ReportNo. 6785-CD Chad EconornicSituation and Priorities Public Disclosure Authorized October26,1987 Country Operations SahelianDepartnient Africa Regioni FOR OFFICIALUSE ONLY Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Documentof the World Bank Thisdocument has a restricteddistribution and may be used by recipients onlyin the performanceof theirofficial duties. Its contentsmay not otherwise bedisclosed without World Bank authorization. CURRENCY EQUIVALENTS -/ Currency Unit CFA Franc (CFAF) US$1.00 CFA 302 1/ CFAF 1 million US$3,311 CFAF/US$ (Annual Average) (End Period) 271.7 1981 287.4 328.6 1982 336.3 381.1 1983 417.4 437.0 1984 479.6 449.3 1985 378.1 346.3 1986 322.8 303.2 1987 (8 mo.) 302.3 MEASURES AND EQUIVALENTS 1 meter (m) - 39.37 inches (in) 1 square meter (m 2 ) 10.9 square feet (sq ft) 1 kilometer (km) - 0.62 mile (mi) I hectare (ha) = 10,000 m 2 or 2.471 acres 2 1 acre - 4,047 m or 0.405 ha 1 kilogram (kg) = 2.2 pounds (lbs) 1 pound (lb) = 0.454 kg 1 ton (metric) = 2,205 lbs or 1,000 kgs 1 coro 11.7 to 2.3 kg FISCAL YEAR Government of Chad = January 1 - December 31 1/ Average for August, 1987. The CFA Franc (CFAF) is tied to the French Franc (FF) in the ratio of rF 1 to CFAF 50. The French Franc is currently floating. An exchange rate of CFAF320 = US$1.00 is used for projection purposes in this report. FOROMCIL USEONLY ACRONYMSAND ABBREVIATIONS ADB AfricanDevelopment Bank AEDES AssociationEuropeenne pour le D4veloppementde la Sante ADF AfricanDevelopment Fund AICF Action Internationalecontre la Falm BADEA Banque Arabe de D6veloppementdes Etats d'Afrique BDEAC Banque de Developpementdes Etats d'AfiiqueCentrale BdL Brasseriesdu Logone BDT Banque de Developpementdu Tchad I3EAC Banque des Etats d'AfriqueCentrale BELACD Bureau d'Etudeset de L i.sond'Actions Caritatives et de Dgveloppement BGT BoissonsGazeuses du Tchad BIAT Banque Internationalepour l'Afriqueau Tchad BTCD Banque Tchadiennede Credit et de DAp8t CM Caisse Autonome d'Amortissement CCCE Caisse Centralede CoopgrationEconomique CEPOD Centre d'Etudeet de Formationpour le Developpement CFAF Franc de la Conmunaut6Financigre Africaine CFDT CompagnieFrancaise des Textiles CHACOT Chambrede Commercedu Tchad CILSS Comit6 Inter-Etatde Lutte contre la Secheresseau Sahel CNPS Caisse Nationalede PrivoyanceSociale COTONTCHAD Soci6t6Cotonni&re du Tchad CSPC Caisse de Stabilisationdes Prix du Coton CTT Coop6rativedes TransporteursTchadiens EDF. EuropeanDevelopment Fund EIB EuropeanInvestment Bank ENSPSS Ecole Nationalede Sante Publique et des ServicesSociaux FAC Fonds d'Aide et de Cooperation FAO Food and AgriculturalOrganization FDAR Fonds de Dgveloppementet d'ActionsRurales FIPP Fonds d'Interventiondes ProduitsPgtroliers HIID Harvard Institutefor InternationalDevelopment ICOR IncrementalCapital Output Ratio ILO InternationalLabor Organization IHAP InternationalHuman AssistancePrograms INADES InstitutAfricain pour le DiveloppementEconomique et Social INSE InstitutNational des Sciencesde l'Education IRCT Institutde Recherchedu Coton et des TextilesExotiques LICROSS Ligue Internationalede la Croix Rouge MAS Ministeredes AffairesSociales MADR Minist4rede l'Agricultureet du D6veloppementRural MAGAVET MagasinGUngral d'Approvisionnement en Produitset Matgriels Vft6rinaires MCT Manufacturedes Cigarettesdu Tchad MEHP Minist4rede 1'Elevageet de l'HydrauliquePastorale Thisdocument has a retricted distributionand may be usedby recipientsonly in the performance of their officialduties. Its contentsmay not otherwisebe disclosedwithout World Bank authorization. - ii - MIC Ministare de l'Industrie et du Commerce MSA Ministare de Is S6curitg Alimentaire et des Populations Sinistrees MSF Medecins Sans Frontieres MSP Ministere de la Sante Publique MTPHU Ministare des Travaux Publiques de l'Habitat et de l'Urbanisme MTPF Medium-Term Policy Framework NGO Non Governmental Organisation OFCA Office des Carri6res OFNAR Office National des Routes OMVSD Office de Mise en Valeur de Sategui-Deressia ONADEH Office National de Developpement de l'Horticulture ONC Office National de Cgr6ales ONG Organisation Non-gouvernementale ONDR Office National du D6veloppement Rural ONHPV Office National de l'Hydraulique Pastorale et Villageoise OPE Office for Program Execution OPIT Office de Promotion Industrielle du Tchad ORSTOM Office de Recherche Scientifique et Technique d'Outre-Mer ORT Organization for Rehabilitation and Training OXFAM Oxford Committee on Famine PEV Programme Elargi de Vaccination PHARMAT Centrale Pharmaceutique du Tchad PME Petites et Moyennes Entreprises SCET Societe de Conception d'Etudes Techniques SECADEV Secours Catholique au Developpement SEDES Societe d'Etudes pour le Developpement Economique et Social S.HT Societe Hoteliare du Tchad SIMAT Societe