Report No. 6785-CD Chad Econornic Situation and Priorities October 26,1987 Country Operations Sahelian Departnient Africa Regioni FOR OFFICIAL USE ONLY Document of the World Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed 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 (m2) 10.9 square feet (sq ft) 1 kilometer (km) - 0.62 mile (mi) I hectare (ha) = 10,000 m 2 or 2.471 acres 1 acre - 4,047 m2 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 1 1.7 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. FOR OMCIL USE ONLY ACRONYMS AND ABBREVIATIONS ADB African Development Bank AEDES Association Europeenne pour le D4veloppement de la Sante ADF African Development Fund AICF Action Internationale contre la Falm BADEA Banque Arabe de D6veloppement des Etats d'Afrique BDEAC Banque de Developpement des Etats d'Afiique Centrale BdL Brasseries du Logone BDT Banque de Developpement du Tchad I3EAC Banque des Etats d'Afrique Centrale BELACD Bureau d'Etudes et de L i.son d'Actions Caritatives et de Dgveloppement BGT Boissons Gazeuses du Tchad BIAT Banque Internationale pour l'Afrique au Tchad BTCD Banque Tchadienne de Credit et de DAp8t CM Caisse Autonome d'Amortissement CCCE Caisse Centrale de Coopgration Economique CEPOD Centre d'Etude et de Formation pour le Developpement CFAF Franc de la Conmunaut6 Financigre Africaine CFDT Compagnie Francaise des Textiles CHACOT Chambre de Commerce du Tchad CILSS Comit6 Inter-Etat de Lutte contre la Secheresse au Sahel CNPS Caisse Nationale de Privoyance Sociale COTONTCHAD Soci6t6 Cotonni&re du Tchad CSPC Caisse de Stabilisation des Prix du Coton CTT Coop6rative des Transporteurs Tchadiens EDF. European Development Fund EIB European Investment Bank ENSPSS Ecole Nationale de Sante Publique et des Services Sociaux FAC Fonds d'Aide et de Cooperation FAO Food and Agricultural Organization FDAR Fonds de Dgveloppement et d'Actions Rurales FIPP Fonds d'Intervention des Produits Pgtroliers HIID Harvard Institute for International Development ICOR Incremental Capital Output Ratio ILO International Labor Organization IHAP International Human Assistance Programs INADES Institut Africain pour le Diveloppement Economique et Social INSE Institut National des Sciences de l'Education IRCT Institut de Recherche du Coton et des Textiles Exotiques LICROSS Ligue Internationale de la Croix Rouge MAS Ministere des Affaires Sociales MADR Minist4re de l'Agriculture et du D6veloppement Rural MAGAVET Magasin GUngral d'Approvisionnement en Produits et Matgriels Vft6rinaires MCT Manufacture des Cigarettes du Tchad MEHP Minist4re de 1'Elevage et de l'Hydraulique Pastorale This document has a retricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without 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 Interentreprise GUngral 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 country economic memorandum is based on the findings of a mission which visited Chad in November 1986. The mission was composed of Mr. Bension Varon (mission chief), Mr. Philippe Annez, Mr. Alexander Marc, Mr. James Stevens, Ms. Ellen Goldstein, Ms. Anne-Laurence Dodge (consultant-education), and Ms. Oren Whyche (consultant-private sector). Ms. Rebecca De Bakey was responsible for laying out and processing the various drafts. The report draws on the analyses carried out by the Projects Divisions and the staff of the IMF over the last 18 months. It benefitted greatly from the effective cooperation A the Chadian authorities at all levels, as well as the major donors (bilateral and multilateral) and non-governmental organizations represented in Chad. The report was discussed with the Government in 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. General Characteristics ... ......... ,. ...... *...... 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 Support Outook........................ , .......... 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 Rebabilitation Programm........ 42 2. The Improved Outlook of Cotton ........................ 44 3. Cost of Cotton Production at the Producer Level ........., 45 4. Costs at the COTONTCHAD Level......... . 47 5. Financial Projections ............. ............ O , . 48 6. Conclusion .......... 53 B, Food-Crops: Regional Food Self-Sufficiency or Food Securit? 55 1. Introduction ..........., 55 2. Regional Food Self-Sufficiency .................. 57 3. Minimizing Fluctuations in Production ...........,.... 64 4. Agricultural Credit and Institutional Constraints,,,,,,, 67 5. The Potential for Agricultural Diversification......... 68 C. Livestock: What Is Holding Up Development? ............... ,,, 69 2. Investment and Aid .... ...... ........,... ... . *, 70 3, Production Strategy ..................... , 71 4. The Institutional Environment .......................... 72 5. Water Resources Development ............................. 73 6. Export Constraints and Potential.............. 0*0**.. 73 D. Fishing: What Is the Potential?,........ 75 E. Environmental Concerns: The Need for Action ........,,...0,, 76 IV. INFRASTRUCTURE AND INDUSTRY ....................... 77 A. Transport: What Are the Main Priorities and Issues? ....... 77 1. The Transport Network 77 2. Traffic Volume .... ,, ..,. ** **,***...,,.,, 78 3. Transport Carriers and Institutions .................... 81 4 . Se c tor Issu es . .00*00**0#0. . 046es.#04. * . . $ * 8 2 B. Petroleum: What Changes willDomestic Production Bring?.... 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 and New Enterprises............................ 90 1. The Experience of Chad's Major Industries ........,........ 91 2. Constraints for the Development of SMEs.........,........ 94 3. Creating an Appropriate National and Regional Environment 98 V. THE SOCIAL SECTORS .............................................. 100 A. Education: What Are the Priorities?......,................. 100 1. Background ........ ... ,.,., 101 2. Community Participation ................................ . 102 3. Teacher Training........ 0.................... ........,.. 103 4. Institutional Isus................................105 5. Long-Term Strategy.... 106 B. Health: Status and Efforts to Improve It. .......,.......... 106 1. Health Status.............,.. .,..,...,. .........,, ................... 106 2. Health Administration and the Institutional Framework .... 108 3. Defining Priorities in Health Care....................... 109 4. Personnel and Facilities for Health Care Delivery ........ 110 5. Financing Health Care................................... . 112 VI. DETERMINANTS OF FUTURE TRENDS. ................................. , 114 A. Political Climate .... o ............ o............. 0000000*6 114 B. Domestic Resource Constraints ................*...... . ....,.. O 115 1. Revenue Constraints ........................... 115 2. Implications ........... 117 C. Investment and Develoment Assisance..... .................. 119 D. Economic Management and Technical Assistance..... ,.....,0 .00. 129 1. Public Administration...... ........ ............. 130 2. Public Enterprises ... ..................... 130 3. Public Investment Programming ...o....o................ . 131 - vii - Page No. VII. PROSPECTS AND POLICIES ...................... , , , 133 A. Medium-Term Projections....... ...................... ........, 133 1. Base See n a r i o 133 2. Sensitivity Analysis,.............................., , 138 B. Medium-Term Policy Framework ........ 140 1. Objectives and Policies, .......................... 140 2. Prerequisites for Successful Implementation... t........... 142 C. Beyond the Medium-Term....... ........o ... o , ,o,0 .,..,...0 , ..0 . 143 1. A Complementary Agenda ......o.o..o.. ........... ,........,.. 143 2. Toward a Chadian Future .. *00000#0v 000* ... 0.0*9 145 ANNEXES 1. The World Cotton Situation and Outlook.............,,*... 149 2. NGO Activities in Transition........... 158 3. Policy Matrix, 197-98 7 - 90.. . 162 4. A Complementary Agenda. ............. 168 5 . Bibliography ............ 18 STATISTICAL APPENDIX .......... 182 - viii - LIST OF TEXT TABLES Table 1 - Central Government Consolidated Operations, 1983-86 ... 21 Table 2 - Balance of Payments, 1983-1986 ............. ....,..... 25 Table 3 - Debt and Debt Service, 1985-1986.,.....,.................. 30 Table 4 - Gross Domestic Product and Output by Sectors, 1983/1986..... 31 Table 5 - Investment, Savings, and consumption, 1985/1986 .... 60... .. 33 Table 6 - World Cotton Situation, 1984/1985-1986/1987...... 44 Table 7 - Profitability of Cotton Cultivation, 1986, CFAF.O.......... 46 Table 8 - Cotton Production Cost, 1983-1984o.9600... -.. .....,.... 48 Table 9 - Operating Deficit/Surplus of COTONTCHAD and Cotton Sub-Sector ......................... o .......... o ........... * 53 Table 10 - Food Crop Production, 1983-84 to 1986-1987.**#..*.*..*.. ...* 56 Table 11 - Cereals Prices in N'Djamena, 1983-1986.... o................ 59 Table 12 - Per Capital Cereals Production, by Zone, 1984-1986....1..986 60 Table 13 - Ownership of Manufacturing Industries.................0000 91 Table 14 - Volume Indices for Industrial Production..ducti......n....... 92 Table 15 - Health and Population Indicators.......... 00O..0.. .... . 107 Table 16 - Health Problems in 1985,,....,,..,............*.o... ,... 108 Table 17 - Health Personnel and Facilities, 1985.o .....,............ 111 Table 18 - External Aid: Estimated Disbursements by Sector and Objective ........,.,. , ... . . . . . ........... .. . ....... 123 Table 19 - Growth in Aggregate Output, 1986-1995.......*.*** .......... 135 Table 20 - Projected Merchandise Trade ... o *................ ...... 136 Table 21 - Projected Aid and Debt Service..,,,,,G..................... 137 Table 22 - Projected Balance of Payme atse .... ...........138 - ix - LIST OF CHARTS Page No. 1. Food Needs, Cereals Production and Livestock Herd, 1965-85...,. 7 2. Seed Cotton Production and Producer Price, 1960-8404..... 11 3. World Cotton Production, Consumption and Stocks, 1980-86....... 17 4. World Cotton Price, 1980-87 .............,............. e ....ev 19 5. Composition of External Assistance, 1985-87.,.............. 27 6. World Cotton Price, Short-Term Outstanding Debt to COTONTCHAD, and Net Foreign Assets of the Central Bank, 1984-86 984-. .8. . ....... .......... 35 7. Projected World Cotton Price and COTONTCHAD's Production Costs, 1986/87-1994/95.................... ................. 51 8. Aid Projects: Estimated Disbursements in 1987, by Type of Activity ................. .......................... 121 9. Aid Projects: Estimated Disbursements In 1987, Distribution by Geographic Location .......................... 127 COUNTRY DATA: CHAD AREA POPULATION DENSITY 1,284,000 sq km 6.12 million (mid-1988 est.) 4.0 por square km Rate of Growth: 2.4 POPULATION CHARACTERISTICS (1986) HEALTH (1986) Crude Blrth Rate (per 1,000) 44 Population per physician 38,482 Crude Death Rate (per 1,000) 21 Population per nursing person 3,441 Total Fortility Rate 6.7 Irfant Mortality R&z.e (per 1,000) */ 139 INCOME DISTRIBUTION DISTRIBUTION OF LAND OWNERSHIP Not available Not available ACCESS TO PIPED WATER ACCESS TO ELECTRICITY Not available Not available NUTRITION EDUCATION Not avellable Primary school enrollment % 38 CNP PER CAPITA in 1986: USS1I8 GROSS NATIONAL PRODUCT IN 1988 ANNUAL RATE OF GROWTH (X, constart prices) US$ MIn. % 1988 ________ ------- ---- GNP at Market Prices 811.0 100.0 -1.7 Gross Domestic Investment 87.0 10.7 72.3 Gross National Saving -106.2 -13.0 Current Account Balance -177.4 -21.9 Export of Goods, NFS 142.8 17.6 Import of Goods, NFS 379.6 48.8 OUTPUT, EMPLOYMENT AND PRODUCTIVITY IN 1988 ------------------------------------------- Value Added Labor Force b/ V.A. Per Worker US$ Min. X Min. X US I X Agriculture 880.0 48.8 2.4 83.0 158.3 54.4 Industry 147.0 17.9 0.1 6.0 1044.0 368.6 Services 293.0 36.7 0.3 12.0 887.1 297.8 Total/Averoge 820.0 100.0 2.8 100.0 291.2 100.0 GOVERNMENT FINANCE __________________ Contral Government ----------------------------------- (CFAF Bln.) X of GDP 1988 1988 1976 Current Receipts 16.8 6.9 14.3 Current Expendltures 24.8 8.6 16.1 Current Surplus -7.6 -2.7 -0.9 Capital Expenditures c/ 30.0 10.6 ---------------------------------------------------------------------__------__----------------------------- a/ Official figure. Health workers estimate actual IMR at around 200 per 1,000 live births. b/ 1980 estimates of size and distribution of labor force are merely Indicative, being based on 190 percentage estimates applied to 1986 population estimates. c/ 1986 capital expenditures were entirely foreign-financed and are estimated at around CfAF 30 billion. - xi - COUNTRY DATA: CHAD MONEY, CREDIT and PRICES 1982 1983 1984 1986 1986 (millions of CFAF outstanding, end of period) Money Supply 84,849 42,889 87,769 71,898 72,918 Bank Credit to Public Sector 11,888 10,936 10,498 3,473 7,061 Bank Credit to Private Sector 29,991 32,465 45,930 84,960 76,004 (percentage or index numbers) Money as X of GDP 18.0 19.1 80.2 24.1 26.8 General Price Index (1977=100) 162.6 166.9 178.2 184.0 178.5 Annual percentage change in: General Price Index 8.9 8.8 7.4 3.3 -3.0 Bank Credit to Public Sector .. -7.8 -4.0 -68.9 103.3 Bank Credit to Private Sector .. 8.2 41.5 41.4 1656 BALANCE OF PAYMENTS MERCHANDISE EXPORTS (AVERAGE 1984-86) 1988 1984 1986 1988 US$ Min X (millions of USS) Cotton fiber 61.3 67.9 Cattle 28.9 25.4 Exports of Goods, NFS 188.7 185.7 128.1 142.8 Textiles 6.0 4.8 Imports of Goods, NFS 203.9 226.1 347.2 379.8 Beer 0.2 0.2 Resource Gap (deficit=-) -67.2 -80.4 -224.1 -237.3 Other goods 12.6 11.8 Total 106.9 100.0 Interest Payments (not) -4.7 -3.7 -3.1 -3.8 Other Factor Payments (not) -1.6 -4.6 -2.3 -5.8 Not transfers 68.0 49.0 94.1 89.2 EXTERNAL DEBT, DECEMBER 81, 1986 Balance on Current Account -17.6 -19.6 -135.4 -177.3 -------------------------------- US$ MIn Direct Private Investment -1.1 7.3 58.7 83.3 --------- Official Capital Grants 81.2 27.6 4686 128.8 Public Debt, ncl. guaranteed 206.2 Net MLT Borrowing -1.8 -1.0 14.1 17.8 Non-guaranteed Private Debt Disbursement 2.5 8.9 19.8 28.9 Total outstanding and disbursed 206.2 Amortization 4.8 4.9 656 6.1 Other Capital (not) -2.8 6.2 -3.3 -18.4 NET DEBT SERVICE RATIO for 1986 Increase In Reserves (4) 8.6 19.S -24.3 -20.8 Gross Reserves (end year) 29.1 48.6 24.8 8.6 5--- Public Debt, lncl. guaranteed 1.6 Non-guaranteed Private Debt RATE OF EXCHANGE Total outstanding and disbursed 1.6 ________________ Annual Averages End Period IBRD/IDA LENDING, May 31, 1987 (Millions of USS) 1984 1985 1986 Aug. 1987 IBRD IDA Outstanding A Disbursed 0.0 68.1 US I 1.00 a CFAF 487.0 449.8 346.0 802.8 Undisbursed 0.0 58.7 C-A-F C.00 = US 8 0.0023 0.0022 0.0029 0.0098 Outstanding, lnl. Undisb. 0.0 116.8 ----------------------------------------------------- -------------__--------__--------------------------- CHAD ECONOMIC SITUATION AND PRIORITIES EXECUTIVE SUMMARY Background 1. Chad Is one of the world's poorest countries. Its economic development has been held back by a landlocked location and harsh and variable climatic conditions. At Independence (1960), the new nation found itself poorly prepared, even in comparison to other African countries, in terms of physical and social infrastructure, the level of education and health, and the role of nationals in the management of economic activity. Moreover, Independence was followed by internal and external conflict which has lasted until recently. 2. The Chadian economy nevertheless expanded at an annual rate of 2 percent in the 1960s. Climatic conditions were about normal for most of this period, and Chad was self-sufficient in cereals throughout the decade. The first half of the 1970s witnessed a multi-year drought which caused average GDP growth to fall to less than one percent a year. Real GDP shrank by about 30 percent during the 1979-82 war, reflecting the severity of the economic disruptions caused by the war. After the establishment of the current government in 1982, and with the progressive restoration of stability, the economy began to recover. A drought of unprecedented severity in 1984, followed quickly by a sharp decline in the world price of cotton, slowed this progress. 3. Chad has considerable development potential. It has proven to be self-sufficient in food during various periods in each of the last three decades, apd the possibilities for expanding agricultural output are significant and real. Although only 15 percent of the land is arable, the country is so large that this represents nearly ten times the currently cultivated area. There is also significant potential for irrigation. In addition, Chad has substantial petroleum resources which can potentially satisfy nearly all domestic demand. Chad truly has the potentisl to make significant progress. In spite of exceptionally valiant efforts on the part of the people and their leaders, it has hitherto simply lacked a reasonable chance to realize this potential. Recent Developments 4. In 1985 and 1986, Chadians were forced to grapple with an economic crisis of unprecedented magnitude resulting from the collapse of the world market price for cotton. The price of a representative variety of cotton (Middling 1-3/32 inch) fell from a peak of US$1.96/kg in mid-1984 to US$0.83/kg in mid-1986. Depreciation of the US dollar in 1986 exacerbated the decline in the sale price in CFAF terms. Moreover, the price decline coincided with a sharp increase in the production expenditures of COTONTCHAD (the mixed capital enterprise which processes and markets all of the Chadian crop), caused by poor financial and administrative management. As a result, the company sustained huge losses and accumulated arrears to the domestic banking system totaling CFAF 43 billion. Despite the downturn in the cotton industry, Chad's remarkable rebound from the drought -- cereals production more than doubled -- allowed - xiii - GDP to grow by nearly 30 percent in 1985. GDP growth was reversed in 1986 as the effects of the cotton crisis were felt. They were, however, mitigated by another excellent cereals harvest and continued reconstitution of the livestock herd. The real decline in GDP was held to 2 percent, while nominal GDP dropped by 5 percent as a result of an estimated 3 percent decline in prices. This deflation reflects the sharp drop in cereal prices, as well as the negative effects of the cotton crisis on demand in the economy. 5. The Government and the donors responded to the cotton crisis swiftly by implementing an "emergency program" to support the cotton industry through a period of adjustment. The program comprises a number of measures affecting producers, COTONTCHAD and the Government; they include the phased elimination of input subsidies, the freezing of the producer price, the closing down of redundant ginneries and purchasing centers, reduction of COTONTCHAD staff, and suspension of export taxes paid by COTONTCHAD, Most of the program has already been implemented. Moreover, the regional central bank, BEAC, has undertsken to reschedule COTONTCHAD's domestic debt over a period of 10 years with 5 years grace and a two-year moratorium on the payment of interest. 6. The loss of export taxes on cotton is estimated to have contributed to a decline of more than 20 percent in government revenues in 1986. The decline would have been even greater but for new taxes introduced during the year. The Government also implemented austerity measures which succeeded in reducing current expenditures, already at a critically low level, by 3 percent in nominal terms. The budget deficit is nevertheless estimated to have increased from CFAF 3.8 billion in 1985 (on a commitment basis) to CFAF 7.5 billion in 1986, or from 1.3 percent of GDP to 2.6 percent. The deficit was financed largely through budgetary aid. In the absence of cotton revenues, the avenues open to the Government for reducing the fiscal deficit are to trim expenditures or to generate additional revenues through improvements in the fiscal system and tax administration. There is little room to maneuver on the expenditure side, because revenues are insufficient to cover even the most basic expenditures. Public investment, estimated at 10-12 percent of GDP, is entirely financed through external assistance, as is a significant portion of the associated recurrent costs. Most civil service salary payments are equivalent to 60 percent of their 1967 level in nominal terms. And the Central Government does not subsidize the parapublic sector in any way, barring the possibility of compressing government expenditures in this area. 7. Chad's external current account deficit, which had been modest in 1983 and 1984 rose to CFAF 60 billion, equivalent to about 25 percent of GDP, in 1985. In 1986, the deficit equaled that of the previous year but disbursements of capital grants more than doubled. The focus of aid also changed -- from emergency food aid to development assistance. Budget support has also increased in response to the impact of th3 cotton crisis on public finances. In 1987, disbursements are estimated to reach CFAF 77 billion (US$240 million) -- a 50 percent increase over the 1985 level -- raising per capita aid from about US$23 to US$48 over a period of two years. This would boost Chad above the per capita average for low-income Sub-Saharan Africa, but it is still quite low for a country as poor as Chad, with such critical post-war reconstruction needs. - xiv - 8. Chad's actual debt service ratio in 1985 and 1986 was quite low at about 5 percent. Payments did not, however, fully cover the debt service due, and arrears were accumulated in both years. By end-1986, arrears amounted to about US$80 million, Scheduled debt service is on the order of US$10-13 million in 1987-89, or approximately twice what the Government has been able to pay in recent years. Although the debt service ratio (5-7 percent) is low by most standards, it represents a heavy financial burden for the Chadian economy; the debt service due in 1987 amounts to about 15 percent of expected government revenues for the year. Current Situation 9. The Chadian economy has, in many respects, recovered from the devastation of the war. Rapid growth, from an exceedingly low base in 1982, has brought many economic indicators back to pre-war levels. The cotton crop has been quite variable but well within the production range of the past several decades. At the same time, in years of adequate rains, foodcrop production has achieved or surpassed pre-1977 levels, with minimal inputs. Althougl' manufacturing suffered a setback in 1986, all the major industrles have the capacity to produce at or above 1977 levels and have done so in the 1984-85 period. Overall, real GDP has risen to nearly its 1977 level, although it must be shared among an estimated one million more people. Most striking is the limited expansion of the public sector, which has remained, in real terms, much smaller than In previous decades. 10. There are many non-quantifiable aspects of recovery as well, including an atmosphere of dynamism and growth in the informal sector, where Chadians have been exploring ways to fill the gaps in their economy. The number of formal sector, small- and medium-scale enterprises may have declined compared to the 1970s, but more may be owned by Chadians, rather than expatriates. The overwhelming impression is that Chadian entrepreneurs have a wealth of ideas and a dynamic entrepreneurial spirit, but there is a severe shortage of capital and the technical skills needed to turn these ideas into reality. 11. Having recouped many of the losses to the economy in the years following the war, Chad is now moving beyond a period of ->latively "easy" growth associated with immediate reconstruction efforts. The task is now more difficult, especially when the traditional "engine of growth" -- the cotton sector -- is unable to fulfill its former role. The paiallel difficulties of restructuring the cotton sector and defining an appropriate plan for economic development and diversification will limit real growth in the short-run. Similarly, the risk of recurring drought or a resumption of the conflict in the North casts a shadow over prospects for growth. However, the outlook for 1987 and 1988 has several encouraging aspects. First, the world price for cotton is recovering more rapidly than anticipated: it more than doubled in nominal terms from June 1986 to June 1987. Second, incentives for livestock marketing and export will improve with the resumption of exports to Nigeria, which were interrupted in late 1986/early 1987. In general, trade relations with Nigeria should improve as a result of recent bilateral discussions, Third, and finally, donor support is increasing, particularly aid for investment. This will allow Chad to lay the necessary foundation over the next few years for modest but sustained growth. xv - Sectoral Constraints and Priorities 12. Cotton, Cost estimates and financial projections used in this report, indicate that cotton remains a viable crop over the medium- and long-term in Chad. However, this viability is contingent on implementing the reforms defined in the Emergency Cotton Program. Indeed, efforts to improve COTONTCHAD's efficiency must be reinforced. Furthermore, given Chad's over-dependence on cotton, economic diversification must remain a high priority, regardless of the prospects for the world cotton market. Also, policies should be developed to make the volume produced and the price paid for seed cotton more responsive to world market conditions. At the same time, mechanisms and systems must be strengthened to prevent a reoccurrence of the poor financial management and excessive expenditures which inflated COTONTCHAD's production costs beyond profitable levels -- even if world market prices had not collapsed. 13. These concerns will be the focus of the next phase of the rehabilitation program for the cotton sub-sector. A number of flexible solutions are being considered, some of which have recently been adopted by neighboring cotton-producing countries. These might include, not exclusively: (a) differentiating producer prices by region, to favor production in more profitable areas and minimize COTONTCHAD's pre-processing transport costs; and (b) indexing producer prices for seed cotton to world cotton prices, to increase supply responsiveness to market conditions, or partial indexing to mitigate the risk to producers associated with fluctuating prices. 14. COTONTCHAD's profitability and competitiveness on the international market will depend on government actions in certain other sectors as well. In particular, government investments in the road network, transport policies, and transport arrangements with neighboring countries will significantly affect the FOB price of Chad's cotton fiber. In the course of supervisory meetings for the on-going Emergency Program -- and assisted by several consultants' studies of the sub-sector -- the Government, COTONTCHAD, and the donor community have begun to shape the second phase of the cotton program, although more profound discussion is now needed to define the necessary policy reforms and formulate a precise action program. 15. Fooderops. The 1984/85 drought, which produced a serious national cereals deficit, also underlined a chronic problem in Chad: the regions of the Sahelian zone are generally cereal-deficit regions, while those in the Sudanian zone are self-sufficient or in surplus. However, inter-regional marketing is underdeveloped in Chad, constrained, in large part, by communication and transport problems. Therefore, in defining its strategy for foodcrop production, the Government must address two key issues which are interrelated: (i) minimizing production fluctuations and increasing output at a rate which maintains cereals self-sufficiency; and (ii) encouraging marketing, and especially inter-regional transfers, to alleviate regional supply/demand disequilibria. To define an appropriate strategy, the Government needs, first, to clarify its overall goal with respect to food production and food security. - xvi - 16. The Covernment's 1985-88 Interim Plan established regional food self-sufficiency as a p-riuirity objective. (iven the current isolation of some of Chad's regions, the idea of self-suifficiencv on a regional basis is an attractive one. However, it may he unattainable, or attainable at too high a cost, making Inefficient use of scarce investment resources. There is certainly a value inherent in assuring a degree of regional self-sufficiency, and it justifies exploration of alternative production methods in a variety of settings, hut the emphasis on regional self-sufficiency should not overshadow the importance of making efficient investments in production, and, where feasible, in efficient inter-regional trade. A broader objective of ensuring food security is warranted. To this end, the Government needs to make the medium- to long-term Investment in facilitating inter-regional marketing by the private sector in order to (i) provide incentives for increased food production, and (ii) avoid excessive regional price fluctuations and localized food shortages. Given Chad's exceptional transport problems, opening up inter-regional marketing channels will be a lengthy and difficult process. However, in the long run, it is the most efficient and most sustainable means of stabilizing prices and avoiding localized food emergencies. 17. In addition to expanding marketing channels, the Government will have to focus on appropriate research, improved seeds and cultivation techniques, better water management, greater credit availability, and development of support institutions in order to minimize the risk associated with fluctuations in foodcrop production and increase output to maintain Chad's overall cereals self-sufficiency. 18. Although food aid is essential in Chad to overcome periodic aggregate food deficits, it has the potential to depress market prices and discourage cereals production in years of good rains. Chad has made relatively good use of its food aid, but currently -- after two bountiful harvests -- most such aid is no longer needed. However, much of the food aid linked to development activities is difficult to eliminate without jeopardizing its developmental benefits. Such is the case for a number of agricultural projects which are not yet self-financing and for school-feeding programs which provide the primary motivation for sending children to school. In addition, certain non-governmental organizations (NGOs) have a vested interest in the continuation of food aid programs which are the mainstay of their operations. These issues are not easy tu resolve, although donors might consider replacing food aid with surplus local cereals. Regardless of the source of cereals, given Chad's internal and external transport constraints, an in-country security stock is warranted, although the optimal size and location of this stock needs to be determined. Adeqtuate planning for emergency interventions is also necessary. 19, Livestock. The livestock sector of Chad can make a significant contribution to the countrv's economic growth provided that well-focused actions are taken to promote the productive environment, develop water resources, create an appropriate institutional climate, and reform the system of livestock trading and export. Livestock raising and marketing are carried out strictly on a traditional basis, with the fam.ily constituting the basic production unit and ethnic relationships defining migratory patterns. Care must be taken to improve the production environment without drastically altering the sector's socioeconomic - xvii - patterns. The actionis iieoded include: (i) support for animal health; (ii) teclhnical and organizational assistance; (iii) breeding research; (iv) train1ing for extension agents; and (v) the creation and support of producer groups, based on existing socia] structures, which can progressively assume fiull responsibility for distribution of veterinary drugs and( other inputs, and a role in marketing. The present system of livestock trading poses a serious constraint to sector development. First, it cons1st, largely of exports of live animals. Second, the taixed-ownership enterprise SO1ERA has an official monopoly on exports of livestock and meat products; this monopoly needs to be relinquished. Third, trade and marketing efficienev is also hindered by a complex system ol export taxes and licenses, which should be reviewed and streamlined as soon as possible. The Government is currently preparing (with the support of IDA and FAO) a national livestock project which will provide critical institutional support whlle encouraging a larger role for the private sector. 20. Fishing. Chad's fisheries sector is based on the unsystematic exploitation of lake and river resources. Direct interventions in support of this sector have been few and have had little impact. As with the livestock sector, strong ethnic and social traditions have worked against the introduction of organizational structures from outside. Future interventions should be designed to utilize and build on traditional structures through which technical advice and production inputs can be channeled. Given the sector's potential with respect to food self-sufficiency and employment and income generation, fisheries components should be considered for all rural development interventions near major rivers. 21. Industry and Trade. Chad's industrial sector, which contributes about 20 percent of GDP, is dominated by seven enterprises which produce cotton and textiles, sugar, cigarettes, beer and soft drinks, and agricultural equipment. Although five of these are mixed-ownership companies, government interference in the management of industry and trade is minimal. Industrial growth is constrained by weak domestic demand, lack of raw materials, and high production costs, which are attributable, in turn, to over-dependence on imports and the diseconomies of small-scale operations. Moreover, locally-produced goods have to compete with unofficial, untaxed imports which set market prices. However, in order to generate employment and income, Chad needs to give priority to the development of viable, small-scale industries and enterprises. The factors which constrain this development include lack of access to credit and a shortage of management and technical skills. A number of NGOs, particularly Volunteers in Technical Assistance (VITA), have been very helpful in alleviating these constraints. However, greater efforts are needed to channel Chad's considerable entrepreneurial energies from trade to industrv. The Government has a special responsibility for creating an appropriate institutional environment, both at the national and regional level, which encourages domestic production and helps to promote trade through legal channels. This requires actions in the following areas: (i) trade relations, particularly with Nigeria and Cameroon; (ii) fiscal reform, (iii) revision of the Investment Code (to extend tax and customs advantages to Small and medium-scale enterprises); (iv) streamlining of administrative procedures concerning industry and trade; and (v) implementation of an appropriate transport sector strategy. - xviii - 22, Transport. Chad's transport sector, which is dominated by road transport, is so underdeveloped that it hampers not only agriculture, industry and trade, but also hinders the provision of social services. Long distances, difficult terrain, widely dispersed population, lack of suitable construction materials, and high energy prices contribute to high construction and transport costs, which cannot be fully supported by current low volumes of traffic. Chad's highest priority is the restoration of critical road communication between different parts of the countrv. A priority rehabilitation network has been identified for that purpose, although it needs further review. Another priority is the selection of suitable design standards for the various regions. It is also important to ensure that the benefits of rehabilitationi are not lost through lack of miaintenance. Although there may be some scope for increasing the revenues (petroleum tax) earmarked for that purpose, donors will need to assume a major share of maintenance costs in the foreseeable future. The efficiency and development of the sector would be assisted by the removal of the monopoly enjoyed by CTT, the truckers' cooperative, and by elimination, if possible, of the various contrc-.s and fees imposed on Chadian traffic in neighboring countries, 23. EergyZ. Petroleum resources were discovered in 1974 east of Lake Chad and, more recently, in the South as well. U'ntil these resources are exploited, petroleum products have to be trucked over long distances, which greatly increases their landed cost. In 1985, Chad's petroleum import bill was about US$50 million, equivalent to about 27 percent of merchandise imports and 8 percent of GDP. Because the cost of bringing finished products to Chad exceeds the cost of extracting and refining domestic crude, it is economically justified to exploit Chad's oil reserves (in the North) even at prevailing low world prices. Preparation of a project to achieve that was resumed in 1986. If the project proceeds on schedule, Chad should be able to satisfy 80 percent of its demand for petroleum products beginning in the early 1990s. Production for export will have to await a reconfirmation of reserves and a major improvement in world prices. 24. Flectricity production costs are high in Chad, mainly because of the large share of petroleum products in the cost structure and the high cost of imported petroleum. The national electricity and water company (STEE) has been experiencing serious financial difficulties which are attributable to (i) significant technical losses, and (ii) problems in billing and collection. The company is currently defining a rehabilitation plan to deal with these and other problems such as cross-arrears with the Government. Furtlhermore, the construction of a power plant, to be supplied with domestic fuel , is under consideration. 25. Education. Chad's education sector ceased to function during the period 1979-82. Schools throughout the country were looted, destroyed or converted to military use; nearly the entire stock of teaching materials was lost, as were all education statistics and records. Only limited progress has been made since then in restoring minimal acceptable operating conditions in the sector. To meet the country's most basic educational requirements, Chad will have to conicentrate its scant resources on the development of primary education. The Covernment s strategy for this sub-sector should focus on: (i) encouraging community participation in the cost and management of the sub-sector; (ii) strengthening and expanding teacher training, particularly in-service training; and (iii) reinforcing the planning and monitoring capacities of the institutions involved. Once - xix - the basic requirements of the primary education system have been assured, Chad should address the long-term priorities for secondary and post-secondary education. Specific areas which merit examination include the development of a core curriculum suited to the countrv's educational environment and human resource needs, and the potential for private sector participation in vocational training. 26. Health. Infant, child .nd maternal mortality rates are very high in Chad, reflecting poverty, chronic malnutrition, lack of access to safe water, little or no health education, limited access to health care, poorly trained health personnel, and inadequate health facilities, equipment and medical supplies. Health care has been the focus of numerous, sustained interventions by donor agencies, NGOs and church-related groups. Many have created delivery systems which operate for the most part independently of the national health care system. These parallel systems, though essential and laudable, have made the coordination of health services and the definition and implementation of a national health sector strategy more complex. Such a strategy is needed in order to arrive at the most appropriate allocation of scarce resources among competing needs. Moreover, new aid commitments in the health sector are declining as donors diversify into other sectors; the Government is, therefore, faced with the need to develop alternative methods of health care financing. Here, as in education, cost recovery offeis possibilities. The growing number of community and church-sponsored dispensaries and pharmacies that do charge fees suggests that access may be a bigger constraint to health care than willingness or ability to pay, provided that fees are kept very modest. Medium-Term Prospects 27. According to this report's projections, the Chadian economy is expected to expand at an annual rate of 2 percent through 1989 -- slower than the population growth rate of 2.4 percent. This is largely because of the gross under-investment which has occurred over the last 10 years; the inevitable focus of recent and on-going investments on reconstruction and rehabilitation; the short-term recessionary impact of the cotton crisis; the already high level of fooderop production as a result of generally favorable weather; and the rormal lag between policy decisions and results. However, as the policy and institutional changes on which the projections are predicated take hold and, in particular, as the focus shifts from emergency operations to development-oriented projects, the growth rate of CDP can be expected to accelerate to 2.4 percent a year in 1989-92 and to receive a further boost by the projected start of domestic refined-petroleum production in the early 1990s. Thus, GDP growth is projected to overtake population growth beginning in 1991 and to average 4.7 percent a year in 1992-95, with petroleum, 3.2 percent without petroleum. 28. Under the same base scenario, Chad's external current account deficit is anticipated to double in absolute terms by the mid-1990s, but it would remain at roughly the present share of GDP, namely 23 percent. -he projected aid flows, moreover, should be sufficient to finance the deficit. Total assistance to Chad (grants and loans) would increase from about US$148 million in 1986 to nearly US$450 million in 1995, implying a trebling of per capita assistance. Despite this rapid growth (14 percent - xx - in nominal terms a year), by 1995, per capita aid to Chad would be US$52 in 1986 US dollars -- a figure significantly lower than the recent level of assistance to a number of low-income African countries, none of which have suffered similar devastation. 29. The sensitivity of the above projections was tested by considering six alternative sets of assumptions regarding cotton prices and output, cereals production, and aid flows. The analysis revealed that variations in aid flows have the biggest impact on aggregate production. This is not surprising because 65 percent of aid is estimated to consist of development assistance, which "drives" investment; moreover, aid is the biggest "sector" of the Chadian economy, being equivalent to more than 2.5 t±mes the level of export earnings. The results of the sensitivity analysis have nevertheless three important implications: o Given the importance of external assistance in shaping Chad's future, avoiding fluctuations in it should be as important as its absolute level. Systematic and effective aid coordination and investment programming are essential to achieve that objective. o Projections are even more sensitive to Government policies than to aid flows because they determine: (i) how much aid Chad needs, especially budgetary support; (ii) whether and how easily Chad can obtain aid; and (iii) how well it uses it -- which, in turn, influences its ability to mobilize additional aid. o , Chad has an interest in maximizing aid. But two caveats are in order in this connection. First, as a result of the aid flows underlying the above projections, Chad's total debt (disbursed and outstanding) would rise from about US$200 million in 1986 to more thdn US$1.3 billion, or around 80 percent of GDP, by 1995. Practically all of this aid is projected to come from multilateral organizations at highly concessional terms (most bilateral aid already consists of and is expected to remain in the form of grants). Although the resulting debt service will be low compared to that of most countries, it will prove a heavy burden for the fragile Chadian budget. Second, an increase in aid of the magnitude projected will require an extraordinary effort to identify projects which can effectively absorb such assistance and to establish the institutional capacity needed to implement and supervise these projects. Although the increase is feasible, it is less certain that it can be achieved in the projection timeframe of eight years without exceptional efforts by Chad and the donors, Therefore, until the institutional and micro (project) bases for them take shape, the macro projections summarized above must remain merely illustrative. Medium-Term Policy Framework 30. The realization of the above projections depends on the implementation of certain policies and actions over the medium-term. These are incorporated in a coherent policy framework prepared by the Government in collaboration with the IMF and the World Bank. The framework covers the period July 1987 to June 1990 and comprises two groups of actions: sectoral policies, especially in the rural sector, and economic management. - xxi - Many of the measures are already under Implementation and all are embodied in a detailed action program, prepared by the Government, which itemizes the various steps and their implementation schedules. Only the general objectives of the measures -- and only the most important among them -- can be highlighted in this space. 31. In support of the cotton sub-sector, the policy framework integrates the on-going Emergency Program but also includes measures which aim to (a) strengthen management and Improve financial monitoring through technical assistance and external audits, and (b) adjust prices and production levels as warranted by market conditions. For foodcrops and livestock, the framework alms largely at the preparation of sector or sub-sector strategies, currently lacking, with the help of well-focused studies. Specific measures include redefinition of the roles of ONC (the National Cereals Office) and SOTERA. In both cases, the objective is to minimize market intervention, which has proven ineffective and, in some cases, detrimental to sub-sector growth. In the transport sector, a key objective is the definition of a sector strategy. The action program for the sector includes the reexamination of the role of CTT with a view to stimulating competition in the industry. The action program for economic management is centered on the programming and budgeting of public investment, where the objective is the preparation of a rolling multi-year public investment program to be implemented through annual investment budgets. A number of actions are also planned to address the problems of the public enterprise sector. These are to be implemented in phases, starting with audits, which are to be followed by measures to improve accounting practices and enterprise management. The action program includes reexamination of the role and justification of a number of enterprises which have a significant impact either on public finances or on the economy. 32. The objectives of the policy framework in public finance are to: (i) increase revenues by strengthening tax collection and administration, reduce abatements and exemptions and introduce a new system for taxing petroleum products; (ii) restrain the growth of expenditures through the application of strict controls such as quarterly ceilings, the integration of certain extra-budgetarv expenditures into the general Treasury balance sheet, and limiting recruitment of civil servants; (iii) eliminate existing domestic arrears and prevent the accumulation of new ones; and (iv) improve external debt management with respect to both borrowing and orderly debt service payment. 33. The implementation of the policy framework will depend first and foremost on political will, especiallv the Government's resolve to act on all the policy areas stipulated, as the measures are inter-dependent. Judging by the Government's performance to date, the needed resolve is there. The donors can assist in the implementation of the policy framework by: (i) ensuring coordination of financial and technical assistance, both among themselves and with the Government; (ii) financing recurrent costs as much as possible; and (iii) maintaining a frank dialogue with the authorities on strategies and policies. Finally, implementation will depend on the quality and effective use of technical assistance, for which both the donor community and the Chadian Government must take responsibility. - xxii - 34. It should he underlined in this connection that (.had is so highly dependent on aid that it cannot adequately influence allocation decisions: if budgetary aid arrives, salaries are paid; if it does not, they are not paid. Often donors take full respf-sibility for choosing, financilng, executing and monitoring aid projects. lt is important to malke the Chadian authorities equal partners in these decisions by helping them acquiire the necessary statistical base, knowledge and analytical skills, In Chad's context, slow progress may be preferable to fast if the by-product is the reinforcement of Chadian skills -- and self-confidence. A Complementary Agenda 35. The policy framework is limited to the most urgent actions in key sectors. In parallel with those actions, the Government will need to take or plan actions in the same or other areas that go beyond the medium term. Highlights of such a complementary agenda are as follows. With regard to the all-important COTONTCHAD, actions fall into two categories: (i) follow-up on the Fmergency Program. Chief among this group of actions is a realistic rescheduling of COTONTCIIAD's arrears owed to the Central Bank. The financial projections in this report indicate that a significantly more liberal rescheduling is essential for the recovery of COTONTCHAD, the cotton sub-sector and the overall economy; (ii) new questions that would need to be addressed in the design of Phase II. Among these are the nature of the fiscal regime to be applied to COTONTCHAD once the company's profitability is restored, and the possibility of restructuring the ownership of the enterprise. Concerning agriculture other than cotton, three areas merit special attention: (a) research, (b) marketing, and (c) irrigation, where a national strategy is needed to minimize fluctuations in production. Two other problems need to be addressed under the agriculture heading, although their solution is long-term and requires multisectoral approaches; they are desertification and soil conservation. In the livestock sector, increasing attention needs to be given to the problem of distribution of drugs, vaccinations and pastoral water points, taking into account nomadic routes and grazing systems, and the development of a market for frozen meat exports. 36. The complementary agenda also includes (i) reactivation of mineral exploration (which, before the war, revealed indications of a number of minerals); (ii) reexamination of energy sector policies once petroleum production starts, as the latter will have ramifications for the cost and price structure of STEE, the availability and cost of sub-products, etc; and (iii) definition of a strategy to develop the tourism sector, which has a not insignificant potential. With regard to industry and commerce, key questions that need to be addressed are the long-term viability and growth potential of the existing four large manufacturing enterprises (textiles, cigarettes, beer, and sugar) and the potential for diversification of manufacturing. 37. Concerning economic management, the complementary agenda extends the focus from programming and budgeting to medium and long-term planning, paying particular attention to developing in-house capability. With respect to public finance, the priorities include the implementation of a fiscal reform and other measures to expand the revenue base partly by bringing an increasing part of the informal sector into the official, - xxi i - recorded economy; improvement of the budgetary process so as to base it more closely on resource availability; and preparation of an action program for restoring civil service salaries to a more realistic, equitable level consistent with financial resources and efficJency. Toward a Chadian Future 38. The outcome of these actions will depend to a significant extent on Chad's success in learning from experience and avoiding the mistakes made by other developing countries in the past. Chad needs to avoid especially an over-expansion of the government apparatus, over-regulation, and projects that are not founded on clearly articulated strategies or which involve the crea!ion of new public enterprises. Chad should also beware of creating a structural dependence on technical assistance, i.e., introducing it without a time-bound program for replacing it tlhrcugh well-focused on-the-job and other training. Chad should also try to avoid an unmanageable rate of urbanization, given the problem of unemployment, the needs for services, and the high import-content of urban consumption. 39. While avoiding the mistakes of others, Chad must take careful account of its own heritage and experience as well as local conditions in defining a future. This is particularly true with respect to fostering national unity, diversification of the economy, promotion of the private sector, human resource development, and preservation of the ecological system. Key points are: o National Unity. This is an extremely important goal of the Government. Although significant progress has been achieved, expanding and solidifying it will require economic integration, i.e., the interlinking of regions through transport, trade and balanced access to services. The objective should be the participation of the largest possible number of communities in the development process. O Diversification. Efforts should concentrate not only on the introduction of new activities but also on the revitalization of traditional production (niebe, gum arabica, etc.), the output of which can be significantly increased. Furthermore, diversification should be pursued in the context of the regional African market; Chad's economic future depends more on that market than on the national or overseas market. o Promotion of the Private Sector. The success of the adjustment effort, of which diversification is a vital part, will depend just as much on private sector initiative as on government action. Despite the considerable progress achieved since the end of the war, the revitalization of the private sector has a long way to go. Creating the conditions which permit Chadian entrepreneurs to launch productive enterprises and which encourage the return of foreign companies or the arrival of new companies would accelerate the development of the private sector. o Human Resource Development. Rather than rely on eco,Lomic growth to gradually improve welfare, Chad needs to invest in human resource development now in order to make an acceleration of - xxiv - economic development possible. These investments need to be tailored to existing social structures. Traditional bonds, whether at the level of the extended family or the ethnic group, are still very strong in Chad. They are an extremely important asset in a country where the Government does not have the resources to assume the role of all-giver (Etat providence). The country was able to withstand the effects of drought largely because of those bonds. Development must therefore be based on them rather than act against tlhem. O Ecological Balance. Cho1 has a fragile ecological system which faces many problems: deforestation, deterioration of soil conditions, and exhaustion of water supply. The problems are difficult, but not insurmountable, if the key parties concerned -- the Chadian authorities, donors, farmers and herders -- work together. And this they must do, because the physical environment, which has shaped Chad's past more than any other factor, will also shape its future. - xxv - INTRODUCTION 1, The last country economic memorandum (CEM) on Chad was distributed in 1977 and covered developments through 1975. 1/ A total of four CEMs were prepared from 1968 to 1977, with a cycle of roughly three years (1968, 1971, 1973, and 1977). This cycle was interrupted primarily because of the political/military events experienced by Chad between 1979 and 1982. 2. The timing of the current CEM is attributable to a number of factors besides the return of stability to most of the country. The first concerns the statistical bas of Chad, which was almost entirely destroyed during the conflict. AlthouE the data base still has serious deficiencies, which inhibit a full and classical analysis of the economy, ,iere is -- after a long hiatus -- sufficient information to prepare a reasonably reliable assessment of Chad's overall economic situation, major constraints and broad prospects. Second, the main economic institutions (ministries, banks, large enterprises, etc.), which have been substantially reconstituted since 1982, have begun to turn their attention from short-term concerns to longer-term issues. Third, Chad's relations with the donors are normalized, and the policy dialogue with them is strong and growing. Fourth, as noted in the Preface, cooperation among the donors is also at a high level; they are eager to share information and pursue shared objectives. 3. These factors have also shaped the intended audience and the objectives of this CEM, which is addressed, in particular, to the Bank, the Government of Chad, and the donor community: the Bank, because of the hiatus of 10 years since the last CEM; the Government, because Chadian institutions have, for the moment, very limited capacity for economic analysis; and the donors, because shared objectives presuppose shared knowledge. 4. The objectives of the CEM are to take stock of the economic and social situation of Chad -- in the aftermath of a turbulent period characterized by protracted conflict, two droughts and the collapse of the world price of cotton, Chad's major export -- and to define as clearly as possible the actions and resources necessary to improve the situation and prospects. It should be stressed that any diagnosis of the problems in the Chadian economy at this time is subject to a significant margin of error (partly because of statistical limitations), and its prospects are subject to wide uncertainties as well. It is therefore, too early, and risky, to propose long-term solutions to this country's well-known, long-standing problems -- low income, landlocked location, overconcentration on cotton -- which have been exacerbated by the war of 1979-82. It is now time, however, to raise long-term questions and suggest first steps, accepting the risk which this entails. The theme of this report is, therefore, the identification of priorities wherever possible. 1/ Republic of Chad: Economic Memorandum (Report No, 1340-CD), June 30, 1977. - xxvi - 5. Chapter I of the CEM provides background on the evolution of the Chadian economy since the mid-seventies, the period covered by the last CEM, focusing on the far-reaching and lingering effects of the 1979-82 conflict. Recent developments are th( focus of Chapter II; in addition to examiniing the main macroeconomic aggregates, this chapter reviews the initiatives taken by the Government as well as the donors in the last 2-3 years. Chapters III to V contain a discussion of sectoral issues and priorities, covering the productive, infrastructure and social sectors and focusing, inter alia, on sectoral strategies and the need to define or refine them. Chapter VI examines the determinants of future trends in Chad, which include exogenous and semi-exogenous factors such as trade relations, domestic resource mobilization, investment prospects, and institutional constraints. Finally, Chapter VII presents medium-term projections and the policies associated with them, distinguishing between those already adopted by the Government and those to be adopted or implemented. That chapter closes with a brief discussion of the issues which belong on the longer-term agenda of Chad but require increasing attention. Among these are diversification, private sector strengthening, environmental issues, and development of human resources -- Chad's most important asset by far. 6. Annex I presents a synopsis of the world cotton situation and outlook. The activities of non-governmental organizations (NGOs) in Chad are reviewed in Annex 2, and the Government's action program for the next three years is outlined in matrix form in Annex 3. Annex 4 contains a list of suggested actions that complement the medium-term program. To assist the researcher at this critical juncture, the report also contains (in Annex 5) a bibliography of relevant publications, including official documents which are not available to the public at large. 7. This is the Bank's first economic report on Chad in more than a decade. For this reason, the choice was made to focus intently on those sectors and sub-sectors which are of primary and immediate importance to the Chadian economy. A number of other topics were addressed only briefly, including, most notably, telecommunications, air transport, environmental concerns, and tourism. In many instances, the almost complete lack of information and data prevented anything but a cursory analysis. Such was the case, for example, for the informal sector which clearly plays a central role in the development of the Chadian economy. As the Government increasingly establishes priorities for longer-term development, and as studies are launched and data gathered, the scope of the Bank's future economic reports will be broadened to encompass other important sectors and issues. I. BACKGROUND A. General Characteristics 1. Chad has a number of characteristics which determine its economic as well as social and political development. These fall into three broad categories. The first group, and the most important, are physical, beginning with the country's location. Although Chad is not the only landlocked country in Africa, it is among the least accessible and the largest. 1/ The distarce between the nearest seaport (Port Harcourt, Nigeria) and the capital city, N'Djamena, is 1,765 km. The Chadian towns of Abeche and Sarh are further away from the sea by 760 km and 560 km, respectively (see the map on the next page). Moreover, because of the poor state of the roads, the cost of land transport per t/km is significantly greater within Chad than on external routes. It is, therefore, not uncommon for the cost of a product in Abeche or Sarh to be twice the f.o.b. cost in Europe. This is an extraordinary penalty for a country with Chad's per capita income. The landlocked location of Chad accentuates, inter alia, the importance of maintaining good political and economic relations with its neighbors. 2/ 2. Another physical characteristic of Chad is its "asymmetrical" nature with respect to climate, especially rainfall. Whereas the northern half is arid, lying within the Saharan zone, the southern region is tropical, with abundant rains feeding two perennial rivers, which feed a major lake (Lake Chad). This asymmetry -- which is also found in the distribution of population and the configuration of cultures -- produces extremes. For example, the North has generally 4 days of rain per year compared to 95 days for the South (66 days for N'Djamena). Flooding is common and a major problem in the South (also because of soil conditions) making roads impassable for days or weeks. On the other hand, because of the temperature level, which reaches 120 degrees (F) in the shade in April, 90 nercent of the water flowing into Lake Chad evaporates. 3. More important than the variability of weather and rain by region is their variability over time. Chad has experienced no less than six droughts in the last twenty years, two of them especially severe. A dramatic illustration is provided by the variation in the size of Lake Chad over the last century. Its size, which had been estimated at 28,000 sq.km. in 1870, stood at 12,700 sq.km. in 1908; it reached 26,000 sq.km. in 1963 but shrank to less than 5,000 sq.km. in 1984. The amplitude of the fluctuations and the uncertainty of their timing place a heavy burden on the administration and the population, and constrain the utilization of natural resources. Well-being severely suffers; occupations change -- one 1/ With about 1.3 million sq. km. (more than twice the area of France), Chad is the 5th largest country In Africa and the 20th largest in the world. 2/ Sudan, C.A.R., Niger, Nigeria, Cameroon, and Libya. - 2 - year there may be 50,000 fishermen, next vear none; and planning becomes d.fficult, if not impossible, in an environment where the extreme is not unusual: it is as if one had to plan for two lives. Moreover, the end of the drought brings its own problems or dangers such as premature resettlement and overdependence on food aid. All of these problems are difficult enough, and more so for a poor country like Chad. 4. A second group of characteristics concern the Chadian population's adaptation to the physical environment. Chad's population was estimated at about 5 million in 1985 -- an average density of 4 inhabitants per square kilometer although density varies greatly by region. Only about 3 percent of the population live in the northern Saharan zone where soils are sandy and annual rainfall is less than 300 mm. The dominant activity here is nomadic and transhumant livestock herding; crop production is limited to oases and to the lowlands during occasional flooding. Roughly 40 percent live in the southern, Sudanian zone which covers 25 percent of Chad's area, where soils are heavy clay and annual rainfall is 600-1,200 mm. Physical conditions in this region allow the production of cotton as a ca,h crop and of cereals, tubers and groundnuts (for the local market) as major foodcrops. In between these two extremes lies the Sahelian zone with mixed sand and lcam soils and 300-600 mm of rainfall. More than half of the population live in this area, where subsistence agriculture is blended with livestock herding by settled farmers and semi- nomadic herders. The blend changes in favor of livestock as one moves north. Crop production is centered on millet and sorghum, the main staples in the Chadian diet. Although 80 percent of Chad's population live in rural areas, the urban population has been growing faster thap the total population, as elsewhere in Africa. N'Djamena is estimated to have about 400,000 inhabitants, or twice the level of just 12 years ago. 5. The demographic pattern mirrors the distribution of economic opportunities -- which are shaped largely by the physical environment -- except in the case of N'Djamena whose growth is more recent and the reasons for which are more complex. Cotton, too, is perhaps a special case. Although the climate and soil in the southern region are suitable for its cultivation, it was only introduced -- indeed, imposed -- by the colonial government in 1925: cotton cultivation was "mandatory" for a number of years. Production increased steadily since then, largely because of the organization of inputs distribution and processing, which led to expanded acreage. 6. The third and last group of Chad's distinguishing characteristics is cultural pluralism of its population, in particular: its 20 major ethnic groups, the largest being the Sara (in the south), the Arabs (in central Chad) and the Maba (in east-central Chad); its religions (Tslam, Christianity and Animism); and its languages (consisting of 12 groups and as many as 110 dialects). 7. These three groups of characteristics go far to explain Chad. For example, the physical differences that are observed as one moves north are reflected in income disparities which reinforce the potential for conflict; even the interruption of communication (because of flooding and the poor state of the roads) on a seasonal basis reinforces that potential by adversely affecting different sub-regions and ethnic groups '3- ~~~~~~~IBRD 2 146 ,, ,’8, o. ,> 150 /s t0° 15° ~~~~~~~ARAB REP. v s ~~~~~~LIBYA jOF EGYPT ALGERIA //V '. _.W zs ,__a NIGER|i ,' ~CHAD _ '_'--.\ r _,_ t1, *,fAPt:hi A SUDAN L \lr ? NIEI r XMRO ) .oobr kutu~~~~~~~~~~ MwWdeobo \ > ! , J ZAI~~~~FRIAN REPBI EQUATORIAt~~~~~~~~~~~~~~~~~~~ 8mbr a(i CUINEA j _ _ _ jo°j"'° } ,-,ab L18COREVLL Nkn; ob 84to PEOPL U t < > REP. ' o,_~~~~~~ZIR GABON iOF THE . SCONGCV, MOYOum f4 0 BR^AZZVtL v INTERNATIONAL TRANSPORT k- "'N I - vSINSHASA CONNECTIONS _0 ~ ~ ~ pn*Nii Oj1. t Airports og i ~~~~~~~~~~~~National CapHitas \,<.14ef~~~~~~~~~~odlRilroads ANGOlA River Route . I~~~~~~~~~~~~~~~~~~~~~~~ntemnotional Boundairies o so X oo I so 200 v>>@f>2b#tt-£tth*s**f6-*@S*t-W~~~~~~~ o 0 260 30 _ 0CSVa ’11lVlrlfftO_liEte.vlS ~~~~~~~~~~~~~~~~~~~~~~~Kilo0efe,s _ I __ i * - | ~~~~~~~~~~~~~~~~~~~~~~MAY 1987 7- ;Z-p - 5 - disproportionatelv. Similarly, the unrecorded exportation of 14ve animals, or livestock "on the hoof," to Nigeria is the product of physical (not just economic) factors, and the existence of ethnic ties across borders. 8. One fact stands out above all others: the extent of Chad's dependencv on che physical environment and on fluctuations in it which are beyond the country's control. Although the dominant share of cotton in its export earnings makes Chad especially vulnerable to fluctuations in the world price of this commodity, this vulnerability is accentuated by weather-induced fluctuations on the supply side: since Chad is a price taker on the world market, a decline in output may coincide with a lower world price. B. The Economy Since Independence 9. There are very few statistical series that go back to 1960 in Chad. Even when historical estimates are available and they show a change, it is difficult to determine whether the change is real or whether it reflects a change in the estimation methodology or in the accuracy of the data. This is true of the population estimates, which suggest an acceleration in the growth rate since 1960. 