IMF Executive Board Concludes 2016 Article IV Consultation with Chad
IMF News, July 25, 2016
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- Published: July 25, 2016
Macroeconomic developments and shocks
- Major exogenous shocks: lower oil prices and elevated regional insecurity have caused oil revenues to "collapse to a fraction of their previous level" and disrupted economic activity.
- Security threats caused economic disruption, reprioritization of spending to defense, hosting of refugees and internally displaced persons, and exacerbated the economic situation.
- Economic activity:
- GDP growth estimated to have decelerated to 1.8 percent in 2015 from 6.9 percent in 2014.
- Non-oil GDP contracted by -2.9 percent in 2015.
- Oil GDP recorded -4.8 percent in 2015.
- Prices and inflation:
- Domestic price volatility increased, with average inflation of 3.7 percent in 2015, slightly above the CEMAC target of 3 percent.
- Fiscal and public finance:
- Despite a large fiscal adjustment, the overall fiscal deficit remained high at 6.6 percent of non-oil GDP in 2015.
- Domestic arrears accumulated to reach 3.9 percent of non-oil GDP (CFAF 200 billion) at end-2015.
- Monetary and financial:
- Money supply contracted and credit to the private sector slowed significantly in 2015.
- Net foreign assets change: -40.3 (2015).
- Net domestic assets change: 35.6 (2015).
- Credit to private sector: 0.3 (2015).
- External sector:
- Current account balance, including official transfers, widened to -12.4 percent of GDP in 2015 from -9.0 percent in 2014.
- Export of goods and services, f.o.b. change: -17.4 (2015).
- Import of goods and services, f.o.b. change: -23.7 (2015).
Short- and medium-term outlook and projections (2016–2018)
- Growth projections:
- Including a contraction of 1.1 percent in 2016, GDP growth is projected to average about 2 percent per year over 2016–18, compared to almost 5 percent over 2013–15.
- A gradual recovery of non-oil GDP growth is expected over 2016–2018, reaching 4 percent per year over the medium term.
- Drivers of recovery: agriculture, commerce, and transportation and easing fiscal constraints with a rebound of fiscal oil revenues.
- External outlook:
- External position projected to remain weak, with only a gradual improvement in the trade balance starting in 2017.
- Foreign direct investment in the oil sector will remain a key source of external financing.
Executive Board assessment and key messages
- Directors welcomed authorities’ policy efforts, noting a substantial fiscal adjustment and progress on the structural front despite adverse external conditions.
- Directors emphasized that the collapse in oil revenue and elevated regional insecurity have seriously affected the macroeconomic situation and near‑term outlook.
- Core Board recommendations and concerns:
- Additional fiscal efforts and bolder structural reforms are needed to safeguard fiscal and financial stability, protect recent progress in human development, and bolster the non‑oil economy.
- Continued close engagement with the Fund and the international community is crucial to support the authorities’ efforts.
- Given precarious liquidity and uncertainty about exceptional receipts from an oil sector asset sale, authorities should elaborate a contingency plan to guide spending in case of a significant shortfall in fiscal receipts.
- Limit spending commitments strictly to available resources to avoid a breakdown in the expenditure chain and further accumulation of arrears.
- A comprehensive arrears clearance strategy, based on validation via an independent audit, is imperative.
- Need for a medium‑term fiscal strategy incorporating a sizable permanent adjustment while protecting vulnerable populations.
- Mobilize more non‑oil revenue by expanding the non‑oil revenue base, reducing tax exemptions, and strengthening tax and customs administrations.
- Continue strengthening public financial management, with focus on stricter spending controls and enhanced spending efficiency.
- Enhance oil revenue transparency for better budget preparation, execution, and accountability.
- Banking sector is vulnerable to fiscal deterioration despite high liquidity; close monitoring in coordination with relevant regional bodies is needed.
- Be mindful of possible crowding out of credit to the private sector when placing government securities with commercial banks.
- Use current challenges as an opportunity for bold structural reforms to diversify the economy, improve the business climate, foster financial inclusion, and achieve more inclusive growth.
- Directors looked forward to details of the authorities’ national development plan covering 2016–2020, especially in agriculture, human capital, governance, judiciary reform, and social protection.
Selected economic and financial indicators (2011–2016)
- Real economy (annual percentage changes, unless otherwise indicated):
- GDP at constant prices: 2011: 0.1; 2012: 8.9; 2013: 5.7; 2014: 6.9; 2015: 1.8; Prel. 2016: -1.1.
- Oil GDP: 2011: -0.3; 2012: -4.1; 2013: -7.2; 2014: 32.2; 2015: -4.8; 2016: …
- Non-oil GDP: 2011: 0.2; 2012: 11.6; 2013: 8.0; 2014: 7.1; 2015: -2.9; 2016: …
- Oil prices:
- WEO (US$/barrel)1: 2011: 104.0; 2012: 105.0; 2013: 104.1; 2014: 96.2; 2015: 50.8; 2016: 42.9.