Industrielle de Materiel Agricole SME Small and Medium Size Entreprises SMIG Salaire Minimum InterentrepriseGUngral SODELAC Societg de Developpement du Lac SONAPA Socigt6 Nationale de Production Animale SONASUT Sociftf Nationale Sucriere du Tchad SOTERA Socigte Tchadienne d'Exploitation des Ressources Animales STEE SociWte Tchadienne pour l'Eau et l'Electricite STT Societg Tchadienne de Textile UDEAC Union Douaniere des Etats d'Afrique Centrale VITA Volunteers in Technical Assistance - iii - PREFACE This countryeconomic memorandum is based on the findingsof a mission which visited Chad in November 1986. The mission was composedof Mr. Bension Varon (missionchief), Mr. PhilippeAnnez, Mr. Alexander Marc, Mr. James Stevens, Ms. Ellen Goldstein, Ms. Anne-LaurenceDodge (consultant-education),and Ms. Oren Whyche (consultant-privatesector). Ms. Rebecca De Bakey was responsible for layingout and processingthe various drafts. The reportdraws on the analysescarried out by the ProjectsDivisions and the staff of the IMF over the last 18 months. It benefittedgreatly from the effectivecooperation A the Chadianauthorities at all levels,as well as the major donors (bilateral and multilateral) and non-governmentalorganizations represented in Chad. The reportwas discussedwith the Governmentin July 1987. - fy - CHAD: ECONOMIC SITUATION AND PRIORITIES TABLE OF CONTENTS Page No. EXECUTIVE SUMMARY................... ..,.#**. ......... xii INTRODUCTION ............... ......?**#so ....... **s xxv I. BA,CKGROUND..................*.# ...... .... 1 A. GeneralCharacteristics ... .........,. ......*...... 1 B. The Economy Since Independence.... 3 1. The First Seventeen Years .. ............. .....0,. 5 2. The Period 197b-35....,.. , . e .......O * *....*..0.0 9 C. The Development Challenge a l l ....e ..............n ge.10...... 10 II. RECENT ECONOMIC DEVELOPMENTS............................ ......, ,.14 A. The Cotton Secoe....................... 14 B. The Public Sector.................... ............... 16 1. Overview of Revenues and Expenditures................... 16 2. Controlling the Fiscal Deficit ......................... 21 C. The External Sector.... ...-....... ... 24 1. Overview of the Balance of Paymentsy................ 24 2. Increasing Flows of External Assistance,g.........6tc... 26 3. The Burden of External Debt .................. ..... 29 D. Macroeconomic and Sectoral Growtho......... ..,......... 30 E. Money and Credit. .. , .. .,.... ,. 33 F. Government Actions to Rebuild the Economy....... .......... 34 G. Donor SupportOutook........................ , .......... 39 H. The Current Outok... t ....l ....ook...#*o 40 PaRe No. III. THE RURAL SECTOR.................... ..... ............ 42 A. Cotton: How Soon Can Profitabilit be Restored.?............42 1. The RebabilitationProgramm........ 42 2. The ImprovedOutlook of Cotton........................ 44 3. Cost of Cotton Productionat the ProducerLevel ......... , 45 4. Costs at the COTONTCHADLevel......... 47 5. Financial Projections............. ............O, . 48 6. Conclusion.......... 53 B, Food-Crops: RegionalFood Self-Sufficiencyor Food Securit? 55 1. Introduction ........... , 55 2. Regional Food Self-Sufficiency.................. 57 3. MinimizingFluctuations in Production........... ,.... 64 4. AgriculturalCredit and InstitutionalConstraints,,,,,,, 67 5. The Potentialfor AgriculturalDiversification......... 68 C. Livestock: What Is HoldingUp Development?............... 69,,, 2. Investment and Aid .......... ........ ,... ... .*, 70 3, Production Strategy ....................., 71 4. The InstitutionalEnvironment .......................... 72 5. WaterResources Development ............................. 73 6. Export Constraintsand Potential..............0*0**.. 73 D. Fishing: What Is the Potential?,........ 75 E. EnvironmentalConcerns: The Need for Action........ ,,...0,, 76 IV. INFRASTRUCTUREAND INDUSTRY ....................... 77 A. Transport: What Are the Main Prioritiesand Issues?....... 77 1. The Transport Network 77 2. Traffic Volume .... ,, ..,. ** **,***...,,.,, 78 3. Transport Carriers and Institutions .................... 81 4. Sec tor Issues ..00*00**0#0.046es.#04. * . $ * 82 B. Petroleum: What ChangeswillDomestic ProductionBring?.... 84 1. The Sector at Present ... ......... ........ .. 84 2. The Sector Once Domestic Production Begins ............. 85 - vi - Page No. C. Electricity and Water: High Rates and Low Recovery........ 86 D. The Urban Sector: How Is Chad Coping?...................... 88 E. Trade and Industry: The Constraints Facing Existing andNew Enterprises............................ 90 1. The Experience of Chad's Major Industries........ ,........ 91 2. Constraints for the Development of SMEs.........,........ 94 3. Creating an