3/ Although this is not inconsisteint with experience elsewhere in Africa, there is a particularly severe lack of supporting data in Chad. Similar reservations apply to historical estimates of GDP, which lack both continuity and consistency. Partly for that reason, this section does not attempt to trace the economic history of this period; it focuses, rather, on selected developments which can help to understand where Chad stands now and why. 1. The First Seventeen Years 10. Chad's economy expanded more or less steadily, but modestly, in the first seventeen years after Independence. Available data indicate that during the 1960s, GDP grew at an estimated annual rate of 5 percent in current prices and about 2 percent or less in constant prices, possibly leading to a decline in real per capita income (see para. 9 for population figures). Growth occurred primarily in the monetized economy, which includes cotton, commercial activities ard public sector services; the traditional economy is estimated to have growr by 1.6 percent annually. In the first half of the 1970s, which witnessed a major multi-year drought, the average annual (real) growth rate of GDP decelerated to less than one percent. 4/ 3/ The last five CEMs cite the following estimates: 1968 CEM, 1.4 percent; 1971 CEM, 2.0 percent; 1973 and 1977 CEMs, 2.1 percent; current CEM, 2.4 percent. 4/ World Bank, Chad's Economic Development: Constraints and Potential (Report No. 75a-CD), July 2, 1973, p. 3; and 1977 CEM, op.cit, Table 2.2. - 6 - 11. Chad was less prepared at Independence than most other countries in Africa. In 1960, the countrv had no paved roads, and the only all-weather road was from N'Djamena (Fort-Lamy) to Sarh (Fort-Archambault). There was one phvsician per 73,000 people; life expectancy at birth was 39 years; onlv 17 percent of the primary-school age population attended school; and the enrollment ratio for secondary school was less than one percent. Moreover, even in 1967, 15 percent of the labor force consisted of non-Chadians. The proportion of non-Chadians in top and middle management was about 95 percent; even in the case of foremen, it was 80 percent. 5/ 12. Independence was followed by internal and external turmoil which has persisted in recent years. The most revealing statistical indicator of the first years of Independence is the share of detense and security outlays in government current expenditures, which increased from 7.7 percent in 1960 to 29.4 percent in 1966. 6/ Yet government revenue increased by 15 percent a year during this period (faster than GDP), and the current budget was in surplus or in balance from 1963 to 1967. The increase in revenues came from new taxes, improved tax administration and larger cotton crops. The surpluses helped to finance 20 percent of the government Investment budget. 13. The ratio of investment, public and private, to GDP hovered around 10 percent during the sixties -- not an impressive figure -- partly because of the growing security outlays. Moreover, while external assistance did expand in the second half of the decade, a growing proportion went to finance the emerging budgetary deficits (after 1967) and miscellaneous current expenditures. In 1969, only 37 percent of the external aid consisted of "development assistance;" 36 percent consisted of "technical assistance," mostly to pay foreign teachers, and 27 percent of "current assistance". 7/ This pattern was to be repeated in the early 198Cs. 14. The most important influences on this period -- other than internal instability -- were the weather and the evolution of the decisions affecting the cotton sector. Climatic conditions were normal-to-favorable during the sixties, with the exception of a drought in 1969. Chad was self-sufficient in cereals throughout the decade -- by a large margin in the second half (see Chart 1). A severe drought from 1971 to 1973 transformed the surplus into a deficit which was met largely through food aid. The drought, nevertheless, had a profound effect throughout the economy. GDP declined by 9 percent in real terms in 1973, its agricultural component recording a 14 percent drop. Moreover, a third of the cattle herd was lost, bringing about a net disinvestment irn that peak drought year. 5/ 1973, op.cit., Table 1.10. 6/ World Bank, The Economy of the Republic of Chad, (Report No. SF0071), March, 1968, Table 15. 7/ World Bank, The Current Economic Situation and Prospects of Chad (Report No. AW-24a), April 9, 1971, p. 13, FOOD NEEDS, CEREALS PRODUCTION AND L-IVESTOCK HERD, 1965-85 800' *16000 LEGEND 700-_ - 15000 _- PRODUCTION t -- NEEDS - 14000 200 2 I l l l 0 013000 cn 500 -12000 o ..'400 \V (D ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~FO ED COYFSOL CR>ED 11000 = : 300- -10000 200 - 9000 100- 8000 o f-] ~~~~~~~~~~~~~~~7000 U 65 67 69 71 73 75 77 79 81 83 85 Yea r MOOD NEEDS OOVERS ON4LY CE0REALS NM:S Pe I 15. Cotton prodtuction was also affected bv the fluctuations iD climatic conditions through the first seventeen years. A bigger influence, however, was the introduction of "productivity programs" beginning in 1960, as discussed in Chapter TJJ. These programs contrilbuted to increasing yields by as much as 40 percent in the late sixties and led to a dramatic decline in area planted beginning in the mid-1970s. In addition, after remaining unchanged at CFAF 26/kg for 14 vears, the producer price of cotton was raised in four successive steps to CFAF 43/kg by 1974/75 (Chart 2). The price increase, together with the normalization of weather after the 1971-73 drought, boosted production by 25 percent and earnings by even more, as ic coincided with the worldwide commodity boom. This produced a "euphoria", as manifested in the adoption of the extraordinary cotton production target of 750,000 tons for 1975/76 which, under "Operation Agriculture", was to be achieved by directing city workers into cultivation 8/. Although the scheme was swiftlv abandoned, cotton output nevertheless Increased bv another 21 percent that year, to 174,000 tons -- a historical record. 16. lt should be noted that government revenue declined by more than 20 percent during the 1970-73 drought and the current deficit doubled. The current deficit was halved when good weather returned and revenues increased in 1975. By the mid-seventies Government revenues were at a higher level than their pre-drought level, and aggregate production was at its peak with a GDP of CFAF 160 billion (US$157 per capita) in 1977, thanks to the large cotton crops. At that time, in addition to an active informal sector, Chad had four local banks, several large manufacturing industries, and about 90 small and medium-scale enterprises (SMEs). 2. The Period 1978-85 17. Over the past decade, Chad has been devastated by three successive calamities: (i) an internal conflict which was much more divisive and violent than any experienced before; (ii) a drought of unprecedented severity; and (iii) a decline in the world price of cotton, sharper and more abrupt than any in that commoditv's history. Although data for the war period (1979-82) are limited and unreliable, the drop of about 30 percent in aggregate output over those years reflects the severity of the economic disruption experienced. The modern sector was the hardest hit, with u,ost inidustries severely reducing or suspending operations. The banking sector shut down for two years, as did the Central Bank. Amazingly, the cotton industry continued to operate, overcoming great logistical difficulties and maintaining an average seed cotton production of about 65 percent that of 1973-77. More than half of the small- and medium-scale enterprises (SMEs) were abandoned or temporarily shut down. The population of N'Djamena fell to less than a third of its pre-war level of 300,000, and the city was largely destroyed. Most expatriates left the courtrv. Political administration at all levels ceased to function, and public utilities and government services were abandoned. Much infrastructure and physical capital was destroyed or dilapidated from lack 8/ Africa South of Sahara, p. 294. - 10 - of maintenance; the road network, in particular, deteriorated severely, crippling internal trade and producing economic fragmentation. 18. With the establishment of the current government in 1982 and the progressive restoration of relative political stability, the economy began a period of recovery, with real GDP growing by 5.5 percent in 1983, to reach nearly 78 percent of the 1977 level. Economic recovery was stalled, however, by the unprecedented drought of 1984-85, which shrank Lake Chad to one-tenth of its normal size and dried up segments of the Chari River. Cereals production dropped to only 346,000 tons, causing a cereals deficit of about 300,000 tons, or half of total requirements. The northern Sahelian zone was particularly affected, creating an influx of refugees in the Sudanian zone. A well-coordinated international relief effort, led by UNDP and with full cooperation from the Covernment, averted widespread famine and avoided the establishment of refugee camps through the skillful relocation and resettlement of displaced populations in productive agricultural zones (see page 1 of Annex 2 on the role of SECADEV in defining this resettlement policy). Nonetheless, the decline in cereals production brought economic recovery to a halt, with a 5.5 percent drop in real GDP in 1984. 19. Although good rainfall returned in 1985, this favorable development was overshadowed by the collapse of the world price of cotton: between April 1984 and mid-1985, the price of Chadian cotton fell by nearly 40 percent. These developments are examined in the next two chapters. 20. During the 1983-85 period, Chad benefitted from substantial donor assistance totaling about US$325 million. The allocation of that assistance reflected the emergency nature of the difficulties and Chad's revenue constraints: 52 percent consisted of emergency aid, mostly food, 10 percent of budgetary assistance, and less than 40 percent of development assistance. 9/ C. The Development Challenge 21. This review of Chad's experience since Independence leads to the following observations. First, if Chad is one of the poorest countries in the world, this is only partly due to its physical and human resource constraints. It is also because (i) it started with little physical and administrative capital at Independence; (il) it has received relatively little development aid; and (iii) political conflict absorbed a great deal of attention ard resources, domestic and external, at the expense of development. 22. Second, despite the physical limitations highlighted in Section A, the country has considerable development potential. It has 9/ Government of Chad, Plan Int6rimaire, 1986-89, p. 28. SEED COTTON PRODUCTION AND PRODUCER PRICE, 1960-84 180- 360 LEGEND 170-. 180 - PRODUCTION 150-. -5 '' PRICE t14S0-- . / \300 AREA 130- --280 120- g ~~~~~~~~~~~~~~~~~~~~~~~~~-260 100- -240 CD 90 220 O 70 -_200 60- 180 50- 50 160 40 / 30- ,,,’D - 140 1 5 -L - - -I 5-- -t 5-- 5-- -_ C_|S 20 i i I I I I I 1 1 - 120 60 62 64 66 68 70 72 74 76 78 80 82 84 Year Produation and area are three-year moving averag. I I %r4 7C - 13 - proven to be self-sufficient in food during various periods in each of the last three decades, and the possibiliti.s for expanding agricultural output are significant. Although only 15 percent of the land is arable, the country is so large that this represents nearly ten times the currently cultivated area. There is also significant potential for irrigation. 10/ In addition, Chad has substantial petroleum resources which can potentially satisfy nearly all of the domestic demand (Chapter IV). Indeed, it is not that Chad does not have the promise to make significant progress, but that it has not had a reasonable chance to do so. 23. Third, by most counts, the development clock has stood still for Chad during the last 10-15 vears. On the negative side, it means that valuable time has been lost, This loss can be measured in different terms, all tragic: in terms of health status and well-being, agricultural research, personal and societal rewards of education, training opportunities and administrative experience... There is also another kind of loss: it is often said that economic development is a "unifier" -- politically and ethnically; if it is, this too is a measure of Chad's loss. The development challenge both at the macro and the sector levels is not too different than it was 10-15 years ago. As stated forthrightly in the 1973 CEM, it is essentially (i) to raise rural production, which would also produce the resources to alleviate poverty, and (ii) to improve health, nutrition, and education -- and of course transport -- without which the potential in agriculture and labor productivity cannot be realized. 11/ 1O/ T. James Goering, Toward Greater Food Security in the Sahel: An Overview of Issues and Prospects, World Bank AGREP, Division Working Paper No. 15, March 23, 1978, p. 16. 11/ 1973 CEM, op.cit., pp. 16 and 32. - 14 - II. RECENT ECONOMIC DEVELOPMENTS 24. Although Chad's economic recovery suffered a setback in 1984 from the impact of the drought on agricultural production, recovery from the destruction and dislocations of 1979-82 continued in other sectors. By 1984, the Central Bank (BEAC) had already re-opened, as had two commercial banks, while all major industries had resumed operations and were producing at or above 1977 levels. The informal trading sector, which had sustained the economy throughout the hostilities, was thriving, and a number of small- and medium-scale enterprises had resumed operations. Although the economy lagged behind 1977 levels in many respects, there were encouraging trends: fiscal revenues were recovering, while export earnings were more than double their nominal 1977 level, thanks ';o an exceptional cotton Crop in 1983/84 and a strong world market. 25. Because of cotton's crucial role in shaping the evolution of the Chadian economy, especially in the last two years, this chapter begins with a review of recent developments in that sector. This is followed by an analysis of the evolution of the public sector and the external accounts. The aggregate macroeconomic picture is examined next within the limitations of available data and estimates. The review then turns allocated to the principal actions taken by the Chadian Government and the donors in recent years. The chapter closes with a summary of the current situation and a brief evaluation of the short-term outlook. A. The Cotton Sector 26. The story of the Chadian economy in 1985 and 1986 is to a large extent the story of how a crisis in the cotton sector has negatively affected virtually all key sectoral and macroeconomic variables. As a resul,t,.,Chadians have been forced to grapple with an economic crisis of unprecedented magnitude, at a time when the country is still recovering from the effects of drought and war. In 1984, and with moderate variation in preceding years, the cotton industry generated about 20 percent of Government budgetary revenues and 60 percent of total export earnings (almost 75 percent of earnings from merchandise exports) as indicated below: Budgetary Export Industrial Credit to Revenues Earnings Turnover Private Sector (in billions of CFAF) 1984 Total 14.8 73.0 64.0 45.9 of which: cotton 2.7 42.4 42.5 18.0 1986 Total ./ 14.2 50.4 42.3 75.0 of which: cotton 0.0 14.7 17.2 42.8 The sector provided cash income and employment for an estimated 650,000 farmers and industrial workers, while the sales of COTONTCHAD, the mixed-ownership cotton enterprise, represented two-thirds of Chad's - 15 - industrial turnover. By the end of 1984, COTONTCHAD had also absorbed almost 40 percent of all domestic credit to the private sector, a figure which would rise as the financial crisis deepened. 27. The roots of the cotton crisis are both exogenous and endogenous. The collapse of prices (see Annex 2) coincided with the ballooning of COTONTCIiAD's production expenditures resulting from poor financial and administrative management. Favorable world market prices in 1983/84 led to an unprecedented 9 percent increase in world cotton acreage in 1984/85. Record yields then produced a world supply totalling 19 million tons of cotton fiber for an estimated world demand of 15.1 million tons. Of particular importance was the emergence of China -- until recently a net importer of cotton -- as a major exporter on the world market. By mid-1986, world stocks had risen to about 10 million tons -- or two-thirds of annual world consumption (see Chart 3). China held nearly half of these stocks. This market disequilibrium led to the sharpest decline ever recorded in the world cotton price: from a peak of US$1.9^/kg in mid-1984 to US$1.34/kg in mid-1985, bottoming out at US$0.83/kg in mid-1986. 12/ Given the level of world stocks, full price recovery is expected to take time, reaching into the next decade. However, the outlook for 1987-88 is significantly better than anticipated less than a year ago. In late 1986, prices began recovering faster than had been expected bv cotton market analysts, reaching more than US$1.40/kg in early 1987 -- rather than the US$1.10/kg predicted six months earlier (Chart 4). The upward movement has continued with prices climbing to US$1.70/kg by mid-1987. 28. Depreciation of the US dollar in 1986 exacerbated the decline in cotton prices in CFAF terms, so that COTONTCHAD's export price fell from a peak of over CFAF 850/kg in 1984 to less than CFAF 300/kg in early 1986, This coincided with a period of lax financial management which led to a rapid escalation in average production costs (see Chapter III, Section A). These costs increased by 70 percent in nominal terms between 1982/83 and 1984/85 -- years with similar levels of production. With average costs of over CFAF 1,100/kg in 1984/85 and an average market price of only about CFAF 430/kg, COTONTCHAD sustained an operating loss of CFAF 18.1 billion (US$41 million) in 1984/85, followed by a CFAF 23.3 billion (US$67 million) deficit in 1985/86. The company was unable to service its considerable short-term debts or fulfill its fiscal obligations, and the continuation of operations in the cotton sector was suddenly thrown into question. 29. The complete collapse of the sector as a result of these developments would have had extraordinarily harsh economic and social consequences, including an abrupt decline in rural income, increased unemployment, paralysis of the banking system, and losses of both Government revenues and export earnings. Faced with this bleak scenario, the Government, in cooperation with the donor community, acted swiftly to implement an emergency program (described in Chapter III) to support the 12/ Unless otherwise specified, all references to world prices in this report are for the "A" index, Middling 1-3/32 inch quality, CIF North Europe. - 16 - cotton industry through a period of adjustment, thereby allowing the continuation of cotton operatlons and banking activities in the short-term. 30. It is against this backdrop that one must assess recent economic developments in Chad. The task is made more difficult by a lack of information on certain fundamental aspects of the economy. Basic data with respect to population, GDP, prices, and investment are either completely lacking or very sketchy, making it extremely difficult to assess real growth and social welfare at the macro level. However, using sectoral and micro-level analyses to supplement macro-level estimates, one can paint a reasonably reliable portrait of an economy struggling to overcome the latest in a series of obstacles to its lohg-run development. B. The Public Sector 1. Overview of Revenues and Expenditures 31. Chad's public sector is small relative to the size of its economy, and has declined as a proportion of GDP in recent years. In 1977, total revenues of the ~entral Government amounted to about 9 percent of GDP while total expenditures represented 11 percent. These figures had dropped to approximately 6.0 and 8.6 percent, respectively, by 1986, and the deficit reached a new peak at 2.6 percent of GDP -- not a particularly alarming figure until one realizes that it represented more than one-third of government revenues in that year. 13/ The small size of Government operations is a consequence of the recent establishment and limited resources of the administration, It also reflects the Government's preference for a liberal economy, where the public sector serves as a complement to -- rather than a substitute for -- private sector activity. On the positive side, the reduced size of Government operations should help Chad to shape an efficient, streamlined administration and avoid subsidy schemes (e.g., for parastatals or consumer goods! 4htlch have drained Government resources in other countries. 32. In absolute terms, both revenues and expenditures increased througlhout the 1°83-85 period, until the impact of the cotton crisis led to a retrenchment in 1986. In the previous year, 1985, the fiscal system had been unaffected by the emerging financial crisis in cotton. In fact, export revenues, swollen to CFAF 3.4 billion by the delayed export of the exceptional 1984 cotton crop, helped total revenues to increase to a record CFAF 21 billion (see Table 1). Expenditures increased more slowly, reducing the fiscal deficit from CFAF 5.6 billion in 1984 to CFAF 3.9 billion in 1985. As in previous years, the deficit was financed partly through the accumulation of arrears, and, in larger part, through external budget support (see Appendix Table 22). 13/ The fiscal accounts presented in this report record only a portion of actual transactions. The actual fiscal deficit is presumed to be significantly greater, predominantly du2 to unrecorded military outlays. WORLD COTTON PRODUCTION, CONSUMPTION, AND STOCKS, 1980-1986 20 1 LEGEND CONSUMPTION 16 _ -PRODUCTION CHINA STOCKS 14- W4- _ . |WORLD STOCKS F-~~~~~~~- 80 81 82 83 84 85 86 Year I I WORLD COTTON PRICE, 1980-87 2.50.._.. LEGEND 2.25 -- AC 2.00- _ESIATE 1.75-. E O1.50- 1.5 .00- 0~~~~~~~18 1.7 Year i N4 a I - 21 - Table 1 - Central Government Consolidated Operations, 1983-86 (billions of CFAF) 1983 1984 1985 1986 Total Revenues 1/ 8.5 18.3 21.3 16.8 of which: tax revenues - 6.5 14.8 17.2 14.2 of which: export duties 0.3 2.7 3.4 0.1 Total Expenditures 2/ 13.2 23.9 25.2 24.3 Salaries 3/ 6,6 6.3 8.2 9.5 Military - 2.1 9.0 9.4 8.4 Goods and services 3.3 2.4 4.5 2.7 External debt service - 0.0 0.1 1.8 1.4 Other 1.2 6.1 1.3 2.3 Deficit(on a commitment basis) -4.7 -5.6 -3,9 -7.5 1/ The consolidated accounts of the Government include the operations of the CAA. 2/ Capital expenditures financed with domestic resources were insignificant in the 1983-86 period. 3/ In addition, there are large military expenditures which are externally financed and do not appear in the Government's budget. 4/ Including 1986 payments for the settlement of arrears. Does not include payments made by the BEAC directly to the IMF. Source: Appendix Tables 17 and 22. 33. The 1986 budget was based largely on the results of the 1985 exercise, and did not foresee the complete loss of cotton revenues for both the Treasury and the Autonomous Amortization Fund (CAA) which is responsible for servicing the external public debt. This loss led to a 21 percent decline in total revenues, reversing the growth of the past two years and producing a 90 percent increase in the fiscal deficit. The urgent need to finance the CFAF 7.5 billion deficit was met with exceptional levels of external budget support. 2. Controlling the Fiscal Deficit 34. During 1986, COTONTCHAD was absolved of all fiscal obligations in the medium-term as part of the Emergency Program. Therefore, the challenge for the Government in the near future is to control the fiscal deficit (in the absence of cotton revenues) by trimming expenditures, which are already exceedingly lean, or generating additional revenues through improvements in the fiscal system and tax administration. It is clear that on the expenditure side, there is little room to maneuver, because revenues are insufficient to cover even the most basic current expenditures. Public investment, estimated at CFAF 30 billion in 1986, is entirely financed through external assistance, as is a significant portion of the associated - 22 - recurrent costs. 14/ Nor does the Central Government subsidize the parapublic sector in any way, barring the possibility of compressing Government expenditures in this area. 15/ 35. Military outlays and salaries are the largest budget items. The former Is highly unpredictable and unlikely to be significantly reduced soon; the latter (salaries) is difficult to compress from its present level. With the reestablishment of the administration and the resumption of normal Government activities in 1982, the number of civil servants increased quickly, and has remained between 20,000-23,000 since early 1985 (see Appendix Table 37). This reflects, in part, the Government's strong support for a policy of national reconciliation which guarantees positions to former civil servants wishing to reenter the administration. The Government wage bill totalled CFAF 8.2 billion in 1985 and CFAF 9.5 billion in 1986 (Table 1). Civil servants are still being paid only 60 percent of the salary scale adopted in 1967. At 60 percent, salaries currently range from CFAF 7,200 to 126,000/month (or US$21-360/month), and the mean salary in 1985 and 1986 was approximately CFAF 38,000/month (around US$100/month). By way of comparison, this mean salary is only 40 percent of the average for employees of Chad's five major industries, and is roughly equivalent to the lowest, entry-level salary in Senegal's civil service in 1985. 16/ Although salaries are low, the Government has not been able to finance the entire wage bill, and, in several instances, wages have been delayed for months at a time while awaiting disbursement of external budget support. There continues to be strong pressure for growth in the civil service, but because of financial constraints, the overall wage bill cannot increase significantly in the near future. 36. Expenditures on goods and services are also extremely compressed, as evidenced by the generalized lack of basic equipment and supplies (e.g., desks, chairs, paper, simple office machines) in Government offices. After reconstruction of,Chad's external debt records in 1983, the Government has attempted to service a growing proportion of the debt due and avoid further arrears. However, a lack of resources has thus far prevented the CAA from servicing the full amount of debt due. Actual payments were only US$4.1 million out of a scheduled US$6.1 million in 1985 and US$2.2 million 14/ See Chapter VI for a discussion of the public investment program and external assistance. 15/ The parapublic enterprises are discussed in Chapters ITT-V dealing with the sectors and in Chapter VI, Section D, under the heading "Economic Management". 16/ Wage distribution appears to be more skewed in Chad's industrial sector than in the administration, however. Several industries have wage scales reaching as low as about 10,000 CFAF/month for semi-skilled laborers, and surpassing 400,000 CFAF/month for mid-level Chadian managers. - 23 - out of a scheduled US$6.8 million in 1986. 17/ The CAA also made a payment of US$1.9 million to settle arrears in 1986. Although the Government has actively negotiated cancellations and re8chedulings of debt service and arrears, the CAA will be responsible for scheduled debt service on existing loans which is expected to rise from about US$7 million in 1987 to more than US$13 million in 1989, placing additional pressure on the Government to find new revenue sources, 37. Until 1986, between 55 and 60 percent of Government tax revenues were derived from international trade, especially import duties. The loss of cotton export duties in 1986 reduced this figure to 45 percent, with the bulk of the remaining tax revenues coming from "unitary" and turnover taxes on goods and services, and from the personal income tax. 18/ The search for additional revenues, particularly in the wake of the cotton crisis, has run up against certain weaknesses in the fiscal systeut. First, ic rests on a narrow, undiversified base, for which the yield is reduced by inadequate tax administration. Second, the Government has only a limited capacIty to analyze the economic and social impact of fiscal options -- a factor leading to a rather unintegrated, ad hoc system of taxation. Often3 this system proves too cumbersome and complex, or too distortionary, causing consumption-switching toward smuggled goods, which creates significant disincentives to domestic production. and/or to marketing through official channels. This, in turn, undercuts the ve,.y revenues the Government seeks to tax. According to the directors of Chad's major industries, consumption-switching to smuggled goods has been a particularly serious problem in the manufacture of cigarettes, soft drinks, sugar, oil and soap. Chad faces an inevitable conflict between the need for Government revenues and the need for undistorted markets in a country where permeable borders permit a steady flow of free-market, smuggled goods. The sectors in which tax mechanisms are particularly cumbersome and/or the tax burden is extremely heavy are generally highly visible sources of revenue, such as livestock marketing, petroleum marketing and manufacturing industries. 38. With the loss of cotton revenues, the Government established i"supplementary" unitary taxes on several key industries (cigarettes, beer, textiles) to bolster CAA's revenues for debt service. It is too early to assess the impact of these taxes, which entered into effect in October 1986, but local heads of industry predict that the increase in consumer prices (which generally reflects 100 percent of the tax under Chad's system of "prix homologu6s") will encourage greater consumption of untaxed, 17/ This does not include additional debt service payments of approximately CFAF 1.0 billion per annum made directly by the BEAC to the IMF. Beginning in 1988, the CAM will assume responsibility for all IMF payments as well. 18/ The unitary tax functions as a tax on industrial production which grants industries exemptions from customs duties on imported inputs. - 24 - smuggled goods, thereby reducing sales of domestic production. 19/ This would exacerbate the recessionary impact of the cotton crisis, which has reduced domestic purchasing power. The Government urgently needs additional sources of revenues, but it must try to broaden the tax base to the greatest extent possible and improve yields. This, in turn, requires increased capacity to analyze fiscal options and to administer the resulting taxes. The potential for improving the fiscal situation is further discussed in Chapter VI. C. The External Sector 1l Overview of the Balance of Payments 39. Chad has experienced trade deficits throughout the 1980's, the Tvagnittude c.f which are determined largely by cotton exports. In 1984, Chad had exceptiorally high export earnings and registered only a modest trade deficit due to the record production of cotton and a strong world market for cotton fiber. The following year, with lower production and collapsing market prices, cotton export earnings were halved and total export earnings on goods dropped by one-third. If livestock exports -- for which no 1977 data are available -- are excluded, 1985 export earnings only reached approximately the same nominal level as in 1977. Continued difficulties in the cotton sector in 1986 led to further decline in export earnings. At the same time, the value of imports increased by almost 40 percent in 1985 to more than CFAF 80 billion, and were only partially cut back -- to about CFAF 70 billion -- in 1986. As a result, the modest trade deficits of 1983 and 1984 grew into a large deficit in 1985, which only marginally improved in 1986 (see Table 2). At the same time, payments for non-factor services skyrocketed, predominantly because of services associated with oil exploration. Chad's current account, which had also registered relatively modest deficits in the 1982-84 period, recorded a deficit of CFAF 60 billion (US$130 million) in 1985. This deficit was equal to almost one-fifth of,estimated GDP for that year. Despite substantially increased disbursements of development assistance (both grants and loans), as well as US$54 million in direct investment by the ESSO oil company, net reserves were drawn down -- for the first time since 1981 -- by CFAF 11 billion (US$32 million). 19/ "Prix homologu6s'" are Government price ceilings based, in principle, on production costs plus 7 percent profit margin. Establishment of 2rix homolo&u6s is slow and often does not keep pace with rising costs. In establishing new taxes, the Government sought to protect industries by increasing the prix homologugs by the full amount of the tax (except for textiles). However, passing 100 percent of the tax on to consumers may lead to switching in favor of smuggled goods. Fiscal questions aside, it is difficult to see the value of price ceilings if, in fact, smuggled goods are continually placing downward pressure on domestic prices. - 25 - Table 2 - Balance of Payments, 1983-86 (billions of CFAF) 1983 1984 1985 1986 Merchandise Balance (net) -6.7 -2.7 -43.6 -37.2 Non-factor services (net) -18.8 -23.7 -57.1 -45.0 Factor services (net) -2.4 -3.6 -2.4 -3.2 Current Transfers (net) 21.3 21.4 42.3 23.9 Current Account Balance - 6.6 -8.6 -60.9 -61.4 Official capital grants 11.9 12.1 20.9 42.9 Medium- aiid long-term lending (net) -0.7 -0.5 6.3 6.2 Direct investment and other capital flows -1.4 5.5 22.8 5.1 Change in Net Reserves 3.2 8.5 -10.9 -7.2 Memo item: cotton exports (22.5) (42.4) (19.8) (14.7) Source: Appendix Table 15. 40. In 1986, the current account deficit equaled that of the previous year, but disbursements of capital grants more than doubled. Despite a reduction in direct investment by ESSO, the draw-down in reserves was reduced to CFAF 7.2 billion (US$21 million), but Chad's official reserves equaled only about one month of merchandise imports by the end of 1986. Direct investment for oil exploration was almost fully disbursed in 1986, so that further improvement in the balance of payments depends in large part on recovery in the cotton sector and/or diversification of exports, as well as on continued high levels of aid flows to Chad. 41. The sharp decline of world cotton prices and the weakening of the value of the US dollar, in which the bulk of this commodity is traded internationally, accentuated the pressure on Chad's balance of payments in recent years. Until 1986, domestic inflation (estimated unofficially at 5-10 percent per annum), contributed to this pressure. A number of countries with fixed exchange rates like Chad have dealt with this problem by placing a surtax on imports and using its proceeds to help finance export subsidies. This is not as urgent or clear-cut a choice for Chad. Cotton prices have been recovering faster than anticipated and two consecutive good cereals' harvests have contributed to bringing about a general decline in the price level. Furthermore, existing tariffs and very high transport costs already tend to counteract any bias toward imports, which, through official channels, are largely limited to imports essential for growth. Under these conditions, an import surcharge would only raise the economy's overall cost structure without the benefit of encouraging import substitution. The effectiveness of an import surcharge would be further constrained by the permeability of Chad's externsive frontier. Given the predominance of cotton in merchandise exports, at a price which is determined outside of Chad, and in view of the limited potential for manufactured exports, the impact of export subsidies to promote exports - 26 - would be marginal. An export subsidy on cotton would only improve the cash position of COTONTCHAD, with little impact on farmers' income, while financing it through an import surtax would run the risk of stimulating smuggling and seriously reducing imports through official channels. Although any improvement in COTONTCHAD's financial situation is desirable, it would be difficult to argue for an import surtax/export subsidy strictly on that basis, and without further study, considering that COTONTCHAD's production cost structure is favorable compared to other African producers (see para. 88). 2. Increasing Flows of External Assistance 42. A look at aid flows in the recent past reveals a significant shift in the composition of external assistance to Chad. Following the 1984/85 drought, Chad enjoyed two years of bountiful harvests, as well as growing political stability in the South. This permitted a shift away from emergency operations towards longer-range development planning, and, in parallel, a shift away from emergency food aid towards development assistance (see Chart 5). Budget support has also increased in response to the impact of the cotton crisis on public finances. This trend is expected to continue in 1987, with 85 percent of estimated aid flows being in the form of development assistance for projects, and 12 percent as budget support. Of equal importance, the volume of disbursements is expected to increase from about CFAF 52 billion (US$115 million) in 1985 to an estimated CFAF 77 billion (US$250 million) in 1987, raising per capita aid from about US$23 to US$48 over the two years (see Appendix Table 18). 20/ This would boost Chad above the per capita average for low-income Sub-Saharan Africa, but it is still quite low for a country as poor as Chad, with such critical post-war reconstruction needs. 43. In the 1983-85 period, project assistance was concentrated (in descending order) on human resourc&A (especially health), agricultural development, and infrastructure. In 1986, the urgent needs of the cotton industry boosted commitments to the industrial sector. In terms of sector disbursements, however, infrastructure development (mostly roads) was the highest priority, followed by agriculture and rural development, industry, and health (see Appendix Table 19). 44. All of Chad's external assistance in the past decade has been on concessional terms. However, 1986 saw a significant increase in the proportion of loans compared to grants -- an increase which is likely to be maintained. In the 1983-85 period, with its emphasis on emergency assistance for health and nutrition, loans represented only 9 percent of disbursements. In 1986, witb the shift towards project assistance, the resumption of World Bank lending, and the need to target relatively large sums of money on the cotton sector, loan commitments increased dramatically, although loan disbursements lagged behind, equaling only 20/ It should be recognized, however, that these 1987 disbursement projections, which are based on donor surveys, may prove to have an upward bias. COMPOSITION OF EXTERNAL ASSISTANCE, 1985-87 200 -- L-EGEND 180 - _ t t FOOD AIDE BUDGET SUPPORT 160 [II] DEVELOPMENT AID 140 > 120 ° 100-l > 80 _ 60- 40- _ rt 20+ 1985 1986 1987 * Year e 1987 oatimatea biaed on aurvey of donOr. I - 29 - about 14 percent of total disbursements. This figure, however, is expected to rise to as much as 33 percent in 1987. Although these loans are concessional, their impact on Chad's future debt service will not be negligible. 3. The Burden of External Debt 45. By the end of 1986, Chad's public and publicly-guaranteed debt outstanding and disbursed (DOD) stood at about CFAF 71 billion (US$206 million), equivalent to 25 percent of estimated GDP. Over three-quarters of this debt is on concessional terms, with two-thirds owed to multilateral creditors and one-third to bilateral donors. The remaining, non-concessional loans are split fairly equally among suppliers' credits, private financial institutions, and certain bilateral creditors (most notably, Kuwait); and all predate the conflict of 1979-82. Before the conflict, the terms of lending to Chad hardened as risk increased, and Chad's creditworthiness progressively became -- and has remained -- insufficient to tap private financial markets. In the 1983-85 period, the degree of concessionality returned to the level of a decade earlier, with a grant element of about 50 percent. However, the volume of new commitments was exfremely low, averaging less than US$10 million per annum. This reflected two factors: (i) lending from oil-exporting nations and institutions had tapered off; and (ii) official creditors hesitated to resume lending to Chad. With the resumption of World Bank lending in 1986 and increased lending from France, new commitments returned to their pre-1977 levels of around US$40 million per annum. 46. Chad's actual debt service ratio in 1985 and 1986, based on the public and publicly-guaranteed debt for which the CAA is responsible, was exceedingly low, at 3.3 percent and 1.5 percent, respectively (Table 3). Payments did not, however, cover the full amounts of scheduled debt service, and arrears were accumulated in both years. By the end of 1985, arrears stood at CFAF 25.4 billion (US$57 million), or about a third of debt outstanding and disbursed, a-. this total was reduced slightly, to CFAF 24.8 billion (US$72 million) in 1986 due to an arrears payment of about CFAF 650 million and the rescheduling of arrears owed to private sources in Europe. If one includes the payment of arrears, the debt service ratio in 1986 rises to 2.8 percent. In addition to debt service payments by the CAA, BEAC has made direct payments of approximately CFAF 1.0 billion per annum to the IMF, raising Chad's overall debt service ratio to around 5 percent in both years. Debt service of this magnitude will continue to be paid to the IMF in coming years, but the obligation will be transferred to the CAA, beginning in 1988. Overall, Chad will face scheduled debt service on existing loans of between US$10-13 million per annum in the 1987-89 period, or nearly twice what the Government has been able to pay in the past two years. Although the debt service ratio -- at 5-7 percent -- will remain low by most standards, it represents a heavy financial burden for the Chadian Government. Debt service of US$10 million is about 15 percent of expected Government revenues in 1987, and this does not yet begin to address the settlement of existing arrears. - 30 - Table 3 - Debt and Debt Service, 1985-86 (millions of US$) 1985 1986 Debt outstanding and disbursed (DOD) 155.2 206.2 includ. undisbursed 226.3 320.7 DOD/GDP (%) 24.5 25.1 Accumulated arrears 56.5 71.8 Scheduled debt service, exclud. arrears and IMF payments 6.1 6.8 Actual debt service 4.1 2.2 Debt service ratio (%) 3.3 1.5 Settlement of arrears 0.0 1.9 Debt service ratio, includ. arrears payments (%) 3.3 2.8 BEAC payments to IMF 2.4 2.9 Debt service ratio, includ. arrears and IMF payments (%) 5.2 4.8 1/ Debt service as a proportion of export earnings on goods and services. Source: Appendix Table 17. 47. The Government has a two-pronged approach to debt management. First, negotiations are continuing with certain creditors for the cancellation or rescheduling of existing debts. In 1983, two major bilateral creditors, France and the Federal Republic of Germany, cancelled debts amounting to CFAF 5.3 billion (US$13.8 million) and CFAF 2.2 billion (US$5.8 million), respectively. Second, the Government relies on the CAM to collect revenues, not included in the Government budget, with which to service the external debt. CAA revenues consist predominantly of unitary taxes on manufacturE.d goods and taxes on the profits of various industries, banks, and special funds (e.g. Sugar Fund, Petroleum Fund). These revenues totalled CFAF 1.6 billion (US$4.6 million) in 1986, including those from new taxes imposed in October to help compensate for the loss of cotton revenues. With these additional taxes, and, in particular, the strengthening of CAA's capacity for tax administration, the Government expects CAA's revenues to more than double in 1987, to CFAF 3.9 billion (US$12 million). It is not clear whether CAA will be able to achieve this optimistic projection -- which rests heavily on the taxation of goods and services -- particularly when the economy is suffering from the recessionary impact of the 1986 cotton crisis. However, results from the first half of 1987 are encouraging: CAA collected CFAF 1.7 billion in revenues, or more than 40 percent of their annual target. D. Macroeconomic and Sectoral Growth 48. In using estimates of GDP to measure growth in the Chadian economy, it is important to recognize the limitations of the methodology used and to interpret the results with caution. Since 1977, value-added - 31 - has been calculated based on changes in production volume, using fixed input-output ratios which were established, for the most part, in 1973. These input-output ratios, as well as the weighting of sub-sectoral components within a sector, may have changed significantly since then as a result of technological change or other factors. In addition, Chad has no Inflation index; as a working hypothesis, inflation is assumed to have been 8-10 percent per annum in the 1978-83 period, and is estimated using extremely limited information on prices thereafter. In this respect, nominal GDP has an additional aspect of uncertainty relative to real GDP. Despite these limitations, the available GDP estimates can be used to assess aggregate changes in the volume -- and less reliably, the value -- of output in the Chadian economy. Interpretation of the estimates can be cross-checked and supported through examination of sectoral and subsectoral production figures. Table 4 - Gross Domestic Product and Output by Sectors, 1983-86 Gross Domestic Product 1983 1984 1985 1986 Nominal (billions of current CFAF) 223.9 224.2 298.7 283.0 Real (billions of 1977 CFAF) 133.5 125.8 162.3 158.5 Primary sector 62.2 46.7 74.3 73.0 Secondary sector 23.4 29.5 29.8 28.2 Tertiary sector 47.1 48.8 57.3 56.4 Indirect taxes 0.8 0.8 0.9 0.9 Production Agriculture Cotton (000 MT) 158 98 99 89 Cereals (000 MT) 453 346 739 726 Livestock (millions of head) 10.4 8.6 9,1 9.3 Industry Cotton Fiber (millicns of MT) 38 60 36 39 Cooking Oil (000 hectoliters) 79 88 112 77 Sugar (000 MT) 2228 25 24 Textiles (millions of meters) 13 14 16 15 Beer (000 hectoliters) 121 135 152 124 Cigarettes (millions of packs) 8 15 15 12 Services I/ Transport - (000 MT) n.a. 162 152 105 Electricity consumed (millions of kwh) 35.4 37.3 43,7 48.3 Source: Appendix Tables 1 and 9 1/ By CTT, the Chadian truckers' cooperative. - 32 - 49. In 1983, the record cotton crop, combined with an initial surge of industrial recovery, allowed real CDP to grow by 5-6 percent. This growth was completely reversed in 1984 due to the severe impact of drought on foodcrop production and livestock. Recovery and growth in industry and construction were impressive, however. Chad's remarkable rebound from the drought -- with cereals production more than doubling -- led to 29 percent growth in real GI)P in 1985, despite the downturn in the cotton industry. This growth allowed real GDP to surpass, for the first time, its peak 1977 level, with nominal GDP estimated at CFAF 299 billion. However, real growth was reversed in 1986 as the direct and indirect effects of the cotton crisis were felt, particularly in the industrial sector, where production in all major industries except COTONTCHAD declined by 5-21 percent. The negative impact of the cotton sector was mitigated by another excellent cereal harvest (despite a slight decline in production attributable to localized locust damage) and continued reconstitution of the livestock herd. Overall, the decline in real GDP was limited to 2 percent, while nominal GDP dropped to CFAF 283 billion, as a result of an estimated 3 percent decline in prices in the economy. This deflation reflects the sharp drop in cereals prices, as well as the downward adjustment of the economy to the cotton crisis. Losses of income and the limited availability of credit have constricted demand, placing downward pressure on prices to re-establish market equilibrium. The decline in real GDP, in conjunction with estimated population growth, implies that real per capita income dropped by 5 percent in 1986. However, official population estimates are open to question, being based on a 1964 survey and a 1968 administrative census, with no adjustments for the effects of war or drought. Nonetheless, even if Chad's population were 4 million, as opposed to the official figure of 5 million in 1985, nominal per capita GDP in both 1985 and 1986 would be between US$100 and 200 -- clearly placing Chad among the lowest income countries. 50, Little can be said about consumption and savings levels in the recent past because of the lack of data on public and private investment. Donor surveys conducted in preparation of the 1987 Public Investment Program -- Chad's first such program in over a decade -- permit an estimation of public investment of around CFAF 26 billion in 1986. Along with estimated private investment, gross investment is estimated at around CFAF 30 billion, or around 65 percent of total aid disbursements. Gross domestic savings were highly negative implying aggregate consumption well in excess of GDF and per capita consumption of around CFAF 66,300 (US$192). (See Table 5). Taking a similar ratio of gross investment to aid disbursements in 1985, per capita consumption is estimated at CFAF 72,700. It should be noted, however, that these figures for savings and consumption are merely indicative, resting on very rough estimates of public and private investment, as well as on questionable estimates of Chad's GDP and population, as noted above. - 33 - Table 5 - Investment, Savings, and Consumption, 1985-86 (billions of CFAF) 1985 1986 GDP 299 283 Net imports 83 87 Available resources 382 370 Gross investment 18 30 Gross domestic savings -65 -57 Constumption 364 340 Consumption per capita (CFAF) 72,700 66,300 E. Money and Credit 51. Growth and diversification of the economy have been inhibited in recent years by the limited financial resources of the banking sector. On the surface, the situation appears favorable -- although money supply has increased quite rapidly: in the 1982-85 period, it grew at an average annual rate of 27 percent, while growth of domestic credit averaged 18 percent per annum. The proportion of credit to the Government, which was approximately 25 percent in 1982-83, has been reduced, both in absolute terms and proportionally, to less than 9 percent in 1985 and 1986 (see Appendix Table 27). Although more than 90 percent of credit has been extended to the private sector, two factors have diminished its impact on the economy: a moratorium on all credits and deposits prior to 1980, and the dominance of lending to COTONTCHAD in the overall credit portfolio. 52. The Government imposed a five-year moratorium, which will end in December 1988, freezing all deposits and credits outstanding prior to 1980. The purpose was to prevent a run on capital when banks re-opened in 1983, as well as ease the financial burden for borrowers, many of whom had assets destroyed in the conflict. Initially, frozen credits dominated the banks' portfolios, but as new credits were extended, the proportion dropped to three-fourths by the end of 1984 and to one-half by the end of 1985 (see Appendix Table 30). Similarly, the proportion of frozen deposits declined to about 40 percent by end-1985, due to new deposits as well as the unfreezing of certain existing deposits. 53. The aggregate impact of the moratorium is difficult to assess. Certainly, the magnitude of frozen credits implies limited turnover of capital, reducing credit availability for the private sector. In addition, some entrepreneurs are unable to withdraw their frozen capital for investment or operations. However, the amount of frozen credits is more than twice that of frozen deposits, and has served to protect certain entrepreneurs who would otherwise be unable to service their debts -- either because assets were destroyed or, as in some instances, because the business was in financial straits prior to the conflict. 54. Government and banking officials have begun planning for the end of the moratorium. They were reassured by the recent unfreezing of certain deposits that the lifting of the moratorium will not trigger massive capital flight from Chad. The other concern is that investors may not - 34 - return to Chad because of the accrual of substantial interest arrears on their debts, and that many other borrowers in Chad will still not be in a position to service their debts. Although the commerclal banks are willing to renegotiate the terms of these loans, the BEAC is required under its statutes to receive full interest payments on rediscounted credits, which make up the vast majority of frozen credits. The commercial banks fear they will be squeezed between a large contingency of defaulting debtors and a demanding Central Bank -- at a time when the banking sector will not have fully resolved the problem of cotton credit. BEAC, however, is unlikely to insist on payments which would provoke the collapse of Chad's commercial banks. 55. The credit portfolios of Chad's banks are overwhelmingly short-term and dangerously undiversified. By mid-1986, almost 90 percent of the claims on the private sector were short-term, and more than 70 percent of this was extended to COTONTCHAD. Overall, COTONTCHAD claimed 64 percent of all credit to the economy; with the addition of the other four major industries, this figure rises to 72 percent. This situation reached crisis proportions in late 1985 and earlv 1986 when COTONTCHAD fell into arrears on its short-term credit. The story is revealed clearly by the banks' balance sheets: in mid-1984, short-term credit to the economy began to expand quickly, reaching CFAF 65 billion by mid-1986. Virtually all of the credit extended to COTONTCHAD was in the form of rediscounted credits from BEAC, and this credit permitted a level of industrial and consumer imports which drained BEAC's exchange reserves rapidly. By mid- 1986, these reserves had plunged to almost zero, and Chad's overall net foreign assets dipped dangerously low (see Chart 6 and Appendix Table 28). Operations in the banking sector ground to a halt as COTONTCHAD fell into arrears on CFAF 44 billion in short-term credit. 56. In late 1986, the regional BEAC negotiated a rescheduling of roughly three-fourths of this debt, on terms permissible under its statutes: a maturity of ten years, plus five years' grace and an interest rate -- after two years' grace -- of 6 percent. Although this arrangement may prove to be an interim solution, given COTONTCHAD's expected financial difficulties in the medium-term, it does positively affect the attitude of the regional BEAC towards further lending to Chad. In fact, an interim solution to the arrears problem was a de facto prerequisite for approval of new crop credit needed for working capital in the cotton sector. This solution does not, however, reduce the exposure of the commercial banks or directly improve credit availability in the economy. F. Government Actions to Rebuild the EconomY 57. The Government's first task in the post-war period wac to reestablish normal administrative and public service activities through the reintegration of former civil servants and the hiring of "temporary" employees. A difficult rehabilitation of the payroll service was accomplished without external technical assistance, and whereas civil servants were paid only once in 1982, the situation gradually improved, so that in 1983, fairly regular payments were being effected in N'Djamena and some of the provinces. By 1986, wages were being paid regularly throughout the country, although with occasional delays. Tn early 1987, the proportion of pre-war salaries actually being paid was increased from 50 to WORLD COTTON PRICE, SHORT-TERM DEBT OUTSTANDING TO COTONTCHAD AND NET FOREIGN ASSETS OF THE CENTRAL BANK, 1984-86 45- -180 LEGEND 40-_ -170 - DEBT 354 ./160 ASSErS PRICE 30-_ 150 25+ -140 c_> 02 o2t0o m - T130 U U, 0 ~~~~~~~~~~~~~~~~~~c> t X15 t 120 10- 110 5-- 100 0 90 0 -5- I I I i I 80 9/84 12/84 3/85 6/85 9/85 12/85 3/86 6/86 Month and Year I,)~~~~~~~~~~~~Q Io - 37 - 60 percent, except for those civil servants at the rank of director or above, and the police, who have received 100 percent of their salaries for the past several years. In 1986, the Government halted the hiring of ""temporary" employees and began a census of civil servants which will permit better financial management of the pay-oll service. 58. The Government is relying on the development or the Controle d'Etat to monitor public sector financial management. The Contrale d'Etat is an auitonomous auditing unit directly attached to the Presidency. It performs audits and investigations at the request of the President, providing ex post control over the operations of public agencies and enterprises, carried out on either a random basis or when there is a probability of impropriety. In recent years, it has performed this task to considerable effect, thereby acting as a major deterrent to public fraud and the misuse of public funds. While in some countries an autonomous audit agency has become overly powerful to the point of encumbering the work of the Ministries, this situation is unlikely to arise in Chad, given the small size of the Controle d'Etat. 59. In 1983, the Ministry of Finance produced its first Central Government budget in four years. The budgeting process has since improved, and in 1986, a nomenclature was adopted which will allow more effective management of revenues and expenditures. In addition, in 1984 and 1985, the Government introduced certain measures to improve tax administration, including the reorganization of N'Djamena into three tax inspection areas, the creation of a tax enforcement team, the establishment of tax offices in secondary cities, the creation of tax control records for the largest tax-paying enterprises, and improved coordination among relevant administrative services. 60. A ministerial restructuring took place In April 1986, leaving twenty-one functioning ministries. The Government's structure has always reflected its pragmatic, issues-oriented approach, as evidenced by the creation of the Ministry for the Campaign against Natural Disasters (the MLCCN, now called the Ministry for Food Security) as well as the existence of a number of interministerial committees to grapple with issues such as the coordination of drought relief, negotiations with the IMF, and the crisis in the cotton sector. Given the relatively recent establishment of the admJnistration, and its severely limited resources, the Government has made remarkable strides in overcoming emergency situations and taking the first steps toward planning for long-term development. 61. In the aftermath of the 1984 drought, Chad has often been cited as a model for the effective use of food aid -- not just to meet emergency nutritional needs, but to resettle affected populations in productive areas and build assets through Food-for-Work schemes. This was possible only because the Government was receptive to innovative uses of food aid, and was determined to avoid the creation of refugee camps and a dependency on free distributions. The MLCCN worked closely with the international community to overcome exceptional logistical difficulties, and organized weekly meetings with donor agencies and NGOs to assess the progress of relief efforts. Similarly, the Government recognized the gravity of the impending crisis in the cotton sector and the lack of a "quick fix" solution. It has since worked diligently with COTONTCHAD, the principal - 38 - donors, and the banking (ommunity to develop and implement the emergency adjustment program for the cotton sector. t):,. IWile placing top priority on resolving crisis situations such as Vhose described above, the Covernment has also made considerable progress in creating a healthv environment for the recovery of economic activity. Tii the hankinR sector, the Government was instrumental in the establishment of the 1983 moratoritum and the resumption of banking activities. It has taken ftill responsibility for the settlement of damages and theft incurred by the Central Bank during the conflict, and is actively reconstructing financial records to determinie the internal arrears sltuation. With respect to regional trade, Chad rejoined the Customs Union for Central African States (UDEAC) in 1984, with plans to progressively align customs duties with those of the other member countries by 1990 (see Chapter IV, para. 77). To encourage investment, the Government is revising the Investment Code, which was first introduced in 1963. Although the exact nature of the changes are still under discussion, key objectives are to increase the eligibility of small- and medium-scale enterprises (SMEs) for tax and customs incentives, and to develop stronger employment criteria for potential investors (see Chapter IV, para. 71). 63. Considerable efforts to cement relationships with the international community have been made as well. The Government has taken full responsibility for the financial obligations of previous administrations, and, in 1983-84, it conducted a survey of creditors to reconstruct external debt records. By the end of 1984, the CAA had developed a fairly complete picture of the debt situation, including the substantial arrears accumulated. At the same time, the Government worked to negotiate rescheduliig and/or cancellations with certain creditors and began servicing the deb. within the constraints of its limited resources. 64. In emergency situations, as well as in efforts to engage in longer-term development planning, the Government has worked closely and fruitfully with the donor community. In 1985, as the urgency of drought relief subsided, the Covernment produced, with the assistance of UNDP, an Interim Plan for 1986-88, which was presented to donors at a UNDP-sponsored Round Table Conference in December 1985. Although the Interim Plan fell far short of a full definition of sectoral strategizs and investment criteria, it was an impressive first step in the planning process, containing a thoughtful description and analysis of the macro and sectoral situation, as well as over 200 project outlines for further study. At the Round Table conference, the donor community pledged to help build the Government's capacity for development planning and investment programming, and to follow up the Round Table process with improved coordination of donor activities in Chad. To this end, the Government has recently prepared, with assistance from key donors, several sector meetings. The most recent, in December 1986, focused on the discussion of a new strategy document for the agricultural sector, and documents are currently under preparation for a transport sector meeting scheduled for late 1987. 65. The year 1987 also marks the Government's first attempts in more than a decade to prepare a Public Investment Program (PIP) and to initiate an investment programming process which will permit better coordination of external assistance and, eventually, better evaluation of the recurrent - 39 - co8t burden arising from public investments (Chapter VI). The planning and programming process is in a nascent phase, however, and the challenge for the Government in the next few years remains the precise definitioni of sectoral strategies and investment priorities. C. Donor Support 66. A number of donor agencies and NGOs were active in Chad in the aftermath of the war. They provided valuable political and financial support to the Government -- often at considerable risk to themselves -- as it struggled to solidify administrative control of the country and reverse the most devastating effects of the fighting. In more recent years, they continued to respond positively to Chad's most urgent needs. The severity of the 1984/85 drought in Chad was recognized quite late, and there was little demographic information available with which to determine the location and the likely condition of affected popul&tions. It proved even harder to reach these affected populations, but the donor community surmounted incredible logistical difficulties in their largely successful relief operations. They rehabilitated certain roads and constructed a temporary pontoon bridge in order to create an access route for heavy trucks laden with food aid. They established regional radio contacts to facilitate the weekly coordination of relief efforts, and they avoided a massive rural exodus and the creation of refugee camps, with the exception of one camp at Ati. Instead, they experimented with rural resettlement schemes in areas where cultivation was still possible (e.g., in the wadis), often using Food-for-Work incentives. These efforts contritbited greatly to the rapid rebound in agriculture following the drought. 67. Non-governmental organizations were particularly important in executing nutrition and health relief programs, and many have continued to function as models for, and extensions of, the Government's own public health and social welfare efforts. For example, the NGO, Medecins Sans Frcntieres (MSF), in cooperation with the Ministry of Public Health, has taken full responsibility in recent years for primary health care in over half the country. Now, because of abundant harvests and the Government's shift toward longer-term development planning, the donor and NGO community must continue to act responsibly to eliminate unnecessary food aid, tailor remaining programs to development needs, and work closely with the administration to coordinate external assistance and transfer important management skills. 21/ 68. Donor response to the cotton crisis was timely, as well, A number of donors cooperated to provide quick-disbursing financial support linked to the emergency adjustment program. They are continuing to work with the Government, COTONTCHAD, and the banking community to explore the options available for the cotton sector and develop an appropriate medium-term policy. 21/ For further information on the activities of NGOs, see Annex 2. 40 - 69. The donor community has been stupportive of the Government's initial efforts to establish a long-term planning process and expand planning and implementation capabilities. The UNDP was instrumental in the development of the Interim Plan and the organization of the first Round Table Conference and is now financing a technical assistance project for the Ministry of Planning, to be executed by the World Bank. At the Round Table, the UN (UNDP and FAO) ancl the World Bank agreed to take the lead in coordiniating external assistance and sponsoring meetings for the agriculture, cotton, transport, and energy sectors. H. The Current Outlook 70, The Chadian economy has, in many respects, recovered from the devastation of the war. Rapid growth, from an exceedingly low base in 1982, has brought nmany economic indicators back to pre-war levels. With respect to production, the cotton crop has been quite variable but well within the production range of the past several decades. At the same time, in years of adequate rains, foodcrop production has achieved or surpassed pre-1977 levels, with minimal inputs. Although manufacturing suffered a setback in 1986, all the major industries have the capacity to produce at or above 1977 levels and have done so in the 1984-85 period, Overall, real GDP has risen to nearly its 1977 level, although it must be shared among an estimated one million more people. Most striking -- in addition to the apparent decline In real per capita income -- is the limited recovery of the public sector, which has remained, in real terms, much smaller than in previous decades. 71. There are many non-quantifiable aspects of recovery as well, includinig an atmosphere of dynamism and growth in the informal sector, where Chadians have been exploring ways to fill the gaps in their economy. The number of formal sector, small- and medium-scale enterprises may have declined compared to the situation in the 1970s, but more may be owned by Chadians, rather than expatriates. The overwhelming impression is that Chadians have a wealth of ideas, as well as enthusiasm and the will to succeed, but there is a striking shortage of capital and the technical skills needed to turn these ideas into reality. 72. Plaving recouped many of the losses to the economy in the years following the war, Chad is now moving beyond a period of relatively "easy" growth associated with immediate reconstruction efforts. The task is now more difficuilt, especially when the traditional "engine of growth" -- the cotton sector -- is unable to fulfill its former role. The parallel difficulties of restrumcturing the cotton sector and defining an appropriate plan for economic development and diversification will limit real growth in the short-run. Similarly, the risk of recurring drought or a resumption of hostilities casts a shadow over prospects for growth. However, the outlook for 1987 and 1988 has several encouraging aspects, First, as mentioned previously, the world price for cotton Is recovering more rapidly than anticipated, and Chad can expect to export its usual level of 36,000-39,000 MT of cotton fiber. Second, incentives for livestock marketing and export will improve with the lifting of the export ban to Nigeria, In general, trade relations with Nigeria should improve as a result of recent bilateral discussions and Nigeria's exchange rate reform. Third and finally, support from the donor community is increasing, - 41 - particularly with respect to aid for investment. This will allow Chad to lay the necessary foundation over the next few years for modest but sustained growth. One area with considerable growth potentlal is the agricultural sector, broadly defined to include both crop production and livestock development. This sector, which provides employment, subsistence, and income for most Chadians, will be examined in the following chapter. - 42 - ITT. ThF RURAL SECTOR 73. This chapter is devoted to the agricultural sector, broadly defined, which generates nearly half of the country's estimated CDP. Section A focuses on the cotton sub-sector, and especially on the implications of recent and projected prices for producers, the industry, and the sub-sector as a whole. Section B discusses foodcrop production in the larger context of Chad's food security. Two key Issues are addressed: (i) the need to minimize fluctuations in production and increase production at a rate which preserves Chad's cereals self-sufficiency; and (ii) the need to improve marketing, especially interregionally, to alleviate localized supply/demand disequilibria. Section C concentrates on the livestock sector, which has made important contributions to national income and export earnings, but represents an underutilized resource. Constraints to unlocking the potential of this sector are given special attention. The chapter closes with a brief discussion of the fishing sector which highlights the need for more information regarding the possible contribution o!' fishing to food security and income generation in Chad. A. Cotton: How Soon Can Profitability Be Restored? 