- Basic data
- Public finances and the state budget
- Banking system
- Tax System
The economy of Chad is and will continue to be oriented towards agriculture and commodities without higher added value (climate-dependent crop production, pastoralism, mineral resources). It will thus remain very vulnerable and dependent on external influences. In addition, it faces huge problems (neglected infrastructure, unfavorable investment climate, corruption) that cannot be overcome quickly. Chad will thus continue to remain one of the poorest countries in the world. Chad’s recovery from the pandemic was hindered in 2021 by the weak security situation after the president’s death, which limited the development of the domestic economy, hampered the expected influx of investments and international donor support. The increase in economic activity in 2020 is driven by the introduction of new extraction technologies in the oil sector and the opening of new fields, which will further increase revenues. Privatization of the oil industry led to greater investment. The privatization of the cotton semi-state company CotonTchad société nouvelle in 2018 paved the way to increase the sector’s contribution to the country’s economic growth. We expect an increase in cotton production in the coming years. However, the security situation together with the refugee crisis continue to constitute serious obstacles to the development of small businesses, transport, agriculture and livestock breeding. This will be partially offset by increased public investment in construction and manufacturing. The development risk would then be further deterioration of security conditions, which would disrupt cross-border trade, and drought, which would negatively affect agriculture. The main economic goals are to increase food production, diversify the economy (development of the agri-food sector), improve water supply and create job opportunities. The CFA franc will remain pegged to the EUR at a rate of 655.96 and will therefore fluctuate against the USD in relation to the development of the EUR. Inflation is expected to be in the range of 2.5-3%. The economic situation will also be affected by crises in the surrounding countries (Libya, Sudan, Central African Republic and Nigeria). Chad has been actively involved in solving the crisis in Mali, the Central African Republic and in the fight against Boko Haram in Nigeria, but trade with neighboring countries suffers from these crises (Nigeria is, for example, a large customer of beef cattle from Chad). Inflation reached -0.6% in 2021 partly due to Chad’s membership of the XAF zone. The current account balance will depend on oil prices. Restructuring of the national debt of the G20 countries is planned. In 2021, consumer prices and inflation rose by an average of 0.4%, in line with projected increases in regional food prices. A more significant increase in inflation will be prevented by the appreciation of the XAF against the USD and the drop in world oil prices. In 2020, the main imports from Chad were machinery and transport equipment, chemicals and related products, food and live animals, miscellaneous products and raw materials, non-edible except for fuel. The main export products of Chad are mineral fuels (lubricants and related materials, raw materials (non-edible except fuels) and machinery and transport equipment. Check ebizdir for economical facts of Chad.
|GDP growth (%)||3.3||-0.9||0.7||2.5||2.7|
|Export of goods (billion USD)||3.9||3.2||3.6||4.1||4.1|
|Import of goods (billion USD)||2||2||2.3||2.4||2.4|
|Trade Balance (Billion USD)||1.2||-0.1||0.6||1||0.9|
|Industrial production (% change)||ON||ON||ON||ON||ON|
|OECD export risk||07.VII||07.VII||07.VII||ON||ON|
Source: EIU, OECD, IMD
Public finance and state budget
|State budget balance (% of GDP)||-1|
|Public debt (% of GDP)||49.9|
|Current account balance (billion USD)||-0.9|
¾ of Chad’s export income comes from oil, trends in oil production and prices will therefore remain decisive for Chad’s trade surplus. In 2019, slightly higher production offset falling global oil prices and is estimated to have led to an increase in export earnings. Higher export earnings from cotton should offset further declines in world oil prices in the coming period. In 2020-21, we expect an increase in import expenditure, which reflects slightly stronger domestic demand, which is a consequence of the revival of economic activity and also higher imports of capital goods. The trade surplus expressed as a percentage of GDP could thus decrease from an estimated 9.2% in 2019 to 7.2% in 2021 as import growth exceeds export growth. We expect the fiscal deficit to narrow in 2021-22, after reaching an estimated 3% of GDP in 2020. Public finances will continue to depend heavily on oil production volumes and prices, with oil accounting for around 40% of fiscal revenue. Oil revenues will rise in 2021-22, reflecting higher prices and sluggish production growth.
