Chad at high risk of another debt default after restructuring

• Restructuring of Glencore loans reduces interest rates and extends maturity by four years
• IMF accepts minimum needed to make debt ‘sustainable’, while country remains at high risk of debt default
• Public spending in real terms is being cut by 30% per person

Chad has completed its debt restructuring with UK-listed commodity trade Glencore, which has increased the maturities on the debt and lowered interest rates. The loans, which were originally given in 2013 and 2015, were due to be repaid by 2022, but this has now been spread out to 2026. The restructuring was a condition of IMF bailout loans to Chad. However, following the restructuring, the IMF still rates Chad as at high risk of debt distress.

Rond point de l’Armée, N’Djamena, Capital of Chad (Ismouz / Flickr)

Under the new debt payment schedule, Chad’s external debt service is projected to stay on the IMF’s threshold of 18% of government revenue until 2025 (see graph below). In effect, the debt restructuring has been designed to provide the minimum debt relief necessary to allow the IMF to say Chad’s debts are sustainable. However, one economic shock could quickly lead to another default, with debt payments rising over 25% of government revenue. The IMF backed debt restructuring therefore replicates what the IMF has in the past criticised as being “too little” restructurings, leaving Chad teetering on the edge of another default.

IMF prediction for Chad government external debt payments as a proportion of revenue. Blue = baseline prediction, red = historical scenario, black = one economic shock, dashed green = IMF threshold for when defaults start to occur.

Furthermore, with debt payments continuing to stay high for several years to come, Chad remains in a debt crisis, with debt payments leaving the country, undermining the domestic economy and public services. Between 2015 and 2020, current public spending per person is projected to be cut by 30% in real terms, from €107 per person in 2015 to €75 per person by 2020.

In February there was a general strike against the austerity programme. Over 100 people were arrested as workers, joined by students, protesting in the streets were met by anti-riot police.


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