On June 30, 2017, the Executive Board of the International Monetary Fund (IMF) approved a three-year arrangement under the Extended Credit Facility (ECF) for Chad for SDR 224.32 million (about US$ 312.1 million, or 160 percent of Chad’s quota) to support the country’s stabilization and recovery strategy. Today’s Board decision also notes the cancellation of the previous ECF arrangement. Policies under the new arrangement are expected to catalyze further support from Chad’s external partners.
The ECF-supported program aims to help Chad restore macroeconomic stability and lay the foundation for robust and inclusive growth. It will also contribute to the regional effort to restore and preserve external stability for the Central African Economic and Monetary Union (CEMAC).
An amount equivalent to SDR 35.05 million (about US$ 48.8 million) will be immediately disbursed to Chad. The remaining amount will be phased over the duration of the program, subject to semi-annual reviews.
Following the Executive Board discussion on Chad, Mr. David Lipton, First Deputy Managing Director and Acting Chair, stated:
“Chad’s macroeconomic and financial performances have deteriorated significantly over the past two years, against the backdrop of low oil prices, tense regional security situation, and a heavy external commercial debt burden. In 2016, real non-oil GDP contracted by 6 percent, following a 2.9 percent reduction in 2015.
“The new three-year arrangement under the ECF will support the authorities’ strategy towards macroeconomic stabilization in the short term and a robust, equitable, and sustainable recovery.
“The program, supported by the new ECF arrangement, aims at stabilizing the fiscal and external position as well as reestablishing debt sustainability, through the restructuring of external commercial debt, prudent fiscal policies, and the resumption of growth.
“The authorities are committed to preserving the fiscal adjustment achieved so far and to improving the mobilization of non-oil revenue, which requires measures to broaden the tax base, and strengthen tax and customs administrations.
“Achieving debt sustainability and stabilizing the fiscal position hinge on reducing the burden of external debt service. To this end, the authorities are committed to restructure the debt with Chad’s major external commercial creditor, and have appointed financial and legal advisors to help them through the process. These efforts would serve to ensure the protection of poverty-reducing social spending and allow the phased clearance of arrears thereby supporting growth.
“Structural reforms to improve public financial management and diversify the economy are key elements of the program. This includes improving budgetary practices and strengthening cash management and forecasting. Fostering long-term growth will require greater diversification of the economy. The authorities are committed to boost competitiveness by improving the business environment and addressing supply side bottlenecks. The new National Development Plan, which is expected to be released soon, will constitute a milestone in that regard.
“Continued strong implementation of the ECF-supported program will be critical to catalyze financial support from international partners to more effectively tackle development needs and support economic growth.
“The success of Chad’s program will depend in part on the implementation of supportive policies and reforms by the regional institutions.”
Annex
Recent Economic Developments
Economic activity contracted sharply in 2016, for the second year in a row. The economy continued to be affected by a very challenging external environment, with low oil prices and a tense security situation coupled with a refugee crisis; the heavy burden of servicing external commercial debt; and the impact of the sharp fiscal adjustment in 2015 and 2016 (the non-oil primary deficit fell from 16.2 percent of non-oil GDP in 2014 to 4.4 percent in 2016). This adjustment, and the accumulation of large domestic arrears, have set in motion a vicious cycle of contraction in non-oil economic activity, non-oil revenue, and government spending. Following a 2.9 percent reduction in 2015, real non-oil GDP contracted by another 6 percent in 2016, with consumer prices declining by about 1 percent on average in 2016.
Program Summary
Chad’s reform strategy is embedded in the coordinated regional approach outlined at the Yaoundé Heads of States summit in December 2016. The new ECF arrangement (which becomes effective today further to the cancelation of the previous ECF) is expected to address the country’s protracted balance of payments problems by supporting policies required to stabilize and better manage the fiscal position, place public debt on a sustainable path, and foster long term inclusive and robust growth including through the diversification of the economy. The program also aims to support the regional stabilization efforts.
The program aims to maintain fiscal prudence through preserving the fiscal adjustment achieved in the last few years and reallocating resources for domestic arrears clearance, investment and social spending; reestablish debt sustainability by restructuring external commercial debt; focus on improving non-oil revenue mobilization over the medium-term; and reduce reliance on domestic financing to ease liquidity pressure on banks. Structural reforms will also focus on improving public financial management, and on boosting competitiveness.
Background
Chad, which became a member of the IMF on July 10, 1963, has an IMF quota of SDR 140.2 million.
For additional information on the IMF and Chad, see:
http://www.imf.org/external/country/TCD/index.htm
