Helping Chad Strengthen Public Debt Management – UNCTAD | Vette Leader

A new UNCTAD project will help the African nation modernize its debt management system and improve its ability to track, monitor and report on public finances.

© Cupid Photos/Shutterstock | Women collect water in Abeche, Chad. High levels of public debt can affect the government’s ability to invest in essential services and infrastructure.

Although Chad has recorded relatively few COVID-19 cases, its economy has been hit by the impact of the pandemic — particularly as the price of oil, its top export, plummeted early in the crisis.

Some estimates show that after years of growth, the country’s real gross domestic product (GDP) contracted by 0.6% in 2020 and 1.1% in 2021.

The Central African nation’s prospects for recovery are hampered by unsustainable external debt stocks, which reached $3.6 billion in 2020 – an amount equivalent to more than a third of its gross national income (GNI), according to World Bank data.

“High levels of public debt can undermine the government’s ability to provide basic services like health care and education,” said Gerry Teeling, UNCTAD’s debt management program director.

In a country where around 42% of the population lives in poverty, according to the latest data, using tight public finances to service debt will have dire consequences for years to come.

A European Union-funded UNCTAD project will help Chad’s finance and budget ministries manage the country’s public debt.

During the project, which began in January 2022 and will run for 18 months, UNCTAD will provide new equipment and install the latest version of its specialized debt management and financial analysis software (DMFAS) and train government debt officials.

prerequisite for debt restructuring

In January 2022, Chad became the first country to formally request a debt restructuring under the debt reduction program set up by the Group of 20 major economies (G20), known as the Common Framework.

During the pandemic, Chad had benefited from the G20 Debt Service Suspension Initiative (DSSI), which froze debt repayments until December 2021.

While the initiative brought decisive relief, it was only temporary.

Under the Common Framework, the Chadian government would agree to a debt restructuring with the International Monetary Fund (IMF) and bilateral creditors. It would also aim to achieve similar debt relief for private sector loans.

In June 2021, a creditors’ committee including China, France, India and Saudi Arabia was formed to restructure the country’s debt.

The IMF has also finalized talks with Chad for a medium-term financing program worth about $560 million under its expanded credit facility. But the deal still has to be approved by the IMF’s Executive Board.

“The availability of comprehensive, accurate and timely information on sovereign debt is critical to policy making and risk management, and a prerequisite to any debt restructuring process,” said Mr. Teeling.

“This is a key reason why the new project with Chad’s Ministry of Finance is important.”

Better data for better policymaking

In addition to updated software, the project includes a major capacity building component. Public finance officials will improve their knowledge and skills in data entry and validation, debt reporting, statistics and debt portfolio analysis.

By improving the scope and quality of the country’s debt statistics and analysis, the project will increase the transparency of public finances.

“Better data will also help policymakers devise a more effective sovereign debt strategy,” said Mr. Teeling.

A major outcome that is expected is the regular production of a revised statistical bulletin on debt, aligned with international standards.

The revised Bulletin will help improve the country’s performance on relevant indicators in external assessments. These include the World Bank’s Country Policy and Institutional Assessment (CPIA), the Public Expenditure and Financial Accountability (PEFA) Framework, and the Debt Management Performance Assessment (DeMPA) conducted by the Debt Management Facility.

“UNCTAD is delighted to be working with the Treasury Department and appreciates the support of the European Union,” said Mr. Teeling.

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