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© 2009 International Monetary Fund
February 2009
IMF Country Report No. 09/68
Chad: 2008 Article IV Consultation—Staff Report; Staff Supplement; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for Chad
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2008 Article IV consultation with Chad, the following documents have been released and are included in this package:
The staff report for the 2008 Article IV consultation, prepared by a staff team of the IMF, following discussions that ended on November 19, 2008, with the officials of Chad on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on January 12, 2009. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF.
A staff supplement on the joint IMF/World Bank debt sustainability analysis.
A Public Information Notice (PIN) summarizing the views of the Executive Board as expressed during its January 28, 2009 discussion of the staff report that concluded the Article IV consultation.
A statement by the Executive Director for Chad.
The document listed below has been or will be separately released.
Selected Issues Paper
The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.
Copies of this report are available to the public from
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International Monetary Fund
Washington, D.C.
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INTERNATIONAL MONETARY FUND
CHAD
Staff Report for the 2008 Article IV Consultation
Prepared by the Staff Representatives for the 2008 Consultation with Chad
Approved by Emilio Sacerdoti and Anthony Boote
January 12, 2009
Mission: Discussions were held in N’Djamena during November 6–19, 2008. The staff team comprised Messrs. Singh (head), Melhado and Camara (all AFR), Op de Beke (SPR), and Simone (FAD), and was assisted by Mr. Karangwa (resident representative). The mission met with Prime Minister Abbas, Finance Minister Ngoulou, Economy and Plan Minister Breme, Infrastructure Minister Younousmi, National BEAC Director Ngardoum and other senior officials. It also met with civil society and donor representatives. It overlapped with a World Bank mission conducting a portfolio review and assessing PRSP implementation.
Fund relations: The last Article IV was concluded on December 18, 2006. A PRGF arrangement approved in February 2005 expired in May 2008 after a three-month extension and without any reviews completed. A staff-monitored program negotiated in July 2008 was not approved by management because of fiscal slippages.
Exchange regime: Chad is a member of the Central African Economic and Monetary Community (CEMAC). Chad has accepted the obligations under Article VIII. The regional currency, the CFAF, is pegged to the euro.
Statistical issues: Data provision has serious shortcomings that significantly hamper surveillance. Chad participates in the GDDS.
Contents
Executive Summary
I. Introduction
II. Recent Economic Developments
III. Medium-Term Outlook and Policy Discussions
A. Medium-Term Macroeconomic Framework
B. Fiscal Sustainability
C. The 2009 Budget
D. Oil Revenue Management
E. Structural Reform
F. External Stability and Debt Sustainability
G. Improving Growth Prospects
IV. Program Relations
V. Staff Appraisal
Figures
1. Oil Outlook, 2003-11
2. Recent Economic Developments, 2002-08
Boxes
1. PIH Frameworks and the Sustainable Non-Oil Primary Deficit (NOPD)
2. Real Effective Exchange Rate Assessment
3. Summary Assessment of Financial System Soundness
Tables
1. Selected Economic and Financial Indicators, 2006-12
2. Consolidated Fiscal Operations (in billions of CFA francs), 2006-12
3. Consolidated Fiscal Operations (in percent of non-oil GDP), 2006-12
4. Monetary Survey, 2006-12
5. Balance of Payments, 2006-12
6. Millennium Development Goals
7. Social and Demographic Indicators
Executive Summary
Background and outlook
Economic developments are dominated by the onset of oil production in 2003. After strong oil-driven growth over the first half of the decade, economic activity turned sluggish. Oil production began to decline in 2006. Non-oil growth has been depressed, in part due to security problems. Food price inflation has increased sharply since end-2007. High oil revenues have strengthened the external position but also boosted expenditures—notably security and investments—resulting in large non-oil primary fiscal deficits. Budgetary management is weak and concerns exist over the quality of public spending.
The macroeconomic outlook is fragile although external vulnerabilities appear manageable. Chad is seriously affected by declining oil prices, which will require substantial fiscal adjustment and will lower reserves, albeit not to critical levels. Otherwise, contagion from the global crisis should be contained by the low global integration of Chad’s economy.
Policy discussions
The policy discussions focused on fiscal sustainability and external stability. To ensure fiscal and debt sustainability, the mission recommended a medium-term fiscal adjustment path consistent with a permanent income approach hypothesis. To reverse the rapid increase in non-oil primary fiscal deficits, permanent expenditures should gradually be brought in line with permanent (non-oil) revenues and made consistent with financing constraints. The strategy should be three pronged: raising non-oil revenue collection, strengthening public financial management to restore budget control, and improved efficiency and effectiveness of spending. Staff called for a revised 2009 budget and medium-term fiscal framework to adjust to a more negative oil price outlook. The authorities’ current overly optimistic oil price assumptions and reliance only on lower security spending risked financing problems and costly spending adjustments later on. Structural reforms must be accelerated to improve the prospects for the non-oil sector and reduce the fiscal burden of inefficient public enterprises.
The real effective exchange rate has appreciated since 2000 but there is no strong evidence that it is inconsistent with fundamentals. However, trade performance has been flat over the past decade. Competitiveness is undermined by very high transport and energy costs and a business climate among the weakest in low-income countries.
Fund relations
The authorities are keen on a staff-monitored program (SMP) starting in early 2009. Progress will depend in particular on actions being taken to strengthen fiscal policy and management.
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INTERNATIONAL MONETARY FUND
CHAD
Staff Report for the 2008 Article IV Consultation
Informational Annex
Prepared by the African Department (In Consultation with other Departments)
Approved by Emilio Sacerdoti and Anthony Boote
January 12, 2009
Relations with the Fund. Describes financial and technical assistance by the IMF and provides information on the safeguards assessment and exchange system.
Joint Management Action Plan (JMAP). Describes the priorities and main activities of the World Bank Group and areas of cooperation in their work with the Chadian authorities.
Statistical issues. Assesses the quality of statistical data. Data provision have serious shortcomings that significantly hamper surveillance.
Contents
I. Relations with the Fund”
II. The JMAP Bank–Fund Matrix
III. Statistical Issues
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INTERNATIONAL DEVELOPMENT ASSOCIATION AND
INTERNATIONAL MONETARY FUND
CHAD
Joint Fund-Bank Debt Sustainability Analysis Under the Debt Sustainability Framework for Low-Income Countries
Prepared by the staffs of the International Development Association and the International Monetary Fund
Approved by Sudhir Shetty and Carlos Alberto Braga (IDA) and Anthony Boote and Emilio Sacerdoti (IMF)
January 13, 2009
Based on the external Low-Income Country (LIC) Debt Sustainability Analysis (DSA), Chad’s risk of debt distress is moderate although subject to important risks in the external environment and the conduct of economic policy. The inclusion of domestic debt does not alter the assessment of Chad’s risk of debt distress.1
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Public Information Notice (PIN) No. 09/11
FOR IMMEDIATE RELEASE
January 30, 2009
International Monetary Fund
700 19th Street, NW
Washington, D. C. 20431 USA
On January 28, 2009, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Chad.1
