By Staff Report
IMF Staff Monitored Program report
- Chad is a fragile country with weak institutional and policy capacity,
- Chad is facing a trend decline in oil revenues (barring new oil discoveries), and vulnerable to oil price and regional security shocks.
- The country is enjoying its longest period of domestic political stability since independence and has become a beacon of stability in a very volatile region, actively contributing to international efforts to restore order in Mali and the C.A.R..
- Macroeconomic policy over the last few years has achieved a gradual tightening of the underlying fiscal policy stance, despite a sizable increase in public investment.
- A Staff-Monitored Program (SMP) was approved in July, with the aim of sustaining recent improvements in macroeconomic outcomes and supporting the implementation of fiscal structural reforms.
- Discussions focused on two key challenges:
- (i) ensuring fiscal and debt sustainability while implementing development plans;
- (ii) how to diversify the economy and make growth more inclusive.
- Outlook and risks:
- The economic outlook is relatively positive driven by a projected temporary uptick in oil production, with a high risk of debt distress.
- The main sources of risk to the outlook stem from the volatility of fiscal oil revenue and the difficult regional security situation.
- Negative oil price and production shocks would force downward adjustments to public investment plans and reduce the availability of foreign exchange.
- Regional security instability could require continued elevated levels of security spending as well as damaging investor confidence. Recommendations:
- Fiscal policy should remain anchored on a sustained reduction of the non-oil primary deficit, supported by public financial management reforms (to enhance fiscal control and the quality of spending) and sizable increases in non-oil revenue collection to offset the projected exhaustion of oil revenue (through enhancements in both tax policy design and revenue and customs administrations). A more diversified and competitive economy over the medium- and long-terms will require increased efforts to improve the business environment for the private sector, promote agricultural activities, and expand access to basic and financial services.
Please access full text-http://www.imf.org/external/pubs/ft/scr/2014/cr14100.pdf