IMF Executive Board Completes First and Second Reviews of ECF Arrangement for Chad and Approves US$ 149.3 Million Disbursement
IMF News, December 22, 2022
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- Published: December 22, 2022
Review outcome and disbursement
- The IMF Executive Board completed the First and Second Reviews of the Extended Credit Facility (ECF) arrangement with Chad.
- Disbursement enabled:
- SDR 112.16 million (about US$ 149.3 million).
- Total disbursements under the arrangement to date:
- SDR 168.24 million (about US$224 million).
- Original ECF arrangement (three-year) approved on December 10, 2021:
- SDR 392.56 million (about US$570.75 million at the time of program approval or 280 percent of quota).
- The Board approved waivers of non-observance of performance criteria on:
- the non-oil primary balance, and
- the stock of domestic arrears.
Debt treatment, risk assessment, and regional implications
- Chad is the first country to reach a debt treatment agreement with official and private creditors under the G20 Common Framework.
- The debt treatment agreement:
- provides Chad with adequate protection against downside risks,
- brings the risk of debt distress to moderate by the end of the IMF-supported program, as required under the IMF’s exceptional access policies.
- The ECF-supported program aims to:
- help put Chad’s 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).
Economic outlook and key projections
- Recent and near-term performance:
- Economic activity contracted in 2020 and 2021 and is expected to gradually recover over the medium term.
- Growth projections:
- 2½ percent in 2022,
- 3½ percent in 2023,
- driven by a recovery in both oil and non-oil production.
- Inflation:
- Average inflation is expected to rise to 5.3 percent in 2022—reflecting increasing food price pressures from the poor 2021 crop, the impact of the war in Ukraine, and recent floods—before gradually moderating over the medium term.
- Current account:
- Expected to register a surplus of 2.8 percent of GDP in 2022, reflecting higher oil prices, before declining over the medium term as oil prices are expected to gradually recede.
- Public debt:
- 56 percent of GDP at end-2021,
- expected to gradually decline to about 40 percent of GDP in 2024.
Key challenges and risks
- Ongoing vulnerabilities:
- food insecurity,
- oil price volatility,
- climate change,
- security issues,
- the pandemic remains a concern,
- last year’s poor crop, Russia’s war in Ukraine, and recent floods have exacerbated food insecurity,
- prolongation of the political transition has heightened social tensions and the security situation remains volatile.
- Program performance:
- quantitative performance under the program has been mixed,
- significant progress on structural reforms has been achieved.
Policy recommendations and reform priorities
- Fiscal policies and public finance:
- Fiscal consolidation efforts remain key to ensure debt sustainability and create fiscal space for social and investment spending needs.
- Authorities will implement measures to:
- enhance domestic revenue mobilization,
- contain the wage bill,
- streamline non-priority expenditures, such as fuel and electricity subsidies.
- Additional oil revenue will help rebuild buffers, repay domestic arrears, and reduce domestic debt.
- Structural reforms:
- enhance public financial management and fiscal transparency,
- improve governance,
- strengthen the banking sector.
- Regional policy and support:
- Chad’s program will continue to be supported by implementation of policies and reforms by the CEMAC regional institutions, which aim at supporting an increase in regional net foreign assets.
Selected statements from the Acting Chair (Mr. Kenji Okamura)
- “Chad continues to face considerable challenges. Higher oil revenues improved the government’s cashflow position. However, the pandemic remains a concern while last year’s poor crop, Russia’s war in Ukraine, and the recent floods have exacerbated food insecurity. The prolongation of the political transition has heightened social tensions while the security situation remains volatile. Reflecting in part these challenges, quantitative performance under the program has been mixed, although there has been significant progress on structural reforms.”
- “The medium-term outlook is projected to gradually improve, as reforms accelerate. Both oil and non-oil GDP growth is projected to pick up. After increasing rapidly in 2022 on account of higher food prices, inflation is expected to gradually moderate over the medium term.”
- “The debt treatment agreement reached with official and private creditors under the G20 Common Framework—the first in its kind— provides Chad with adequate protection against downside risks while bringing the risk of debt distress to moderate by the end of the program, as required under the IMF’s exceptional access policies.”
- “Continued reform efforts are needed to enhance growth, poverty reduction, and resilience. Fiscal consolidation efforts remain key to Chad’s efforts to ensure debt sustainability while creating the fiscal space necessary to meet its considerable social and investment spending needs.”
IMF Press Release No. 22/458, December 22, 2022.