Chad 2021 Economic Update : Recovering from Shocks - Improving Macro-Fiscal Sustainability to Rebuild Better

The COVID-19 pandemic has significantly disrupted Chad's economic recovery, which started in 2018. GDP contracted by 0.9 percent in 2020. Agriculture and the oil sector remained the main drivers of growth, contributing 1.1 percentage points, while services contracted (contributing -2.0 percent). The impact of containment measures on domestic supply chains pushed up prices, and inflation rose from -1.0 percent in 2019 to 3.5 percent in 2020. Both the fiscal and current account balances deteriorated substantially, and difficulties in financing fiscal deficit may have led to further domestic arrears' buildup. Given the lack of fiscal space and large financing requirements, bold actions are needed. In this regard, the government could first strengthen economic diversification to enlarge the fiscal base, by removing bottlenecks to livestock exports, adopting business-friendly reform to support the private sector, and strengthening fiscal administration and policy for better revenue collection. Second, the government could improve its spending efficiency to deliver quality service under declining resources by enhancing the selection process, the planning and designing of investment projects, and improving public spending efficiency in health and education. Finally, the government should improve debt sustainability by strengthening its management and transparency