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AfDB, Chad sign €39 million in financing agreements to improve public expenditure

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The African Development Bank (AfDB) and Chad signed, on Wednesday, June 29, 2016 in Abidjan, funding agreements of over €39 million with a view to enhancing quality of public expenditure and diversifying Chad’s sources of growth. This second phase of the Public Finance Management Reforms Support Programme includes a loan of €5 million and two grants totaling €34 million.

Chad is in a difficult financial situation on account of the drastic drop of global oil prices, deterioration of regional security conditions which negatively impacted intra-regional trade, fishing and livestock, and brought an important influx of refugees (more than 1 million persons). The country is therefore going through serious cash flow pressures, with a financing gap of €107 million.

AfDB’s support will provide responses to most of these fragility factors. This budget support will help close more than one third of Chad’s financing gap, allowing the government to clear its domestic arrears with local suppliers. It will help improve the weak performance of Chadian administrative institutions by the implementation of reforms relating to public procurement and the improvement of the business climate.

By virtue of its impact in terms of fostering the efficiency of public spending, diversifying the economy, the programme will contribute to job creation – a mitigating factor against the social crises that often give rise to armed conflicts.

In addition, it will help protect priority social expenditure against budget cuts, by maintaining their share at 19%. These expenditures will help cushion alleviate human vulnerabilities such as low life expectancy, high infant mortality rates or low immunization levels and school enrolment rates. It will put a special emphasis on the education of girls (including by providing vocational training).

Lastly, the programme will support the Government’s actions aimed at enhancing agricultural resilience, through the revision of the Land Tenure and Ownership Code. This is critical for securing agricultural sector investments in Chad and improving food security and nutrition.

“I commend Chad for having successfully stabilized its macroeconomic framework and initiated reforms to improve the business environment with a view to diversifying its economy, which is too dependent on oil exports,” said Kapil Kapoor, AfDB’s Acting Vice-President for Agriculture, Water, Human Development, Governance and Natural Resources. “AfDB’s assistance as well as support from other technical and financial partners, has been highly instrumental in the achievement of these outcomes. We are pleased to be your partner today in improving the efficiency of public spending and strengthening the resilience of the economy to external shocks, related particularly to the volatility in oil prices,” Kapoor added.

The first phase of PARFIP helped to consolidate the country’s macroeconomic framework in conjunction with the support of other partners. It helped to control the trend of public expenditure, resulting in a 26% decline in primary expenditure in 2015. The programme also improved the monitoring of expenditure executed before payment authorisation (DAO) which was reduced from over 20% in 2013 to 9% in 2015. The taxpayer census was validated and the new Tax and Fiscal Procedures Code adopted in September 2015 to improve tax collection. The new Public Procurement Code, compliant with CEMAC Directives, was adopted to improve transparency in this domain, which was the main source of corruption.

Chad Minister of Planning and Prospective, Mariam Mahamat Nour, commended the AfDB for its efforts to respond efficiently to the needs of African countries. “The rapid signature of these financing agreements, two days only after the programme was approved by the Board of Directors, is a clear testimony of your commitment to better serve Africa,” she said.

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