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Chad: Request for Disbursement Under the Rapid Credit Facility and Cancellation of the Extended Credit Facility Arrangement—Press Release; Staff Report; and Statement by the Executive Director for Chad

Author(s):
International Monetary Fund. African Dept.
Published Date:
August 2020
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Recent Economic Developments and Outlook

1. The twin Covid-19 pandemic and terms of trade shocks continue to severely disrupt the Chadian economy. The drop in international oil prices has reduced export proceeds and government revenue, leading to large fiscal and external financing needs. One oil company interrupted its production temporarily as its expatriate staff could not return to Chad, due to the suspension of passenger flights. Non-oil activity in retail trade, transport, tourism and hospitality was significantly impacted as a result of the containment measures (curfew and isolation of cities), the closure of markets and non-essential stores, and restrictions on travel, gatherings, and public transportation.

2. Compared to RCF-1, the 2020 outlook has further deteriorated (Text table 1). Real GDP is expected to decline by 0.8 percent. Inflation would reach 2.8 percent driven by an increase in prices for food and beverages as a result of the disruption in distribution channels. Inflation between January and May reached an average of 3.7 percent (y/y), compared to an average of 1.3 percent (y/y) during the same period last year. The fiscal position will significantly worsen due to lower non-oil revenues and the increase in health and security expenditures. The current account deficit is forecasted to further widen.

Text Table 1.Selected Economic Indicators 2019–21
201920202021
Est.5th Rev.RCF 1Proj.5th Rev.RCF 1Proj.
(Annual percentage change)
Real GDP3.03.0-0.1-0.83.96.16.1
Non-oil GDP2.02.0-0.7-1.53.03.03.1
Inflation-1.03.02.22.83.02.93.0
(Percent of non-oil GDP)
Overall fiscal balance (incl. grants, commitments basis)-0.83.0-1.5-1.92.5-3.4-3.8
Non-oil primary balance (commitment basis, excl. grants)-4.8-4.9-6.8-9.1-5.0-6.6-7.3
(Percent of GDP)
Overall balance of payments0.01.1-4.3-5.01.1-5.2-6.2
Current account balance, including official transfers-4.9-6.2-13.2-14.0-6.6-10.4-11.6
Sources: Chadian authorities; and IMF staff estimates and projections.
Sources: Chadian authorities; and IMF staff estimates and projections.

Chad: Global Covid-19 Pandemic1

Sources: World Health Organization; John Hopkins Coronavirus Resource Center; Oxford COVID-19 Government Response Tracker.

1 Figures as of July 14, 2020

3. With deficient medical equipment, lack of trained personnel, as well as limited testing capacity, the public health system has reached its limit, prompting the authorities to take swift action.1 A national contingency plan was put in place in March to contain the impact of the pandemic at a current estimated cost of CFAF 37.0 billion, thanks to higher donor support, of which CFAF 32.4 billion were executed (Text figure 1).2 As part of the contingency plan, a state of health emergency was declared, allowing for the implementation of exceptional measures. In this context, gatherings were forbidden, a curfew was imposed in N’Djamena and several provinces, and main cities were later isolated from the rest of the country. Other measures included the suspension of passenger flights, the closure of certain borders, and the ban of gatherings of more than 50 people, while masks remain mandatory in public places. Since early June, a few measures were relaxed: (i) markets, retail shops, urban public transportation as well as grills and restaurants for carry-out reopened; (ii) schools, universities, and tertiary institutions were progressively reopened; and (iii) places of worship were allowed to resume service.

Chad: Disbursements towards COVID-19 Health Contingency Plan1

(Billions of CFAF)

Source: Chadian Authorities

1/ Figures reflect 32.4B CFAF disbursed out of 37.0B CFAF announced, as of July 10.

4. The authorities have been implementing several measures to help businesses absorb the economic impact of the pandemic (Text table 2). At the time of RCF-1, the authorities approved the following measures for small and medium-sized enterprises: (i) reduction in business license fees and the presumptive tax by 50 percent, and (ii) tax breaks, such as carryforward losses and delays in tax payments, which will be considered on a case-by case basis. Since RCF-1, they also decided to clear arrears to suppliers totaling CFAF 110 billion (2.1 percent of non-oil GDP) as part of the government clearance strategy adopted last January.

Text Table 2.Chad: Authorities’ measure to contain Covid-19
CFAF (Billions)% of non-oil GDP
Measure adopted prior to RCF-116.70.3
Measures to Support SMEs:
50 percent reduction of business license fees4.00.1
Deferral of all tax controls for 3 months
Measures to Support Households:
Temporary provisions of water & electricity7.70.1
Payment of the death benefits5.00.1
New measures adopted after RCF-1289.55.6
Measures to Support SMEs:
Clearance of domestic arrears owed to suppliers110.02.1
Subsidy to Agricultural Sector17.00.3
Measures to Support Households:
Replenishment of the National Food Distribution Program25.00.5
Hiring of additional health workers7.50.1
Establishment of Solidarity Fund100.01.9
Establishment of Youth Entrepreneurship Fund30.00.6
Total Cost of Measures306.25.9
Source: Chadian Authorities and IMF Staff estimates and Projections
Source: Chadian Authorities and IMF Staff estimates and Projections

5. The authorities have also stepped up their efforts to support households. Measures approved at the time of RCF-1 included: (i) the temporary suspension of payments of electricity and water bills, (ii) clearance of arrears on death benefits due to deceased civil and military agents, indemnities and ancillary wages owed to retirees, and medical expenses for civilian agents and defense and security forces. Since RCF-1, the authorities adopted the following additional measures: (i) introduction of a food distribution program with the help of UN agencies, (ii) tax exemptions and simplification of the import process for food and necessity items, including health equipment, (iii) the creation of a solidarity fund for the vulnerable population amounting to CFAF 100 billion, and (iv) the adoption in early May by the National Assembly of a new law that establishes a Youth Entrepreneurship Fund.

6. Additionally, BEAC and COBAC have taken measures to ease monetary policy and cushion the banking sector, in order to accommodate for the COVID-crisis. Prior to RCF-1, BEAC had eased monetary policy, including a decrease in policy rates and increase in liquidity provision. Since then, BEAC announced in June 2020 the relaxation of eligibility criteria for private and public collateral to be refinanced by BEAC. COBAC also informed banks to utilize a capital conservation buffers of 2.5 percent, in order to absorb pandemic-related losses, while requesting that banks adopt a restrictive policy for dividend distribution. COBAC also plans to set up a closer monitoring of banks’ liquidity.

