Jun 17, 2021 News
After 17 years…
By Kiana Wilburg
Despite being the 10th largest oil producer in Africa, corruption and unimaginable instances of squandermania have left Chad’s economy bursting at the seams with debt.
Today, Chad, a landlocked country in northern Central Africa, has one of the highest levels of hunger in the world. In fact, 66.2 percent of its population totalling15.5 million people live in severe poverty. Most people lack access to even the most basic amenities, including drinking water, sanitation, medical infrastructure and decent housing.
Hit by the perils of the COVID-19 pandemic last year, Chad, which has been an oil producer since 2003, is in desperate need of billions of US dollars in debt relief from its international partners.
It was only last year that the World Bank and the International Monetary Fund (IMF) had urged G20 countries such as China, France, India and Saudi Arabia to establish the Debt Service Suspension Initiative (DSSI). The DSSI is intended to help countries concentrate their resources on fighting the pandemic and safeguarding the livelihoods of millions of the most vulnerable people.
Since it took effect on May 1, 2020, the initiative has delivered more than US$5 billion in relief to more than 40 eligible countries. Chad was one of them.
But that was not enough. It subsequently approached the IMF to approve a four-year economic reform programme supported by an Extended Credit Facility and an Extended Fund Facility, amounting to US$560M. This is still awaiting approval from IMF’s Executive Board.
Then in January, Chad requested that a “common framework” be set up between the Paris Club and the G20 for the treatment of its debt. It was the first country to ever make such a request since the programme was established in 2020 between the G20 – under Saudi chairmanship – and the Paris Club to address the bankruptcy risks facing countries that have been most affected by the economic slowdown of the COVID-19 crisis.
The Creditor Committee for Chad was subsequently formed on April 15, 2021, in application of “Common Framework for Debt Treatments beyond the DSSI.”
Yesterday, the members of the committee noted that a meeting was virtually held on June 10, 2021, in the presence of the IMF staff and the World Bank staff where members examined the macroeconomic and financial situation of Chad.
The creditor committee said it supports Chad’s envisaged IMF upper credit tranche (UCT) programme and its swift adoption by the IMF Executive Board to address Chad’s urgent financing needs. The creditor committee also encouraged Multilateral Development Banks (MDBs) to maximise support for Chad to meet its long-term financial needs.
Consistent with their national laws and internal procedures, the creditor committee members said they are committed to negotiating with the Republic of Chad, terms of restructuring their claims to be finalised in a Memorandum of Understanding (MoU) in accordance with the “Common Framework for Debt Treatments beyond the DSSI.”
Following the statement issued by the creditor committee for Chad, Ms. Kristalina Georgieva, Managing Director of the International Monetary Fund, was keen to note that the work of the committee represents a key milestone on the path to the debt relief that Chad urgently needs, together with envisaged financial support from IMF, the World Bank and other development partners. Georgieva said the committee’s statement also demonstrates concrete progress in implementing the G20’s Common Framework, which sends a positive signal to other countries that may need debt treatments to support a strong and lasting recovery from this unprecedented crisis.
The IMF Head said, “The Creditor Committee’s support for Chad’s envisaged IMF-supported programme, together with its commitment to negotiate debt restructuring terms, accordingly, provides the IMF with official financing assurances.”
She added, “Speedy steps towards debt treatments by Chad’s private creditors, on comparable terms to the debt treatment under the Common Framework, are now essential to pave the way for the IMF Executive Board to consider approval of a Fund-supported programme for Chad.”
The official said that the approval of the programme worth over US$500M by the IMF Executive Board would in turn facilitate much needed financing to help put Chad’s economy on a sustainable path of growth and poverty reduction.
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