed their commitment to these reforms, including during the presidential and legislative electoral period in 2021.
Authorities expect IMF financial support will help catalyze substantial financial support from development partners and debt relief from creditors.

Fiscal policy, supported by technical assistance from the IMF and other donors, will aim to:
- Restore debt sustainability.
- Support the post-Covid recovery.
- Build resilience.
Continued mobilization of domestic revenues combined with fiscal discipline should reduce budget dependence on oil revenues and free up resources for efficient investment and social spending.
In addition to fiscal consolidation under the program, the Chadian authorities have made an official request to restructure their external debt under the G20 Common Framework for debt restructuring, which will help restore debt sustainability.

Financial sector reforms will focus on ensuring the banking sector remains resilient amid the pandemic and is able to finance domestic activities and strengthen financial inclusion in the medium term.
Measures highlighted:
- Continued timely repayment of government debt obligations owed to banks.
- Clearance of domestic arrears in the context of the government’s arrears clearance strategy to help improve banking system liquidity.
- Medium-term reforms to improve access to financial services and strengthen financial inclusion by encouraging the creation of strong and secure microfinance institutions.

Reforms to strengthen governance, enhance transparency, and improve the business climate are central to the program and essential to promoting economic growth and efficient use of public resources.
Commitments include:
- Strengthening anti-corruption efforts through implementation of comprehensive asset declaration requirements for public servants and strengthening anti-corruption bodies.
- Transparency measures, including publication of audit reports and establishment of a requirement to publish procurement contracts, including beneficial ownership of awarded legal entities, to help prevent misallocation of funds and improve good governance and the quality of government contracting.

An IMF mission led by Edward Gemayel held virtual meetings during December 3-14 and on January 25 to discuss IMF financial support to the authorities’ economic reform program.
The IMF team held working sessions with:
- Mr. Tahir Hamid Nguilin, Minister of Finance and Budget.
- Mr. Annour Mahamat Hassan, National Director of the BEAC.
- Senior officials from the Ministries of Finance, Planning, Oil, Justice, Agriculture and the Secretary General of the Government.
- Representatives of the oil sector and Chad’s technical and financial partners.
The IMF team thanked the Chadian authorities for candid and constructive discussions.

Press Release No. 21/26 — January 27, 2021 — IMF Communications Department