7. The pandemic has added pressure to an already fragile social situation and a difficult security environment. Due to the pandemic, legislative elections, which were scheduled for mid-December 2020 after being delayed since 2015, have been adjourned to October 2021, after the presidential elections planned for April 2021. While the agreement signed in January with labor unions to restore some benefits to public servants has helped maintain social peace, the wage bill is weighing considerably on public finances, while the weak private sector does not provide employment to a growing young population. Boko Haram has intensified attacks in the Lake Chad region, putting significant pressure on the 2020 budget. The increased fight against Boko Haram’s attacks has also forced Chad to suspend the deployment of troops to the regional (G5 Sahel) fight against terrorism that had been promised at the January Pau Summit in France.

8. The macroeconomic outlook remains dire and is resulting in an urgent balance of payments need estimated at about 7.0 percent of non-oil GDP. Donor financing including the IMF is expected to significantly reduce unidentified budget support needed to close the BOP financing gap. But with the current account deficit in 2020 at 18.0 percent of non-oil GDP, the financing needs remain substantial.

9. Fund emergency financing is catalyzing donor support (Text Table 3). Since RCF-1, the authorities were able to secure additional financing in the amount of USD 136 million to be disbursed by end-2020, thanks to higher budget support than originally expected from the World Bank, AfDB, the EU, and France.

Text Table 3.Chad: External Financing Sources in 2020
RCF1Proj.
CFAF (Billion)% of non-oil GDPCFAF (Billion)% of non-oil GDP
Financing gap1238.04.6365.77.0
IMF Financing68.41.3108.52.1
of which: RCF (1st)68.41.368.41.3
of which: Prospective RCF (2nd)40.10.8
Financing from other Development Partners79.81.5
of which: World Bank60.01.2
Debt Relief7.50.1
of which: CCRT
of which: DSSI7.50.1
Residual financing gap169.63.3170.53.3
Source: Chadian Authorities and IMF Staff estimates and Projections

The financing gap in the RCF1 Request assumes that IMF Financing includes a disbursement for the 6th review (CFAF 23 billion). This disbursement is exluded from RCF 2.

Source: Chadian Authorities and IMF Staff estimates and Projections

The financing gap in the RCF1 Request assumes that IMF Financing includes a disbursement for the 6th review (CFAF 23 billion). This disbursement is exluded from RCF 2.

Policy Issues and Discussions

10. A supplementary budget is being prepared (Text table 4). Staff and the authorities agreed to temporarily loosen fiscal policy as the twin shocks depressed revenues and created temporary spending needs. Oil revenues are projected to decline by around 1.5 percent of non-oil GDP relative to the 2020 budget due to lower oil prices, which was partially offset by higher profit tax from oil companies, while non-oil revenues are expected to decline by round 1.6 percent of non-oil GDP. On the spending side, the wage bill will increase, reflecting the reestablishment of some benefits for public workers. Transfers and subsidies are expected to increase as a result of new measures to help households and higher security spending. Domestically financed investment will also increase, reflecting additional spending related to health and security. Overall, the NOPB deficit is expected to widen to 9.1 percent of non-oil GDP compared to 4.9 percent projected in the 2020 budget, while the overall 3.0 percent surplus will now turn into a deficit of 1.9 percent of non-oil GDP.

Text Table 4.Chad: Fiscal Financing Developments, 2019–20(Percent of non-oil GDP)
20192020
Est.5th Rev.RCF-1Proj.
Total revenue and grants17.322.519.521.0
Revenue15.719.115.215.9
Oil6.49.76.48.2
Non-oil9.49.48.87.8
Grants1.53.44.45.0
Budget support0.11.22.02.1
Project grants1.42.22.33.0
Expenditure18.019.521.022.9
Current12.513.114.415.3
Wages and salaries7.06.77.77.7
Goods and services1.61.91.92.1
Transfers and subsidies2.63.33.74.4
Interest1.21.11.21.1
Investment5.66.46.67.6
Domestically financed3.02.42.42.7
Foreign financed2.64.04.24.9
Overall balance (incl. grants, commitment)-0.83.0-1.5-1.9
Non-oil primary balance (excl. grants, commitment)-4.8-4.9-6.8-9.1
Overall balance (incl. grants, cash)-1.22.0-2.8-5.3
Financing1.3-2.0-1.8-1.7
Financing gap10.00.04.67.0
RCF11.31.3
Prospective RCF0.8
Prospective financing from World Bank1.2
Prospective financing other development partners0.3
CCRT0.0
DSSI0.1
Residual financing gap0.03.33.3
Sources: Chadian authorities and IMF staff estimates and projections.

The financing gap in RCF-1 request assumes that IMF financing includes the 6th review disbursement (CFAF 23 billion)

Sources: Chadian authorities and IMF staff estimates and projections.

The financing gap in RCF-1 request assumes that IMF financing includes the 6th review disbursement (CFAF 23 billion)

11. As a result of the shock, a financing-gap of 7 percent of nonoil GDP will emerge. The gap is expected to be closed through (i) additional donor financing, and (ii) domestic measures. The latter could include (i) issuance of securities mostly for the clearance of the arrears, (ii) a credit from banks for arrears clearance (para 15), (iii) the use of savings in the stabilization fund given that oil prices are lower than budgeted, and (iv) some cuts in non-priority recurring expenditures and domestically financed investments.

12. The authorities will strengthen transparency around all COVID-related expenditures, which will help ensure that the financial assistance received is efficiently spent. A trust fund, in the form of a dedicated Treasury account, was established to mobilize financial contributions to fight the pandemic. To ensure transparency, the authorities will report all COVID-19 related spending in the supplementary budget. In addition, the authorities will publish the full text of procurement contracts on the website of the Ministry of Finance and Budget, including the names of the beneficial owners of awarded legal persons, within 30 days of their conclusion. They will also subject all emergency spending procurement procedures to the health and other sectors to an ex-post compliance audit by a reputable international auditing firm, which will be conducted with the support of the Inspectorate of Public Finances within six months of the end of the fiscal year. The audit will also cover all COVID-related expenditures. Delivery reports for goods and services will be published on the website of the Ministry of Finance and Budget within three month of the end of the execution period for each contract.

