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Chad Table of Contents

Chad

THE NATIONAL DEBT AND FOREIGN ASSISTANCE

National Debt

The CAA was responsible for servicing Chad's external public debt. The CAA collected revenues not included in the government budget to service the debt. Those revenues consisted mostly of unit taxes on manufactured goods and taxes on the profits of industry, banks, and the surpluses of other special funds. In 1985 and 1986, losses of revenues from the cotton sector also affected the CAA's revenues. In 1986 the CAA compensated by imposing new taxes on other industries, and it also strengthened its administration and collection abilities.

From 1980 to 1985, Chad's annual external debt averaged US$169 million (see table 7, Appendix A). In 1987 Chad's public and publicly guaranteed debt (outstanding and disbursed) stood at about US$206 million, amounting to 25 percent of GDP. Three-fourths of the debt was given on concessional terms; two-thirds of this amount was owed to multilateral creditors, and one-third was owed to bilateral donors. One-fourth of the debt represented nonconcessional loans that predated the 1979-82 conflict and were owed to suppliers, private financial institutions, and certain bilateral creditors, such as Kuwait. Even before hostilities escalated in 1979, Chad's credit-worthiness was low and through 1987 was insufficient to tap private financial markets. Only official creditors lent to Chad. The volume of lending was low in the 1983-85 period, but in 1986 the World Bank resumed lending, and France increased its lending. In 1987 lending on concessional terms to Chad reached pre-1977 levels of about US$40 million a year. Chad's actual debt service ratio--as a proportion of export earnings on goods and services--was low in 1986, standing at 1.5 percent. When payments on arrears and the BEAC payments to the IMF (which were to be transferred to the CAA in 1988) were added, Chad's total debt service ratio stood at between 5 and 7 percent. Although considered low by most standards, this situation created a heavy burden for the CAA and the Chadian government. For the 1987-89 period, Chad faced scheduled debt service on existing loans of between US$10 and US$13 million per year, more than double the amount the government was able to pay in the 1985-87 period. Debt service of US$10 million represented about 15 percent of expected government revenues in 1987, not including unsettled existing arrears. The CAA's efforts to increase revenues by instituting new taxes and by improving administration were encouraging throughout 1987. In late 1987, observers were unable to predict how Chad would cope with its long-term debt problems, especially in the face of a shrinking tax base, which was exacerbated by difficulties in the cotton industry.

Data as of December 1988