The International Monetary Fund (IMF) and the World Bank’s International Development Association (IDA) have decided to support $1.1bn in total debt relief for Chad, of which $1bn is expected to be delivered by multilateral creditors and the remainder by bilateral and commercial creditors.

The Boards of Directors of both institutions determined that Chad has made satisfactory progress in meeting the requirements to reach the completion point under the Heavily Indebted Poor Countries (HIPC) Initiative, the stage at which the HIPC debt relief becomes irrevocable and the country will benefit from the Multilateral Debt Relief Initiative (MDRI).

Mauricio Villafuerte, IMF mission chief for Chad, said reaching the HIPC completion point represents an important achievement and milestone for Chad.

“It reflects the significant improvement in economic management in recent years, including during the period covered by a staff monitored program (SMP) approved by Fund management in July 2013 and the ongoing three-year ECF-supported program approved by the Executive Board in August 2014,” he said.

“It will also help Chad allocate more resources for poverty reduction and the promotion of economic growth. Sound macroeconomic management will remain critical after the completion point for Chad to reap the full benefits of the debt relief,” he added.

Chad has taken the key decisions, actions and measures required to fulfill all but four of the 15 triggers, including the participatory preparation of a full Poverty Reduction Strategy Paper (PRSP) and its satisfactory implementation for at least one year, and the continued maintenance of macroeconomic stability as evidenced by broadly satisfactory implementation of the Extended Credit Facility (ECF) supported program.

Debt relief under the HIPC Initiative from all Chad’s creditors was estimated at $170.1m in end-2000 present value terms.

Debt relief from the IMF would total $18m and from the World Bank’s IDA, $68.1m.

After reaching the HIPC completion point, Chad also becomes eligible for further nominal debt service reduction from IDA ($509m) and the African Development Fund ($236m) under the MDRI.

Paul Noumba Um, World Bank Country Director for Chad, said: “The attainment of the HIPC completion point opens a new development era for Chad. It acknowledges the many efforts accomplished by Chad to exit from a difficult decade of conflict and instability, and allows refocusing attention and resources on Chad’s forward looking emergence agenda.”

“In the next months, the World Bank will present its new Country Partnership Framework to support Chad’s aspirations over the period 2016-20, notably in terms of rural development, health, education, social protection, and governance,” he said.

Full delivery of debt relief (HIPC Initiative, MDRI, and additional bilateral assistance at the completion point) will significantly reduce the debt burden of Chad.

The present value of debt-to-exports ratio would fall from 55.1% at end-2013 to 31.3% at end-2015.
It is projected to fall further to 12.5% at end-2019.

However, the future evolution of these indicators will be sensitive to the macroeconomic developments, particularly petroleum exports and the terms of new external financing, as well as government policy.

In particular, sound macroeconomic management, further progress with export diversification, and strengthened debt management will be important for debt sustainability.

Chad is the 36th country to reach the completion point under the HIPC Initiative.