Press Release No. 24/457

IMF Executive Board Concludes 2024 Article IV Consultation with Chad

December 9, 2024

Washington, DC: The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Chad.^[1]

Chad’s post-pandemic recovery picked up steam in 2023 with growth increasing to 4.9 percent. Non-oil activity expanded by 4.5 percent, driven by a rebound in agricultural production and a substantial increase in public investment. Oil GDP grew by 7.6 percent as closed oil fields were brought back on-stream. After declining in 2023 (to 4.2 percent from 8.3 percent at end-2022), y-o-y inflation increased to 8.7 percent at end-August 2024, reflecting a readjustment of fuel oil prices and a rebound in food prices. The external current account balance returned to a deficit of 0.7 percent of GDP in 2023, as oil prices receded and an increase in public investment boosted imports.

After increasing substantially in 2023 (to 11.9 percent of non-oil GDP), the non-oil primary deficit moderated to 4.2 percent of non-oil GDP during the first seven months of 2024, reflecting a reduction in the use of emergency spending procedures, expenditure restraint, and financing constraints. Total public debt fell to 34.2 percent of GDP in 2023 as persistently high oil prices boosted government revenue. The procyclical fiscal stance in 2023 and the first few months of 2023 led to a depletion of liquidity buffers, with government deposits falling from 3.4 percent of GDP at end-2022 to 1.1 percent at end-July 2024.

Economic growth is projected to decline to 3.1 percent in 2024 on account of the impact of the recent floods and a slight decline in oil production but would rebound in the medium term owing to sustained public investment and structural reforms. Inflation is expected to remain temporarily elevated in 2024 and to gradually converge towards the BEAC target of 3 percent over the medium-term as food and fuel prices moderate. Further fiscal consolidation efforts focused on mobilizing non-oil revenue and streamlining non-priority spending would contribute to a reduction in the non-oil primary deficit to 8 percent of non-oil GDP in 2024, 7.2 percent in 2025, and 5 percent over the medium term. Public debt is projected to stabilize at around 32 percent of GDP while net debt would gradually decline to 27½ percent of GDP by 2029, reflecting the gradual build-up of fiscal reserves of 5 percent of GDP. Risks to the outlook are substantial and tilted to the downside and include potential delays in implementing fiscal consolidation measures, a larger-than-expected decline in oil prices, an increase in the influx of Sudanese refugees, and a further increase in the frequency and severity of climate change-related events.

Executive Board Assessment^[2]

Executive Directors agreed with the thrust of the staff appraisal. They noted the negative impact of recent severe shocks—including historical floods and the continuous inflows of refugees from Sudan—on Chad’s economic growth and on an already difficult food security situation. Against this background, they welcomed the authorities’ reengagement with the Fund and their commitment to promoting economic and social development, notably by broadening access to public services, strengthening governance, and improving the business environment. Directors encouraged the authorities to work with the IMF and other development partners to finalize their new national development plan (PND) and articulate the macroeconomic policies and reforms to reach these objectives.

Directors stressed that a prudent and sustainable fiscal policy—aimed at creating the necessary fiscal space for social and investment spending—should be a key component of the PND. They stressed the importance of anchoring the fiscal stance on a net debt target and a buildup of fiscal buffers, which would also increase resilience to shocks. Directors encouraged the authorities to accelerate structural reforms to digitalize tax administration, strengthen public finance and investment management, and improve SOE management.

Directors called for intensified efforts to strengthen the financial sector. They emphasized the importance of accelerating the adoption and implementation of restructuring plans to improve the operational and financial performance of the two systemic public banks and provide for their recapitalization.

Directors agreed on the importance of diversifying the economy to reduce reliance on the oil sector, and underscored that reforms to strengthen the business environment, enhance governance, and reduce gender gaps are essential to achieving a sustained and inclusive growth over the medium term. To strengthen the business environment, they encouraged the authorities to implement governance and anti-corruption frameworks, together with measures to improve education, increase access to basic infrastructure, and promote formalization and financial inclusion. Directors also underlined the importance of improving women’s educational outcomes and increasing female labor force participation to boost growth and reduce poverty.

Directors noted that the increasing frequency of climate related shocks underlined the importance of advancing Chad’s adaptation strategy. They stressed the need to integrate climate change into the PND to enhance public investment management capacity and to reactivate the High Interministerial Committee for the Environment to strengthen policy coordination and facilitate access to international climate funding.

Directors emphasized that improvements in the quality and timely provision of economic statistics are necessary to better inform surveillance and economic analysis. They welcomed the capacity development strategy and called for close alignment of delivery planning with demand from the authorities and continued coordination with other technical assistance providers.

It is expected that the next Article IV consultation with Chad will be held on the standard 12-month cycle.

[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summing ups can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm .