The International Monetary Fund (IMF) has agreed to provide Chad with $560 million to support its economy under the extended credit facility and extended fund facility, pending a final approval.
The financing will support Chad’s economic recovery at a time the Central African country is battling the effects of the COVID-19 pandemic and heightened terrorism in the region.
Although Chad is one of the less affected countries in the continent, the drop in global crude oil price has further plummeted its oil-dependent economy.
“Lower oil prices and oil production, and domestic containment measures are weighing on the outlook, and are causing significant adverse economic and social effects,” IMF found, stressing that in 2020, “oil output is estimated to have grown at a subdued pace (2.4%)” while non-oil activity is expected to shrink by 1.7%.
Overall, IMF projects the country’s growth at -0.7% for 2020.
The Washington-based lender approved nearly $130 million last year to help Chad meet its urgent balance of payment needs. This time, the disbursement will be followed by a series of reforms set to be deployed over four years at least.
IMF has also signaled to Chad’s government to “urgently diversify the country’s sources of income and reduce poverty and public debt.”
“The authorities’ medium-term program […] 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 institution said.
IMF suggests “fiscal discipline,” especially as the 2021 state budget provides for many incentive measures.
In 2017, President Idriss Déby’s government obtained $312 million in financing from the IMF to support its stabilization and recovery strategy. Although the lender considered the reforms implemented at that time satisfactory overall, it said they did not enable the country to achieve its goals.
According to the World Bank, the number of poor people in the country increased from 4.7 million in 2011 to about 6.5 million in 2019. In 2018, 42% of the population lived below the national poverty line, a figure that is expected to increase due to the pandemic