Chad: Economy

More than 80% of the work force is involved in agriculture--small-scale subsistence farming, herding, and fishing. Like other developing countries, Chad has a small formal sector and a large, thriving informal sector. In 2010, Chad's GDP was estimated at approximately $8.6 billion, distributed among agriculture, industry, and services. Chad is highly dependent on foreign assistance. Its principal donors include the European Union, France, and the multilateral lending agencies. Petroleum, cotton, cattle, and gum arabic are Chad's major exports.

Since 2000, a consortium of three oil companies--U.S.-based Exxon Mobil and Chevron, joined by the Malaysian Petronas company--has been extracting oil from wells in the south of Chad and sending it to market via a pipeline from Chad through Cameroon to the Gulf of Guinea. The consortium has invested more than $7 billion in the Chad-Cameroon petroleum pipeline project, which originally had support from the World Bank in the form of Bank loans to Chad and Cameroon to enable them to participate in the project. In return, the Chad Government agreed to a set of unique mechanisms for World Bank, private sector, government, and civil society collaboration to guarantee that future oil revenues would benefit local populations and result in poverty alleviation.

Economically, the project has been extremely successful, rewarding both the consortium and the Chad Government with profits well beyond those initially expected by either one. Chad’s oil exports to the U.S. make it the sixth-leading African exporting country to the U.S. However, the poverty alleviation goals of the agreement were not met, due in part to Chad’s emphasis on defense expenditures rather than on socio-economic development per the agreement. The agreement was renegotiated in 2006, but the Bank did not judge that Chad’s performance under the second agreement was acceptable. Consequently, the Bank decided in 2008 to withdraw from the Chad petroleum sector and asked the Chad Government for early repayment of its loans. The Chad Government complied in 2009. The Bank and Chad continued to cooperate in sectors other than petroleum through 2010, when the World Bank sent a resident representative to Chad to broaden cooperation.

Primary markets for Chadian non-petroleum exports include neighboring Cameroon and Nigeria and France, Germany, and Portugal. Cotton remains an important export. The national cotton company--CotonTchad--is planned for privatization. The parastatal has been poorly managed and cotton yields have been steadily declining over the past several years.

The other major export is livestock--cattle, sheep, goats, and, camels--driven to market or skins shipped to market in neighboring countries, particularly Nigeria. Chad also sells smoked and dried fish to its neighbors and exports several million dollars worth of gum arabic to Europe and the United States each year. Other food crops include millet, sorghum, peanuts, rice, sweet potatoes, manioc, cassava, and yams. Chad's economic performance outside the oil sector continues to depend on fluctuations in rainfall and in prices of its principal export commodities, especially cotton.

Public revenue management and corruption continue to plague Chad. The country reached a decision point in 2001 for Heavily Indebted Poor Countries (HIPC) debt relief and was receiving assistance from the International Monetary Fund (IMF) and World Bank. By 2002, however, the country needed an extension on the IMF Poverty Reduction and Growth Facility (PRGF) program's performance indicators. It continued to receive assistance from the international financial institutions but struggled to meet the program's financial targets, and the Fund ceased the program for non-performance. The IMF renewed Fund-managed programs with Chad in 2008 and 2009, but the country was unable to meet the targets and is not currently eligible to received IMF or HIPC assistance.

Sources:

CIA World Factbook (January 2012)
U.S. Dept. of State Country Background Notes ( January 2012)

Glossary