OREANDA-NEWS. September 29, 2015. An International Monetary Fund (IMF) mission led by Mauricio Villafuerte visited N’Djamena for the second review of Chad’s financial and economic program supported by the IMF’s Extended Credit Facility (ECF).1 The Executive Board approved the ECF arrangement for Chad on August 1, 2014 (see Press Release No.14/381). The discussion covered the implementation of the program as well as economic and financial developments in 2015, the outlook for 2016, the medium-term outlook, and the policies needed to consolidate macroeconomic stability and foster inclusive growth.

At the conclusion of the mission, Mr. Villafuerte issued the following statement:

“Chad’s overall macroeconomic performance continues to be significantly impacted by the deep decline in oil prices and the deterioration of the security situation, that generates both direct costs from Chad’s key role in maintaining peace and stability in the region, as well as the costs of hosting refugees.

“Against this difficult background, non-oil GDP is expected to contract by 1 percent this year (compared to a 5 percent growth rate recorded in 2014). While the growth in agricultural output remains in line with expectations (around 5 percent), the construction and the services’ sectors will contract, on account of the deterioration of security conditions, the sharp adjustment to fiscal spending, and the accumulation of government domestic payment arrears. In addition, disruptions to cross-border trade flows with Cameroon and Nigeria have led to upward pressures on prices of imported products, with the annual average inflation reaching 4 percent at the end of August, above the 3 percent Central African Economic and Monetary Community convergence criterion.

“Despite the weaker economy, preliminary information suggests that all but one of the program’s quantitative targets for end-June have been met, including the ceiling on the non-oil primary deficit (the fiscal policy’s anchor for public debt sustainability), and the floor for poverty-reducing social spending. However, the targeted non-accumulation of new domestic arrears was missed reflecting lower than expected oil and non-oil fiscal revenue. The structural reform agenda is being implemented as planned. “To tackle the projected revenue shortfalls and allow the repayment of accrued arrears, the authorities have designed a strategy that relies on a combination of additional financing on top of scheduled budget support disbursements from the World Bank, the European Union, and the African Development Bank, and some supplementary expenditure cuts. The authorities continue to be committed to protect priority social spending.

“Successful execution of the 2015 revised budget is also important to ensure a smooth transition to the 2016 budget. Discussions focused on the macroeconomic framework and targets for the draft 2016 budget under preparation, emphasizing the need to rely on prudent and credible assumptions—in particular regarding oil prices—and to allocate sufficient resources for priority areas, while preserving fiscal and external sustainability. Enhanced oil revenue transparency and cash management are key structural reform priorities going forward. The mission will remain in close contact with the authorities in coming weeks to finalize discussions on the policy framework for 2016 that could form the basis for the completion of the second review under the ECF arrangement.

“The mission wishes to express its gratitude to the authorities for their warm hospitality and the frank and constructive discussions.

“The mission met with the Prime Minister Mr. Kalzeub? Payimi Deubet, the Minister of Finance and Budget Mr. Ngarlenan Docdjengar, and other Ministers as well as senior government officials, the private sector, and development partners of Chad.”

1 The Extended Credit Facility (ECF) is the IMF’s main tool for medium-term financial support to low-income countries. It provides for a higher level of access to financing, more concessional terms, enhanced flexibility in program design, and more focused, streamlined conditionality. Financing under ECF currently carries a zero interest rate, with a grace period of 5? years, and a final maturity of 10 years.