Country Risk Rating

A high-risk political and economic situation and an often very difficult business environment can have a very significant impact on corporate payment behavior. Corporate default probability is very high. - Source: Coface

Business Climate Rating

The business environment is very difficult. Corporate financial information is rarely available and when available usually unreliable. The legal system makes debt collection very unpredictable. The institutional framework has very serious weaknesses. Intercompany transactions can thus be very difficult to manage in the highly risky environments rated D.


  • Exploitation of new oil fields
  • Development potential of the agricultural sector


  • Over-reliance on oil
  • Business climate not conducive to thriving private sector; high level of corruption
  • Geographic isolation
  • Worsening security conditions at both national and regional levels (role of Boko Haram)

Current Trends

Slightly Improved Growth Prospects

Activity is expected to pick up in 2018. The climate of insecurity linked to the activities of terrorist group Boko Haram will keep adversely impacting the agricultural sector in the west of the country. However, agriculture (12% of GDP) is expected to sustain growth, given the government’s plans to support cotton production in order to diversify the economy. In its five-year development plan (2016-2020), the government shows its resolve to rebalance the economy by taking full account of the country’s agricultural potential. This plan also includes sections on improving human capital, governance and social protection. Nonetheless, the government’s ambitions will likely be constrained by weak public accounts. Tax receipts – 50% of which derive from oil production – will continue to be hit by ongoing difficulties in this sector, which has failed to reach its pre-2014 levels, notably due to reduced investment by Glencore. However, the oil industry remains dominant (one-fifth of GDP) and the exploitation of new oil fields in the south of the country will boost activity. Oil company investments are expected to continue to rise slightly in the form of foreign direct investments (3.2% of GDP in 2017 according to IMF estimates). Finally, private consumption will be hit by public spending cuts and rising inflation, even though the latter will be contained due to the CFA franc’s fixed exchange rate against the euro.

The Failure of Debt Restructuring Negotiations Weakens Debt Profile and Public Accounts

 Budgetary income, half of which comes from oil revenues, is expected to increase, in line with the evolution of oil prices and the start-up of new oil fields. Fiscal assistance from various donors remains a significant source of income. The tax base is extremely narrow, and so the government has to raise its taxes on foreign investors – thus weakening the business climate. Moreover, regional unrest has led to higher spending on security, which prevents the government from allocating more spending to sustaining growth. Due to these fiscal difficulties, in the summer of 2017 the IMF approved a three-year USD 312 million arrangement to “restore macroeconomic stability and lay the foundation for robust and inclusive growth”. About USD 49 million was immediately disbursed with the remaining amount due to be phased in over the duration of the program. However, the next disbursement, which is contingent to the outcome of debt restructuring negotiations, is already delayed and could be suspended. Indeed, the talks over oil-backed debt with Glencore, which represents more than a billion dollars, are deadlocked and jeopardize the sustainability of the public debt. With over 80% of the debt service owed to the oil company, and as external arrears accumulates, default of payments looms if an agreement is not found in 2018.

The current account deficit is expected to widen. Despite weak domestic demand and, in particular, weak investment, imports are expected to increase slightly as economic activity picks up. The precariousness of oil production (almost 90% of exports) and terrorism in the Lake Chad region, which depends on agriculture, will hit exports of oil and agriculture.

Strong Regional Tensions and a Degraded Business Climate

Idriss Déby, president since 1991, was re-elected in 2016 for a fifth five-year term. After announcing in February 2017 that the parliamentary elections would be delayed because of insufficient public funds, the president said that they will be held in 2018. This electoral uncertainty coupled with weak economic performance could lead to further social discontent. In addition, regional tensions (Sudan, Central African Republic) have sharply increased the influx of refugees in the country, while attacks by Boko Haram have resulted in displacements of people within the country. The terrorist group has conducted a growing number of suicide attacks since 2015. The military co-operation among the four countries on the Lake Chad border (Cameroon, Niger, Nigeria, Chad) and France aimed at eradicating its influence remains strong. Chad is therefore very active diplomatically, as the country is also a founder member of the G5 Sahel and currently presides over the Central African Economic and Monetary Community (CEMAC).

The humanitarian situation in the country is an increasing cause for concern, with 3.5 million people affected by food insecurity in 2016, according to UN estimates. Finally, Chad is among the countries with the most difficult business climate (180th out of 190 countries in the World Bank’s most recent Doing Business rankings). Corruption is endemic and does not appear to be improving, with the country ranked 159th on Transparency International’s index (176 countries assessed).


Coface (01/2018)