Chad ECONOMIC UPDATE Special Chapter Improving Resilience to Floods 2023 CHAD ECONOMIC UPDATE Special Chapter: Improving Resilience to Floods April 2023 © 2023 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclu- sions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or fail- ure to use the information, methods, processes, or conclusions set forth. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be construed or considered to be a limitation upon or waiver of the privileges and immuni- ties of The World Bank, all of which are specifically reserved. Rights and Permissions The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. Publication design and layout by The Word Express, Inc. ii TABLE OF CONTENTS Abbreviations, Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi 1. Economic and Poverty Developments and Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Recent economic and poverty developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Economic and poverty outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 Spotlight: Sahel Country Climate and Development Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 2. Improving Resilience to Floods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Context and evolving disaster risk profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Main drivers of flood risk in Chad . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Selected policy options to reduce the impact of floods and improve resilience . . . . . . . . . . . . . . . . . . . . . . . . 25 2. Annex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 3.1. Selected economic indicators for Chad, 2020–2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 3.2. Note on Chad’s 2023 Budget Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30 3.3. Microsimulation model to account for sectoral growth and food/non-food inflation . . . . . . . . . . . . . . . . 32 3.4. Modeling of climate change impacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 iii List of Figures Figure 1.1 Chad’s economic recovery pattern is similar to other oil-exporting countries . . . . . . . . . . . . . . . . . .2 Figure 1.2 GDP grew positively in 2022 given high oil revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Figure 1.3 The CPI increased steadily until November 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Figure 1.4 CPI inflation in Chad followed the CEMAC trend but with stronger extremes . . . . . . . . . . . . . . . . . . 4 Figure 1.5 The significant improvement of the fiscal balance was driven by higher oil revenues . . . . . . . . . . .5 Figure 1.6 Total government spending has decreased in 2022 given lower capital expenditure . . . . . . . . . . . 5 Figure 1.7 External debt is evenly distributed across lender types . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Figure 1.8 The external debt service to revenue ratio is projected to hover around the 14% threshold from 2026 onwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 Figure 1.9 The trade balance surpassed pre-pandemic levels as exports exceeded imports in 2022 . . . . . . 7 Figure 1.10 In 2022, the current account balance recorded a positive value for the only time between 2019 and 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Figure 1.11 Rising inflation and slightly negative per capita growth induced an increase in poverty in 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Figure 1.12 The growth contraction in 2021–22 has affected the poorer population less than the wealthier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Figure 1.13 Agriculture dominates the employment of the poorest welfare deciles . . . . . . . . . . . . . . . . . . . . . . 11 Figure 1.14 Secondary and tertiary sectors generate a higher share of income than actual employment across welfare deciles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Figure 1.15 Given higher consumption, wealthiest households were most impacted by rising inflation . . . . .12 Figure 1.16 Following a decline in income inequality, growth is projected to widen inequality in 2023–2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Figure 1.17 Chad could lose between 4.2 and 10.5 percent of GDP by 2050 . . . . . . . . . . . . . . . . . . . . . . . . . . .15 Figure 1.18 High annual variability in climate shocks increases volatility of growth . . . . . . . . . . . . . . . . . . . . . . 15 Figure 1.19 Damages to roads and bridges (floods), lower labor productivity due to heat stress and inland flooding drive GDP losses under a wet and optimistic scenario . . . . . . . . . . . . . . . . . . 