- Chadian price (US$/barrel)2: 2011: 97.7; 2012: 102.0; 2013: 103.9; 2014: 98.0; 2015: 43.4; 2016: 33.8.
- Oil production (in millions of barrels): 2011: 43.6; 2012: 41.2; 2013: 36.3; 2014: 38.5; 2015: 52.5; 2016: 49.7.
- Exchange rate FCFA per US$ (period average): 2011: 471.4; 2012: 510.2; 2013: 493.9; 2014: 493.6; 2015: 591.2; 2016: …
- Money and credit (changes as a percent of broad money stock at the beginning of period)3:
- Net foreign assets: 2011: 25.3; 2012: 14.8; 2013: -2.6; 2014: -1.8; 2015: -40.3; 2016: -10.2.
- Net domestic assets: 2011: -11.0; 2012: -1.3; 2013: 11.2; 2014: 28.2; 2015: 35.6; 2016: …
- Of which: net claims on central government: 2011: -18.8; 2012: -13.1; 2013: 10.0; 2014: 18.0; 2015: 31.6; 2016: 1.7.
- Of which: credit to private sector: 2011: 9.0; 2012: 12.9; 2013: 2.8; 2014: 17.3; 2015: 0.3; 2016: -2.7.
- Income velocity (non-oil GDP/broad money): 2011: 5.9; 2012: 5.6; 2013: 5.5; 2014: 4.8; 2015: 5.0; 2016: …
- External sector (valued in CFA francs):
- Exports of goods and services, f.o.b.: 2011: 22.3; 2012: -8.6; 2013: 1.4; 2014: -34.1; 2015: -17.4; 2016: …
- Imports of goods and services, f.o.b.: 2011: 11.3; 2012: 3.8; 2013: -7.7; 2014: 9.9; 2015: -23.7; 2016: -12.3.
- Export volume: 2011: -2.8; 2012: -13.7; 2013: 27.6; 2014: -7.9; 2015: …
- Import volume: 2011: 4.6; 2012: 2.9; 2013: -5.4; 2014: 9.8; 2015: -21.2; 2016: -9.9.
- Terms of Trade: 2011: 18.3; 2012: -2.1; 2013: 8.5; 2014: -46.6; 2015: …
- Current account balance, including official transfers (in percent of GDP): 2011: -5.6; 2012: -8.7; 2013: -9.2; 2014: -9.0; 2015: -12.4; 2016: …
- External debt (in percent of GDP): 2011: 21.8; 2012: 20.1; 2013: 21.2; 2014: 29.2; 2015: 25.1; 2016: 23.9.
- Government finance (in percent of non-oil GDP, unless otherwise indicated):
- Revenue and grants: 2011: 34.6; 2012: 35.0; 2013: 27.8; 2014: 23.3; 2015: 15.5; 2016: …
- Of which: non-oil revenue: 2011: 7.6; 2012: 8.1; 2013: 9.3; 2014: 9.5; 2015: 8.3; 2016: …
- Expenditure: 2011: 31.3; 2012: 34.4; 2013: 31.4; 2014: 29.6; 2015: 21.4; 2016: …
- Current expenditure: 2011: 17.9; 2012: 16.5; 2013: 17.7; 2014: 16.7; 2015: 14.1; 2016: 14.3.
- Capital expenditure: 2011: 13.3; 2012: 13.7; 2013: 7.3; 2014: 5.8; 2015: …
- Non-oil primary balance4 (commitment basis, excl. grants): 2011: -19.6; 2012: -20.1; 2013: -18.2; 2014: -16.3; 2015: -9.8; 2016: -7.0.
- Overall fiscal balance (incl. grants, commitment basis): 2011: 3.3; 2012: 0.7; 2013: -3.6; 2014: -6.3; 2015: -6.6; 2016: -4.6.
- Overall fiscal balance (incl. grants, cash basis): 2011: 0.6; 2012: 2.1; 2013: -4.5; 2014: -5.2; 2015: -5.8; 2016: …
- Total debt (in percent of GDP)5: 2011: 30.5; 2012: 28.8; 2013: 30.3; 2014: 39.2; 2015: 42.6; 2016: 45.0.
- Of which: domestic debt: 2011: 8.7; 2012: 9.1; 2013: 17.5; 2014: 21.1; 2015: …
- Memorandum items:
- Nominal GDP (in billions of CFA francs): 2011: 5,736; 2012: 6,314; 2013: 6,397; 2014: 6,885; 2015: 6,444; 2016: 6,159.
- Of which: non-oil GDP (in billions of CFA francs): 2011: 4,108; 2012: 4,400; 2013: 4,661; 2014: 5,152; 2015: 5,153; 2016: 5,144.
- Nominal GDP (in billions of US$): 2011: 12.2; 2012: 12.4; 2013: 13.0; 2014: 13.9; 2015: 10.9; 2016: 10.4.
- (Additional memorandum values shown: 8.6; 9.4.)
IMF Communications Department. Press Release No. 16/360. July 25, 2016.