N’DJAMENA, September 30, 2020 — Two new reports published by the World Bank analyze the impact of the coronavirus pandemic (COVID-19) on Chad’s economic outlook and the fiscal space that the government could use to effectively address this crisis.
“These reports are intended to better inform the decisions of policy makers who are waging a difficult battle against the economic and financial effects of the COVID-19 pandemic,” said Rasit Pertev, World Bank Country Manager for Chad. “In a challenging budget environment that is making trade-offs difficult, the government must maintain macroeconomic balance while taking the needs of the social sectors into account in order to safeguard the well-being of the poorest and vulnerable citizens.”
According to the first report, Chad: Economic and Poverty Update Under COVID-19, the pandemic has clouded the macroeconomic outlook for Chad for the next two years. Even if the number of confirmed cases remains fairly low, the economic fallout of the pandemic is expected to trigger a recession in 2020. The oil sector, which accounts for roughly 90% of Chad’s exports and 40% of government revenue, has been severely impacted. Lower exports, reduced foreign direct investment inflows, border closures, and social distancing measures are expected to cause a 0.2% contraction in the economy (compared to the pre-pandemic projected growth rate of 4.8%), which in turn is expected to widen the current account deficit in the balance of payments, reduce fiscal revenue and public spending, and increase arrears accumulation. These figures, which were produced in May 2020, will be updated in the coming weeks during the Annual Meetings of the World Bank and the International Monetary Fund that will be held virtually from October 12-18, 2020.
The study also warns of the fragility of the socioeconomic context: regional conflicts and prolonged border closures could exacerbate the situation and have a severe impact on the poorest and vulnerable population groups. The study notes that while poverty has fallen over the past 15 years, it remains particularly high, with 42.3% of the population living below the national poverty line in 2019 (about 6.5 million people).
To mitigate the negative impacts of the global pandemic in Chad, the authorities announced major economic and social support measures. Fulbert Tchana Tchana, World Bank Senior Economist for Chad and coordinator of the study, noted that “the authorities have the difficult task of providing ongoing support for the hardest-hit vulnerable households and private businesses while continuing to invest in key sectors and infrastructure to prepare for the future.”
The second report titled Tchad 2019: Analyse de la dépense publique, marge budgétaire pour des dépenses productives dans les secteurs sociaux (Chad 2019: An Analysis of Public Expenditure, Fiscal Space for Productive Spending in Social Sectors) raises concerns about weak social spending in the country and underscores the need to invest in human capital to improve social and human development indicators. According to the report, public spending on education and health is extremely low and inefficient. Between 2013 and 2018, the share of public spending on education fell from 3.2% to 2.2% of GDP. In 2018, health expenditure accounted for 3.3% of all government spending, more than 10 percentage points below the target rate of 15% pledged by African Union countries. In fact, Chad has the lowest human capital index score in the world (0.29). The report’s authors believe that the Chadian authorities should step up their efforts to facilitate a sustainable shift in their fiscal policy in order to achieve the objectives of the National Development Plan.
