Chad's economy is characterized by a large primary sector dominated by the oil sector, an embryonic secondary sector and a tertiary sector, which employs around 20% of the active population. Given the weakness of its financial capacities and the scale of its financing needs in the fight against climate change, Chad ranks first among the countries that could benefit from international solidarity by the global climate funds. However, in order to do so it is important that Chad must strengthen its institutional and regulatory framework for the fight against climate change.
Mobilizing finance and have a strong institutional framework to manage those is a challenge for the country. Chad is confronted with an interplay of multidimensional development challenges that have resulted in low economic growth, limited opportunities, and fragility [1].This stagnation is perpetuated by the negative feedback loops produced by characteristics of the country, which are the low density, the long distances, and a profound social, cultural, and ethnic divisions that characterize the economic geography of the region; furthermore, climate change and conflict exacerbate such development challenges making access and management of finances difficult to cope with [1].
Key policies and governance approach
Efforts to improve the institutional and regulatory framework for the environment and climate change sector have been carried out in recent months (approval in October 2016 by the Green Climate Fund of the Readiness program of Chad) through and from, the preparation of the accreditation of the Special Fund for the Environment (FSE), from the Adaptation Fund, the national dialogue for GEF-7, etc. The search for innovative financing through the public-private partnership could be carried out, as well as could locally financing through the partnership of banking institutions, microcredits and local communities. (NSLCC 2017).
However, the external current account deficit of the country fell from 6.6% to 4.7% between 2018 and 2019 as a result of the hike in oil prices and strong oil export performance. The government is continuing its fiscal accommodation efforts by mobilizing revenue and controlling recurrent costs [1].
In June 2018, Chad finalized the restructuring of its oil-collateralized loan with the Glencore petroleum company. This agreement and the planned clearance of arrears is expected to reduce the public debt-to-GDP ratio from 51.9% in 2017 to 41.2% in 2020. The risk of external debt overhang nevertheless remains high. In the medium term, oil exports will remain a key driver of GDP growth. Moreover, the privatization of the public cotton company is expected to considerably improve the contribution of the agricultural sector to GDP growth
Successes and remaining challenges
In Chad, implementing national growth and poverty reduction policy remains a challenge. This applies especially to the core elements of good governance and rural development. The World Bank is planning to carry out an assessment of the economic and social situation in Chad to prepare its next development support strategy for Chad. The current CPF covers the period 2016-2020 and, aligned with the government’s priorities, it aims at achieving the following objectives: (i) improve public resources management, (ii) boost agricultural productivity and value chains; (iii) and strengthen human capital (health, nutrition, education) and reduce vulnerability [1].
Initiatives and Development Plans
In Chad, for the period 2014-2020, the EU has allocated €811.5 million in development cooperation to support food, nutritional security, rural development, sustainable management of natural resources and the consolidation of the rule of law and civil society [2]. These focuses aim to improve: the public finances (support for the modernisation of public finances), the business environment (support for trade),the quality and competitiveness of Chadian products (support for key sectors: livestock, acacia gum, etc.), and the transparency in the management of oil resources (support for Chad's adhesion to the Extractive Industries Transparency Initiative)[2].
In the context of its trade relationships with the European Union, Chad also benefits from the “Everything but Arms” initiative granted to the least developed countries, allowing access to the European market without customs duties or quantitative restrictions. However, this framework is being modified by the Cotonou Agreement signed in 2000 brought an end to the Generalized System of Preferences [3].
Furthermore, in collaboration with the World Bank, IFC is helping the Chadian government with the implementation of reforms needed to improve the business climate. [1] . IFC is also exploring the possibility of strengthening agricultural sectors such as cotton, gum Arabic, sesame, and livestock, as well as providing technical advisory services and assistance to improve access to financing in Chad [1].
Goals and Ambitions
Chad’s Vision 2030 is to be an emerging country with a middle-income economy, generated by diverse and sustainable growth sources and value adding activities [4]. This vision is aligned to the main objective of its axis 4, which is to improve the living conditions of the population and reduce social inequalities while ensuring the preservation of natural resources and adaptation to climate change[5].
The financing of this strategy will be done through the national budget. Due to the scarcity of national public funds following the oil crisis, the mobilization of funds for the protection of the environment and the fight against climate change can be done through the multilateral institutions that are such as the UNFCCC, the. World Bank, the GEF, UNDP, UNEP, etc
- A specific approach is needed in terms of access to financial resources to achieve the goals of the country's NDC.
- An investment plan will define the priorities and the funding program necessary for the implementation of the various measures.
- Chad will need a combination of national budget allocations, external funding sources and private sector financing.
- The climate investment plan will estimate resource needs and propose additional financial mechanisms and instruments needed to finance the NDC. Thereby that mechanisms to encourage or mobilize the private sector in order to promote the mobilization of resources. It will also help to propose a mechanism for monitoring the investments made to implementation of the NDC and to propose a framework for the annual report of funds mobilized and investments made for the implementation of the revised NDC.
- In addition, and in order to strengthen climate governance within the government of Chad, the feasibility of implementing a Chadian Climate Fund will be explored on the basis of experiences national and international organizations that could be responsible for mobilizing funding opportunities for the implementation of NDC activities and other activities related to mitigation and long-term climate change adaptation.
- Establish an integrated financing framework for the PND in order to increase the mobilization of resources for the development of the country in accordance with the Addis Ababa Action Agenda, for the financing of sustainable development.
[1] The World Bank (2020). The World Bank in Chad - Overview.
[2] INTPA, EC (2020). EU announces €194 million additional support to the Sahel.
[3] Delegation of the European Union to Uzbekistan (2016). Chad and the EU.
[5] Ministry of the Economy and Development Planning, REPUBLIC OF CHAD (2017). Vision 2030.