the country’s economic and financial situation has deteriorated in 2021 (IMF)

the country’s economic and financial situation has deteriorated in 2021 (IMF)
Written by on100dayloans

(Ecofin Agency) – Chad has seen its economy decline due to “lasting shocks since the start of covid-19”, according to the IMF. In order to revive the economy, the authorities have had recourse to the Fund, within the framework of the ECF whose approval was obtained last December.

According to the International Monetary Fund (IMF), Chad’s economic and financial situation has deteriorated in 2021. The information comes from a press release from the international institution published on Wednesday March 30, following of the 15-day visit of one of its delegations to the country.

This situation is due to a decline in oil production and low rainfall which has led to a drop in agricultural production. The effect was to cause inflation to rise.

Overall, real GDP contracted by 0.3%, driven by a 3% reduction in oil production. While average annual inflation was limited to -0.8% in 2021, the poor 2021/22 harvest fueled inflationary pressures, with food prices rising 6% year-on-year in January. These pressures are expected to be compounded by the war in Ukraine “, says the briefing note.

N’Djamena, which is involved in an IMF program which should lead to financing of more than 570 million dollars, has only given satisfaction to the financial institution on ” two of the three quantitative performance criteria, end-December 2021 “. The IMF points out that Chad has spent more than planned on “ military equipment and payroll “. It has nevertheless recorded progress in the implementation of certain structural reforms. The institution recognizes that two structural benchmarks have been met, and that the reforms covered by the other three should be finalized in the coming weeks “.

For this year, the IMF forecasts a revival of the economy which should reach 2.3% growth. It will be driven by a recovery in oil and non-oil production. However, risks such as a possible resurgence of covid-19 and further delays in vaccination, security concerns, risks of refinancing of domestic debt and possible delays in the implementation of reforms could prevent the achievement of these goals.

The IMF has called for two measures to strengthen public finances. It is about stepping up efforts to “increase domestic revenue mobilization “and to use the additional oil revenues” to replenish liquidity reserves, and reduce the government’s reliance on domestic borrowing from a constrained banking system “.

In order to strengthen public finance management and domestic revenue mobilization, improve governance and transparency, and the business environment, the financial body has proposed additional structural reforms to be implemented during the period 2022- 23.

As a reminder, between 2011 and 2018, Chad succeeded in reducing the poverty rate by 5% to reach 42%, according to the World Bank. Unfortunately, the advent of the pandemic has slowed this progress. Indeed, due to covid-19, N’Djamena has experienced a recession and hundreds of thousands of Chadians have fallen into extreme poverty. In a report dated October 2021, the Bank estimates that 75% of Chadians live in a situation of extreme food insecurity.

Jean-Marc Gogbeu

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