I am saddened by the news about President Idriss Déby‘s passing. My deepest condolences to the Chadian people on the loss of a leader who has devoted his life to his country and to the security of the Sahel region. pic.twitter.com/4wtws85QqH
— Kristalina Georgieva (@KGeorgieva) April 21, 2021
“The death of Chad’s President Idriss Déby is likely to trigger political instability in the key oil-producing country and the wider central African region, with a potential impact on its oil sector,” said the S&P Global rating agency the day after the death of the head of state, who had just been elected to a sixth presidential term, was announced.
It is important to note that the fight against terrorism (Boko Haram, Islamic State) and rebellions (notably led by Conseil de Commandement Militaire pour le Salut de la République and the Front pour l’Alternance et la Concorde au Tchad – FACT) has been weighing heavily on an economy worth barely $12.5bn.
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With 1.5 billion barrels of proven oil reserves and an output of about 140,000 b/d, Chad is Africa’s 10th largest oil producer. Black gold accounts for 90% of its exports, about 40% of government revenues and 20% of GDP.
The agricultural sector (cereals, gum arabic, cotton and livestock) and the tertiary industry (banks, trade, telecoms, etc.) represent about 40% of the economy.
Even before the upheaval that the country is now facing, Chad was already in debt, notably to the trader Glencore for prepayments for its future oil production, which is facing an acute liquidity crisis despite having a reasonable debt ratio of 42% of GDP.
This stranglehold on public finances, aggravated by the Covid-19 pandemic, prompted the country to ask, at the end of January, if it could benefit from the new debt restructuring framework put in place in November 2020 by the G20. This framework encourages private creditors – including Glencore – to commit themselves to at least as much as public lenders.
At the same time, the IMF and N’Djamena reached an agreement under the Extended Credit Facility and the Extended Fund Facility of $560m over four years.
“The authorities’ medium-term plan is focused on introducing ambitious reforms to support post-crisis recovery and poverty reduction, as well as restoring debt sustainability,” said the institution, which in April (before Itno’s death was announced) had revised the country’s growth forecasts for this year, bringing them down to 2.1%, compared to an expected rate of 6.1% six months earlier.
Trade deficit and dry foreign exchange reserves
The IMF rarely makes public statements regarding political transitions in its countries of intervention. And it is not yet known when the $560m package, which was promised at the beginning of the year, will be disbursed.
But there is no doubt that the new Chadian authorities will have to rely on the Fund’s support, both in terms of the budget and to strengthen the country’s foreign exchange reserves. All the more so since the World Bank warned a few months ago that “persistent regional insecurity could disrupt bilateral trade and put pressure on public finances.”
According to projections, the Chadian government’s revenues were expected to fall by 10% to 747bn CFA francs compared to the previous year, while expenditures rose by 10.5% to 1,177bn CFA francs.
To make matters worse, the country’s trade balance (exchange of goods) deteriorated in 2020, going from a surplus of 676bn CFA francs to a deficit of 3bn CFA francs according to the Fund’s projections, which a few months ago anticipated a “rebound” to 198bn CFA francs in 2021. Furthermore, the country’s foreign exchange reserves have reached a plateau of $300m, far from the $1.1bn anticipated before the oil crisis.
Under the auspices of the IMF, Chad has committed to improving the climate and strengthening the banking sector, ensuring transparency – particularly in the awarding of public contracts – and good governance (fighting corruption, declaring assets, etc.).
In a message published on 21 April, Kristalina Georgieva, the head of the IMF, expressed her condolences to the Chadian people and paid homage to the memory of “a leader who has devoted his life to his country and to the security of the Sahel region.”
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