13. The banking sector’s vulnerabilities worsened, reflecting the tight sovereign-bank nexus and the high dependence on oil. Preliminary data for the first quarter of 2020 suggests that (i) several banks are liquidity constrained and facing collateral constraints, (ii) the sector’s capital adequacy ratio has slightly deteriorated,3 and (iii) the level of overdue loans had increased. Staff encouraged the authorities to closely coordinate with regional bodies to: (i) monitor the liquidity and solvency situation, particularly for systematic banks, and (ii) ensure compliance with prudential regulations, especially for risk management and governance. Meanwhile, the Ministry of Finance has started the monthly repayment of arrears owed to the two large public banks (CFAF 250 million and CFAF 500 million per month, respectively). It also plans to recapitalize by end of July one of the two banks by injecting CFAF 3 billion.4

14. Chad’s risks of external and overall debt distress remain high but debt is sustainable. The baseline debt service-to-revenue ratio forecast exceeds the key risk benchmark of 14 percent through 2027. The ratio exceeds the target level for the 2018 Glencore debt renegotiation of 18 percent in 2022. Historically, the authorities have been able to service debt at this level and program performance under the ECF suggests strong commitment to obligations. Staff views the baseline level of external debt to be sustainable. However, all external debt risk indicators exceed their thresholds under the most extreme shock scenarios. As for overall public debt, fiscal pressures in the near term push the forecast present value (PV) of total public debt-to-GDP ratio above benchmark level of 35 percent from 2020 to 2024. In the medium-term, though, ratios of public external debt-to-GDP and the PV of external-debt-to-GDP are expected to gradually decline, both in nominal terms and in present value terms as a share of GDP.

15. Domestic arrears clearance has accelerated. The authorities are setting up a mechanism with local banks to clear CFAF 110 billion in domestic arrears in 2020 through (i) an CFAF 85 billion, 8-year loan arrangement that allows banks to substitute credit to the government for arrears-linked non-performing assets, and (ii) the issuance of treasury bonds with maturities ranging between 3–5 years amounting to CFAF 25 billion. The authorities indicated that this operation will improve suppliers’ and banks’ balance sheets while lengthening the average maturity of domestic debt. Staff encouraged the authorities to reach out and coordinate this operation with regional bodies.

16. Some progress was made on the external arrears front since RCF-1. Only three official or private creditors remain with outstanding arrears: Equatorial Guinea, Republic of Congo—both of which the debt is in CFA—and Mega International Commercial Bank from Taiwan Province of China. The authorities are making good faith efforts to resolve them; all are in active negotiations and those with Mega Bank are nearing completion.

Request for Disbursement Under the Rapid Credit Facility

17. The authorities are requesting a disbursement under the RCF equivalent to 35 percent of quota to address the urgent balance of payments and fiscal financing needs emerging as a result of the pandemic. The RCF disbursement of SDR 49.07 million, is expected to fill 10.9 percent of the estimated BOP financing gap through indirect budget support.5 It will provide timely fiscal support to address the damaging impact of the COVID-19 pandemic and its aftermath. The remaining gap is expected to be covered by loans and grants from Chad’s multilateral and bilateral partners with whom the authorities are actively engaged.

18. Chad’s capacity to repay the Fund remains adequate (Table 7). The RCF disbursement would bring outstanding IMF credit to 299 percent of quota,6 or 5.6 percent of GDP and 21.5 percent of exports in 2020. Debt service to the IMF would peak in 2026 at 2.0 percent of exports and at 7.4 percent of revenue.

Table 1.Chad: Selected Economic and Financial Indicators, 2017–24
20172018201920202021202220232024
Prel.Prel.Est.5th Rev.RCF-1Proj.RCF-1Proj.Proj.Proj.Proj.
(Annual percentage change, unless otherwise indicated)
Real economy
GDP at constant prices-2.42.33.03.9-0.1-0.86.16.14.94.03.8
Oil GDP-11.212.77.67.52.42.419.219.210.64.42.8
Non-oil GDP-0.50.32.03.0-0.7-1.53.03.13.43.84.1
GDP deflator-0.82.31.52.8-5.2-4.72.42.13.43.53.3
Consumer price index (annual average)-0.94.0-1.03.02.22.82.93.03.13.03.0
Oil prices
Brent (US$/barrel)154.471.164.060.536.937.039.538.141.644.647.0
Chadian price (US$/barrel)249.465.161.057.534.935.037.536.138.641.644.0
Oil production for exportation (millions of barrels)36.042.247.051.148.348.358.958.965.969.171.3
Exchange rate CFAF per US$ (period average)580.9555.2585.9
Money and credit
Net foreign assets0.511.36.911.2-4.7-7.81.31.81.22.03.7
Net domestic assets-4.8-10.814.51.24.67.44.73.55.44.93.5
Of which : net claims on central government-4.5-6.910.2-1.17.910.8-0.30.10.8-2.7-3.8
Of which : credit to private sector11.50.61.02.3-1.7-1.85.13.44.65.37.2
Broad money-2.91.919.712.41.41.06.05.36.66.97.2
Velocity (non-oil GDP/broad money)35.45.44.74.84.74.74.74.74.84.84.7
External sector (valued in US dollar)
Exports of goods and services, f.o.b.14.537.63.13.0-30.2-30.223.019.315.710.58.9
Imports of goods and services, f.o.b.5.410.34.54.1-2.1-2.17.87.96.68.06.2
Export volume-12.211.19.68.511.411.519.419.39.33.93.1
Import volume5.28.33.53.8-0.20.68.38.65.86.94.3
Overall balance of payments (percent of GDP)-1.42.70.01.1-4.3-5.0-5.2-6.2-5.8-4.8-5.0
Current account balance, including official transfers (percent of GDP)-7.1-1.4-4.9-6.2-13.2-14.0-10.4-11.6-9.5-9.4-9.1
Terms of trade30.221.5-6.8-5.4-36.2-35.63.40.65.05.33.7
External debt (percent of GDP)425.625.824.623.227.030.624.227.829.129.330.0
NPV of external debt (percent of exports of goods and services)94.164.259.759.190.397.172.080.876.373.171.7
(Percent of non-oil GDP, unless otherwise indicated)
Government finance
Revenue and grants17.118.317.322.519.521.017.917.619.421.220.5
Of which : oil revenue4.16.76.49.76.48.25.25.06.07.46.0
Of which : non-oil revenue8.78.19.49.48.87.89.28.59.49.910.6
Expenditure18.016.518.019.521.022.921.321.420.720.220.0
Current13.712.012.513.114.415.314.414.413.813.212.9
Capital4.44.55.66.46.67.67.07.06.97.07.1
Non-oil primary balance (commitment basis, excl. grants)5-3.8-4.2-4.8-4.9-6.8-9.1-6.6-7.3-5.8-4.7-3.8
Overall fiscal balance (incl. grants, commitments basis)-0.91.9-0.83.0-1.5-1.9-3.4-3.8-1.31.00.4
CEMAC reference fiscal balance (in percent of GDP)60.5-0.8-2.1-1.1-2.6-4.5-2.6-2.3-1.3-1.0-4.2
Total debt (in percent of GDP)450.349.144.339.747.749.147.149.448.947.847.3
Of which : domestic debt24.723.219.716.620.718.423.021.719.918.517.3
Memorandum items:
Nominal GDP (billions of CFA francs)5,8556,1276,4066,8806,0626,0606,5846,5707,1297,6688,222
Of which: non-oil GDP4,8304,9615,1305,4665,2065,1945,5175,5155,8766,2856,738
Nominal GDP (billions of US$)10.111.010.911.810.310.111.311.012.012.813.7
Sources: Chadian authorities; and IMF staff estimates and projections.

