Chadian Economy Deteriorates- IMF
Chad’s economic and financial situation and its medium-term outlook have steadily deteriorated due to a series of lasting shocks since the onset of the pandemic, compounded by delays in donor support due to the crisis. ‘insufficient progress in debt treatment discussions.
An International Monetary Fund (IMF) mission led by Edward Gemayel visited N’Djamena from October 05 to 09, 2021. Mr. Vitaliy Kramarenko, Deputy Director of the Africa Department of the IMF, participated in the policy discussions. The mission took stock of macroeconomic and financial developments, discussed progress on government reform priorities, and reviewed government efforts to intensify ongoing discussions on debt treatment with creditors in the sector. private.
A commitment from major private sector creditors is needed to establish a credible process for appropriate debt treatment, which is required for the IMF Executive Board’s consideration of Chad’s request for an Extended Credit Facility agreement.
The economic and financial situation and the outlook have continued to deteriorate since the start of the pandemic. The combined and lasting shocks of the COVID-19 pandemic, volatile oil prices, climate change, terrorist attacks and delays in donor support continue to rock the Chadian economy. Real GDP is estimated to have contracted 0.8% in 2020 and is expected to grow by a meager 1% this year, which is lower than pre-COVID forecasts as well as initial expectations regarding the impact of the pandemic, says Edward Gemayel.
As a result of the significant deterioration in the economic outlook, external debt service has become unbearable and the debt unsustainable. Limited progress in debt treatment discussions delayed official financing. A clear path to restoring debt sustainability and mobilizing sufficient financing, including debt service relief, are essential preconditions for an IMF-backed program, which should catalyze support. important donors. As these conditions have not yet been met, official funding dried up in 2021. As a result, the government was forced to cut essential social and development spending. The continuation of this situation could have serious social consequences in an already poor and fragile country, with unfavorable social indicators, including a rising poverty rate, poor access to basic services and health and education indicators among the weakest in the world. To help cope with the situation, the Chadian authorities have decided to spend their share of the recent SDR allocation to meet urgent social needs.
Although official bilateral creditors have provided assurances of funding, a credible process for appropriate debt treatment by the private sector on their readiness to negotiate debt treatments within the parameters of the program envisaged to be supported by the IMF remains to be established. The official creditors within the Creditors Committee for Chad under the Common Framework for the Treatment of Debt Beyond the DSSI (Common Framework), in their June 16 statement, provided the IMF with funding assurances. official. However, discussions with private sector creditors have been delayed.
Not only will an IMF-backed program provide the urgently needed financing, it will also give a strong impetus to the authorities’ medium-term reform agenda, reflected in the January 2021 IMF staff agreement. structural reforms aimed at improving the government’s capacity to strengthen social services, invest in human capital and infrastructure, begin to build resilience to climate change and promote private sector development.
The mobilization of domestic revenues, the improvement of public finance management, governance and anti-corruption measures, as well as the reduction of administrative formalities are the main commitments of the program. Coordinated and timely donor support for budget and project financing, as well as capacity development, is critical to the success of the authorities’ program.
The mission was received by President Mahamat Idriss Deby, Prime Minister Padacké Pahimi, and met Mr. Tahir Hamid Nguilin, Minister of Finance and Budget, Mr. Issa Doubragne, Minister of Economy, Development Planning and International Cooperation, Mr. Idriss Ahmat Idriss, National Director of BEAC, and other senior officials, as well as representatives of international development partners.