15 Figure 1.20 Lower labor productivity due to heat stress and lower rainfed crops and livestock yields drive GDP losses under a dry and optimistic climate scenario . . . . . . . . . . . . . . . . . . . . . . . 15 Figure 2.1 Number of climate-related events (left) and proportion of population affected by floods (right) in Chad . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18 Figure 2.2 Three main dynamics driving flood risk in Chad . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Figure 2.3 Projected departures from natural variability of mean temperature in Chad . . . . . . . . . . . . . . . . . . 20 Figure 2.4 Projected change in distribution of largest 5-day cumulative precipitation, SSP2-4.5 . . . . . . . . . . 20 Figure 2.5 Additional share of built capital damage in a 1-in-50-year flood in Chad under climate change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Figure 2.6 Expected damage increase of a range of flood events with and without adaptation, relative to historical conditions in N’Djamena, under an RCP8.5 scenario . . . . . . . . . . . . . . . . . . . 21 Figure 2.7 Total value (left) and per capita value (right) of natural resources in Chad . . . . . . . . . . . . . . . . . . . 23 Figure 2.8 Percentage of built-up areas exposed to a 1-in-100-year flood (left) and flood exposure by return period in Chad (right) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Figure 2.9 Projection estimates for urban population . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26 Figure 2.10 Projection estimates for national built-up areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Figure 3.1 Key Fiscal Indicators in the Finance law 2022 (LF22) and the Initial Finance Law of 2023 (LFI23) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Figure 3.2  Impact on annual GDP of combined effects of climate change shocks from six impact channels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38 iv 2023 CHAD ECONOMIC UPDATE List of Tables Table E.1 Policy options to strengthen macro-fiscal sustainability and financial resilience to climate shocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii Table 3.1 Key Fiscal Indicators in the Finance law 2022 (LF22) and the Initial Finance Law of 2023 (LFI23) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Table 3.2 Budget allocation by ministry (in CFAF million) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Table 3.3 Climate scenarios modeled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35 List of Boxes Box 1.1 Unexpected flooding poses serious risks and damages to population and economy . . . . . . . . . . .3 Box 1.2 Recent food insecurity in Chad . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Box 1.3 Oil revenue management in Chad . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Box 1.4  Impact channels – modeling the link between climate change and the economy . . . . . . . . . . . . .14 Box 2.1 Selected policy options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Box 3.1 Main takeaways of the 2023 Budget Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Box 3.2 Impact Channel and Adaptation Modeling Details . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Table of Contents v ABBREVIATIONS, ACRONYMS ANAM National Meteorological Agency G5 Group of Five (G5 Sahel ASA Advisory Services and Analytics countries) BEAC Bank of Central African States IEc Industrial Economics CCDR Country Climate and Development IMF International Monetary Fund Report IPCC International Panel on Climate CEMAC Economic and Monetary Change Community of Central African IPSS Infrastructure Planning Support States System CERC Contingent Emergency Response LF Finance Law Component LFI Initial Finance Law CF G20 Common Framework MATUH Ministry of Territorial Development, CFAF Franc de la coopération financière Urban Planning, and Housing en Afrique centrale (Franc of the MEA Ministry of Water and Sanitation Financial Cooperation in Central MFMod The World Bank’s Macro-Fiscal Africa) Model CMIP Coupled Model Intercomparison MOU Memorandum of Understanding Project NCB Non-concessional Borrowing CMT Transitional Military Council NEER Nominal Effective Exchange Rate CPI Consumer Price Index NPL Non-performing Loan CREWS Climate Risk and Early Warning O&M Operation and Maintenance Systems PPP Purchasing Power Parity DPC Civil Protection Directorate RCP Representative Concentration DRE Water Resources Department Pathway DSA Debt Sustainability Analysis REER Real Effective Exchange Rate ECF Extended Credit Facility SDPF Sustainable Development Finance FACT Front for Alternation and Harmony Policy in Chad SDR Special Drawing Rights FCS