WEO projections for Brent crude oil price.

Chadian oil price is Brent price minus quality discount.

Changes as a percent of broad money stock at the beginning of period.

Central government, including government-guaranteed debt.

Total revenue excluding grants and oil revenue, minus total expenditure excluding net interest payments and foreign-financed investment.

The CEMAC reference fiscal balance is calculated as the overall fiscal balance minus the savings from oil revenue, which is the sum of 20 percent of oil revenue of the current year and 80 percent of the oil revenue in excess of the average oil revenues in the previous three years.

Sources: Chadian authorities; and IMF staff estimates and projections.

WEO projections for Brent crude oil price.

Chadian oil price is Brent price minus quality discount.

Changes as a percent of broad money stock at the beginning of period.

Central government, including government-guaranteed debt.

Total revenue excluding grants and oil revenue, minus total expenditure excluding net interest payments and foreign-financed investment.

The CEMAC reference fiscal balance is calculated as the overall fiscal balance minus the savings from oil revenue, which is the sum of 20 percent of oil revenue of the current year and 80 percent of the oil revenue in excess of the average oil revenues in the previous three years.

Table 2.Chad: Fiscal Operations of the Central Government, 2019–21(In billions of CFAF, unless otherwise indicated)
201920202021
Est.5th Rev.RCF-1Proj.RCF-1Proj.
Total revenue and grants8851,2301,0151,090988971
Revenue8061,045789828795747
Oil1326531331424286278
Non-oil480515458404508469
Tax461477438389486452
Non-tax193720152217
Grants79185226262193224
Budget support7641051075889
Project grants72121121155135135
Expenditure9241,0651,0951,1901,1771,180
Current639715751796793796
Wages and salaries360368399399417417
Civil Service248256286286301301
Military111112113113116116
Goods and services8310697110111111
Transfers and subsidies2133179191227204205
Interest646264596163
Domestic212527272426
External433737333737
Of which: Glencore loan (after restructuring)312627282626
Investment285350344394384384
Domestically financed153130124140139139
Foreign financed3132220220254245245
Overall balance (incl. grants, commitment)-39165-80-100-189-209
Non-oil primary balance (excl. grants, commitment)4-249-268-353-472-363-403
Float from previous year5-49-80-90-90-79-79
Float at end of period5907979799191
Var. of Arrears6-64-45-45-165-40-40
Repayment of other arrears70-10-10000
Overall balance (incl. grants, cash)-62110-146-276-217-237
Non-oil primary balance (excl. grants,cash)-272-324-419-648-391-431
Financing65-110-92-90-97-148
Domestic financing38-78-85-78-65-123
Bank financing1791919-4-29-29
Central Bank (BEAC)1791919-4-29-29
Deposits105-2-3-3-22-22
Advances (net)000000
IMF742121-2-7-7
Commercial banks (deposits)000000
Other financing (net), of which:-141-97-104-74-36-94
Amortization-74-142-144-154-28-38
Commercial banks loans0-9-9-91010
Non-bank loans (gross) 823535413938
Treasury bills (net)-70-641714-45-44
Treasury Bonds (gross)0970490-49
Bank Recapitalization0-3-3-5-2-2
Stabilization Funds0-100-10-10-10
Privatization and other exceptional receipts000000
Foreign financing27-32-7-11-33-25
Loans (net)-1-58-34-38-59-52
Disbursements727370597272
Budget borrowings1396000
Project loans596464597272
Amortization-73-131-104-97-131-123
Of which: Glencore loan (after restructuring)-24-62-35-36-55-56
Debt relief/rescheduling (HIPC)282626272627
Financing Gap-20238366315385
RCF-16868
Prospective RCF40
Prospective financing from World Bank60
Prospective financing other development partners18
CCRT27
DSSI7
Residual financing gap170171315379
Memorandum items:
Non-oil GDP5,1305,4665,2065,1945,5175,515
Poverty-reducing social spending241
Bank deposits (including BEAC)149207152152174174
(In months of domestically-financed spending)2.32.92.11.92.22.2
BEAC advances9480480480480480480
Sources: Chadian authorities; and IMF staff estimates and projections.

Net of cash calls and transportation costs linked to the oil public enterprise (SHT) participation in private oil companies.

includes subsidies to the electricity company starting from 2020.

Includes projects financed by the BDEAC, but the corresponding loans (in CFAF) are counted as domestic financing.

Total revenue, less grants and oil revenue, minus total expenditures, less interest payments and foreign financed investment.

Difference between committed and cash expenditure, and errors and omissions.

Recognized arrears, as registered by the Treasury in the “restes à payer”

Other arrears include unrecognized arrears, the total of which will be specified after the audit of arrears, and the clearance in 2018 of CFAF 54 billion of arrears of the then public company Coton Tchad owed to domestic banks.

Bilateral or multilateral loans in CFAF (e.g. BDEAC, loan from Cameroon in 2016).

All debt to BEAC was consolidated and rescheduled in September 2017 into long term securities.

Sources: Chadian authorities; and IMF staff estimates and projections.

Net of cash calls and transportation costs linked to the oil public enterprise (SHT) participation in private oil companies.

includes subsidies to the electricity company starting from 2020.

Includes projects financed by the BDEAC, but the corresponding loans (in CFAF) are counted as domestic financing.

Total revenue, less grants and oil revenue, minus total expenditures, less interest payments and foreign financed investment.

Difference between committed and cash expenditure, and errors and omissions.

Recognized arrears, as registered by the Treasury in the “restes à payer”

Other arrears include unrecognized arrears, the total of which will be specified after the audit of arrears, and the clearance in 2018 of CFAF 54 billion of arrears of the then public company Coton Tchad owed to domestic banks.

Bilateral or multilateral loans in CFAF (e.g. BDEAC, loan from Cameroon in 2016).

All debt to BEAC was consolidated and rescheduled in September 2017 into long term securities.

