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INTERNATIONAL MONETARY FUND
IMF Country Report No. 18/260
CHAD
SECOND REVIEW OF THE PROGRAM UNDER THE EXTENDED CREDIT FACILITY, REQUEST FOR WAIVERS OF NONOBSERVANCE OF PERFORMANCE CRITERIA, AND FINANCING ASSURANCES REVIEW—PRESS RELEASE; STAFF REPORT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR CHAD
August 2018
In the context of the Second Review of the Program Under the Extended Credit Facility, Request for Waivers of Nonobservance of Performance Criteria, And Financing Assurances review, the following documents have been released and are included in this package:
A Press Release including a statement by the Chair of the Executive Board.
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on July 27, 2018, following discussions that ended on May 13, 2018, with the officials of Chad on economic developments and policies underpinning the IMF arrangement under the Extended Credit Facility. Based on information available at the time of these discussions, the staff report was completed on July 16, 2018.
A Debt Sustainability Analysis prepared by the staffs of the IMF and the International Development Association (IDA).
A Staff Supplement updating information on recent developments.
A Statement by the Executive Director for Chad.
The documents listed below have been or will be separately released:
Letter of Intent sent to the IMF by the authorities of Chad*
Memorandum of Economic and Financial Policies by the authorities of Chad*
Technical Memorandum of Understanding*
*Also included in Staff Report
The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
© 2018 International Monetary Fund
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Front Matter Page
INTERNATIONAL MONETARY FUND
CHAD
SECOND REVIEW OF THE PROGRAM UNDER THE EXTENDED CREDIT FACILITY, REQUEST FOR WAIVERS OF NONOBSERVANCE OF PERFORMANCE CRITERIA, AND FINANCING ASSURANCES REVIEW
July 16, 2018
EXECUTIVE SUMMARY
Context. The current ECF arrangement (access of 160 percent of quota or SDR 224.32 million) was approved on June 30, 2017 in the context of a very difficult and deteriorating social, economic, and financial situation. The crisis was precipitated by the oil price and security shocks that began in 2014, and the heavy burden of external commercial debt. An agreement in principle to restructure the Glencore debt was reached in February 2018, which paved the way for the completion of the first review in April 2018. Chad’s stability is key for the regional security situation given its regional peace-keeping efforts.
Program. All but one performance criterion (PC) for end-December 2017 were met, as were all structural benchmarks (SBs). Most indicative targets (ITs) for end-March 2018 were also met. The continuous PC on the non-accumulation of external arrears was missed. The authorities are requesting waivers for the two missed PCs. The final agreement to restructure the Glencore debt was signed in June (prior action); it is in line with the program and will restore debt sustainability and generate sufficient financing for the program. The program is supported by union-level efforts to maintain an appropriate monetary policy stance, build up regional reserves, and promote financial sector stability.
Staff views. Staff support the completion of the second review under the ECF, and the waivers of non-observance of the two PCs. Completion of the second review will result in the disbursement of SDR 35.05 million. The Fund arrangement remains instrumental to catalyze donor support to address Chad’s protracted balance of payment needs. Downside risks to the program include large resort to nonconcessional financing, overshooting in the wage bill, further deterioration in the liquidity position of banks, a significant drop in oil price, and a worsening of the security situation.
Approved By
David Owen and Yan Sun
Discussions took place in N’Djamena (May 5-13, 2018) and through video conferences afterward. The staff team comprised Mr. Bakhache (head), Messrs. Ben Hassine and Delepierre (all AFR), Mr. Greenidge (SPR), Mr. Nachega (Resident Representative) and Mr. Topeur (local economist). Mr. Bangrim Kibassim (Advisor to the Executive Director) participated in the video conferences. Meetings were held with the Minister of Finance and Budget, Minister of Economy and Development, Minister of Justice, National Director of the BEAC, Director General of the oil public enterprise (SHT), staff of the BEAC headquarters, representatives of the banking sector, and representatives of international development partners. Ms. Ibrahim and Ms. Canales supported the preparation of the staff report.
CONTENTS
BACKGROUND
RECENT DEVELOPMENTS
PROGRAM PERFORMANCE
POLICY DISCUSSIONS
A. Medium-Term Macroeconomic Framework
B. Fiscal Policy for the Remainder of 2018 and the Medium Term
C. Tax and Customs Reforms
D. Banking Sector
E. Public Financial Management and Other Structural Reforms
F. Financing, Program Modalities, and Risks
STAFF APPRAISAL
TABLES
1. Selected Economic and Financial Indicators, 2015–21
2. Fiscal Operations of the Central Government, 2015-21 (in billions of CFAF, unless otherwise indicated)
3. Fiscal Operations of the Central Government, 2015-21 (in percent of non-oil GDP, unless otherwise indicated)
4. Balance of Payments, 2016-21
5. Monetary Survey, 2015-21
6. Financial Soundness Indicators, 2011–17
7. Performance Criteria and Indicative Targets up to End-March 2018
8. Prior Action and Structural Benchmarks for the Program Under the ECF Arrangement – Status as of end-June 2018 and Proposed New Benchmarks
9. Summary Table of Projected External Borrowing Program
10. Schedule of Disbursements Under the ECF Arrangement
11. Indicators of Capacity to Repay the IMF, 2018–32
APPENDIX
I. Letter of Intent
Attachment I. Memorandum of Economic and Financial Policies
Attachment II. Technical Memorandum of Understanding
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INTERNATIONAL MONETARY FUND
CHAD
July 16, 2018
Second Review of the Program Under the Extended Credit Facility, Request For Waivers Of Nonobservance Of Performance Criteria, And Financing Assurances Review—Debt Sustainability Analysis
Approved By
David Owen and Yan Sun (IMF) and Paloma Anos-Casero (IDA)
Prepared by the staffs of the International Monetary Fund and the International Development Association
Following the restructuring of the debt to Glencore and the progress made in clearing external arrears, debt vulnerabilities declined significantly and the external risk rating has been upgraded to high. The Debt Sustainability Analysis1 (DSA) shows that all debt burden indicators, except the debt-service-to-revenue ratio which has minor and temporary breaches, are below their respective thresholds in the baseline from 2018 onwards. The debt-service-to-revenue ratio, falls below the threshold in 2019 and remains so throughout the projection period, except for minor breaches in 2020 and 2021. Overall, total public debt vulnerabilities are elevated although the present value (PV) of the public debt-to-GDP ratio remains on a downward trajectory. The fixed primary balance scenario, which keeps the primary deficit-to-GDP ratio unchanged from 2017, shows the debt ratio declining at a slower pace throughout the forecast period, further highlighting the need to adhere to the prudent fiscal policy framework underpinning the IMF-supported program. Adoption and implementation of an appropriate debt management strategy, while making progress in economic diversification would further reduce vulnerabilities.
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INTERNATIONAL MONETARY FUND
CHAD
July 25, 2018
SECOND REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT, REQUEST FOR WAIVERS OF NONOBSERVANCE OF PERFORMANCE CRITERIA, AND FINANCING ASSURANCES REVIEW — SUPPLEMENTARY INFORMATION, AND SUPPLEMENTARY LETTER OF INTENT
Approved By
Dominique Desruelle and Yan Sun
Prepared by the African Department in consultation with SPR and LEG
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Press Release No. 18/317
FOR IMMEDIATE RELEASE
July 27, 2018
International Monetary Fund
Washington, D.C. 20431 USA
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July 27, 2018