Fragile and Conflict-affected SSP Shared Socioeconomic Pathway Situations WAEMU West African Economic and FDI Foreign Direct Investment Monetary Union GCM General Circulation Model WB World Bank GDP Gross Domestic Product WMO World Meteorological GHG Greenhouse Gas Emissions Organization vii ACKNOWLEDGEMENTS The Chad Economic Update was prepared by the tor), Rasit Pertev (Country Manager), Theo Thomas Teams from the Macroeconomics, Trade and Invest- (Practice Manager), Fulbert Tchana Tchana (Program ment Global Practice, with inputs from the Poverty; Leader) and Yue Man Lee (Lead Economist). Urban, Disaster Risk, Resilience & Land and; Envi- The authors are grateful to the peer review- ronment & Natural Resources and supervised by ers, Raju Singh, Nga Thi Viet Nguyen, Elly Baroudy, Daniel Pajank. Chapter 1, covering macroeconomic Christian Bodewig, Michel Matera and Karima Ben and poverty developments, was prepared by Demet Bih for their constructive and valuable comments. Kaya, Claudia Noumedem Temgoua, and Aboudra- The team would like to also extend sincere thanks hyme Savadogo, with inputs from Landry Brice Kuate to the Industrial Economics (IEc) team of Brent Fotue and on the Sahel Country Climate and Devel- Boehlert, Kenneth Strzepek, Diego Castillo, and Sil- opment Report Spotlight provided by Yue Man Lee via Colombo who led the impact channel and adap- and Michael Evers. Chapter 2, covering improving tation modeling, on which the CCDR Spotlight and resilience to floods, was prepared by Jin Rui Yap, Chapter 2 rely. Aurelie Rossignol and Oscar Anil Ishizawa Escu- Maude Jean-Baptiste and Theresa Bampoe dero with inputs from Joaquin Muñoz and Rafael van supported the preparation and publication of the der Borght. The report was prepared under the over- report, and Yannik Strittmatter provided invaluable for- all guidance of Clara Ana De Sousa (Country Direc- matting assistance. ix EXECUTIVE SUMMARY This 2023 Economic Update for Chad is articu- successful completion of the G20 Common Frame- lated in two chapters, plus a spotlight. The first work for Chad’s debt restructuring, the debt service chapter presents the recent economic and poverty to revenue ratio is projected to average 17 percent in developments as well as the outlook from 2023 to 2022–23, before falling below 14 percent from 2024 2025. This chapter is followed by a summary of the onward. macroeconomic-poverty impact analyses for Chad High food inflation drove up poverty, partic- in the World Bank Sahel Country Climate and Devel- ularly in rural areas. Poverty measured at the inter- opment Report (2022). The second chapter offers a national extreme poverty line of US$2.15/day (per deep dive on Chad’s disaster risk profile and the driv- capita, 2017 PPP) is estimated to have increased by ers that make floods an increasingly important threat 2.4 percentage points between 2021 and 2022. Pov- to economic growth and provides policy options to erty incidence reached 38.7 percent in 2022, imply- reduce the impact of floods and improve resilience. ing that the number of extreme poor increased by Chad experienced modest GDP growth in over 600,000 people to reach 6.8 million. Extreme 2022, as floods and a volatile security environ- poverty in Chad is a rural phenomenon (47.4 percent ment dampened an expected recovery. Follow- of the rural population is extreme poor) and character- ing a 1.2 percent contraction in 2021 (–4.3 percent ized by significant regional disparities. For instance, in per capita terms), Chad’s economy was expected poverty is 59 percent in Tandjile against 7 percent in to recover in 2022 on the back of high global oil Ennedi Ouest. Poverty was exacerbated by food infla- prices (averaging US$99.8/barrel in 2022) cou- tion, which reached 12.2 percent in 2022 compared pled with increased oil production, and the CFAF/ to 5.1 percent in 2021. Food products became scarce USD exchange depreciation. However, the recov- in local markets in 2022 partly due to the uneven ery was dampened by floods and a volatile security regional rains during the last raining season. environment with GDP growth estimated at 2.2 per- To counter inflation across CEMAC coun- cent (–0.9 per capita), and non-oil GDP growth at tries and strengthen reserves, the Bank of Cen- 1.3 percent from 0.4 percent in 2021. Industry (mainly tral African States (BEAC) continued to tighten oil) was the main contributor to growth (contributing its monetary policy in 2022. BEAC raised its pol- 4.1 percentage points), followed by agriculture with a icy rate in September 2022 from 4.0 to 4.5 percent, 0.6 percentage point contribution, below average due its second