The Conclusion of an IMF Mission to Chad
An International Monetary Fund (IMF) mission led by Mr. Mauricio Villafuerte visited N’Djamena during December 9 - 19, 2013 to conduct consultations under Article IV of the IMF Articles of Agreement and assess performance under the Staff Monitored Program (SMP) approved last July.
“Macroeconomic developments for 2013 are broadly in line with previous estimates. Real GDP growth is projected at 3.6 percent this year reflecting a return to trend of agricultural production but also a dip in oil production due to unexpected technical problems in mature oil fields and delays in the start of production of new oil fields. As a consequence of the latter fiscal oil revenue were significantly below budget projections, and a projected increase in the overall fiscal deficit to 6.1 percent of non-oil GDP. The average 12-month inflation rate for 2013 is projected at 0.4 percent mainly on account of lower food prices. A recent revision to historical balance of payment figures implies a sizable increase in the external current account deficit, currently projected at 9.4 percent of GDP for 2013. For 2014, real GDP is projected to grow at 10.8 percent in 2014 as new oil fields start production, while inflation is expected to remain close to the CEMAC annual target of 3 percent.
“The Article IV consultation discussions focused on options for diversifying the economy, and making growth more inclusive while ensuring fiscal and debt sustainability.
“Maintaining fiscal space for tackling Chad’s substantial development needs, despite the projected trend decline in oil revenues in the coming years, will hinge on boosting non-oil revenues—low even by regional standards—strengthening fiscal controls, enhancing the public investment process, and prudent public borrowing. The mission noted that tax policy reforms should focus on broadening the non-oil tax base, reviewing tax incentives and exemptions, and simplifying the tax structure. In addition, there is scope for rationalizing the investment program and to rely more heavily on competitive bidding while increasing budgetary allocations for operations and maintenance.
“Discussions on promoting non-oil growth focused on removing capacity bottlenecks and improving the business climate for the private sector. A strict prioritization of reforms, building on Chad’s National Development Plan 2013-15, would be desirable. Promoting improved productivity in agriculture activities could help reduce rural poverty while generating jobs. Promotion of financial development and inclusion was also highlighted as a growth-enhancing strategy given the limited levels of financial deepening in Chad.
“Policy performance under the SMP has been mixed. Most quantitative targets for end-September were met, including the one for the non-oil primary deficit despite spending pressures arising from the difficult regional security situation. However, in the context of a larger overall fiscal deficit and delays in placing domestic debt, the government agreed to a sizable external commercial borrowing operation in the form of oil sales’ advances. In turn, that operation increases financing needs for 2014 and 2015. Against this background, it was agreed that additional actions to ensure a fully financeable budget for 2014 are needed.
“The government continues to make progress with its fiscal reform agenda, which aims at ensuring spending discipline and enhancing non-oil revenue mobilization. The mission welcomed the efforts to adopt the recommendations of recent technical assistance missions by the IMF’s Fiscal Affairs Department, particularly in terms of rationalizing emergency spending procedures and the deployment of payment automation. The authorities expressed their determination to introduce an integrated computerized accounting system in 2014 and will have to step up efforts to introduce a reliable cash management plan.
Source: International Monetary Fund
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