74. The crisis confronting COTONTCHAD is attributable in part to its weak management in the period preceding the establishment of its rehabilitation program. Among its management problems were: (i) inadequate accounting and financial supervision; (ii) inadequate management of inventories of spare parts, rolling stock and motor vehicles; and (iii) overall weakness of the monitoring and control system. These problems were exacerbated by the political/military environment in which the company operated from 1979 to 1982, when it was obliged to provide logistical and other support to the military forces controlling the region. The investment program of COTONTCHAD was also far from optimal (e.g., with respect to the number, location and capacity of ginneries). These factors contributed to raising COTONTCHAD's production costs by 70 percent in nominal terms between 1982/83 and 1984/85, as mentioned in Chapter IJ. The fundamental problem is that the sale price of cotton (FOB) has been well below average production costs for nearly three years. This has led to the question "is cotton production still viable?" ln order to provide an answer, it is necessary to: (i) take stock of the rehabilltation program initiated in response to the crisis; (ii) re-examine the world cotton situation; (iii) review the economics of cotton production and processing at the level of the producer and COTONTCHAD, respectively; and (iv) revise the financial projections for COTONTCHAD. 1. The Rehabilitation Program 75. The Chadian Government and COTONTCHAD have launched a comprehensive action program to restore the financial and economic viabllity of the cotton sector. This program was combined with a number of immediate measures, such as changes in the executive officers of the company. The principal measures of the program are the following: * At the producer level: (i) moving to full cost recovery on inputs from the 1987/88 season onward, with an intermediary step - 43 - (75 perceiit cost recovery) in 1986/87; (ii) no increase in the producer price of seed cotton, which has been set at CFAF 100/kg for the moment; and (iii) iImiting seed cotton production to not more th.n 100,000 tons through adjustment of the area under intensive cultivation. * At the COTONTCHAD level: (i) closing down seven out of twelve ginneries in operation; (ii) selling non-essential or non-performing assets to the private sector (two aircrafts, 80 trucks, 69 cars); (iii) closing down the Bangui and Pointe-Noire branches and laying off the staff; (iv) reducing the number of cotton-buying centers; and (V) reducing the COTONTCHAD staff by half. * At the Government level: (i) exempting COTONTCHAD from taxes (export tax) and other contributions (e.g., to CAA, the debt amortization fund, and ONDR, the extension agency) until its accounts are balanced; (ii) redefining the role of CSPC (the cotton price stabilization fund) and reducing its staff; (iii) reducing the staff of ONDR and reassessing its role and objectives. 76. The objective of the program is to reduce production costs to enable the company to reach financial equilibrium as soon as feasible -- that is, in 1991, according to projections made in mid-1986. Most of this program has already been implemented. BEAC has also undertaken to reschedule COTONTCHAD's domestic debt: on November 25, 1986, the Executive Board of BEAC authorized the rescheduling of the domestic arrears over a period of 10 years with 5 years' grace and a two-year moratorium on the payment of interest. Although the terms are too hard to be manageable over the medium- to long-term, given the difficult financial situation and prospects of COTONTCHAD, they do remove the immediate threat of a collapse of the Chadian banking system. 77. The actual and potential impact of this program on the economy is substantial. Freezing of the producer price of cotton at its current level of CFAF 100/kg, along with the phased elimination of input subsidies, will gradually reduce the profitability of intensive cotton cultivation (particularly through the use of fertilizers), as well as decreasing the net revenue of farmers (see para. 11). The firing of 1,300 employees -- more than half of the COTONTCHAD staff -- appears to be having a negative impact on incomes in the Sudanian zone. Furthermore, the lost revenues of the Government and the public agencies as a result of the cotton crisis are estimated at CFAF 3.7 billion (US$10.3 million) in 1986. The direct impact of the adjustment program on the central Government (CFAF 2.8 billion) is equivalent to 17 percent of the Government's 1986 revenues of CFAF 16.8 billion. 78. To support this Government program, France, the European Community, the Netherlands and the World Bank, have put together an Emergency Cotton Program for two years (1986/87-1987/88), totalling approximately CFAF 17 billion (US$47 million). This program is designed to finance the inputs program of COTONTChAD (and thus avert the financial deficit that would arise from it); support the cost reduction policy that - 44 - the company is implementing; and allow other institutions linked to cotton production to continue operating. The program will also allow the preparation of the next, post-emergency phase which will concentrate on rehabilitation of the sub-sector, and increased research and experimentation on options for agricultural diversification. 2. The Improved Outlook for Cotton 79. In August 1986, when the above program was approved, world cotton prices had hit a low of US$0.82/kg. World stocks were approximately 60 percent above their "normal" level, equaling 7.5 months of world consumption instead of the 4.5-5.0 months generally considered sufficient to accommodate international trade without exerting undue pressure on prices. Prices were expected to recover slowly, given the size of the world surplus and a long-term growth in world consumption of only 1,6 percent a year. Since then, the situation h3s changed significantly. The demand for cotton at low prices was much higher than anticipated, so that world consumption increased by 6.6 percent in 1985/86 and is expected to increase by 3.7 percent in 1986/87 (Table 6). At the same time, bad weather, low world prices and changes in incentive policies led to a 10.4 percent decline in world production in 1985/86, and a similar decline is anticipated for 1986/87. Table 6 - World Cotton Situation, 1984/85 - 1986/87 l/ (millions of tons) 1984/85 1985/86 1986/87 World Production 19.2 17.2 15.3 World Consumption 15.2 16.2 16.8 (beg.) (beg.) (beg.) (end) World Stocks 5.4 9.4 10.5 8.9 "Normal" 6.0 6.4 6.6 6.6 Excess -0.6 3.0 3.9 2.3 1/ Crop season runs August-July. Source: Annex 1, Table 1. 80. World excess stocks have, therefore, declined much faster thaRn anticipated: by 40 percent in one year. By July 1987, these stocks were equivalent to 15 percent of world production -- a level which could, in fact, be eliminated by just one poor crop season. The recent reduction in stocks has been reflected in an upturn in world prices. Indeed, price projections for the next two seasons have been revised upward by about 20 percent, although even after this revision, the February 1987 price of cotton (US$1.44/kg), was already above the level projected for 1988 (US$1.41/kg). By mid-1987, the price had climbed to US$1.70/kg. It is possible, even probable, that some of the gain in prices is seasonal and may be lost as the 1987/88 crop comes on the market, but there is no - 45 - question that the surplus situation has eased dramatically and that Chad will benefit in the short-run fro.n a higher cotton export price than had been anticiDated only six months ago. The changed cotton situation is described more fully in Annex 1. 3. Cost of Cotton Production at the Producer Level 81. Today, most cotton producers in Chad have the options of (i) cultivating only food crops, using traditional methods; (ii) cultivating food crops traditionally and cotton intensively, using the full package of fertilizers and insecticides; and (iii) cultivating both food crops and cotton traditionally. A number of variations can also be envisaged, including increased use of animal traction, varying levels of intensive inputs for cotton, and developing intensive Jinput packages for foodcrop production. One interesting option to examine would be to cultivate cotton semi-intensively, using only insecticides -- an approach which farmers may already be using in practice, although they have not had the choice of buying just insecticides. Fertilizers and insecticides have always been sold as a package to cotton farmers, It must be proven, however, that such an option would not provoke soil deterioration. 82. Until the crisis, cotton cultivation was quite profitable for the farmet, especially under the subsidized intensive-input program, as has been substantiated in a number of studies. 22/ The significant expansion of cotton production from 1960 to 1986, averaging approximately 9 percent per year, was achieved despite a downward trend in the total area planted with cotton. However, the area under intensive cultivation expanded steadily: from 1 percent of the total in 1960/61 to 13 percent in 1970/71, 43 percent in 1980/81, and 69 percent in 1985/86. Two factors contributed to this: (i) the subsidization of inputs by donors and the Government (by 50 percent until 1985/86), and (ii) the increase in producer prices for cotton after 1979, and especially since 1981. Producer prices did not change from 1960 to 1970 and rose only slowly from 1970 to 1981. This situation progressively eroded the incentive for cotton cultivation, particularly since input prices were rising constantly during this period. The substantial increase in producer prices since 1980 contributed to restoring the profitability of cotton production for the farmer. The cotton emergency program changes, a priori, the equation for the producer, mainly because of the elimination of subsidies on inputs and the freezing of the producer price. 83. Table 7 shows the valuation of a day of work for cotton under traditional cultivation and intensive cultivation. It indicates that, without subsidies, cotton under the intensive program becomes slightly less profitable than cotton under traditional cultivation. Comparison with foodcrop cultivation is difficult because of the much poorer statistical information and the high variability of foodcrop prices from one season to another. However, estimates made by ONDR and IRCT (the cotton research 22/ See, for example, SEDES, Le Projet Sud-Tchad: octobre 1980, and CILSS, Bilan programme des productions,v6ggtales au Tchad, 1983. - 46 - institute) show that without subsidies, cotton could prove to be less profitable than a number of food crops. Table 7 - Profitability of Cotton Cultivation, 1986 (CFAF) Intensive Cultivation Insecticides Traditional 50 Percent 25 Percent No Only, No Cultivation Subsidies Subsidies Subsidies Subsidies Yield (Kg/ha) 300 925 925 925 725 Price (CFAF/Kg) -/96.4 -/ 96.4 96.4 96.4 96.4 Revenue per ha 28,920 89,170 89,170 89,170 69,890 Repayments for Inputs 0 2,400 37,000 49,000 25,500 Net Revenue 28,920 65,170 52,170 40,170 44,390 Days of Work 85 120 120 120 105 Daily Income Generated 340 543 435 335 427 1/ Weighted average price for two qualities of seed cotton. 2/ This figure does not allow for the fact that, with traditional cultivation, a larger proportion of cotton will be of an inferior quality and therefore fetch a lower price. Source: ONDR. 84. The above analysis must be tempered by the following considerations. First, eliminating insecticides for cotton production would tend to reduce the overall quality of seed cotton and would certainly lead to greater annual fluctuations in yield due to insect damage. Second, the effects of eliminating fertilizers are still open to debate. Yields would decline, but so would production costs. Yields on food crops might also decline, if farmers have been using these fertilizers for both cotton and food crops. Risk would not necessarily increase, however, because fertilizer use itself carries a considerable risk, depending on the level and timing of rainfall. Eliminating fertilizers might also lead to some soil degradation, although some agronomists feel that the existing, traditional system of crop rotation and the usual length of fallow periods in this land-abundant country are sufficient to maintain soil quality. In short, an argument can be made for eliminating fertilizers, but the same cannot be said for eliminating insecticides. Finally, in terms of the choice between food crop production and cotton production, the large fluctuations in food crop prices typically seen in Chad (see Section B) makes the trading of these products uncertain, while the fixed producer prices for cotton tend to assure a relatively steady cash revenue. This strongly suggests that even if their revenue from cotton were to drop due to the freezing of producer prices and eliminating input subsidies, farmers - 47 - would still be attracted to cotton cultivation. However, if a system is adopted indexing producer prices to world market prices for cotton fiber, the attractiveness of cotton cultivation as a stable source of cash income would be thrown into question. More information is needed on farmers' revenue sources and production patterns in order to better understand the decision-making process at the producer level and, therefore, assess the viability of cotton production under varying circumstances. Unfortunately, no system exists to gather this type of information, and it is strongly recommended that a study be launched for this purpose. 4. Costs at the COTONTCHAD Level 85. The viability of cotton fiber production depends on how far COTONTCHAD's costs of production can be reduced and whether COTONTCHAD can be -- and stay -- competitive, at least with the other cotton producers of West Africa, given the local production conditions and, in particular, the landlocked situation of Chad. In 1985 and 1986, the situation was not representative of the performance of COTONTCHAD because it was significantly affected by the mismanagement that occurred in 1984/85. The performance of COTONTCHAD should be analyzed with reference to more normal years of financial management such as 1983/84, and also by estimating the effect of the Emergency Program on production costs. 86. COTONTCHAD's ginning yields are slightly lower than the average for cotton producers in West Africa: 38.9 percent in Chad against an average yield of 39.4 percent. (In comparison, ginning yield in the United States are 21.7 percent for machine-stripped, 24 percent for machine-scrapped, and 31.5 percent for machine-picked.) However, COTONTCHAD's yields have increased rapidly with the introduction of new varieties, and are expected to reach 40 percent in one or two years as a result of the distribution of new seed varieties currently being produced by IRCT on COTONTCHAD's seed farms. According to CFDT figures, in 1983/84, COTONTCHAD's buying price for seed cotton was lower than the West African average and, as a consequence, the factory gate price was one of the lowest in francophone Africa, However, the ginning cost was slightly higher than the West African average in 1983/84 and increased significantly in 1984/85. This has two reasons: industrial investments have not been optimal; and, because of poor management, in particular since 1984, the cost of spare parts, the wage bill, and the various expenses linked to ginning have been higher than they should have been. The Emergency Program aims to improve this situation, especially by strengthening management and closing down excess ginneries. 87. Another element of production costs that is more structural and more difficult to reduce is the cost of transportation from the ginneries to the export port. Moundou, the center of the cotton producing region, is situated 1,350 km fromi Douala, the major port used for cotton exports. The resulting high cost of transportation affects both the FOB export cost of cotton and the cost of imported inpits for cotton production. Although costs are very high, Chadian cotton is of good quality and generally fetches a price slightlv higher than the world price for a comparable staple length. Moreover, COTONTCHAD has adopted an efficient, dyniamic and flexible marketing strategy, and the company has a good reputation on the international market. - 48 - 88. In summary, a comparison of COTONTCHAD's overall cost of production with other West African producers before the management problems of 1984/85 shows that cotton production was viable in Chad. In 1983/84, a relatively normal year, Chad had the lowest ex-ginnery cost among nine producers in the region (Table 8); it had the third lowest FOB embarkation port cost, despite its geographic location; and its net profit per kg was exceeded only by that of Senegal, entirely because of a transport advantage, 23/ Table 8 - Cotton Production Costs, 1983/84 (CFAF/kg) Seed Cotton Ex-ginnery Transport FOB - CIF -/ Sale Net Cost Cost Cost Cost Cost Price Profit Benin 100 449 67 516 552 725 173 Burkina 70 454 40 494 542 749 207 Mali 75 441 67 508 545 750 205 Ivory Coast 100 603 45 648 693 780 87 Senegal 70 424 28 452 500 793 293 Togo 75 472 52 524 574 750 176 Cameroon 117 551 70 621 668 746 78 CAR 80 534 85 619 664 732 68 Chad 80 372 130 502 532 777 245 1/ Here, FOB refers to border pr-ce and CIF to price at port of embarkation (i.e., Douala, for Chad). Source: CFDT. 5. Financial Projections 89. Since the preparation of the financial projections underlying the Emergency Program, there have been changes affecting some of the income and expenditure components, the price projections, and the exchange rate projections. The estimated revenues from COTONTCHAD's soap and oil 23/ Although the producer price has been raised from CFAF 80 to CFAF 100 since 1983/84 in Chad, the difference and its incidence on total costs are too small to alter the above conclusions. Besides, similar -- and, in some cases, larger -- increases in producer prices have taken place in almost all the countries included in the above comparison. - 49 - subsidiary operations have been revised downward; the sale of these products has seriously suffered from competition with imports passing through Nigeria and from the decline in the world price of all edible oils. The operating costs of the subsidiary operations have been higher than previously projected. Expenditure estimates were also modified to include the cost of training and of providing some additional extension services and small implements which had been omitted from the original estimates. The net effect of these and other revisions was to increase the operating deficit for 1986/87 (the year most affected) from CFAF 6.6 billion to CFAF 8.3 billion. 90. The latest price projections by the commodity projection services of the Bank are given in Annex 1. They show that the recovery will continue in both nominal and real terms. In nominal terms, by 1990 the cotton price will be just 5 percent below the 1982-84 average -- a period when the market was roughly in balance and stocks were roughly normal -- and by 1995 they will exceed the same average by 42 percent. In real terms, the recovery is expected to be slower: the price will come within 5 percent of the 1982-84 average by 1995. 91. The experience of the last two years has shown the difficulty of projecting annual change (as opposed to the trend) in the world cotton price, especially 2-3 years in advance. For that reason, it seems appropriate to use, in making financial projections, a price range as illustrated in Chart 7. 24/ 92. The same type of uncertainty applies to the US$/FF exchange rate. Chad's cotton export earnings have suffered as a result of the depreciation of the US dollar against the CFAF in the past year. The current projections show further weakening of the US dollar vis-a-vis the French franc and the CFA franc (whose parity to the French franc is fixed) until 1989, before beginning a recovery (Annex 1). The incertainties about the rate are too great to rely on a single forecast, especially because exchange rates can be influenced more directly and quickly than cotton prices through government policies and agreements. We have assumed, as an alternative, that the rate will remain constant at its projected 1987-95 average, namlely US$1 = CFAF 320. 25/ 93. The Break-even Point for Cotton Fiber Operations. It should be underlined that the projections made on the basis of the above assumptions are by no means definitive and, despite the adjustments made, are still not entirely up-to-date. (The results and lessons of the first year under the Emergency Program will be extremely meaningful and may alter them significantly.) These projections are not, therefore, offered for setting precise targets or prices. They are intended, rather, to show the range of possibilities and choices. Chart 7 suggests that there are, indeed, 24/ See Annex 1 for the estimation of the range. 25/ This is slightly below the rate of CFAF 330 used in the calculations for the Emergency Program. -50- multiple scenarios and outcomes. The chart isolates COTONTCHAD's revenues and expenditures concerning its cotton fiber operations alone. 26/ It shows that: - if the producer price is kept at CFAF 100/kg, a break-even point could be reached, at the earliest, during 1988/89, depending on the world price; - if the producer price were reduced to CFAF 80/kg, the break-even point may be reached as early as 1987/88; - if the producer price remains at CFAF 100 but the cost of interest on the existing debt is added (not included in the two illustrations above), the break-even year is pushed to between 1990/91 and 1992/93, depending on the world price. The interest adds roughly 10 percent to the average cost of cotton fiber. 94. The Break-Even Point for COTONTCHAD and the Cotton Sub-sector. Table 8 summarizes the financial consequences of the revised projections distinguishing between: (i) projections for COTONTCHAD, i.e., including Its cotton fiber operations and its soap and oil operations (panel A); and (ii) those for the sub-sector, i.e., including COTONTCHAD as defined above and the other organizations (ONDR, IRCT) providing supplementary services to the sub-sector (panel B). The latter is consistent with the projections underlying the Emergency Program, which included financing for these organizations in the project. They are, however, not part of COTONTCHAD; COTONTCHAD may have a responsibility to finance them in part but has no control over their operating efficiency. Although both the sale price of fiber and the producer price of seed cotton were varied in the sensitivity analyses, for the sake of simplicity of presentation, Table 9 summarizes the results varying only the producer price and the payment of interest. The table shows the following: the break-even point for COTONTCHAD under the basic scenario, occurs in 1989/1990, one year before it occurs for the sub-sector; lowering the producer price to CFAF 80/kg advances the break-even period by one year; adding interest payments pushes it back by two years; although the break-even year (under identical producer prices) is the same as under the Emergency Program, the cumulative losses over the period 1986/87-1988/89 (either for COTONTCHAD or the sub-sector) are roughly CFAF 2 billion (US$6.4 million) less than projected last year. Since the earlier projected loss had been financed under the Emergency Program, the CFAF 2 billion 26/ The projections In this section do not include depreciation. No capital replacement is planned for the next few years and no estimates of current or future needs are available. PROJECTED WORLD COTTON PRICE AND COTONTCHAD'S PRODUCTION COSTS, 1986/87 to 1994/95 800 - 750- FE PROD. COSTS @ 80 CFAF. NO INTEREST I PROD. COSTS @ 100 CFAF, NO INTEREST 700 X PROD. COSTS / 100 CFAF. W/ INTEREST a~ 650- 0600 iŽ 550 500 s / 450 - COTTON PRICE RANGEC 400- 86/87 87/88 88/89 89/90 90/91 91/92 92/93 93/94 94/95 Year l I - 53 - represents a "savings", or a cushion which can be used to cover losses if the break-even point were pushed back by one or two years. Table 9 - Oerating Deficit/Sur2lus of COTONTCHAD and Cotton Sub-Sector Producer price and interest assumEtion 1986/87 1987/88 1988/89 1989/90 1990/91 1991/92 A. COTONTCHAD CFAF 100/kg w/o interest (base scenario) Emergency Program -3.7 -2.8 0.4 2.6 3.1 5.8 New Projections -3.5 -1.1 0.1 1.4 2.6 5.6 CFAF 80 w/o interest -1.5 0.9 2.1 3.4 4.6 7.6 CFAF 90 w/o interest -2.5 -0.1 1.1 2.4 3.6 6.6 CFAF 100 w/interest -3.5 -1.1 -1.9 -0.6 0.6 3.6 B. Cotton Sub-Sector CFAF 100/kg w/o interest (base scenario) Emergency Program -4.9 -4.3 -0.9 1.2 1.7 4.3 New Projections -4.9 -2.1 -0.9 0.3 1.5 4.4 CFAF 80 w/o interest -3.2 -0,4 0.8 2.1 3.2 6.2 CFAF 100 w/interest -4.9 -2.1 -2.9 -1.7 -0.5 2.4 Projected World Cotton Price (CFAF/kg) Emergency Program 385 399 488 548 574 647 Current Projections - 451 493 531 576 618 659 1/ Based on "high" price assumptions, exchange rate of US$1 = CFAF 320. Source: Mission calculations. 6. Conclusion 95. Whether cotton production in Chad is viable or not is a complex question which depends, inter alia, on: (i) how one defines "viability" or the "cotton sector", (for its benefits extend beyond the sector in its strict sense); (ii) the world price of cotton; and (iii) the options available given the evolution of the economic situation. Uncertainties attach to each of these, and the evaluation of the third factor (the economy) is hindered by the shortcomings of the statistical base. In addition, the above financial projections (which are based on the model used in the preparation of the Emergency Program) have limitations. The methodology did not allow the measuring of the impact of changes in net producer price on production levels or estimating changes in certain - 54 - production costs associated with variations in production. 27/ Despite these caveats and limitations, cotton remains a viable crop over the medium- and long-term in Chad. However, this viability is contingent on implementing the reforms defined in the Emergency Program. Even under optimistic assumptions, world prices in real terms will not return to the 1982-84 average level until 1995, and it is possible that the recovery could be slower than currently anticipated. For this and other reasons, efforts to improve COTONTCHAD's efficiency must be reinforced. Furthermore, given Chad's over-dependence on cotton, economic diversification must remain a high priority, regardless of the prospects for the world cotton market. A priori, viability -- narrowly defined -- does not necessitate a reduction in the producer price; i.e., under the world price assumptions used here, the break-even point can be reached without it in two years. This however, is without allowing for depreciation, interest payments or debt amortization. Any of these would require a reduction in the producer price if COTONTCHAD's break-even year (depending on the scenario) is not to be delayed. 96. To reduce costs further, COTONTCHAD can: (i) reduce expenditures on fixed assets or variable costs associated with transport and processing activities; (ii) reduce the volume of seed cotton purchased making sure that this will have a positive impact on net income by reducing fixed costs; and (iii) reduce the producer price paid for seed cotton. Policies should be developed to make the volume produced and the price paid for seed cotton more responsive to world market conditions, without unduly increasing the risk involved for producers. Mechanisms and systems must also be strengthened to prevent the reoccurrence of the poor financial management and excessive expenditures which inflated COTONTCHAD's production costs beyond profitable levels -- even if world market prices had not collapsed. In addition, the future of the cotton price stabilization fund (CSPC) must be determined. Considering the very important transfers that COTONTCHAD made to it over the years, it should have been able to alleviate significantly the financial crisis of the cotton industry (as will be discussed further in Chapter VI). However, it has never functioned properly, and in any event, the necessity of having any kind of independent fund to serve as a financial cushion for COTONTCHAD against market fluctuations has not been demonstrated. 97. These concerns, as well as the issue of agricultural diversification, will be the focus of the second phase of the rehabilitation program for the cotton subsector. This phase is being defined, and a number of flexible solutions are being studied, some of 27/ It appears, however that changes in production would not have as big an impact on the financial results as changes in prices, largely because of the importance of fixed costs for COTONTCHAD -- unless the reduction in production is sufficiently large to justify closing down a ginnery and selling trucks and other equipment. A similar conclusion was reached in the analysis carried out for the Emergency Program. - 55 - which have recently been adopted by neighboring cotton-producing countries. After thorough study, these solutions might include, not exclusively: * differentiating producer prices by region and by cotton quality, to favor production in more profitable areas; * minimizing COTONTCHAD's pre-processing transport costs, particularly by purchasing seed cotton only at the factory gate; * indexing producer prices for seed cotton to world cotton prices to increase supply responsiveness to market conditions. A three-year moving average, partial indexing, or the establishment of a floor price could be used to mitigate the risk to producers associated with fluctuating prices; * Government monitoring of average production costs in the cotton industry and/or determination of an "average cost ceiling" which would guide industry decisions on investments, inventory levels, debt servicing capacity, etc. 98. COTONTCHAD's profitability and competitiveness on the international market will also depend on government actions in certain other sectors. In particular, Government investments in the road network, transport policies, and transport arrangements with neighboring countries will significantly effect the FOB price of Chad's cotton fiber. In the course of supervisory meetings for the on-going Emergency Program -- and assisted by several consultants' studies of the sub-sector -- the Government, COTONTCHAD, and the donor community have begun to shape the second phase of the cotton program, although more profountd discussion is now needed to define the necessary policy reforms and formulate a precise action program. B. Food Crops: Regional Food Self-Sufficiency or Food Security? 1. Introduction 99. In Chad's northern Saharan zone, foodcrop production is infrequent and consists mostly of pearl millet cultivation in oases and ouaddis during periodic flooding. In the Sahelian zone, there is considerable cereals production, of which 60-80 percent is pearl millet and sorghum, 10-30 percent is berbere, and the remainder is maize and wheat grown largely in polders and ouaddis (Table 10). In addition, niWbe, manioc, groundnuts and a number of vegetables are grown for subsistence as well as marketing. Fooderop production in the Sudanian zone is more diverse, including cereals, nigb6, manioc, groundnuts, sesame, sugarcane, and a variety of fruits and vegetables. 28/ However, between 80 and 28/ Sugarcane is produced only on plantations owned by SONASUT, using wage labor exclusively. - 56 - 90 percent of the cereal production in the Sudanian zone is pearl millet or sorghun. Table 10 - Food Crop Production, 1983/84 to 1986/87 (thousands of metric tons) 1983/84 1984/85 1985/86 1986/87 Sudanian Zone Pearl Millet 73.5 87.8 134.9 142.2 Sorghum 178.7 194.2 260.5 259.1 Berbere 6.7 7.8 15.5 17.7 Rice 18.0 1.6 7.6 19.5 Maize 12.9 13.3 16.3 22.6 Sub-total: Cereals 289.8 304.7 434,8 461.1 Groundnuts 76.8 76.6 104.9 97.9 Sesame 7.9 8.8 il.4 10.3 Sugarcane 277.0 208.0 239.0 237.0 Sahelian Zone Pearl Millet and Sorghum n.a. 23.0 165.6 191.9 Berbere n.a. 12.0 79.8 24.6 Rice n.a. 0.8 0.2 0.2 Maize n.a. 4.2 18.8 2.7 Wheat n.a. 1.2 5.3 0.6 Sub-total: Cereals 163.2 41.2 269,7 220.0 Groundnuts n.a. 2.4 6.6 8.4 Sesame n.a. 0.1 0.1 0.9 Other Cereals production 1 n.a. n.a. 34.3 45.6 Total: Cereals 453.0 345.9 738.8 726.7 Total: Area ('000 ha) 1,009.8 958.7 1,314.9 1,272.8 1/ From agricultural projects outside the ONDR operational zones. Source: ONDR. 100. In general, cereals dominate the Chadian diet, although consumption patterns differ according to geographic zone. There is very little precise information on consumption in the various zones, but it is clear that the reliance on cereals declines in favor of milk and meat consumption as one moves north in the country. Accurate information on population distribution is also lacking. The official population estimates used in the remainder of this chapter are based on a 1968 census and should be accepted with caution. War and drought have since provoked substantial migration within Chad and to neighboring countries. Tne magnitude and reversibility of these population shifts are not known. This section will focus largely on cereals production in the context of Chad's food self-sufficiency, although it is recognized that alternative crops -- oilseeds, tubers, fruits and vegetables -- could play an increasingly - 57 - important role in Chad, both nutritionally and in terms of generating cash income. More research and experimentation on the potential for these alternatives is clearly called for within the broader examination of agricultural diversification possibilities in Chad. 2. Regional Food Self-Sufficiency 101. The extreme variation in rainfall levels and the predominant reliance on rainfed agriculture leads to considerable annual fluctuations in production in the Sahelian zone and generally lesser fluctuations in the Sudanian zone. When rainfall in the Sahelian zone tapered off to only 372 mm. in 1984, cereals production plummeted to around 40,000 tons -- one-fourth that of the previous year, which was already below average (see Appendix Tables 3 and 4). Rainfall and production in the Sudanian zone were also low but remained well within the normal range. Overall, total cereals production of 346,000 tons was the lowest recorded level in the past twenty years, fully 100,000 tons below production in the 1973/74 drought. 102. With the return of good rains in 1985 and despite some locust damage in 1986, Chad has experienced a remarkable rebound in agriculture, with cereals production exceeding 700,000 tons in both 1985/86 and 1986/87. At this level, Chad is considered to be self-sufficient in cermals. This has been demonstrated in a number of attempts to calculate Chad's "food balance", generally using estimates suggested by the FAO for export and import volumes, and per capita minimum cereals needs by region. 29/ These calculations are inevitably quite approximative, given the almost complete lack of import/export studies and consumption surveys, as well as the unreliability of population data. However, the dramatic decline in market prices for cereals in the past year supports these calculations. 103. The 1984/85 drought underlined a chronic problem in Chad: the regions of the Sahelian zone are largely cereals-deficit regions, while those in the Sudanian zone are self-sufficient or in surplus. However, inter-regional marketing is underdeveloped in Chad, constrained, in large part, by communication and transport problems. Therefore, in defining its strategy for foodcrop production, the Government must address two key issues: (i) minimizing production fluctuations and increasing output at a rate which maintains cereals' self-sufficiency; and (ii) encouraging marketing, and especially inter-regional transfers, to alleviate regional supply/demand disequilibria. To define an appropriate strategy, the Government needs, first, to clarify its overall goal with respect to food production and food security. Polic'es regarding agricultural production, trade in foodstuffs, Government market intervention, and use of food aid need to be better articulated and coordinated, so that the Government has an internally consistent strategy to ensure food security. The diversity of institutions dealing with these issues (i.e., the MADR, MSA, ONC, ONDR, OMVSD, etc.) may inhibit the integration of these policies. The sector is 29/ It is generally agreed that at production levels above about 650,000 tons, Chad is currently self-sufficient in cereals. - 58 - also characterized by the weakness of support institutions for foodcrop production (e.g., for research, credit, extension services, and marketing) and the inadequacy of their financial and human resources. 104. The Government's 1985-88 Interim Plan established regional food self-sufficiency as a priority objective. Given the currernt isolation of some of Chad's regions, the idea of self-sufficiency on a regional basis is an attractive one. However, it may be unattainable, or attainable at too high a cost, making inefficient use of scarce investment resources. There is certainly a value inherent in assuring a degree of regional self-sufficiency, and it justifies exploration of alternative production methods in a variety of settings, but the emphasis on regional self-sufficiency should not overshadow the importance of making efficient investments in production, and, where feasible, in efficient inter-regional trade. A broader objective of ensuring food security is warranted. To this end, the Government needs to make the medium- to long-term i.vestment in opening up marketing channels in order to (i) provide incentives for increased food production, and (ii) avoid excessive regional price fluctuations and localized food shortages. In addition, given Chad's vulnerability to climatic fluctuations, the Government needs to plan for emergency situations and maintain, with donors' assistance, a security stock, so it can respond directly with targeted injections of locally-produced cereals, or, in times of aggregate deficit, food-aid cereals. a. Producer and Consumer Prices 105. Producer and consumer prices for food crops are not controlled by the Chadian Government. 30/ Nor are there any Government subsidies for food production and consumption. 31/ The Government generally supportE a liberal pricing policy, although concern over recent price fluctuations has provoked discussions about the Government's potential role in ensuring price stability and has led to unsuccessful market interventions by the National Cereals Office (ONC) as discussed later. 106. Market forces produce dramatic seasonal, annual, and regional price differentials in Chad. Regional and annual fluctuations aside, prices tend to be between 50 and 150 percent higher in the pre-harvest season than in the immediate post-harvest period. 32/ Although there is currently no standardized system of price checking throughout Chad, the Government and donors have tried to monitor cereals prices, particularly to 30/ However, COTONTCHAD does buy a portion of the groundnut crop at a pre-determined price and several of the large-scale irrigation projects do the same with respect to th(ir various crops. 31/ In the past, subsidies on inputs for cotton production indirectly benefitted foodcrop producers when the inputs were used to increase productivity in both areas. These subsidies have now been eliminated. 32/ The harvest period is roughly from October to January. - 59 - assist in targeting drought relief operations. Table 11 illustrates the impact of drought on cereals prices in N'Djamena in recent years. Prices began to rise in late 1983, following the poor 1983/84 harvest, and shot up rapidly prior to the 1984/85 harvest. By September 1984, prices in N'Djamena were two to three times higher than at the same time in previous years, and presumably were even higher in isolated regions of the Sahelian zone. The 1984/85 harvest, combined with a massive inflow of food aid, produced a modest decline in prices in early 1985, with a rapid drop following the excellent 1985/86 harvest. With another exceptional harvest in 1986/87, and residual food aid distributions, prices have continued to fall, returning to 1978-80 nominal levels by late 1986. In November, the average price for pearl millet or white sorghum in N'Djamena was CFAF 200 per "coro", a traditional volume measure which holds about 1.7 to 2.3 kg. That same coro sold for CFAF 100 in a village market less than 30 km from N'Djamena, and several sources reported that prices in more isolated areas had dropped to as little as CFAF 25 per coro. The prices in N'Djamena were considered "normal" by Chadians in a year with good rains, but according to sellers in the market, they were, for the most part, still selling off surplus from 1985/86. Prices were expected to fall even further when the 1986/87 crop reached the market. Table 11 - Cereals Prices in N'DJamena, 1983-86 ('000 CFAF/40 coro sack) Pearl White Red 2/ Millet Sorghum Sorghum Maize Rice Wheat - 1983 March 11.5 10.0 8.5 10.0 16.5 n.a, September1/ 10.0 9.0 8.5 10,0 16.5 n.a. November - 13.5 11.0 11.0 n.a. 17.0 n.a. 1984 March 15.8 12.0 10.3 11.5 19.6 4.8 September 30.0 20.0 17.5 15.0 21,3 8.0 December 19.0 13.5 14.5 14.5 22.0 9.3 1985 March 20,0 18.0 18.0 15.0 20,5 7.0 September 20.0 n.a, 7.0 8.0 17.0 4.3 December 10.5 n.a. 8.5 10.5 17.0 4.0 1986 March 10.3 7.9 6.7 6.1 15.5 2.8 September1/ 8.5 8.2 6.4 6.0 15,5 2.4 November - 7.5 8.3 4.8 4.9 14.0 2.1 1/ December not available. 2/ 50 kg sack. - 60 - b. Marketing 107. It was estimated in the early 1970s that only about 10 percent of the cereals crop in a good year was marketed in Chad, with the rest providing subsistence for farmers and their families. This figure is still used, although the actual level of cereals marketed in Chad or exported to neighboring countries is unknown. A number of long-term observers claim that during the drought-ridden 1973-85 period, farmers have -omewhat lost the habit of storing cereals year-round. Even in years of abundant p,z-uction, they tend to sell off too much of their crop at low prices in the imn>ediate post-harvest period. Perhaps this reflects urgent cash needs or the need to repay debts accumulated during drought years. They often sell to local merchants, some of whom reportedly manipulate the market, creating artificial shortages to increase consumer prices. 108. Most Chadian farmers and merchants market cereals locally or within a limited distance. A portion of the crop is informally exported, and several prominent traders in N'Djamena specialize in importing cereals -- mostly rice from Cameroon or wheat flour which has been imported through Nigeria. The volume of inter-regional trade within Chad is difficult to assess, as are the actual regional imbalances. Using the best available estimates of regional population and cereals production, one finds that per capita production is well below the national average in most regions of the Sahelian zone, and well above in most regions of the Sudanian zone (see Table 12 and Appendix Table 5). During the most recent drought, Table 12 -Per Capita Cereals Production, by Zone 1984-86 Estimated Cereals Per Capita Population Production Production ('000 inhabitants) ('000 MT) (kg per annum) - 1984… Saharan 94 n.a. n.a. Sahelian 2,456 41.3 17 Sudanian 2,393 304.6 127 Total 4,942 345.9 70 …-----------______------ 1985… Saharan 96 n.a. n.a. Sahelian 2,515 290.2 115 Sudanian 2,450 449.0 183 Total 5,061 739.0 146 …_____________---------- 1986… Saharan 98 n.a. n.a. Sahelian 2,575 257.9 100 Sudanian 2,509 470.6 188 Total 5,182 728.5 141 Source: Appendix Table 5. - 61 - aggregate production in the northern zone may have averaged less than 20 kg per capita, and even in years of good rainfall, it remains below suggested norms for minimum per capita needs. 33/ Migration may have significantly alleviated the aggregate deficit in the Sahelian zone, but nonetheless, there appear to be considerable regional imbalances in per capita production which could provoke localized food shortages and price instability in the absence of sufficient inter-regional trade. Certain regions, such as Salamat and Lac, currently have large surpluses, as well as considerable potential for increased production if adequate marketing opportunities exist. The recent collapse of prices in isolated regions with high levels of cereals production (e.g., Salamat) is testimony to the inadequacy of inter-regional marketing, which can be attributed to a number of factors, including poor roads, a lack of appropriate vehicles, high transport costs, insufficient pricing incentives, little or no inter-regional flow of market information, and insufficient capital to undertake trading operations. A medium-term policy to promote inter-regional cereals transfers is necessary in order to help unlock the agricultural potential of regions in both the Sudanian and Sahelian zones, as well as mitigate regional price differentials for cereals. co Government Intervention in the Cereals Market 109. The Government's response to the inadequacy of inter-regional marketing -- and the resulting price instability and localized food shortages -- has been through the National Cereals Office (ONC), Its objectives are to: * maintain a security stock for direct intervention in emergency situations; * assist in the sale of food aid while retaining financial autonomy from the Government; * improve cereals distribution throughout the country; * regulate prlces for b-*h producers and consumers. Although the ONC is under the supervision of the Ministry for Food Security (MSA), it relies on external aid or counterpart funds generated by the sale of food aid and is not subsidized by the Government. It is also not the Government's intention -- even if adequate resources were available -- to create a cereals monopoly. Since 1984, ONC has engaged in two actions: (i) purchases and sales of local production; and (ii) sales of food aid on a limited basis. 110. ONC's interventions in the local cereals' market have been very modest (1,270 tons in 1984/85 and 7,530 tons in 1985/86), and their impact 33/ The FAO suggests that 135 kg per capita per annum is the necessary minimum requirement for the Sahelian zone, although actual consumption patterns have not been adequately studied. - 62 - has proven to be negligible. The 1984/85 effort was delayed for lack of resources and was not adequately guided by the most basic principles of price stabilization: ONC made purchases at the wrong time (at elevated prices offered by middlemen, not farmers), and then could not resell the bulk of its purchases (in largely the same locations) at prices which covered costs. Timing improved in 1985/86, but the rapid decline of market prices agaln led ONC to sell at well below its purchase price. In short, ONC has been ineffective in stabilizing market prices and improving cereals distribution through purchases and sales of local production, and has sustained serious operating losses in its attempts to do so. This situation is untenable and calls for reconsideration of ONC's operations. Purchases and sales of local production should be abandoned, to avoid institutionalizing them as Government functions, thereby pre-empting the pot.tial role of the private sector in carrying out inter-regional cereals marketing. Furthermore, it is unlikely that ONC would have adequate resources in the medium-term to intervene effectively in the market. There are already merchants and farmers marketing cereals at the village and sub-regional levels, and a generally dynamic informal sector engaging predominantly in trading. The Governmeat's role should be to open up marketing channels in the mediuim-term and facilitate private sector marketing, especially between cereal-sueplus regions and chironic cereal-deficit regions. This could involve any or all of the following policy initiatives: * improving the regional radio links established during the drought, and providing, through radio broadcasts, a regular flow of market information based on price checks in local markets; * offering credit, other financial assistance, and technical assistance to enable farmers and merchants to purchase appropriate vehicles and expand their marketing areas; * eliminating fixed transport tariffs and other impediments to competition (Chapter IV), if necessary, using external assistance to subsidize -- with a gradual phase out -- private transporting and marketing. Of course, the Government must continue its medium- to long-term investmert in road rehabilitation and maintenance (see Chapter IV). Given Chad's exceptional transport problems, opening up inter-reoional marketing channels will be a lengthy and difficult- process. However, in the long-run, it is the most efficient and most sustainable means of stabilizing prices avoiding localized food emergencies and ensuring increased aggregate production. lll. ONC's other area of activity has been the sale of relatively small quantities of food aid at market prices. In 1984/85, ONC sold 5,000 tons of rice, and in the following year, it sold 17,500 tons of a 32,500 ton allocation of wheat, sorghum, and maize, some of which was in - 63 - poor condition upon arrival. 34/ The rest of Chad's food aid, which totalled around 176,000 tons in 1984/85 and 53,000 tons in 1985/86, was either distributed free or through a variety of Food-for-Work and special programs. The Ministry for Food Security (MSA), which has very limited implementation capacity, directly handled free distributions for less than 10 percent of the total volume. Donors and NGOs distributed the bulk of the aid, often through school-feeding programs, agricultural resettlement projects, urban sanitation projects, or other food aid programs with a developmental impact. These distributions are done in cooperation with the MSA, par.icularly through the Government-sponsored, Action Committee for Food Security (CASAD), which brings together government agencies, official donors, and NGOs active in the field. 112. Chad has made relatively good use of its food aid, but after two bountiful harvests, such aid is no longer needed to overcome an aggregate food deficit. However, much of the food aid linked to special programs is difficult to eliminate without jeopardizing the developmental benefits of the programs. Such is the case for a number of agriculture projects which are not yet self-financing and for school-feeding programs which provide the primary motivation for sending children to school. In addition, certain NGOs have a vested interest in the continuation of food aid programs which are the mainstay of their operations (see Annex 2). These issues are not easy to resolve, although donors should be encouraged to replace food aid with surplus local cereals. On the whole, the donor community has done a relatively good job of cutting back food aid in the past year. Only about 30,000 tons are expected in 1986/87, which will be added to approximately 30,000 tons in existing stocks to act as a security stock. 113. Given Chad's internal and external transport constraints, an in-country security stock is warranted, although the optimal size and location of this stock needs to be determined. Adequate planning for emergency interventions is also necessary, including adequate coverage of related storage and transport costs, which are quite high in Chad. Although food aid is needed occasionally to overcome periodic aggregate food deficits, it has the potential to depress market prices and discourage cereals production in years of good rains. Managing food aid in this changing environment requires close cooperation among the relevant Government institutions, as well as between the Government and the donor community. Basically, there are two food security activities for which the ONC and the MSA are responsible: (i) preparation for emergency food interventions, and (ii) promotion of cereals marketing. The first includes maintaining a security stock, working with the donor community to develop appropriate intervention strategies for emergency situations, and developing food emergency warning systems such as the SAP (systeme d'alerte precoce), a program currently being implemented in the MSA with the help of the NGO AEDES. The second involves monitoring regional markets and disseminating market information inter-regionally, supervising any marketing promotion schemes (e.g., technical assistance, credit, private 34/ The food aid year runs from November to October. - 64 - sector subsidies, etc.), and coordinating and monitoring the market impact of non-emergency food aid programs. Responsibility for these various activities need to be clearly delineated; however, ONC's autonomy should not lead to an administrative schism between the Office and the MSA. Administratively, ONC should operate within a food security strategy adopted and implemented by the Ministry, and its responsibilities should be clearly distinguished from those of other sections of the Ministry. Overall, food security strategy needs to be defined in close cooperation with the Ministry for Agriculture and Rural Development (MADR). The coordination of food aid policy with the emerging agricultural development strategy may prove difficult as two independent Ministries are involved. The Government may wish to consider the costs and benefits of merging them, although such a merger is not essential as long as the necessary administrative links and information flows are established to ensure adequate communication and produce a consensus in defining an appropriate food security strategy. 3. Minimizing Fluctuations in Production 114. In addition to expanding marketing channels, the Government will have to focus on appropriate research, improved seeds and cultivation techniques, better water management, greater credit availability, and development of support institutions in order to minimize the risk associated with fluctuations in foodcrop production and increase output to maintain Chad's overall food self-sufficiency. 115. Research on Food Crops. Until recently, agricultural research in Chad focused exclusively on the cotton sector. Today, there is no research center in the Sahelian zone, and no research efforts focusing on traditional cereals, although before the war, limited experimentation with millet, sorghum, and maize was carried out at centers in Dougui-Bokoro and Ain-Dam. In the Sudanian zone, the IRCT has initiated research on certain food crops, including maize, niebe, rice, and groundnuts. Research was also carried out a the Deli center. However, resources are very limited, and additional research is needed on regionally-adapted seed varieties and production techniques, as well as on soil conservation and water management. The socioeconomic implications of introducing new varieties or production techniques must also be addressed. The World Bank's Agricultural Rehabilitation Project will include technical assistance to help define an appropriate research program. 116. Seed Selection and Multiplication. Chadian farmers generally store their own seeds, although during the recent drought, many were forced to rely on food aid or emergenry distributions of seeds to replenish their stocks. Thus, a number of new varieties were introduced which were not necessarily well-adapted to Chad's various ecological zones. There are currently only three multiplication centers in Chad, one in the Sahelian zone and two in the Sudanian zone for rice and traditional cereals. An expanded seed program is needed to introduce improved varieties at the regional level and to encourage seed storage and multiplication at the producer level. The Government recently outlined the key elements of a national expanded seed program and presented it to the donor community at the agricultural sector meeting held in December 1986, although the design and funding of such a program have not been finalized. - 65 - 117. Production Techniques. Food crop producers in Chad rely overwhelmingly on simple agricultural tools and traditional methods, such as alternating fallows and slash-and-burn cultivation. In addition, a system of crop rotation which includes cotton is practiced in the Sudanian zone, and chemical fertilizers purchased for cotton may sometimes be used indiscriminately to benefit food crops as well. Damage from the 1986 locust infestation was largely avoided through emergency insecticide sprayings by several donors. The need for such emergency interventions served to underline the necessity of developing adequate institutions and systems for foodcrop protection in Chad, 118. A major animal traction program -- mostly linked to cotton production -- was introduced prior to the war, but progress was stalled by subsequent events. In 1982/83, it was estimated that only 16 percent of producers in the Sudanian zone used animal traction, and the practice was virtually non existent in the Sahelian zone. 35/ Growth has been limited by several factors: first, the local production of ploughs and other equipment ceased in 1979 and was only resumed in 1984. Second, nearly all. veterinary services for cattle were interrupted. Finally, the losses in cash income associated with the war, the drought .,nd, most recently, the restructuring of the cotton sector, have made it extievely difficult for producers to purchase the oxen and equipment necessary fot animal traction, particularly at prices which cover SIMAT's relatively high costs. In the past, this constraint was eased by subsidies on tha purchase of equipment which were financed by the extension agency, ONDR. However, ONDR's current financial difficulties have eliminated this subsidy, and the lack of agricultural credit systems (discussed later) has further compounded the problem. 119. Irrigated Farming, Chad urgently needs to define a coherent strategy for the development of irrigated farming, which has thus far evolved rather haphazardly, with limited coordination of projects and policies. According to the FAO, Chad has approximately 12 million ha. of potentially irrigable land. This represents the largest irrigation potential in the Sahel, although Chad's existing rehabilitation and extension projects will cover 12,000 ha., half of which will benefit from controlled irrigation. Currently, only about 3,500 ha. are under irrigation. 120. Traditional, uncontrolled irrigation has been practiced in Chad's polders since pre-colonial times. Today, there are three large-scale irrigation projects: the polders of SODELAC, which recently resumed operations on Lake Chad, the rice perimeters of OMVSD, and the Casiers A, B, and C on the Logone River. In addition, work has resumed on the principal small-scale irrigation project launched prior to the war along the Chari River, and the Government is planning a new project for the polders of Lake Chad. During the drought, a number of donors and NGOs, in 35/ Limited attempts were made just prior to the war to introduce donkey traction in the Sahelian zone, for groundnut cultivation around Bokoro and in the ouaddis of Kanem. - 66 - cooperation with the relevant Governlment institutions, introduced and/or improved a variety of water management techniques, including the use of chadouf, or levered water pumps, small-scale dam building, and small-scale irrigation. Many of these projects are proving successful and merit more systematic experimentation and diffusion. 121. In defining a development strategy for irrigated production, the Government must address certain fundamental questions, including: (i) how heavily should Chad invest in irrigation; (ii) how best to assure adequate cost recovery for investments and recurrent costs; (iii) which crops should be produced; and (iv) how best to introduce producers to a new structure of production and new cultivation methods. Little research has been conducted in Chad to determine which crops are most appropriate for irrigated development. Initially, some additional cotton production was envisaged, although most perimeters have focused on rice production and, to a lesser extent, maize and wheat. However, information on consumption patterns and the demand for different cereals is limited. Demand for rice, for example, may be lagging behind the development of rice production, particularly when a large portion of the available supply is smuggled in from large-scale irrigated perimeters in northern Cameroon. 122. The on-going irrigation projects in Chad have generally not discovered a satisfactory, self-sustaining system for cost recovery, neither for the initial investment costs, nor for subsequent recurrent costs. The Government does not, and cannot, subsidize these projects, and full cost recovery through the producers themselves requires that there be adequate production incentives and marketing opportunities to guarantee an acceptable rate of return. In particular, the return must be greater than is possible through traditional cultivation techniques, although, thus far, this may not always have been the case. Yields for irrigated perimeters have tended to be low, perhaps because the projects are relatively young and the producers have not entirely adapted to the new organization of production and the cultivation techniques involved. Furthermore, the level of cereals production in the past two years has reduced market prices and may discourage farmers' interest in irrigated production, despite the longer-term need to increase production and productivity. 123. Another key issue is the streamlining of the management of the parastatals responsible for managing Chad's large-scale irrigation projects (e.g., SODELAC, OMVSD). These parastatcls generally have excessive administrative structures and elevated overhead costs. To cover these costs, they have resorted to either lowering their fixed producer prices, which discourages production, or raising consumer prices, diminishing their competitiveness on the market and inhibiting sales. Options for alternative management systems need to be explored. At the very least, overhead costs need to be reduced to a minimum, and the various pricing policies need to be coordinated to create consistent incentives. 124. Strengthening of extension services and establishment of appropriate training programs are essential in introducing producers to new irrigation techniques and enabling them to achieve yields which are superior to those obtainable by traditional methods. Care must also be taken to ensure that irrigated farming systems are compatible with other economic activities undertaken by many Chadian producers. The difficulty - 67 - of establishing producer cooperatives to manage small-scale irrigation projects was also often under-estimated by executing agencies and has led to a large number of abandoned perimeters. Certain projects were initiated very rapidly during the drought, often using Food-for-Work schemes, and insufficient attention was paid to the need for a progressive shift toward self-financing and producer management. The many approaches to irrigation development and the policies (e.g., for credit availability, marketing guarantees, etc.) adopted by various projects were largely uncoordinated and, in some cases, contradictory. Therefore, it is essential for the Government and the donor community to work together to establish a common approach and a coherent policv framework within which irrigation projects of all dimensions can operate. A study of irrigation experiences in Chad is currently underway. 4. Agricultural Credit and Institutional Constraints 125. The cash income of Chadian farmers is now more limited than usual as a result of the crisis in cotton and the recent decline of market prices for cereals. The lack of formal credit systems for the sector is, therefore, more acute. No banking institution or other agency currently specializes in agricultural credit, although a number of project-related and informal credit systems exist. Several NGOs extend and manage medium-term credit for ploughs and other simple agricultural equipment. Similarly, the large-scale irrigation projects often distribute tools and inputs on credit, with repayment automatically deducted from marketed output. There is also a poorly documented, informal credit system through local merchants who extend credit, at reportedly very high interest rates, in exchange for guarantees of future production. 126. Before the war, crop credit was first extended by the BDT, and later, by ONDR. The Government's Fonds de D_veloppement et de I'Action Rurale (FDAR), also extended credit on a limited basis for the marketing of agricultural products, but experienced poor repayment rates. The FDAR ceased operations in 1981, and, in 1985, the Fonds d'Intervention Rurale (FIR) was established. It is not vet operational and has never received the financing it has been allocateo under the Government budget. Nor has the donor community provided financial support for agricultural credit at the broader, sectoral level. The needs are varied and include credit for (i) equipment and tools; (ii) oxen for animal traction; (iii) simple processing equipment (e.g., peanut grinders and oil presses); and (iv) packaging and vehicles for marketing. The role of FIR in addressing these needs remains to be defined, and appropriate credit systems must be designed in cooperation with other institutions such as ONDR (extension services) and SIMAT (agricultural equipment manufacturing). A study of credit needs and options, as well as long-term technical assistance for the MADR on credit issues, is being financed under the World Bank's Agricultural Rehabilitation Project. 127. The Ministry of Agriculture and Rural Development (MADR) is responsible for the definition and execution of Chad's agricultural strategy, working through its four principle departments: Agriculture, Rural Engineering, Water Resources and Meteorology, and Agricultural Training. Activities in the field are largely carried out by a variety of Government offices and parastatals, including SODELAC, OMVSD, ONDR, and - 68 - ONADEH (the latter for the development of market gardening). In addition, there is the Ministry of Livestock and Rural Water and all Its associated agencies, as well as agro-industrial production of sugarcane and tobacco through SONASUT and MCT (see Chapter TV). 128. Many of the institutions in the agricultural sector were reestablished in the past few years according to the sector strategy and institutional framework which prevailed prior to the war. Many of them are seriously crippled by a lack of human and financial resources. Thus, there is a critical need to reexamine the goals, structures, and activities of these institutions with respect to the agricultural strategy which is being defined currently (with the support of FAO, UNDP and the World Bank, under its Agriculture Rehabilitation project) and within the existing resource constraints. The most salient feature of the new strategy will be the increased emphasis on agricultural diversification and, in particular, on food production -- in contrast to a previously narrow focus on the cotton sub-sector. The Government will have to reorient existing institutions as well as develop appropriate support systems and institutions for foodcrop production. Large gaps are evident, for example, in terms of credit availability, research programs, marketing channels, and extension services. ONDR has functioned relatively effectively, but until recently it concentrated its extension services predominantly on cotton production. Efforts are being made to develop and implement a more integrated program, but this has been difficult as ONDR struggles to adjust to the loss of revenues from the cotton sector, which totalled approximately three-quarters of the agency's budget in 1985. As a result, ONDR has begun a major restructuring process with the help of technical assistance from France and Switzerland. 5. The Potential for Agricultural Diversification 129. The possibilities for agricultural diversification vary by region and will depend largely on the potential for water management systems (especially irrigation) and proximity to domestic or external markets. In the Sahelian zone, as water management systems are introduced, it may be possible to expand production of traditional crops such as millet, ni6b6, sesame, and onions to supply secondary urban centers in the North. In the Lac and Chari-Baguirmi regions, the proximity to the relatively large N'Djamena market affords the opportunity to diversify, particularly into fruits, vegetables, and wheat. Throughout the Sudanian zone -- and to a lesser extent in the southern part of the Sahelian zonie -- there is potential to expand production of traditional cereals as well as to pursue diversification into rice, maize, oilseeds, tubers, roots, fruits and vegetables. Some export potential for these crops exists, especially in the large market in northern Nigeria, although fluctuations in production -- particularly for traditional cereals -- tend to be regional in nature (i.e., when southern Chad is in surplus, so are the northern regions of C.A.R., Cameroon, and Nigeria). None of these crops offer the potential for large-scale export to European markets, as cotton does; and Chad has thus far been unable to compete in the European groundnut market due to its transport disadvantage relative to other groundnut producing countries. Finally, there appears to be little scope for expansion of Chad'n other industrial crops: tobacco and sugarcane. Domestic demand for cigarettes and sugar is relatively small and growing slowly, particularly in the face - 69 - of competition from unofficial imports. It is also unlikely that either industry could compete in external markets in the medium-term. C. Livestock: What Is Holding up Development? 