increase in 2022. In March 2023, the pol- to inadequate rainfall distribution and severe floods. icy rate was raised again to 5.0 percent. BEAC also High oil revenue led to a fiscal surplus of reduced its weekly liquidity injections from CFAF 160 4.5 percent of GDP in 2022 (the non-oil fiscal def- billion in April 2022 to CFAF 50 billion in December icit was 7.4 percent of GDP). This positive trend 2022. Regional reserves increased from 3.4 months was driven by the high 2021 oil revenue, as there is in 2021 to around 4 months of imports of goods and a one-year lag in the main component of oil-revenue services at the end of December 2022, thanks to tax collection, and lower capital expenditure in 2022 tighter monetary policies at the regional level and ris- (by –17.7 percent). The oil sector is estimated to have ing oil prices. Reserves remained, however, below the exhibited an overall strong performance in 2022, with 5 months of imports level considered adequate for oil revenue accounting for 62.2 percent of total reve- monetary stability in a resource-rich monetary union nue including grants and 86 percent of export value. with a fixed exchange rate. Total public debt is estimated to have dropped accord- Growth is expected to moderately increase ingly to 49.6 percent of GDP by end-2022. Despite the to 3.2 percent in 2023, which is equivalent to xi almost zero per capita growth. Non-oil GDP is pro- countries. Chad’s weighted average interest rates jected to increase by 2.4 percent in 2023, thanks to for T-bonds in 2022 rose from 7.5 percent in 2021 to the gradual elimination of the effects of the Covid-19 10.4 percent in 2022 (8.9 percent for the CEMAC aver- pandemic, the recovery in the services sector, and age). In the past couple of months, several CEMAC increased domestic revenue mobilization efforts. The countries, including Chad, have had uncovered auc- outlook assumes increased domestic revenue mobili- tion experiences. zation, with higher tax revenue collection due to digi- The Sahel region is among the world’s most talization reforms in public finances. While significant vulnerable to climate change while having some government investments are expected to be mobilized, of the highest poverty rates. According to the Inter- government consumption will be limited. Assuming national Panel on Climate Change (IPCC), most cli- ongoing global recovery in international trade, moder- mate scenarios show that temperatures in the Sahel ate oil prices, and increased government investment, will rise by at least 2°C between 2021 and 2040, while the economy is expected to growth at a similar pace rainfall patterns are projected to become more irreg- over 2024–25. Inflation is projected to fall to 5.2 per- ular. The Sahel CCDR (covering Burkina Faso, Chad, cent in 2023 and further to 3 percent by 2025, as food Mali, Mauritania, and Niger) projects that by 2050 the inflation gradually decreases, supported by govern- 5 countries’ annual GDP would be reduced by 7 to ment measures to address food insecurity. 12 percent with 13.5 million additional poor due to cli- Poverty is projected to slowly decline over mate change-related shocks if urgent investments in the next 3 years thanks to moderate growth in climate adaptation are not taken. Chad’s annual GDP agriculture and services amid lower levels of could be reduced by 10.5 percent due to climate inflation. Oil-sector driven growth is not expected to change by 2050 with high poverty impacts especially lead to poverty reduction without significant structural in rural areas, including in some of the most vulnera- reforms, as there are few linkages between the extrac- ble border communities in Chad. tive sector and the livelihoods of poor and vulnera- Unplanned and rapid urbanization inter- ble groups. Moreover, the continued security restric- acts with environmental degradation and cli- tions and the low coverage of social safety nets will mate change to amplify flood risk in the country. limit the pace of poverty reduction. Extreme poverty is In Chad, flood risk is predominantly concentrated in expected to decrease to 34.4 percent by 2025, in line urban centers, with N’Djamena exhibiting the high- with moderate growth in the agriculture and services est exposure of built-up areas at 14 and 74 percent sectors and declining inflation. However, with rapid exposed to 1-in-10 and 1-in-100-year floods, respec- population growth, the total number of poor is pro- tively. Inadequate and insufficient stormwater drain- jected to decline by only 81,000 people to 6.7 million. age and flood management infrastructure, unman- This outlook is subject to uncertainty