Country Report Chad September 2008

Outlook for 2008-09

The security situation in Chad is expected to remain extremely fragile. The deployment of EU peacekeepers will continue to bolster the security situation for humanitarian and UN workers. However, armed groups have already engaged EU troops in combat and will continue to do so. Oil output is forecast to decline in 2008-09, which will slow economic growth, especially in 2009, when global prices fall. Economic policy will continue to be influenced by political conditions and trends in the oil sector. Continued insecurity will hit agricultural output. As a result, real GDP growth will remain slow, at 1.7% in 2008 and 1.3% in 2009.

The political scene

Rebel attacks were carried out in the east of the country in June-August. Some humanitarian agencies suspended operations in July as insecurity continued to worsen. Sudan offered in mid-July to renew diplomatic ties with Chad, but mutual suspicions and mistrust have persisted. The finance minister, Abakar Mallah Mourcha, was dismissed in August for alleged embezzlement. Also in August, death sentences were passed in absentia against 12 rebel opposition leaders, including a former president, Hissen Habre, who faces charges in Senegal of crimes against humanity.

Economic policy

On July 25th the legislature amended the 2008 budget in the light of the impact of the fighting of February 2008. Expenditure was revised upwards from the CFAfr774.5bn (US$1.6bn) budgeted after previous amendments to the 2008 budget (made on March 8th) to CFAfr905bn. Some extra spending was allocated for reconstruction costs, but most of the additional expenditure is believed to be on armaments. Altogether, the revisions slashed the projected budget surplus from an original estimate of CFAfr145bn to just CFAfr7bn.

The domestic economy

Agricultural production has dropped sharply. Rural insecurity has prevented internally displaced people from returning to harvest this year's crop and to sow next year's. New deposits of crude oil have been discovered in the Bongor basin. Oil production averaged 44,000 barrels/day (b/d) in 2007 and 130,700 b/d in the first half of 2008.

Foreign trade and payments

It appears that the World Bank has suspended co-operation with the Chadian authorities in response to their failure both to honour loan repayments and to manage oil revenue as agreed. The US remained the single-largest recipient of Chadian exports in 2007, and France was the largest source of imports.