Previous Quarterly Editions
Expropriation Risk: 68 67 68 68 ► Political Violence Risk:68 68 68 68 ►Terrorism Risk:57 55 55 53 ►Exchange Transfer and Trade Sanction Risk: 73 73 73 73 ►Sovereign Default Risk:83 83 83 83 ►
TREND ►
Protest intensity to date* 2022 2023 Low LowUnrest risk in 2024**Cost of living: -Anti-austerity: Medium
Chad’s public debt continues to fall from 55.9% of GDP in 2021 to 44.7% in 2022. The downward trend is expected to continue, dropping to 38.3% in 2023 and 34.3% in 2024. After two years of negotiations, Chad became the first country to reach a debt restructuring agreement in November 2022 with private creditors under the debt reduction program established by the G20 major economies and known as the Common Framework. The agreement included the rescheduling of Chad’s debt until 2024, thereby providing the government a much-needed respite to put its finances in order.
*Note: Protest intensity is calculated based on ACLED. **Risk levels are calculated by WTW. Where data are missing no risk level will be displayed. For details of 'anti-austerity' calculations, see the essays in the introduction; for details of 'cost-of-living' calculations, see the previous edition of the Index.
The country’s finances improved with the budget balance moving from a deficit of 2.4% in 2021 to a surplus of over 0.5% of GDP in 2022, due largely to substantial oil revenue. However, the current account is projected to return to a deficit between 1.2% and 2.3% of GDP in 2023 and between 4.4% and 4.7% in 2024, driven by increased imports of high-cost food products.
Inflation is expected to decrease in 2023 and 2024 but not enough to hit the 3% target set by the six-nation Central African Economic and Monetary Community (CEMAC). The cost of living remains high, with pressing demands on public finances for social spending and investment in local food production.
The tough economic situation amid a tense political climate as well as the humanitarian problems arising from the ongoing civil war in neighboring Sudan will likely force junta leader General Mahamat Deby significantly to relax his austerity measures aimed at cutting costs. Besides, Chad’s positive public debt outlook is at the mercy of oil price volatility as well as domestic political and security shocks to the economy.
Chad’s operating environment is beset with a variety of obstacles, including the common practice of awarding public contracts without competitive bidding; the lack of equality before the courts; breach of contracts; a lax approach to combatting corruption; insufficient skills; and the severe delay in addressing, or the non-settlement of, domestic debt.
Chad’s decision in March 2023 to nationalize all assets belonging to Esso Exploration and Production Chad, a former subsidiary of ExxonMobil, underscores the unpredictability of the country’s operating environment. The nationalization of Esso Chad’s assets, which were bought by U.K.-based Savannah Energy, was carried out despite an arbitration in January 2023 by the International Chamber of Commerce in Paris, in favor of Savannah Energy. The government said its objection to the sale of the oilfield to Savannah and its right of preemption were ignored.
Chad’s expropriation risk will remain high under the military administration, and this risk is likely to affect mainly the energy and telecom sectors, which are vital to public finances. Expropriation in other sectors is likely to be used as a political instrument by the administration to go after individuals or businesses that are perceived to be against the government.
Political tensions are likely to persist in Chad during the transition period, which has been extended to October 2024. In October 2022, the extension provoked a large-scale violent protest in many parts of the country, including N’Djamena, which resulted in the deaths of over 50 people and about 600 arrests. The military administration’s justification of the use of excessive force against protestors was that the event was not a protest but a violent insurrection to overthrow the government. Going forward, the military administration is almost certain to crack down on anti-government elements, adopting a heavy-handed approach.
The coup risk is elevated in Chad. In January 2023, the government reported that it had foiled a coup in December 2022, including the arrest of 11 military officers accused of “attempted destabilization.” Besides, the inclusive national dialogue that followed the Doha peace agreement between the government and some rebels and political groups has not led to peace and reconciliation.
The rebel group FACT (Front for Change and Concord) continues to pursue its armed struggle to unseat Mahamat Deby, who also is no longer seeking to make peace with FACT. In August 2023, FACT announced the end of its unilateral cease-fire in place since 2021, alleging Chadian forces attacked its bases (which are in the north, at the border with Libya). Deby justified the attack against FACT, accusing the group of crossing into Chadian territory.
Chad’s security and humanitarian situations are under pressure as the military battles the escalating jihadist violence in the Sahel and the Lake Chad Basin regions and rebel movements in the north. Chad has had many attacks from the Nigeria-based jihadist groups Boko Haram and its offshoot Islamic State of West Africa Province.
In addition to jihadist attacks, the country faces communal and inter-ethnic tensions, with recurring clashes taking place. These tensions are largely common in Chad’s central, southern and northern regions. Intercommunal violence is increasingly being caused by disputes over water and land resources. The devastating effects of climate change are therefore likely to exacerbate these intercommunal disputes as water resources and arable lands deplete.
The risk of trade sanctions on Chad is low, as the military government has the full backing of Western governments, including the United States and France, the latter being Chad’s former colonial power. As a sign of Chad’s good relations with the West, Deby was the only military leader invited to the United States-Africa summit in Washington, D.C., in December 2022 and the inauguration of the Chadian embassy in Israel in February 2023.
Also, as a CEMAC member, Chad’s foreign reserves are regulated by the bloc’s Bank of Central African States (the French acronym is BEAC). Consequently, exchange transfer risk largely emanates from the monetary policy of the BEAC.
As noted above, Chad’s public debt is expected to decline from 55.9% of GDP in 2021 to 44.7% in 2022, dropping further to 38.3% in 2023 and 34.3% in 2024. According to the International Monetary Fund, high oil prices in 2022 coupled with the lifting of COVID-19 pandemic containment measures have strengthened the external position and gradual post-pandemic recovery of CEMAC countries, including Chad.
The oil windfall also bodes well for public revenue, lowering the risk of a sovereign default. Furthermore, an ongoing United Nations project will help Chad upgrade its debt management system and improve its capacity to record, monitor and report on public finances.
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