and aged expansion of informal settlements in flood-prone multiple downside risks related to recurrent areas, and the poor quality of construction contrib- and emerging sources of vulnerability, includ- ute to increased flood risk in urban areas. Beyond ing tighter financial market conditions and cli- direct asset damages, these factors limit the capac- mate shocks. Source of risk and uncertainty include ity of urban centers to yield agglomeration benefits dampening and volatile oil prices, increased politi- that typically come alongside urbanization. Looking cal instability surrounding the political transition and forward, as cities continue to expand, well-planned elections, intensified security risks, further climate- urbanization will be a critical factor to control the rapid related shocks, continuing food security challenges, increase in flood risk in the country. and related social discontent. A significant risk that The recent floods in Chad have been deadly, has emerged over the past 12 months is the rising displacing growing populations, and inflicting cost of financing on the regional market. Tighter mon- severe damage to physical assets and infrastruc- etary policy has translated into higher yields for 6 ture. Floods cause significant negative spillovers to 12-month T-bills and 5-year T-bonds for CEMAC disrupting economic activity, adversely impact the xii 2023 CHAD ECONOMIC UPDATE welfare of the most vulnerable, and exacerbate chal- The implementation of targeted policy lenges related to internal displacements and conflict. reforms will be critical to strengthen Chad’s abil- Without urgent measures to effectively reduce risk ity to adapt to and reduce the impact of floods. and enhance climate adaptation, these trends sug- Measures to reduce physical and social vulnerabil- gest that the flood impacts will be further aggravated ity are required to lessen the economic impacts of and could inhibit long-term development prospects. floods, while simultaneously promoting more produc- The impacts of less frequent but more extreme floods tive and economically active cities. In N’Djamena, cli- are expected to increase with climate change: under mate resilient infrastructure could reduce the damage a high-warming scenario, a 1-in-50-year flood could of frequent floods by up to 70 percentage points by destroy an additional 4.5 percent of national built-up the end of the century, compared to a no-adaptation capital by the end of the century. scenario. TABLE E.1    Policy options to strengthen macro-fiscal sustainability and financial resilience to climate shocks Policy Objectives Policy Options (with estimated costs and gains) Feasible to implement in the short-term (1 year) Managing oil revenue volatility • Use the stabilization fund at BEAC to save oil revenue windfall (to be used during economic downturns) and increase the size of the fund if the windfall remains high in 2023. Under the current rule, the maximum inflow per year is XAF 20 billion (0.2 percent of GDP). Improving food security • Make agriculture more climate resilient: increase the share of irrigated land: and enhance the use of groundwater resources. • Refill the food bank with sufficient cereal stocks for periods of agricultural production deficit. There is a current gap of about 47.2 thousand tons of food that should cost around XAF 27 billion (0.3 percent of GDP) Strengthening disaster preparedness and emergency • Improve coordination and definition of roles and responsibilities for early warning and emergency preparedness and response to response floods. • Strengthen the financial and human resource capacities of the Civil Protection Directorate and ensure decentralization capacity across the country for effective emergency preparedness and response. Important to implement in the medium term (2 to 5 years) Strengthening fiscal management • Scale up the modernization and digitalization of the tax administration within 24 months as planned in the 2023 budget. • Improve public expenditure efficiency by establishing a transparent and efficient budgeting process. Strengthening the social contract • Implement the resolutions of the national dialogue, focusing on the key priority areas identified for the 24-month second phase transition. The 194-action plan cost of the transition roadmap is evaluated at XAF 1,016 billion (12 percent of GDP). • Strengthen the role of civil society. Strengthen budgetary processes for climate action • Adopt systems for transparent monitoring of and decision-making for the national budget allocation for priority climate actions. Strengthening resilience to extreme flood events • Enforce