- Economic activity continues to be affected by the decline in oil prices and regional security challenges
- IMF staff and the government agreed on the need to move away from the reliance on oil and diversify the economy
- Non-oil output contracted significantly for a second year in a row and inflation was negative in 2016
An International Monetary Fund (IMF) staff team led by Said Bakhache visited N’Djamena during March 22–April 4, 2017 to assess recent economic developments in Chad and performance under the current financial and economic program supported by the IMF’s Extended Credit Facility (ECF) approved in August 2014. Discussions were also held on the government’s interest in a new program.
At the conclusion of the mission, Mr. Bakhache issued the following statement:
Non-oil output contracted significantly for a second year in a row and inflation was negative in 2016
“Economic activity continues to be strongly affected by two external shocks: the sharp and persistent decline in oil prices and regional security challenges. These, together with high external debt service burden from commercial debt, have put significant strains on budgetary resources. Sharp reduction in government expenditures, together with significant investment cuts and layoffs by oil companies, has had strong spillover on the rest of the economy. Non-oil output contracted significantly for a second year in a row and inflation was negative last year.
“The banking system has been adversely affected by the slowdown of activity and buildup of government arrears to private contractors, and has limited capacity to provide new financing to the government. A comprehensive stabilization and reform strategy, with support from both internal and external stakeholders, is urgently needed to turnaround the economy. Against this backdrop, the government expressed interest to replace the existing ECF arrangement with a new program.
“Discussions with the authorities focused on policies to revive the economy in a sustainable way. The mission and the government reviewed the fiscal outcome for 2016 and early 2017 in light of recent developments. For the period ahead. the mission underscored the importance of better mobilizing non-oil revenues, keeping spending in line with budgetary resources while safeguarding social spending and boosting public investment over the medium term. The staff team noted that maintaining external debt sustainability, including by keeping debt service manageable, is essential to maintain economic stability. IMF staff stressed the need for a transparent and predictable framework for domestic arrears clearance based on the outcome of an audit of all domestic arrears and a plan that could be executed within budgetary means. This would be important to help revitalize private sector activity and improve conditions in the banking sector. In addition, discussions were also held on the government’s plans for greater transparency in oil sector, improving public financial management and budget execution.
“The government and IMF staff agreed that there is a need to move away from the reliance on oil and diversify economic activity. To this end, the staff discussed the government’s plans for diversification, including plans to improve the business climate and competitiveness, which would support sustainable and inclusive growth and job creation.
“Significant progress was made on the discussions towards a new IMF program. Discussions will continue in the coming weeks including at the IMF and World Bank Spring Meetings in Washington D.C.
“The IMF staff team met with the Prime Minister, the Minister of Finance and Budget, the Minister of Economy and Planning, the National Director of BEAC for Chad, and other ministers, as well as senior government officials, representatives of the private sector, civil society and labor unions, and technical and financial partners of Chad.
“IMF staff express their gratitude to the authorities for their warm reception and the open and constructive discussions.”
Source: International Monetary Fund (IMF).