Chad secures IMF staff-level deal to support economic reform

0

Ndjamena, Jan. 28, 2021 International Monetary Fund (IMF) staff have completed policy discussions with the authorities in Chad on a new medium-term programme that could be supported by IMF resources of about US$560 million under the Extended Credit Facility (ECF) and the Extended Fund Facility (EFF), it was announced on Thursday.

“Chad continues to face serious challenges from the combined shocks of the Covid-19 pandemic, terms of trade, climate change, and heightened regional insecurity,” said Mr. Edward Gemayel, who led the IMF virtual mission during discussions on financial support to the authorities’ economic reform programme.

According to the IMF, lower oil prices and oil production, and domestic containment measures are weighing on Chad’s outlook, and are causing significant adverse economic and social effects.

In 2020, non-oil activity was expected to contract by 1.7 percent, the banking sector was strained, oil output is estimated to have grown at a subdued pace (2.4 percent), and average annual inflation picked up to 4.5 percent from negative levels in 2019.

Two disbursements under the Rapid Credit Facility (RCF) in April and July 2020 contributed to closing the external financing gap, although substantial fiscal and external financing needs remain over the medium term.

“The authorities’ medium-term programme is centred on ambitious reforms aimed at supporting the post-Covid recovery and poverty reduction, as well as restoring debt sustainability,” Mr. Gemayel remarked at the end of the mission.

“In particular, it includes a set of reforms geared at increasing non-oil revenue, allocating adequate resources to social sectors and public investment, strengthening the banking sector, promoting access to cheaper and green energy, and improving governance, debt transparency, and the business climate.

“The authorities renewed their commitment to these reforms, including during the presidential and legislative electoral period in 2021. They expect that IMF financial support will help catalyze substantial financial support from development partners and debt relief from creditors,” he explained in a statement issued on Thursday.

According to the official, fiscal policy, supported by technical assistance from the IMF and other donors, will aim to restore debt sustainability, support the post-Covid recovery, and build resilience.

In his view, continued mobilization of domestic revenues combined with fiscal discipline should reduce the budget dependence on oil revenues and free up some resources that will be allocated to efficient investment and social spending.

In addition to the fiscal consolidation efforts envisioned under the programme, the Chadian authorities have made an official request to restructure their external debt under the G20 Common Framework for debt restructuring, which will help restore debt sustainability.

The same statement pointed out that Chad’s financial sector reforms will focus on ensuring that the banking sector remains resilient amid the pandemic and is able to finance domestic activities and strengthen financial inclusion in the medium term.

In this context, the continued timely repayment of government debt obligations owed to banks and the clearance of domestic arrears in the context of the government’s arrears clearance strategy will help improve the banking system liquidity position.

Over the medium term, reforms will focus on improving access to financial services and strengthening financial inclusion by encouraging the creation of strong and secure microfinance institutions.

“Reforms to strengthen governance, enhance transparency, and improve the business climate will be central elements of the programme and are essential to promoting economic growth and efficient use of public resources,” Mr. Gemayel said.

He noted that the authorities are committed to strengthening anti-corruption efforts through the implementation of comprehensive asset declaration requirements for public servants and the strengthening of anti-corruption bodies.

Commitments to transparency, including publication of audit reports and the establishment of a requirement to publish procurement contracts, including beneficial ownership of awarded legal entities, will help prevent the misallocation of funds and improve good governance and the quality of government contracting, the statement added.

This site uses Akismet to reduce spam. Learn how your comment data is processed.