Washington, DC -December 22, 2022: The Executive Board of the International Monetary Fund (IMF) approved today the completion of the first and second reviews under the Extended Credit Facility (ECF) for Chad.
The completion of the two reviews enables the disbursement of SDR 112.16 million (about US$149.3 million), bringing total disbursements under the arrangement to SDR 168.24 million (about US$224 million). Chad's three-year ECF arrangement was approved on December 10, 2021, for SDR 392.56 million (about US$570.75 million at the time of program approval or 280 percent of quota) to help meet Chad's large balance-of-payments and budgetary needs, including by catalyzing financial support from official donors (see Press Release No. 21/377 ). Based on the policies and reforms to which the authorities committed, the planned corrective actions, and the regional policy assurances, the Board also approved waivers of non-observance of performance criteria on the non-oil primary balance and the stock of domestic arrears.
Over the longer term, policies under the ECF-supported program will help put the economy on a balanced and sustainable path towards inclusive green growth and poverty reduction. It will also contribute to the regional effort to restore and preserve external stability for the Central African Economic and Monetary Union (CEMAC).
After contracting in 2020 and 2021, economic activity is expected to gradually recover over the medium term. Growth is expected increase to 2½ percent in 2022 and 3½ percent in 2023, driven by a recovery in both oil and non-oil production. Average inflation is expected to rise to 5.3 percent in 2022--reflecting increasing food price pressures from the poor 2021 crop, the impact of the war in Ukraine, and recent floods--before gradually moderating over the medium term. Reflecting higher oil prices, the current account balance is expected to improve markedly in 2022, when it would register a surplus of 2.8 percent of GDP, before declining over the medium term as oil prices are expected to gradually recede. Public debt is expected to gradually decline over the next few years from 56 percent of GDP at end-2021 to about 40 percent of GDP in 2024.
Following the Executive Board discussion, Mr. Kenji Okamura, Deputy Managing Director and Acting Chair, made the following statement:
"Chad continues to face considerable challenges. Higher oil revenues improved the government's cashflow position. However, the pandemic remains a concern while last year's poor crop, Russia's war in Ukraine, and the recent floods have exacerbated food insecurity. The prolongation of the political transition has heightened social tensions while the security situation remains volatile. Reflecting in part these challenges, quantitative performance under the program has been mixed, although there has been significant progress on structural reforms.
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"The medium-term outlook is projected to gradually improve, as reforms accelerate. Both oil and non-oil GDP growth is projected to pick up. After increasing rapidly in 2022 on account of higher food prices, inflation is expected to gradually moderate over the medium term.
"The debt treatment agreement reached with official and private creditors under the G20 Common Framework--the first in its kind-- provides Chad with adequate protection against downside risks while bringing the risk of debt distress to moderate by the end of the program, as required under the IMF's exceptional access policies.
"Continued reform efforts are needed to enhance growth, poverty reduction, and resilience. Fiscal consolidation efforts remain key to Chad's efforts to ensure debt sustainability while creating the fiscal space necessary to meet its considerable social and investment spending needs. The authorities will continue to implement measures aimed at enhancing domestic revenue mobilization, containing the wage bill, and streamlining non-priority expenditures, such as fuel and electricity subsidies. Additional oil revenue will help rebuild buffers and repay domestic arrears and reduce domestic debt. Structural reforms will also aim at enhancing public financial management and fiscal transparency, improving governance, and strengthening the banking sector. Chad's program will continue to be supported by implementation of policies and reforms by the CEMAC regional institutions, which notably aim at supporting an increase in regional net foreign assets."