Table 3.Chad: Fiscal Operations of the Central Government, 2019–21(Percent of non-oil GDP, unless otherwise indicated)
201920202021
Est.5th Rev.RCF-1Proj.RCF-1Proj.
Total revenue and grants17.322.519.521.017.917.6
Revenue15.719.115.215.914.413.5
Oil16.49.76.48.25.25.0
Non-oil9.49.48.87.89.28.5
Tax9.08.78.47.58.88.2
Non-tax0.40.70.40.30.40.3
Grants1.53.44.45.03.54.1
Budget support0.11.22.02.11.11.6
Project grants1.42.22.33.02.42.4
Expenditure18.019.521.022.921.321.4
Current12.513.114.415.314.414.4
Wages and salaries7.06.77.77.77.67.6
Civil Service4.84.75.55.55.55.5
Military2.22.02.22.22.12.1
Goods and services1.61.91.92.12.02.0
Transfers and subsidies22.63.33.74.43.73.7
Interest1.21.11.21.11.11.1
Domestic0.40.50.50.50.40.5
External0.80.70.70.60.70.7
Memo: Glencore loan (after restructuring)0.60.50.50.50.50.5
Investment5.66.46.67.67.07.0
Domestically financed3.02.42.42.72.52.5
Foreign financed32.64.04.24.94.44.4
Overall balance (incl. grants, commitment)-0.83.0-1.5-1.9-3.4-3.8
Non-oil primary balance (excl. grants, commitment)4-4.8-4.9-6.8-9.1-6.6-7.3
Float from previous year5-1.0-1.5-1.7-1.7-1.4-1.4
Float at end of period51.81.51.51.51.61.7
Var. of Arrears6-1.2-0.8-0.9-3.2-0.7-0.7
Repayment of other arrears70.0-0.2-0.20.00.00.0
Overall balance (incl. grants, cash)-1.22.0-2.8-5.3-3.9-4.3
Non-oil primary balance (excl. grants, cash)-5.3-5.9-8.1-12.5-7.1-7.8
Financing1.3-2.0-1.8-1.7-1.8-2.7
Domestic financing0.7-1.4-1.6-1.5-1.2-2.2
Bank financing3.50.30.4-0.1-0.5-0.5
Central Bank (BEAC)3.50.30.4-0.1-0.5-0.5
Deposits2.00.00.00.0-0.4-0.4
Advances (net)0.00.00.00.00.00.0
IMF1.40.40.40.0-0.1-0.1
Commercial banks (deposits)0.00.00.00.00.00.0
Other financing (net)-2.7-1.8-2.0-1.4-0.6-1.7
Privatization and other exceptional receipts0.00.00.00.00.00.0
Foreign financing0.5-0.6-0.1-0.2-0.6-0.4
Loans (net)0.0-1.1-0.6-0.7-1.1-0.9
Disbursements1.41.31.31.11.31.3
Amortization-1.4-2.4-2.0-1.9-2.4-2.2
Debt relief/rescheduling (HIPC)0.50.50.50.50.50.5
External arrears80.00.00.00.00.00.0
Financing gap0.00.04.67.05.77.0
RCF11.31.3
Prospective RCF0.80.0
Prospective financing from World Bank1.20.0
Prospective financing other development partners0.30.0
CCRT0.00.1
DSSI0.10.0
Residual financing gap0.03.33.35.76.9
Memorandum items:
Non-oil GDP5,1305,4665,2065,1945,5175,515
Poverty-reducing social spending4.7
Bank deposits (including BEAC)2.93.82.92.93.23.2
(In months of domestically-financed spending)2.32.92.11.92.22.2
BEAC advances99.48.89.29.28.78.7
Sources: Chadian authorities; and IMF staff estimates and projections.

Net of cash calls and transportation costs linked to the oil public enterprise (SHT) participation in private oil companies.

includes subsidies to the electricity company starting from 2020.

Includes projects financed by the BDEAC, but the corresponding loans (in CFAF) are counted as domestic financing.

Total revenue, less grants and oil revenue, minus total expenditures, less interest payments and foreign financed investment.

Difference between committed and cash expenditure.

Recognized arrears, as registered by the Treasury in the “restes à payer” table.

Other arrears include unrecognized arrears, the total of which will be specified after the audit of arrears, and the clearance in 2018 of CFAF 54 billion of arrears of the then public company Coton Tchad owed to domestic banks.

27 billion in 2016 include arrears to China, cleared through an agreement in April 2017.

All debt to BEAC was consolidated and rescheduled in September 2017 into long term securities.

Sources: Chadian authorities; and IMF staff estimates and projections.

Net of cash calls and transportation costs linked to the oil public enterprise (SHT) participation in private oil companies.

includes subsidies to the electricity company starting from 2020.

Includes projects financed by the BDEAC, but the corresponding loans (in CFAF) are counted as domestic financing.

Total revenue, less grants and oil revenue, minus total expenditures, less interest payments and foreign financed investment.

Difference between committed and cash expenditure.

Recognized arrears, as registered by the Treasury in the “restes à payer” table.

Other arrears include unrecognized arrears, the total of which will be specified after the audit of arrears, and the clearance in 2018 of CFAF 54 billion of arrears of the then public company Coton Tchad owed to domestic banks.

27 billion in 2016 include arrears to China, cleared through an agreement in April 2017.

All debt to BEAC was consolidated and rescheduled in September 2017 into long term securities.

