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Expropriation Risk: 66 65 65 66 ► Political Violence Risk:68 68 68 68 ►Terrorism Risk:55 55 57 57 ▲Exchange Transfer and Trade Sanction Risk: 73 64 64 73 ▲Sovereign Default Risk:83 75 75 83 ▲
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Geopolitical alignmentEast 1 2 3 4 5 West
Alignment five years agoEast 1 2 3 4 5 West
Degree of contestationSettled 1 2 3 Contested
Chad remains a key ally and partner of France in the fight against jihadist groups in the Sahel. President Emmanuel Macron of France is backing Chad’s military government led by President Mahamat Deby Itno, the son of the late President Idriss Deby Itno, who died in April 2021 of his injuries sustained in a firefight with a rebel group, the Front for Alternation and Concord in Chad (FACT).
Shortly after Mahamat took over, he made an official visit to Paris to meet Macron, to discuss several issues including financial aid. Pro-democracy groups condemned the visit, accusing Paris of endorsing the military coup in Chad. Among the coup leaders in France’s former colonies, the Chadian president was the only one invited to Paris, which indicates the level of French interests in supporting the Deby administration.
Unlike Russia, which has virtually no presence in Chad, China has made some inroads through trade and the provision of loans, especially to the previous administration. Even so, China does not have significant leverage in the country. Under the Deby administration, Chad is almost certain to remain in the sphere of France’s influence as the country remains a vital partner to France’s counterterrorism strategy and operations in the Sahel.
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In principle, businesses are protected from nationalisation and expropriation by law. However, the military is ruling by decree and the constitution has been suspended, with the junta having the power to nationalise and expropriate at will. In practice, however, the junta is unlikely to target international companies because it nonetheless still seeks international recognition and legitimacy. Therefore, any confiscation of private and business assets is likely to be politically motivated if it happens, targeting those opposed to the government.
Since the publication of a report on the ease of doing business in Chad in 2018 by the Chamber of Commerce, Industry, Agriculture, Mines and Handicrafts, the country’s operating environment has not significantly improved. The 2018 report identified several obstacles to private sector development. These obstacles include 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 severe the delay in addressing, or the non-settlement of, domestic debt.
In August 2022, the president signed a peace agreement with rebel and political groups in Qatar’s capital, Doha. However, some prominent rebel groups such as FACT, refused to sign the agreement. FACT accused the government of failing to meet its demands, including the release of about 400 fighters from prisons. Alongside FACT, the Military Command Council for the Salvation of the Republic, another formidable rebel group, also refused to sign, underscoring the challenges the government faces in fostering durable peace and security in Chad.
The Doha peace agreement paved the way for a national dialogue that started in the Chadian capital, N’Djamena, to promote peace and lay the foundation for a new constitution to return the country to democratic rule. The dialogue has got off to a difficult start with some political leaders and civil groups boycotting the event.
As the government looks set to extend the 18-month transition period due to end in December 2022, pro-democracy groups are highly likely to persist with anti-government and anti-French protests for the foreseeable future.
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. Chad has had many attacks from the Nigeria-based jihadist groups Boko Haram and its offshoot Islamic State of West Africa Province (ISWAP).
Moreover, the security situation in Lake Chad is showing no sign of abating despite the death of prominent jihadist leaders – Abubakar Shekau of Boko Haram in May 2021, and Abu Musab Al-Barnawi and Malam Bako of ISWAP in September and October 2021, respectively – as well as the defection of hundreds of jihadist fighters to the Nigerian army. The violence is worsening amid the internecine fighting between Boko Haram and ISWAP over territorial control in the Lake Chad region.
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 France, the country’s former colonial power, as noted above. Also, as a member of the Central African Economic and Monetary Community (CEMAC), Chad’s foreign reserves are regulated by the bloc’s Bank of Central African States (the French acronym: BEAC). Consequently, exchange transfer risk largely emanates from the monetary policy of BEAC.
Chad’s sovereign default risk improved in January 2022, when it became the first country officially to request debt restructuring under the debt reduction programme established by the G20 major economies known as the Common Framework.
Additionally, Chad was one of the countries to have benefited from the G20’s Debt Service Suspension Initiative, which froze debt repayments until December 2021. The country’s external debt rose to USD3.6 billion in 2020, which is over one-third of its gross national income, according to World Bank data.
The United Nations is currently implementing a project to help Chad upgrade its debt management system and improve its capacity to record, monitor, and report on public finances. Increases in the global crude oil price will bode well for public revenue, lowering the risk of a sovereign default.
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