130. The livestock sector in Chad can make a major contribution to the country's growth and incomes, replacing in part the lost income and export potential of the hard-hit cotton sector. Before this potential can be realized, however, a number of key constraints to the development of the sector need to be addressed. Needed actions include the implementation of well-focused strategies for the promotion of the productive environment and for the development of water resources, the creation of an appropriate institutional environment, and the reform of the system of livestock trading and export. 1, Background 131. Livestock has traditionally been an important source of income, export revenue and food self-sufficiency in Chad. Despite serious set-backs to growth in the sector (the 1979-82 war, a Rinderpest outbreak and drought in 1984), livestock production accounted for approximately 17 percent of GDP in 1986, not counting the mostly informal transformation and marketing activities the value added of which is difficult to measure. The Ministry of Livestock and Rural Water (MEHP) estimates that there are currently 3.5 to 4 million head of cattle in the country, about the same number estimated in the last official livestock census taken in 1975-76. 36/ The annual offtake of cattle is estimated at 10 percent, and production is estimated at 64,000 tons. Approximately 4.5 million goats and sheep and 0.9 million camels, donkeys and horses round out the livestock sector. 132. About half of the cattle are in herds which migrate seasonally between the Sahelian and Sudanian pastoral zones. Although sedentary livestock raising is concentrated in the South, this practice Is gaining importance in the Sahelian zone, and there is ample scope for expanding the use of animal traction and other forms of integration with agriculture. The country has major fodder reserves in normal rainfall years and, even in drought years when fodder production in the Sahelian zone is inadequate, 36/ The last official census of Chad's livestock herd was published in the "Inventaire Qualitatif du Cheptel Tchadien". Following the cen.us, two growth rates were used to estimate the evolution of Chad's herd over a ten-year period. Due to a reduced birth rate resulting from the 1978 drought, it was estimated that the herd would grow by 1.6 percent from 1977 to 1981. A growth rate of 2.5 percent, estimated to be normal for Chad, was used from 1982 to 1986. The rate of exploitation for cattle was estimated at 12 percent, a figure which probably declined considerably as a result of the above-mentioned set-backs to growth in the early 1980s. 70 - total f.eed production in the Sudanian zone would be enough to support a somewhat expanded herd. 37/ 133. lJvestock market-inf! in Chad is carried otit prlmarily on a traditional basis; herders sell animals to large traders through a network of 40 principal and secondary centers. Some refrigerated meat was exported in the late 1960'3 (reaching 11,460 tons in 1971), but the market declined rapidly durirng the 1970's as a result of increased competition from Europe and Latin America and higlher transport costs, and stopped altogether with the outbreak of hostilities in 1979. 38/ Chadian livestock is currently exported almost exclusively "on the hoof" mainly to Nigeria, with a small quantitv goinig to the Central African Republic. Approximately 180,000 cattle were officially exported in 1985, although the number is closer to 300,000 if informal channels are included. An estimated 150,000 sheep and goats were also exported in 1985, all via unofficial channels. Using these estimated figures, the total value of livestock exports for 1985 was about 11S$60 million, surpassing for the first time the export revenue of the cotton sector. 2. Investment and Aid 134. In view of the livestock sector's proven durability and its potential for expansion, investments to increase the sector's efficiency are a key element of Chad's rehabilltation efforts. During the Rinderpest epidemic in 1983, a major effort was undertaken by the EDF, FAC, BTD and FAO to reequip the Ministry of Livestock and Rural Water with vehicles and vaccination equipment. Since that time, a number of externally-financed, small-scale projects have included support for veterinary services, rehabilitation of the vaccine producing facilities at the Farcha Laboratory (which already exports vaccines to neighboring countries), restoration and expansion of the pastoral well system, and provision of technical assistance for the institutions involved in the sector. The most important of these is financed by EDF, FAC, FAO, the Federal Republic of Germany, and the NCO, OXFAM. However, these projects are regionalized and function independentlv with little coordination. According to the Covernment's inventory of aid projects for 1987, approximately US$4.5 million equivalent of external assistance will be devoted to development of the livestock sector as compared to US$45 million equivalent for agricultural development. This imbalance will be addressed in the Government's 37/ In addition to Chad's major fodder reserves, large amounts of cotton-seed grain suitable for animal consumption are produced during COTONTCHAD's milling operations. This resource has, however, yet to be fully exploited. 38/ Approximately 30 tons of refrigerated meat has been exported to Cameroon and the Congo since 1983. Expansion of this market is a prlmary objective of Chad's livestock development strategy (see para. 146). - 71 - investment program for 1988. For the time being, development activities in the sector focus largely on cattle, although camels, sheep and goats all represent an important resource for the country. 135. Given Chad's financial constraints, the highest priority should be given to investments which: (i) increase national livestock production on a sustainable basis; (ii) improve the efficiency of livestock marketing; and (iii) increase the sector's contribution to the economy. Based on these investment criteria, the Government is currently preparing, with the support of IDA and FAO, a National Livestock Project which will provide urgent institutional support while encouraging a Larger role for the private sector. The project's main objectives will be to expand the availability of key inputs and services, improve the quality of sectoral planning and extension, and reorganize the administration and financial regulations governing livestock export. 3. Production Strategy 136. In view of the country's weak financial base, utilizing and building on the traditional methods of managing Chad's herd is the most appropriate approach to increasing livestock production. While the family is the basic production unit of migratory herders, ethnic relationships between herder families and the traditional hierarchy are still strong and continue to define migration patterns. In addition, the relationships between herders and the Chadian administration, as well as between herders and cultivators, have long been a source of social and political tension. 39/ Priority should, therefore, be given to support actions which promote the productive environment through provision of technical advice and inputs without drastically altering the sector's socioeconomic patterns. Such actions would include increased suDport for animal health (particularly the distribution of medicines), the introduction of technical and organizational assistance, breed improvement research, and training for extension agents. 137. In line with the objective of reducing recurrent costs while expanding production incentives at the producer level, the Government's medium-term development strategy needs to focus on the creation and support of producer groups based on existing social structures. These groups would form a national umbrella structure which would gradually assume full responsibility for the distribution of veterinary drugs and other inputs, and eventually take on an important role in meat and by-product marketing. Responsibility for the management of water points and rangelands would also be transferred to producer groups in an effort to maintain a high degree of mobility in the more drought-prone Sahelian zone. Predominantly public sector tasks such as sanitary inspection, vaccination against major epidemics and other essential veterinary treatments, research and provision of technical advice should remain government responsibility in the 39/ The assessment of a tax on livestock in 1964 was a catalyst for civil disturbances at Mangalme which proved to be precursors of the hostilities to come. - 72 - medium-term. However, a gradual transfer of vaccination and extension responsibility to producer-group organizations should be envisaged over ti.e long term, with research and sanitary control eventually remaining the only Govermnent operational tasks. 4. The Institutional Environment 138. In correlation with actions at the producer level, the creation of an appropriate institutional environment is essential for growth in the livestock sector. All institutions in the sector, with the exception of the Farcha laboratory, ceased to function during the war, and their facilities (buildings and vaccination centers) remain largely dilapidated. Despite a number of externally-financed emergency relief actions In support of the MEHP, the scarcity of funds for refurbishing buildings, purchasing vehicles and equipment, and especially for operating expenses has reduced the Ministry to a provider of minimal emergency assistance. In addition to the lack of operational resources, the MEHP's capacity for planning and the provision of technical advice is severely limited by the lack of qualified personnel at all levels. 139. Several parastatal enterprises operating in the sector are faced with the same constraints as the MEHP. The National Office for Village and Pastoral Water Supply (ONHPV) is charged with planning, coordinating and, in some cases, executing the rehabilitation and construction of rural water points in cooperation with the MEHP's Water Bureau. Although the ONHPV benefits from numerous externally financed projects in support of its rehabilitation and construction operations, it still lacks the capacity both to program and coordinate all interventions in the sector and to provide certain necessary technical expertise, particularly in the area of well maintenance. In the field of veterinary services, MAGAVET has a de lure monopoly on the importation and distribution of veterinary products. Its distribution network, however, is grossly inadequate and needs to be broadened, and it is unable to recover its costs. Chad's only slaughterhouse located at Farcha suffers from a dilapidated plant and a shortage of qualified management personnel, which cause the enterprise to operate at a loss. Similarly, the National Society for Animal Production (SONAPA), charged with the production and marketing of milk, eggs, chickens and animal feed, is subject to weak financial management and the lack of markets for some products, which severely limits its profitability. With respect to disease control, the Farcha laboratory has played a key role over the last decade through research and preparation/distribution of vaccines. Both activities are being Ptrengthened with assistance from France, the EDF and IDA. 140. Strengthening the services of MEHP and those of its associated enterprises will be a principal objective of the Government's livestock development strategy. Funds will be provided under the National Livestock Project for office construction and rehabilitation, equipment, vehicles, training and technical assistance, as well as for operating costs on a declining scale. Training and organizational assistance will also be provided on a pilot project basis in support of producer groups. Further operational support will be provided to MAGAVET, which will transfer responsibility for delivery of common medicines to the producer groups in the designated pilot areas while maintaining its import monopoly. MAGAVET - 73 - will limit its responsibilities to the wholesale distrIbution of medicines in the pilot areas, while working to improve its efficiency in the rest of the country. 141. A reevaluation of SONAPA's operations will be necessary to determine the institution's future viability. Because of the lack of viable markets, there appears to be little justification for several of SONAPA's activities, in particular the production of animal feed. A major investment recently approved by BDEAC in support of SONAPA's operations -- because of its vast size (CFAF 500 million) conpared with the small turnover of the company -- further complicates the question of the institution's financial viability. Following an analysis of market prospects, the rationale for continued State participation in the sector nceds to be examined with an eye to, rds resolving SONAPA's debt issue. In any case, the potential for private sector participation should be investigated for production and marketing activities which might prove viable. 5. Water Resources Development 142, Also crucial to the development of livestock resources in Chad is the need to define a strategy for the creation, rehabilitation and maintenance of pastoral wells. Since 1983, donors have financed numerous small and widely-scattered interventions in this field, which have resulted in a variety of policies and operational strategies for the development of the sector. The lack of basic information such as specific head counts, herder routes, fodder production capacity and ground water reserves makes it all the more essential for the Government and donors to expand their knowledge of the sector's capacity and to coordinate future development efforts. 143. Of particular necessity in the short term is the definition of a strategy for the creation of water points along herder routes in relation to the capacity of the surrounding grazing lands. The implementation of an appropriate strategy would avoid a repetition of the mass starvation of cattle and severe ecological damage that resulted from over-grazing around water points during the 1973 drought. Technical assistance will be provided under the National Livestock Project to MEHP's Water Office for the programming of water points along established marke:ting trails. While ONHPV will be responsible for monitoring the establishment of these facilities, the actual construction should be carried out, where possible, with private sector participation. The responsibility for maintenance of water points should also be transferred to producer groups and to small entrepreneurs. 6, Export Constraints and Potential 144. The pres.nt svstem of livestock trading also poses a serious constraint to the sector's development. The mixed-enterprise SOTERA (Society for the Exploitation of Animal Resources) has an official monopoly on the exports of livestock, meat and by-products, but in practice its function has been reduced to controlling exports of live animals by allocating export permits among its shareholders. Numerous permits, licences, certificates, fees and taxes are required not only for export but - 74 - also for the domestic market, making the system prohibitive for many traders. Consequently, extensive use is made of informal export channels for livestock, depriving the State of needed tax revenues. In addition, as explained in Chapter IV, the weakness of the Nigerian naira in relation to the CFA Franc has encouraged Chadian traders to use export revenue to purchase Nigerian goods which are subsequently smuggled into Chad for resale, further depriving the Chadian Government of trade revenues linked to the livestock sector. 145. Faced with this situation, the Government temporarily banned livestock exports in March 1986, citing the need to rebuild stocks and to organize livestock marketing through official channels. The ban ended in January 1987. Because Chad's livestock exports to Nigeria represent only about 5 percent of total Nigerian meat consumption, the impact of the ban on prices has probably been negligible. On the contrary, according to customs officials, the ban has cost the Government an estimated CFAF 300 million in tax revenue, and may have even cost a loss in market share, 146. In order to create a more favorable environment for commercial activ-Jies in the livestock sector, the following actions are required in the short-term: (i) SOTERA's export monopoly, which severely restrains marketing efficiency, needs to be relinquished; SOTERA should limit its role to the promotion of exports of meat and animal by-products; and (ii) the complex system of export taxes and licenses needs to be reviewed and streamlined. While a certain amount of unrecorded trade is unavoidable due to the traditional nature of the sector, the implementation of these actions should serve to increase the Government's revenue from livestock exports by as much as 50 percent in a period of one year. The Government, with assistance from IDA, is currently examining the role of SOTERA, as well as formulating its proposals for the simplification of the administrative and financial framework of livestock exports, which will be supported under the National Livestock Project. 147. The potential for increasing exports of meat and meat by-products also needs to be examined in order to retain a higher value added for the national economy. Because of competition with subsidized European and Latin American exports of frozen boneless meats, Chad, which unusually high costs for air transport, has been unable to recapture its share of the regional market for refrigerated meat. In addition, Chad's processing facilities (mainly the Farcha slaughterhouse) do not have the capacity to produce boneless meat, so that "had can only export meat on the bone, which further increases transport costs. In practice, SOTERA grants export authorizations to independent merchants, so that its export monopoly is not strictly enforced. The Government has recently commissioned a livestock meat and by-products study which will examine the present and projected supply and demand situation in the region, especially the Nigerian market. Based on the scope of these opportunities, recommendations will be made on the necessary investments in the processing and refrigeration facilities. The potential for exporting leather and other animal by-products also requires further study. In the meantime, the development of a parastatal enterprise in this area should be avoided. Depending on market conditions and the possibility for private sector intervention, investments could be considered in the area of leather production. 75 - D. Fishing: What Is the Potential? 148. ln view of Chad's limited resource base and the need to diversify output In the agricalta1ral sector, the expansion of production in the fisheries sector -- a resource with considerable potential in Chad -- merits closer studv. 149. Little formal information has been collected on Chad's fisheries sector since a comprehensive study was carried out by the French Research Institute, ORSTOM in 1973. 40/ At that time, it was estimated that, in years of normal rainfall, approximately 100,000 metric tons of fish are produced annually from Lake Chiad and the Chari and Logone rivers. 41/ This output represents an important contribution to Chad's food self-sufficiency. However, as in other Sahelian countries, fish production in Chad is extremely sensitive to rainfall conditions, and supply can vary greatly between the wet and dry seasons as well as from year to year. Fresh fish marketing in Chad is limited to N'Djamena, Sarh and Moundou, while smoked and dried fish is traded throughout the c..untry and exported informall; to Cameroon and Nigeria, and to a lesser extent to the Central African Republic. However, improved drying techniques must be developed to eliminate frequent parasi-? problems. 150. Direct interventions in support of the fisheries sector have been few and largely ineffective. During the 1960's, the Government made several attempts to organize marketing cooperatives for fish production, but results were disappointing. As with the livestock sector, strong ethnic and social traditions have worked against the introduction of organizational structures from outside particularly when accompanied by administrative constraints. Efforts in this area should be designed to utilize and build on traditional social structures through which technical advice and productive inputs can be channeled. The Government has adopted a more flexible approach to fisheries promotion based on the creation of small-scale, self-managed pre-cooperatives. 151. In an effort to reduce the rainfall sensitivity of fish production, the Government is currently examining, with the support of UNICEF and several NGOs, the potential for fish farming in man-made stock ponds. The marketing strategy for pond fish will focus on the dry season when prices are driven up as a result of decreased supplies of fresh fish. Future development of these activities will depend on the results of pilot schemes currently underway. 152. Given the sector's potential in the areas of food self-sufficiency and income generation, fisheries components should be 40/ "Le Commerce du Poisson au Tchad" (P. Couty & P. Duran, ORSTOM). 41/ 100,000 metric tons represents total estimated output from the above-mentioned bodies of water including Nignrian and Cameroonian catches. Chad's share of this total is estimated to be approximately 70 percent. - 76 - considered for all rural development interventions situated near major rivers or Lake Chad. In the meantime, a comprehensive review of the sector's current rapacity is needed to determine growth potential and to define a medium-term development strategy. A study of this type is underway, with financing from the BDEAC, E. Environmental Concerns: The Need for Action 153. Development of the agro-sylvo-pastoral sector is closely linked to ecological conditions, in particular to the questions of desertification and soil degradation, Chad, like other Sahel countries, has been seriously affected by recurrent drought since the late Sixties. However, a number of observers ieel that drought-induced damage and degradation have been less severe than in other Sahel countries due to Chad's relatively low population density. Nonetheless, the situation is serious and the Government is currently reviewing the components of a proposed national program to combat desertification which was designed in collaboration with technical experts from CILSS. 2-'sertification in Chad has multiple causes, including, among other reasons, indiscriminate cutting of fuel wood, brush fires, and overgrazing by livestock. The Ministry of Environment, which is grossly under-equipped and lacking in skilled technicians, has initiated several tree nursery and reforestation projects, with support from the donors and NGOs such as Africare, CARE, SECADEV and AICF. Many of these NGOs also have their own programs to combat desertification, frequently within the framework of larger agricultural development projects. 154. Although a reforestation policy is essential, it is not sufficient to effectively combat desertification. A number of other actions are also necessary, some of which have already been introduced in Chad. In the Lac and Kanem regions, efforts have focused on dune stabilization around the polders, protection of ouaddis against sand and salt intrusion, and the installation of wind-breaks and sheltering screens around dwelling areas. Throughout the Sahelian zone, and in vulnerable areas in the Sudanian zone, actions underway or in planning, have included the building of anti-erosion barriers, water conservation measures, regeneration of gum arabic and palm oases, development of tree varieties appropriate for fuelwood production, distribution of improved-efficiency cookstoves, and the promotion of a program for fuelwood conservation. Simultaneously, there is a need to combat brush fires, determine the placement of rural water points based on available pasture lan;s, and ensure adequate management of forest areas surrounding urban ( nters. The defirition and rapid implementation of a comprehensive plan to combat desertification is essential and cannot be separated from the formulation of policies for rural development. Sw - 77 - IV. INFRASTRUCTURE AND INDUSTRY 155. Transportation is crucial to the development of not only agriculture, as we have seen, but also industry and trade, and even education. This chapter begins, therefore, with a section on this sector. Given Chad's limited resources and the urgency of improving the transport network, the sector identifies and discusses the issues and actions which deserve priority. Section B examines Chad's petroleum sector and how it may change after domestic production begins, which is possible as early as 1990. This is accompanied by a brief review (Section C) of the main problems of the electricity and water sub-sectors, namely high production cost and low cost-recovery. Chad's urban population has been increasing dramatically in recent years, largely because of the successive droughts; Section D examines how Chad is coping with this situation. Section E is devoted to trade and industry, distinguishing between the constraints facing existing and new enterprises. A. Transport: What Are the Main Priorities and Issues? 1. The Transport Network 156. The transportation network of Chad is dominated by road transport. Chad has no railroad. It has one international airport and five domestic airports, three of which receive regularly scheduled services provided by Air Tchad. 42/ River and lake navigation, once important, have declined with the drought and appear unlikely to justify the major investments which would be required to ensure reliable waterborne transport in the future. Formal intercity passenger services are virtually non-existent. Statistics on freight and passenger transport are very weak. 157. Chad has about 7,300 km of classified roads and tracks and some 24,000 km of unclassified tracks serving rural areas. 43/ Only 28 km are paved, a decline from 253 km in 1978, and only about 1,260 km are engineered, all-weather roads; most of the remaining are passable only during the 7-8 months of the dry season. Road distribution is uneven; roads are more concentrated in the cotton producing area in the South approximately defined by the triangle N'Djamena-Sarh-Moundou (see map on next page). In this area, soil conditions permit the construction of easily maintained later4te roads. 158. Circulation on roads is restricted by the difficulty of crossing rivers and lo.. lying areas during and for several months after the rainy season. There are very few bridges and only elever ferries. Two bridges 42/ Two-thirds of Air Tchad is owned bv the Chadian Government and one-third by UTA. 43/ The classified network consists of roads that have been maintained from time to time; the unclassified network refers to an estimate of recognized or marked tracks. - 78 - -- one near N'Djamena and the other at Lere, both connecting Chad to Cameroon's road network -- have recently been rehabilitated. Only seven ferries have been rehabilitated; the cost of rehabilitating the others is at present not economically justified by the volume of traffic. 159. The Chadian Government has identified a priority road network of 3,800 km which will be reconstructed in the next five years. Rehabilitation or spot repairs are currently being carried out on about 2,000 km of the high-priority network, and a capacity to maintain these roads is being developed under projetts financed by IDA and USAID. Experience has shown that spot -epairs have a very short lifetime, while rehabilitation to all-weather standards is extremely costly in the Chadian context due to the scarcity of suitable materials. Therefore, careful consideration needs to be given to the definition of the high-priority ro.d network, the standards of improvement, and the selection of maintenance policies and practices. 160. On the whole, the transport sector of Chad is so underdeveloped that it seriously hampers overall economic development. Long distances, difficult terrain, widely dispersed population, lack of suitable road construction materials, and high energy prices contribute to high construction and transport operating costs, which the small dispersed population and low volumes of traffic cannot fully support. Intensive efforts will be needed to move Chad from a low equilibrium characterized by high transport costs and low traffic volumes to a situation similar to that of other countries in West Africa. 2. Traffic Volume 161. Chad's external traffic of some 350,000 tons per year is, at present, carried predominantly on the road/rail route from the port of Douala in Cameroon to N'Djamena (1,750 km). The main exceptions are petroleum imports (90,000 tons), which come by road from Cameroon or Nigeria, and cotton exports (40,000 tons), which go directly from southern Chad to Cameroon. Alternative routes through Nigeria should be shorter and cheaper but have remained largely closed to Chadian traffic in recent years for political reasons. The Transequatorial route (2,500 km) through CAR and Congo is no longer in use, nor is the Benoue river route through Cameroon. 162. Domestic freight transport handles about 265,000 tons per year; of this, 180,000 tons represent traffic internal to the cotton zone and 25,000 tons the distribution of petroleum products. Domestic food flows in a normal year are estimated at about 50,000 tons; however, this traffic does not appear in official statistics. The remainder accounts mainly for the distribution of beer (10,000 tons), sugar (9,000 tons), and miscellaneous consumer goods. 163. Present road traffic levels are low: less than 100 vehicles per day everywhere except in the immediate vicinity of tne major urban centers, and less than 10 vehicles per day on most of the road network. Currently, domestic traffic between the northern and southern parts of the country often has to pass through Cameroon during the rainy season. The on-going rl s/A- I ~~~~-~ I - / ' '' , n:, , - ', S 9> n z / < 3/1La "s de ', O / \X '~ mI / 't 4 t ~. /4 ... ~~~~~~~~~I/ . °~~~~~~~~~~~~~~. - bL *~~~~~ N I G E R ! ,,i ,-o /' ! Z l | r } l I ./' ,/--';, ' ! | ./ k\\ I I ) :gol / , e '>s^ ._.J / ,/ , .- ( psttFcT Pt1AL)': / ' t UiR t ; \X ;1'N! D .................................. N.tt i G/A.,:d. , . + s v s N .; . *'s,> X , o- t. r 5 X t * - - * . . 1 r l rs f sK . < / . T SIr 2>+ *rdo} ( t t r -9ttS TO tE 2t -oA_i L) l 4 > ,' , >, . (, - ,x n .  9 - f rr wt C-+wET R UC  D j -rS \ + S .F^t +s,,/S 2 t- f ts''s, t )XhL t .. ; v - 0 r / oO', ..... q ,, . s^, ' / S  I | .1X,." % / ................ 6 s ' <, t . u - -- ! ,4. >*. . t , cseo1 :B’,s 's , , 0 ' ! R- , S .t.15 '> t*>/------ i*q1£ ' ' I \ dw A\s W +C % + 09 f CN , / ( 'S, Y ' . ,- "N3t . \ _ . _ . . , t | o E; s ,; * t s x \ H_ <; 5 ' i? Q / A'+s rrz;  at ,>s - e 4k } I / \ ,"'QC4b.> t \,_,, t- \, , / 4 t ' __ _____ 3 t + } w E 9   r s _ t | .<; A v , ,;, ,+;,,, \ .,, 4 \ % x t ;°>.stoe >s 4'''1io ro 9 n L\R __ _ -' \ X MOt, F 1,, , R A+*>---^--h+? -o- -"-X ._ _ . _ i v t7- t>L ’; <- = z U , t f t C E N T R A L A F R ,§, C A N R E P ,V ,B, L I C -t- trt' r1- "- - --z>'v3- rt ,a, t°l g .t' x,, tlQz ,(,7 let" 'e' ''+ -- - - 81 - road rehabilitation and maintenance program will re-establish communications between the country's principal cities (N'Djamena, Sarh and Moundou). 3. Transport Carriers ard Institutions 164. There are five main groups of transporters: the Cooperative des Transporteurs Tchadiens (CTT), COTONTCHAD, the UNDP/OPE Emergency Food Program transport fleet, a small number cf enterprises which provide for their own needs, and independent operators. 165, The CTT is an association of private truck owners and ihas a de jure monopoly on all internal and external transport for Chad, except for the domestic operations of COTONTCHAD and other enterprises. In 1985, CTT had 382 members who owned 580 trucks with a total capacity of 16,700 tons, and 108 tanker trucks with a capacity of 3,427 m 3. They transported an estimated 150,000 tons of dry cargo and 8,700 m93 of petroleum products. Most trucks under 5 tons are not owned by CTT members. While they do not officially take part in petroleum transport, they carry significant quantities of goods and passengers, usually over short distances. 166. COTONTCHAD is the largest single transporter in Chad and is not a member of CTT. It provides transport services to cotton farmers in the southwest of Chad: it collects seed cotton and distributes seeds and agricultural inputs. Up to 1985, it operated a fleet of about 260 heavy trucks and about 100 light to medium vehicles. As part of its Emergency Program (Chapter III), it has sold about 80 tractor trailer trucks to CTT and, in the future, will rely on this organization for all long distance export-import freight movement. 167. In addition to CTT and COTONTCHAD, UNDP/OPE still manages a fleet of more than 150 trucks which represents the remains of the 240 truck fleet brought in to help with the distribution of emergency food aid in 1985. Although this fleet is still transporting some relief aid to pockets of population stricken by locust infestation, part of the fleet is underutilized and competes with the CTT in certain areas to cover its recurrent costs. The Government, fearing a renewed catastrophic drought, is reluctant to lose the security provided by this extra transport capacity. A technical commission comprising representatives of the Ministries of Road Security, Planning, Transport and Public Works, as well as of the participating international agencies, has been appointed to prepare a plan for disposing of trucks which are either superfluous or unsuited to current operating conditions in Chad. 168, In short, present capacity in the trucking industry far exceeds the foreseeable demand for transport services associated with domestic production and external trade. Moreover, much of the vehicle fleet is oversized, over-aged or in poor condition and can only be operated on the international routes. Thus, while there is an excess capacity for carrying large loads over paved roads, there is at the same time a shortage of appropriate transport (small trucks, vans and off-road vehicles) and support services (fuel depots, garages and workshops, break-bulk handling and storage facilities) to promote local and regional traffic flows. - 82 - 169. Domestic transport tariffs are fixed, broadly reflecting different road conditions in the three major climatic zones. Considering that 10 percent of the revenues go to CTT, these tariffs, though high, barely cover transporters' actual costs on the domestic road network. Consequently, few private transporters provide domestic services. By agreement between Chad and Cameroon, Chadian truckers may transport 50 percent of Chad's import-export traffic to and from Ngaounder6 in Cameroon, The tariffs applicable to such traffic are favorable in cnmparison to actual user costs on the almost fully-paved road. For those reasons, Chadian truckers, strongly prefer to travel on the international routes. The limited distribution of garages and workshops in country and the difficulties of obtaining spare parts are additional disincentives for Chadian truckers to operate on the domestic road network. 170. The recently created Ministry of Transport and Civil Aviation is responsible for transport sector planning and policy formulation. It is supported in this role by technical assistance funded by UNDP. The Ministry has very limited staff and resources, and needs to focus sharply on the most pressing policy issues and on implementation of agreed policies. The Ministry of Public Works, Housing and Urban Development (MTPHU), through its Public Works Department, is responsible for planning the development of the road network. Road maintenance is the responsibility of the Office National des Routes (OFNAR), an autonomous public enterprise under the tutelage of MTPHU. Three OFNAR subdivisions (N'Djamena, Sarh and Moundou) are operational, and the subdivisions of Ab6ch6 and Mongo will be made operational as road rehabilitation advances into these areas. Technical assistance and training is being provided by USAID to OFNAR's central staff and equipment divisions, and will be provided under the ongoing IDA-financed Highway Maintenance project to OFNAR subdivisions, as well as to the Department of Public W'rks. Except for planning, management and design staff, most of the personnel of the Public Works Department has been transferred to OFNAR. Another public enterprise, the Office National des Carrieres (OFCA), has recently been created under the tutelage of the Ministry of Public Works to manage quarry operations and, in particular, the large crusher which will be installed at the Mani quarry with USAID financing. 4. Sector Issues 171. Definition of the Priority Road Network. Chad's highest priority at the moment is the restoration of critical road communication between different parts of the country. A start has been made on this through several road rehabilitation projects supported by donors. Once the basic network is rehabilitated, Chad's next priority should be to rehabilitate existing links between agricultural areas and internal and external marketing centers. Although the broad objectives are clear, the designation of the priority roads requires further careful consideration, especially with a view to reducing costs and maximizing returns. 172. Selection of Suitable Design Standards. Widely varying soil conditions in Chad make the choice of road design standards particularly difficult. Partly because of differences in these standards, rehabilitation projects to date have estimated unit costs ranging from CFAF 1.5 million per km to CFAF 10 million per km. The choice of an appropriate - 83 - design depends on reasonably accurate estimates of construction and maintenance costs and traffic volumes. Consequently, design standards may to vary by region. 173. Financing of Maintenance. The rehabilitated network appears likely to expand faster than the country's financial or technical capacity to assure even routine maintenance. Chad has made a significant effort to contribute to the cost of road maintenance by setting aside a share of petroleum tax revenues for the OFNAR budget but, for a variety of reasons, these revenues have not been as high as anticipated. Although revenue performance is expected to improve, this will take time, and revenues are not likely to grow as fast as the rehabilitated road network. Alternate solutions will have to be found, at least in the short term, to ensure that the benefits of rehabilitation are not lost because of inadequate maintenance. Donors will need to assume a major share of routine and periodic maintenance costs, as well as finance the costs of rehabilitation in the foreseeable future. 174. Encouragement of the Private Sector. The Government is committed to limiting the growth of the public sector and encouraging the private sector, particularly small-scale and traditionally rooted enterprises. Applying that policy in transport would require, first, the phased removal of the de jure monopoly of CTT. Elimination of the various informal controls on the external network and removing the causes of delays in customs would also encourage private truckers, in addition to helping reduce transportation costs. Private contractors could also be used more regularly for the execution of routine road maintenance, emergency repairs and minor improvements. Another area where the Government should relinquish its role is quarrying -- a critical activity in a country where construction materials are extremely scarce. The newly created OFCA should be abolished and this activity should be left to the private sector, with regulatory authority vested in the Ministry of Public Works. 175. Definition of a Sector Strategy. Chad's transport sector strategy is not well defined at present. A sector strategy statement is under preparation for presentation to a transport sector donors' meeting currently scheduled for late 1987. The principal sector objectives should be: (i) to reconstruct, rehabilitate and maintain high-priority infrastructure; (ii) to reorganize and rationalize transport services; (iii) to remove a wide range of constraints in order to lower costs for the transport user; (iv) to improve the planning and management of infrastructure and facilitate the provision of transport services by the private sector; and (v) to mobilize additional resources for maintenance and improve cost recovery. The sector strategy should define, in particular, what is meant by "high priority" infrastructure. Two issues that are critical to the definition of a sector strategy require further study. One is a study of soil and climatic conditions and consequent construction and maintenance costs, leading to the definition of optimal design standards for road rehabilitation in different geographical zones and traffic classes. The second, which depends in part on the first, is a study of air transport alternatives, leading to an assessment of the most cost-effective means of meeting transport needs in remote areas. Finally, the Government's capacity to devise and implement appropriate transport - 84 - sector policies and to plan and manage the development of transport infrastructure requires conslderable strengthening. B. Petroleum: What Changes Will Domestic Production Bring? 176. Although oil has been discovered in Chad, it is not produced at present. Exploration activities started in 1970 and a consortium led by Conoco discovered oil in 1974 in Sedigi, north of Lake Chad. Since then, the same consortium, this time led by Esso, discovered oil in the South as well. Although exploration continues, it is possible that oil resources in the South may be sufficient to justify an export-oriented developmant as soon as oil prices rise sufficiently to make the transport costs to a seaport affordable. 1. The Sector at Present 177. Until Chad's domestic resources are exploited, its landlocked situation means that imported petroleum products have to be trucked over long distances from the nearest sources of supply: Douala, Cameroon or Kano, Nigeria. This greatly increases the landed cost (i.e., in N'Djamena) of petroleum products in Chad. In 1986, their cost was about US$600 per ton (CFAF 200 per liter), compared to a CIF cost of about US$150 per ton (CFAF 50 per liter) on the West African coast. Chad's oil import bill in 1985 was more than US$50 million (equivalent to about 27 percent of merchandise imports and 8 percent of GDP). 44/ It should be noted that because of the high cost of transport, even a significant reduction in the international price of oil has a relatively small impact on the cost of products delivered in Chad. For example, while the average CIF price of petroleum products on the West African Coast dropped by 40 percent between 1985 and 1986, the relevant landed cost in Chad only decreased by 15 percent. 178. Cameroonian petroleum products have a lower ex-refinerv price than Nigerian products. The difference is largely offset by higher transport cost for Cameroonian products: the refinery in Douala (Cameroon) is 1800 km from N'Djamena while the Kano (Nigeria) refinery is only 800 km away. The difference is further increased by a CFAF 25 levy per liter of gasoline and CFAF 10 per liter of diesel imposed in Cameroon. The levy serves to fund Cameroon's Caisse de stabilisation. Chad's Fonds d'intervention des produits p6troliers (FIPP) was set up to equalize import prices by taxing Nigerian imports and subsidizing Cameroonian imports. (The FIPP is discussed further in Chapter VI in the context of domestic resource mobilization.) The system has never worked properly and has led to fraud: cheaper Nigerian imports received subsidies after transiting through Cameroon. Chad halted imports of oil products from Cameroon after it failed to persuade the Cameroonian authorities to lift the levies on oil exports to Chad, and now the entire fuel price equalization levy, amounting to CFAF 39 per liter of gasoline and 33 per liter of diesel fuel, accrues 44/ Chad's oil consumption is estimated at more than 90,000 cubic meters, including smuggled imports. - 85 - to the FIPP. In addition, some retailers pay into FIPP an amount representing the difference between the real and presumed ex-factory purchase price, amounting to about CFAF 40 per liter in mid-1986. The Government has begun implementing a reform of petroleum taxation based on a reduction in the number of taxes and a simplification of collection procedures, which aims to reduce smuggling. 179. Chadian taxes on fuels, excluding price equalization, are about 15 percent of the CFAF 200 per liter retail price; 9 percent is earmarked for OFNAR, the road maintenance organization. If the price equalization levy is included, total taxes amount to 40 percent of retail prices, three-fourths of which goes to FIPP. Distributor margins account for about 13 percent of retail costs; they include allowances for storage, losses, depreciation, overhead, financial costs, delivery, and wholesale and retail profits. Because retail ceiling prices are set by the Government for all petroleum products, any decrease in cost of petroleum products at the refinery or any decrease in other costs cause profits on officially-sold petroleum products to soar. 180. The domestic consumption of energy in Chad is comparatively very low, because domestic supply sources and incomes are very limited, and imported energy is much more expensive -- about three times world prices -- than in most other countries. The majority of the population relies on wood or charcoal for cooking and heating; a minority, mainly urban, uses kerosene instead. An even smaller number, mainly expatriates, use electricity and/or butane gas. In 1985, total consumption of oil products amounted to only 90,000 m3, or about 15 kg of oil per capita -- about 12 kg, if one excludes the aviation gas and jet fuel used by military and civil aviation. 2. The Sector Once Domestic Production Begins 181. Because the cost of bringing finished petroleum products to Chad excecds the cost of extracting and refining domestic crude, it makes sense to exploit Chad's oil reserves as soon as possible, even when international oil prices happen to be very low. It is estimated that petroleum could be purchased at the domestic refinery at a price roughly equivalent to US$150/ton, which is equal to the CIF price obtainable on the West African coast. A domestic refinery would thus save Chad the high external transport costs associated with importing petroleum. In 1978, the World Bank prepared a project for US$62 million (supported by a US$20 million IDA credit) to produce, transport and refine domestic crude and to use residual fuel oil for power generation in N'Djamena. Processing of the project was suspended when the war broke out in January 1979. In mid-1986, preparation of a new project resumed, taking into account changes in the Chadian economy and current downward price pressures in the oil industry. Currently, the project is expected to include well development in the Sedigi field, a pipeline to N'Djamena, a mini-refinery (2,000-5,000 barrels/day), and the transformation and/or acquisition of power-generating equipment in N'Djamena to burn the refinery's residual fuel oil. If current progress continues in project preparation, in engineering design and in the negotiations between the Government of Chad and oil companies concerning oil leases, Chad should p.7oduce its own gasoline, diesel fuel, kerosene, butane gas, and fuel oil by the early 1990's. - 86 - 182. When the refinery comes on stream, Chad will be over 80 percent self-sufficient in petroleum products. The effect on the balance of payments will be immediate; not only will Chad not have to import gasoline, diesel, butane and kerosene, it may even export some residual fuel oil and other light products which may be temporarily in excess supply. This will represent a gross savings of about CFAF 10 billion (US$33 million) per year (not counting the income effect on all other imports and the repayment of debt incurred to develop the sector). The conversion of most large power-generation equipment in Chad from diesel to the cheaper residual fuel oil will reduce the cost of power which, for the moment, is among the highest in the world (about US$0.50 per kwh). Since all petroleum products, except jet fuel and lubricants, (which will still need to be imported), will be produced in the refinery in N'Djamena, the Government will be able to tax all other products at the source. Under these conditions, fraud prevention should be easier and cheaper, even if current tax rates remain, and revenues should increase substantially. As an added benefit, the sale of cheaper kerosene and butane gas may cause households to consume less wood and charcoal, slowing down environmental degradation and deforestation. 183. Once the refinery comes on stream, the imports of most petroleum products by the large oil companies (among them, Shell, Mobil and Total) will come to an end, as will imports by a larg*s number of independent operators. The distribution of oil products is currently carried out by both the large oil companies and a vast network of small informal retailers. This situation will most likely continue for a while after the opening of the refinery, but it may change thereafter, depending on the evolution of profit margins, which are largely a function of the system of market regulations and taxation. Petroleum distribution should be placed in the hands of a competitive private sector, The current large-scale foreign distributors should be encouraged to either sell their trucks to local companies, set up local subsidiaries or leave. The small-scale operators may regularize their situations (e.g., become gas station owner-operators) but should not be driven out of business by a state petroleum enterprise which monopolizes distribution; nor should any monopoly be accorded to CTT or other transport organizations. C. Electricity and Water: High Rates and Low Recovery 184. STEE (Societe Tchadienne d'Eau et d'Electricite) is a mixed-ownership enterprise (81 percent of its shares belonging to the State and 18 percent to the CCCE) that supplies the four main urban areas -- N'Djamena, Moundou, Sarh and Abeche -- with electricity and water and six additional towns with water. 45/ Despite old equipment and high maintenance costs, STEE facilities are, in principle, adequate to satisfy 45/ The four mentioned above, plus Mao, Moussoro, Bongor, Kelo, Doba, and Fianga. - 87 - projected demand for electricity and water until 1990. However, there is a risk of frequent breakdowns due to delapidated equipment; rehabilitation of the existing plant is, therefore, extremely urgent. Production of electricity and water has increased significantly since 1983 as shown below: 1983 1984 1985 1986 Electricity (mill. kwh) 40.0 53.2 58.1 62.1 Water (mill. 33) 8.2 8.7 9.3 10.8 185. Electricity production costs are relatively high in Chad, mainly because of the large share of petroleum products in the cost structure and the high cost of imported petroleum (Section B). The average operating costs per unit produced are CFAF 90/kwh for electricity (compared to CFAF 25 in C.A.R.) and CFAF 65/mi3 for water. To compensate for it -- and to cover the high production costs -- electricity and water tariffs are set at especially high levels: the average electricity rate for low-voltage service is about CFAF 145 kwh (US$0.50/kwh), and the average rate for the first two tranches of water is CFAF 167/m3 (US$0.55/m3), to which a monthly service fee and taxes of 9.9 percent of the selling price are added. In addition to discouraging the development of small and medium-scale enterprises, these high tariffs accentuate the problem of bill collection, given the very low purchasing power of the Chadian population. 186. Not surprisingly, STEE has been experiencing serious financial difficulties which are attributable to three factors: (i) significant technical and non-technical losses; (ii) problems in billing; and (iii) a collection rate which is extremely low. The technical losses are estimated at approximately 10 percent of production, of which 3-4 percent are power losses. This situation is due to the age of the equipment, which makes maintenance particularly difficult. Billing is unsatisfactory mainly because of the anarchy that prevailed during the war: meters were tampered with and a number of illegal connections were made. An inventory of customers was carried out (with assistance from the CCCE) in 1986; it helped to improve billing to some extent. However, illegal connections and tampering with meters continue, given the inadequacy of control arrangements within STEE. Cash collection from private customers is only around 25 percent (but higher for medium-voltage customers). Following the completion of the above-mentioned inventory, a committee was created in order to implement decisions concerning disconnection of service to non-paying customers. The committee was instrumental in the recovery of about CFAF 100 million of an estimated CFAF 800 million in arrears. 187. STEE's financial relations with the Government -- which accounts for about 25 percent of its sales -- are complex and far from clarified. STEE receives grants from France of about CFAF 600 million each year. It counts those subsidies against the charges due by the administration. But this is not enough to clear the Government debt or alleviate the company's financial difficulties. STEE registered losses of CFAF 82 million in 1984 and CFAF 280 million in 1985. On June 30, 1986, its balance sheet showed a slight profit, despite the recovery problem, which is encouraging. - 88 - 188e The management of STEE is currently defining a rehabilitation plan for STEE which will include the following: (i) computerization of billing in order to improve cost recovery; (ii) updating of the customer inventory and files and definition of a cash collection strategy; (iii) evaluation of personnel training and supervision needs and definition of a training strategy; (iv) replacement of obsolete or old equipment; and (v) preparation and implementation of a plan for the settlement of Government arrears, curtailment of Government consumption, and making realistic budgetary provisions to pay for estimated consumption in order to avoid the build-up of new arrears. Some of these activities have already been initiated by STEE. For the longer term, the petroleum project (Section B) provides for the construction of a new power plant which would be supplied with heavy residual fuel produced by the mini-refinery. This power plant would be operational by 1991. D. The Urban Sector: How Is Chad Coping 189. Whereas in many countries the urban areas, and the capital city especially, appear much wealthier and better developed than the rest of the country, in Chad they are a reflection of the situation in the country at large. Urban areas have practically no public infrastructure; most streets are unpaved, unlit and have only open ditch sewers; few areas have water lines or standpipes. Public buildings are mostly old, damaged by war and by lack of maintenance. Private dwellings, on the other hand, are fairly well maintained, but mostly built out of non-durable mud blocks. The absence of storm drainage causes flooding in many cities during the rainy season, makes the dirt roads impassable and damages the mud walls of dwellings. Except for expatriates and a few rich merchants, the bulk of the population live in relatively similar conditions, giving the impression that income and wealth are fairly evenly distributed. 190. The urban population is estimated to be growing by about 6 percent per annum -- a rate approximately three times higher than that of the total population. Still, Chad is not highly urbaniztd: only about 20 percent of the population live in cities; but, if the current trend continues, 35 percent of the population will live in urban areas by the year 2,000. Currently, there are only about 40 settlements of more than 5,000 inhabitants, The largest by far is N'Djamena which now counts nearly 400,000 people. The next two largest, Sahr and Moundou, have together about 150,000 inhabitants. 191. In N'Djamena, the majority of households have access to water. However, there are only about 3,000 officially connected customers, a good portion are collective connections, and there are, in addition, an estimated 1,500 illegal connections. The rest of the population receives water directly from standpipes. Only the 10 largest cities in Chad have continuous electricity supply and many households are not connected to the electricity network. In N'Djamena, currently, only about 5,000 customers are officially connected. As with water, however, there are many illegal accounts which serve more than one premise. Because electricity is very expensive and because most appliances which consume electricity are out of the reach of most inhabitants, power consumption per connect(d household is still very low. - 89 - 192. Storm and sewer drainage is a serious problem during the rainv season In several cities, especially N'Djamena. The capital is built o, a very flat plain and much of the soil consists of impermeable clay. Waste water is inadequately drained, leading to contamination of underground water sources which supply much of the city's drinking water. Efforts to improve N'Djamena's drainage situation were started in 1974 with a study financed by the ADB. Actual construction, also financed by the ADB, began in 1978 but was interrupted by the hostilities. Recently, ADB has taken steps to allow work on major drainage canals to resume. When completed, the ADB-financed project will only cover about half of N'Djamena. The Municipality is responsible for the maintenance of all drainage facilities, but lacks the qualified personnel, equipment and spare parts to perform its duties. Instead, the Municipality appeals regularly to citizens to clean and maintain the open ditches in front of their plots, and in some cases such efforts are coordinated by neighborhood associations. 193. A great majority of urban roads are not paved, and even those which are paved, are in bad need of repair. Under the ongoing IDA Highway Maintenance Project, OFNAR is providing assistance to the Municipality of N'Djamena to carry out the most urgently required road repairs. 194. All urban areas are under-funded and under-equipped. The 1984 budget of the municipality of N'Djamena was only CFAF 325 million (about CFAF 800, or US$2.60, per inhabitant). This is equivalent to only about two-thirds, in nominal terms, of the annual budget before the war (only about a quarter in real terms). N'Djamena has nevertheless been able to balance its budget; it has achieved this mainly by cutting the level of services and by delaying almost all needed investments. The principal revenues of the larger municipalities are, by order of importance, municipal taxes, market fees, national taxes earmarked to municipalities, and other taxes. Municipal taxes include taxes on business turnover, fees for a variety of official certificates and documents, entertainment taxes, taxes on rents of professional facilities, and utility fees. Roughly 60 percent of municipal resources are spent on personnel, and the balance on materials, mainly for maintenance and repair of buildings and for the operation and maintenance of vehicles. All municipalities lack machinery and trucks to perform routine repair work and to collect garbage. Recently, to help with the most urgent needs, the Italian Government offered a number of trucks to N'Djamena and the EDF offered some fire fighting equipment. 195. Municipal revenues are likely to remain insufficient in the near future unless government revenues improve drastically. Municipalities will have to rely on external financing to pay for major investments (such as drainage systems). Community-based improvements such as those realized by CARE Chad in cooperation with UN Food-for-Work programs, or those underway in N'Djamena with financing from OXFAM, should be encouraged. Such investments do not put a burden on Government resources because investment costs are shared by donors and the local population, and because the maintenance cost of small investments such as street drainage ditches is assumed by the beneficiaries. Overall, it is unlikely that large resources will be available in the near future to improve public amenities in most urban areas. However, municipalities will continue to urgently need management and technical training to help their personnel use scarce - 90 - resources more efficiently. Also essential is the preparation of a master plan for urban management in N'Djamena, or at least, the preparation -- without delay -- of a sanitation plan which would allow better targetting of donor financing toward priority needs in this sector. E. Trade and Industry: The Constraints Facing Existing and New Enterprises 196. Historically, Chad has been a country of traders. The kingdoms that predated the colonial era (such as those of Kanem, Bornou and Ouaddai) built their power largely on commerce. Their principal partners were Libya, Egypt and Sudan. During the colonial period, trade was increasingly oriented toward the francophone countries as well as Nigeria. This shift benefitted the western regions of Chad at the expense of the eastern provinces, which saw their economies decline despite their considerable potential. During the 1970s, the structure of Chad's external tlade closely resembled the pattern inherited from the colonial period. The most important partners were France and Nigeria, although much of the trade with the latter did not pass through official circuits. After the events of 1979-82, unofficial exchanges with Nigeria increased, while official trade with France contracted. This is partly explained by the closing down of many French-affiliated firms and the virtual elimination of customs controls. French goods continued to come in, but mostly unofficially through Nigeria. Another change since the war has been the disappearance of certain exports, most notably refrigerated meat. 197. Chad's trade with Nigeria, Cameroon and C.A.R. has historical roots, and much of it is carried out by families having interests in more than one country -- a fact which permits them to move their capital quickly in response to changes in the business environment and opportunities. In this respect, commerce is truly multinational. Unofficial exports from Chad are made up largely of cattle, fish, meat, skins, cereals and tubers; unofficial imports consist of petroleum products (representing 80-90 percent of the country's needs) and consumer goods imported illegally, many of which (sugar, cooking oil, soap, and cigarettes) compete with Chadian products. 198. Controlling Chad's border is very difficult; the border is long and part of it (north of Lake Chad) lies totally in the desert. Chad and its southern neighbors have limited resources to devote to border control, and collusion among smugglers and border patrols is not uncommon. Trade relations with Cameroon and C.A.R. have been fairly smooth, and official trade channels are open. However, relations with Nigeria have been more problematic, and the border has been officially closed for extended periods in recent years. Given the type of terrain and both countries' limited capacity for applying controls, the closing has never been very effective. It has nevertheless contributed to a sense of uncertainty and insecurity, especially regarding the supply of petroleum products to Chad. The two countries -- particularly the neighboring regions -- are natural partners, and regularization of trade would serve both. 199. The permeability of Chad's borders resulus in a significant loss of Government revenues from export/import duties. It also creates a market in which untaxed, smuggled goods set prices. Locally-produced goods, as - 91 - well as legal imports, must compete in this environment, although they face a number of constraints, including high production costs, diseconomies of small-scale operations, and price distortions resulting from Government pricing and fiscal policies. This section concentrates on the constraints facing the trade and industry sectors in Chad, distinguishing between the experience of Chad's existing, relatively large-scale manufacturing industries, and additional constraints and special problems faced by entrepreneurs attempting to laun^h small- and medium- scale enterprises (SMEs) in Chad. The section also explores ways for creating an appropriate regional environment both to promote trade through legal channels and to encourage Chadian production for domestic and external markets. 1, The Experience of Chad's Major Industries a. Background 200, Chad's industrial sector has traditionally been dominated by five manufacturing enterprises: COTONTCHAD, SONASUT (sugar), STT (textiles), BdL (beer), and MCT (cigarettes). It is estimated that these industries generate around 20 percent of GDP. With the escalation of hostilities in 1979, all of Chad's formally-registered enterprises either ceased to operate or considerably reduced their activities. Infrastructure and physical capital were destrcyed or deteriorated from neglect, purchasing power was reduced significantly, institutional support mechanisms were curtailed, and nearly all foreign investors withdrew from the country. However, by 1983, all five of Chad's major industries had resumed normal operations, and in more recent years, two smaller industries, SIMAT (agricultural equipment) and BGT (soft drinks), have been reestablished. Five of these seven industries are mixed-ownership enterprises (Table 12). The State holds majority shares in the two biggest, COTONTCHAD and SONASUT, as well as in SIMAT. The State is a minority shareholder in MCT and STT. The remaining capital is mostly from foreign, private sector sources, and one industry, BdL, is completely under foreign, private ownership. As Table 12 shows, participation of the Chadian private sector in ownership of the major industrial enterprises is extremely limited. In addition, with the exception of COTONTCHAD, these industries have expatriate directors, and often expatriate accountants and mid-level managers as well. Table 13 - Ownership of Major Manufacturing Industries COTONTCHAD SONASUT MCT STT BdL SIMAT BGT Total capital (millions of CFAF) 3,800 4,711 312 800 800 200 110 of which: Chadian, state (%) 75.0 83.0 15.0 27.5 -- 65.0 -- Chadian, private (%) 6.0 19.0 Foreign, state (%) 2.0 37.5 Foreign, private (%) 17.0 17.0 85.0 35.0 100.0 35.0 81.0 Source: Enterprises cited. - 92 - 201. Industrial output grew rapidly in 1983 and 1984 as Chad's major industries resumed and expanded operations. Growth slowed in 1985, however, as the effects of the cotton crisis began to be felt. In 1986, output declined for all products except cotton fiber -- which was supported by the Fmergency Program -- as the full recessionary impact of the cotton situation took its toll (Table 13). This downturn in production has left Chad's major industries with considerable unused capacity, ranging from 15 to 50 percent. Table 14 - Volume Indices for Industrial Production 1/ (1983=100) 1975 1984 1985 1986 Cotton fiber 139 157 94 101 Fdible oils 2 112 143 98 Sugar 79 126 114 108 Beer 112 112 126 103 Textiles n.a. 111 122 116 Cigarettes n.a. 198 196 155 1/ Major enterprises only. Source: Appendix Table 10. 202. Thus far, employment has not registered a decline corresponding to the downturn in production, except for COTONTCHAD under the Emergency Program. As of 1986, Chad's seven largest manufacturing industries had around 6,000 employees, or less than 0.2 percent of the estimated population. In comparison, there were more than 21,000 civil servants. Overall, the wage bill for Chad's major industries is equivalent to only about 10 percent of aggregate industrial turnover. Nonetheless, the average wage in these industries is high compared to that of the civil service, although it appears to be elevated by a small number of employees earning high salaries. Whereas the mean industrial wage in 1985 was around CFAF 94,000/mo. (US$215/mo.), several industries reported minimum wages as low as CFAF 10,000/mo, (US$23/mo.). The official minimum wage (SMIG), which has been unchanged since the early 1970s, is still CFAF 8,320/mo. (US$19/mo.), b. Constraints 203. The growth of manufacturing in Chad is limited by weak domestic demand. Much of the economy is non-monetized; purchasing power is extremely low; and cash income has declined for many as a result of the cotton crisis and the dramatic fall in cereals prices. Sales of locally-produced consumer goods began falling off in 1986, causing production to decline and leading several industries to project further declines in output for 1987. 204, Industrial growth in Chad is also constrained by production costs which appear to be high relative to those in neighboring countries. A detailed study of comparative costs is needed to determine which of Chad's - 93 - industries are -- or can be -- competitive with imports from neighboring countries. Factors which undoubtedly raise Chad-an production costs include the overdependence on imported inputs and the diseconomies associated with relatively small-scale operations. Imported inputs are equivalent to approximately 30 percent of industrial turnover for COTONTCHAD, BdL, and STT, and more than 60 percent for MCT. When local materials are used, in many instances it is more costly to do so. In addition to COTONTCHAD's use of seed cotton and groundnuts, MCT uses local tobacco and SONASUT uses local sugarcane. In addition, STT processes COTONTCHAD's cotton fiber and BGT adds SONASUT's refined sugar to its products. However, MCT blends one-third local tobacco to two-thirds imported varieties, which it claims are both higher-quality and less expensive to use. SONASUT imports refined sugar at less than local production costs and markets it to subsidize local production. BGT would prefer to import its sugar as well, but is obliged under its "convention" to buy locally. 