Table 4.Chad: Balance of Payments, 2019–21(In billions of CFAF, unless otherwise indicated)
201920202021
Est.5th Rev.RCF-1Proj.RCF-1Proj.
Current account, excl. budget grants-312-428-800-934-682-767
Trade balance67653325-3246198
Exports, f.o.b.2,0572,1681,3841,4101,7141,699
Of which : oil1,6811,7209921,0161,2851,267
Imports, f.o.b.-1,381-1,635-1,359-1,413-1,468-1,501
Services (net)-1,294-1,327-1,259-1,255-1,330-1,366
Income (net)-170-193-171-170-179-167
Transfers (net)476559606494581569
Official (net)118163200115157182
Private (net)358396406379424386
Financial and capital account296506542546338353
Capital transfers69117117151131131
Foreign direct investment277453278258305310
Other medium and long term investment-35-6710192-59-52
Public sector (excl. budget support loans)-14-58-34-43-59-52
Private sector-21-913513500
Short-term capital-1534545-39-36
Errors and omissions000000
Overall balance-1678-258-389-344-414
Financing-99-124-28-522
Change in official reserves (decrease +)-99-124-28-522
Exceptional Financing282626272627
Debt relief (HIPC)282626272627
Exceptional Financing000000
Other Exceptional Receipt000000
External arrears accumulation000000
Financing gap-87-20-260-366-316-386
Financing gap (percent of GDP)-1.4-0.3-4.3-6.0-4.8-5.9
Expected financing (excl. IMF; incl. expected budget loans and grants)13008707
Budget support loans1300
Program grants (current transfers)0877
World Bank060
Other development partners018
CCRT27
DSSI7
IMF financing, of which74219010900
IMF ECF7421210
IMF RCF-16868
Prospective IMF RCF-240
Residual gap01-170-171-379
Memorandum items:
Current account (incl. expected budget grants; percent of GDP)-4.9-6.2-13.2-14.0-10.4-11.6
Overall Balance of Payment (incl. expected budget support; percent of GDP)0.01.1-4.3-5.0-5.2-6.2
Exports (percent of GDP)32.131.522.823.326.025.9
Of which : oil26.225.016.416.819.519.3
Imports (percent of GDP)-21.6-23.8-22.4-23.3-22.3-22.8
FDI (percent of GDP)4.36.64.64.34.64.7
Gross imputed reserves (billions of USD)0.30.70.40.30.40.3
Sources: Chadian authorities; and IMF staff estimates and projections.
Sources: Chadian authorities; and IMF staff estimates and projections.
Table 5.Chad: Monetary Survey, 2019–21(In billions of CFAF, unless otherwise indicated)
201920202021
Q1Q2Q3Q4
Est.Proj.Proj.
Net foreign assets-135.3-119.3-187.3-223.3-220.9-200.9
Central bank-85.3-89.3-157.3-193.3-190.9-185.9
Foreign assets1190.8188.7192.9194.0193.8191.7
Foreign liabilities-276.1-278.0-350.2-387.3-384.7-377.6
o/w. IMF financing1-232.0-233.8-302.2-342.3-342.3-335.7
Commercial banks-50.0-30.0-30.0-30.0-30.0-15.0
Net domestic assets1243.31202.61251.31307.51323.71361.8
Domestic credit1391.21346.31501.31557.51573.71611.8
Claims on the government (net)1842.6863.5926.9962.0960.4961.5
Treasury (net)812.6833.5896.9932.0930.4916.5
Banking sector812.6833.5896.9932.0930.4916.5
Central bank695.8706.8770.2805.3803.7774.8
Claims on general government744.9746.8815.2855.3855.3848.6
o/w. Advances2479.9479.9479.9479.9479.9479.9
o/w. IMF financing1232.0233.8302.2342.3342.3335.7
Liabilities to general government-49.1-40.0-45.0-50.0-51.6-73.9
Commercial banks116.7126.7126.7126.7126.7141.7
Claims on general government230.0240.0240.0240.0240.0255.0
Liabilities to general government-113.3-113.3-113.3-113.3-113.3-113.3
Other non-treasury30.030.030.030.030.045.0
Credit to the economy633.4482.9574.4595.6613.3650.3
Other items (net)-130.7-143.7-250.0-250.0-250.0-250.0
Money and quasi money1092.11083.31064.01084.21102.81161.0
Currency outside banks496.9492.9476.5485.6501.8528.3
Demand deposits474.4470.6473.5482.5479.1504.4
Time and savings deposits120.7119.8113.9116.1121.9128.4
Memorandum items:
Broad money (annual percentage change)19.71.05.3
Credit to the economy (annual percentage change)1.4-3.26.0
Credit to the economy (percent of GDP)9.910.19.9
Credit to the economy (percent of non-oil GDP)12.311.811.8
Velocity (non-oil GDP)4.74.74.7
Velocity (total GDP)5.95.55.7
Sources: Chadian authorities; and IMF staff estimates and projections.

2018 data does not include December 2018 IMF disbursement which showed up in the Treasury account on February 2019.

Include statutory and exceptional advances.

Sources: Chadian authorities; and IMF staff estimates and projections.

2018 data does not include December 2018 IMF disbursement which showed up in the Treasury account on February 2019.

Include statutory and exceptional advances.

Table 6.Chad: Financial Soundness Indicators, 2011–19
201120122013201420152016201720182019
Capital Adequacy1
Regulatory capital / Risk-weighted assets2, 320.018.122.013.414.713.218.016.86.7
Asset Quality
Non-performing loans / Gross banking loans7.67.49.811.717.020.925.828.622.9
Provisions / Credits in arrears89.064.565.368.358.956.453.556.564.6
Net credits in arrears / Gross banking loans0.82.63.43.77.09.112.012.48.1
Profitability
Return on Assets (ROA)42.62.22.82.11.61.40.61.6
Return on Equity (ROE)19.215.521.119.415.214.65.314.0
Liquidity
Liquid assets / Total assets29.931.828.630.826.023.127.520.226.8
Liquid assets / Short term liabilities149.3146.6139.3152.9142.1155.0188.9117.9124.9
Sources: IMF Financial Soundness Indicators; COBAC.

Starting in 2019, indicators reflect new regulatory capital definition in line with Basel II

Current year profits are excluded from the definition of regulatory capital, following the Basel II capital accord guidelines. General provisions are included in Tier 2 capital up to an amount equal to 1.25% of risk-weighted assets. Regulatory capital is the sum of Tier 1 capital, and the minimum of Tier 1 and Tier 2 capital.

The risk-weighted assets are estimated using the following risk weights: 0% – cash reserves in domestic and foreign currency and claims on the central bank; 100% – all other assets.

The ratio of after-tax profits to the average of beginning and end-period total assets.

Sources: IMF Financial Soundness Indicators; COBAC.

Starting in 2019, indicators reflect new regulatory capital definition in line with Basel II

Current year profits are excluded from the definition of regulatory capital, following the Basel II capital accord guidelines. General provisions are included in Tier 2 capital up to an amount equal to 1.25% of risk-weighted assets. Regulatory capital is the sum of Tier 1 capital, and the minimum of Tier 1 and Tier 2 capital.

The risk-weighted assets are estimated using the following risk weights: 0% – cash reserves in domestic and foreign currency and claims on the central bank; 100% – all other assets.

The ratio of after-tax profits to the average of beginning and end-period total assets.