a risk-informed urban and territorial planning and building code. • Build institutional and financial capacity of local governments to support implementation and enforcement of the urban and territorial planning and building code. • Incorporate disaster and climate-related risk considerations in the public investment system. Ensuring protection of environment and natural • Strengthen institutional capacities and infrastructure for adequate waste management. capital • Increase urban green cover and spaces, and the development and implementation of erosion management plans. • Scale up integrated landscape management and green cities. EXECUTIVE SUMMARY xiii 1 ECONOMIC AND POVERTY DEVELOPMENTS AND OUTLOOK1 Following a decade of successive crises, Chad nue is a major source of vulnerability, which has threat- continues to face significant challenges to ened fiscal consolidation and debt sustainability. making progress in economic and human devel- Chad ranked at the bottom on the Human opment. Development Index in 2021 countries, an evi- dence of the country’s limited progress in Chad’s economy has been challenged by suc- improving its population’s living conditions. The cessive crises since the 2014–15 oil price shock. Notwithstanding the 2018–19 recovery, annual GDP 1 This report covers economic and poverty developments growth has been subdued, averaging 0.3 percent over in Chad. For global trends, forecasts, and analysis of the past six years, which, given high population growth major developments impacting the global and regional (3.3 percent on average), translated into an average economy, refer to the World Bank’s Global Economic annual decrease in per capita income of 2.9 percent. Prospects report. The Commodity Markets Outlook offers analysis for major commodity groups, and Africa’s Growing political and security expenses and poor Pulse, a publication of the Office of the Chief Economist oil revenue management have constrained improve- in the World Bank Africa Region analyzes the short-term ments in basic services and infrastructure delivery. economic prospects for the continent and current devel- Moreover, the volatility of Chad’s oil-dependent reve- opment challenges. 1 FIGURE 1.1    Chad’s economic recovery pattern is FIGURE 1.2    GDP grew positively in 2022 given high similar to other oil-exporting countries oil revenues GDP growth (percent) GDP growth (percent) 6 8 6 4 4 2 2 0 0 –2 –2 –4 –4 –6 –6 –8 –8 –10 Chad Cameroon Congo rep. Gabon Nigeria Angola 2020 2021 2022e 2023f 2024f 2025f 2020 2021 2022e 2023–25f Oil GDP Non-oil GDP Real GDP Source: World Bank MPO. Source: Chadian authorities and World Bank staff estimates. main constraints to Chad’s economic and social ever, Chad’s recovery was dampened by floods and development include the following: poor oil reve- a volatile security environment with GDP growth esti- nue management; insecurity; vulnerability to climate mated at 2.2 percent (–0.9 per capita), and non- change; political unrest; institutional instability; weak oil GDP growth at 1.3 percent from 0.4 percent in governance and transparency; poor trade networks; 2021 (Figure 1.2), supported by the agriculture sec- weak human capital investment; and a large infra- tor. Industry (mainly oil) was the main contributor to structure deficit. growth (contributing 4.1 percentage points), followed by agriculture with a 0.6 percentage point contribu- tion due to inadequate rainfall distribution and severe Recent economic and poverty floods (Box 1.1). In 2022, domestic security and polit- developments ical situation remained tense. The completion of the national dialogue in October 2022 marked the begin- In 2022, the expected economic recovery was ning of a second-phase transition that is expected to hindered by floods and continued insecurity as last for 24 months. GDP only grew by 2.2 percent. On the demand side, growth in 2022 was driven by private consumption on the back of Chad’s economic recovery in 2022 has been higher wages. Private consumption contributed to dampened by floods and a volatile security envi- growth by 1.6 percentage points, with nearly no con- ronment. Chad’s economy was expected to recover tribution to growth from government consumption, in 2022 following a 1.2 percent contraction in 2021 while gross fixed investment’s contribution to growth (4.3 percent in per capita terms), on the back of was negative (–0.8 percentage points). Lower expen- high global oil prices (averaging $99.8/barrel in ditures in goods and services (by 25.3 percent) con- 2022) coupled with increased oil production, and the strained government consumption while lower capital CFAF/USD