205. The Government does not -- and cannot -- subsidize prices for consumer goods, but applies a system of "prix homologu6s" for most industrial products, with the major exception of STT textiles (see Appendix Table 43). These prix homologu6s are, in principle, price ceilings designed to protect consumers while assuring industries of adequate returns above production costs. Industries are free at any time to submit their estimated production costs, with appropriate documentation, to the Government for revision of the prix homoloSu6s. However, industry heads claim that the procedure is unwieldly and slow, and the Government fails to revise prices fast enough to keep pace with rising production costs, thereby squeezing their profit margins to unacceptable levels. In addition to the system of prix homologues for manufactured goods, the Government also establishes price ceilings for the marketing of certain imports, based on the costs of importing and internal transport. 206. Prix homologues have little impact as price ceilings because smuggling exerts constant downward pressure on consumer prices. Their elimination is advisable, although liberalizing prices will not necessarily mitigate the smuggling problem; industries have been free under the system of prix homologu6s to reduce their sales price in order to compete on domestic markets. They have not done so, perhtps indicating that price reductions would not allow them to cover costs -- raising once again the fundamental question of cost competitiveness. 207, Recent fiscal initiatives threaten to divert demand further toward untaxed, smuggled goods. In October 1986, new unitary taxes were introduced for beer (CFAF 20/liter), cigarettes (CFAF 7.25/pack for local production, CFAF 15/pack for MCT imports), textiles (CFAF 30/meter), and soft drinks (CFAF 25/liter), as part of a broader series of fiscal measures to compensate for the loss of cotton revenues. Thus far, whenever the Government has introduced new taxes and/or higher tax rates on manufactured goods, prix homologues have been adjusted upward to cover the full value of the tax. 208. For MCT, the prix homologues for cigarettes were raised in April 1985 and October 1986 to take account of tax increases. Following the first increase, MCT experienced a 13 percent decline in monthly sales of - 94 - local production for the remainder of 1985. The average for the first nine months of 1986, however, was 21 percent below the late 1985 level, although taxes had not changed. Following the latest tax increase, MCT predicted a further decline, by nearly one-third, in sales of local production. It is difficult to assess to what extent these declines are attributable to an overall reduction in consumption or to a shift in demand toward smuggled goods. They may also have resulted from MCT's change in production and marketing strategy in response to the increased relative profitability of marketing imported cigarettes. In fact, MCT's import level and turnover on imports have approximately doubled between 1984 and 1986. 209. Textile prices are not regulated by the Government, and textile retailers did not believe they could pass the entire burden of the new tax on to consumers without seriously losing sales. They raised consumer prices by about one-third the value of the tax, obliging STT to cover the cost of the remaining two-thirds. STT management decided that it could not cover this cost at prevailing market prices, and informed the Government and its shareholders of its intention not to pay the tax. No action has yet been taken by the Government, although financing for a study to assess the fiscal and economic impacts of the new taxes has been requested. 210. The fundamental issue here is whether Chadian industries can compete -- not just in the export market, as with cotton fiber, but in the domestic market, under prevailing pricing and fiscal policies, against both legal and illegal imports. More detailed study of comparative production costs and the impact of pricing and fiscal policy is essential, not only to inform policy-makers at the Government and industry level, but also to assess the scope for industrial diversification and, in particular, for the development of small- and medium-scale enterprises (SMEs). 211. For large-scale industries, it is imtportant to first ascertain the long-run viability of existing entreprises. In addition, the Government is considering two other industrial projects: a mini-refinery for petroleum (see para 183) and a cement factory, to be located in Mayo-Kebbi. For the latter proposal, a prefeasibility study was recently carried out by UNIDO, with UNDP financing The Government is currently reviewing this study in order to determine the optimal design of such a factory. Given the proximity of the Figil cement factory in Cameroon, and the overall sluggishness of Chad's industrial sector, this proposal should be studied with great care before a decision is made. 2. Constraints for the Development of SMEs a. Background 212. In addition to the major manufacturing industries discussed above, Chad's pre-war industrial sector included 80 to 100 SMEs, the majority of which were involved in the processing of agricultural products or export/import activities. Approximately half of these enterprises were the local subsidiaries or distributorships of foreign-owned companies, or Chadian firms with significant foreign capital. Foreign-owned firms were principally involved in petroleum exploration and distribution, sales of agricultural equipment and construction materials, and the banking sector. In addition, a significant number of individual foreign investors from - 95 - neighboring African countries and the Middle East were involved in the import/export and services sectors. With the exception of agricultural processing, few enterprises were engaged in directly productive activities. 213. During the 1979-82 period, the Chadian economy was largely reduced to informal activities, and the informal sector proved flexible and resilient in meeting the basic consumer needs of the population. Since 1983, and with the exception of Chad's major enterprises and direct investment in oil exploration, foreign Investment has not returned to any great extent because of the heavy losses experienced during the war, the high costs of reinst:l1ation, and the perception of continued political uncertainty. 46/ Ho;.ever, despite the lack of small-business credit and institution3l support, most Chadian-owned enterprises have managed to reestablish operations. As before the war, the majority of small business activities remain family-owned enterprises operating mainly in the import/export sector with no formal relationship to the banking sector. b. Constraints 214. The scope for development of manufacturing and processing SMEs in Chad will depend on whether incentives can be created to channel entrepreneurial energies from commerce to more directly productive activities, although both industrial and commercial SMEs should be encouraged. Many constraints to SME development could be alleviated in the short-term by improving credit availability, providing appropriate technical assistance, creating a supportive institutional environment, and developing managerial skills. 215. Lack of access to credit is one of the major constraints to the development of SMEs in Chad. Although two commercial banks (BIAT and BTCD) and the Chadian branch of the BEAC have reopened in Chad since 1983, local SMEs have resumed operations largely without access to the Chadian banking system. As discussed in Chapter II, the banking moratorium and the high proportion of credit issued to Chad's major industries have limited the volume of credit available for SMEs. 216, A number of factoi8 combine to limit the access of entrepreneurs to that credit which is available for SME development. Because of the high-risk nature of SME lending, the loan qualifying criteria of Chad's commercial banks are particularly strict. Potential borrowers must provide the banks with a financial history of their operations, including audited and certified balance sheets and income statements for at least two years. Proposals must contain an analysis of the market potential as well as sales projections. In addition, the banks require collateral and life insurance guarantees, often in excess of the loan amount. Given the fledgling nature of private sector development in Chad, few SME owners have adequate accounting procedures and the technical skills needed to provide the 46/ Approximately 20 foreign-owned firms have returned to Chad since the end of the war. Most of these have been small operations involved in import/export activities. - 96 - required information, nor do they have sufficient collateral or insurance coverage. Lacking adequate human and financial resources to supply the technical assistance that SMEs need, the Chadian commercial banks are unable to help entrepreneurs meet their lending criteria. 217. Since 1983, several donors have establlshed short-term credit programs in cooperation with the Chadian Government and commercial banks. The CCCE and EIB have each provided lines of credit in the amount of CFAF 700 million to be administered by the BTCD and BIAT, respectively. However, because the com..ercial h'anks are solely responsible for promoting and administering the programs, and all credit risk remains with the banks, little has changed in the lending process, and use of these programs has been minimal. A technical assistance project financed by UNDP and executed by UNTDO works with Chad's Industrial Promotion Office (OPIT) to help entrepreneurs identify and evaluate SME projects and prepare the necessary documents to obtain bank credit. However, OPIT believes that a loan guarantee fund must be established to increase SMEs' access to credit. One of the major obstacles to obtaining a loan, according to OPIT, is the inability of individual, small-scale entrepreneurs to provide the guarantees required by commercial banks. Although there is an obvious need for the kind of technical support provided by OPIT, the project has suffered from the lack of a well-defined target group, particularly with respect to the types of enterprises and the size of the loans requested. Since 1984, 96 requests for financing have been presented to OPIT but only one request has been approved and funded, arnd fi-ve others are under study by the local banks. The Government has asked UNDP, within the framework of the project, to undertake a study of industrial strategy in preparation for a proposed sector meeting scheduled for late 1988. 218. In contrast, the USAID-funded VITA (Volunteers in Technical Assistance) project provides a good example of how technical assistance can be used effectiveiy to increase the access of entrepreneurs to short-term credit facilities. Despite interest rates and collateral requirements similar to those of the commercial banks, VITA has approved 97 of 550 loan requests, providing financing valued at around US$470,000 equivalent. Approximately 75 percent of all mouthly payments are paid on time and there have been no loan defaults. The relative success of VITA's lending program is attributable to two principal factors. First, VITA has focused its efforts on funding less ambitious projects (US$5000 average loan size) which are more appropriate given Chad's limited market potential. Targeted sectors include poultry marketing, fisheries, vegetable and fruit gardening, seed producticn and distribution, expansion of grain milling operations, distribution and storage of imported machinery, and furniture production and marketing. Second, after a proposal is judged potentially viable, VITA's staff (two expatriates and six Chadian professionals) work closely with entrepreneurs to prepare the loan application and meet loan qualification criteria. This includes assistance in setting up simple accounting procedures. Once loans have been approved, the VITA staff monitor the progress of each project through monthly field visits, and provide logistical ind operational assistance, if necessary, to modify the project design. The cost of such technical assistance is indeed high, but apparently well-justified. - 97 - 2i9. The success of VITA's "hands-on" approach has prompted the BTCD to investigate the potential for co-financing projects with VITA. Such cooperation would allow the BTCD to expand its client base among SMEs while exposing its staff to VITA's lending and follow-up techniques. A reevaluation of the bank's lending criteria, including requirements for comprehensive historical information, collateral and insurance could then be carried out based on VITA's lower risk approach. Co-financing arrangements would also allow VITA to leverage its limited funding and gradually undertake lending to enterprises requiring larger loans. 220. Efforts to replicate VITA's hands-on approach could be one important element of Chad's SME development strategy. Lending workshops and tiaining programs could profitably organized utillzing VITA's technical assistance expertisu. The possibility of using the VITA approach facilitate lending under donor-financed lines of credit should also be investigated. Because VITA's approach is labor-intensive, other efforts to use this approach will have to include financial support for maintaining an adequate staff to provide the necessary technical assistance. 221, The lack of information on the Chadian private sector is also an obstacle in defining a strategy for SME development. Reliable data are currently unavailable on the number of existing enterprises, their contribution to GDP, the types of products and services provided, the number of employees per enterprise, salary levels, capacity utilization, and skill requirements for the workforce. Recognizing the urgent need for such information in the Government's economic and social services planning, Chad's Ministry of Industry and Commerce (MIC) is cturrently undertaking a survey of the private sector. Because of the MIC's limited resources, the survey is proceeding slowly, and it is unclear whether the pertinent information is being compiled. In view of the MIC's budget and personnel limitations, technical assistance is needed to improve and accelerate the survey and to develop a plan for the analysis of the information once it has been collected. 222. In conjunction with the development of a private sector data base, the MIC is focusing its efforts to create a favorable environment for SME development on the revision of the Chadian Investment Code, which currently offers no tax or customs advantages to SMEs. Chad's Investment Code has remained unchanged since its adoption in 1963. According to MIC officials, proposed changes include an amendment to the Code granting SMEs fiscal and customs advantages similar to those of Chad's larger industries. Although efforts to amend the Code indicate a desire on the part of the Government to address the obstacles faced by SMEs, it is unclear to what extent, if any, tax and customs obligations effect SME investment decisions. Before addressing specific SME issues, a comprehensive review of the Code's past effectiveness is needed. Following completion of the private sector survey, short-term technical assistance could be used to help the MIC to carry out an analysis of the Code (including comparison with codes in neighboring countries) and make recommendations for revisions that reflect realistic objectives for private sector development. Particular attention should be given to the Code's fiscal implications, the potential for stimulating foreign investment, the need for employment generation, and streamlining the application process for enterprise licenses. - 98 - 223. Another key constraint for private sector development is the paucity of management and technical skills. A professional and vocational training strategy is necessary to identi; priority needs and recommend specific interventions in the sector. Recognizing the need for management training, the Chadian Chamber of Commerce (CHACOT) is in the process of reestablishing its Professional Training Center which provided mid-level management training to Chadian students before the war. Because CHACOT has an excellent reputation in the Chadian private sector, as well as the active participation of its dues-paying membership, it provides a convenient institutional structure through which to channel training materials and technical assistance. An analysis of the Professional Training Center's pre-war performance needs to be carried out along with an evaluation of CHACOT's plans for reestablishing the center. 224. Two technical schools have reopened since 1982, but resource limitations have severely reduced their effectiveness. The Government is currently considering a proposal to adopt specialized curricula for these institutions based on the skill needs of the Chadian workforce. The technical school in N'Djamena would expand its current focus on accounting and finance to include auto-mechanics, small-scale civil engineering, electronics and carpentry. The technical school at Sarh would offer an agriculture-related curri.ulum including agronomics, agricultural mechanics and technical skills used in processing industries. Final decisions on core curricula for these institutions should reflect the specific skill needs identified in the private sector survey. 3. Creating an Apprriate National and Regional Environment 225. Despite the constraints highlighted above, several factors favor the development of the private sector in Chad. Its historically dynamic trading sector provides a base of small-scale enterprise activity and a reservoir of entrepreneurial skills. Established trade links with the more developed Nigerian and Cameroonian markets offer additional market opportunities for Chadian entrepreneurs. The Government's role has, for the most part, been limited to providing support services for the private sector. With certain notable exceptions (e.g., livestock exporting), Government-managed parastatals and/or de jure or de facto monopolies have not been a major disincentive to private sector entrepreneurship. In order to build on these advantages, the Government needs to focus on creating an appropriate environment -- both nationally and at the regional level -- which helps to promote trade through legal channels and encourages Chadian production for domestic and/or external markets. This will require action in the areas of (i) trade relations; (ii) fiscal reform and streamlining of administrative procedures associated with trade and manufacturing, and (iii) implementation of an appropriate transport sector strategy. 226. Until September 1986, the Nigerian currency, the naira, was not freely convertible, and its exchange rate was fixed. The currency was significantly overvalued and was, therefore, traded in large quintities in a "parallel" market. In March 1986, whereas officially one US dollar was equivalent to one naira, in the parallel market it was worth five naira. Under these conditions, it was to the advantage of Chadian exporters to obtain goods in Nigeria in exchange for their exports (either as barter or by using the naira they earned). The goods obtained were brought in - 99 - without paying customs duties, giving them a competitive edge over official imports or locally-produced goods. Chadian importers were also encouraged to buy the naira they needed in the parallel market. In 1986, Nigeria initiated a number of far-reaching reforms as part of its structural adjustment effort, The reforms involve, inter alia, moving toward a market-oriented official exchange rate, ln September 1986, the Nigerian authorities adopted an auction system which, by February 1987, brought the rate to 4 naira per US dollar, compared to the parallel market rate of 5 naira per US dollar. This significant devaluation should not have an immediate or significant effect on Chadian trade, which was already based on the parallel market rate. It should, however, progressively induce the use of legal trade channels, permitting more effective border control and generating additional Government revenues from customs duties. 227. In recent years, disputes over territorial rights, trade policy, and transport arrangements, as well as political unrest within Nigeria -- have prompted Nigerian officials to close the border with Chad for extended periods. The Chadian Government is keenly aware of the importance of trade with -- and transport through -- Nigeria, and has pursued bilateral discussions to resolve these issues. In December 1986, Nigeria and Chad signed a cooperation agreement in the technical and commercial fields. Although the agreement is general, it affirms the two countries' appreciation of the need for such cooperation, and should pave the way for concrete actions to improve trade relations. 228. Chad's trade relations with other neighboring countries are, to an increasing extent, regulated by the customs union of the Central African States (UDEAC), which Chad rejoined in 1984, after a fifteen-year hiatus. UDEAC members, which consist of those countries making up BEAC, have preferential tariffs for trade among themselves and a common external tariff. When it rejoined, Chad agreed to align its tariffs to those of UDEAC by 1990, progressively lowering its tariffs according to an agreed calendar. Chad's trade balance with UDEAC countries is negative, and lowering tariffs could exacerbate this official trade deficit. The Chadian customs authorities will soon complete a study of the revenue implications of joining UDEAC, although a study of the economic implications has not yet been undertaken. In addition, joining UDEAC will entail a special cost in 1987, as Chad is assuming the Presidency of the Heads of State committee of member countries. While membership may lead to some shift in trade with the CAR and Cameroon, it is not expected to affect Chad's trade with overseas countries significantly. 229. Finally, the impact of the existing fiscal system and administrative regulation on trade and industrial production has not been adequately analyzed. Reform may be needed in areas (e.g., livestock trade, manufacturing industries) where the fiscal system and administrative procedures serve as disincentives to local production and marketing through official channels. Reform measures are already being implemented with respect to trade in petroleum products. At the same time, the Government will be implementing its transport strategy (Section A) which should progressively improve the environment for trade and industrial production by reducing the fragmentation of the Chadian market, by reducing transport costs as a component of total production and marketing costs, by providing adequate incentives for private sector transport, and by assuring relatively stable transport arrangements with Nigeria and Cameroon. - 100 - V. THE SOCIAL SECTORS 230, The social development of Chad, as measured by demographic, education and health indicators, lags seriously behind those of most countries, even low-income countries, and was further set back by the sar, Requirements in the education and health sectors far exceed Chad's financial and institutional means. After reviewing the situation in these two sectors, this chapter examines the most important constraints in each and discusses the role of community participation, cost recovery and, in certains cases, NGOs in overcoming them. This chapter provides a brief overview of the education and health sectors, two sectors which have been the focus of numerous interventions in recent years. It is recognized that the social sectors cover a broader range of issues, Including -- but not limited to -- labor and employment, and women's role in development. Although these issues warrant a more thorough analysis, they are beyond the scope of the present report and will he the focus of more detailed analysis in subsequent economic reports. A. Education: What Are the Priorities? 231. The education sector in Chad virtually ceased to function from 1979 to 1982, Since that time only slow progress has been made in restoring minimal acceptable operating conditions in the sector. To meet the country's most basic educational requirements in the short-term, Chad will have to concentrate its limited available funding for the sector on the development of primary education which is the priority objective of the Government. Based on the limited knowledge currently available on the sector, and the country's weak financial base, the Government's development strategy for primary education should focus on low-cost, practical solutions which have an immediate impact and can be easily implemented. The priority elements of this strategy include encouraging community participation in the cost and management of schools, strengthening and expanding teacher training -- particularly in-service training, and reinforcing the planning and monitoring capacities of the institutions involved. 232. In the long-term, the need for rehabilitation of Chad's education sector offers the Government an opportunity to create a new educational model for all levels of education based on the country's educational environment and human resource needs. Such a model would be designed to supply qualified workers to the productive sector3 of the Chadian economy in the most cost-effective manner possible. However, efforts to design a Chadian education model cannot be initiated until a more thorough analysis of the sector has been developed. Similarly, the institution of a new model must be preceded by the strengthening of the sector's institutional framework and the creation of basic delivery systems for pedagogic support and control. The section which follows provides a preliminary analysis of pioblems and priorities in primary education. - 101 - 1. Background 233. The damage to educational infrastructure during the 1979-82 hostilities was substantial. Schools throughout the country were looted, destroyed or converted to military use. Almost the entire stock of teaching materials was lost, as were all education statistics and records. Since the end of hostilities, financial constraints have limited the ability of the Chadian Government to rebuild the sector. In 1985 and 1986, Chad's Ministry of Education was allocated a budget of CFAF 4.6-4.8 billion, or about 11-12 percent of the overall budget proposal. However, actual total government expenditures have been only about half of the budgeted amount, and the social sectors have received only a fraction of their proposed allocation. Education, like the health sector (see below) appears to have received only about a third of its allocation, although the actual level is not well documented. Of the available amount, the majority -- perhaps 90 percent -- was allocated to pay teacher salaries, and the rest was used for operations and for the purchase of materials. Even with such a large percentage of the budget allocated to salaries, Chadian teachers are currently paid only 60 percent of official 1967 teacher salaries. No funds were allocated for school construction in 1986, and only two donors, the World Food Program and SWISSAID, have provided significant external financing for the construction of elementary schools. 234, About 30 percent of the primary school-age population is currently enrolled in formal public schools, with a retention rate of 1 in 4 by the end of the six-year curriculum. 47/ Despite financing provided by a number of international donors including UNICEF, the ACCT and IDA, there are few books or other educational supplies, and those that do arrive in Chad are distributed slowly due to the poor transportation network. Classes in most communities are held in makeshift structures or out-of-doors, and teacher-to-student ratios are often as high as 1/100 in early grades and even higher if only qualified teachers are considered. Furthermore, the difficult teaching conditions and the fact that teachers are only receiving half pay have combined to create motivational problems and high teacher absenteeism. 235. Despite the difficult conditions, student enrollments at the primary level have increased by approximately 8 percent per annum in recent years, up from an estimated 4 percent before the war. Much of this increase can be attributed to the presence of emergency feeding programs in the primary schools. It is unclear whether the upswing in enrollments will continue now that the crisis is past and international donors are discontinuing emergency food aid. At present, however, the demand for qualified teachers far outstrips supply. 47/ Girls accounted for approximately 28 percent of primary school students in 1986. - 102 - 2. Community Participation 236. In response to the breakdown of Chad's educational system during the period of hostilities, an educational self-help movement emerged in many communities across the country. Since 1983, many of these village-based efforts have been supported by donor-financed emergency feeding and food-for-work programs, particularly in the northern part of the country. Now that the emergency situation has passed, local parent associations in many areas are continuing under their own initiative to build schools and collect school fees for hiring teachers and purchasing educational materials and supplies. The success of self-help at the village level in Chad demonstrates a commitment to basic education which merits the support of the Chadian Government and the donor community. 48/ 237. The self-help movement presents a unique opportunity for the Government of Chad to increase its resource base for primary education by transferring a portion of its costs and administrative responsibilities to the private sector, In an effort to legitimize the spontaneous school movement, the Government needs to recognize parent associations as official entities through which available resources -- material or financial -- can be channeled. Moreover, official lines of communication need to be established between the associations and the Education Ministry. Cost-sharing agreements for teacher's salaries (including in-kind support) and for the provision of materials and supplies could then be negotiated with parent associations based on the community's ability to pay. Such arrangements would allow the Ministry the flexibility to increase teacher salaries or redirect budgetary resources to priority teacher training programs. 238. International donors should also be encouraged to take an active role in supporting local associations. In particular, NGOs working in integrated development projects at the village level could finance and deliver non-indigenous construction materials as well as educational materials and supplies. NGO-implemented programs should also be conducted on a cost-sharing basis. Since interested communities in Chad have demonstrated that they are capable of acting on their own initiative to rebuild educational facilities, all future interventions for the provision of community infrastructure should include a significant self-help component. 239. A series of projects financed by SWISSAID provide an excellent example of how self-help can be exploited to reduce project costs and Instill a sense of community pride In an undertaking. SWISSAID forms a contract with the parent association in a community wherein the community 48/ It should be noted in this connection that the self-help movement has also given birth to a number of non-secular schools that often use only Arabic and do not follow official programs. The spread of these schools has been particularly important in the Sahelian zone and implies a need for minimum control by the Government co ensure that education is oriented toward the country's needs. - 103 - agrees to provide labor and local materials, while SWISSAID provides technical training in masonry and material inputs, such as wood and tin roofing. Two innovative aspects of the SWTSSAID projects are worth noting. First, once a structure has been completed, the community is left with semi-skilled masons who can help direct future projects. Second, 25 percent of Swiss Aid's budget for Chad is spent on research to improve local building materials and indigenous architectural designs. The success of its programs at the village level has earned SWISSAID an excellent reputation with the Ministry of Education and with local populations. 240. The Government mav wish to consider the creation of a national committee on education to improve communication between all parties involved in Chad's educational system and to coordinate the distribution of resources ln support of self-help efforts. The Minister of Education could chair the committee composed of representatives from parent and teacher associations, as well as from NCOs and other international donors active in the sector. 3. Teacher Training 241. There Is a severe shortage of trained primary school teachers in Chad, The country's five teacher training colleges had a total enrollment of 762 in 1985-86 and have a projected enrollment of 878 for 1986-87, Although there has been notable expansion of facilities in recent years, the capacity of these schools is far less than student demand for places, which has increased dramatically as a result of Chad's high rate of unemplovment for students who have completed a secondary education. In 1986, there were over 2,000 candidates for only 350 places in the first year teacher-training class. Due in part to the spontaneous school movement, there has also been a large increase in the demand on the Education Ministry to provide teachers at the village level. When qualified teachers have not been available, parent associations have resorted to recruiting untrained teachers. An estimated 1,300 of these "benevole" teachers (accounting for approximately one-third of the teachers at the primary level in 1985-86) are currently teaching throughout the country without the necessary academic credentials; some have only completed their primary education while others have completed a secondary degree. The Education Ministry does not have the capacity to monitor these teachers nor to provide training for them. 242. Meeting the growing demand for qualified teachers at the primary education level is the highest priority in Chad's medium-term development strategy for the education sector. Since many teachers are currently functioning in the primary school system with little or no formal training, particular emphasis will be put on the provision of in-service training for those already teaching. In addition to being more cost effective than formal teacher training programs, the development of an innovative in-service training program will minimize the distribution of ongoing educational activities during the school year. 243. Chad's National Institute of Education Sciences (INSE) has responded to the demand for more teachers with a plan for recruiting and training new teachers and for upgrading the qualifications of teachers - 104 - already in the field. 49/ This program, if fully implemented, would consolidate the wide range of qualitative categories for teachers in Chad which currently include "educators", "associate educators" and three categories of "monitors". All associate educators who have taught for at least four years will be allowed to take an examination for entrance directly into the third and final year of teacher-training college and, upon graduation, be qualified for full educator status. The monitor category will be phased out and current monitors will be encouraged to enter one or two-year special training programs qualifying them for associate educator status. Any person who has passed the Baccalaureate exam will be allowed to enter a one-year intensive training program which will qualify the student for full educator status. 244. While it is extremely important to raise the qualifications of existing teachers, the INSE plan raises several issues. First, in view of the severe teacher shortage that currently exists, it is inappropriate at this time to withdraw up to 300 teachers (associate educators and monitors) per year from active service as proposed by INSE. Although the INSE claims that newly trained teachers will take the places of all those teachers being recalled for more advance training, this at best would result in the number of teachers in the field remaining constant at a time when there is a high demand for more qualified teachers. Second, the upgrading of teachers to full educator status would mean a proportionate raise in teacher salaries at a time when the Government is hard pressed to pay half salaries to teachers at their current level. Finally, a plan for addressing the status and upgrading the quality of the large number of "benevole" teachers has yet to be proposed. 245. In view of the severe teacher shortage, Chad's weak financial position and the overwhelming educational needs at the primary level in Chad, formal, long-term academic training to increase the quality of existing teachers is not justified at this time. A more efficient strategy in the short-term would be to concentrate on providing well-qualified, new teachers and upgrading the skills of teachers currently in the field using on-site, in-service programs held during holidays and the summer break. Such programs would help ease the strain on an already overburdened system by allowing teachers to remain in the field during the school year. To the extent possible in-service training should be focused initially on the "benevole" teachers who have received no formal training. Following sufficient professional and academic training, "benevoles" should be allowed to present themselves as private candidates for classification as monitors (under the existing classifications) based on competitive exams. In order to avoid the question of salary increases, in-service training programs should not be tied to reclassification of teacher grades in the near term. 49/ INSE is strongly supported by a FAC project that is providing technical assistant in the form of a pedagogic advisor in order to help INSE to define its training policy and to implement it. - 105 - 246, In-service training is currently carried out at the "prefecture" level in two different forms: groups of pedagogic advisors provide periodic on-site visits under the supervision of the INSE, and regional training centers are organized by the Inspector's Department at the Ministry of Education. It is unclear how these two systems interrelate or whether they represent a duplication of effort. An evaluation of the organization and content of in-service training programs is needed to ensure that Chad's limited training resources are being used in the most efficient and effective way possible. Depending on the results of the evaluation, short-term technical assistance could be used to introduce innovative methods for rapidly training large numbers of teachers. Similar assistance might also be called for to adapt pedagogical methods to Chad's difficult teaching environment characterized by large numbers of students per class and few educational materials. 247. Since it is uncertain whether the increased demand for teachers will continue at current levels, major investments in the rehabilitation of existing training facilities and the construction of new facilities should not be committed at this time. A comprehensive evaluation of the country's long-term requirements in the education sector, including projected teacher needs, will be carried out once sufficient information on the sector has been amassed. Until that time, the use of make-shift facilities and externally-financed training assistance in the form of grant aid will allow Chad to make significant progress in meeting the short-term demand for education. 4. Institutional Issues 248. Little information is currently available on the operational and management performance of Chad's Ministry of Education. Following the end of hostilities, the Ministry was reestablished with the help of a management consultant, but an analysis of its internal efficiency or effectiveness was not feasible at that time. The INSE functions as a self-contained unit within the Education Ministry. Whether there is a duplication of responsibilities or competition between the INSE and the Inspector's Department is unclear. Nonetheless, increased cooperation between these two departments in the area of in-service training is necessary. 249. In order to concentrate limited resources on the provision of basic primary education to Chad's school-age population, a comprehensive institutional reevaluation of the country's education sector should remain a long-term objective. A participatory diagnosis of the Ministry of Education's planning and monitoring capabilities could, however, be useful in helping the educational leadership to identify and address the sector's longer-term needs and corresponding investment priorities. Such a diagnosis could be carried out with the assistance of an organizational development specialist on the basis of a short-term consultancy combined with peritodic follow-up visits to evaluate progress. 250, Assistance is also needed to develop a sustainable system of teacher support. While efforts to share teacher salary and support costs with the local populations will help to reduce the Education Ministry's budget constraints, increased external support for salaries will be - 106 - necessary to alleviate the severe motivational problems now evident among teachers in Chad. External financing for the salary budget is now being provided by USAID and IDA. The allocation of additional external funding for salaries would be an effective means to improve the short-term efficiency of Chad's educational system. 5. Long-Term Strategy 251. Comprehensive statistical documentation for the 1985-86 school year has recently been completed by an IDA-financed UNESCO consultant attached to the Ministry of Education. The data will be immediately useful for the short-term programming of investments in the education sector. It will also provide, along with annual updates, a basis upon which to analyze Chad's longer-term education priorities at the primary level, as well as for secondary and post-secondary education and vocational training. The objective of this strategy should be how best to supply qualified workers to the productive sectors of the economy. Specific areas which merit examination include reform of the sec. 's institutional structure, investments for the rehabilitation and construction of the sector's infrastructure and training facilities, the potential for private sector participation in vocational training, and, as mentioned previously, the development of a core curriculum suiting the country's educational environment and human resource needs. B. Health: Status and Efforts to Improve It 1. Health Status 252. The health status of Chad's population -- short life expectancy, high infant and child mortality, high fertility rate -- only too clearly reflects the country's status as one of the poorest and least-developed nations in the world. Very little is actually known on an aggregate level; the lack of demographic surveys in the past two decades means that the standard indicators for health have all been estimated based on scanty data from the mid-1970s or earlier and/or formulated using models from other low-income countries. Thus, the indicators in Table 15 represent more what demographers would expect to find in a country like Chad than what has actually been found. However, health professionals working in Chad confirm that conditions are as bad -- and in many cases worse -- than indicated. The infant mortality rate is considered to be much higher than the official estimate of 139 per 1,000 babies, and is probably closer to 200, making it among the highest in the world (see Table 15). 501 Child and maternal mortality are also extremely high, reflecting poverty, chronic malnutrition, lack of access to safe water, little or no health education, limited access to health care, poorly-trained health personnel, and inadequate health facilities, equipment, and pharmaceutical supplies. 50/ Recently, the Ministry of Public Health indicated that they had adopted a revised official estimate for infant mortality of 210 per 1,000 infants. - 107 - Table 15 - Health and Population Indicators Average for low-income, Chad Sub-Saharan Africa Population (1985) 5.0 million -- Population Growth Rate (1980-2000) 2.4% 3.0% Total Fertility Rate (1984) 5.6 6.6 Life Expectancy - male (1984) 43 years 47 years - female (1988} 45 years 50 years Infant Mortality Rate (1984)27 139 129 Child Mortality Rate (1984) - 27 26 Inhabitants per Physician (1985) 38,462 27,922 3/ Inhabitants per Nursing Person (1985) 3,441 3,148 - 1/ Infants under 1 year of age. 2/ Children between 1 and 5 years of age. 3/ 1980 figures. Source: World Bank, World Development Report 1985, and African Development Bank, Health Services Devekoment in the Republic of Chad, April 1986. 253. Official population figures are unreliable, taking no account of war casualties and outmigration. Total population is assumed to be anywhere between 4.0 and 5.2 million. The growth rate of population, as well as the total fertility rate, are probably underestimated. This means more babies are being born than indicated -- but sadly, more are dying as well. 254. Disease reporting has been very spotty and unsystematic. In 1986, a health planning project executed by the Harvard Institute of International Development (HIID) attempted to analyze incomplete morbidity data for 1985 from a wide variety of health facilities in Chad. The reporting forms were not standardized, and the resulting categories of "health problems" were very general, reflecting the inability of many poorly-trained Chadian health workers to make more specific diagnoses. The results of the survey are summarized in Table 16. Although the sample is biased, including only those cases for which formal treatment was sought, it is indicative of Chad's overall health problems. Dysentary and other diarrheal diseases are a leading problem; one study in 1983 reported that 70 percent of deaths in children under five were due to, or associated with, diarrhea. 51/ Diseases 'h%.dden" within these broad categories 51/ African Development Bank, Health Services Development in the Republic of Chad, p. 5. - 108 - include malaria, measles, and vitamin A deficiency, among others. Malnutrition is generally not reported, although it is often present in conjunction with Table 16 - Health Problems In 1985 Health problem Percent of Cases Diarrhea 15 Fever 11 Trauma of all kinds 10 Acute respiratory disease 8 Eye disorders 7 Ear, nose, throat diseases 6 Digestive system diseases 6 Skin diseases 3 Gonorrhea 3 Bone and joint diseases 2 Other 29 T'otal 100 Source: Projet de Restauration de la Planification Sanitaire, Etude Preliminaire des Problemes de Sante au Tchad, 1985 other health problems. Some nutritional testing was carried out during the 1984/85 drought, particularly by several NGOs and church-related groups, but this has tapered off in the past two years. At the height of the drought, the U.S. Center for Disease Control undertook a survey of urban areas in Chad's Sahelian zone, finding that anywhere from 10 to 60 percent of children under five were acutely malnourished. 52/ Health professionals today claim that they rarely see acute malnutrition, although chronic under-nutrition is prevalent. 2. Health Administration and the Institutional Framework 255. Chad's Ministry of Public Health (MSP) is, in principle, responsible for national health care delivery, although the Ministry of Defense maintains many military health units and the Ministry of Social Affairs (MAS) manages certain maternal and child health programs. The MSP consists of seven administrative departments: 1) preventive and rural health; 2) curative and urban health care; 3) primary health care; 4) sanitary engineering; 5) pharmacy and medical laboratories; 6) professional training and health education, and 7) administrative and flnancial affairs, The first three deal directly with health-care delivery, although their actions are often uncoordinated at the delivery level, leading to inefficient use of scarce personnel, equipment, and facilities. Generally, health-care coordination takes place at the central 52/ Ibid, p. 6. - 109 - level, with little coordination at the regional level or at delivery sites. Efforts are being made to improve this situation, for example, by using the MAS network of maternal and child health (MCH) centers as delivery sites for the national vaccination program. 256. The most striking aspect of Chad's health care system is that it really consists of multinle, independent systems. Health-care, as one of the most basic needs, ha teen the focus of numerous, sustained interventions by NGOs, donor agencies, and church-related groups. Many have created delivery systems which operate, for the most part, independently of the national health-care system. Most notably, the NCO Medecins Sans Frontiares (MSF) has provided virtually all health-care services in nine of Chad's thirteen regions. MSF has acted as a substitute for, or as an extension of, the MSP system, albeit a fairly independent extension. These parallel systems have been essential, and laudable, given the MSP's severe lack of resources, but they have made the coordination of health services and the definition and implementation of a national health sector strategy vastly more complex. They also tend to discourage the development of a nation-wide local capacity for health care delivery, which could prove dangerous if a major health care provider withdraws from the country. This threat may soon become reality, as MSP considers substantially curtailing its activities in Chad. 3. Defining Priorities in Health Care 257. The lack of standardized, aggregated data on health problems and liealth-care needs has hindered Government planning in the sector. For the past two years, the HIID project, operating within the MSP, has worked to develop a nation-wide health information system and train Chadian counterparts to exploit the resulting data. A standardized reporting form was developed which was acceptable to all governmental and non-governmental health-care providers, and responded to the planning needs of the MSP. The system is now in place, although much of the funding for the project is scheduled to end in September 1987, despite the neAd for more time to train Chadian counterparts, ensure smooth operation of the system, and ascertain that the system provides appropriate information for health planning. 258. The Government's stated objective in the health sector, as indicated in the Interim Plan, is to improve the health status of the greatest number at the least cost. This will involve a three-pronged approach emphasizing (i) preventive care (e.g., immunization campaigns, nutrition programs, maternal and child health care, sanitary engineering); (ii) increased access to care (e.g., primary health care, support for small-scale dispensaries, services for the handicapped), and (iii) increased quality of care (e.g., support for academic and in-service training programs). MSP is assisted in its planning efforts by a WHO technical team. Certain elements of the Government's approach are better defined than others, depending in large part, on donor willingness to sponsor particular programs. The Expanded Vaccination Program (PEV), for example, is relatively well-defined and has received considerable technical and financial support from the donor community. However, because of trained manpower constraints, the PEV has thus far fallen short of its annual goals. Similarly, the oral rehydration therapy (ORT) program has been defined and implementation has begun, although institutional rivalries - 110 - between the MSP and the MAS, as well as trained manpower constraints, have delayed implementation. Other stated priorities, such as water supply and sanitation or services for the handicapped, have received far less external support and are less clearly defined. It is important for MSP to integrate these various components into an overall sector strategy, in order to determine the most appropriate allocation of resources and encourage donors to diversify their assistance among the many competing priorities. 4. Personnel and Facilities for Health Care Delivery 259. Chad's limited resources for health care are spread far too thinly: many facilities have crumbling walls, no beds and no equipment; pharmacy shelves are often bare; and much of Chad's health personnel has only rudimentary training and is unable to recognize and treat common illnesses. The medical needs of the military have placed an additional strain on this over-taxed system. The actual number of physicians and nurses working in Chad is on par with other low-income, Sub-Saharan countries, that is, approximately two to three times less than WHO minimum recommended norms (see Table 17). Less than half of Chad's physicians work through the MSP health care system, with NGOs (especially MSF) providing another 22 percent, donor agencies 15 percent, and church-related groups the remaining 15 percent. In addition to the personnel shown in Table 16 below, there are an estimated 350 village health workers, most with little or no training, who are community-supported. In contrast, the Government estimates that there are as many Chadian doctors practicing abroad as there are in Chad -- a common problem in places with no tn-country physician training. 260. The National School of Public Health and Social Services (ENSPSS) offers three-year programs for nurses, nurse-midwives, and sanitation workers, as well as two-year programs for intermediate nurses, and health and social workers. About 300 students attend ENSPSS, although the quality of training is seriously undermined by the lack of funds for instructors' salaries, textbooks, equipment, and supplies. As of late 1986, the start of the 1986/87 academic year had been postponed indefinitely for lack of funds. Although donors have provided scholarships for ENSPSS in recent years, these are declining as some donors shift resources out of the health sector in an effort to broaden Chad's development activities. - ill - Table 17 - Health Personnel and Facilitles, 1986 GovernventalNon- 2 Health Personnel Governmental - Governmental Total Physicians 63 67 130 Nurses 1,141 312 1,453 Other categories 714 45 759 Total 1,918 424 2,342 Health Facilities Hospitals 5 3 8 Medical centers 17 4 21 Infirmaries 19 4 23 Dispensaries 140 66 206 Health stations 1 14 15 Preventive health centers 8 -- 8 Maternal/child health centers 22 -- 22 Military health stations 111 111 Total 323 91 414 1/ Includes Ministry of Public Health, Ministry of Social Affairs, and Ministry of Defense. 2/ Includes church-related groups, NGOs, donors. Source: Ministry of Public Health and African Development Bank, Health Services Development i the Republic f Chad, April 1986. 261. Thirty percent of MSP health personnel, including two-thirds of all MSP physicians, work in N'Djamena, which accounts for an estimated 8 percent of Chad's population. This imbalance is mitigated by non-governmental health personnel, the majority of whom work in other regions. Government health facilities are more evenly distributed, although the addition of non-governmental facilities disproportionally favors the southern Sudanian zone. In 1977, there were 168 MSP facilities, most of which were closed or destroyed in the hostilities. By 1986 there were 190 MSP feilities, with the increase due largely to the Government's emphasis on smaller-scale, wide-spread dispensaries and health stations to increase access to primary care. 262. Improved access to pharmaceutical products is also necessary. The MSP directs the National Pharmacy Supplier (PASP), which is responsible for providing MSP facilities with medicines and other pharmaceutical products on the Government's "essential" list. In recent years, PASP purchases have been entirely aid-financed and were sufficient to supply only about half the MSP facilities; some of the remaining facilities have been supplied directly by NGOs and donor agencies. Military health units also draw on the PASP, as necessary, often leaving little for civilian facilities. Non-governmental facilities are generally supplied by their - 112 - sponsoring agencies. In addition, PHARMAT, a mixed-capital enterprise with a legal monopoly (except for PASP) on importing pharmaceutical products, sells wholesa'e to about 75 private pharmacies, mostly located in or near N'Djamena. Medicines and supplies are also available on the parallel market, and reportedly may help to supply as many as 1,000 village-level, community-sponsored pharmacies. 5. Financing Health Care 263. The diversity and independence of health-care providers in Chad make it difficult to assess aggregate expenditures in the sector. Government revenues allocated to health are small and must be supplemerted with external budgetary support just to cover MSP salaries and operatlng costs. External assistance finances all equipment and project costs. In the 1984-86 period, expenditures by the MSP were constrained to only about one-third of the amounts budgeted, ranging between CFAF 0.4 and 0.5 billion per annum -- or just 2 to 3 percent of the Government's total expenditures. This is equivalent to less than CFAF 100 (US$0.30) per capita. In contrast, disbursements of aid for the health sector in the 1983-85 period averaged more than CFAF 3.0 billion per annum. In 1986, disbursements rose to over CFAF 5.0 billion, or roughly CFAF 1,000 (US$3.00) per capita. However, new commitments in the health sector appear to be declining as donors diversify into other sectors, and the Government is faced with the need to develop alternative methods for health care financing. 264. One financing option, particularly to cover recurrent costs, is to increase the use of service fees and the sale of pharmaceutical products. Officially, the MSP charges a token fee of CFAF 100 for out-patient visits. In-patient services are free, as are all PASP pharmaceutical products. Revenues generated by fees and reported to the MSP were estimated to total CFAF 43 million in 1986. However, these revenues do not finance the health sector directly; they are placed in the Government's general Treasury. Fee collection is reportedly erratic, and when they are collected, they are often used to finance the immediate needs of the health facility (e.g., medicines bought on the parallel market) or for other purposes. 265. PHARMAT sells its products at official prices which have been quite profitable. PASP, with technical assistance from USAID, is experimenting with several "self-financing" pharmacies, which aim to cover recurrent costs through sales. Many of the NGO and church-related facilities have always charged fees for services and pharmaceutical products and, in many cases, have successfully covered the recurrent costs of their operations. The growing number of community-sponsored dispensaries and pharmacies implies that access may be a greater constraint to health care than purchasing power. The Government needs to explore the potential for greater cost recovery through the use of fees, while being cautious not to impose prohibitive fees which limit the access of many Chadians to basic health care. * * * * - 113 - 266. The lack of basic data on social welfare (e.g., income, emnployment, consumpticn, health and nutritional status, and education) of the Chadian people has hindered anaivsis, policy-making and programming for poverty alleviation. To ameliorate this situation, the Chadian Government has decided to participate in a regional project, financed by UNDP and executed by the World Bank, entitled the Social Dimensions of Structural Adjustment. The objective is to gather information on a broad range of social welfare indicators in order to determine the welfare effects of economic events and adiustment measures on differeuit groups in Chadian society. The project will establish a permanent household survey capability within the Statistical Division of the Ministry of Planning, supported, initially, by technical assistance where necessary. A living standards survey will be launched to generate data for a series of socio-economic studies which will respond to the Government's priority policy questions. This should enable the Government to better define policies and development programs which improve the welfare of the most vulnerable groups and/or compensate groups which are negatively affected by economic adjustment. As a first step in this process, a demographic census survey will be carried out shortlv as part of a World Bank technical assistance project. This initial survey will permit the establishment of an appropriate sample frame for the upcoming living standards survey. .,, O. - 114 - VI . DETERMINANTS OF FUTURE TRENDO 267. A number of economic and non-economic, quantitative and qualitative, cross-sectoral factors can influence future trends in a country. In the case of Chad, the most important of these are (i) political stability, (ii) domestic resource constraints, (iii) investment and external assistance, and (iv) economic management. These are the focus of this chapter. Although their link to the projections is not always direct, these factors -- as well as the social factors reviewed in the preceding chapter -- affect expectations concerning the pace, limits and quality of change. They are therefore discussed here as a background to the projections presented in the next chapter. A. Political Climate 268. Political instability has been a major deLerminant of the evolution of the Chadian economy since Independence. Examining the causes and prospects of this phenomenon is beyond the mandate of this report, but the question cannot be ignored because political stability is, beyond doubt, a pre-condition for Chad to realize its economic potential. The fulfillment of this pre-condition is, therefore, a key assumption in the rest of this report. The assumption is analytically necessary, but is also justified. The Government has made systematic and successful efforts to foster national unity and reconciliation. As a result, the internal and external security situation is better than it has been in a decade, and this augurs well for the future. The purpose of this brief section is not to speculate about the prospects for enduring political stability but, rather, to consider the changes which it may bring in terms of security outlays, decision-making, and external aid -- all relevant to an assessment of future economic prospects. 269. A priori, security outlays should decline as internal and external security is solidified. However, given the continued security risk along Chad's border, it would be unrealistic to expect such outlays to decline dramatically in the years ahead. Besides, the reduction is likely to be accompanied by some reconstruction/rehabilitation expenditures in the North. For that reason, the net financial benefit of an improved security situation for the rest of the country is not likely to be great; on the contrary, care should be taken to make sure that it is not negative. Currently, an important part of security outlays are financed externally, If the financing is reduced without converting it into general development assistance or reconstruction assistance for the North, the impact on overall finances may indeed be negative. 270. The benefits of an improved security situation are likely to be greater in the areas of decision-making and external aid. In principle, it will be possible to devote increasing attention to economic questions -- this has already started; and the improved security situation should also lead both to a diversification and expansion of external assistance -- as donors less familiar with Chad become willing, and find it feasible, to operate in the country -- and to an increase' ability to attract high-quality techrnical assistance. Neither of these, however, will be easy or happen automatically. The challenge for the Chadian authorities will be - 115 - to base decisions affecting the economy as much as possible on economic (rather than political) considerations. This is not a simple task because the choices are not clear-cut: some decisions which are economically sound can have unacceptable political costs, while some motivated by political considerations (such as, for example, the promotion of nat.ial and unity) can have economic benefits. The expected positive impact on aid is not automatic or assured either; it will require the establishment and pursuit of smooth external relations, including the expansion of trade with neighboring countries. In short, while the economic benefits of stability will be significant, they will depend on how Chad "manages" that stability. B, Domestic Resource Constraints 1. Revenue Constraints 271. This section focuses on the financial resources of the State, which consist of fiscal revenues, "'special funds," and "exceptional" taxes. The next section discusses the implications of the financial constraint for the administration and development policy. 272. Fiscal revenues. Chad's fiscal base is small relative to the size of the subsistence economy and the informal sector, because of the limited size of the modern sector and because the average income level is low, with little variation around the mean. Furthermore, the tax base has shrunk since the advent of the cotton crisis. In 1986, fiscal revenues amounted to 5 percent of GDP, compared to 9 percent in 1977 and a peak of 15 percent in 1971. By comparison, in 1986, the ratio of fiscal revenues to GDP was 22 percent in Mauritania, 19.5 percent in Senegal, and 12 percent in the CAR. The production of petroleum, particularly when exports become feasible, could become a new revenue source in the medium-term. Besides this, the potential for expanding the base in the short- to medium-term is limited. There is scope for reducing existing exonerations and exemptions, particularly on import duties, although care must be taken not to discourage aid-financed imports deemed essential for Chad's development. Improvements are also possible in the structure of taxes in areas such as petroleum products and livestock marketing, as well as in the administration of taxes. 273. The potential for revenue generation is limited, but to exploit that potential, the tax burden should be shared as widely as possible, and the structure of taxes should be carefully considered in order to maximize fiscal revenues without discouraging domestic production and offjcial marketing. Currently, the tax burden is borne disproportionately by relatively few economic agents, and especially by the five major industries. They figure heavily in many of Chad's major sources of revenue, including, in descending order of magnitude, import duties, unitary taxes, corporate taxes, and turnover taxes (see Appendix Table 23). As discussed in Chapter IV, the problem is compounded by the pervasiveness of fraud: an increase in taxes leads to an increase in prices, which encourages fraud, reduces domestic sales and cuts the tax yield. This is a structural problem in Chad which has been the object of reform as far back as 1972. At that time, taxes were lowered in order to reduce fraud and stimulate domestic production, i.e., increase the tax base to offset the impact of the lower tax rates. The reform did not work; the tax/GDP ratio - 116 - was reduced, but formal (recorded) trade and production did not expand. This experience suggests the need to proceed with care in designing and implementing such reforms in Chad, Efforts to strengthen tax administration and to diversify the tax base should start with a survey of taxpayers. 274. Special Funds. There are a number of special funds in Chad which either collect taxes on behalf of the Government or derive revenues from their activities, Although the Central Government's accounting system is undergoing a significant improvement (aided by the adoption of a new budget nomenclature), the accounts of most of these funds are seriously deficient -- even if some of the funds are relatively well-managed -- as shown by the following brief survey of their situation and problems. 275. The cotton price stabilization fund (CSPC) has had a broad mandate: stabilizing producer prices, financing the deficit of COTONTCHAD, and playing a financial role in all industrial and commercial operations in the sector. If, in a marketing season, COTONTCHAD produces a surplus, 80 percent of it goes to CSPC, 20 percent is retained by COTONTCHAD; if the industry produces a deficit, all of it is supposed to be financed by the CSPC. From 1971/72 to 1983/84, COTONTCHAD transferred roughly CFAF 21 billion to CSPC. Yet CSPC did not finance any of the COTONTCHAD deficits incurred in 1978/79, 1979/80 and since 1984/85. The resources went to subsidize the activities of ONDR and IRCT, to make investments in or loans to public enterprises, and to finance CSPC's own (high) administrative costs. Under the Emergency Program, CSPC no longer benefits from transfers by COTONTCHAD, so it cannot play its role; it manages to cover its expenses through rental income from buildings it owns. 276. The continued existence of a Petroleum Fund (FIIP) also does not seem entirely justified. As noted in Chapter IV, Chad imports petroleum from both Nigeria and Cameroon for reasons of supply security, xv.!2n though their prices are different -- a problem which is dealt with by taxing Nigerian oil and subsidizing Cameroonian oil. The Fund, which performs this role, should break even if the ratio of Cameroonian oil to Nigerian oil is roughly 40/60. Since 80-90 percent of imports have been coming from Nigeria, the FTIP should be accumulating very large resources, which is not the case. The reasons for this include fraud (falsification of country of origin), but also poor accounting and financial management. Since administering the price equalization policy has proven difficult, and since the majority of imports now come from Nigeria, it would seem appropriate to move without delay to a simple unified tax taking into account the import cost and the retail price. The Government is currently preparing a reform of petroleum taxation which would move in this direction. At the same time, tax collection at the border points needs to be drastically improved. 