We expect the authorities to continue to work to diversify the revenue base to boost revenue, but progress will be slow and non-oil revenue will increase only gradually. We expect spending to decline as a share of GDP in 2021-22, but only slowly. Expenditures linked to deteriorating security conditions and planned presidential and legislative elections in 2021 will continue to keep spending high, as will the influx of large numbers of refugees from neighboring countries due to regional insecurity. Overall, we expect the fiscal deficit to decrease to 1.6% of GDP in 2021 and to 1.2% of GDP in 2022. The deficit will be financed by a combination of concessional loans on concessional terms and the issuance of domestic debt.
The banking system of Chad is controlled by the joint central bank of the Central African countries – Banque des Etats de l’Afrique Centrale (BEAC), based in Yaoundé. It oversees the activities of banks in the other five member countries of the Central African Integration Group (Congo, Central African Republic, Gabon, Cameroon and Equatorial Guinea). The Central Bank of BEAC issues currency and oversees liquidity within the Central African Monetary Zone, basically copying the decisions of the European Central Bank in its monetary policy. The Central African Franc is firmly anchored to the Euro, the exchange rate is 655.65 CFA/Euro. The exchange rate to the dollar fluctuates. In 1993, the BEAC member countries also created a transnational institution for banking supervision – COBAC (Commission Bancairede l’Afrique Centrale), which has special powers for the regulation of activities and compliance with discipline for all banking institutions of the CEMAC integration group. Like all other signatories to the CFA Franc Zone in Africa (1948), Chad is also required to hold at least 60% of its foreign reserves in a “compte d’operation” account managed in Paris.
The Chadian banking system is currently small and provides only basic services (letters of credit, short-term loans, financial transfers, savings and money exchange). Loans are provided at a high interest rate (up to 16-25% for short-term loans). The use of credit cards is very limited.
The following major banks operate in the country: •Commercial Bank Tchad (CBT, formerly Banque de Developpement Tchadienne) •Ecobank •Société Générale des Banques (SGB) •Oranbank (formerly Financial Bank Tchad) •UBA Tchad (Nigerian) •Banque Internationale pour l’ Afrique au Tchad (BIAT) •Banque Sahelo Saharienne pour l’investissement et le Commerce •Banque Commercial du Chari (BCC) •Banque agricole et commerciale (Chad-Sudan Investment Bank)
These banks have an A+/A ranking, so they meet international banking standards.
Chad’s tax system is slowly adapting to the unified system within the CEMAC countries, but it is still very complicated (ranked 186th out of 189 countries evaluated) and changes with each newly adopted budget. There are two extremes, either an entrepreneur does not pay any taxes thanks to his activity in the informal sector, while legally operating businesses, on the contrary, pay excessively high taxes. The main source of tax revenue is oil companies. Companies registered in Chad and branches of non-resident companies are subject to tax obligations. Corporate tax is paid from the profit generated in Chad. Resident natural persons (natives and foreigners staying in Chad for more than 183 days a year) should pay income tax in Chad based on worldwide income. Others pay tax only on income in Chad. A foreigner is considered a resident,
The Chadian tax system consists of the following basic direct and indirect taxes and employee social insurance:
- Personal income tax is progressive according to income in the range of 20-60%
- Corporate tax – 40% or 1.5% of turnover
- Value Added Tax (VAT) – 18%, selected pharmaceuticals, medical devices and supplies, glasses, meat and poultry, milk, bread, books and magazines, oil exploration equipment, renewable energy production equipment, water and electricity, bricks and social services have zero VAT Business is burdened by a number of other payments and levies (real estate tax 10%, land tax 12%, business license tax 0.1% of turnover, withholding tax 20%, apprentice tax…). The employer contributes 16.5% of the salary to the employee’s social insurance.
No major changes in tax rates are planned for the future.