Press Release No. 21/26

IMF Reaches Staff-Level Agreement with Chad on a Four-Year Program Under Extended Credit Facility (ECF) and Extended Fund Facility (EFF)

January 27, 2021

• The program aims to anchor the government’s policy and reform efforts, aimed at bolstering the country’s response to the pandemic and at laying the foundation for a green and inclusive economic recovery and restoring debt sustainability.
• This agreement is subject to the approval of the IMF Executive Board and receipt of the necessary financing assurances
• Key policy actions under the home-grown program supported by the IMF will focus on advancing the authorities’ structural reform agenda to support inclusive growth and poverty reduction, as well as addressing fragilities, and restoring debt sustainability via growth-friendly fiscal consolidation and an ambitious debt restructuring.

Washington, DC: In response to a request from the Chadian authorities, an International Monetary Fund (IMF) mission led by Edward Gemayel held virtual meetings during December 3-14 and on January 25 to discuss IMF financial support to the authorities’ economic reform program.

At the end of the virtual mission, Mr. Gemayel issued the following statement:

“IMF staff completed policy discussions with the authorities on a new medium-term program that could be supported by IMF resources of about $560 million under the Extended Credit Facility (ECF) and the Extended Fund Facility (EFF).

“Chad continues to face serious challenges from the combined shocks of the Covid-19 pandemic, terms of trade, climate change, and heightened regional insecurity. Lower oil prices and oil production, and domestic containment measures are weighing on the outlook, and are causing significant adverse economic and social effects. In 2020, non-oil activity is expected to contract by 1.7 percent, the banking sector was strained, oil output is estimated to have grown at a subdued pace (2.4 percent), and average annual inflation picked up to 4.5 percent from negative levels in 2019. The two disbursements under the Rapid Credit Facility (RCF) in April and July contributed to closing the 2020 external financing gap, although substantial fiscal and external financing needs remain over the medium term.

“The authorities’ medium-term program is centered on ambitious reforms aimed at supporting the post-Covid recovery and poverty reduction, as well as restoring debt sustainability. In particular, it includes a set of reforms geared at increasing non-oil revenue, allocating adequate resources to social sectors and public investment, strengthening the banking sector, promoting access to cheaper and green energy, and improving governance, debt transparency, and the business climate. The authorities renewed their commitment to these reforms, including during the presidential and legislative electoral period in 2021. They expect that IMF financial support will help catalyze substantial financial support from development partners and debt relief from creditors.

“Fiscal policy, supported by technical assistance from the IMF and other donors, will aim to restore debt sustainability, support the post-Covid recovery, and build resilience. Continued mobilization of domestic revenues combined with fiscal discipline should reduce the budget dependence on oil revenues and free up some resources that will be allocated to efficient investment and social spending. In addition to the fiscal consolidation efforts envisioned under the program, the Chadian authorities have made an official request to restructure their external debt under the G20 Common Framework for debt restructuring, which will help restore debt sustainability.

“Financial sector reforms will focus on ensuring that the banking sector remains resilient amid the pandemic and is able to finance domestic activities and strengthen financial inclusion in the medium term. In this context, the continued timely repayment of government debt obligations owed to banks and the clearance of domestic arrears in the context of the government’s arrears clearance strategy will help improve the banking system liquidity position. Over the medium term, reforms will focus on improving access to financial services and strengthening financial inclusion by encouraging the creation of strong and secure microfinance institutions.

“Reforms to strengthen governance, enhance transparency, and improve the business climate will be central elements of the program and are essential to promoting economic growth and efficient use of public resources. The authorities are committed to strengthening anti-corruption efforts through the implementation of comprehensive asset declaration requirements for public servants and the strengthening of anti-corruption bodies.  Commitments to transparency, including publication of audit reports and the establishment of a requirement to publish procurement contracts, including beneficial ownership of awarded legal entities, will help prevent the misallocation of funds and improve good governance and the quality of government contracting.

“The IMF team would like to thank the Chadian authorities for the candid and constructive discussions. The mission had working sessions with Mr. Tahir Hamid Nguilin, Minister of Finance and Budget, Mr. Annour Mahamat Hassan, National Director of the BEAC, and senior officials from the Ministries of Finance, Planning, Oil, Justice, Agriculture and the Secretary General of the Government. The Mission also had exchanges with representatives of the oil sector and Chad’s technical and financial partners.”