277. In contrast, the Debt Amortization Fund (CAA) has a well-justified role and functions properly, servicing the debt from its own revenue/tax sources. It is currently reinforcing its collection capabilities, and its resources are included in the consolidated government accounts. The other funds are the Sugar Price Stabilization Fund, which the Government has agreed to abolish; the Social Security Fund (CNPS), the Rural Intervention Fund (FIR), which has, for the moment, no resources; the Veterans and War Victims Fund (funded through a share of import duties on - 117 - petroleum); and OFNAR, the road transport agency which, though not strictly a fund, is also financed through a levy on petroleum. On the whole, use of these funds constitutes a form of taxation which drains considerable resources from the economy: CFAF 3 billion In 1986, not counting the CAA. The recent decision to make these funds transit through the Treasury should assure better monitoring, although the role of most of them should be reviewed, and all can benefit from organizational reform. 278. Exceptional Taxes. The first exceptional taxes were introduced in 1984 in the form of relinquishing one month's salary to contribute to national reconstruction; the tax yielded CFAF 1.8 billion. The year 1985 saw the introduction of a tax to combat the effects of the drought, and 1987 a variable tax to support the war effort. None of these exceptional taxes are included in the Government budget, although they place a significant burden on taxpayers. 2. Implications 279. The above review leads to the following observations: - it will be difficult for Chad to increase its fiscal revenues significantly; they have been historically low for structural reasons; - a restructuring of the fiscal and parafiscal system could nevertheless lead to some increase in revenues. This is particularly true with respect to the yield on petroleum taxes; - institutional reform of special funds and of tax collection services could also lead to increased revenues. The low level of financial resources has implications for (i) the functioning of the administration, (ii) its contribution to public enterprises and recurrent costs, and (iii) development strategy. 280. Functioning of the Administration. With current salaries, many civil servants cannot support a family. The average salary of a civil servant is about CFAF 38,000 per month, while the minimum cost of housing and feeding four people (and providing the charcoal or wood needed) is around CFAF 50,000, without allowing for electricity or running water. Thus, unless he/she or other members of the family have supplementary jobs, they will live in poverty, lacking in the most basic needs, particularly during the dry season when food prices tend to be much higher. Although the situation depicted may be better than before the war, it cannot continue without affecting the efficiency of the administration. Understandably, raising civil servants' salary payments is an Important medium-term objective of the Government. Yet in view of the financial constraints, it is important to ensure t;.at an increase in salary payments is not accompanied by an expansion of the civil service. The Government is conscious of this despite the political cost it represents. The new civil service statute which was adopted in February 1987 will put an end to automatic recruitment of university graduates; recruitment will be based on need and competition. This will help limit the quantity and improve the - 118 - quality of the civil service. The Government's operating budget also requires increased attention. With the rehabilitation of government buildings and the strengthening of public services, operating expenditures will have to be increased, particularly to ensure adequate maintenance of rehabilitated infrastructure. Given resource constraints, this will require the setting of clear priorities and strict management of expenditures to avoid the build-up of arrears. 281. Financial Contributions. Revenue constraints also have implications for the Government's ability to subsidize parapublic enterprises, finance the re"urrent costs of development projects, and service the external debt. Up to now, subsidies to public enterprises have been very rare and limited. Only SODELAC received an operating subsidy in 1985. As we have seen, some agencies and funds benefit from fiscal and parafiscal resources, but they do so to finance services which are the responsibility of the State: road maintenance in the case of OFNAR, extension services in the case of ONDR. It is important, however, to avoid allocating fiscal resources to activities for which external assistance may be available, This seems particularly applicable to the Rural Intervention Fund, which is supposed to be financed by the State, but -- by its nature and objectives -- could be appropriately funded with external assistance. In short, state enterprises should place the least possible burden on the Government budget. This also applies to recurrent costs of projects. A large proportion of the on-going aid projects (reviewed in the next section) do involve the financing of recurrent costs, often in combination with investment financing. 282. Development Strategy. The severe resource constraints of the State underline the need for community participation in the financing or provision of public services. Such community participation is already important in a number of areas such as health and education (see Chapter V), as well as in water supply. T'iL is welcome and should be further encouraged. It is, however, neither quick nor easy; it requires preparation and training -- an area in which a number of NGOs may have valuable experience to offer. 283. Another way for the Government to avoid taking on responsibilities which it cannot finance is to encourage the private sector. However, as discussed in Chapter IV, the development of the private sector will require external assistance, training and institution building, and will take time. It is clear that given its resource constraints, the Government cannot finance for an extended period operations which are structurally in deficit, regardless of their justification. This necessitates selecting and designing projects in a manner that maximizes self-financing of recurrent costs, even if this entails less ambitious projects. 284. In a fragile country like Chad, pursuing a high growth rate through a multiplicity of Government programs could quickly provoke serious disequilibria in its public finances as well as in the balance of payments. A more appropriate objective would be to give greater weight to modest, but sustained growth. Such a policy would especially emphasize the development of the rural sector, which has proven to be both solid and dynamic. This sector also provides the basis for important social bonds which, once - 119 - broken, can be mended only slowly. The cooperative movement in Chad is not well-understood, but numerous "spontaneous" groups were formed during the war to assume the respcnsibility for certain public services (e.g. health care, education) as well as launch productive activities. The Government believes these groups have a critical role to play in Chad's development and has begun, with support from the ILO, an inventory of cooperatives in the countrv. In addition, a study is being carried out by CEFOD, with OXFAM financing, on the nature and operations of these groups. C. Investment and Development Assistance 285. Public investment in Chad has been entirely aid-financed in recent years, as has a large portion of the recurrent costs associated with these investments, Given the limited outlook for augmenting fiscal revenues in Chad, the donor communitv must be prepared to continue financing -- for an extended period -- the bulk of recurrent costs and all the initial Investment costs of development projects, as well as the costs of providing basic social services such as health care and education. 286. ln the last quarter of calendar 1986, the Chadian authorities, with assistance from the World Bank and the cooperation of the major donors, prepared an inventory of aid projects -- those under implementation and those expected to start in 1987 (excluding budgetary and milita,ry assistance), The inventory was initiated primarily as a first step toward the preparation of an investment budget for 1987 and, later on, a multi-year investment program. The exercise was expanded from investment to aid projects partly because of the difficulty of distinguishing between investment assistance and other types of assistance (recurrent cost financing, technical assistance), but also because of the analytical value of an inventory of -id projects per se. The donors provided valuable assistance both in generating and in verifying the data. Nevertheless, the Inventory has a number of shortcomings which are attributable to the lack of standardization of donor reporting, the difficulty of reconstructing past series for comparison, and the problem of correctly gauging executing capacity. For those reasons, the disbursement estimates for 1987, for example, may have an upward bias, since they come essentially from the donors and are largely "planning estimates" by them. The focus of this section, however, is more on the distribution and potential effectiveness of the assistance than on its precise level, and the data do permit a number of meaningful generalizations in that regard. 287. According to the inventory, disbursements of project assistance to Chad are expected to increase by nearly 50 percent (in current CFAF terms) in 1987, after more than doubling in 1986, as showm below: 1985 1986 1987 1988 1989 Thousands of CFAF 1 19,205 44,423 65,251 41,870 19,018 (millions of US$) - 43 127 204 131 59 1/ Converted at a rate of CFAF 320 per US dollar in the 1987-89 period. - 120 - Disbursements from the projects surveyed are projected to decline as rapidly as they rose, reflecting their quick-disbursing character. Keeping disbursements at their 1987 level, let alone raising them, will require the speedy identification and financing of other quick-disbursing projects and/or a very sharp increase in balance of payments aid. 288. As noted, the data do not permit distinguishing between investment expenditures and others. However, a rough estimate can be developed by attrJbuting projects or sub-categories of expenditures to one grotup or the other, based on their primary objective. On that basis, roughly 55 percent of the projected aid disbursements in 1987 would support investment expenditures, 19 percent recurrent costs of the Government, and 21 percent operating costs of the public or mixed enterprises (5 percent would consist of miscellaneous outlays). The figures cited probably underestimate the weight of investment expenditures; even if they did not (i.e., even if investments expenditures represented only 55 percent of external assistance), this would not necessarily be bad: in Chad's actual situation, the financing of certain current expenditures may deserve priority over capital outlays and may have a bigger developmental impact. More important is the purpose and activity that the expenditure is serving. The distribution of aid from that point of view is generally positive; as illustrated below, with few exceptions, the donors have done quite well in allocating external resources to priority needs. 289. Approximately half of the projected aid disbursements in 1987 are to finance rehabilitation activities, 10 percent for the expansion of existing capacity, and 14 percent for building new capacity (Chart 8). This distribution is consistent with both the physical state of existing capacity and the restraint that Chad and the donors must exercise in building new capacity. The proportion of rehabilitation is highest in Infrastructure and Services (80 and 73 percent, respectively). The proportion of new capacity is highest in education, although even there it is only 25 percent. Another feature of the distribution of aid by purpose is the large share (21 percent) allocated to financing "support actions" (institution building, technical assistance, training). The ratio of aid falling in that category is highest for rural development and education (54 and 51 percent, respectively). Overall, rehabilitation and support actions absorb three-quarters of the aid. 290. Table 18 presents a detailed profile of aid programs/projects in Chad with an ad hoc functional classification developed for the purpose of the current analysis. The sectoral distribution of projected aid seems well adapted to Chad's intersectoral priorities, with 32 percent going to infrastructure, 26 percent to rural development, 22 percent to industry and energy, and 16 percent to the social sectors, split roughly equally between education and health. The intra-sectoral distribution, too, seems consistent with Chad's problems and needs. Within rural development, about a third of the aid is directed at integrated regional development and 15 parcent at institutional support. Institutional support is also the object of 6 percent of the assistance to industry. Within the road sub-sector, 44 percent of the aid is for maintenance, compared to 36 percent in 1986. Primary education will absorb 24 percent of aid to the education sector, while higher education will receive 9 percent, compared to 18 percent the year before; the lion's share, 44 percent, will go to AID PROJECTS: E.STIMATED DISBURSEMENTS IN 1987 BY TYPE OF ACTIVITY 2250C)- - __ LEGEND 20000 [cm]NEW CAPACilY SUPPORT ACTIONS 17500- _r 1750 |II] EXPANSION 15000-- REHABILITATION Cl) S)12500- 10000- 7500- 15000 -_l'^i =112500 - _iai 0 INFRASTRUCTURE IND 8 EGY HEALTH UVESTOCK X AGRICULTURE EDUCATION OTHER SECTORS *217lV' tnclude Admtntatraton. S4"ce0 & Sochl Afutrs. V~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~' -4A 1/-E7 ~ - L4I - 123 - TABLE 18: EXTERNAL AID: ESTIMATED DIS8LRSEMENTS BY SECTOR AND OBJECTIVE (In CFAF MILLIONS) 1986 1987 % of Sector Sector/Subsector * of e of ProJects Amount Projects Amout 1986 1987 Rl4AL DEVELOPMENT Integrated Regional Development 13 3.519 15 5.425 30% 32% Sectoral Development 15 3.123 18 5.703 27% 33% InstIttitnal Support and Studies 5 844 6 2.489 7% 15% Research 1 252 1 265 2% 2% Crop Protectlon 5 510 3 397 4% 2% Tralning 7 557 6 484 5% 3% Eoulpement 2 86 1 200 1% 1% Productlon and Storage of Seeds 2 438 2 529 4% 3% Llvestock 7 1.342 7 1.418 12% 8% FIsherIes 1 14 1 8 0% 0% Forestry 1 183 1 165 1% 1% Other 2 693 1 17 6% 0% Rural Deveiopment SubtotaI 61 11.540 62 17.100 100% 100% % of Total Investment 34% 26% 34% 26% INDUSTRY AND ENERGY Marvwfacturlng 7 4.889 8 10.575 76% 72% Small and Medlum Industrles 2 828 3 2.104 13% 14% Energy 3 571 3 592 9% 4% Institutional Support 0 4 829 0% 6% ConstructIon Materials 2 77 2 498 1% 3% Industry Subtotal 14 6.163 20 14.598 100% 100% % of Total Investment 8% 14% 11% 22% INFRASTRUCTURE Road and Brldge Construction 5 4.436 5 7.036 31% 34% Road MaIntenance 3 2.467 2 5.610 17% 27% Institutional Support to Road Sector 1 43 2 113 0% 1% Alr Transport 4 2.543 2 2.677 18% 13% Water upply 10 2.033 8 2.997 14% 14% Sanitation 1 491 1 402 3% 2% Telecommunicatlons 1 426 2 795 3% 4% Other 2 1.862 2 1.128 13% 5% Infrastructure Subtotal 27 14.301 24 20.758 100% 100% % of Total Investment 15% 32% 13% 32% - 124 - TABLE 18 (cOnt IMd) 1988 1987 X of Sector Sector/Stbsector * of * of Projects Amount Projects Anut 1986 1987 EDWCATION Prlmary Educatlon 3 1.142 3 1.204 352 24X Secondary E.xatlon 2 263 4 707 8X 14X Hlor Eduatlon 4 592 3 441 18X 92 Teacher 1ralning 7 867 7 2.20B 272 44X Other 2 375 2 442 122 92 Educatlon Sbtotal 18 3.238 19 5.000 1002 1002 2 of Total Investment 10X 7X 102 82 HEALTH Medical Coverage 8 2.783 6 1.541 562 33X Vaccinatlon & Ejldemloiogy Programs 5 970 5 1.066 192 232 Nutritlonal & Rehydratlon Programs 4 112 3 101 22 2X Health Infrastructure 3 162 5 1.031 3X 22X Training 3 164 4 468 3X 10X Institutional and Logistical Stxvrt 7 792 7 522 162 J W Health Subtotal 30 4.982 30 4.731 100X 100X 2 of Total Investment 172 112 162 7a OTHER Telecwmnicatlons 4 459 4 304 112 102 Admnnistration 12 2.958 13 1.338 70X 442 Social Affairs 9 302 8 364 7X 122 ServIces 4 479 3 1058 11X 352 Other Slbtotai 29 4.198 28 3.064 1002 1002 2 of Total Investment 162 9X 152 52 TOTAL FOR ALL SECTORS 179 44.423 183 65.252 - m - 125 - teacher training. Within the health sector, nearly a quarter of the aid will finance vaccinations, and 22 percent will help rehabilitate sector infrastruicture where the needs are acute, as noted in Chapter V; 10 percent will go to training. 291. The inventory nevertheless gives rise to a number of questions. First, it reveals a degree of regional concentration by donor. For example, Italy focuses its interventions in the Kanem and Lac regions, the EDF on Chari-Baguirmi, Germany on Mayo Kebbi and Ouaddai. This pattern of concentration may make it difficult to follow a national approach, especially in the absence of a well-defined development strategy, which is indeed lacking in a number of sectors. Second, the operations in livestock and fishing are rather modest in number or amount -- a fact which probably reflects the donors' hesitation to intervene in sectors where social and ecological questions make the elaboration of projects difficult. Third, a number of on-going projects seem. to have been financed without studying or documenting their economic justification adequately. In the agriculture sector, this is the case with the development of polders at Mamdi undertaken by SODELAC. This project involves the development of 1,600 hectares over a period of five years. The pre-feasibility study, which was prepared before the war and updated by SCET AGRI in 1983, is primarily technical. Neither the SODELAC organizatioii nor its system for collecting water fees has been adequately studied. Nor was it ascertained whether the output of the irrigated perimeters could be marketed and the projected rates of return realized. In short, this project carries considerable risks, and the financial consequiences for SODELAC could be disastrous. 292. Overall, Chad seems to have embarked on a program of rehabilitation and extension of irrigated perimeters (OMVSD, SODELAC, Chari-Baguirmi) without defining a strategy. Thus, the following questions remain unanswered: what are the products which can be produced in the perimeters in a manner suited to cultural practices and which can be marketed profitably; what is the most suitable approach for recovering investment and operating costs; - what is the appropriate organization/management structure, especially from the point of view of minimizing operating costs. Similarly, large investments are allocated to rice cultivation (OMVSD, rice development scheme at Gounou Gaya), which could raise production above Chad's still quite low domestic demand. The rest of the agriculture program consists of a variety of projects which are not tied together by a precise strategy, but this is unavoidable because the definition of a strategy will take time. Some projects include insufficient provision for extension services. In one case, the installation, let alone utilization, of water pumps already in the field remains blocked by the lack of resources, - 126 - 293. Tn the manufacturing sector, the expansion of some activities involves real risks. In the case of SONAPA (dairy and animal feed), the financing of CFAF 500 million by BDEAC represents a heavy burden, given its limited production prospects. The project places SONAPA in an extremely difficult financial situation and hampers present efforts to mobilize private capital (see para. 140). 294. In the transport sector, one donor has allocated US$35 million for the construction of a road that would serve Bol and the Lac region. Soil conditions are extremely difficult, and the construction of several test strips near Bol has not produced a technically satisfactory solution to this problem. In its current form, this project is highly problematic since it will absorb a large share of the funds allocated to the transport sector without making a commensurate contribution to the reduction of transport costs. These funds could be more effectively used in the rehabilitation and maintenance of the priority road network. The Government is conscious of this situation and has asked that, if the project is to be implemented, maintenance of the road for three years also be financed under the project. This continued donor involvement should also ensure that any technical deficiencies discovered will be remedied. 295. In general, the disbursement projections seem very optimistic. In the past, such projections have rarely materialized as foreseen, even though in Chad, in recent years, the donors have had a much bigger role in project execution than in other countries. The road project mentioned above seems particularly optimistic in that regard, since (i) the projected disbursements are quite large by Chadian standards (nearly CFAF 7.5 billion in 1987, equivalent to more than 10 percent of the entire aid/investment inventory), and (ii) physical progress is likely to be very slow due to technical problems. Disbursements of this magnitude and rhythm, even if they proved feasible, would provide little control over the quality of the intervention. 296. Despite the above observations, the inventory of projects seems to conform fairly well to Chad's needs and financial constraints, which severely limit its ability to finance recurrent costs. The inventory is also well balanced with respect to geographic distribution -- and this is particularly welcome. The N'Djamena district will be the beneficiary of just 16 percent of disbursements in 1987; projects in the Sahelian and Sudanian zones will receive 21 percent and 26 percent, respectively; the remainder, and the largest portion (36 percent), will go to "national" projects cutting across regions (Chart 9). The distribution is less even with respect to aid to Education, Administration and Services, but this is largely because of the distribution of population as well as actual facilities such as schools, government agencies, telecommunication and other services -- a factor which influences the allocation of the rehabilitation expenditures and the support actions financed. 297. Information on the terms of the aid are not available for all the projects. The terms do seem, however, to be consistent with Chad's financial constraints. Approximately two-thirds of the projected disbursements consist of grants; one-third consists of loans but come almost entirely from multilateral organizations on concessional terms. Overall, 40 percent of the disbursements in 1987 will come from the AID PROJECTS: ESliMATED DISBURSEMENTS IN 1987 NAnONAL SAHEUAN ZONE DISTRIBUTION BY GEOGRAPHC LOCATiON N'DJAMENA , SUDANIAN ZONE INDUST/ENERGY AGRICULTURE UVESTOCK 2.3% 6.3% Vi 33.1X 71.0% 16. - ' 0.6% / o X .’214% 0.6% 1 38.8% ~ ~~~~~~~~~~~68 16.8% ~~~~~~70.0OX INFRASTRUCTURE EDUCAMON HEALTH 36.4X 36.9% 7.- - - -------- ' 0.5% .,- -6.4X: 14.9% 3 g' I I - 129 - bilateral donors, with France, the largest, providing 24 percent of total disbursements, followed by Italy (11 percent), the United States (6 percent) and Germany (4 percent). The multilateral organizations will supply 55 percent of total disbursements. IDA, the largest contributor in this category, will provide nearly 15 percent, the other UN organizations will provide 11 percent and various European Community agencies another 12 percent (Appendix Table 18). 298. According to the Inventory, 5 percent of the projected disbursements in 1987 are to come from NGOs' own resources. This figure underestimates the quantitative contribution of this donor group, because the inventory did not include projects of less than CFAF 50 million which are typical of the activities of many of these organizations. The figure certainly underestimates the qualitative contribution of NGOs, which is much larger than the figures would suggest (as they very often act as executing agency for some donors) and will, therefore, be reviewed separately -- and differently -- in the next section. The sectoral distribution of the NIGO projects inventoried shows that roughly half of the funds are directed at agriculture, the other half going to health care and industry, mainly small-scale enterprise rehabilitation and promotion. 299. Further information on the various aspects of the aid effort sketched above are found in the detailed tables of the Statistical Appendix. The above review indicates that the aid effort is significant, growing and by and large well-balanced. It would be wrong, however, to expect dramatic change to result from it in the medium term. As we have seen, more than half is focused on rehabilitation and a quarter on support activities. These are appropriate. However, although they are necessary for growth, they are not likely to produce dramatic growth in the medium- term. Furthermore, their impact will depend on the timely and efficient execution of the projects as well as the economic and sectoral policies that must accompany them. Chad faces a number of constraints in that regard, which are beginning to be addressed only now and will take time to overcome; these may also limit the absorptive capacity for new aid (see Chapter VII), D. Economic Management and Technical Assistance 300. State intervention in the Chadian economy is limited, compared to many African countries, Price controls are applied to a small group of commodities, and thlere is no evidence that these have so far resulted in any major distortions in the market. Monetary policy is defined by the Executive Board of BEAC based on a proposal from the national monetary committee, which also monitors the implementation of the resulting policy, estimates the demand for credit in the economy and recommends rediscount ceilings to BEAC. The State granted monopoly privileges to some enterprises in the past (CTT, SOTERA), but it is now beginning to reevaluate the justification for these in light of its policy of encouraging the private sector. The responsibility for monitoring this and other policy initiatives taken since 1984 (described in Chapter II) falls on the Ministries of Planning, Finance, and Commerce and Industry. The State also intervenes in the economy through the public enterprises, although their role has been relatively limited in Chad. - 130 - 1. Public Administration 301. The successful and widespread use of NGOs in Chad partly reflects the weakness of domestic institutions. The problem with the Chadian administration is not its size -- which is appropriately modest -- but the constraints on the majority of administrative organisms. These include: (i) lack of equipment, facilities and vehicles; (ii) lack of staff possessing crucial skills and lack of training mechanisms to impart these skills; and (iii) weak organizational structures. On the positive side, the Administration is "open" and decision-making is by-and-large "transparent"; moreover, channels of communication and decision-making are not excessive or cumbersome like in many developing or developed countries. Unfortunately, with the steady expansion of the administration's activities and the rising complexity of its tasks, bottlenecks have started to appear. To help surmount these and related problems, the donors have financed a number of technical assistance operations. An assistance project for the Planning Ministry, financed by the UNDP and executed by the World Bank has just begun. The objectives of the project are: (a) to strengthen the information base; (b) to institute an investment programming and monitoring system, as explained later; (c) to reinforce the Ministry's capacity for aid coordination; and (d) to assist the authorities in their negotiations with donors, especially regarding the definition of structural adjustment measures. 302. Another important initiative to improve economic management is the assistance being extended by France to the Ministry of Finance with the objective of strengthening, in particular, the Customs administration, the Treasury, and tax collection services. The same team of experts is also expected to assist in preparation of the budget, expansion of budgetary revenues, improvement of Treasury accounts, and implementation of the adjustment measures agreed upon with the multilateral organizations. A broadly-defined project to strengthen economic, macro-economic and development planning, which will focus, in particular, on the Ministries of Finance and Planning, is under preparation by the Bank. Other donors are also extending technical assistance In the area of economic or financial management, but with narrower objectives such as monitoring the disbursement and utilization of their own assistance. Although this type of monitoring benefits the authorities, too, the donors need to give greater attention to enabling the Chadian authorities to assume the responsibility for monitoring. In the last few years, the Government has taken the initiative, without external technical assistance, to deal with a number of complex problems and establish the appropriate administrative systems to resolve them. It is important to avoid stifling the administration with technical assistance which is too heavy and may undermine or erode the enthusiasm of a still fragile administration. 2. Public Enterprises 303. The parapublic sector in Chad consists of 16 mixed-ownership companies of which two are commercial banks and a third is a development bank which is not functioning at present. The State has majority participation in a number of these, including several of the major industrial enterprises reviewed in Chapter IV and the major service enterprises, such as Air Tchad and PHARMAT. Government intervention in the - 131 - operations of these enterprises is minimal, with the exception of COTONTCHAD (see Chapters II and III); both operating and investment decisions are taken at the enterprise level. By and large, the management of these mixed-ownership enterprises is better than those of other public enterprises. The parapublic sector includes also three fully-owned state enterprises (the slaughterhouse of Farcha, SONAPA and SODELAC), 19 government agencies/offices, and six major "funds" (see Appendix Table 26). These entities have a number of management-related problems in common: (a) Many of them suffer from inadequate financial controls and poor accounting practices (this is less so for the mixed companies). A number of the companies have not been audited for a long time and have records which are grossly inadequate. Often, their Boards are weak and do not fulfill their basic roles. (b) The objectives of a number of enterprises are either not clear or no longer respond to clearly defined needs. This is the case with the cottpn price equalization fund (CSPC), the sugar price equalization fund (CSPS), the petroleum fund (FIPP), the hotel association (SHT) and the development bank (BDT) among others. The Government has started to evaluate the role and effectiveness of some of these enterprises. (c) A number of enterprises have cross-arrears with the Government and the private sector. An inventory of these arrears is in progress; when completed, it should be followed by a plan for their liquidation. (d) Since a number of enterprises or offices have limited resource or revenue potential (ONDR, OFNAR), their functions should be reviewed and tailored to their financial resources. 3. Public Investment Programming 304. As noted in Section D, in 1986 the Government prepared an -inventory of aid projects which permitted the preparation of a draft investment budget for 1987, the first in nearly a decade. This budget will be integrated into the existing financial statutes, and a proposal for this purpose is already under preparation. The Government also drew up an investment programming strategy. The key elements of that strategy are: Mi) definition of appropriate project selection criteria which assign priority to projects which support directly productive sectors and have a substantial social impact. Once implemented, these projects will help to increase the country's foreign exchange earnings, reduce foreign exchange costs and raise fiscal receipts, while minimizing recurrent costs; (ii) taking a number of measures to improve both the programming and monitoring of investments, e.g., defining clearly the respective roles of the Ministries of Planning and Finance, and adopting a nomenclature for the budgeting, recording and monitoring of expenditures; (iii) articulation of the importance to be accorded to the development of the private sector and of the need to integrate investment decisions in strategy packages - 132 - involving policy reform, institutional development, and traIning; and, (iv) adoption of a phased program for the preparation and updating of an investment program consistent with the agreed criteria. The next phases of that program are: preparation by mid-1987 of a draft investment budget for 1988; and preparation by mid-1988 of a program for 1988-90, which can be rolled over annually thereafter. This schedule and sequencing will allow the work to expand as the technical assistance team under the Planning Assistance Project financed by UNDP takes its place and becomes operational, and as more sector knowledge is gained and feasibility studies on priority projects are completed. 305. The objective of the above steps should be not just to draw up a good program but to do so on the basis of decisions and arbitrages made by the Chadian authorities themselves, with external assistance of a purely technical or advisory character. This objective should apply to all areas of decision-making, and the donors have a special responsibility in this regard. Chad is generally so highly dependent on external aid -- particularly in certain areas -- that it cannot influence decisions: if budgetary aid arrives, salaries are paid; if it does not, they are not paid. The Government can't afford to refuse aid, but has difficulty reorienting it; often the donors choose, finance and monitor aid projects and programs. It is important to make the Chadian authorities equal partners in these decisions by helping them acquire the necessary training, knowledge, statistical base, and analytical skills. Both donors and the authorities can usefully learn from some of the NGOs in this respect. The effectiveness of many NGOs is largely the result of their participatory approach to decision-making, i.e., their philosophy of working closely with the population affected, acting by trial-and-error and modifying decisions along the way. The approach to technical assistance should recognize that, in the context of Chad, slow progress may be preferable to fast if the by-product is the reinforcement of Chadian skills and self-confldence. 306. The Bank is preparing an economic management project responding to the above needs. Its objective is to strengthen the Government's overall capacity to define and implement its development program and carry out effective economic management. More specifically, the project would help the Government strengthen its internal capacity to monitor economic performance, improve the collection of revenues, develop training programs in areas that might constrain economic development and Government operations, and re-establish the statistical base. The project, which will be cofinanced with the Swiss Government, would also be used to (i) support the development of project ideas and full-scale proposals; (ii) finance the construction of critically needed office buildings for the Ministries of Finance and Planning, as well as equipment and vehicles needed for routine operations; and (iii) provide scholarships for short- and long-term training overseas in key skill areas. It will also support a sample census survey, which will be carried out in cooperation with the Department of Statistics. Both the UNDP-financed project (para. 300) and the French technical assistance project at the Ministry of Finance will benefit from this broader, economic management project, especially through Its training and studies components and the improvement of the data base. - 133 - VII. PROSPECTS AND POLICIES 307. On the basis of the preceding analysis, this chapter examines the prospects of the Chadian economy over the medium-term, and the policies necessary to continue the recovery and place the economy on the path to development. Chad's prospects are subject to a great deal of uncertainty, and projections can do no more than illustrate possible outcomes, given a set of assumptions or preconditions. The assumptions underpinning the projections presented in this chapter are noted in Section A and the supporting tables of the Statistical Appendix. The assumptions include the successful implementation of certain policies and actions, already adopted or agreed to by the Government, which are outlined In Section B. Section C focuses on some additional actions which seem to be called for over the medium- and long-term. The chapter concludes by highlighting what Chad needs to do -- and to avoid -- in order to start a development process which is sustainable and builds upon its national heritage. A. Medium-Term Projet2ions 1. Base Scenario 308. Because of Chad's severe constraints, its level of poverty and its costly experience with the war, a bold approach should be the norm for the Government and the donors with respect to policies and aid, respectively. The base scenario is, therefore, an optimistic one which assumes favorable, rather than "average", developments in a number of respects and good, rather than adequate, progress in dealing with the major constraints, Optimism is warranted, given the achievements over the past two years, the seriousness of the Government, and the recent increases in aid flows. The downside risk is assessed through sensitivity analysis. The scenario, covering the period 1987-95, was developed with the help of the Bank's Revised Minimum Standard Model (RMSM) -- a trade gap model which provides an accounting framework for the national accounts, balance of payments, and external debt. The model uses current price trade projections, pipeline and projected aid flows, and other current and capital account items to calculate the amount of additional external financing needed to sustain the projected level of imports and, implicitly, the projected rate of economic growth. The main assumptions and results are summarized below. 309. Prices. Domestic prices, as measured by the GDP deflator, are assumed to increase at an annual rate of 5 percent. The world price of cotton is projected to improve as assumed in the financial projections for COTONTC1HAD presented in Chapter III. The sensitivity of the rest of the projections to a lower cotton price will be tested in the next section. The fact remains, however, that even under more conservative assumptions about the recovery of the world cotton situation, the direction of cotton prices over the next 7-8 years is likely to be upward in both nominal and real terms (see Annex 2). Largely because of the expected continued recovery of cotton prices, Chad's terms of trade index should improve by 25 percent between 1986 and 1995, as shown below: - 134 - Indices (1977=100) 1986 1989 1992 1995 Export prices 77.8 111.7 126.3 142.6 Import prices 100.1 126.3 134.2 146.4 Terms f trade 77.7 88.4 94.2 97.4 310. Aggregate Output. The output projections were shaped by five major factors or assumptions: (i) the gross under-investment which has occurred since at least 1979: investment was nil or negative during the war; it amounted to an estimated 5.7 percent of GDP in 1985 and 11 percent in 1986; (ii) the inventory of existing projects reviewed in Chapter VI which, given Chad's situation, focuses on rehabilitation of existing Infrastructure rather than the construction of new production capacity; (iii) the expectation that these investments and the Government's medium-term policies will, however, have a positive impact on production with a lag of 3-4 years and that the productivity of capital will improve as the focus shifts from emergency operations (aiming at preventing production from falling) to development-oriented projects aiming to increase production; (iv) the already high level of foodcrop production in 1986 (the base year) as a result of favorable weather; and (v) the start-up of refined petroleum production in 1993. The refinery is estimated to satisfy about 80 percent of domestic demand, or 83,000 m3; at average 1987 prices for petroleum products, this would represent a value-added of CFAF 10.8 billion (US$34 million), or 4.6 percent of the estimated 1993 GDP (without petroleum). Production may actually start one or two years sooner, as indicated in Chapter IV (Section B); it was assumed to start in 1993 for the sake of prudence. 311. The projected growth rates by sector are summarized in Table 19. GDP is estimated to grow at an average annual rate of about 2 percent through 1989, accelerating to 2.4 percent in 1989-92 and 4.7 percent in 1992-95, including petroleum -- 3.2 percent without petroleum. In 1993, because of petroleum production, GDP is estimated to grow by 7.7 percent, falling to 3 percent the following year and 3.3 percent in 1995 (see Appendix Table 34). Thus, beginning in 1991, GDP growth is expected to overtake estimated population growth, resulting in a slow improvement in per capita income. Cotton production is assumed to remain constant at 100,000 tons until 1992and to grow by one percent a year from then until 1995; this modest expansion would enable Chad to maintain its share of world exports (which are projected to grow at that rate). Cereals production is initially assumed to grow by 2 percent annually from t'e 1986 base year, when production was relatively high -- a projection which may be optimistic, as it implies that favorable weather will continue or that its benefits can be replicated through improved cultivation practices. In fact, rainfall through July, 1987 has been sporadic and poorly-timed, leading some observers to predict a moderate decline iii cereals production in 1987. If this prediction proves true, it would probably reduce real GDP growth to less than one percent in 1987 -- making more accelerated growth in following years essential if a two percent average is to be maintained in the 1987-89 period. The projected growth rate for livestock is - 135 - consistent with the weighted reproduction rate of the various species. After the high rate of the post-war reconstruction period, the growth of construction decelerates but remains nevertheless significantly above GDP growth and in line with the trend in aid flows (see below). For all the sectors, including transport, commerce and government services, the projections foresee an acceleration of growth after 1989 with the pace increasing after 1992, not because of petroleum but, rather, because of the increased productivity of capital. Indeed, the five-year incremental capital-output ratio (ICOR) is estimated to decline from 10.6 percent in 1990 to 4.5 in 1995; the productivity of capital, as measured by the reciprocal of the ICOR, would improve from 9.4 percent to 22.2 percent. The investment to GDP ratio over the same period would be 16 to 17 percent. Table 19 - Growth in Aggregate Output, 1986-1995 (percent) Average Growth Per Year 1986-89 1989-92 1992-95 GDP 2.0 2.4 4.7 GDP, excl. petroleum 2.0 2.4 3.2 Value added Agriculture 2.0 2.5 3.3 Cotton 1.7 0.0 1.0 Cereals 2.0 2.8 3.5 Livestock 2.4 2.4 2.4 Manufacturing 0.8 1.6 2.2 excl. cotton ginning 0.8 2.0 2.4 Construction 12.0 8.5 9.0 Commerce/transport 1.8 2.5 3.5 Services 2.0 2.5 3.5 312. External Trade. Chad's merchandise exports are expected to roughly double in value between 1986 and 1995, owing largely to the projected improvement in cotton prices and livestock volume (Table 20). A major adjustment in the composition of exports took place in 1985 when cotton's share fell drastically; over the projection period, it will remain under 50 percent, with livestock accounting for about 35 percent. The structure of merchandise imports is expected to undergo an equally drastic change: first, the projected high level of foodcrop production will be reflected in a decline in food imports by almost 25 percent in nominal terms and 50 percent in real terms from their relatively low level of 1986. Food aid will decline sharply, stabilizing at about 5,000 tons per annum in 1993-95, for use only in special programs such as maternal and infant care or school feeding programs; second, petroleum imports should be reduced by nearly 80 percent once production starts ir 1993. On the other hand, project-related imports (capital goods and related materials) are expected to nearly treble over the 1986-95 period. These trends will combine to increase the trade imbalance by roughly US$100 million to US$206 million in 1995. - 136 - Table 20 - Projected Merchandise Trade (million US Dollars) 1986 1989 1992 1995 Exports, FOB 99 133 163 198 Cotton 43 63 93 Livestock 35 45 55 68 T'extiles 5 5 6 7 Other 16 20 24 30 TEmorts, FOB 1/ 207 295 366 40 Food 24 23 18 19 Other Consumer Goods 54 71 88 107 Petroleum 27 36 44 11 Industrial Inputs 28 47 58 79 Project-Related Goods 54 100 135 156 Other (Unclassified) 20 18 23 31 Trade Balance -108 -162 -203 -205 1/ In 1986, uncategorized imports (valued according to the amount of Chadian banknotes collected in other BEAC countries) have, for the sake of the projections, been distributed among food (20 percent) petroleum (20 percent) and other consumer goods (60 percent). See Appendix Table 12. 313. Aid and Debt. Total external assistance to Chad is projected to increase fro-mUS$148 million in 1986 to US$443 million in 1995, representing an average growth, in nominal terms, of 13 percent a year, more than doubling per capita assistance (Table 21). Despite this rapid growth, by 1995 per capita assistance in 1986 dollars to Chad would still be lower than the recent level of assistance to a number of low-income African countries, none of which have suffered similar devastation. 53/ (The feasibility of this sharp increase of aid to Chad, and the sensitivity of the projections to it, are discussed in Section 2.) The structure of assistance to Chad is expected to change significantly over the coming years, with the share of medium and long-term (MLT) lending in total disbursements rising rapidly from less than a one-fifth at present to nearly half of the total by 1995. This assumes rapidly increasing lending by international and multilateral organizations. Although these are taken to be at very concessional (IDA) terms with respect to both interest and grace period, they will nevertheless cause interest payments to rise steadily. The debt service ratio is expected to remain low compared to most countries, but will nevertheless prove a heavy burden for the fragile Chadian budget. Moreover, as a result of this trend, total debt disbursed and outstanding would rise seven-fold: from around US$200 million in 1986 53/ US$52 for Chad in 1995, compared to US$80 for Gambia, US$70 for Somalia, US$61 for Guinea-Bissau, and US$52 for Senegal in 1984. - 137 - to more than US$1.3 billion, or about 80 percenit of GDP, in 1995. Since nearly all of Chad's existing or projected debt is or will be owed to the multilateral organizations, rescheduling is not a factor in the projections. Table 2] - Projected Aid and Debt Service (million US Dollars) 1986 1989 1992 1995 Official (.rants 124 162 198 243 MLT Disbursements 24 103 150 200 Total, current 148 263 348 443 Total, constant (1986 US$) 148 235 285 327 Per capita, current 29 48 59 70 Per capita, constant 29 43 48 52 Scheduled Debt Service 9.7 8.6 12.5 17.3 Amortization 6.1 3.7 4,1 6.3 Interest 3.6 4.9 8.4 11.0 Debt Service Ratio 1/ 6.7 4.5 5.3 6.1 Total Disbursed Debt 171 430 824 1,354 1/ Based on scheduled debt service. 314. Chad also benefits from net public transfers estimated at US$65 million in 1987, divided as follows: Food aid 17 million Budget support 28 million Other 54/ 20 million These transfers are projected to increase to roughly US$90 million by 1995; it is imperative that the savings resulting from a reduction in food aid, and possibly in military assistance, be channeled to budget support, enabling Chad to increase selected, grossly under-funded current expenditures (Chapter VI, Section B). 315. Balance of Payments. Chad's current account deficit is projected to more than double in absolute terms by the mid-1990s, although it would remain at roughly the current level relative to GDP, namely 23 percent (Table 22). The projected aid flows (net of amortization) should be sufficient to finance the deficit after allowing for a build-up of reserves 54/ Military assistance, French aid to STEE, etc. - 138 - to roughly two months of imports of goods and non-factor services in 1995. Statistically, the projections show a financing gap of about US$16 million in 1992 and no financing gap in 1995. The small gap in 1992 can be financed if necessary, although Chad may not be confronted with this gap because it falls fully within the margin of error, amounting to less than two percent of the sum of the balance of payments debits and credits. Table 22 - Projected Balance of Payments (millions of US$) 1986 1989 1992 1995 Merchandise Balance -108 -163 -203 -205 Non-factor Services (net) -130 -148 -184 -235 Resource Balance -238 -311 -387 -440 Factor Services (net) -9 -11 -15 -18 Net Current Transfer 69 52 50 64 Current Account Balance -178 -270 -352 -394 (% of GDP) (22) (25) (27) (23) Official Grants 124 162 198 243 Net MLT Loans 18 100 146 194 Other Capital Flows 15 0 0 0 Change in Reserves (--increase) 21 -5 -8 -43 Reserves (end of year) 19 31 51 115 Financing Gap (-=surplus) 0 13 16 0 2. Sensitivity Analysis 316. The sensitivity of the above projections was tested by considering three alternative assumptions for cotton, an alternative assumption for cereals production, and two alternative assumptions for aid flows. The assumptions were: (i) a cotton export price 10 percent lower than under the base scenario; (ii) a cotton export price 20 percent lower than under the base scenario; (iii) a cotton production level of 80,000 tons, rather than 100,000 tons, from 1987 to 1992; (iv) a cereals production of 550,000 tons in the base year, rather than 730,000 tons under the base scenario, same growth rate thereafter; (v) a lower level of total aid, assuming that MLT loan disbursements in current terms increase by 7 percent a year - 139 - in the 1986-91 period, rather than 15 percent under the base scenario; (vi) a higher level of total aid, assuming that grants in current terms increase at a rate of 15 percent per annum rather than 7 percent under the base scenario. The sensitivity analysis focused on the impact of these alternative assumptions on growth and the current account deficit. The findings can be summarized as follows: * The lower cotton price assumptions affect mainly the current account deficit but only marginally; they increase it by US$8-15 million, or 2.5 to 5.0 percent on average, each year. * The assumption of lower cotton production causes a similar increase in the current account deficit and, on average, a 1.5 percent per year reduction in GDP relative to the base scenario. * The lower cereals production causes a shortfall in GDP of about 7 percent on average per year from the level under the base scenario. The current account balance is unaffected, however, because the cereals gap is filled through food aid imports which are then counted under current transfers (above the line). * The lower aid assumption decreases both the GDP growth and the current account deficit, and the high aid assumption has the opposite effect, as shown below: Base Low High Scenario Aid Aid Average annual current account deficit (US$ million) 314 290 320 Investment growth (% p.a.) 4.0 1.9 9.5 GDP growth (% p.a.) 1986-89 2.0 2.0 2.0 1989-92 2.5 2.3 2.9 1992-95 4.7 4.1 5.9 317, The overall conclusion that emerges is that variations in aid flows have the biggest impact on production, especially in the later years. This is not surprising because: (i) 65 percent of aid is estimated to consist of development assistance which "drives" investment; and (ii) aid is the biggest sector of the Chadian economy, equivalent to more than 2.5 times the level of export earnings. The above conclusion has three important implications. First, given the importance of external assistance in shaping Chad's future, avoiding fluctuations in it should be as important as its absolute level. Systematic and effective aid coordination and investment programming are essential to achieve that objective. - 140 - Seco_d, in a fundamental way, any future scenario is most sensitive to Government policies because they determine: how much aid Chad needs (especially, but not exclusively, food aid and budgetary support); whether and how easily Chad can obtain aid; and how well it uses it -- which, in turn, influences its ability to mobilize additional aid. Third, in light of the above findings, Chad obviously has an interest in maximizing aid. It should be stressed, however, that an increase in aid of the magnitude projected above will require an extraordinary effort to identify projects which can effectively absorb such assistance, and to establish the institutional capacity needed to implement and supervise these projects; these conditions apply whether the assistance is in the form of project aid or balance of payments support. Although this scenario is feasible, it is less certain that it can be done in the projection timeframe of eight years without exceptional efforts by Chad and the donors. Therefore, until the institutional and micro (project) bases for them take shape, the macro proiections di:cussed above must remain merely illustrative. B. Medium-Term Policy Framework 1. Objectives and Policies 318. As noted earlier, the realization of the above projections is dependent on the implementation of certain policies and actions over the medium-term. These are incorporated in a coherent policy framework prepared by the Government in collaboration with the IMF and the Bank, which was submitted formally to the two organizations on March 21, 1987. The framework covers the period July 1987 to June 1990. This important initiative is expected to form the basis for possible assistance by the IMF under its Structural Adjustment Facility (SAF), 319. The preparation of the medium-term policy framework (MTPF) is a natural outgrowth of efforts underway in Chad since 1983. As noted in Chapter II, following the war of 1979-82, policy-making was dictated by emergency needs and constrained by limited institutional capacity. Priority was accorded to reestablishing the administration, mitigating the effects of the 1984/85 drought, and putting in place programs to deal with emergency needs in the cotton and transport sectors. Priority was also given to the preparation of an interim recovery program which served as a vehicle for taking stock of the situation, setting broad goals, and beginning a dialogue with the donor community on policy options and priorities. The preparation of the MTPF is testimony to the progress that has been achieved in these areas and others, particularly in strengthening institutions and in creating the conditions -- in the economic as well as the political arena -- which permit a vision of a stable future for Chad, Yet, with respect to policies, the situation is still evolving. Although the medium-term framework is embodied in a set a specific measures with target dates, it should not be seen as a static (fixed) list of actions. It is, rather, in the nature of a "rolling" action program. Thus, while it contains actions such as studies to define strategies, once these actions/studies are completed, specific measures to implement the resulting strategies will be integrated into the framework. 320. The MTPF comprises two groups of actions: (i) sectoral policies, especially in the rural sector, and (ii) economic management. They are - 141 - summarized in a policy matrix (Annex 3) which is largely self-explanatory, as many of the measures are already under implementation and have been referred to in preceiing chapters. This section highlights simply the general objectives of these measures and the most important among them. 321. Sectoral Policies. In support of the cotton sub-sector, the MTPF integrates the on-going Emergency Adjustment Program described in Chapter III, but it complements the program with measures which aim to (a) strengthen management and improve financial monitoring through technical assistance and external audits, and (b) adjust prices and production levels as warranted by market conditions. A study has been launched to define mechanisms for setting the purchase price of cotton and the sale price of cotton fiber (to STT), cottonseed oil and other derived products. The elaboration of a system linking the producer price of cotton to world prices is under way. For other aspects of the rural sector (food crops, livestock), the MTPF aims largely at the preparation of sector or sub-sector strategies (currently lacking) with the help of well-focused studies. These measures include redefining the roles of ONC and SOTERA, the two parastatal enterprises which were examined in Chapter III (Sections B and C, respectively). In both cases, the objective is to minimize market intervention, which has proven ineffective and, indeed, detrimental to sub-sector growth. 322. In the transport sector, a key objective is the definition of a sector strategy in two phases: a medium-term strategy, on the basis of on-going studies, by end-1987; and a longer-term strategy, the studies for which are to be started soon. The action program for the sector also includes a reexamination of the role of CTT with a view to ending its monopoly and stimulating competition in the transport industry. With respect to the human resources sector, the program places emphasis oni increasing community participation in primary education, furnishing books and teaching materials, strengthening and expanding teacher training, encouraging the private sector to finance vocational training, and improving the capacity for planning in the sector. 323. Economic Management. The action program for economic management is centered on the programming and budgeting of public investments and the role and management of public enterprises. The measures regarding pblic investments were described in Chapter VI (Section C) and aim essentially at preparing a rolling multi-year public investment program to be implemented through annual investment budgets. The program for public enterprises is guided by both financial considerations (avoiding waste of resources) and economic objectives (avoiding distortions). The actions planned are multifaceted and will be implemented in stages, starting with audits which would lead to measures to improve accounting practices and enterprise management. The action program includes reexamination of the role and justification of a number of enterprises, discussed in the preceding chapters, which have a significant impact either on public finances (such as OFNAR, FIPP, and STEE) or on the economy (such as SOTERA, ONC, and CTT). The Government has stated that it will dissolve non-essential institutions. During the MTPF period, all operating subsidies to public enterprises will be eliminated. - 142 - 324. The objectives of the MTPF in public finance are also to improve the tax system, restrain the growth of expenditures and prevent the accumulation of arrears. Efforts to increase revenues will rely on strengthening tax collection and administration. Measures will also be taken to reduce abatements and exemptions; to introduce a more rational and effective syatem for taxing petroleum products, which could increase revenues substantially; and to improve the buoyancy of the tax system by reducing reliance on "specific" taxes. According to the MTPF, the Government intends to restrain overall expenditure growth through a variety of measures including the application of strict controls such as quarterly ceilings, integration of certain extra-budgetary expenditures into the general Treasury balance sheet, and limiting recruitment of civil servanta. A number of measures have also been adopted to eliminate existing arrears, prevent the accumulation of new ones, and improve external debt management, with respect to both borrowing strategy and orderly debt service payment. 2. Prereguisites for Successful Implementation 325. Despite its complexity, the policy framework outlined above represent no more than a "first step" in addressing Chad's many structural problems. Implementation will depend, above all, on political will -- especially, the will to act on all the policy areas stipulated in the MTPF and to follow up on these actions. Judging by the Government's performance to date, there is strong evidence that the political will is there. Implementation will be affected by a number of factors other than political will. First, the MTPF will stretch the institutional capabilities of the inexperienced, recently reconstituted administration; given this constraint -- and the demonstration effect of successful implementation -- it will be desirable to give priority to completing the actions already started or planned, and executing them well, before adding new ones. Successful implementation will also depend on fine-tuning of actions as experience is gained, which presupposes efficient monitoring and follow-up, as well as close coordination with donors to provide prompt and appropriate technical assistance. 326. Responsibility for implementing and monitoring the MTPF lies primarily with the Ministries of Finance and Planning. Internal coordination will be achieved through a Technical Committee composed of representatives from the Ministries of Planning, Finance, Commerce and Industry, selected technical ministries, the Central Bank, and the CAA. In starting and supporting these efforts, the Government will have the benefit of a number of technical assistance projects noted earlier (Chapter VI, Section D). Other sectoral projects also provide assistance to implement the agreed policies and funding for the studies or audits recommended. 327. To help with the implementation of the MTPF, it is imperative that donors: (a) ensure coordination of financial and technical assistance with other donors and with the Government, (b) participate in the financing of recurrent costs, and (c) maintain a frank dialogue with the authorities on strategies and policies. Last but not least, successful implementation will depend on the quality and effective use of the technical assistance. The donors have the primary responsibility for the first, Chad for the second. - 143 - C. Beyond the Medium-Term 328. Although the MTPF discussed above is ambitious relative to Chad's institutional capacity, it is limited to the most urgent actions in key sectors. In parallel with these actions, the Government will need to take or plan actions in other areas or that go beyond the medium-term. If the work ahead is so heavy, it is largely because the Chadian administration practically ceased to function from 1978 to 1983 and the information base was almost completely destroyed. Moreover, this is a crucial period and a unique opportunity for Chad: in rebuilding its institutions, the actions taken by the Government in the next few years will set the course of the economy for a very long time to come. Although many of the tasks involve the preparation of studies and strategies, rather than the implementation of precisely defined policies, they are no less important, because they represent essential first steps; if they are delayed, so is a rational long-term solution to the problems at hand. 329. Annex 4 contains a list of suggested actions that complement the medium-term framework -- actions to be considered as the implementation of the MTPF advances. The following section highlights the thrust of the actions, the most important among t:iem, and the way they complement the MTPF. 1. A Complementary Agenda 330. The actions proposed in Annex 5 cover not only the sectors which were the object of the medium-term program, but health, industry, energy, and mining as well. They also deal with intersectoral policy questions such as desertification and soil conservation. Within agriculture, cotton occupies again the central place. The measures needed follow-up on the objectives set under the Emergency Cotton Program (Phase I), which were integrated into the MTPF, as well as measures which can form part of a Phase II program. Among the first group (follow-up actions) is a realistic rescheduling of COTONTCHAD's arrears owed to the Central Bank. The financial projections presented in Chapter III indicated that a significantly more liberal rescheduling would be essential for the recovery of COTONTCHAD, the cotton sub-sector and the o-verall economy. Improvement of the management of the sub-sector, COTONTCHAD's in particular, also needs further attention, preferably through a "contrat plan" between the Government and the company. The new questions that would need to be addressed (in the design of Phase II) include the nature of the fiscal regime to be applied to COTONTCHAD once the company's profitability is restored, and the ownership structure of the enterprise. 331. Concerning agriculture other than cotton, three areas merit special attention: (i) research, a necessity for defining a diversification policy and a long-term work program to implement it; (ii) marketing, which is essential for stimulating production and improving food security, as discussed in Chapter III (Section B); and (iii) irrigation, where a policy is needed to minimize fluctuations in production but cannot be properly defined without resolving the question of the viability of large perimeters (a reason why the planned audits and studies of SODELAC, OMVSD and the "casiers" are so important). Two other problems need to be addressed under the agriculture heading, although their - 144 - solutions require multisectoral approaches. They are desertification and soil conservation, for which precise measures are yet to be formulated; an on-going study by CILSS, focusing on the current ecological situation of Chad, may assist in that regard. 332. In the livestock sector, the MTPF focused on institutions (SOTERA, in particular), market organization, and the regulatory environment. While market liberalization objectives are pursued, increasing attention will need to be given to the distribution of drugs, vaccination programs, and pastoral water supply policy, which needs to be reconsidered taking into account nomadic routes and grazing systems. Moreover, in the long-term, Chad needs to seek an export market for frozen meat -- not just animals on-the-hoof -- so that the country can reap a higher value added from its livestock sector. The fishing sector, already potentially quite dynamic in Chad, based principally on Lake Chad and the Chari and Logone Rivers, requires the formulation of a well-conceived strategy. 333. Because of the essentially long-term nature of their prospects, the mining and energy sectors were omitted from the medium-term framework. Mineral exploration, carried out on a limited scale before the war, led to the discovery of potentially significant traces of a number of minerals, mostly in the northern regions. These minerals include platinum, tungsten, gold, cadmium, tin, uranium, bauxite, copper, and iron ore. Exploration needs to be resumed on a systematic basis as soon as the security situation allows. With respect to energy, sector policies will need to be reexamined once domestic petroleum production starts, as the latter will have ramifications for the cost and price structure of STEE, the availability and cost of sub-products, etc. The feasibility study for the refinery will provide the basis for the policy changes that may be appropriate. 334. With regard to industry and commerce, a key question is the long-term viability and growth potential of the existing four large manufacturing industries (textiles, cigarettes, beer, sugar) -- a question which was not addressed in the MTPF. The steps designed to assist the SMEs (lines of credit, management assistance) have so far produced limited results; the development strategies for these sectors need to be clarified and strengthened. Special attention should be given to attracting foreign investors (those that left as well as new ones), adopting a more dynamic policy to promote trade with neighboring countries, and creating a policy environment which reorients parallel market activities toward official channels. 335. Tourism has some potential in Chad. One of the richest national parks of Central Africa, the Zakouma park, is located there, and the Lake and Tibesti regions offer tourism development possibilities, too. However, the high cost of transportation to reach Chad and to travel in it, as well as the shortage of hotels, constitute major constraints. A strategy should be defined as soon as practicable to develop this sector which, before the war, constituted a non-negligible activity. 336. In the transport sector, the need is essentially to shift attention progressively toward the longer term, namely: rehabilitating the secondary road network, developing air transport, improving sector - 145 - management, decontrolling transport tariffs, avid a niumber of more technical objectives (see Annex 4). 