Via IMF (Den Internationale Valutafond)

On July 3, 2019, the Executive Board of the International Monetary Fund
(IMF) completed the fourth review of Chad’s economic and financial
program supported by an Extended Credit Facility (ECF) arrangement.
Completion of the review enables the disbursement of SDR 28.04 million
(about US$38.9 million), bringing total disbursements under the
arrangement to SDR 168.24 million (about US$233.1 million).

Chad’s ECF arrangement was originally approved by the Executive Board
on June 30, 2017 (see Press Release No. 17/257) for SDR 224.32 million
(about US$310.8 million or 160 percent of Chad’s quota). The
ECF-supported program aims to help Chad restore macroeconomic
stability, lay the foundation for robust and inclusive growth, and
contribute to the regional effort to restore and preserve external
stability for the Central African Economic and Monetary Union (CEMAC).

Following the Executive Board discussion on Chad, Mr. Mitsuhiro
Furusawa, Deputy Managing Director and Acting Chair, made the following

“Performance under the ECF-supported program has been broadly
satisfactory, reflecting strong commitment by the authorities despite a
challenging environment including security concerns and a difficult
social situation. All end-December 2018 performance criteria and most
end-March indicative targets were met. Progress is underway on the
structural reform agenda, despite some delays.

“Moving forward, it is essential that efforts continue to create fiscal
space for increased social spending and public investment, and to
reduce domestic debt and clear arrears. Key actions in this regard
include continued fiscal prudence, increasing domestic revenue
mobilization, particularly by reducing exemptions, and strengthening
public financial management. Pursuing these policies, accompanied by
continued structural reform implementation, will help further stabilize
the fiscal position, energize non-oil growth, and reduce banking sector

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“Chad’s program is supported by the implementation of supportive
policies and reforms by the regional institutions in the areas of
foreign exchange regulations and monetary policy framework and to
support an increase in regional net foreign assets, which are
critical to the program’s success.

The Executive Board also concluded the 2019 Article IV Consultation
with Chad.

Chad is a low-income fragile country that depends heavily on oil
revenues. In recent years, it has been heavily impacted by an oil price
shock and security tensions which intensified recently. Significant
progress has been made under the 2017 ECF arrangement to help restore
debt sustainability and fiscal stability. However, the economic,
financial, and social situation is still very difficult, and the
recovery in the non-oil economy has not taken strong hold as the
economy continues to deal with legacies from the crisis and
long-standing structural weaknesses.

Executive Board Assessment


Executive Directors commended the authorities’ continued commitment to
the reform program supported by the IMF despite a challenging
environment marked by fragility and significant development challenges.
Notwithstanding the broadly favorable outlook, Directors noted the
significant downside risks, including from the deterioration in the
security situation and large drops in oil prices. In this context, they
underscored the need to maintain fiscal discipline, while implementing
reforms to address long‑standing structural impediments to non‑oil
activity and achieve higher and more inclusive growth.

Directors commended the authorities for maintaining prudent fiscal
policy. However, in light of high risk of debt distress, they
emphasized the importance of increasing non‑oil revenue, including by
reducing costly exemptions and improving VAT collection, and
maintaining spending discipline. This would help to ensure debt
sustainability and create space for the much needed social and
infrastructure spending. To reduce vulnerability to oil price
fluctuations, Directors encouraged the authorities to consider a simple
price‑smoothing mechanism. They noted that strengthening public
financial management and clearance of domestic arrears also needs to
remain a priority.

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Directors noted that vulnerabilities in the financial sector remain
elevated, reflecting the tight sovereign‑bank nexus. They encouraged
curtailing the public banks’ financing of the budget, reducing the high
levels of non‑performing loans and improving banking sector liquidity.

Directors encouraged the authorities to accelerate the pace of
structural reforms to promote private sector development, diversify the
economy and boost competitiveness. They emphasized the need for efforts
to improve the business climate, enhance the fight against corruption,
strengthen public financial management, and deepen financial inclusion.
Directors noted that these efforts should be supported by well‑targeted
and coordinated capacity development activities, taking into account
the authorities’ absorptive capacity. To ensure the effectiveness of
the provided technical assistance many Directors supported the
authorities’ call for long‑term resident experts.

Directors noted that Chad’s program continues to be supported by the
implementation of policies and reforms by the regional institutions,
which are critical to the program’s success. These comprise the policy
assurances provided in the December 2018 Letter of Policy Support,
which were implemented as planned, and the assurance on NFA
accumulation in 2019 presented in the updated letter of June 2019 and
discussed in the June 2019 union‑wide staff report. Completion of the
fifth review will be conditional on the implementation of the updated
policy assurance.