Table 7.Chad: Indicators of Capacity to Repay the Fund, 2020–34
202020212022202320242025202620272028202920302031203220332034
Fund obligations based on existing credit
(SDR millions)
Principal2.08.117.029.747.762.765.056.145.628.08.40.00.00.00.0
Charges and interest0.00.00.00.00.00.00.00.00.00.00.00.00.00.00.0
Fund obligations based on existing and prospective credit (SDR millions)
Principal2.08.117.029.747.762.774.865.955.437.918.20.00.00.00.0
Charges and interest0.00.00.00.00.00.00.00.00.00.00.00.00.00.00.0
Total obligations based on existing and prospective credit
SDR millions2.08.217.129.747.862.774.865.955.437.918.30.00.00.00.0
CFAF billions1.76.713.924.439.351.761.754.445.731.315.10.00.00.00.0
Percent of exports of goods and services0.10.40.61.01.51.82.01.61.30.90.40.00.00.00.0
Percent of debt service11.75.08.613.520.227.325.420.323.320.513.20.00.00.00.0
Percent of GDP0.00.10.20.30.50.60.70.50.40.30.10.00.00.00.0
Percent of tax revenue0.41.52.64.05.96.97.45.94.52.81.20.00.00.00.0
Percent of quota1.45.812.221.234.144.753.447.039.527.013.00.00.00.00.0
Outstanding IMF credit based on existing and prospective drawings
SDR millions417.3409.2392.2362.5314.8252.1177.4111.556.118.20.00.00.00.00.0
CFAF billions342.3333.5320.3297.1258.8208.0146.392.046.315.00.00.00.00.00.0
Percent of exports of goods and services21.517.714.712.39.87.34.72.81.30.40.00.00.00.00.0
Percent of debt service1358.5249.6197.4164.4133.2109.660.234.423.69.90.00.00.00.00.0
Percent of GDP5.65.14.53.93.12.41.50.90.40.10.00.00.00.00.0
Percent of tax revenue87.973.859.949.338.827.917.610.04.61.30.00.00.00.00.0
Percent of quota297.7291.9279.7258.6224.5179.8126.579.540.013.00.00.00.00.00.0
Net use of IMF credit (SDR millions)131.2-8.1-17.0-29.7-47.7-62.7-74.8-65.9-55.4-37.9-18.20.00.00.00.0
Disbursements133.20.00.00.00.00.00.00.00.00.00.00.00.00.00.0
Repayments and repurchases2.08.117.029.747.762.774.865.955.437.918.20.00.00.00.0
Memorandum items:
Exports of goods and services (CFAF billions)1,5891,8802,1772,4112,6302,8473,1383,3023,4773,6633,7553,7453,7433,7133,708
External Debt service (CFAF billions)195134162181194190243268196152114137167207238
Nominal GDP (CFAF billions)6,0606,5707,1297,6688,2228,8119,47010,09710,76611,48012,16812,89613,69114,50515,372
Tax revenue (CFAF billions)3894525346036677458319241,0171,1181,2291,3381,4581,5881,729
Quota (SDR millions)140.2140.2140.2140.2140.2140.2140.2140.2140.2140.2140.2140.2140.2140.2140.2
Source: IMF staff estimates and projections.

Total external debt service includes IMF repurchases and repayments.

Source: IMF staff estimates and projections.

Total external debt service includes IMF repurchases and repayments.

19. The BEAC has implemented the priority recommendations from the 2017 safeguards assessment. In particular, the BEAC’s secondary legal instruments were aligned with its amended Charter, and the central bank has recently issued its FY 2019 audited financial statements in full compliance with IFRS. Both recommendations mark the conclusion of a multi-year governance-focused reform with support from the Fund.

20. The authorities are cancelling the current ECF and expressed interest in a successor arrangement. The current ECF arrangement was approved on June 30, 2017, with an access level of 160 percent of quota and has one more review before expiration. The cancellation is motivated by the high degree of uncertainty regarding the duration and scale of the pandemic and the associated difficulties in securing timely commitments under the 6th and last review. Additionally, it would also allow Chad to receive 35 percent of quota under RCF-2.7 The authorities also indicated that they intend to request a successor arrangement later this year. Access of 35 percent of quota under the RCF should not trigger high access procedures, which were suspended by the Board at the start of the Pandemic.

21. The risk to the outlook and capacity to repay is to the downside. The outlook is based on the temporary nature of the pandemic with a gradual pickup in global economic activity later this year. The main downside risks include rising insecurity, a further decrease in oil prices, a decrease in oil production should oil prices fall below cost recovery, further deterioration in the banking sector vulnerabilities, and a prolonged Covid-19 outbreak. Upside risks include an increase in international oil prices.

22. The authorities requested debt service suspension under the G20 debt service suspension initiative (DSSI) and debt service relief under the Catastrophe Containment and Relief Trust (CCRT). According to preliminary estimates, the suspension of debt service to Paris Club and G20 creditors could fill about $12 million of the balance of payments financing gap in 2020. Chad has no debt service falling due in the first six months of CCRT access. If access extends to the end of 2020 it could provide $1.6 million, which would contribute to filling the financing gap.

Staff Appraisal

23. The twin Covid-19 pandemic and terms of trade shocks continue to severely impact the Chadian economy. The macroeconomic outlook has further deteriorated, with greater economic contraction and higher balance of payments and budgetary financing needs. The risk to the outlook is tilted to the downside.

24. The authorities’ response to the pandemic remains appropriate. The fiscal loosening in 2020 is adequate, as it provides priority to saving lives and helping those mostly affected by the pandemic. However, once the crisis abates, the authorities should be ready to gradually unwind the temporary emergency measures. Fiscal adjustment will be needed in the medium term, especially since oil prices are expected to remain low, including by allowing temporary expenditure measures to expire. The authorities should strengthen domestic revenue and rationalize spending while protecting poverty reducing expenditure. Public debt vulnerabilities remain high and the authorities should continue to commit to a zero limit on non-concessional borrowing consistent with their commitments under the DSSI and the terms of the World Bank’s Sustainable Development Financing Policy.

25. Staff supports Chad’s request for assistance under the RCF in the amount of SDR 49.07 million (35 percent of quota). Staff support for the RCF is based on the large and urgent balance of payments need which, if not addressed, would result in an immediate and severe economic disruption. Additionally, it would provide a catalytic effect for other external financing. While risks have risen sharply, staff assesses that debt remains sustainable —contingent on identifying sufficient concessional resources to close financing gaps— and Chad’s capacity to repay the Fund remains adequate.

Chad: Recent Economic Developments, 2012–2020

Sources: Chadian authorities; and IMF staff calculations.

1/ Oil revenue is net of operational costs linked to government participation in oil companies, and transportation cost.

Table 8.Chad: Schedule of Disbursements Under ECF Arrangement, 2017–20
Amount (Percent of Quota)Amount (Million SDR)Available DateConditions for Disbursement
25.035.05June 30, 2017Executive Board approval of the three year ECF arrangement
25.035.05August 15, 2017Observance of the performance criteria for June 30, 2017 and completion of the first review under the arrangement
25.035.05April 15, 2018Observance of the performance criteria for December 31, 2017 and completion of the second review under the arrangement
25.035.05October 15, 2018Observance of the performance criteria for June 30, 2018 and completion of the third review under the arrangement
20.028.04April 15, 2019Observance of the performance criteria for December 31, 2018 and completion of the fourth review under the arrangement
20.028.04October 15, 2019Observance of the performance criteria for June 30, 2019 and completion of the fifth review under the arrangement
20.028.04N/A1Observance of the performance criteria for December 31, 2019 and completion of the sixth review under the arrangement
Total160.0224.32
Source: IMF Staff estimates and projections.

The ECF will be cancelled and the final disbursement will not occur

Source: IMF Staff estimates and projections.

The ECF will be cancelled and the final disbursement will not occur

Appendix I. Letter of Intent

N’Djamena, July 15, 2020

Madame Kristalina Georgieva

Managing Director

International Monetary Fund

Washington, DC, USA

Dear Managing Director,

The Chadian authorities are grateful to the International Monetary Fund (IMF) for its continued support under the ECF arrangement and, more recently, under the Rapid Credit Facility (RCF) approved by the IMF Executive Board on April 14, 2020. Early IMF emergency assistance was essential in catalyzing donor support and in providing needed resources for health and economic relief to address the negative impact of the COVID-19 pandemic.

As explained in our Letter of Intent of April 9, 2020, the global impact of the pandemic and the resulting health sector spending has generated substantial balance of payments and budgetary needs. However, these financing needs, previously estimated at CFAF 238 billion (4.6 percent of non-oil GDP), have now increased to CFAF 366 billion (7.0 percent of non-oil GDP). The impact of the crisis on the economic outlook has worsened and, due mainly to the weak health care system, the actual implementation of the COVID-19 contingency plan, including important measures to assist populations and support businesses and agriculture, has proved challenging and costlier than envisaged. This has led to urgent balance of payments needs characterized by a financing gap that, if not addressed, would result in an immediate and severe economic disruption.

To help address the higher financing needs generated by the pandemic, the government requests another disbursement under the RCF, in the amount of SDR 49.07 million, equivalent to 35 percent of quota. At the same time, because of the duration and scale of the pandemic and the technical difficulties to complete the 6th review under the ECF arrangement and to achieve the last disbursement (SDR 28.04 million, 20 percent of quota) in a timely manner, provided that the Executive Board approves this RCF request, we are cancelling the current ECF arrangement, which was to expire at end-September 2020, as of the date of the Board approval of the RCF disbursement. In this context, we intend to request a successor arrangement and initiate discussions with Fund staff in the fall.

The government is implementing the set of measures outlined in the April 2020 Letter of Intent aimed at addressing the economic and health consequences of the COVID-19 crisis. We also undertake, under Decree N°0374 of March 24, 2020 creating a special allocation account entitled “Special Fund for the fight against the Coronavirus” to keep separate accounts for COVID-19 expenses and provide separate reporting for the transparent management and in accordance with the best budget management practices to which we have always adhered. In this context, a trust fund, in the form of a dedicated Treasury account, was established in the local banking system for the mobilization of various financial contributions to the fight of the pandemic. A draft revised budget law, which reflects all health and economic costs resulting from the pandemic, will be submitted before end of July to the National Assembly for adoption. Resources dedicated to the COVID-19 will be used in full transparency. In addition to being reflected in the budget law, they will be committed in line with the CEMAC PFM directives. In particular, emergency spending for urgently needed supplies will be committed according to the provisions of Decree No. 1025/PR/MFB/2020 of May 29, 2020, derogating from public procurement rules concluded in the context of the fight against the coronavirus and subjected to an ex-post compliance audit by a reputable international auditing firm, which will be completed with the support of the Inspectorate of Public Finances within six months of the end of the fiscal year. The audit will also cover all COVID-related expenditures. Auditing reports, also including analysis of compliance with procedures, in particular with regards to regulated agreements, will be published within a month upon completion on the website of the Ministry of Finance and Budget. The full text of procurement contracts, along with the names of the beneficial owners of awarded legal persons, will be published on the website of the Ministry of Finance and Budget within 30 days of the award of any contract concluded under the fight against the coronavirus. Delivery reports for goods and services, including the list of suppliers and contractors, will be published on the website of the Ministry of Finance and Budget within three months of the end of the execution period for each contract.

To avoid any risk of debt distress for Chad, debt management will be strengthened, and external borrowing will continue to be made only on concessional terms. In view of the still volatile external environment, we will undertake fiscal adjustment in the medium term as needed with the objective of meeting the CEMAC convergence criterion and helping safeguard debt sustainability, including by allowing temporary expenditure measures to expire. This year, the requirements in terms of control of the wage bill, with the exception of the recruitment of 1638 new health workers for the Ministry of Public Health in the context of the fight against COVID-19, will continue. Chad requested a grant under the Catastrophe Containment and Relief Trust (CCRT) to cover future debt service to the Fund falling due in 2020/21. Chad has also requested debt service suspension from official bilateral creditors in line with the term sheet in the April 15, 2020 Communiqué of the G20 Finance Ministers and Central Bank Governors. On June 9, 2020, a Memorandum of Understanding was signed with Paris Club creditors. The fiscal space released by that debt service suspension will be spent on mitigating the health, economic and social impacts of the COVID-19 crisis. The use of the generated resources will be monitored and reported to the IMF on a quarterly basis.

The government commits to maintaining excellent relations with the IMF. In this context, we will not introduce any measures or policies that would compound our balance of payment difficulties. To facilitate policy monitoring and assessment, the government undertakes to provide all necessary information to IMF staff on a regular basis and in a timely manner.

We will continue to implement policies that are consistent with maintaining regional external stability. In particular, to help achieve regional NFA objectives, we will continue to support the efforts of the BEAC and COBAC to improve compliance with the new foreign exchange regulations, which requires notably the repatriation of export proceeds, including oil revenues. The BEAC also continues to implement the remaining recommendations of the 2017 safeguards assessment.

In keeping with our longstanding commitment to transparency, the government agrees to the publication of the staff report for the RCF request and this letter of intent on the IMF website.

Very truly yours,

/s/

Tahir Hamid Nguilin

Minister of Finance and Budget

1

As of July 14, the number of confirmed COVID-19 cases reached 884. The country’s testing capacity is limited to 80–100 daily tests conducted by one mobile laboratory serving the whole country.

2

At the time of RCF-1, the initial estimate to contain the pandemic was CFAF 15 billion.

3

At end-2019 the system-wide CAR was already below the current regulatory minimum of 8.0 percent, mainly as a result of the changes in COBAC’s reporting requirements to Basel II standards.

4

The two banks had signed performance contracts with the Ministry of Finance in March, in line with the restructuring and funding plans adopted at end-2019, which were endorsed by the regional authorities. The first regular reports are scheduled for end-September.

5

Total IMF emergency disbursement (RCF-1 and RCF-2) is expected to fill 29.8 percent of the estimated 2020 BOP financing gap.

6

This is just below the normal cumulative access limits under the PRGT of 300 percent of quota.

7

Chad’s outstanding credit to the Fund, which includes the prospective 20 percent of quota disbursement under the 6th and final review under the ECF, is equivalent to 284 percent of quota. By cancelling the ECF, the outstanding credit to the Fund would be 264 percent of quota, thus paving the way for an access of 35 percent of quota under RCF-2.

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