337. Longer-term measures for the educationi and health sectors are included in the Complementary Agenda, while actions concerning the urban sector and telecommunications will have to be identified at a future stage, as resources available to Chad expand and after more urgent needs have been met. 338. Concerning economic management, the Complementary Agenda extends the focus from programming and budgeting to medium and long-term planning, underlining the importance of (i) adopting a flexible approach to it -- a three-year revolving plan rather than a five-vear plan -- given the significant expansion of knowledge about the economy and of the Government's options which is expected, indeed planned for, over the next several years; and (ii) developing in-house capability. A priority in this connection is the definition of a three-year program to improve the statistical base, starting with basic surveys. With respect to public finance, the priorities include the implementation of a fiscal reform and other measures to expand the revenue base partly by bringing an increasing part of the iT.formal sector into the official (recorded) economy; improvement of the budgetary process so as to base it more closely on resource availability; and preparation of an action program for restoring civil service salaries to a more realistic, equitable level consistent with financial resources and efficiency. With respect to public enterprises, the measures of the MTPF, which focused mainly on audits and strengthening of accounting, need to be followed by actions, such as concluding "contrat plans", designed to improve management. Last but not least, aid coordination efforts should be continued through the vehicle of the UNDP Round Table as well as through a carefully programmed series of sectoral meetings linked to the advancement of the planning process and the preparation of the studies/strategies in the MTPF and the Complementary Agenda. The next meeting of the Round Table should be held as soon as possible (perhaps early 1988). 2. Toward a Chadian Future 339. The outcome of the many actions/measures in the MTPF and the Complementary Agenda are difficult to predict precisely. Much depends on Chad learning from experience and avoiding mistakes made by other developing countries in the past. 340. Chad needs to avoid, above all, an over-expansion of the Government apparatus (ministries, agencies, offices, funds, and civil service); over-regulation; and projects that involve the creation of new public enterprises. The last-mentioned would not only be inefficient and costly, but would also give the wrong signals to the private sector. Chad should also avoid locking itself into a formalistic, rigid planning system, grinding out five-year plans that rapidly become obsolete, Instead, it should aim at a flexible approach that combines a rolling three-year PIP with periodically revised policy statements that trace out the longer term objectives and sectoral strategies, adjusting to new information as the economy expands. Above all, Chad should not approve projects that are not founded on clearly articulated sector strategies. It will be important to - 146 - avoid the creation or perpetuation of industries that have a large import content without generating export earnings (which is the case now with SONASUT, for example) and projects which have large recurrent cost requirements, even if these are initially financed entirely by donors. The latter would tend to accentuate dependence on aid, which is dangerous, even if the aid is entirely in the form of grants or loans on very concessional terms. In the same vein, Chad should beware of creating a structural dependence on technical assistance, i.e., introducing it without a time-bound program for replacing it through well-focused training, particularly on-the-job training. Last but not least, Chad should avoid an excessive and unmanageable rate of urbanization, given the problem of unemployment, the needs for services, and the high import content of urban consumption. 341. While Chad can usefully be inspired from the experience of other countries, as suggested above, it must take careful account of its own heritage and experience as well as local conditions in defining a future. This seems particularly true with respect to the following five key areas: * Diversification. The preceding chapters have noted the important role that agricultural research and mineral exploration and development can play in the diversification process. Three additional points need to be underlined in this connection: (i) the success of this effort will depend more on private sector Initiative than on government action; (ii) the diversification strategy should be based not only on the introduction of new activities, but also on the revitalization of traditional production such as nieb6 and gum arabica as well as fruit production, the output of which can be significantly increased; and (iii) diversification should be pursued in the context of the regional African market; Chad's economic future depends on that market more than on the national or overseas markets. * National Unity. National unity is an extremely important goal of the Government, but it will be difficult to achieve or will prove fragile without economic integration, i.e., the interlinking of regions through transport, trade and a balanced access to services. The objective should be the participation of the largest number of communities possible in the development effort. This task must be pursued because national unity is not possible without economic integration, and economic integration -- and growth -- cannot be achieved without national unity. * Private Sector Development. As noted in the preceding chapters, the role of the private sector is crucial for recovery and development. Although the tradition of commerce and the reservoir of entrepreneurship that exist in Chad are important assets -- and the resilience of the indigenous private enterprise was remarkable during the period of war -- the revitalization of the private sector has still a long way to go. Creating the conditions for the return of foreign companles and for attracting new companies - 147 - should accelerate rather than thwart the development of the Chadian private sector. Foreign investors would bring capital, extend know-how, and change the perception of risk through their involvement. * Human Resource Development. Chad's health and welfare indicators place it among the "poorest of the poor". In the long-run, the most effective way to increase the population's productivity and welfare is through education. Rather than rely on economic growth to improve welfare, Chad needs to invest in long-term human resource development now, in order to make an acceleration of economic development possible. Although investments in health, education, and other social services may not have an immediate and quantifiable return, they are crucial not only in the implementation of development projects, but in making them sustainable long after the external technical assistance has left. These investments need to be tailored to -- and take advantage of -- the social structures (see below) and aim at increasing production as well as generating the administrative leadership which will be needed in years to come in order to make the most of Chad's resource base, external assistance, and human capital. R Social Structure, Traditional bonds, whether at the level of the extended family or the ethnic group, are still very strong in Chad. In addition to social support, many important economic activities such as credit provision, maintaining seed stocks and livestock herding are carried out through informal systems at the level of the local community. The country was able to withstand the effects of the droughts, largely because of these bonds; they are an extremely important asset in a country where the Government does not have the resources to assume the role of all-giver (Etat providence). Development must be based on using these bonds rather than weakening them, which would cause emigration from rural areas and destabilization of the agro-pastoral sector as well as unemployment in the urban centers. Special attention in this regard should be devoted to livestock raising where lifestyle -- and indeed life itself -- is closely tied to economic activity. * Ecological System. As underlined in Chapter I, Chbd has a fragile ecological system, especially in the Sahelian zone. Although nearly half of the country is desert, according to CILSS experts, desertification is occurring less rapidly in Chad than in other countries of the region; it is nevertheless a very important problem with significant consequences for the agropastoral sector. The problem, moreover, has many facets: deforestation, a major cause of desertification; deterioration of soil conditions, another important problem caused by inappropriate cropping systems and overgrazing; exhaustion of water supply, due to indiscriminate pumping and the inappropriate placement of - 148 - wells; and increase in salinity, especially in the Kanem area. The problems are difficult but not insurmountable if the key parties concerned -- the Chadian authorities, donors, farmers, and herders -- work together. And this they must do, because the physical environment, which has shaped Chad's past more than any other factor, and with which this report opened, will also shape its future. - 149 - Annex 1 Page 1 of 9 WORLD COTTON SITUATION AND OUTLOOK 1. In August 1986, world cotton prices had hit a low of US$0.82/kg. World stocks amounted to 10.5 million tons, equivalent to about eight months of world consumption. According to cotton analysts, a stock level of 4.5 to 5 months' consumption is considered "normal", i.e., sufficient to accommodate trading without exerting undue pressure on prices. By this guide, world stocks were then 35-40 percent above normal.. The long-term growth in world cotton consumption (based on the trend from 1970 to 1984) had been 1.6 percent per annum. In August 1986, it was clear that if consumption continued to expand at that rate, the reduction of excess stock would take a very long time; it would have to depend primarily on adjustments on the production side, since the effects of lower prices on consumption were not estimated to be great. 2. The situation has changed very significantly since then, although these changes did not become apparent until recently because of lags in the compilation of the data. They are reflected in the significant upturn in prices (Chapter II) and have been brought about by unexpected developments in both demand and supply, some price-induced, some weather-induced, and some structural. World consumption expanded by 6.7 percent in 1985/86 (four times faster than the long-term trend) in the current season (Table I.1). World production is estimated -o have declined by 11 percent this season, falling 8 percent below consumption. The decline is attributable to changes in area as well as yields; weather negatively affected both plantings and productivity, although planting decisions responded also to prices and changes in policy or legislation. Significantly, the biggest declines occurred in the United States and China -- the two countries holding the largest stocks -- although smaller crops were also reported in several important producing countries such as Brazil, Australia and India. Since 1984/85 world production has shrunk by 20 percent, U.S. production by 25 percent, and Chinese production by 40 percent, 3. This turnaround has produced a significant reduction in world stocks: U.S. stocks are estimated to decline by about 40 percent this season, and Chinese stocks by 17 percent. The change can be more fully appreciated by focusing on the evolution of "excess" stocks (stocks above "normal" levels). For the purpose of this illustration, normal is defined as the equivalent of 4.75 months of consumption, except for the United States where the legislative target is a more suitable base for comparison. It may be argued in this connection that Chinese stocks do not exert the same pressure on the world price as do stocks in the other exporting countries such as the U.S. It is, therefore, useful to evaluate the excess world stocks with and without China (with respect to both consumption and stocks). The results of these calculations are highlighted below. 4. Excess stocks are in the process of being reduced dramatically in 1986/87: by more that 70 percent in the United States alone and by - 150 - Annex 1 Page 2 of 9 40 percent for the world as a whole (Table 1.1). As a result, by July 1987, excess world stocks should be equivalent to about 15 percent of world production including China, 4 percent excluding China -- or significantly Table 1.1 - World Cotton Situation, 1984/85-1986/87 A" (thousands tons) Cumulative Est. Two-Year 1984/85 1985/86 1986/87 Change (%) 1. World production 19,185 17,183 15,338 -20.1 United States 2,827 2,925 2,132 -24.6 China 6,249 4,137 3,745 -40.1 2. World consumption 15,203 16,233 16,783 +10.4 United States 1,206 1,393 1,526 +26.5 China 3,375 3,810 3,810 +12.9 (Change over (beg.) (beg.) (beg.) (end.) 1986/87) 3. World stocks 5,439 9,371 10,517 8,933 -15.1 United States 604 893 2,035 1,193 -41.4 China 1,691 4,301 4,007 3,321 -17.4 World, including China Normal stocks 2/ 6,020 6,430 6,650 6,650 Excess stocks -581 2,941 3,867 2,283 -41.0 % of normal -8.7 45.7 58.2 34.3 % of production -3.0 17.1 25.0 14.9 World, excluding China Normal stocks 2/ 4,680 4,916 5,135 5,135 Excess stocks -932 154 1,375 477 -65.3 % of normal -19.9 3.1 26.7 9.3 % of production -12.0 1.2 11.9 4.1 United States Target stocks 3/ 870 870 870 870 Excess stocks -266 23 1,165 323 -72.2 % of target -30.6 2.6 133.9 37.1 % of production -9.4 0.8 54.6 15.2 1/ Year beginning on August 1. 2/ Estimated as 4 3/4 months of consumption. 3/ Current legislative. - 151 - Annex 1 Page 3 of 9 less than the average annual fluctuation in world output (8.6 percent). 55/ In short, one bad crop would be sufficient to wipe out the excess stock. The upturn in price lends credibility to this argument: prices would not have risen so fast if stocks had represented a bigger cushion in the eyes of traders. Indeed, as noted in Chapter II, price projections for the next two seasons have been revised upward by about 20 percent. Even after this revision, the February price of cotton, US$1.44/kg, is above the level projected for 1988 (US$1.41/kg). It is possible, indeed likely, that some of the gain in prices is seasonal and may be lost as the 1987/88 crop, which is expected to be larger than the 1986/87 crop, comes on the market, but there is no question that the surplus situation has eased dramatically. This has led the International Cotton Advisory Committee (ICAC) to conclude "Provided production is not unduly encouraged by the improvement in cotton prices, the way may be clear for a reduction in the surplus more quickly than was supposed earlier." 56/ 5. With respect to China, whose policies played a major role in shaping recent developments in the cotton market, the latest reports are mixed. First, according to the ICAC, "the assessment of stocks is especially tenuous and inventories may be lower than carried in current statistics." 57/ Second, under its current five-year plan, cotton procurement is frozen through 1990 at 4.2 million tons; this is 12 percent above this year's crop, but a third less than the 1984/85 crop that caused severe problems for the world cotton economy. Although steps have been reportedly taken to bring output to the target level, no increases above that level are likely. 6. The latest price projections by the commodity projection services of the Bank are given in Table I.2 and the underlying long-term trends in consumrtion, production and trade are presented in Tables 1.3- 1.6. The projections show that the price recovery will continue in both nominal apd r,' terms. In ncrw.iw t Iim:, Iy 19C tU.s c(Itcn price will be just 5 percent below the 1982-84 average -- a period when the market was roughly in balance and stocks were roughly normal -- and by 1995 they will exceed the same average by 42 percent. In real terms, the recovery is expected to be slower: the price should come within 5 percent of the 1982-84 average by 1995. 7. These trends are relevant to all producing countries including Chad. The year-to-vear change depicted by the projections, however, is 55/ Deviation from a 5-year moving average over the period 1965-1985. 56/ Statement of the 45th Plenary Meeting, October 27-November 1, 1986, Buenos Aires, p. 4. 57/ Ibid. - 152 - Annex 1 Page 4 of 9 less meaningful for the inquiiry in Chapter III of this report, which focuses less on annual export projections than on the viability of cotton production and the magyittide of COTONTCHAD losses -- questions which should not le approached on the basis of point forecasts. Two adjustments to the forecasts seem appropriate in this light. First, the projections show a kink (a jump of 12 percenst in prices in 1990, or twice the increase in the previous year) due to a projected annual adjustment in production, following a projected upward adjustment the year before. The experience of the last two years hlas shown the difficulty of projecting annual change (as opposed to the trend), especially three years in advance. That kink should be smoothed for the pulpose of the current illustration. Second, again Table 1.2 - Cotton Price and Exchange Rate Projections Cottonl Price (US$/k ) Projected Exchan e Rate 2/ Constant Culrrent Range 1 (CFAF/US 1982 154 16( 329 1983 184 185 381 1984 180 70 437 1985 132 132 449 1986 89 106 345 1987 110 132 132-141 320 1988 110 141 132-154 320 1989 115 - 154 141-166 320 1990 128 166 154-180 320 1991 135 180 166-193 320 1992 141 193 180-206 320 1993 149 206 193-221 320 1994 156 221 206-237 320 1995 164 2>37 231-243 320 1/ See paragraph 7. 2/ Projected exchange rate used throughout this report. - 153 - Annex 1 Page 5 of 9 experience shows that although the justification of a forecast may be sound, the projection for a given year may mlaterialize a year in advance or a year later. For that reason, it seems app.,priate to use for each year a range consisting of the projections for the preceding year and the following year. 58/ 8. The same type of uncertainty applies to the US$/FF exchange rate. The current projections show a significant weakening of the US dollar vis-±-vis the French franc and the CFA franc (whose parity to the French franc is fixed) until 1989, before beginning a recovery (Table f.2). The uncertainties about the rate are too great to rely on a single forecast. This is especially so because exchange rates can be influenced more directly and quickly than cotton prices through government policies and agreements. We have assumed, as an alternative, that the rate will remain constant at its projected 1987-95 average, namely US$1 = CFAF 320. This is slightly below the rate of CFAF 330 used in the calculations for the Emergency Program but higher than the current (April 1987) rate of CFAF 300. 58/ This is tantamount to considering a variation around the point forecast; but the above method seems more appropriate than taking a fixed percentage because it is more sensitive to the trend in the series. It allows for an error in time rather than in amount. Table I.3: ..- OroN - PRODUCTION BY MAIN COUNTRIES AND ECONOMIC REGIONS -----------------------------------------------------------__----------------__--------------------------__---------------------- ACTUAL PROJECTED GROWTH RATESIA AVERAGES COUNTRIESI -------------------------------------- ECONOMIES 69-71 79-81 84 85 86 87 88 90 2000 61-84 70-84 85-2000 ---------------------------------------------------------------__------------__---------------___________------------------------- -------------------------------------(O000 TONS)------------------------------------ ------(X PER ANNUM)------- INDUSTRIAL 2306 3141 3025 3259 2326 2560 2620 2625 3190 -0.4 0.7 -0.2 UNITED STATES 2225 3004 2827 2947 2130 2300 2350 2350 2800 -0.5 0.4 -0.3 CENTRALLY PLANNED 2150 2745 2354 2612 2450 2670 2665 2785 2980 2.4 1.1 0.9 USSR 2132 2733 2343 2600 2439 2650 2655 2775 2970 2.5 1.1 0.9 DEVELOPING 7765 8517 12813 11155 10224 10470 10510 10915 13240 2.3 2.0 1.1 ASIA 4231 5018 9105 7117 6764 7040 6860 7000 9100 3.3 3.7 1.7 CHINA 2154 2627 5258 4150 3484 4200 4000 4000 6000 5.0 5.7 2.5 INDIA 1088 1314 1250 1615 1611 1490 1500 1530 1850 1.2 0.9 0.9 PAKISTAN 595 730 1020 1150 1309 960 1010 1035 1300 3.0 1.7 0.8 AFRICA 1319 1168 1259 1383 1290 1220 1260 1380 1465 1.2 -0.7 0.4 EGYPT 520 504 400 466 403 440 450 475 500 -0.1 -0.8 0.5 SUDAN 235 116 219 196 170 200 210 250 300 0.0 -3.3 2.9 AMERICA 1622 1646 1699 1859 1450 1540 1680 1770 1800 -0.1 -1.2 -0.2 BRAZIL 684 555 723 926 641 640 725 760 800 0.6 -1.2 -1.0 S. EUROPE 593 685 810 796 720 670 710 765 875 3.4 1.1 0.6 TURKEY 441 488 580 517 491 475 500 540 600 3.3 0.5 1.0 WORLD 12221 14403 18252 17026 15000 15700 15795 16325 19400 1.7 1.7 0.9 MEMO ITEM: INDUSTRIAL & DEVELOPING 10070 11657 15898 14414 12550 13030 13130 13540 16420 1.5 1.8 0.9 ---------------------------------------------------------------------__------__---------------------------------------------_____ Al LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-84)t END-POINT FOR PROJECTED PERIODS (1985-2000); 8I ESTIMATE SOURCES: FAO. PRODUCTION YEARBOOK TAPES (ACTUAL); WORLD BANK, ECONOMIC ANALYSIS 6 PROJECTIONS DEPARTMENT (PROJECTED). (D X O 0 D-t Tab l e 1. 4: COTTON - MILL CONSUMPTION SY MAIN COUNTRIES AND ECONOMIC REGIONS …_________________________________________________________________________________________________________________________________ ACTUAL PROJECTED GROWTH RATESIA AVERAGES COUNTRIES/ -------------------------------------- ECONOMIES 69-71 79-81 84 8S /B 86 87 88 90 2000 61-84 70-84 85-2000 ---------------------------------------------------------------__------------__--------------------------------------------------- -----------------------------------('000 TONS)------------------------------------ - (1---(Z PER ANUW) -- INDUSTRIAL 3824 3029 2945 3080 3246 2960 2960 2845 2570 -1.9 -2.2 -1.2 N. AMERICA 1837 1391 1261 1325 1470 1300 1325 1250 1110 -2.4 -2.9 -1.2 UNITED STATES 1756 1335 * 1206 1225 1300 1250 1275 1200 1060 -2.3 -2.8 -1.0 EEC-10 1110 805 848 910 900 830 815 790 685 -2.9 -2.7 -1.9 JAPAN 751 720 721 690 690 715 710 700 675 0.0 -0.5 -0.1 CEINRALLY PLAIUNED 2361 2568 2635 2645 2765 2785 2700 2735 2915 1.5 0.6 0.7 USSR 1773 1946 1986 1995 2110 2125 2035 2065 2215 1.7 0.6 0.7 E. EUROPE 58S 622 649 630 655 660 665 670 700 0.9 0.6 0.5 DEVELOPING 5658 8574 9594 9955 10194 10455 10700 11335 13915 4.0 3-7 2.3 ASIA 4052 6221 7088 7235 7504 7755 7950 8485 10540 4.1 3.9 2.5 CHINA 1882 3346 3912 3965 4200 4110 4350 4725 5600 5.3 5.4 2.3 INDIA 1160 1301 1471 1560 1600 1570 1590 1625 1800 1.1 1.1 1.0 AFRICA 404 616 648 690 700 715 725 750 915 5.3 3.1 1.9 EGYPT 196 299 274 300 305 310 315 325 380 3.8 2.9 1.6 AMERICA 761 1051 1014 1150 1100 1070 1100 1150 1320 2.6 2.0 0.9 BRAZIL 293 554 560 650 640 595 605 630 760 4.3 5.2 1.0 S. EUROPE 440 685 844 880 890 915 925 950 1140 4.8 4.3 1.7 WORLD 11844 14171 15174 15680 16205 16200 16360 16915 19400 1.8 1.6 1.4 MEMO ITEM: INDUSTRIAL & DEVELOPING 9463 11603 12540 13035 13440 13415 13660 14180 16485 1.8 1.8 1.6 …----------------------------- ___--------- _--------------------------__------_ _-------------------------------------------------- Al LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-84); END-POINT FOR PROJECTED Pp.RIODS (1985-2000). D/ ESTIMATE SOURCES: INTERNATIONAL COTTON ADVISORY COMMITTEE (ACTUAL); WORLD BANK, ECONOMIC ANALYSIS & PROJECTIONS DEPARTMENT (PROJECTED). - Table I.5: COTTON - GROSS EXPORTS BY MAIN COUNTRIES AND ECONOMIC REGIONS …-------------------------------___-----------------------__---_-------------__-----_----------__----_---_------------------------ ACTUAL PROJECTED GROWTH RATEStA AVERAGES COUNTRIES/ -------------------------1------- ECONOMIES 69-71 79-81 84 85 86 87 88 90 2000 61-84 70-84 85-2000 -------------------------------------('000 TONS)------------------------------------ ------(Z PER ANNUM)------- INDUSTRIAL 753 1622 1612 1290 1000 1515 1470 1515 1610 2.2 5.4 1.5 N. AMERICA 719 1540 1497 1097 750 1400 1350 1400 1500 2.0 5.0 2.1 UNITED STATES 719 1540 1497 1097 750 1400 1350 1400 1500 2.0 5.0 2.1 CENTRALLY PLANNED 521 866 651 638 650 635 630 610 765 4.3 2.5 1.2 USSR 505 849 642 631 640 625 620 600 755 4.3 2.4 1.2 DEVELOPING 2673 1998 2060 2276 2575 2450 2480 2555 2755 -0.8 -2.3 1.3 ASIA 487 459 584 828 1291 1245 1240 1235 1185 0.7 0.2 2.4 CHINA 22 8 218 347 450 490 500 520 500 11.9 4.4 2.5 PAKISTAN 174 210 98 435 640 450 440 460 525 -0.2 0.9 1.3 AFRICA 914 621 752 653 614 580 600 645 810 -'0.8 -3.1 1.4 EGYPT 290 163 170 144 150 140 145 140 120 -3.2 -4.Z -1.2 SUDAN 214 124 211 100 135 130 135 160 250 -0.5 -4.6 6.3 AMERICA 927 661 487 610 450 425 430 460 575 -2.5 -3.1 -0.4 MEXICO 250 189 123 77 40 35 35 40 54 -5.6 -3.7 -2.3 BRAZIL 336 13 33 102 60 50 55 60 40 -12.7 -16.7 -6.0 S. EUROPE 345 258 237 220 220 200 210 215 185 1.5 -2.8 -1.1 TURXEY 265 179 101 125 110 100 105 110 90 0.7 -5.5 -2.2 WORLD 3948 4487 4323 4204 4225 4600 4580 4680 5130 0.8 0.6 1.3 MEMO ITEM: INDUSTRIAL & DEVELOPING 3426 3621 3672 3566 3575 3965 3950 4070 4365 0.2 0.2 1.4 Al LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-84), END-POINT FOR PROJECTED PERIODS (1985-2000); B/ ESTIMATE SOURCES: FAO, TRADE YEARBOOK TAPES (ACTUAL); WORLD BANK, ECONOMIC ANALYSIS & PROJECTIONS DEPARTMENT (PROJECTED). 0"0 O l~~~~~~~~~~~~~~~~~ Table I. 6: COTTON - GROSS IMPORTS BY MAIN COUNTRIES AND ECONOMIC REGIONS ACTUAL PROJECTED GROWTH RATESIA ______________________________------______-_--____-------- ----- - - - - - - - - - - - - - - - - - - - I- _-__---___________________-- AVERAGES COUNTRIES/ -------------------------------------- ECONOMIES 69-71 79-81 84 85 86 87 88 90 2000 61-84 70-84 85-2000 -------_--------------------------- - - (o000 TONS)*--------------------------------- (1 PER ANNUM)------- INDUSTRIAL 1980 1655 1690 1745 1673 1704 1670 1653 1553 -1.5 -1.6 -0.8 N. AMERICA 85 63 59 57 55 54 53 51 48 -3.8 -3.1 -1.1 EEC-10 1059 782 825 898 817 830 813 790 685 -2.6 -2.3 -1.8 GERMANY, F.R. 245 172 212 240 235 237 239 224 180 -2.1 -1.6 -1.9 FRANCE 241 187 165 159 155 157 150 147 120 -2.1 -2.5 -1.9 ITALY 222 225 257 257 253 255 258 263 270 -0.1 1.0 0.3 UNITED KINZDOM 157 72 48 54 50 48 46 42 35 -6.9 -8.9 -2.8 JAPAN 733 718 708 681 701 720 710 700 650 0.0 -0.8 -0.3 CENTRALLY PLANNED 783 700 841 829 800 801 813 815 820 0.2 -0.7 -0.1 USSR 224 52 166 187 150 146 143 140 120 -4.9 -8.9 -2.9 E. EUROPE 559 648 613 637 650 655 670 675 700 1.1 0.6 0.6 DEVELOPIPG 1161 2314 1966 1970 1952 2090 2107 2212 2757 4.3 4.4 2.3 ASIA 826 1881 1388 1351 1343 1460 1462 1530 1855 4.8 4.7 2.1 CHINA 217 958 304 288 20 20 20 20 20 6.9 5.9 -16.3 HONG KONG 157 192 218 199 175 177 179 183 200 2.4 1.3 0.0 KOREA, REP. 110 321 353 357 366 375 384 404 S1S 9.8 10.1 2.5 AFRICA 59 70 133 143 173 179 185 198 280 4.5 3.9 4.6 AMERICA 79 88 118 101 96 100 98 99 107 1.2 1.0 0.4 S. EUROPE 196 275 325 375 340 351 362 385 515 3.3 3.7 2.1 WYRLD 3924 4668 4497 4544 4425 4595 4590 4680 5130 0.8 0.9 0.8 MEMO ITEM: INDUSTRIAL & DEVELOPING 3141 3969 3656 3715 3625 3794 3777 3865 4310 0.9 1.2 1.0 ------------------------------------------- ---------------------------------------------------------^----------------------------- (C Al LEAST SQUARES TREND FOR HISTORICAL PERIODS (1961-84)t END-POINT FOR PROJECTED PERIODS (1985-2000): X Bf ESTIMATE SOURCES: FAO. TRADE YEARBOOK TAPES (ACTUAL); 0 WORLD BANK, ECONOMIC ANALYSIS & PROJECTIONS DEPARTMENT (PROJECTED). t~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~. - 158 - Annex 2 Page 1 of 4 NGO COMMUNITY IN TRANSITION 1. The widespread famine of 1984-85 which ravaged populations in Et"{opia and Sudan was averted in Chad on the basis of timely decisions by the Gov-ernment and a well-coordinated response on she part of donors, particularly the international community of Non-Governmental Organizations (NGOs). Faced with an imminent crisis, the Government quickly recognized that it lacked both the manpower and the means to manage the emergency importation and internal distribution of massive quantities of food aid. The Government and major food donors turned immediately to the NGO community for logistical support in receiving and moving food shipments to designated regions throughout the country. The NGO response was timely, efficient and effective. 2. Although the primary goal of food aid distribution was the prevention of starvation, the use of food aid as a development tool was, from the beginning, an important element of NGO drought relief programs. SECALEV was particularly innovative in its approach to food distribution in places where, despiLe the effects of the drought, some production was still possible. By providing minimal extension services and material support along with food aid, rural populations were encouraged to produce some of their own food. This strategy was responsible for keeping people closer to their original settlements during the crisis period thereby limiting the emergence of drought-induced camps around the major cities. In addition to SECADEV's program, CARE, AICF and the United Nations Organizations have been particularly innovative in using food-for-work schemes combined with other material and technical support to help displaced persons resume productive activities in their regions of origin. 3. With the restoration of relative political stability and the alleviation of the drought in Chad, the NGO community, like other donors, is making the transition from ad hoc, emergency relief operations to development-oriented programs. For the NGOs which greatly expanded their operations in response to the crisis, the transition to more traditional small and independent interventions has proven difficult in terms of both the need for staff reductions and increased competition for non-emergency development resources. Several of the major NGOs have been reluctant to cut back successful programs built on external food aid distribution, voicing a desire to play it safe in the face of uncertainties concerning the true size of recent crops and the possibility that food deficit "pockets" may continue to exist. In the first post-drought year of 1985, the three major NGOs involved in food distribution, CARE, IHAP and LICROSS, shifted the focus of their food aid programs to targeted feeding programs such as nutritional feeding (particularly in schools) and food-for-work schemes (mainly road repair and sanitation). While these efforts to use food aid as a development tool have been successful on a temporary basis, the need for such programs should be reexamined in view of recent surpluses in domestically produced food. - 159 - Annex 2 Page 2 of 4 4. Despite some vested interest in their successful food aid programs, NGOs in Chad are for the most part keenly aware of the production disincentives of free food distribution and the only short-term potential of food-for-work schemes. Regional food self-sufficiency has accordingly become the primary goal of their development interventions in the rural sector. In most cases, personnel, infrastructure and transportation equipment originally intended for emergency relief operations have been easily converted to .he types of small, grass-roots development interventions typically associated with NGOs. 5. In view of the Government's lack of project implementation capacity and the difficulty involved in reaching the poorest of the poor in Chad's rural areas, the participatory or people-to-people approach to development of NGOs has proven especially successful in Chal. Aside from encouraging local participation in the development process, the most significant impact of NGOs in Chad has been their focus on experimental and innovative activities. NGOs (in particular CARE, AFRICARE, SECADEV, and AICF) have been primarily responsible for adapting water lifting technologies, improving local access to appropriate cereal and vegetable seeds, increasing the number of growing seasons, expanding plot size and recommending cropping programs suitable for the various soil types in wadis areas. With an eye towards popularizing these technological advances, NGOs (in particular INADES) are also on the front lines of training for local extension agents, project managers and government counterpart agents. In addition to efforts in the agricultural sector, NGOs have mounted innovative programs in the areas of education, health and small-scale enterprise development (see sector chapters). The success of these programs at the grass-roots level and the potential for larger-scale replication underlines the need for increased cooperation between NGOs, the Government and the major donors active in Chad. 6. In addition to the hundreds or traditional, small-scale interventions typically financed with their own resources, NGOs have become an inexpensive and efficient source of administrative and technical skills for several of Chad's major donors. By using NGOs as executing agencies for major integrated development projects in the rural sector, donors such as USAID, the EDF and the Swiss have limited their overhead costs in Chad and, in most cases, have increased the quality of their interventions. The funding of NGO projects has also been, however, a means for donors to circumvent government agencies with limited administrative and technical capacity, in order tc ensure the greatest possible impact on project beneficiaries. Until recently, the bypassing of government institutions has been justified by the need to act quickly and the absence of qualified Chadian personnel in these institutions. Many NGOs now recognize the need to improve the Government's own project implementation capacity, and have begun to develop their own contacts with counterpart agencies in Chad's technical ministries, thereby providing an important informal source of information exchange and skill development for each party. Several NGOs (in particular CARE and OXFAM) have begun to extend training opportunities to government agents. - 160 - Annex 2 Page 3 of 4 7. The proliferation of donor and NGO activities following the war has accentuated the need for improved communication and aid coordination between all parties involved in the development of Chad. In addition, it is important for NGOs to integrate their activities into the broad orientations of Government economic policy. Recognizing the important role that NGOs played during the drought emergency and their potential as an efficient and inexpensive source of technical and managerial expertise, the Government of Chad formalized its relationship with the NGO community in October 1985 with the establishment of an Interministerial Committee for the Coordination of NGO Activities and a NGO Secrettwriat to direct the Committee's activities. Located in the Planning Ministry, the NGO Secretariat's functions include compiling and maintaining a NGO register, planning assistance interventions in collaboration with the technical ministries, assuring that NGO project proposals are in line with Chad's development strategy, and evaluating the inpact of NGO interventions on the economy. The Committee, chaired by the Mir.iste^ of Planning and made up of delegates from the technical ministries, meets periodically to review and approve all new NGO projects. With 41 NGOa currently registered in Chad implementing hundreds of development interventions, the Planning Ministry's participation in the planning and coordination of NGO activities has become an essential element of the Ministry's aid coordination mandate. 8. To date, the functioning of the Committee has been marked by dissention between the Planning Ministry and delegates from the technical ministries which has slowed, and in some cases halted, the approval of new NGO-executed projects. Although the transfer of NGO-executed resources has been momentarily slowed, the institutionalized dialogue between the Planning Ministry and the technical ministries should be seen as a healthy first step towards defining broadly accepted sectoral development strategies. While projects developed by NGOs are often in coope,eation with the key technical ministries, the NGO Secretariat and the Planning Ministry have until recently had little knowledge of project preparation until the finished project document was presented to the Committee for approval. As a key player in the Ministry's efforts to institute public investment programming, the NGO Secretariat is currently expanding its dialogue with NGOs and the major donors at the project identificatior stage. The birth pains of the Committee are a natural consequence of the Planning Ministry's efforts to reassert its coordinating role on aid flows into Chad, and should be commended and supported by the donors at all levels. A recently approved World Bank-executed UNDP project in support of the Planning Ministry (see para. 304) will provide technical and administrative support for the Interministerial Committee's aid coordination efforts. At the same time, a small study should be carried out to evaluate NGO activities in Chad, 9. The Government of Chad, as well as local populations welcome the type of grass-roots development support that NGOs bring to the country. While the number of NGOs registered with the Government has grown each year since the end of hostilities, the total resources for NGO funding has declined with the need for emergency assistance. American NGOs which make - 161 - Annex 2 Page 4 of 4 up one quarter of the NGOs currently active in Chad are also facing potential cut-backs in their programs as a result of reduced budget allocations to USAID and changes in U.S. tax laws which reduce incentives for charitable contributions. As the major funder of NGOs in Chad, USAID has committed, in the 1984-86 period, US$12.8 million in financing for programs executed by CARE, AFRICARE, VITA, and IHAP. With the exception of the VITA small-enterprise development project (see Chapter V), these programs have been mainly integrated rural development interventions focusing on agricultural development, water management, agro-forestry, environmental conservation, health and education. Based on the success of these interventions and the need to limit their owni overhead costs in N'Djamena, USAID approved a US$12.7 million NGO Development Project in 1986 which will provide continued, though in some cases reduced, financing for the above-mentioned NGOs plus one newcomer, ORT. To compensate for an anticipated shortfall in future funding, USAID will require each organization to provide 25 percent of project cost from their own sources. 10. The uncertainty of th ir traditional funding base has motivated most of the major NGOs to seek alternative sources of financing, particularly from multilateral organizations already active in Chad. As a result, the EDF has become the second largest funder of NGO-executed activities in Chad channelling funds to BELACD, SECADEV, MSF, AEDES, and CARE. The potential for expanded cooperation between NGOs and multilateral donors should be a principal objective of future aid coordination effc .ts on the part of the Government, the major donors and the NGOs themselves. POLICY HAIRIX. 1987-1990 Objectives/Measures 1987 1988 1989-90 I. AGRICULTURE: Cotton A. Reduction of costs and restoration of profitability to the sector in the medium term 1. Completion of the 1985/86 COTONTCHAD audit. July 2. Completion of management audit. Dec. 31 3. Agreement on tne reform program for COTONTCHAD following the management audit. Mar. 31 4. Review of reform program implementation. June (89) 5. Development of a mechanism, and its implementation schedule, for determining producer prices for the crop year which will take social and economic effects into account. Aug. 31 6. Establishment of a system for adjusting the sale price of cottonseed oil in order to ensure the disposal of oil and unprocessed seed stocks. Aug. 31 7. Establishment of a system for the regular adjustment of the sale price staple cotton to the STT (textile company) in accordance with the world price. July 31 8. Redefinition of the role and objectives of CSPC (Cotton Price Stabilization Fund). Aug. 31 II. AGRICULTURE: Non-cotton A. Definition and execution of a sectoral strategy 1. Studies of the main sectoral questions, including: (a) diversification and development of agricultural production (b) processing and marketing of livestock products; (c) reforestratIon and preservation of natural resources; and (d) rural credit. Aug. 31 2. Definition of development strategy for the Agricultural sector. Aug. 31 0 POLICY MATRIX. 1987-1990 1987 1988 1989-90 B. Promotlon of food crop production and marketinm 1. Re-examination of the role of the Natior-I Cereals Office, with a view to limiting Dec. 31 or eliminating direct intervention in purchaslng and marketing of local cereals. Dec. 31 2. Formulation of an appropriate food aid policy. III. LIVESTOCK: Improvement of revenue from the sector 1. Simplification of rules and administrative procedures for marketing and exports. July 31 2. Redefinition of the role of SOTERA, with consideration given to the possibility of abolishing its monopoly on exports. Sept. 31 IV. TRANSPORIT Definition of a medium-term strategy 1. Preparation of a draft medium-term sectoral strategy for discussion at the r*eeting on the transport sector in September 1987, to be finalized in December 1987. Aug. 31 2. Execution of the following sectoral studies: (a) structure and efficiency of the institutions in the sector; (b) recovery of costs of road maintenance; and (c) the transport sector (trucks and barges). 3. Conclusion of a flnal agreement between donors and the Government on the defin5lion of the high-priority road network for rehabilitation and maintenance. Sept. 30 4. Review of the role and objectives of the CTT (truckers' cooperative) and prerwntation of a plan to reorganize it with a view to abolishing its legal monopoly. Dec. 31 5. Presentation of a plan for the rational use of the OPE (UNDP) truck fleet, including partial sale or mothballing if necessary. Sept. 30 Ie , x 0 POLICY MATRIX, 1987-1990 1987 1988 1988-90 V. Human Resources: A. Enhancement of preparatory training and of teacher training on a large scale 1. Review of existing programs and revision of teacher profile. Dec. 31 2. Definition and preparation of a more extensive and innovative teacher training program. June 30 B. Design of a well-adapted vocational technical training station 1. Review of a vocational/technical training system and of incentives to encourage private sector financing and implementation of vocational/technical training programs. Dec. 31 C. Strengthening management and planning of the educational system 1. Formulation of a short-term program for obtaining study scholarships abroad to meet the the most urgent needs for skilled personnel and staff for the Ministry of National Education. July 31 2. Submission to IDA of training program for staff of Ministry of National Education. July 31 3. Identification of constraints in the sphere of statistical information, and definition of a program to alleviate them. July 31 VI. Government investment program: Creation and implementation of an annual government investment program 1. Preparation of a public investment program for 1988. Nov. 30 2. Preparation of a three-year government investment program for 1988-90. June 30 VTT. Public enterprises and entities: Reduction of size and improvement in efficiency of tile parapublic sector > 3. Preparation of the list of public enterprises and entities for financial and/or management audit, or, where appropriate, introduction of an accounting system and an Lo execution schedule. July 31 as' POLICY MATRIX, 1987-1990 1987 1988 1989-90 2. (a) Completion of seven initial audits or introduction of accounting systems in the entities referred to under 1. July 31 (b) Completion of nine audits or introduction of accounting systems in the entities listed under 1. July 31 (c) Review of the list of public enterprises and entities for financial and/or management audit, or, where appropriate, introduction of an accounting system. Oct. (89) (d) Completion of audits or int-oduction of accounting systems in all entities referred to under 2 on which action is still pending. June (90) 3. Review of the role and objectives of the following entities: (a) Petroleum Products Intervention Fund; and (b) Sugar Price stabilization Fund. Dec. 31 4. increased resources fox OFNAR (National Highways Office). Sept. 30 5. Adoption by the STEE (National Water and Electricity Company) of a financial restruc- turing plan, including improvements in collection. Sept. 30 6. Review of the implementation of the financial reorganization plan for the STEE. Sept. 30 7. Preparation of a program to re-examine the role and efficiency of the other public enterprises. June 30 8. Completion of an inventory and preparation of a plan to eliminate cross-arrears between the public enterprises and the Government. Sept. 30 VIII. Fiscal Policies: Limitation of the ratio of the central government deficit to GDP to 2.6 percent (excluding externally financed investment expenditure) in 1987-90. --- -----1987-90----------- A. Current budget a. Revenue: Improvement of collections 1. Reduction of exemptions and exonerations, particularly in the case of imports. ------------1987-90----------- 2. Inclusion of more informal sector transactions. ------------1987-90 ----------- 3. Reduction of reliance on specific taxes, adjustment of administrative fees and charges. ------------1987-90-------___ POLICY MATRIX, 1987-1990 1987 1988 1989-90 b. Expenditure: Limitation of increase in expenditure to a strict minimum while permitting a return to normal operations by government departments. 1. Slight increase in current expenditure other than external debt service in 1987, and limitation of the rate of increase of such expenditure to a level equivalent to the rate of inflation in 1988-90. 1987-90 2. Expenditure controls to be tightened by impToving the system of quarterly ceilings for N'Djamena and semi-annual ceilings for the provinces. 1987-90 3. Strengthening the system for monitoring outlays at the commitment and disbursement stages. Dec. 31 4. (a) Completion of studies on the integration of extrabudgetary operations and special funds into the Treasury's general balance sheet. Dec. 31 (b) Integration of these operations. Jan. 31 5. Completion of civil service census. July 31 6. Limitation of civil service hiring. Establishment of wage bill ceilings under the annual programs. -----1987-90----------- 7. Freezing of real wage and salary scales. 1987 8. New recruitment to remain subject to prior authorization from the Ministry of Finance and Computer Services. ------------1987-90----------- c. Arrears: Avoidance of further arrears and reduction of external and domestic arrears. 1. Strengthening the system for monitoring expenditure. Reduction of domestic and external arrears by cash payments and rescheduling. Provision of sufficient resources to CAA to enable it to meet debt service payments. ------------1987-90----------- 2. Reduction of cross-arrears between Government and public entities. ------------1987-90----------- x 0 3. Establishment of a timetable for the reduction of domestic and exteriial arrears. Sept. 30 POLICY MATRIX. 1987-1990 1987 1988 1988-90 B. Government Capital Bud8et a. Implementation of a capital budget. 1. Promulgation of the Finance Law on the capital budget. July 31 2. Presentation of the draft capital budget for 1988. Nov. 30 C. External debt 1. Introduction of an operational system for monitoring the external debt. All borrowing requires prior approval by the Minister of Finance and the Autonomous Amortization Fund. July 31 2. Completion of bilateral negotiations on rescheduling of external debt. Dec. 31 IX. Banking System: Improvement in the liquidity of the system. 1. Draft of a plan for ending the moratorium. Dec. 31 Note: Specific dates indicate the deadline for the entry into effect of the measure(s) in question. The year(s) referred to indicate the the period during which the measure will be applied. D>l oou A COMPLEMENTARY AGENDA Objectives and Actions Comments I. AGRICULTURE: COTITON A. Arrears of COTONTCHAD 1. Implement agreement between COTONICHAD and BEAC regarding downpayment. Depends on flexibility of EEC on the use of STABEX funds. 2. Renegotiate the rescheditling conditions of BEAC. This should be done earlier, if possible, with the help of an objective assessment of COTONTCHAD's ability to pay. B. Institutions Involved with Cotton Sector 1. Sign "contrat plan" with COTONTCHAD covering a system for deternmning The "contrat plan" system will allow better follow-up of annually the price structures for cotton-related operations. COTONTCHAD's activities and avoid slippage in management. 2. Separate COTONTCHAD's oil and soap accounts from those of its cotton This will permit assessing the profitability of COTONTCHiAD's operations. subsidiaries. 3. Re-examine the ownership structure of COTONTCHAD. The .xternal assistance extended under the Emergency Program has resulted in a disproportionate increase in Government co equity in COTONTCHAD; there is a need to achieve a more even ownership distribution. 4. Redefine the fiscal system applied to COTONTCHAD. When COTONTCHAD's profitability is restored, Its contribution to Governmont revenue should resume on the basis of a revised system. 5. Define a system for settling the cross-arrears between COTONTCHAD and the Government. 6. Redefine the interventions of IRCT and ONDR. This redefinition will be needed as soon as the second phase of the cotton program is defined in order to adapt IRCT and ONDR interventions to the policy objectives of that phase. xC p.-: (D0 _ A COMPLEMENTARY AGENDA Objectives and Actions Comments 7. Define a policy for increasing animal traction cultivation. The animal traction program was successful before the war; it should be redefined and extended. 8. Define a policy to develop agricultural credit. Concerns food crops as well. II. ACRICULTURE: OTHER THAN COTTON A. Research: Define a strategy coherent with the overall sector strategy. Should be designed according to the new orientations cefined for the cotton sector (see point I.B.6 above). B. Marketing 1. Carry out study on possibilities for marketing, particularly for Traditional crops that seem to have guod export prospects. export, gum arabica, jojuba and ni4bd. 2. Carry out study on different approaches to organizing security stock. No secur4.ty stock policy exists at the present time in Chad. 3. Develop a strategy for food marketing in Chad. a' 4. Define new institutions or reorganize existing institutions dealing with food trading in accordance with the strategy. C. Irrigation 1. Complete audits of SUDELAC and OMVSD. Audits of public enterprises are part of the MTPF. 2. Complete study of cost recovery systems for SODELAC, OMVSD, and the Large-scale irrigation has not been efficient up to now in Chad. "casiers". The intrcduction of new management and cost recovery systems seems essential in the existing projects. D 4 > cQ Ph f A COMPLEMENTARY AGENDA Objectives and Actions Coaments 3. Complete assessment of all irrigated projects undertaken in Chad. 4. Define a strategy and action plan for irrigation. 5. Define a strategy for extension services including institutional This should cover not only irrigation projects but the entire development, training, financing needs, and most suitable agricultural sector. interventions. D. Fisberies: Define a sub-sector strategy. Fisheries is a very promising sector but very few actions to promote it have been undertaken so far. E. Desertification in the Sahelian Zone 1. Assess the regions wbere urgent action is needed. 2. Design reforestation policy, including the strengthening of forestry protection. 4. Define an action plat to fight desertification (institutions involved, coordination, financing needs). F. Soil Protection in tha Sudanian Zone 1. Assess regions where soil degradation is most severe. These actions should be ccordinated with IRCT and the Cotton Program. 2. Define action plan to fight soil degradation. III. LIVESTOCK A. Input Supplies 1. Modifcation of MAGAVET's status to abolish its monopoly with Measures would not apply to toxic drugs. regards to importation and distribution of drugs. 2. Prepare plan to strengthen MAGAVET's distribution network and 4- management. S- A COMPLEMENTARY AGENDA Objectives and Actions Coments 3. Define medium-term vaccination program. No such program exists at present. 4. Implement vaccination program. After discussion with donors in 1989. 5. Introduce users' fees for vaccinations, specifically for non-epizootic This is Fart of a cost recovery policy for input supplies under diseases (antract, black leg) with limited externalities. the IDA Livestock Project in preparation. B. Pastoral Water Installation 1. Prepare a national pastoral water policy. The policy should encourage increased user participation ln costs and in management of water points and Involve the private sector in water point maintenance. 2. Evaluation of experience wlth policy. C. Institutions: 1. Simplify fiscal and administrative regulations. Should be linked to overall fiscal reform. 2. Review land tenure legislation. "a IV. MINING AND ENERGY A. MTn 1. Assess the results of exploration work carried out before the Before the civil war, exploration showed evidence of a large civil war. variety of mineral deposits. 2. Design a plan for further exploration. B. Energy 1. Reassess the energy sector after completion of the feasibility A sector strategy, which is needed for the long-term, has to be study for the refinery. closely linked with the refinery project under preparation, the STEE rehabilitation program, and the forestry strategy. 2. Define an energy strategy Including new tariffs for electricity, prices Preparation of the strategy will probably require a study on for oil products and sub-products from the refinery, and development of petroleum pricing. 4 export capacity. alh A COMPLEMENTARY AGENDA Objectives and Actions Comments V. INDUSTRY AND TRADE A. Industrial Environment 1. Carry out study of diversification possibilities in areas such as A number of small-scale, agro-processing projects have been light manufacturing and agro-processing. started, but there is a need for a fresh, systematic assessment of possibilities in this sector, as well as other diversification options. 2. Define policy for attracting foreign private investment. By 1990, the prospects for attracting such investments should improve significantly. B. Large-Scale Tndustries 1. Assess long-term viabillty and growth potential of the four largest For those industries which are not viable, same studies should industries (exc. COTONTCHAD): SONASUT, SWT, BdL, and MCT. define plans for reorienting production. C. Small-Scale Industries 1. Define, in coordination with donors, a strategy to increase Creation of a committee composed of representatives of VITA, availability and use of credit. the two commercial banks, the CCCE, EDF, IDA, OPIT and Ministry of Commerce and Industry may serve to generate ideas. 2. Define a policy for training SME managers. Responsibility could be assigned to OPIT. 3. Carry out survey of all small- and medium-scale enterprises This survey was started but could not be completed because in Chad. of a lack of financial means. 4. Review experience with new Investment Code with respect to The new investment code will have been implemented for four promotion of SMEs. years in 1991. t0 0 tD A COMPLEMNEiTARY AGENDA Objectives and Actions Comments C. External Trade 1. Assehs the consequences of UDEAC membership on external trade By 1990, Chad will have fully harmonized its tariffs with those and public finance. of UDEAC. 2. Conclude commercial agreement with Nigeria, especially with Will depend also on the progress made by Nigeria in implementing a view to diminishing reciprocal administrative barriers and its structural adjustment program. other constraints to trade. 3. Explore markets for Chadian goods (esp. livestock products, beer, This should be done systematically, with the help of t.echnical and cigarettes) in neighboring countries (esp. Sudan, CAR, assistance. Cameroon, and Nigeria). D. Tourism 1. Define a strategy for developuent of tourism. This strategy will be mainly based on the rehabilltation of the National Parks. VI. TRANSPORTATION A. Priority Road Network 1. Establish appropriate standards, by region, as a function of soil conditions and expected traffic. B. Secondary Road Network 1. Define the network to be rehabilitated. The secondary network should lirk zones where agricultural production is prouising to the priority network. 2. Carry out rehabilitation of network. Xx .5- 0 A COMPLEMEN!TARY AGENDA Objectives and Actions Comnents C. Institutions 1. Create a national laboratory for construction and public works. This is essential, considerint the very difficult technical conditions for road-building in Chad. 2. Prepare a plan for increasing OFNR's resources and the participation of private contractors in highway maintenance. 3. Define a better system for recovering part of maintenance costs. 4. Preoare a plan for the reorganization of the transport sector, Based on the findings of the IDA-financed transport study and including the decontrolling of transport tariffs. with the objective of liberalizing the sector. 5. Carry out a study of the domestic construction industry. This study should aim to define concrete proposals to strengthen this sector, which is essential for the rehabilitation process. D. Air Transportation 1. Carry out a study of the sub-sector. Could be undertaken in conjunction witb the preparation of a _ planned IDA transport sector credit. 2. Establish a program for cost recovery and maintenance of airports. VII. EDUCATION A. EquipMent Buildings and Institutions 1. Define a policy for school construction and school equipment. end-1988 This policy should focus on participation of the private sector (local associations or parents and entreprises) to assume some costs of buildings and equipment. - 0 A COMPLEMENTARY AGENDA Objectives and Actions Comments 2. Assess the public institutions in education and define a The Rehabilitation Program will have to define the needs in rehabilitation program for them, personnel and equipment. In particular, a better balance between recurrent costs and personnel costs will have to be achieved at the budgetary level. B. Educational Strategy 1. Elaborate an overall strategy for the education sector. An IDA financed project under preparatic- will belp the Government to define this strategy. VIII. HEALTH A. Strategy: Reevaluate and adapt various components of a sector strategy to ensure coherence and compatibility, and to determine an appropriate resource allocation among competing priorities. B. Coordination: Improve the aid coordination structures at the Health Aid coordination in health has always been a sensitive issue Ministry. because of the large number of donors and NOOs involved in this sector. C. Training: Develop a program to improve academic and in-service training of medical personnel. D. Pharmaceutical Supplies: Define an appropriate marketing policy for Should aim at both increased access to drugs and cost recovery. medecines and other pharmaceutical products. IX. PUBLIC ADMINISTRATION/MANAGEMENT A. Planning 1. Adopt an approach to planning. The most appr"uriste approach vwov1d be one whicb continues the three-year PIP's but involves the periodic preparation of a 2. Define a work program for preparation of the first document long-term (10 year) perspective framework. desired (see next item) and the institutions responsible for it. D X 3. Prepare a first long-term perspective (1990-2000) framework. A COM4PLEMENTARY AGENDA Objectives and Actions Comments 4. Continue to "roll over" 3-year PIP's6 annually. B. Statistics 1. Prepare a three-year action plan program to improve the statistical Coild be done with the help of a Comittee that could assume a base. coordination function once implementation starts. 2. Produce an adequate data base and a system for regular updating. T.A. will be provided through the UNDP-financed World Bank-executed project in support of the Ministry of Planning. C. Aid Coordination 1. Continue Round Table process but link it to the advancement of the planning process above. 2. Hold next Round Table meeting. 3. Hold sectoral donor meetings. Such meetings are particularly needed in transportation, education,01 health, livestock, and agricultv. e. D. Fiscal Management 1. Complete a study of the fiscal system. Study will be financed under the IDA Technical Assistance Project in preparation. 2. Define a program to simplify the tax system. In close cooperation with the IMF. 3. Update procurement procedures for government purchases. T.A. being provided under UNDP-financed World Bank-executed project. 4. Assess the feasibility of increasing civil servant salaries, In clcse cooperation with the Bank and thp IMF. and define a timetable for progressively restoring salaries to a level ccnsistent with cost of living and administrative efficiency. E. Public Enterprise Management 1. Sign "contrat plans" with more enterprises. These measures are closely linked to the program for public | enterprise development defined in the MTPF. X 1.0 A COM5PLEMENTARY AGENDA Objectives and Actions Comments 2. Extend the system of "contrat plans" to the other enterprises. 3. Implement the recommendations of the management and financial audits concerning enterprise dissolutUon, privatization or reorganization. -I x 01 0l - 178 - Annex 5 Page Iof 4 BIBLIOGRAPHY/BIBLIOGRAPHIE Gelieral Economic/Economie ggngrale Government of Chad, Projet de lan intdrimaire (1986-1988), Ministere du plan et de la recoxistruction nationale, decembre 1985. __ _,___ Budget d'investissement Ann6e 1987. Ministare dglggug A la Prgsidence charge du plan. Budget d'investissement revision: fevrier 1987. ________* Budget 1987, Loi de finances, Ministare des finances et de linformatique. Budget 1985 et 1986, Loi de finances 1985 et 1986, Ministare des finances et du materiel. _Analse statistique des aides extgrieures au Tchad, Ministare du plan et de la reconstruction nationale 1984. _______* t "Tchad: situation 6conomique au 31-12-84", Ministere du plan et de la reconstruction nationale, 1984. _ 9______* "Bulletin de statistique", Ministere du plan et de la reconstruction nationale, 2ame, 3bme, 4eme trimestres 1983. ______ "Statistiques du commerce extgrieur", MinistWre du plan et de la reconstruction, Ann6e 1983-1984-1985. ________, Conseil national du credit. Rapport 1983/1984. Compte de la nation, 1973, Minist6re du plan, 1974. R ecensement de la population, 1968. World Bank, The Econm of the Republic of Chad, Report No. 8F0071, March 1968. _ The Current Economic Situation and Prospects of Chad, Report No, AW-24a, April 9, 1971, Chad's Economic Development: Constraints and Potential, Report No. 75a-CD, July 2, 1973. _____ Reublic of Chad, Economic Memorandum, Report No. 1340-CD, June 30, 1977. - 179 - Annex 5 Page 2 of 4 International Monetary Fund, "Chad: Short-Term Improvements in Tax Administration", December 1984. _ "Chad: Study o' the Budget System and Treasury Operations", March 1, 1985. C.C.EO, "Rapport annuel sur la situation 4conomique en Republique du Tchad", 1984, 1985, 1986. Banque des Etats de l'Afrique Centrale, BEAC Bulletin: Etudes et Statistigues. Cabot, Jean et Christian Bouquet, Le Tchad, Presses Universitaires de France, 1978. Agriculture/Agriculture Government of Chad, Le projet Sud-Tchad Etude d'evaluation des fili6res coton et arachide, Ministere de l'agriculture et de la lutte contre les calamit6s naturelles, Minist6re de la coopgration, octobre 1980. Projet de developgement rural, zone soudanienne, MinistAre Vdftat charge du developpement rural, fevrier 1982. Reunion de suivi de la table ronde de Gengve de dgcembre 1985, - Ministgre llgug A la Pr6sidence de la R6publique charge du plan, d6cembre 1985. _ Etude de la fili6re coton. (Deuxieme phase) Comit6 de reflexion sur la filiere coton. PNUD, BIRD, juin 1986. World Bank, "Toward Greater Food Security in the Sahel: An Overview of Issues and Prospects", AGREP Division Working Paper No. 15, by T. James Goering, March 23, 1978. , "Chad: Agriculture Sector Memorandum", January 1977. ________ "Programme d'intervention de la BIRD au Tchad, Secteur Agro- Pastoral", November 1983. Report and Recommendation of the President of the IDA to the Executive Directors on a Proposed Development Credit of SDR 12.8 million to the Republic of Chad for an Emergency Cotton Program, June 1986. Report and Recommendation of the President of the International Development Association to the Executive Directors for a Proposed Development Credit of SDR 14.5 million to the Republic of Chad for an Agricultural Rehabilitation Project, March 1987. - 180 - Annex 5 Page 3 of 4 CILSS, e productlons v6g6tales au Tchad, 1984. FAO/CP, Projet de d6velopRement du secteur agricole. Mission d'identlfication. Aout 1986. FAO, Etude pour la definition et l'6laboration d'une politique c6rfltliere au Tchad: Role de l'ONC. October 1986. USAID, Irrigatio Develoement options and Tnvestment strateg the mid-1980's, University of Rhode Island, October 1985. USAID/FVA, Evaluation of the A'rican Ema,gency Food Assistance Pro&ram, 1984-85: Chad. July 1986. SEDES, La commercialisation des cereales au Tchad, 1985. Livestock/Fislheries/Elevage/P~ch,es SEDES, Approvisionnement en viande de I'Afrique Centrale, 1971 "Inventaire qualitatif et quantitatif du cheptel tchadien", septembre 1976. IEMVT, "Etude sur 161evage des petits ruminants au Tchad', Government of Chad, "L'6volution du cheptel tchadien et sa production", Ministere du plan et de la reconstruction, juillet 1983. FAO/CP, National Livestock Project, preparation report, February 1987. ORSTOM, Le commerce du poisson au Tchad, 1968. Other Sectors/Autres secteurs World Bank, Report and Recommendation of the President of the International Development Association to the Executive Directors for a Proposed Development Credit of SDR 17.1 million to the Republic of Chad for a Highway Maintenance Project, June 1986. USAID, Sectoral Analysis of Small to Medium-scale Industries and Development Opportunities in Chad, November 27, 1984. PVO Development Initiatives, June 1985. BEICIP, Etude de Prg-faisabilit6 d'un Projet Pgtrolier au Tchad, janvier 1986. - 181 - Annex 5 Page 4 of 4 African Development Bank, Health Services Development in the Republic of Chad, April ]986. Government of Chad, Etude pr6liminaires des problemes de la sante au Chad, Ministere de la Sant6 Publique, 1986. Dodge, Anne-Laurence and .lohn Simmons, Chad: C. Survey of the Primary Education Sector (prepared for the World Bank), December 30, 1986. Whyche, Oren E. Chad: An Assessment of the Private Sector (prepared for the World Bank), January 1987. - 182 - STATISTICAL APPENDIX Table Title Page No. 1 Gross Domestic Product by Sector, 1977-1986.....................*** *** 184 2 Change in Gross Domestic Product by Sector, 1977-1986......,... . . 185 3 Rainfall, 1970-1985 ............... .. . . 186 4 Agricultural Production, 1983/84 to 1986/87 ...... 0*000*0000 187 5 Cereals Production Per Capita, by Region, 1984-1986.............. 188 6 Cotton Production, 1950/51 to 1986/87....,,.,....***......,,.*.., 189 7 Tobacco, Sugar Cane, and Groundnut Production 1983/84 to 1986/87.... 190 8 Livestock Herd, 1945-1985 ... ****. ,., .,..*. 191 9 Operations of Major Industries, 1983-1987.,.,................ 192 10 Industrial Production, Volume, Indices and Annual Percentage Change, 1975 and 1983-1986 ........................ . ...... .. . . 194 11 Operations in the Cotton Industry, 1982/83 to 1986/87 ... .,..... 195 12 Merchandise Trade, 1982-1986 ....,. ........... .....e.... 196 13 Composition of Merchandise Imports, 1982-1986....00....#.... 197 14 Trade in Services, 1982-1986 ........................... ... 198 15 Balance of Payments, 1977 and 1982-1986, in CFAF Francsn......... 199 16 Balance of Payments, 1977 and 1982-1986, in US Dollars........... 200 17 External Debt, Debt Service, and Accumulated Arrears, 1985 and 198.......# 9 86009090.**#00*000 b*#000090000 20 1 18 Commitments and Disbursements of External Assistance Based on Donor Surveys, By Sector, Amounts 1985-1987 ..................... 202 19 Commitments and Disbursements of External Assistance Based on Donor Surveys, Percentage by Sector, 1985-1987 ................. 203 20 Estimated 1987 Disbursements of Project Assistance by Type of Assistance .........e...... 204 21 Estimated 1987 Disbursements of Project Assistance by Geographic Location. . . .. . . o ... ....o.............. , O. 205 - 183 - Table Title Page No. 22 Current Operations of the Central Government, 1977 and 1983-1987 ....... * * * * LLLL*L... 0 *...........*....... 206 23 Budgetary Revenues of the Central Government, 1983-1987.......... 207 24 Budgetary Expenditures of the Central Government, 1983-1987.....O. 208 25 Revenues of the Autonomous Amortization Fund, 1983-1986........... 209 26 List of Public Sector Establishments...,...........,...,......* e 210 27 Monetary and Credit Situation, 1982-1986..,01040..*..*.,... ..Oo.. 212 28 BEAC (N'Djamena) Balance Sheet, 1982-19862..... 213 29 Commercial Banks' Consolidated Balance Sheet, 1982-1986......0,.. 214 30 Active and Frozen Credits and Deposits in the Banking System, 1982-1986 .... ..... .................... 215 31 Distribution of Credit to the Economy, 1981-1986 ......,.,........ 216 32 Outstanding Debt of Major Industries to the Domestic Banking System, End-1985 and Mid-1986.......................... 217 33 Projected Gross Domestic Product By Sector, 1987-1995............ . 218 34 National Accounts Projections, 1987-1995,............... ........ 219 35 Merchandise Trade Projections, 1987-1995.*............,........... 220 36 Balance of Payments Projections, 1987-1995.....................4* * * 221 37 Civil Service Personnel and Wagebill, 1985-1986................06 223 38 Regional Distribution of Civil Servants, 1986 .................... 224 39 Number of Primary Schools, by Type and District, 1985/86o........ 225 40 Number of Primary School Enrollments, Teachers and Classrooms, by School District, 1985/86.Lb ...... ..V****0*0** 226 41 Teacher Training Enrollments, 1984/85 to 1986/87 ........,..b..... 227 42 Evolution of Primary School Enrollments, 1567/68 to 1985/86 .. L..... .........Lb L ..... 