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IndieEconomic activity penalised by floods and threatened by the nationalisation of the oil industry
The government nationalised ExxonMobil's oil assets and exploration licenses in 2023 to prevent the multinational from selling its operations to Savannah Energy, a British company. Having thus regained control of the Doba oil field and the Chad-Cameroon pipeline, the Chadian government risks facing a lack of expertise and financial capacity to manage and develop these infrastructures. This could weaken the sector and discourage foreign investment which is needed for the ageing of the oil fields to maintain production levels. Total fixed capital formation should therefore represent only 0.5% of GDP in 2024, and 0.2% in 2025. The consequences for oil production are likely to appear rapidly because despite an expected increase in production in 2024 to 140,000 barrels per day, oil production could start to decline as early as 2025, falling to 128,000 barrels per day.
In addition, the drop in agricultural production caused by the catastrophic floods in the summer and autumn of 2024 will generate inflationary pressures, already fueled by the 40% rise in fuel prices in February, which will affect private consumption. However, we expect the agricultural sector to recover in 2025, allowing inflation to moderate gradually.
State spending and investment will be constrained by the limited revenues from the oil sector. Public spending is focused on defence and security with a view to combating jihadism on the borders of Nigeria and Cameroon around the Lake Chad region, as well as rebels in the north.
Widening deficits on back of falling oil revenues and substantial public spending
The current account deficit is expected to increase in 2025 due to a weaker trade balance on back of eroding oil revenues. The services deficit will remain high due to the services required by oil industry. However, a reduction in the primary income deficit is expected mainly due to the disappearance of profit repatriations by ExxonMobil. The secondary income account, which reflects flows of development aid, should remain in surplus.
The public deficit is expected to widen in 2025 owing to increased public spending on education, health, public employment and electricity and food subsidies. Added to this are major road, water and energy infrastructure projects, as well as emergency spending linked to the floods. Despite budget rationalisation efforts supported by the IMF, tax revenues will remain insufficient to cover these expenditures. Chad currently benefits from an IMF Extended Credit Facility (ECF), approved at the end of 2021 for three years and totaling USD 570.75 million, of which USD 149.3 million had been disbursed in October 2024. The third review of the program, carried out in May 2023, was not validated due to significant overruns in civil and military expenditure. This has suspended any further disbursements. With the program due to expire in December 2024, Chad will probably seek to negotiate a new agreement with the IMF to meet its financing needs.
In December 2022, Chad signed an agreement to reschedule its external public debt until the end of 2024; this consists of approximately half its public debt. This share is split between bilateral debt (38%), multilateral debt (47%) and commercial debt mainly held by Glencore (15%, but generating more than half of its service).
A no-surprises election in 2024 amid a tense security and humanitarian context
Mahamat Idriss Déby was elected President of Chad in May 2024 with 61% of the vote in a hotly contested election marked by limited opposition and the elimination of his main candidates, including Yaya Dillo Djerou, who was killed by security forces. This election put an end to the Transitional Military Council (CMT) set up in April 2021 by the army and Mahamat Idriss Déby after the death of his father who had been killed by rebels. However, the country remains deeply politically and socially unstable, with a discontented population facing insecurity and poverty. The legislative, provincial and municipal elections scheduled for 29 December 2024, which have been largely boycotted by the opposition, are expected to be won by the Coalition for a United Chad, led by the President.
The government faces serious security risks, although clashes between rebel groups and the army have become much less intense since 2021. Major threats include the Front pour l'alternance et la concorde au Tchad (FACT), which broke the ceasefire in August 2023, and the Conseil de commandement militaire pour le salut de la République (CCMSR), which is active on the Libyan border and involved in the conflict in Sudanese Darfur. In addition, Islamist threats persist in the Lake Chad region, where groups affiliated to the Islamic State and Boko Haram continue their operations. Overexploitation and demographic growth are intensifying competition for water resources, exacerbating conflicts between herders from the north who bring their herds into contact with farming populations in the centre and south of the country.
Chad continues to maintain close ties with France, a key security partner since the deployment of a thousand French soldiers in 1983. France is the last country in the Sahel to maintain links with Paris, which supported Mahamat Idriss Déby's accession to power after the death of his father. However, this does not rule out relations with Russia. On a regional level, the Chadian government remains officially neutral in the Sudanese civil war, seeking to avoid any spillover. However, Sudan accuses Chad of supplying the paramilitary Rapid Support Forces (RSF), many Chadian Rizegat and Arab border communities fighting for the RSF. The civil war in Sudan is causing a humanitarian crisis in Chad, with more than 623,000 refugees arriving in the country in 2024, including 173,000 Chadian expatriates.
