Previous Quarterly Editions
Expropriation Risk: 63 63 63 64 Political Violence Risk: 66 66 66 67 Terrorism Risk: 55 55 55 55 Exchange Transfer and Trade Sanction Risk: 73 73 73 73 Sovereign Default Risk: 83 83 83 83
TREND ►
President Idriss Déby Itno died of his wounds on April 20, 2021, in fighting between Chadian forces and rebels of the Front for Alternation and Concord in Chad (FACT) in the Kanem region, according to Chad’s national television. Following Déby’s death, the military has dissolved his government and the National Assembly and has put in place a transition military council, headed by Déby’s 37-year-old son Mahamat Idriss Déby, for an 18-month period to elect a new President and return to constitutional rule.
Mahamat is a military general. He will not be short of handlers in running the transition council, given that Déby’s government is replete with clan and family members. Mahamat is much respected by the senior and middle-level military officers. However, there are elements within the army that oppose having another Déby in power. This raises the risk of a countercoup or fracturing of the military.
Domestic politics aside, last year Chad suffered its heaviest loss to Nigeria-based Islamist militants while at the same time contending with growing discontent at home from diverse interest groups and pressing humanitarian needs across the country.
Chad is dependent on oil, which accounts for 89% of its exports. When crude prices collapsed, the country came close to bankruptcy in 2016 and 2017. However, four years of austerity measures have paid off. Public debt is expected to fall from 48.2% of gross domestic product (GDP) in 2018 to 37% in 2021. Finance Minister Tahir Hamid Nguilin announced on January 27, 2021, a new USD560mn, four-year economic reform programme from the International Monetary Fund (IMF), which is subject to board approval and the further restructuring of Chad’s debt.
However, with a military junta governing, it is almost certain that the IMF will put on hold the new programme. Any financial squeeze would limit the junta’s ability to meet striking workers’ demands and contain any simmering discontent within the army.
TREND ▲
Chad’s Chamber of Commerce, Industry, Agriculture, Mines and Handicrafts published in October 2018 a report on the ease of doing business in the country, identifying a litany of obstacles to private sector development. The obstacles include common practice of awarding public contracts without competitive bidding; lack of equality before the courts; breach of contracts; a lax approach to combatting corruption; insufficient skills and instability in the administration; and severe delay or non-settlement of domestic debt.
The heavy bureaucracy around public procurement often leads to severe delay to implementation of projects and payments to contractors. One example of bureaucratic hindrance is a provision in the national public procurement code that requires the office of the President to give its approval for any expenditure exceeding about USD16,000.
To limit public spending and boost revenue, particularly by reducing exemptions and broadening the tax base, the military government is likely to maintain Déby’s policy of mandating 84 public and private companies since September 1, 2019 to withhold value-added tax at source, which the state has so far struggled to collect.
Constitutionally, the head of the National Assembly succeeds the President in case of death or incapacitation. However, the military moved quickly to stage a coup and set up their regime headed by Mahamat, who is likely to struggle to establish his father’s stranglehold on power. The military government is likely to use Déby’s network of family and clan members from the Zaghawa ethnic group from which he hails.
Chadian politics remain stagnant amid the late Déby’s continued dominance; he had overcome several rebellions in recent years from members of his own ethnic group and nephews. However, Déby succumbed to the latest attack by the Libya-based rebel group FACT, led by Mahamat Mahdi Ali - this unexpected victory will spur other rebel groups to intensify their campaign to remove the military junta from power.
The junta will face domestic resistance from political leaders and civil activists who will be against another Déby at Chad’s helm. This raises the risk of recurring street protests in N’Djamena and escalation of attacks by rebel groups in the north.
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 region. Pre-election, insecurity will continue in different parts of the country. The situation appears bad in Lac (Lake) Region, in the Lake Chad Basin, where Boko Haram and its offshoot Islamic State of West Africa Province (ISWAP) operate.
Chad has had many attacks from Boko Haram and ISWAP. In April 2020, Chadian authorities claimed the country’s army had killed 1,000 Boko Haram fighters in “Operation Bohoma Anger”, after provocative insurgent attacks. Yet the deterrent effects on Boko Haram and ISWAP appear to have been limited. In January 2021 alone, an estimated 10,000 residents have been displaced in Lac Region due to attacks.
Violence in the Central African Republic and Sudan also sends refugees fleeing into Chad. The challenges of internally displaced persons (estimated at 236,000 even before the most recent displacements) and refugees (estimated at 473,000) are compounded by food insecurity and other humanitarian needs.
Chad is a member of the Central African Economic and Monetary Community (CEMAC), a regional bloc that also includes Cameroon, the Central African Republic, Equatorial Guinea, Gabon, and the Republic of the Congo. The foreign reserves at the bloc’s Bank of Central African States (BEAC) have improved from as low as about USD4.5bn in April 2017, which was less than two months of import cover, to 7.5 months of imports cover at the end of 2020, following the introduction of a new foreign currency exchange regulation in March 2019.
The new regulation requires that companies seek BEAC’s authorisation before opening offshore current accounts. Additionally, every two years they must renew their permission to maintain foreign currency accounts in the CEMAC region. The new regulation has increased the window from 30 days to within 150 days for repatriating export proceeds that fall above 5 million Central African francs (USD9,203) into a certified commercial bank.
However, resident companies operating in mining and hydrocarbons are exempt from the new regulation. An initial compliance deadline of December 31, 2020 has been extended to December 31, 2021, given COVID-19’s disruptive effects. The regulation will affect commercial transactions and raises various risks including around onshore bank credit, exchange rates, and currency convertibility and transferability.
Chad’s public debt of 42% of GDP falls well below the 70% ceiling that CEMAC stipulates. The public debt is expected to fall further to 37% in 2021 due to the ongoing austerity measures, public finances reform and restructuring of outstanding debt. The plans from IMF, which offer around USD560mn in new loans, will inject much-needed money into public coffers. Chad’s government has made a payment of 110bn Central African francs (USD202mn) out of the estimated 1,000bn owed to private companies. Payment delay to suppliers is likely to remain a recurring issue.
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