exchange depreciation. Overall, Chad fol- investment (by –17.7 percent) due to limited external lowed a recovery pattern similar to the other oil-export- financing constrained gross fixed investment. ing countries in the Gulf of Guinea, such as Angola, Security and social conditions remain diffi- Gabon and the Republic of Congo (Figure 1.1). How- cult, as the political transition has been extended 2 2023 CHAD ECONOMIC UPDATE  NEXPECTED FLOODING POSES SERIOUS RISKS AND DAMAGES TO POPULATION BOX 1.1: U AND ECONOMY Chad experienced unprecedented pluvial and fluvial flooding AREAS IN N’DJAMENA AFFLICTED BY THE 2022 (the worst since 1961) late September to December 2022, FLOODS (IN RED) affecting 1.3 million people (7.3 percent of the population) in 19 of the 23 provinces of Chad and causing serious material damages. The floods affected over one million people, 465,000 hectares of cropland and 19,000 cattle in 19 of 23 Chadian provinces. As of December 1st, 2022, over 180,000 people had been displaced in N’Djamena alone. The location of N’Djamena at the confluence of the Logone and Chari rivers made the capital city susceptible to floods caused by heavy seasonal precipitation. The images below depict aerial imagery of the city before and during the 2022 flood events. Chapter 2 discusses the drivers that make floods In Chad an increasingly important threat to economic growth, and policy options to reduce the impacts of September 18, 2021 October 30, 2022 floods and improve resilience. Source : Google Earth Satellite et Centre satellitaire des Nations unies (UNOSAT). Chad’s government declared a state of emergency on October 19, 2022, calling for humanitarian organizations and Chad’s partners help. On October 24, 2022, the government, set up a coordination unit composed of humanitarian actors that will monitor the progress of the response to the flooding crisis. Only 41 percent of the funds required for the Joint Flood Response Plan, including US$18 million received and US$11 million pledged, have been received or committed out of an initial request of US$69.8 million as of end of December 2022. This amount includes the US$5 million Contingent Emergency Response Component (CERC) funding from the World Bank. by 24 months. Chad has been in a challenging polit- over access to and use of natural resources continue to ical transition since the death of President Idriss Déby degrade the local context and social relations.2 in April 2021. “Doha Peace Agreement” was signed in August 2022 by the authorities and most politico-mili- Increases in global prices of food and energy tary groups, but not by the Front for Alternation and Har- paired with domestic insecurity led to a sharp mony in Chad (FACT), which is one of the most active increase in average annual inflation to 5.8 per- groups. The National Inclusive and Sovereign Dialogue, cent in 2022. boycotted by part of the opposition for its structural bias towards the Transitional Military Council (CMT), Inflation increased from 1 percent in 2021 to was held in N’Djamena, from August 20 until October 5.8 percent in 20223 (an increase by 8.3 percent 12. The Dialogue concluded by extending the transition on a year-on-year basis) (Figure 1.3). This was by a further two years and by providing eligibility to the mainly driven by high global prices in food and energy members of the CMT to participate in future presiden- resulting from Russia’s invasion of Ukraine, and food tial elections. A government of national unity was set up supply restrictions due to the security situation. on October 14, 2022. On October 20, demonstrations Episodes of insecurity (such as socio-political unrests against the conclusions of the national dialogue were violently repressed by the authorities and led to many deaths and hundreds arrested. International partners 2 United Nations Office for the Coordination of Humani- tarian Affairs (OCHA) (2022a). Chad latest report on an have heavily criticized the outcome of the dialogue. In overview of community conflicts (inter and intra-commu- addition, the country’s security situation remains calm nity) in November 2022. but volatile, Boko Haram attacks in the Lake Chad have 3 Above the 3-percent convergence criterion for CEMAC decreased considerably while inter-community clashes countries. ECONOMIC AND POVERTY DEVELOPMENTS AND OUTLOOK 3 FIGURE 1.3    The CPI increased steadily until FIGURE 1.4    CPI inflation in Chad followed the November 2022 CEMAC trend but with stronger extremes Monthly CPI variation by sector 140 12 In ation in Chad and CEMAC 7 120 10 6 8 100 5 Sector monthly CPI Headline inflation 6 80 4 4 60 3 2 2 40 0 1 20 –2 0 0 –4 –1 Nov-2 1 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oc t- 22 Nov-2 2 Dec-22 –2 2019 2020 2021 2022e 2023f 2024f 2025f Primary sector Secondary sector Tertiary sector Headline in ation (RHS, y-oy in %) Chad CPI In ation CEMAC CPI In ation Source: Chadian authorities and World Bank staff estimates. Source: Chadian authorities and World Bank staff estimates. in Q4-2022 and inter-communal conflict, intensified pastoral materials, inputs and equipment, and cus- armed attacks and kidnappings in the Lake Chad tom duties reductions for trucks coming from outside region in Q3-2022) contributed to higher food prices the Economic Community of Central African States in local markets by limiting food supply in local mar- (CEMAC). kets. Food inflation, averaging 12.2 percent in 2022, also suffered from weak domestic agricultural pro- High oil prices and lower capital expenditure duction, increasing food insecurity (Box 1.2). Overall, induced a fiscal surplus of 4.5 percent of GDP in Chad consumer price inflation (CPI) was higher than 2022. the CEMAC average (Figure 1.4). The Government as part of its 2023 budget announced a series of mea- In 2022, Chad posted a fiscal surplus thanks sures to alleviate the price pressures, for example by to high oil revenue. The fiscal balance, including introducing tax exemption on the imports of agro- grants, reached a surplus of 4.5 percent of GDP in BOX 1.2: RECENT FOOD INSECURITY IN CHAD Chad has officially declared a ‘food and nutrition emergency’ through a decree published on June 1, 2022. The key drivers were the following: reduction in agricultural output; inflation of good prices; and the unprecedented floods during the lean season, which destroyed 350,000 hectares of crops and farming land. Food insecurity affected 2.1 million people (12.1 percent of the population) at end-2022. Cereal production for 2022–2023 is estimated at 2.9 million tons with a gross deficit of 443,950 tons. To address food insecurity, the government announced on January 8, 2022, a ban on the export of cereals and groundnuts, except for sesame and, on January 14, 2022, taxes and duties exemption on the importation of several types of cereals. The government has also announced a CFAF 88 billion emergency response plan. In addition, the government launched on July 19, 2022 a subsidized sales operation of 120,000 bags of cereals in N’Djamena, which aims at lowering food prices in the markets. The operation should continue throughout the territory with around 6,000 tons of food planned to be distributed to 2 million people. Source: Chadian government and United Nations Office for the Coordination of Humanitarian Affairs (OCHA). 4 2023 CHAD ECONOMIC UPDATE FIGURE 1.5    The significant improvement of the FIGURE 1.6    Total government spending has fiscal balance was driven by higher oil decreased in 2022 given lower capital revenues expenditure Fiscal position (percent of GDP) Government spending (percent of GDP) 25 8 25 6 20 4 20 2 In percent of GDP In percent of GDP In percent of GDP 15 0 15 –2 10 –4 10 –6 5 –8 5 –10 0 –12 2019 2020 2021 2022e 2023f 2024f 2025f 0 2019 2020 2021 2022e 2023f 2024f 2025f Total revenue Total expenditure Overall scal balance (RHS) Non-oil scal balance (RHS) Current expenditure Capital expenditure Oil revenue Total expenditures Wages and salaries Source: Chadian authorities and World Bank staff estimates. Source: Chadian authorities and World Bank staff estimates. 2022 (non-oil fiscal deficit was 7.4 percent of GDP), in Q4 2022, bringing the total outstanding to CFAF compared to the 2.2 percent of GDP deficit observed 678.1 billion (9.2 percent of GDP), of which 79.2 per- in 2021 (Figure 1.5). This positive trend was driven by cent are T-Bonds. In addition, securities’ issuance the 2021 high oil revenue, as there is a one-year lag became more costly for Chad, with the weighted in the main component of oil-revenue tax collection, average interest rates for T-bonds in 2022 raising and lower capital expenditure in 2022 (by –17.7 per- from 7.5 percent in 2021 to 10.4 percent in 2022 cent) (Figure 1.6). The oil sector is estimated to have (8.9 percent for the CEMAC average). Recently, exhibited an overall strong performance in 2022, with Chad has scaled up its fundraising operations with oil revenue accounting for 62.2 percent of total reve- the launch of a CFAF 100 billion bond issue by pub- nue including grants and 86 percent of exports value. lic offering operation on December 12, 2022, the Total public debt is estimated to have dropped accord- third of its history. Thanks to the participation of ingly to 49.6 percent of GDP by end-2022. