Press Release No. 23/143

IMF Staff Completes Mission to the Republic of Chad for Discussions on the Third Review of the Extended Credit Facility Arrangement and the 2023 Article IV Consultation

May 10, 2023

• The Chadian authorities and IMF staff have started discussions on the third review of the ECF-supported program and for the 2023 Article IV consultation. These discussions will continue over the next few weeks.
• Growth was higher than expected in 2022 owing mainly to higher oil production. The growth of the non-oil sector was affected by the floods, which had negative effects on agricultural production. The floods have also exacerbated pressure on food prices.
• The outlook for 2023 is favorable but subject to significant risks, including the conflict in Sudan, climate risks, and oil price volatility.
• Saving part of the oil revenue windfall while prioritizing social and development spending will be key, as well as implementing structural reforms aimed at strengthening the management of public finances and state-owned enterprises (SOEs), enhancing governance in the energy sector, and improving the business environment.

Washington, DC: An International Monetary Fund (IMF) mission led by Édouard Martin visited N'Djamena from April 27 to May 10, 2023, to conduct discussions on the third review under the Extended Credit Facility (ECF) arrangement approved by the IMF Executive Board on December 10, 2021 (see Press Release No. 21/375), and for the 2023 Article IV consultation. This 36-month ECF arrangement in the amount of SDR 392.56 million (about US$570.75 million or 280 percent of quota) helps address Chad's substantial fiscal and balance of payments needs, including through catalyzing financial support from official donors. The first and second reviews of this arrangement were concluded by the IMF Executive Board on December 22, 2022, allowing for the disbursement of 112.16 million SDRs (about $149.3 million).

At the end of the mission, Mr. Martin made the following statement:

The Chadian authorities and IMF staff started discussions for the third review of the ECF-supported program approved on December 10, 2021, and for the 2023 Article IV consultation. These discussions will continue in the coming weeks to reach understandings that could be submitted for approval by the IMF Executive Board.

“Growth was higher than expected in 2022 owing mainly to higher oil production. This increase reflects: a recovery of production of the wells formerly owned by ESSO following the 2021 disruptions; the restart of production of the formerly Glencore fields following their acquisition by Perenco; and higher-than-expected production by China National Petroleum Corporation . Non-oil growth was affected by the floods, which had negative effects on agricultural production. The floods also exacerbated pressure on food prices, which rose 16 percent year-on-year, pushing headline inflation to 8.3 percent year-on-year in December 2022. The current account balance improved more than expected, essentially reflecting higher oil exports.

“Performance under the program has been mixed. Only two of the five end-December 2022 quantitative performance criteria were met. Despite better-than-expected revenues, the non-oil fiscal deficit and net domestic financing performance criteria were notably missed due to significant civil and military spending overruns, partly reflecting security tensions and floods. Progress has been made in implementing structural reforms, with four structural benchmarks met, while the authorities are working to implement the reforms covered by the other two benchmarks.

“The outlook for 2023 is favorable but subject to significant risks. Growth is expected to increase further to reach 4 percent in 2023, while inflation would remain elevated. After the 2022 rebound, oil production is expected to increase significantly (to 6.3 percent). Growth in the non-oil sector would also increase, to 3.5 percent in 2023, owing mainly to the recovery of agricultural production following the 2022 floods. Risks to the outlook include: security challenges, particularly those related to the conflict in Sudan; climate-related risks; and the risk of a higher-than projected decline in oil prices.

“Economic policy discussions focused on measures to strengthen public finances. Staff noted the progress achieved in domestic revenue mobilization, which will need to continue. It also called for a better control and increased efficiency of budget spending, in particular of the wage bill, and for a prioritization of social expenditures. It is also important that budgetary procedures are followed more rigorously and that the use of emergency expenditure procedures (DAOs) is limited to emergencies. Given the high volatility of oil prices, it is also necessary that part of the oil revenues is used to rebuild liquidity reserves and reduce the stock of expensive treasury securities.

“Staff also discussed with the authorities additional structural reforms to be implemented in 2023-24. These reforms should notably aim at strengthening the management of public finances and SOEs, mobilizing domestic revenue, improving governance and transparency in the energy sector, and improving the business environment.

“As part of the Article IV consultation, staff discussed with the authorities policies and reforms aimed at ensuring medium- and long-term growth sustainability, including how to build resilience to climate change and reduce gender disparities.

“Staff would like to thank the Chadian Authorities and other counterparts for their hospitality, excellent cooperation, and frank and constructive discussions.”

The mission met Mr. Saleh Kebzabo, Prime Minister, Mr. Tahir Hamid Nguilin, Minister of Finance, Budget, and Public Accounts, Mr. Moussa Batraki, Minister of Economic Prospects and International Partners, Mr. Haliki Choua, Minister Secretary General of the Government, Mr. Djerassem Le Bemadjiel, Minister of Hydrocarbons and Energy, Mr. Ms. Wanledom Robertine, Minister of Commerce and Industry, and other senior officials, as well as representatives of the private sector, civil society and international development partners.