IMF Executive Board Approves New Extended Credit Facility ECF Arrangement for Chad
IMF News, December 10, 2021
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- Published: December 10, 2021
Overview
- The IMF Executive Board approved a 36-month arrangement under the Extended Credit Facility (ECF) in an amount equivalent to SDR 392.56 million (about US$570.75 million or 280 percent of quota).
- The Executive Board’s decision will enable an immediate disbursement equivalent to SDR 56.08 million (about US$78.28 million).
- The arrangement aims to help meet Chad’s large balance-of-payments and budgetary needs and to catalyze financial support from official donors.
- Chad is the first country to request a debt treatment under the G20 Common Framework for countries beyond the DSSI.
Economic context and shocks
- The combined shocks stressing Chad’s economy:
- COVID-19 pandemic
- Volatility in oil prices
- Heightened insecurity
- Climate change leading to a looming food crisis
- Consequences highlighted:
- Severe stress on an already vulnerable economy
- Deterioration of the macroeconomic outlook with greater macroeconomic weaknesses and more acute liquidity needs than previously envisaged
- Public debt has become unsustainable
- Significant humanitarian and social demands, including expected increase in food insecurity and poverty due to cuts in priority spending and inadequate rain
- Increased refugees fleeing social conflicts in neighboring countries complicating the humanitarian situation
Program objectives and expected longer-term outcomes
- The authorities’ program, supported by the ECF arrangement, aims to:
- Support the recovery from the pandemic
- Promote poverty reduction
- Advance the authorities’ structural reform agenda
- Restore debt sustainability
- Over the longer term, policies under the ECF-supported program will:
- Help put the economy on a balanced and sustainable path towards inclusive green growth and poverty reduction
- Contribute to the regional effort to restore and preserve external stability for the Central African Economic and Monetary Union (CEMAC)
Debt sustainability strategy and G20 Common Framework
- Restoring debt sustainability is based on a three-pronged strategy:
- A multi-year fiscal consolidation program
- Significant donor support
- Deep debt restructuring under the G20 Common Framework
- Securing restructuring agreements with key official and private creditors by end-March 2022 is stated as essential for a successful start to the new ECF arrangement.
- The Executive Board emphasized that finalizing a possible debt workout with all creditors as soon as possible will be critical.
- The debt operation should be accompanied by a growth-friendly fiscal consolidation, based on a balanced mix of revenue mobilization and expenditure rationalization.
Policy recommendations and structural reforms
- Adopt structural reforms in a timely manner to support inclusive green growth and poverty reduction, focusing on:
- Improving the business climate
- Enhancing governance and tackling corruption
- Strengthening revenue mobilization and public financial management
- Addressing weaknesses in the banking sector
- Promoting financial inclusion
Direct quotations from the Executive Board statement (Kenji Okamura, Deputy Managing Director and Acting Chair)
- "The combined shocks of the COVID-19 pandemic, the volatility in oil prices, the heightened insecurity, and a looming food crisis due to climate change have severely stressed Chad’s already vulnerable economy. The macroeconomic outlook has further deteriorated, with greater macroeconomic weaknesses than previously envisaged as well as more acute liquidity needs. As a result, Chad’s public debt has become unsustainable."
- "The Chadian economy continues to face significant humanitarian and social demands, including expected increase in food insecurity and poverty, given cuts in priority spending and inadequate rain. In addition, increased number of refugees fleeing social conflicts in neighboring countries complicates the humanitarian situation."
- "The authorities’ program, supported by a new three-year Extended Credit Facility arrangement, aims to address these challenges by supporting the recovery from the pandemic, promoting poverty reduction, advancing the authorities’ structural reform agenda, and restoring debt sustainability."
- "Restoring debt sustainability is based on a three-pronged strategy, underpinned by a multi-year fiscal consolidation program, significant donor support, and deep debt restructuring under the G20 Common Framework. In this respect, finalizing a possible debt workout with all creditors as soon as possible will be critical. The debt operation should be accompanied by a growth-friendly fiscal consolidation, based on a balanced mix of revenue mobilization and expenditure rationalization."
- "Adoption of structural reforms in a timely manner to support inclusive green growth and poverty reduction remains essential. In this respect, reforms should focus on improving the business climate, enhancing governance and tackling corruption, strengthening revenue mobilization and public financial management. Efforts to address weaknesses in the banking sector and promote financial inclusion will also be necessary."
Key statistics
- ECF arrangement amount: SDR 392.56 million (about US$570.75 million or 280 percent of quota)
- Immediate disbursement: SDR 56.08 million (about US$78.28 million)
- Arrangement duration: 36 months
- Deadline for securing creditor restructuring agreements for a successful program start: end-March 2022
IMF Press Release No. 21/375, December 10, 2021.