228 43 Administered Consumer Prices, 1986..L ..................L.........0 229 TABLE 1: GROSS DOMESTIC PRODUCT BY SECTOR, 1977-1986 (constant 1977 prices) l value-adde4 in millions of CFAF 1977 1978 1979 1980 1981 1982 1983 1984 1985 1988 -- - - - - - - - - - -- - - - - - - - - - - -- - - - - - - - - - - -- - - - - - - - - - - -- - - - - - - - - - - ----------------------- IPRIMARY 86,990 87,813 80,908 83,416 b8,414 69,266 62,208 48,714 74,252 73,046 1 Agriculture 44,883 45,198 37,784 39,784 32,298 34,650 37,846 28,074 54,207 62,620 1 food crops 40,194 40,073 34,368 38,577 29,823 30,829 31,914 24,392 50,483 48,965 I I cotton 4,889 6,125 3,418 3,207 2,673 3,822 5,932 3,682 3,724 3,6555 Livestock 22,107 22,616 23,124 23,632 24,119 24,605 24,362 18,640 20,046 20,s26 ISECONDARY 29,240 28,030 17,670 14,050 18,880 20,880 23,430 29,481 29,840 28,245 I I Manufacturing industries 26,280 24,940 16,530 13,300 18,090 19,930 22,150 27,638 27,450 25,638 I of which: cotton ginning 6,670 5,526 6,097 4,027 3,797 3,186 4,845 7,288 5,030 6,030 1 I Construction and public works 1,700 1,740 290 280 270 300 S00 830 1,391 1,869 I Mining industries 350 360 6u 60 80 60 100 170 140 147 1 I Electricity and water distribution 910 990 690 410 440 690 680 843 859 893 - 1TERTIARY 64,250 63,860 47,220 41,040 44,280 45,750 47,110 48,T86 57,306 S6,297 1 Trade, transport, A communications 52,680 52,530 39,170 32,780 36,750 37,980 42,010 42,486 61,006 49,871 Government and other services 11,670 11,320 8,060 8,280 8.S30 7,790 5,100 6,300 6,800 6,428 I [GDP at factor cost 160,480 159,693 125,898 118,508 219,564 126,885 132,748 124,981 lel398 137,588 indirect taxes 1,280 1,330 800 380 S20 570 760 847 926 933 1 jGDP at 1977 market price l18,760 161,023 126,498 118,888 120,074 128,455 133,508 125,828 162,323 158,621 I I IGOP deflator 100.0 108.8 118.4 128.8 140.1 152.5 166.9 178.2 184.0 178.5 IGDP at current market price 161,760 175,193 149,741 153,116 188,264 192,789 221,452 224,225 298,674 282,980 l I IGDP in millions of current USS 868.4 776.2 704.0 724.8 619.3 586.7 681.1 S13.1 684.8 820.2 I I IExchange rate CFAF/USS 246.7 226.7 212.7 211.3 271.7 328.6 381.1 437.0 449.3 346.0 SOURCE: IMF and IBRD estimates TABLE 2: CHANGE IN GROSS DOMESTIC PRODUCT BY SECTOR, 1977-1986 (annual percentage growth rates) 1978 1979 1980 1981 1982 1983 1984 198S 1986 I . IPRIMARY 1.2 -10.2 4.1 -11.0 5.0 5.0 -24.9 69.0 -1.6 I Agriculture 0.7 -18.4 5.3 -18.8 7.3 9.2 -25.8 93.1 -3.1 I food crops -0.3 -14.2 6.4 -19.0 4.1 3.6 -23.8 107.0 -3.0 cotton 9.3 -33.3 -6 .2 -18.7 43.0 55.2 -37.9 1.1 -4.5 i Livestock 2.3 2.3 2.2 2.1 2.0 -1.0 -23.5 7.5 2.4 i ISECONDARY -4.1 -37.3 -20.0 34.2 10.7 12.2 25.8 1.2 -6.3 Manufacturing industries -6.1 -33.7 -19.6 38.0 10.2 11.1 24.8 -0.7 -7.0 I of which: cotton ginning -16.9 10.3 -33.9 -5.7 -18.1 45.8 58.9 -31.0 0.0 1 I Construction and public works 2.4 -83.3 -3.4 -3.6 11.1 68.7 68.0 67.8 20.0 1 Mining industries 2.9 -83.3 0.0 0.0 0.0 66.7 70.0 -17.8 6.0 I Electricity and water distribution 8.8 -30.3 -40.6 7.3 34.1 15.3 24.0 1.9 4.0 I-n I I ITERTIARY -0.8 -26.0 -13.1 7.9 3.3 3.0 3.6 17.5 -1.8 Trade, transport, A cownunications -0.1 -25.4 -18.4 9.1 8.2 10.7 1.1 20.1 -2.2 I Government and other services -3.0 -28.9 2.9 3.0 -8.7 -34.5 23.6 0.0 2.0 IGOP at factor cost -0.6 -21.3 -5.7 0.9 6.3 5.5 -5.9 29.1 -2.4 1 Indirect taxes 3.9 -39.8 -52.6 36.8 9.8 33.3 11.4 9.2 0.9 I I I &GDP at 1977 market price -0.6 -21.4 -6.0 1.0 6.3 6.8 -5.8 29.0 -2.3 j IGDP deflator 8.8 8.8 8.8 8.8 8.8 8.8 7.4 3.3 -3.0 IGDP at current market price 8.3 -14.5 2.3 9.9 14.8 14.9 1.3 33.2 -6.3 1 I I IGOP in millions of current US$ 17.9 -9.3 2.9 -14.5 -5.3 -1.0 -11.7 29.Ef 23.4 1 SO -URCE:_IMFan-IBR… = es- -timate_--s-… ---- 8 ==8__= SOURCE: IMF and IBRG estimates - 186 - TABLE 3: RAINFALL, 1970-1985 (mm per annum) Sahellan zone Sudanlan zone Year (av. 7 posts) (av. 2 posts) 1970 786 1167 1971 592 1031 1972 623 1060 1973 575 1071 1974 760 1055 1975 819 1192 1976 687 994 1977 537 889 1978 600 1036 1979 715 866 1980 999 940 1981 806 n.a. 1982 511 1151 1983 583 990 1984 512 813 1985 l/ 372 637 1/ 1985 figures are from ONDR and are based on 37 posts In the Sahellan zone and 100 posts In the Sudanlan zone. SOURCE: Minlstry of Agriculture and Rural Development - 187 - TABLE 4: AGRICULTURAL PRODUCTION 1983/84 TO 1986/87 (In Metric Tons and Hectares) I. inminininininmmminminini_inininini_flininininmininininininininininmininm w== -wi 1983/84 1984/85 1985/86 1986/87 1/ :Cotton 2/ t Production 158,492 98,418 99,469 89,469 I Area 175,761 141,937 147,368 125,486 ICereals 3/ I Productlon 453,040 345,968 738,926 726,069 I Area 1,009,795 958,721 1,218,699 1,181,174 * I 1OIIseeds 3/ I Production 4/ 84,685 87,948 123,021 117,561 I Area 155,000 160,040 182,632 181,977 !Sugar Cane 2/ I Production 227,328 207,717 239,004 237,000 1 I Area 3,287 3,327 3,373 3,360 * I 'Tobacco 5/ t Production 45 30 53 150 I Area 98 43 40 115 1/ 1986/87 figures are provisional. 2/ Crop year runs November-October. 3/ Crop year runs July-June. 4/ Production In 1983/84 and 1984/85 Includes only the Sudanian zone. 5/ The crop year runs March-February. SOURCE: ONDR, COTONTCHAD, SONASUT and MCT TABLE S: CEREALS PRODUCTION PER CAPITA, BY REGION, 1984-1988 (000 inhabitants and 000 metric tons) I Region I 1984 2 1985 1 1986 I - I ……………________ _______ _______ ____…- ___________--__ _ _ __ __-_- ____________________________ | I Est. Cereals Per Cap. Variation Est. Cereals Per Cap. Variation I Est. Cereals Per Cop. Variation I Pop. Prod. Prod. from Mean Pop. Prod. Prod, from Mean I Pop. Prod. Prod, from Mean -------------------------------------------------------------------------------------------------------------------------------------------# I 1 I I I ISeheran Zone i 94 n.a. n.a. n.a. I 8e n.e n.2 n.s I 98 n.a n.a n.e I I BET 94 n.e. n.a. n.e. I 98 n.a n.o n. 98 n.a n.0 n.o I II I I ISshelian Zone o 2,465 41 17 -53 1 2,515 290 11S -31 2,675 258 100 -40 I Bathe 3689 n.. n.a. n.a. 378 62 137 -10 1 387 23 69 -81 j Ouaddal I 366 n.. n.. n.a. 1 374 32 84 -82 383 3e 94 -48 1 Biltine 1 188 n.a. n.a. n.s. 190 21 108 -38 2 l95 13 67 -73 i Kanem 210 n.a. n.e. n.a. 216 18 81 -86 1 220 8 29 -111 2 Lac A SODELAC 1/ 1 140 n.a. n.e. n.. 1 143 54 375 229 I 146 39 284 123 I Cuer-a 221 n.a. n.. n.e. 226 41 180 34 1 231 82 268 128 I I Selemat 114 n.e. n.s. n.. | 117 28 237 91 1 120 10 83 -67 1 I Chari-Bsguirmi I 8S2 n".. n.. n.a. 872 47 54 -92 I 893 69 77 -63 ISudenien Zone I 2,393 306 127 57 1 2,450 449 183 37 1 2,509 469 187 47 1 Logone Occidental 344 34 100 30 362 47 133 -13 1 360 4S 12S -16 1 I Logone Oriental A I Polder C 2/ I 341 77 226 1s5 e 349 B8 247 101 1 357 73 204 64 1 I Layo-Kebbi a I Polders A & 8 2/ I 774 88 111 41 I 793 125 158 12 I 812 127 1se 16 I I Moyon-Chari 698 es 108 38 | 810 118 193 47 I 825 119 190 5O I I Tand;ile I OMVSD I 338 43 126 58 1 348 74 212 88 1 364 10 296 15S I III I I ITOTAL I 4,942 348 70 0 1 6,061 739 146 0 I 6,182 728 140 0 I I I i I 1/ 1984 production figures do not inctude SODELAC. 1988 production figures are provisional, and do not include the Lac region. 2/ 1984 and 1986 production figures do not include Polders. 3/ 1984 production figures do not include OMVSD. SOURCE: ONDR Annual Report 1984/85 and ONOR staff. - 189 - TABLE 6: COTTON PRODUCTION, 1950/51 to 1986/87 ---------------------------------------------- High-yleld Average Producer: Production Area Area Yield Price Year (metric tons) (hectares) (hectaros) (Kg./Ha) (CFAF/Kg.) 5 a 1950/51 40,898 n.a. n.a. n.a. n.a. 1951/52 60,363 n.a. n.a. n.a. n.a. 1952/53 56,429 n.a. n.a. n.a. n.a. 1953/54 58,006 n.a. n.a. n.a. n.a. 1954/55 71,473 n.a. n.a. n.a. n.a. 1955/56 69,653 231,000 n.a. 302 n.a. 1956/57 63,561 231,000 n.a. 275 n.a. 1957/58 80,394 230,000 n.a. 350 n.a. 1958/59 66,015 238,00C n,a. 277 n.a. 1959/60 39,669 260,000 n.a. 153 n.a. 1960/61 97,981 288,000 n.a. 340 26 1961/62 46,732 300,000 n.a. 156 26 I 1962/63 90,775 329,760 4,357 275 26 1 1963/64 99,532 276,465 5,370 360 26 1 1964/65 95,679 277,389 6,308 345 26 1 1965/66 83,097 275,978 13,216 301 26 1966/67 122,856 299,487 19,666 410 26 1 1967/68 101,623 298,388 26,116 341 26 1 1968/69 148,496 295,435 34,449 503 26 1 1969/70 116,748 291,162 44,115 401 26 1970/71 94,684 301,575 40,602 314 26 1971/72 108,482 301,906 41,957 359 28 1 1972/73 104,037 275,576 44,723 378 29 1973/74 114,394 269,026 54,852 425 31 1974/75 143,640 272,156 74,976 528 43 1975/76 174,062 336,492 127,459 517 45 i 1976/77 147,384 318,781 131,462 462 45 1977/78 125,279 283,978 120,360 441 50 1 1978/79 136,856 267,300 137,100 512 50 1979/80 91,297 179,821 100,270 508 50 1 1980/81 85,716 166,485 70,940 515 50 1 1981/82 71,391 133,899 56,255 533 60 1982/83 102,118 137,734 75,986 741 70 1 : 1983/84 158,492 175,761 97,607 902 80 * 1984/85 98,416 141,938 77,836 693 100 1985/86 99,469 147,368 94,487 675 100 1 1986/87 1/ 89,469 125,486 67,747 713 100 1 …___ __ __ -…-- - - ------- - ------ - ----- -------- - ---- -------- ------- ------- 1/ Includes area and production In the Sahellan zone. SOURCE: ONDR, ONDR Annual Reports, USAID "Baslc Agricultural Information for Chad", 1985. - 190 - TABLE 7: TOBACCO, SUGAR CANE, AND GROUNDNUT PRODUCTION 1983/84 to 1986/87 1983/84 1984/85 1985/86 1986/87 1/ I !Tobacco 5- a 5 5 Production (MT) 1) 45 30 53 150 Production area (Ha) 98 43 40 115 Average yield (Kg/Ha) 459 698 1325 1304 Number of planters 1208 450 450 1700 5 Producer price (CFAF/Kg) 2) a first quality 150 200 200 200 5 second quallty 115 145 145 145 third quality 60 75 75 755 5 5 !Sugar Cane 1 a Production (MT) 3) 227328 207717 239004 237000 1 Production area (Ha) 4) 3287 3327 3373 3360 5 Average yield (UT/Ha) 69 62 71 711 1 5 -Groundnuts 5 1 a Production (MT) 5) 76798 76684 111506 106361 a Production area (Ha) n.a. 125040 146378 145927 5 I Average yield (Kg/Ha) n.a. 613 762 729 1 a Producer price (CFAF/Kg) 6) 5 whole n.a. 70 70 n.a. 5 5 shelled n.a. 90 90 n.a. I a a 1) Tcbacco crop year runs March-February. 2) Price paid by MCT. 3) Sugar cane crop year runs November-October. 4) All sugar cane le grown on SONASUT plantations, using wage laborers. 5) Groundnut crop year runs July-June. 6) Price paid by COTONTCHAD. SOURCE: MCT, SONASUT and ONDR. - 191 - TABLE 8: LIVESTOCK HERD, 1945-1985 ---------------------------------- (000 head) Year Cattle Sheep/Goats Camels Donkeys Horses I Total 1945 1,104 987 92 330 150 1 2,663 1950 1,399 1,473 110 330 150 3,462 1955 1,374 1,371 134 330 150 1 3,359 1 1960 2,019 1,375 210 330 150 0 4,084 0 1965 3,482 3,004 291 330 150 i 7,257 1 0 1970 4,500 4,300 370 343 153 1 9,666 1 1 1971 4,690 5,200 560 343 153 10,946 1 1972 4,690 5,200 550 300 150 i 10,890 I 1 1973 2,970 4,900 545 300 150 l 8,865 1974 3,250 4,650 518 300 140 X 8,858 1975 3,600 4,800 305 300 145 9,150 1976 3,650 4,848 310 300 145 9,253 5 1977 3,954 4,460 400 271 154 1 9,239 1 1978 4,012 4,508 405 271 154 1 9,350 0 1979 4,070 4,556 410 271 154 1 9,461 1980 4,233 4,624 426 300 160 1 9,743 1 1981 4,402 4,694 443 300 166 1 10,005 1982 4,578 4,764 461 300 170 10,273 1983 4,672 4,826 476 293 172 0 10,439 0 1984 3,750 3,952 459 221 175 l 8,567 l 1985 3,900 4,300 470 250 175 1 9,095 … ------ …-----……-…------- ----- ----- ----- - --- SOURCE: 1984-1985 figures from the Ministry of Livestock and Rural Water Supply. 1945-1983 figures from USAID, "Basic Agricultural Information for Chad", 1985. - 192 - TABLE 9- OPERATIONS OF MAJOR INDUSTRIES, 1983-1987 1983 1984 1985 1986 1/ 1987 2/1 jMCT (cigarettes) I.--------------- !ProductIon (000 packs) 7,532 14,913 14,781 11,637 9,984 !Capacity Utilization (%) 34 68 67 53 ,r1iported Final Product (000 packs) n.a. 2,298 2,538 4,158 2,600 1 !Sales of Local Product (000 packs) 7,554 14,551 14,735 11,298 'Turnover (millions of CFAF) 1,519 1,706 1,880 1,916 local productlon n.a. 1,269 1,302 1,116 Imports n.a. 437 578 800 1Operating surplus/deficit (mil. CFAF) n.a. n.a. -3 -103 -50 'Wage Bill (millions of CFAF) 130 164 197 212 ,Number of Employees 130 112 118 118 125 ISONASUT (sugar) i…-------------- Productlon (MT) 3/ 22,200 27,960 25,341 23,880 23,700 sugar cubes n.a. 13,148 11,693 8,780 sugar cones n.a. 14,812 13,648 15,100 !Capacity Utilization (%) n.a. 100 91 85 85 1 !Sales (MT) 4/ sugar cubes n.a. 14,000 12,000 10,000 sugar cones n.a. 13,000 13,000 13,000 'Turnover (millions of CFAF) 6,100 10,872 10,965 11,600 11,600 1 !Operating surplus/deficit (mil. CFAF) n.a. n.a. -1,868 101 'Wage Bill (millions of CFAF) 982 1,026 n.a. n.a. 'Number of Employees 1,179 3,092 2,823 2,897 S S IBrasserle de Logone (beer) IProductlon (hectollters) 3/ 120,761 135,000 151,813 123,858 121,300 ,Capacity Utilization (%) 67 75 84 69 67 Sales (hectollters) !Turnover (millions of CFAF) 2,587 3,044 3,936 3,980 2,940 1 !Operating surplus/deficit (mli. CFAF) n.a. n.a. 130 334 100 1 'Wage Bill (millions of CFAF) 215 251 350 324 454 Number of Employees 161 225 236 248 220 1 1STT (textiles) Productlon (000 meters) 12,800 14,200 15,600 14,800 16,070 t ICapacity Utilization (%) 56 62 68 64 70 t lExport Sales (000 meters) 5/ 2,800 3,000 3,000 3,500 3-4,000 !Local Sales (000 meters) 5/ 10,000 11,200 12,600 11,300 11-12,000 !Turnover (millions of CFAF) 4,244 5,894 7,006 6,800 !Operating surplus/deficit (mul. CFAF) -370 -499 150 -200 -400-0 1 IWage Bill (millions of CFAF) 700 670 850 850 953 1 iNumber of Employees 425 445 600 635 640 --------- - --- - - ------------------- - -------------…-------------------…---------…-… - 1 93 - TABLE 9: OPERATIONS OF MAJOR INDUSTRIES, 10831987 (continued) 5 - 1983 1984 1985 1986 1/ 1987 2/t 5 a COTONTCHAD (fiber, oil, soap) i- ---------------------------- Product lon 6/ cotton fiber (MT) 38,130 59,875 35,663 38,693 34,750 oll (hectolIters) 78,660 87,900 112,460 77,?30 66,940 soap (MT) 2 2,665 n.a. 344 3,000 1 'Capacity Utilization (%) n.a. n.a. n.a. n.a. n.a. 5 :Sales of Cotton Flber (MT) 7/ 5 exports 37,600 56,300 34,000 37,086 33,200 local sale 1,000 1,500 1,500 1,500 1,500 5 ,Turnover (millions of CFAF) 25,703 42,473 31,710 17,220 12,721 1Operating surplus/deficit (mul. CFAF) 269 1,776 -18,137 -23,261 -22,200? 'Wage Bill (millions of CFAF) 3,000 3,800 4,700 3,800 1,992 1 -Number of Employees 1,929 1,935 2,514 2,036 1,208 1 BGT (carbonated beverages) 8/ ------ ________________ !Production (hectoliters) 26,000 26-32,000 I !Capacity Utilization (X) 43 !Sales (hectoliters) 24,000 24-30,000 5 .Turnover (millions of CFAF) 780-840 !Operating surplus/defIcit (mil. CFAF) -10 5 'Wage Bill (millilons of CFAF) 100 .Number of Employees 60 * a~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 1/ 1986 figures are provisional. 2/ 1987 figures are projected. 3/ Fiscal year runs October-September, although the Brasserie switched to calendar year In 1987. Here, FY 1983/84 Is listed as 1984 and so on. 4/ Sales figures are rough estimates made by SONASUT. 5/ Sales figures are estimates made by STT. 6/ Fiscal year runs November-October. Here, 1982/83 Is listed as 1983 and so on. 7/ EstImated local sales. 8/ Boissons et Glacieres du Tchad (BGT) was reopened In 1985 after a six-year hiatus and began operations In 1986. SOURCE: IBRD mission, based on Information from Industry sources and the BEAC. - 194 - AULILE 1t): INDUSTRIAL PRODUCTION, VOLUME INDICES AND ANNUAL PERCENTAGE CHANGE, 1975 and 1983-86 19/5 1983 1984 1985 1986 1/i Producet ion Cotton tille,r (MI) 52,910 38,130 59,875 35,663 38,693 Edible oI a .k (ie tWII iof s) 840 78,660 87,900 112,460 77,230 Soap (MT) -- 2 2,665 0 344 Sugar (MT) 17,600 22,200 27,960 25,341 23,880 ' I Beer (hec:lilters) 135,210 120,761 135,000 151,813 123,858 Teoytlles (000 meter s) n.a. 12,800 14,200 15,600 14,800 1 I Cigarettes (000 packs) n.a. 7,532 14,913 14,781 11,637 1 Beverages (lhectolftels) n.a. 0 0 0 26,000 I ProductIon Indices (1U83-100) Cotton fibel 139 400 157 94 101 Edible oils 1 100 112 143 98 I Soap -- 100 133,250 0 17,200 I Sugar 79 100 126 114 108 I Beer 112 100 112 126 103 t Textiles n.a. 100 111 122 116 I Cigarettes n.a. 100 198 196 155 0 I Beverages n.a. -- -- -- a a a a Annual Percentage Cl=hange Cotton fiber 57 -40 8 Edible oils 12 28 -31 Soap 133,150 -100 -- Sugar 26 -9 -61 5 Beer 12 12 -18t Textiles 11 10 -5 Cigarettes 98 -1 -21 Beverages - _, --- -- -- --- -- -- I--- -- -- --- -- -- -- --- -- -- --- - - -- - - - --------- a _ ___ ___ __ ___ *_ ___ _a 1/ 1986 figures are provisional. SOURCE: IBRD mission, based on Information from Industry sources and the BEAC. - 195 - TABLE 11: OPERATIONS IN THE COTTON INDUSTRY, 1982/83 to 1980/87 1982/83 1983/84 1984/85 1985/86 1986/87 1/l COTTON FIBER iProduction 2/ seed cotton (MT) 102,118 158,400 98,416 99,469 89,200 cotton fiber (UT) 3 130 89,875 35,663 38,693 34,750 ginning yield (%) 37 38 36 39 39 iSales exports (MT) 37,400 45,933 47,701 37,086 33,250 export price, CIF (CFAF/Kg) 3/ 698 008 573 417 355 local sales to STT (MT) 781 1,054 1,228 1,456 1,500 STT sales price (CFAF/Kg) 290 377 622 387 300 I Turnover (millions of CFAF) 22,855 37,514 27,951 16,028 12,254 1 exports 22,434 37,117 27,311 15,465 11,804 1 local sales 221 397 840 563 450 1 I a~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ I OIL & SOAP I Production o groundnut oll (000 liters) 2,278 1,720 3,920 405 1,060 1 I cotton oil (000 liters) 5,690 7,070 7,328 7,318 5,634 soap (UT) 2 2,685 n.a. 344 3,000 1 I Sales groundnut ofl (000 liters) n.a. I n.a. n.a. 210 n.a. I cotton oil (000 liters) n.e. n.e. n.a. 1,454 n.a. soap (MT) n.a. n.a. n.a. -- n.a. Turnover (millions of CFAF) 2,676 4,086 3,144 1,192 3,001 1 oll and ollcake 2,091 3,202 2,807 n.a. n.a. soap 585 884 337 n.a. n.a. I a TOTAL PRODUCTION t Turnover (millions of CFAF) 4/ 26,703 42,473 31,710 17,220 15,255 ' Not Results (mililons of CFAF) 289 1,778 -18,137 -23,261 -22,200 1 Wage Bili (millions of CFAF) 3,000 3,800 4,700 3,800 1,992 1 Number of Employees 1,929 1,036 2,514 2,036 1,208 I a~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 1/ 1986/87 figures are provlslonal estimates. 2/ COTONTCHAD fiscal year runs November-October. 3/ Average annual export price, calculated from sales volume and turnover. 4/ Total turnover Is greater than the sum of cotton fiber and oil/soap turnovers due to miscellaneous sales and services rendered. SOURCE: COTONTCHAD. 196 - TABLE 12: MERCHANDISE TRADE, 1982-1986 (millions of current CFA) EXPORTS OF GOODS 1982 1983 1984 1985 1986 * a Cotton fiber 10,050 22,485 42,364 19,985 14,691 a I a a Cattle n.a. 11,700 8,800 11,600 12,000 a I Textlles n.a. 2,443 2,290 2,358 1,641 ,aeer ln.a. 67 .32 67 48 Other goods 6,960 n.a. n.a. 932 807 BEAC Banknotes 1/ n.a. 2,490 3,146 3,795 4,20I £ a Exchange record 2/ n.a. 639 652 644 757 * a Total exports, FOB 17,010 39,824 57,384 39,381 34,145 IMPORTS OF GOODS a * __ v a Industrial products 5,020 15,630 22,597 24,269 14,329 I Petroleum products 974 3,699 8,606 8,625 9,105 I Capital project Imports 1,290 5,809 10,750 20,730 27,804 ' Food aid Imports n.a 4,060 8,496 23,898 6,163 Exchange record 2/ n.a 4,109 7,866 9,669 9,127 UnclasslfIed Imports 3/ 4,500 15,433 6,384 9,997 13,309 Subtotal: Imports of goods, CIF 4/ 11,784 48,740 64,699 97,188 79,837 1 t Subtotal Imports of goods, FOB 7,895 32,656 43,348 65,116 53,491I I BEAC Banknotes 5/ 19,590 13,892 16,773 17,879 17,896 1 a t Total Imports, FOB 27,485 46,548 60,121 82,995 71,387 -------__ - - ___ --- -- - - _ - --t - - - - - - - - - - - - - - -- - - - - - - 1/ Banknotes from other BEAC countries which have flowed Into Chad. Eighty percent of total banknotes are assumed to be payment for goods; twenty percent for services. 2/ Record of banklng transactions for merchandise trade not Included In other categories mentlonned here. 3/ Includes unrecorded consumer goods arlsIng from livestock exports as well as certaIn milltary Imports. 4/ CIF expenses assumed to be 33 percent of the total value of Imports. 5/ Chadlan banknotes collected In other BEAC countries. Eighty percent are assumed to be for the purchase of goods; twenty percent for services. SOURCE: BEAC - 197 - TABLE 13: COMPOSITION OF MERCHANDISE IMPORTS, 1982-1986 (millIons of current CFAF) 1982 1983 1984 1985 1986 lndustrlal 5,994 19,329 31,203 32,894 23,434 Cotontchad n.a. 4,564 6,208 6,890 4,108 Sonasut n.a. 4,500 5,786 6,599 2,063 STT n.a. 4,523 7,413 7,013 3,780 Petroleum products 974 3,699 8,606 8,625 9,105 Mobil n.a. 2,895 3,389 3,355 3,150 Shell n.a. 804 740 983 1,275 Total n.a. 0 4,477 4,287 4,680 M MCT n.a. 910 742 948 1,752 BDL n.a. 1,133 1,030 1,127 1,050 Esso n.a. 0 1,420 1,239 51in SHO n.a. n.a. n.a. 453 167 t BGT n.a. n.a. n.a. n.a. 110 NSCKL n.a. n.a. n.a. n.a. 115 I ASECNA n.a. n.a. n.a. n.a. 8 SETA n.a. n.a. n.a. n.a. 666 IFood aid 0 4,060 8,496 23,898 6,163 5 t !Capital project Imports 1,290 5,809 10,750 20,730 27,804 1 t through Grants: n.a. 5,246 9,728 15,444 22,017 : France n.a. 1,592 3,974 n.a. 5,608 t FED n.a. 1,546 1,422 n.a. 3,853 t I USAID n.a. 518 1,262 n.a. 1,932 UNDP n.a. 900 1,168 n.a. 5,196 Other n.a. 690 1,902 n.a. 5,428 1 t through Loans: n.a. 563 1,022 5,286 5,787 1 t t lUnclassifled goods 1/ 4,500 15,433 6,384 9,997 13,309 1 :Exchang, Record 2/ n.a. 4,109 7,866 9,669 9,127 !Total Import of goods, CIF 11,784 48,740 64,699 97,188 79,837 a a 1CIF expenses 3/ 3,889 16,084 21,351 32,072 26,346 a a tTotal Imports of goods, FOB 7,895 32,656 43,348 65,116 53,491 t t tBanknotes 19,590 13,892 -1,773 17,879 17,896 8 a I !Total Imports, FOB 27,485 46,548 60,121 82,995 71,387 a a 1/ Includes unrecorded consumer goods arising from livestock exports, as well as certain milltary Imports. 2/ Record of banking transactions for merchandise trade not Included In other categories mentlonned here. 3/ CIF expenses assumed to be 33 percent of the total value of Imports. SOURCE: BEAC. - 198 - TABLE 14: TRADE IN SERVICES, 1982-1988 (millions of CFAF) 1982 1983 1984 1985 1986 1 * I )Non-factor Services -8,869 -18,846 -23,667 -57,118 -44,950 1 I Receipts 780 12,282 15,011 15,906 15,149 1 I0 Insurance n.a. n.a. n.a. 169 165 1 Is Transport 0 3,445, 3,445 1,865 693 0 Travel 770 3,870 3,506 3,060 1,719 1 Other Private 10 450 939 2,480 2,220 1 Foreign Government 0 4,517 7,121 8,332 10,352 0 I Payments 9,649 31,128 38,678 73,024 60,099 Import Frelght 3,889 16,084 21,351 32,072 27,805 1 Insurance n.a. n.a. n.a. 634 796 1 Transport n.a. 1,278 2,150 2,240 3,303 1 Travel 3,390 6,448 7,339 8,835 10,672 1 Other Private 2,250 4,679 6,890 28,390 16,573 0 of which: ESSO 0 0 1.290 20,352 7,986 1 National Government 120 2,639 948 853 950 -Factor Services -699 -2,390 -3,585 -2,448 -3,179 1 Receipts 630 445 581 1,008 1,227 1 BEAC Profit 0 445 581 1,008 641 1 a Earnings on Deposits 630 n.s. n.a. n.a. 586 1 O Payments 1,329 2,835 4,166 3,456 4,406 1 I1 Total Interest 1,329 1,780 1,619 1,372 1,256 1 t Other 0 1,055 2,547 2,084 3,150 1 a a ITotal Services -9,568 -21,238 -27,252 -59,568 -48,129 0 * I O Recelpts 1,410 12,727 15,592 16,914 16,376 1 I Payments 10,978 33,963 42,844 76,480 64,505 1 S s SOURCE: IMF and IBRD staff estimates. - 199 - TABLE-16: BALANCE OF PAYMENTS, 1977 and 1982-1986, IN GFA FRANCS (millilons of CFAF) 1977 1982 1983 1984z 1985 1986 ---------------------------------------------------------- ----- I......... .. . --- -- - I !Trade Balance -8,759 -10,475 -6,742 -2,737 -43,61b -37,242 1 Exports 26,177 17,010 39,824 57,384 39,381 34,145 of which: cotton ffber n.a. 10,050 22,485 4?,364 19,985 14,691 Imports 34,936 27,485 46,548 60,121 82,995 71,387 !Non-factor Services -21,246 -8,869 -18,846 -23,667 -57,118 -44,950 Receipts 9,716 780 12,282 15,01f 15,906 15,149 1 Payments 30,962 9,649 31,128 38,C78 73,024 60,099 'Factor Services -913 -699 -2,390 -3,585 -2,448 -3,179 1 Recelpts 403 630 445 581 1,008 1,227 I Payments 1,316 1,329 2,835 4,166i 3,456 4,406 of which: Interest n.a. 1,329 1,780 1,619 1,372 1,256 !Transfers 8,002 11,790 21,338 21,418 42,290 23,949 5 Private (net) 1,183 1,701 -2,553 -1,016 3,075 -2,652 Pubilc (net) 6,819 10,089 23,891 22,434 39,215 26,601 I food aid n.a. 0 4,510 9,440 26,553 5,941 I budget support n.a. 600 3,723 6,706 5,641 7,072 I other n.a. 9,489 15,658 6,288 7,021 13,588 ICurrent Account Balance -22,916 -8,253 -6,622 -8,571 -60,890 -61,422 -- -- .- - (excluding public transfers) -29,735 -18,342 -30,513 -31,005 -100,105 -88,023 S I !Official Capital Grants 15,909 8,340 11,873 12,076 20,927 42,877 !Direct Investment 5,197 0 -432 3,172 24,103 11,541 ESSO n.a. n.a. 0 3,226 24,103 12,301 Other n.a. n.a. -432 --54 0 -760 I I Medium- and Long-term Lending (net) 2,933 -1,088 -697 -450 6,328 6,170 1 Disbursement 4,196 160 938 1,704 8,a810 8,267 Amortization 1,263 1,248 1,635 2,154 2,482 2,097 S I :Short-term Lending (net), Errors, and Omisslons -2,250 1,580 -2,102 lu8 -2,605 -6,363 'Exchange Rate Guarantee 0 1,125 1,223 2,107 1,234 0 !Change In Net Reserves -1,127 1,704 3,243 8,522 --10,903 -7,197 Change In Arrears (+ - Increase) n.a 1,768 2,503 1,723 1,090 1,019 Interest n.a 520 1,003 370 -267 165 prlncipal n.a 1,248 1,500 i,M53 1,357 854 Central Bank Financing n.a -3,472 -5,746 -10,245 9,813 6,178 I - ---- --…--.--...--...-----…..-.--------- SOURCE: BEAC. - 200 - TABLE 16: BALANCE OF PAYMENTS, 1977 and 1982-1986, IN US DOLLARS (millions of US$) 1977 1982 1983 1984 1985 1986 1 I I_ ITrade Balanco -35.7 -31.9 -17.6 -6.3 -97.1 -107.5 Exports 106.5 51.8 104.5 131.3 87.7 98.6 of which: cotton fiber 0.0 30.6 59.0 97.0 44.5 42.4 Imports 142.2 83.6 122.2 137.6 184.7 206.1 INon-factor Servlces -86.5 -27.0 -49.5 -54.2 -127.1 -129.8 Receipts 39.5 2.4 32.2 34.4 35.4 43.7 Payments 126.0 29.4 81.7 88.5 162.5 173.5 I t PFactor Services -3.7 -2.1 -6.3 -8.2 -5.4 -9.2 I Recelpts 1.6 1.9 1.2 1.3 2.2 3.5 I Payments 5-4 4.0 7.4 9.5 7.7 12.7 of which: Interest 0.0 4.0 4.7 3.7 3.1 3.6 *I Transfers 32.6 35.9 56.0 49.0 94.1 69.2 Private (net) 4.8 5.2 -6.7 -2.3 6.8 -7.7 Pubilc (net) 27.8 30.7 62.7 51.3 87.3 76.8 0 food aid 0.0 0.0 11.8 21.6 59.1 17,2 budget support 0.0 1.8 9.8 15.3 12.6 20.4 other 0.0 28.9 41.1 14.4 15.6 39.2 ICurrent Account Balance -93.3 -25.1 -17.4 -19.6 -135.5 -177.4 - - (excluding public trans-ers) -121.0 -55.8 -80.1 -71.0 -222.8 -254.2 :Official Capital Grants 64.8 25.4 31.2 27.6 46.6 123.8 1 MDirect Investment 21.2 0.0 -1.1 7.3 53.7 33.3 i ESSO 0.0 n.a. 0.0 7.4 53.7 35.5 5 Other n.a. n.a. -1.1 -0.1 0.0 -2.2 !Medium- and Long-term Lending (net) 11.9 -3.3 -1.8 -1.0 14.1 17.8 1 Disbursement 17.1 0.5 2.5 3.9 19.6 23.9 I Amortization 5.1 3.8 4.3 4.9 5.5 6.1 I I Short-terrq Lending (net), Errors, and Omissions -9.2 4.8 -5.5 0.4 -5.8 -18.4 0 !Exchange Rate Guarantee 0.0 3.4 3.2 4.8 2.7 0.0 t IChange In Net Reserves -4.6 5.2 8.5 19.5 -24.3 -20.8 I Change In Arrears I (..+ - Increase) n.a. 5.4 6.6 3.9 2.4 2.9 1 Interest n.a. .6 2.6 0.8 -0.6 0.5 principal n.a. 3.8 3.9 3.1 3.0 2.5 Central Bank Financing n.a. -10.6 -15.1 -23.4 21.8 17.8 1 !E4change rate CFAF/US$ 245.68 328.61 381.06 436.96 419.26 346.30 1 t……-- ------ ------------- ----- SOURCE: BEAC. TABLE 17: EXTERNAL DEBT, DEST SERVICE AND ACCUMULATED ARREARS, 1936 and 1986 I/ ---------------------------------------------------------------------___---- (eillions of CFAF) Crtedtors by Debt Outstanding Debt Service, 1986 Debt Service, 1988 Arrears, end-198S Arrears, end-IOSS Sottle- I Category End 1985 End 1986 ------------------- ------------------- -------------------- ----------------- - x. t Disb. Undisb. Disb. Und;sb. Prin. Int. Total Prin. Int. Total Prin. Int. Total Prin. Int. Total 18 f I 1. imultilateral 42,367 17,293 44,114 28,180 1,407 290 1,897 282 284 568 895 312 1,207 871 180 1,031 813 1 1 of which: World Bank 14,953 6,169 16,967 13,337 87 183 250 129 96 225 -- -- -- -- __ __ _- of which: IMF Trust I Fund 2/ 4,524 -- 4,194 -- 1,099 87 1,188 -- -- -- -- -- -- -- -- __ - 183lateral l,392 14,648 16,797 11,314 29 118 145 37 158 193 6,572 2,374 8,946 6,081 2,184 8,285 -- DAC countries 5,298 2,354 8,275 1,627 29 116 145 37 158 193 -- -- -- 12 4 -- -- I OPEC countries 7,607 2,080 8,659 1,816 -- -- -- -- -- -- 4,711 1,761 6,472 4,976 1,942 8,917 -- I Other countries 3,587 10,212 2,963 7,971 -- -- -- -- -- -- 1,881 613 2,474 1,094 238 1,332 -- O I _ iFinancial Institutions 6,971 -- 5,908 -- __ __ __ __ __ _- 6,489 3,100 9,689 6,819 3,137 9,956 -- I I iSuppli;rs' Credits 1,782 -- 2,161 -- -- -- -- -- -- 1,341 697 2,038 1,876 857 2,333 35 I 1Other 3/ 3,184 -- 3,184 -- 3,S84 -- 3,584 3,184 -- 3,184 -- I…-------------------…-- - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - ITOTAL 69,686 31,939 71,162 39,604 1,438 408 1,842 319 440 759 18,881 6,483 25,384 18,631 6,138 24,769 848 lof which: Pub' ic Debt 4/ 56,237 28,916 s5,326 37,297 850 261 1,111 282 258 640 14,082 4,713 18,795 13,676 4,307 17,883 n.n. | lof which: Public Enter- I prise Debt 14,449 3,023 16,827 2,207 586 145 731 37 182 219 4,799 1,770 8,569 5,058 1,830 6,886 n.a. I I- -------… -_--_-_--_-_-_-_----_-_ -----------------------------------------------------------------------_-_ ---------------------------…- - --- - - 1/ Information provided by the Caisse Autonome d'Amortissement; it differs from ORS data due to time lags, definitional differences, and exchange rate adjustments. 2/ In addition to these CM payments, the BEAC made direct payments on other IMF accounts totalling CFAF 1.100 billion in 1985 end an estimatoe CFAF 1.008 billion in 1988. S/ Includes Chad's postal debt. 4/ Public Debt is serviced by the CAA, whereas Public Enterprise Debt Is guaranteed by the Government, but serviced directly by the enterprise. SOURCE: CAA. - 202 - TABLE 18: COMMITMENTS AND DISBURSEMENTS OF EXTERNAL ASSISTANCE BASED ON DONOR SURVEYS AMOUNTS BY SECTOR, 1985-1987 1/ (millions of CFAF) Commitments Disbursements 1985 1986 1987 1985 1986 1987 a ~ ~~I I 5Development Assistance Agriculture and rural dev. 5,602 12,519 14,473 1 5,042 10,022 15,508 Livestock 61 2,302 256 187 1,342 1,419 Fishing -- 22 -- I 14 8 I Forestry 2/ -- -- -- 48 163 165i Industry, energy, and mining 2,294 21,616 15,078 2,180 6,163 14,598 I Infrastructure 3/ 20,051 25,335 1,318 5,496 14,301 20,758 I Services 4/ -- 405 810 1 1,523 938 1,362 I Administratlon 2,131 2,070 612 1,087 2,958 1,338 Health 2,318 4,129 4,430 1 2,016 5,081 4,731 Education 1,491 1,380 6,318 , 1,621 3,238 5,000 Social Affairs -- 279 172 1 175 302 364I I Subtotal: development assist. 33,948 70,057 43,467 1 19,375 44,522 65,251 I~~~~~~~~~~~ a IBudget Support n.a. n.a. n.a. t 5,641 7,072 9,050 * I IFood Ald 5/ n.a. n.a. n.a. 1 26,553 5,941 2,545 I TOTAL: external assistance n.a. n.a. n.a. 51,569 57,535 76,846 1) The 1985 and 1986 disbursement figures, based on donor surveys, are somewhat lower than the offIclal fIgures used In the balance of payments (Table 15). 2) Excluding forestry components of rural development projects. 3) Predominantly Investments In water supply and road network. 4) Includlng telecommunicatlons, postal service, and bankIng. 5) The value of food aid arrivals In 1985 and 1986 was calculated based on World Food Program tonnage records and 1984 off lcal commodity prices, adjusted for Inflatlon. Volumes Include cereals, olls, mlIk products, and other food Items, and totalled 176,000 MT In 1985 and 53,000 MT In 1986. Expected volume In 1987 Is estimated at 30,000 MT. SOURCE: IBRD misslon, based on donor surveys. - 203 - TABLE 19: COMMITMENTS AND DISBURSEMENTS OF EXTERNAL ASSISTANCE BASED ON DONOR SURVEYS PERCENTAGE BY SECTOR, 1985-1987 (as percentage of total) ICommitmonts Disbursements 1985 1986 1987 1 1985 1986 -987 I ---------------------------- ---- -------- I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ I ODevelopment Assistance Agriculture and rural dev. 18.5 17.9 33.3 1 26.0 22.5 23.8 Livestock 0.2 3.3 0.6 1 1.0 3.0 2.2 FlshIng 0.0 0.0 0.0 1 0.0 0.0 0.0 I Forestry 0.0 0.0 0.0 0.2 0.4 0.3 I Industry, energy, and mInIng 6.8 30.9 34.7 11.3 13.8 22.4 Infrastructure 59.1 36.2 3.0 1 28.4 32.1 31.8 Services 0.0 0.6 1.9 1 7.9 2.1 2.1 Administration 6.3 3.0 1.4 1 5.6 6.6 2.1 - Health 6.8 5.9 10.2 1 10.4 11.4 7.3 Education 4.4 2.0 14.5 1 8.4 7.3 7.7 Soclal Affairs 0.0 0.4 0.4 0.9 0.7 0.6 1 Subtotal: developmant assIst. 100.0 100.0 100.0 1 100.0 100.0 100.0 Development Assistance n.a. n.a. n.a. 37.6 77.4 84.9 I I I !Budget Support n.a. n.a. n.a. t 10.9 12.3 11.8 I I 'Food Aid n.a. n.a. n.a. 1 51.5 10.3 3.3 TOTAL: external assistance n.a. n.a. n.a. 1 100.0 100.0 100.0 * I SOURCE: TAB8---- SOURCE: TABLE 18 - 204 - TABLE 20: ESTIMATED 1987 DISBURSEMENTS OF PROJECT ASSISTANCE BY TYPE OF ASSISTANCE (In mllilons of CFAF) NEW REHABILI- SUPPORT SECTORS CAPACITY EXPANSION TATION ACTIONS TOTAL Agriculture 1/ 2,703 1,227 3,262 8,481 15,673 % of sector 17.2 7.8 20.8 54.1 100.0 Llvestock 2/ 501 -- 619 307 1,427 5 % of sector 35.1 43.4 21.5 100.0 Industry & Energy 2,804 1,355 10,226 213 14,598 a % of sector 19.2 9.3 70.1 1.5 100.0 Infrastructure 1,172 3,079 16,508 -- 20,758 % of sector 5.6 14.8 79.5 100.0 a a Education 1,216 -- 1,227 2,558 5,000 I X of sector 24.3 24.5 51.2 100.0 * Health 382 959 2,002 1,388 4,731 % of sector 8.1 20.3 42.3 29.3 100.0 Social Affairs 33 15 158 157 364 % of sector 9.1 4.1 43.6 43.3 100.0 1 Services -- 990 372 1,362 % of sector 72.7 27.3 100.0 AdmInIstratlon 103 -- 792 444 1,338 % of sector 7.7 59.1 33.2 100.0 a a TOTAL 8,912 6,634 35,785 13,920 65,251 1 % OF TOTAL 13.7 10.2 54.8 21.3 100.0 …---------------------------------------------------------------------------------- 1/ Includes forestry projects. 2/ Includes fisheries projects. SOURCE: IBRD mission, based on donor surveys. - 205 - TABLE 21: ESTIMATED 1987 DISBURSEMENTS OF PROJECT ASSISTANCE BY GEOGRAPHIC LOCATION (In CFAF MILLIONS) SAHELIAN SUDANIAN a SECTORS NATIONAL N'DJAMENA ZONE ZONE TOTAL t Agriculture 1/ 5.194 -- 5.763 4.712 15.673 i of Sector 33,1 36,8 30,1 100,0 LIvestock 2/ 1.013 166 240 8 1.427 a % of Sector 71,0 11,6 16,8 0,6 100,0 1 a a Indusrty & Energy 3.123 915 333 10.227 14.598 % of Sector 21,4 6,3 2,3 70,1 100,0 a a a a Infrastructure 7.552 4.742 6.560 1.905 20.758 %of Sector 36,4 22,8 31,6 9,2 100,0 ! a EducatIon 1.844 2.180 654 322 5.000 X of Sector 36,9 43,6 13,1 6,4 100,0 i a Health 4.002 705 24 -- 4.731 % of Sector 84,6 14,9 0,5 100,0 a AdministratIon 579 657 103 -- 1.338 a a % of Sector 43,3 49,1 7,7 100,0 a a * ServIces 218 1.079 -- 65 1.362 a a g of Sector 16,0 79,2 4,7 100,0 a I Social Affairs 244 103 -- 17 364 % of Sector 67,2 28,2 4,5 100,0 I TOTAL 23.769 10.547 13.681 17.255 65.251 i I OF TOTAL 36,4 16,2 21,0 26,4 100,0 a 1) Includes forestry projects. 2) Includes fIsherIes projects. SOURCE: IBRO mission, based on donor surveys. - 206 - TABLE 22: CURRENT OPERATIONS OF THE CENTRAL GOVERNMENT, 1977 and 1983-1987 1/ ____ - ----- - _ _ _ _ _ __ _ _ _ _ __-_ - -- - -_- --________________ (mililons of CFAF) 1977 1983 1984 1985 1988 1986 1987 …I…budget prov. budget 2/: -- - - -- - - - - - - - ----- ------ ---- - - ------- - - -- - - - - - - - - - - - - t o 1~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ :Total Revenues 14,880 8,495 18,286 21,341 20,554 16,836 20,550 Tax revenue 14,620 6,465 14,814 17,224 19,431 14,246 18,180 Budgetary 14.620 6,089 13.076 15,916 17,026 12,675 14,280 of which: exports 1,460 281 2,739 3,365 2,733 106 300 CAA 0 378 1,738 1,308 2,405 1,571 3,900 t Nontax revenue 260 2,030 3,452 4,117 1,123 2,590 2,370 iTotal Expenditures 18,220 13,197 23,875 25,187 25,468 24,345 27,687 Salaries (civilian) n.a. 8,599 6,294 8,238 n.a. 9,482 10,160 1 Goods and Services n.a. 3,322 2,418 4,750 n.&. 2,747 5,160 Military n.a. 2,050 9,000 9,397 n.a. 8,400 9,000 I Translers 3/ n.a. 1,024 1,033 1,971 n.a. 1,120 1,490 Interest due n.a. 1,279 1,185 1,123 n.a. 1,388 1,467 I Non-debt CAM expenditures n.e. 19 28 30 n.a. 47 60 I Other current expenditures n.a. -1,098 3,917 -342 n.a. 1,161 350 t IDeficit on a commitment basis (-) -3,340 -4,702 -5,609 -3,826 -4,912 -7,509 -7,137 1 5 S !Change In arrears I (+ - Increase) 10 802 518 691 0 700 -2,200 t Domestic n.a. 202 107 1,008 0 535 -2,040 Treasury n.a. 202 107 1,008 0 535 0 * other n.a. 0 0 0 0 0 0O External n.a. 800 411 -317 0 165 -160 1 !Debt rellef 0 0 0 0 0 0 4941 !Deficit on a cash -3,330 -3,900 -5,091 -3,135 -4,912 -6,809 -8,843 | ' basis (-) 1FInancing 3,330 3,900 5,091 3,135 6,809 5,591 j I External (net) 1,970 3,723 4,246 5,242 5,838 6,791 1 Grants ... 3,723 4,381 5,641 7,072 8,933 1 Amortization pald 0 -135 -399 -1,234 -2,142 1 Domestic (not) 1,360 177 845 -2,107 971 -1,200 , Banking system n.a. -1,176 1,200 -2,018 1,631 -1,200 ' Central Bank n.e. -1,143 1,359 -2,042 1,592 -1,200 IMF (net) n.e. 468 -1,015 1,185 -509 0 X Exceptional SMR advance n.a. 0 2.003 -1,118 -691 -200 1 * Advance under credit aceling n.a. -955 1,981 -2,186 2,238 0 1 * Deposits n.a. -856 -1,610 77 554 -1,000 1 Commercial banks n.a. -33 -159 26 39 0 1 Nonbanking sector n.a. 1,353 -356 -91 -660 0 1 IFinancing need 0 0 0 0 4,912 0 3,252 1 ----~~~~~~~~~~~~~~- -------------------- 1/ Includes revenues and expenditures of the Caless Autonome d'Amortissement (CAA). 2/ 1987 budget estimated by IMF and IBRD staff. 3/ Includes contrlbutions to internatlonal organizations made by the CAA. SOURCE: The Treasury. - 207 - TABLE 23: BUDGETARY REVENUES OF THE CENTRAL GOVERNMENT, 1983-1987 1/ (millions of CFAF) 1983 1984 1985 1986 1986 1987 budget projected! t I ITOTAL REVENUES 8,119 16,528 20,033 18,149 15,265 16,650 TAX REVENUES 6,089 13,076 15,916 17,026 12,675 14,280 ITaxes on Income and profits 658 1,360 3,050 2,715 3,021 2,600 Personal taxes 609 1,195 2,088 2,050 2,087 1,700 Income tax 442 918 1,620 1,500 1,177 1,200 other 167 277 468 550 910 500 Corporate taxes 49 165 962 665 934 9oo profit tax 2 79 104 50 340 250 minimum fiscal contribution 47 86 858 815 594 650 IFiat tax 139 310 538 453 391 400 ITaxes on goods and services 2,195 3,118 3,707 3,855 3,124 3,410 Domestic turnover tax 142 5'/3 1,342 720 997 1,000 I Unitary tax 1,440 1,379 1,402 2,050 976 1,200 Other taxes and duties 613 1,168 983 1,085 1,151 1,210 livestock sales 1 89 208 100 100 240 vehicles 64 70 92 90 97 100 i apprenticeship tax 0 56 5 77 51 30 property tax 0 0 9 83 76 80 I fish 0 0 10 50 2 101 Insurance policles 38 57 135 130 152 150 patents and licenses 4 403 35 70 79 70 I registratlon fees 209 183 168 130 224 180 I stamp tax 144 152 243 150 205 230 other 153 156 58 205 165 120 ICivic tax 0 0 0 1,200 703 1,000 lInternational trade 3,412 7,865 8,905 8,803 5,863 6,870 I Import dutles 3,131 5,126 5,540 6,070 5,757 6,570 Export duties 281 2,739 3,365 2,733 106 300 ' iOther tax revenues -315 423 -282 0 -427 0 i NON-TAX REVENUES 2,030 3,452 4,117 1,123 2,590 2,370 5 - … IProperty rents 137 125 241 155 171 200 5 1 lAdministrative fees 0 0 107 132 147 220 1 INon-industrial sales 180 407 629 602 591 770 1 I iFlnes 5 27 56 54 33 401 IWIndfall revenues 0 172 317 0 0 0 j 1BEAC profits 445 581 1,008 0 641 540 1 I !Exchange guarantee 1,223 2,107 1,247 0 0 0 ,UDEAC membership fund 0 0 140 0 0 0 1 !Other non-tax revenues 40 33 372 180 1,007 600 i -…__ __ __ __ _--------------------------- - - --…-- ------------------- 1/ Not Including the extrabudgetary revenues of the Calsse Autonome d'Amortissement. SOURCE: The Treasury. - 208 - TABLE 24: BUDGETARY EXPENDITURES OF THE CENTRAL GOVERNMENT, 1983-1987 1/ (millions of CFAF) * I-X^"a=cw=_= N usw aS""""S""= D w eunu^""teReU mu t 1983 1984 1985 1986 1987 prov. projected! a I - - 'CURRENT EXPENDITURES 2/ ERR 22,601 23,543 22,910 26,160 'Salarles (civilian) 6,599 6,294 8,238 9,482 10,160 Central administratlon 6,180 5,756 6,572 7,936 9,720 1 Foreign service 147 160 385 404 400 General staff expenses 272 378 688 507 40 Counterpart funds 3/ 0 0 593 635 0 ,Goods and Services 3,322 2,418 4,750 2,747 5,160 1 Central administration 1,184 767 1,511 477 2,440 I Embassies 220 272 577 549 550 General supplies 392 656 1,176 783 470 I BulIldIng maintenance 321 89 309 75 200 Emergency actlon fund 53 21 115 444 500 j Conference expenses e.g. UDEAC 0 0 0 0 500 Miscellaneous expenses 1,152 613 1,062 419 500 I -,Ml1itary 2,050 9,000 9,397 8,400 9,000 t t iTransfers 980 972 1,500 1,120 1,490 Social transfers 61 122 247 361 370 Contributions to organIzations 210 303 924 759 1,090 I Penslons 683 268 329 0 0 Other transfers 26 279 0 0 30 *. a !interest on domestic public debt 0 0 0 0 0 a ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I WOther expenditures -1,096 3,917 -342 1,161 350 iNet lending 0 0 0 0 O - - - - -------------------------------- ----- - - - - -- - - - - -- - - - - - i/ All capital expenditures In the 1983-1987 period have been externally fInanced. Budgetary expenditures do not Include expenditures by the Calsse Autonome d'Amortissement. 2/ Figures provided by the Ministry of Finance differ slightly from the flgures provided by the Treasury In Table 22. 3/ Counterpart funds of U.S. budget support, used to pay salarles. SOURCE: Ministry of Finance, Direction of the Budget. - 209 - TABLE 25: REVENUES OF THE AUTONOMOUS AMORTIZATION FUND, 1983-1986 -------------------------------------------------------------__-- (millions of CFAF) Source 1983 1984 1985 1986 I I 'Export duty 231 340 200 -- 'Loan guarantee commission -- -- 225 -- 'Tax on edible oils -- -- 88 53 JTax on soap -- -- 27 27 :Unitary tax on beer 97 105 360 678 'Unitary tax on cigarettes 36 75 95 78 5Tax on sugar -- -- 34 93 [Tax on lending 12 58 124 213 "Mlscellaneous taxes -- -- 59 91 'Recovery of arrears -- 1,159 96 71 I I 5Introduced in October 1986 ISuppiemental tax on beer -- -- -- 50 i !Supplemental tax on soft drinks - - 14 i 'Turnover tax on CTT transport - 22 'Livestock export tax I1 IFuel Import tax -- -- -- 111i Beverage Import tax -- -- -- 38 . 31 TOTAL 376 1,737 1,308 1,571 SOURCE: CAA. - 210 - Table 26 - List of Public Sector Establishments A. Mixed Ownership 1. Air Tchad 2. Centrale Pharmaceutique du Tchad (PHARMAT) 3. Societe Tchadienne d'Assurances et de Reassurances (STAR) 4. Societe Textile du Tchad (STT) 5. Societe des Vilecommunications Internationales du Tchad (TIT) 6. Societe Cotonnilre du Tchad (COTONTCHAD) 7. Societe Tchadienne d'Exploitation des Ressources Animales (SOTERA) 8. Socifte Tchadienne pour l'Eau et l'Electricite (STEE) 9. Societe Nationale Sucriere du Tchad (SONASUT) 10. Manufacture des Cigarettes du Tchad (MCT) 11. Laboratoire de Farcha 12. Socifte Industrielle de Materiel Agricole (SIMAT) 13. Societe H-oteliere du Tchad (SHT) 14. Socift6 Tchadienne d'Exploitation H8teliere (SOTEXHO) B. Banks 1. Banque de Developpement du Tchad (BDT) 2. Banque Tchadienne de Credits et de DMpSts (BTCD) 3. Banque Internationale de l'Afrique au Tchad (BIAT) C. 100 Percent State-Owned 1. Abattoir Frigorifique de Farcha 2. Societe Nationale de Production Animale (SONAPA) 3. Societe de Developpement de la Region du Lac Tchad (SODELAC) D. Public Establishments and Funds 1. Caisse de Stabilisation des Prix du Coton (Caisse Coton) 2. Caisse Nationale de Prevoyance sociale (CNPS) 3. Caisse de Regularisation des Prix du Sucre (Caisse Sucre) 4. Caisse Autonome d'Amortissement (CAA) 5. Fonds d'Intervention des Produits Petroliers (Fonds Petroliers) 6. Fonds d'Intervention Rural (FIR) 7. Centre National d'Enseignement Artisanal et des Arts Appliques (CNEAAP) 8. Office de Mise en Valeur de Sategui-Deressia (OMVSD) 9. Office National de la Main d'Oeuvre (ONMO) 10. Office National des Cereales (ONC) 11. Office National des Routes (OFNAR) 12. Office des Anciens Combattants et Victimes de Guerre 13. Office National de l'Hydraulique Pastorale et Villageoise - 211 - 14. Office National du Developpement Rural (ONDR) 15. Magasin General d'Approvisionnement en Produits et Matgriels Vft6rinaires (MA.GA.VET.) 16. Office de la Promotion Industrielle du Tchad (OPI) 17. Office National de Developpement de l'Horticulture (ONDH) 18. Office National des Postes et Thlcommunications (ONPT) 19. Office des Carrieres (OFCAR) TABLE 27: MONETARY AND CREDIT SITUATION, 1982-1988 --------------------------------------------------- (millions of CFAF) 1982 1983 1984 1986 1986 1985 1985 1986 1988 198e 1988 l Dec. Dec. Dec. Mar. Juno Sept. Dec. Mar. June Sept. Dec. 1/1 INot foreign assets 2,622 9,478 24,939 24,730 24,032 24,702 17,088 5,682 6,166 3,646 4,290 I Central bank 3,037 10,087 20,312 21,476 18,780 17,9S7 10,499 (787) (2,989) 831 2,617 I Commercial banks 2,297 2,221 7,430 6,081 9,057 9,648 9,372 9,172 10,947 6,618 4,476 Postal debt -2,812 -2,812 -2,803 -2,808 -2,806 -2,80. -2,803 -2,803 -2,803 -2,803 -2,803 1 I i IDon'stic credit 41,824 43,391 58,428 87,791 84,804 69,873 68,423 79,408 80,934 81,190 82,085 t l Credit to government (not) 11,833 10,938 10,498 9,382 8,910 8,271 3,473 7,184 7,258 8,566 7,061 Centtal bank 9,633 8,648 9,889 8,924 9,785 8,612 6,804 8,706 8,608 8,830 7,908 I Commarcial banks -714 -724 -2,175 -2,570 -5,882 -5,546 -6,338 -4,647 -4,253 -3,191 -3,981 1 i Postal debt 3,014 3,014 3,005 3,008 3,007 3,006 3,005 3,005 3,005 3,116 3,134 1 Credit to the economy 29,991 32,46S 46,930 68,429 67,894 53,802 84,9s0 72,244 73,678 72,636 76,004 of which: COTONTCHAD 18,035 27,032 25,532 21,682 29,563 39,882 40,788 40,788 42,788 I t IMoney and quasi-money 34,649 42,389 67.759 80,699 78,878 71,139 71,898 72,271 74,681 72,163 72,918 Currency hold outside banks 23,809 29,196 44,925 48,161 49,209 47,684 47,354 47,438 48,073 44,982 48,88s Demr,d deposits 9,664 11,657 20,200 29,423 24,361 20,008 20,980 20,820 22,133 23,206 22,876 j Term deposits 1,488 1,838 2,634 3,015 3,318 3,687 3,654 4,013 4,476 3,978 3,578 IMedium and long-term foreign I liabilities 2,377 2,633 2,298 2,037 2,029 1,878 1,828 1,381 1,398 1,153 1,140 1 lothor items (net) 7,320 7,845 11,312 9,886 9,929 11,768 11,965 11,338 10,051 11,421 12,290 1/ End-1988 figures are provisional. SOURCE: Tables 28 and 29. TABLE 28: BEAC (N'DJAMENA) BALANCE SHEET, 1982-1986 (millions of CFAF) 1982 1983 1984 1985 1985 1986 1986 1988 1988 1988 1988 1 Dec. Dec. Dec. Mar. Juno Sept. Dec. Mar. June Sept. Dec. 11 ------------------------------------------------------------------------------------------------------------------------------------------_ IASSETS IForeign assets 5,847 13,458 22,828 23,352 20,438 21,967 14,023 2,681 2,490 4,109 6,539 of which: foreign exchange 2,198 9,632 20,884 21,478 18,688 18,212 11,080 224 1SO 1,884 4,385 of which: French Treasury account 2,002 9,126 20,841 20,970 18,121 17,431 10,742 0 0 1,833 3,919 1 IC1aims on Government 9,962 9,721 12,363 11,000 11,044 11,867 9,S68 10,418 11,202 10,834 10,116 ICIaims on Banks 17,806 17,805 22,381 24,410 26,911 27,640 38,679 46,341 47,877 41,718 42,932 1 Short-term 12,423 12,422 18,978 19,027 21,836 22,417 31,783 41,414 42,948 36,862 38,072 1 Med;um-term 6,383 6,383 6,383 6,383 6,276 6,123 4,898 4,927 4,929 4,888 4,860 1 ------------------------------------------------------------------------------------------------------------------------------------------_ ILIABILITIES | lBonk reserves 1,033 988 1,434 952 653 680 439 477 1,726 8S0 670 1 iCurrency held outside banks 23,609 29,198 44,926 48,161 49,209 47,664 47,364 47,438 48,073 44,982 46,865 6 II IGovernment deposits 419 1,075 2,885 2,078 1,259 3,046 2,782 1,712 2,698 2,204 2,208 1 IForeign libilit;es 2,810 3,391 2,516 1,877 1,656 4,010 3,524 3,448 5,479 3,278 3,922 1 of which: French Treasury account 0 0 0 0 0 0 0 395 1,417 0 0 IMedium- and long-term foreign borrowing 1,999 2,255 1,918 1,859 1,861 1,300 1,260 1,003 1,020 775 762 1 IOther (not) 3,735 4,081 4,084 4,037 4,063 4,885 4,939 6,342 2,818 4,673 6,351 1 ------------------------------------------------------------------------------------------------------------------------------------------ 1/ End-1986 figures are provisional. SOURCE: BEAC (N'djamena), BEAC Bulletin TABLE 29: COMMERCIAL BANXS' CONSOLIDATED BALANCE SHEET, 1982-1986 ------------------------------------------------------------__--- (millions of CFAF) |=-=-= -- ==G====_=-=-=I=-=- ===2-== - __=== - _=_=====--=.__--= ========= -==-2=======… I 1982 1983 1984 198S 1986 198S 1986 198e 1916 1986 1988 1 I Dec. Dec. Dec. Mar. June Sept. Dec. Mar. June Sept. Dec. 1/1 ---------------------------------------------------------------------------------------------------------------------------------------_ lASSETS IForeign assets 3,109 3,033 8,353 6,878 8,885 10,427 10,203 9,990 11,759 6,480 5,443 1 I I IBank reserves 1,033 98S 1,434 962 553 560 439 477 1,726 850 670 IClsics on Covernment 179 179 179 179 179 179 179 212 179 179 177 I 1 9 iCIclms on the private sector 29,991 32,465 45,930 58,429 67,894 53,802 64,950 72,244 73,8678 72,636 75,004 9 Short-tern' 21,180 23,537 3e,872 48,938 48,776 44,744 68,208 63,493 64,812 83,302 65,378 1 M Medium-term 8,269 8,376 8,718 8,949 8,678 8,318 8,200 8,209 8,322 8,791 9,034 1 Long-term 642 542 542 642 642 642 642 642 S42 S42 S42 9 I I [LIABILITIES w I I _ _ __ _ _ I oDemand deposits 9,352 11,3SS 19,998 29,221 24,149 19,806 20,788 20,618 21,931 22,892 22,344 ITerm and savings deposits 1,488 1,838 2,834 3,01S 3,318 3,S67 3,54 4,013 4,475 3,976 3,576 COovernment deposito 893 903 2,354 2,749 8,061 6,726 6,616 4,769 4,432 3,370 4,1S9 IBEAC credit 17,808 17,805 22,381 24,410 28,911 27,540 36,679 46,341 47,877 41,718 42,932 IFore;gn liabilities 812 812 923 817 828 879 831 818 812 982 9a7 I iMed. and long-term foreign borrowing 378 378 378 378 378 378 378 378 378 378 378 I I lOther (net) 3,585 3,764 7,248 6,848 6,888 8,873 7,028 S,998 7,435 6,848 6,939 ---------------------------------------------------------------------------------------------------------------------------------------- 1/ End-1988 figures ar. provisional. SOURCE: BEAC (N'djamena), BEAC Bulletin - 215 - TABLE 30: ACTIVE AND FROZEN CREDITS AND DEPOSITS IN THE BANKING SYSTEM, 1982-1986 …_________ - -_________________--_______--____________- - _-- _____- _____ (millions of CFAF) 1982 1983 1984 1985 1986 1/, |_______________ ________-__--_---- ----- -- -- -- - -- -- -- - -- -- -- - -- -- -- -- - -- -- -- - -- -- -- - … ITotal credits to private sector 29,991 32,455 45,930 64,950 75,004 Frozen 32,833 32,833 32,849 30,458 29,547 Active 2/ -2,842 -378 13,081 34,492 45,457 I I :Total deposits of public and private sectors 11,731 13,894 24,986 30,857 30,078 Frozen 13,209 13,209 12,981 13,185 12,958 Active 2/ -1,478 685 12,005 17,672 17,120 1 !BY MATURITY 3/ 5 t Total credits to private sector 0 32,455 45,930 64,950 75,004 Frozen n.a. 27,173 27,187 24,204 29,547 Short-term n.a. 18,942 18,924 18,496 21,287 Medium-term n.a. 7,689 7,721 5,166 7,718 Long-term n.a. 542 542 542 542 5 Active n.a. 5,282 18,743 40,746 45,457 1 Short-term n.a. 4,595 17,748 37,712 44,091 1 Medium-term n.a. 687 995 3,034 1,366 Long-term n.a. 0 0 0 O I I !Total deposits of private sector 0 12,991 22,632 24,342 25,920 1 I Frozen n.a. 12,984 12,674 12,271 11,121 Demand n.a. 11,353 11,043 10,640 9,611 Term and savings n.a. 1,631 1,631 1,631 1,510 Active n.a. 7 9,958 12,071 14,799 Demand n.a. 2 8,955 10,148 12,733 Term and savings n.a. 5 1,003 1,923 2,066 !Total deposits of public sector 893 903 2,354 6,515 4,158 1 Frozen 891 891 891 891 891 Demand 348 348 348 348 348 Term and savings 543 543 543 543 543 I I a s Active 2 12 1,463 5,624 3,267 Demand n.a. n.a. n.a. n.a. n.a. I Term and savings n.a. n.a. n.a. n.a. n.a. I !Frozen/total credits (%) 109 101 72 47 39 !Frozen/total deposits (%) 113 95 52 43 43 1/ 1986 figures are provisional. 2/ Negative values for active credits and deposits result from unexplained Inaccuracies In the data for total and frozen values. 3/ The sum of credits or deposIts by maturity differs from the total values above due to unexplained Inaccuracies In the data. SOURCE: BEAC (N'dJamena), BEAC Bulletin, BTCD, BIAT, and BTD. - 216 - TABLE 31: DISTRIBUTION OF CREDIT TO THE ECONOMY, 1981-86 (millons of CFAF) 1981 1982 1983 1984 1985 1986 1/11986: % lot total !Agriculture 558 559 559 589 515 151 1 0.2 'Mining 0 6 6 6 6 8 0.0 Manufacturing 6,697 6,814 7,153 8,910 9,874 10,009 14.5 I Food 5,022 5,033 5,055 6,749 7,397 6,980 1 10.1 Textiles 761 872 1,222 1,198 1,718 2,105 3.1 I Other 914 909 876 963 759 924 1 1.3 'Utilities 31 38 38 42 49 29 0.0 !Pubiic works & construction 465 466 504 484 573 777 1.1 ICommerce: retail & wholesale 6,196 6,201 6,508 8,246 9,572 7,785 11.3 General 4,039 4,122 4,193 5,145 5,912 5,081 7.4 1 I Food products 83 80 80 229 286 363 0.5 Raw materials & hardware 137 140 155 218 191 264 1 0.4 1 I Machines & vehlv:Ies 816 569 777 843 723 227 0.3 1 Import & distrlb. of fuels 718 899 949 1,438 2,059 1,567 2.3 I Textiles & apparel 83 81 57 79 86 128 0.2 1 Other 320 310 297 294 315 155 ' 0.2 !Commerce: exports 16,557 15,646 15,614 18,151 37,771 44,841 65.1 1 I Cotton 16,521 15,610 15,578 18,115 37,735 44,488 5 64.6 Other 36 36 36 36 36 353 0.5S * aI !Services 1,272 1,175 1,290 1,016 1,265 3,275 1 4.8 1 Transport 737 715 796 708 794 980 1 1.4 1 Transit & storage 94 90 89 109 160 238 1 0.3 1 I Hotels & restaurants 307 306 308 41 54 75 1 0.1 I Other 134 64 97 158 257 1,982 1 2.9 llndividuals 364 413 494 552 663 921 1 1.3 1 lUnallocated 33 0 0 498 191 1,098 1 1.6 1 I I a :TOTAL: credit to economy 2/ 32,173 31,318 32,166 33,494 60,479 68,892 1 100.0 1 1/ 1986 figures Inclucb short-term credit as of end-1986 and medium- and long-term credit as of end-April, 1986. 1/ Data from the BEAC Bulletin on total credit differ slightly from the totals provided by BEAC (N'djamena) and used In Table 27: Monetary and Credit Sltuation. SOURCE: BEAC BulletIn. - 217 - TABLE 32: OUTSTANDING DEBT OF MAJOR INDUSTRIES TO THE DOMESTIC BANKING SYSTEM, END-1985 AND MID-1986 ------------------------------------- (millions of CFAF) O - -- -- - -- -- -- - -- -- - -- -- -- - -- -- -- - -- -- - -- -- -- - -- -- - December 31, 1985 I'l June 30, 1986 ST 1/ MLT I ST MLT a sr 3r ls ;Unz=C a a: :rm’==ata mam=XXsm=3C nr:as-u __- a- COTONTCHAD 37,408 1,519 1 43,594 278 SONASUT 1,320 500 11 1,312 375 t STT 1,520 191 H 1,394 218 a a~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~. a Brasserle de Logone 355 1,038 1 355 1,356 MCT 110 54 , 71 380 t _____ _____ I: _____ _____ I~~~~~~~~~~~~~~~~~~~~~~~~a All major Industrles 40,713 3,302 01 46,726 2,265 1 Total credIt to the economy 54,399 6,080 1 60,387 7,687 1 _________________________--__------------------------t -----------I----- I COTONTCHAD/total (%) 69 25 , 72 4 1 O Major Industries/total (%) 75 54 0 77 29 ------------------------------------a----------- - --------a___- ST + MLT H ST + MLT a COTONTCHAD/total (%) 64 64 * ~~~~~~~~~~~~~~~~~. . ) I Major IndustrIes/totai (%) 73 72 1/ ST refers to short-term deDt and MLT to medIum- and long-term debt. SOURCE: BEAC, Centrale Recapitulatlve du Tchad, Decembre 1985 and June 1986. TABLE 33: PROJECTED GROSS DOMESTIC PRODUCT BY SECTOR, 1987-1995 --------------------------------------------_--------------__-- (constant 1977 prices) value-added in millions of CFAF 1S87 f 1988 1989 1990 1991 1992 1993 1994 1995 I .I 1PRIMARY 74,028 75,620 77,043 78,859 80,986 83,173 86,741 88,392 91,431 I I Agriculture 53,502 64,601 55,520 66,819 58,417 60,063 62,076 64,169 66,817 I food crops 49,947 60,948 51,965 53,264 54,862 65,608 58,486 60,533 62,954 cotton 3,565 3,555 3,S55 3,6SS 3,sss 3,655 3,591 3,828 3,883 I Livestock 20,528 21,019 21,623 22,040 22,589 23,110 23,665 24,233 24,814 ISECONDARY 28,277 29,s52 30,057 30,700 31,394 32,143 41,870 42,898 43,818 I Manufacturing industries 26,178 26,261 28,540 26,938 27,369 27,834 28,391 29,044 29,770 of which: cotton ginning 4,703 6,018 5,018 6,018 1,018 S,018 5,068 5,119 5,170 Construction and public works 2,003 2,163 2,338 2,535 2,760 2,984 3,237 3,629 3,864 I Mining/petroleum 176 191 206 222 240 269 8,938 8,979 8,986 1 I Electricity *nd water distribution 920 947 978 1,005 1,036 1,068 1,104 1,148 1,1f9 1 s I I o~ ITERTIARY 67,124 68,268 59,432 60,798 62,318 64,001 85,921 e8,228 70,967 t I Trade, transport, A communications 60,659 51,681 62,812 53,822 56,168 58,857 68,367 80,400 82,818 1 Government and other services 6,566 6,686 8,819 6,976 7,151 7,344 7,584 7,829 8,142 1 IGDP at factor cost 159,430 183,338 1e8,632 170,357 174,698 179,318 193,332 199,319 206,207 I Xndirect taxes 981 1,019 1,06S 1,079 1,106 1,152 1,241 1,298 1,341 I’DP at 1977 market price 180,411 164,367 167,587 171,436 176,804 180,470 194,673 200,817 207,648 I I I IQOP deflator 182 191 201 211 221 232 244 268 2689 OGDP at current market price 291,787 313,922 338,012 360,873 388,704 418,870 474,196 613,359 667,e40 II lODP in millions of current US: 912 981 1,050 1,128 1,215 1,309 1,482 1,604 1,743 1 I I ------------------------------------------------------F---------------------- -------------------- -------------------------------------- lExchange rate CFAF/USS 320 v 320 320 320 320 320 320 320 320 | …-------------------------------------------- -------------------------------------------- -------------------------------------------- TABLE 34: NATIONAL ACCOUNTS PROJECTIONS, 1987-1996 (constant 1977 prices) I 1 I(MIMiens of CfAf) 1987 1998 1989 1990 1991 1992 1993 1994 19"S ljroas domestic product 160,411 184,367 167,687 171,436 175,804 180,470 194,673 200,617 207,548 I I Terms of trad, adjustment -3,249 -8,823 -8,3so -2,536 -2,114 -1,837 -1,761 -1,314 -876 lOreos domstic Income 157,162 180,734 164,237 168,900 173,690 178,633 192,812 199,308 206,672 1 1 1 - - INst Imports 65,063 65,490 57,607 62,765 64,476 68,938 67,369 70,017 72,481 IIports of 6NFS 1/ 90,313 89,491 92,680 100,686 103,920 109,906 109,316 113,603 117,710 1 I Exports of ONFS 2/ 34,260 34,001 34,993 37,921 39,444 40,988 41,947 43,486 46,229 1 Rosoturces available 213,215 218,224 221,804 231,866 238,166 247,571 260,181 269,320 279,153 i tInvostment 25,318 28,484 27,748 29,104 30,560 31,510 32,499 33,626 34,589 1 Iconsumption 187,899 189,740 194,058 202,581 207,816 218,061 227,882 236,795 244,5684 I Government consumption 22,840 23,644 24,380 26,260 26,170 28,867 27,729 28,621 29,668 I I Private consumption 166,099 188,198 189,876 177,301 181,448 189,204 199,953 207,174 216,006 1 1Gross domestic savings -30,731 -29,006 -29,819 -33,661 -33,926 -37,428 -34,870 -36,492 -37,892 1 I Not factor service income -1,iS60 -1,422 -1,613 -1,718 -1,868 -2,025 -2,0S7 -2,081 -2,239 1 Net current transfers 7,238 6,895 6,940 7,199 6,671 8,698 6,934 7,409 7,893 1 C0ro-s notional savings -26,059 -23,633 -24,392 -28,180 -29,113 -32,866 -29,99. -31,164 -32,238 1 1Croas national product 16B,851 162,935 168,074 169,718 173,946 178,445 192,168 198,536 206,309 1 C0roas national Incom 156,602 169,312 162,724 167,182 171,832 176e,60 190,755 197,222 204,433 1 I/ Imports of goods and non-factor services. 2/ Exports of goods and non-factor services adjusted for the terms of trade. TABLE 35: MERCHANDISE TRADE PROJECTIONS, 1987-1995 -------------------------------------------------- (millions of USS) _5=-==__ _===_=======____=======_=================_===C=======3==_===____ I 1987 1988 1989 1990 1991 1992 1993 1994 1995 I ---------------------------------------------------------------------------------------------------------------------_ IEXPORTS 113.8 123.3 132.4 142.3 152.4 162.9 173.2 184.3 197.6 I I____ I iCotton fiber 63.1 58.1 62.6 87.9 72.8 77.8 82.1 87.1 V3.0 I {Livestock 39.4 42.3 45.3 48.3 51.7 65.4 59.3 83.3 68.1 I I ITextiles 4.3 4.7 5.0 5.3 5.7 8.1 8.3 6.6 6.8 I I IBeer 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.3 0 lOther exports 16.8 18.0 19.3 20.6 22.0 23.8 25.3 27.2 29.3 I I------------------------------------- -------------------------------------------------------------------------------- I IIMPORTS 264.8 273.7 294.9 317.2 333.9 385.7 363.3 381.8 403.6 I iConsumer goods 82.4 66.8 71.4 78.4 78.4 87.6 86.3 101.3 107.4 I IFood 22.8 22.8 22.9 22.2 19.4 18.4 17.7 18.1 18.8 I II IPetroleum 31.2 33.3 35.7 38.2 40.8 43.7 9.3 10.2 11.3 1 I llndustrial 41.0 43.8 46.9 50.2 63.7 67.5 72.8 75.6 78.9 I I lAid-financed 82.9 91.2 100.4 110.8 122.3 135.2 141.6 148.3 156.0 1 II 1Other imports 14.5 16.0 17.8 19.4 21.3 23.4 26.8 28.4 31.3 I I I I…-- - - - - - - - - - - - -- - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- - - - - - - - - - - - - - - TABLE 38: B.A.LANCE OF PAYMENTS PROJECTIONS, 1987-1995 ---------------------------------------------------- (millions of USS) I 1987 1988- 1989 1990 1991 1992 1993 1994 1996 I I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ )Trade Balance -140.9 -150.5 -182.8 -174.9 -181.5 -202.8 -190.0 -197.5 -20S.9 I Exports. 113.8 123.3 132.4 142.2 162.5 183.0 173.3 184.3 197.6 1 I of which: cotton fiber 63.1 58.1 82.6 87.9 72.8 77.8 82.1 87.1 93.0 1 Imports 254.7 273.7 296.0 317.1 334.0 *i65.8 3e3.3 381.8 403.4 i |Non-factor Services -126.6 -138.8 -147.8 -158.2 -170.6 -184.0 -199.8 -210.7 -234.3 1 Receipts 46.2 49.7 53.2 58.8 80.7 85.0 68.0 71.3 76.6 Payments 172.8 l8.s 200.8 214.8 231.3 249.0 267.8 288.0 309.9 1 I I IFactor Services -10.6 -10.3 -11.3 -12.4 -13.8 -1S.4 -15.9 -1S.6 -18.2 1 Receipts 3.4 3.8 4.3 4.8 5.3 6.0 8.8 7.8 8.8 1 Payments 13.9 14.1 16.8 17.2 19.1 21.4 22.7 24.1 26.8 1 I of which: interest 4.6 4.1 4.9 6.9 7.0 8.4 8.8 9.3 11.0 1 [Transfers 48.7 49.8 51.8 52.2 49.8 50.0 53.8 58.8 64.0 1 I Private (not) -16.9 -18.1 -19.3 -20.7 -22.1 -23.7 -25.4 -27.4 -29.7 I I Public (net) 66.6 67.9 71.1 72.9 71.7 73.7 79.2 86.0 93.7 food old 17.2 15.5 14.4 11.6 6.2 1.7 1.0 1.0 1.0 I budget support 28.3 30.3 32.4 34.8 37.1 39.7 42.8 45.9 49.7 j I other 20.1 22.1. 24.3 28.7 29.4 32.3 36.8 39.1 43.0 ICurrent Account Balance -229.3 -247.8 -269.8 -293.3 -318.3 -362.2 -361.7 -372.1 -394.4 I (excluding public transfers) -294.9 -316.7 -340.9 -386.2 -388.0 -425.9 -430.9 -458.1 -488.1 ) ----------------------------------------------------------------------------------------------------------------------------------_ TA8LE 36: BALANCE OF PAYMENTS PROJECTIONS, 1987-199S (continued) (millions of USS) |e==== = - -=__= __2==_C=-=e======e- _____c=_=-____= = =-_ = I 1987 1998 1989 1990 1991 1992 1993 1984 19596 ----------------------------------------------------------------------------------------------------------------------------- ----_ I -I lOfficial Capital Grants 141.4 161.3 181.9 173.2 186.4 198.3 212.2 227.1 243.0 1 IDirect Invstment 3.S 3.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1 I I IMedium- and Long-term I I Lending (net) 72.4 88.4 99.7 115.0 132.7 146.4 159.6 176.2 193.9 1 Disbursement 78.2 89.9 103.4 118.9 136.7 160.6 166.5 182.0 200.2 Amortization 6.8 3.6 3.7 3.9 4.0 4.1 5.9 5.8 6.3 jShort-torm Lending (not), Errors, I and Omissions 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 O I I iChange in Net Res rves I (-=Increaes) 11.9 6.4 8.2 5.1 -1.8 7.S -20.1 -31.2 -42.6 I Not IMF Resources 7.8 6.2 5.2 0 0 0 0 0 01 I I Change In Oth.r Reerves I (-nincrease) -3.4 -4.0 -4.8 -5.8 -6.8 -7.8 -20.1 -31.2 -42.6 jfinsaclng Cap 7.5 5.2 7.8 10.7 4.8 15.3 0.0 0.0 0.0 1 I It…_____-- - - - - - - - - - - - - - - - - - - - - - - -I TABLE 37: CIVIL SERVICE PERSONNEL AND WAGEBILL, 1985-1986 (wages In *;iI7ons of CFAF) I , .. ... I 1198 1 198B 1 1987 1 OffIc/MinaIstry ……---------------------------…------…-- -------------…------------…-- - ---l----------- ---------- - --------…I I I January I Juno 3 January I June I January I May I I warm staff I wage staff I wages stff I wSe staff waes staff I Wag staff -- - - - - -- ----…----- -- ……-- -…… … … … … … … ……--- - -- - - -- - - -- - ---… -- - -- -- - - - -- - - I .I IPresidency 124.1 740 168.3 858 221.0 988 228.4 1,044 227.7 1,055 249.6 1,114 t IPlanning and Reconstruction 6.7 89 7.1 106 6.1 93 4.7 91 6.4 106 6.8 111 1 ITrad. and Industry 5.6 89 5.6 73 4.8 99 5.1 85 5.8 103 8.1 15S II.O.C.E. (Control. d'Etat) 8.2 77 8.4 99 8.4 148 9.2 119 7.2 112 8.3 108 i 'Secretary Ceneral a National Printshop 4.3 76 6.3 84 2.9 63 5.8 104 6.4 113 8.8 127 ITransport 2.9 34 2.7 36 2.1 31 2.3 34 2.6 39 2.7 40 1 INational Defense (civilien personnel) 8.3 268 8.7 261 6.4 246 404.3 249 804.2 241 604.4 241 1 iFinance and Computer Services 20.6 671 2656 1,09S 39.0 1,236 39.8 1,287 44.3 1,368 45.1 1,378 iPublic Health 17.8 976 47.2 2,808 64.0 2,310 44.2 2,300 47.7 2,392 48.5 2,405 3 IFor;ign Affairs 8.7 139 6.8 146 7.0 141 8.8 126 6.7 126 7.7 135 I IPublic Woeks 10.9 471 12.3 585 14.4 698 14.4 672 11.7 496 18.8 495 I I Justice 6.4 172 12.3 618 14.1 619 11.7 617 13.8 828 13.7 6i8 1 INational Advisory Coiittee 8.2 40 7.7 44 10.1 46 9.2 43 11.1 46 10.0 45 1 llnterior and Administrative Reform 59.3 1,173 71.4 4,428 119.6 4,641 114.5 4,386 112.5 4,288 110.3 4,224 I IC;il Service 3.3 73 3.0 77 3.3 77 3.6 80 3.9 93 3.8 84 1 ISocial Welfare and Prmotion of Women 6.0 139 9.1 252 8.8 263 7.6 278 6.9 252 7.8 294 3 ILabor and Employment 1.9 27 1.4 37 2.4 43 2.4 46 2.4 44 2.6 43 3 llnformation 10.7 214 10.2 258 12.8 265 13.8 283 14.3 271 10.1 286 ITour;sm end the Environmnt 8.4 60w 13.1 1,120 20.9 1,279 18.1 1,083 18.2 1,123 16.6 1,138 IPost and Telecomunications 1.6 10 1.8 19 1.6 10 1.7 17 1.7 17 1.6 1i lAgriculture 10.6 378 29.6 1,214 36.6 1,292 29.0 1,151 30.4 1,130 31.6 1,173 IFood Security 3.1 67 4.2 74 8.3 76 2.4 72 3.1 a6 2.7 6s 3 ILivestock 9.8 348 25.9 1,187 21.8 701 20.9 774 20.7 813 21.3 815 1 3National Education 68.2 1,811 150.1 7,20a 156.9 6,940 176.6 5,331 147.3 5,483 168.8 S,919 3 jUining and Energy 1) 3.2 es 3.3 76 ICulture, Youth, Sport. 2) 6.3 134 8.7 211 I Outside N'djamns 3) 412.0 13,965 I TOTAL 811.0 22,510 827.7 22,676 774.1 21,092 1,172.2 20,091 1,383.4 20,568 1395.8 21,266 I ---- - ---… - - -- -- -- -- -- -- -- - - - --- -- - -- - - -- - - - -----…-…---------------… I --- ---- - -- 1) Prior to 1987, part of the Ministry of Public Works. 2) Prior to 1987, part of the Ministry of National Education. 3) Figures on wages and staff located outside N'djamne are not available by ministry for January, 1986. Total includes a December, 1984 aggregate figure for public servants posted outside N'djasena. SOURCE: Ministry of Finance and Computer Services. a1 . e ,4' n'7 § o :g X <:I S 't r~ ri r i fi W I jgj I 8 01 ii# ;.o I I ft .s~~~ j. j -. | i I I ft e I 3 wA* -! e° i iil . - 414 I g j. ft P HZ I a B .v j l j it liI. ft ft ,-j o * I. r U 2 '4 o @ 8 N D I~~~~~~~~~~~~~~~~~~~~~ ,iV i. I 0 I i*i W j. 4 j .4 r ,* 0 j 1 I 0- 0 01 0 01 .00 >J X S i '4, ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ z TABLE 39: UMIBER OF PRIMARY SCHOOLS, BY TYPE AND BY DISTRICT, 1985/88 ------------------------------------------------------ 5 School Public Private 'Spontaneous* Total Schools with Full I District Schools Schools Schools Schools 8-year Cycle -----------------------------------------------------__-----____-------------------------------------------------------- Chari-Baguirmi (urban) 28 0 0 26 21 Chari-Baguirmi (rural) 69 6 37 112 20 Kanam 91 0 0 91 6 Lae 20 0 0 20 6 B.E.T. 8 0 0 a 0 Cheri 18 0 0 16 16 Bahr-Koh 84 0 0 64 35 1 -Bahr-Sara 52 1 0 63 28 Mandoul 54 1 0 S5 33 Salamat 31 0 0 31 3 I Logone Occidental 50 0 0 S0 33 Ngour-Kossou Zs 0 0 35 28 5 Pend- 89 1 0 89 45 U Nye-Pende 26 0 0 25 15 I La Lim 31 0 0 31 22 1 IMayo-Kobbi East 35 1 0 38 23 Mayo-Kobbi West 48 1 4 63 33 1 Zah-Soo 82 0 10 72 38 5 KabbIa-Illy e8 0 19 87 35 5 I Tandj11 46 0 0 45 32 1 Tchire 41 1 0 42 25 Ouaddal 24 0 0 24 9 I IBltine 20 0 0 20 6 1 Batha 19 0 0 19 3 Guera 84 0 68 130 9 1 Privat, schools 0 30 0 30 29 5 ----------------------------------------------------------------------------------------------------------------------- 5 TOTAL 1068 42 136 1244 544 5 -----I-…--------------------------------------------------------------------------------------------------------------- SOURCE: Ministry of Education TABLE 40: NUMBER OF PRIMARY SCHOOL ENROLLMENTS, TEACHERS AND CLASSROOMS, BY SCHOOL DISTRICT, 1985/88 …==============-=================__==============_====-====================== Sehool I Enrollments I Number of Number of Pupil/teacher Pupil/classroom I | District I Girls Boys Total I Teachers Classrooms Ratio Ratio …I. Chari-Beauirmi (urban) 12,117 20,029 32,146 444 305 72 io0 I Chari-Baguirmi (rural) 8,070 15,461 21,531 245 270 88 80 j Kanem 2,959 7,7-'0 10,899 117 126 91 85 I Lac 1,OO0 2,326 3,378 67 62 SO 64 i B.E.T. 404 875 1,279 25 20 51 84 I Chari 3,984 5,329 9,313 215 165 43 Se 1 Behr-Koh 3,084 10,077 13,141 186 154 71 86 Bahr-Sara 2,477 6,083 8,680 134 125 64 88 i IMandoul 4,876 11,939 18,614 188 188 89 99 Sa lamat 1,588 4,338 5,904 e8 81 89 97 I Logone Occidental 6,384 16,198 21,682 329 301 66 72 Ngour-Kossou 2,989 8,839 11,828 1S7 161 76 78 I Pend- 6,290 17,441 23,731 378 291 63 82 I Nya-Pende 1,818 4,887 6,305 139 103 45 el I La Lim 1,863 6,549 8,402 127 108 68 78 Mayc-Kebbi East 2,222 7,309 9,631 143 144 87 6e lMayo-K.bbi West 4,209 12,102 18,311 287 221 61 74 1 Zah-Soo 4,934 11,708 18,842 249 239 87 70 Kabbia-Illy 3,573 18,410 21,983 218 279 101 79 I Tandjile 2,817 10,195 13,012 180 144 81 90 Tchire 2,508 10,220 12,728 121 137 lOS 93 Ouaddal 1,248 4,454 5,702 130 80 44 71 1 Bl;Itir"e 1,099 3,044 4,143 64 63 es 6e Batha 1,384 3,233 4,817 77 57 80 81 Cuera 6,902 16,507 22,409 230 240 97 93 Private schools 6,927 9,202 18,129 214 203 75 79 I TOTAL 95,323 242,293 337,818 4,886 4,217 72 so I ----------------------------------------------------------------------…--------------------------------------------------------------------- SOURCE: Ministry of Education - 227 - TABLE 41: TEACHER TRAINING ENROLLMENTS, 1984/85 to 1986/87 ---------------------------------------------------------- 1984/85 1985/86 1986/87 -- - - - - - - - - - - -- - - - - - - - - - - ----------------------------- 'Teacher trainees 581 762 878 I Flrst year 295 387 375 Second year 174 252 364 Third year 112 123 139 'Professors 30 35 35 !Tralnees/professors 19 22 25 SOURCE: Ministry of Education - 228 - TABLE 42: EVOLUTION OF PRIMARY SCHOOL ENROLLMENTS, 1967/68 to 1985/86 1-"^--s"- -s,---------""t -"--_-_----..- ....-.-=" I 1 Academic Year Enrollments I l l I 1967/68 157,257 1968/69 159,424 1 1969/70 147,926 1970/71 167,917 1971/72 169,588 1972/73 188,439 1973/74 198,030 t 1974/75 192,725 1975/76 202,180 1976/77 216,768 1977/78 219,191 1978/79 n.a. 1979/80 n.a. 1980/81 n.a. 1981/82 261,259 1982/83 282,398 1983/84 273,188 1984/85 319,191 1985/86 337,616 l l SOURCE: Ministry of Education - 229 - TABLE 43: ADMINISTERED CONSUMER PRICES, 1986 1/ t nmmmmmmm m------------------------------------------------- Price Date of Product Unit (CFAF) last revlew! a Gala beer one 65 cl. bottle 360 10/17/86 t I t I Sugar 1kg cubes 480 4/5/85 Cigarettes one pack Bastos 175 10/17/86 t I one pack Slat Selection 175 a O eone pack Sprint 225 t Sone pack Slat Longue 250 Carbonated drinks one 12 oz. bott;e 110 10/17/86 t Fuel one liter Super 290 9/3/84 one liter Gazoll 270 1 t ~~~~~one liter Petrols 245 t I Electricity first 30 kwh./month 90/kwh 10/9/84 t I I Water first 15 m3/month 105/m3 10/9/84 Bread 200 gram baguette 60 5/27/86 1 C Cotton oll (refined) one liter bottle 545 4/19/86 a a Soap one bar 195 4/10/86 1 Transport Prices vary by region and distance 6/16/84 1 a I t a 1/ All prices are retail ceiling prices for N'Djamena. Source: IBRD mission.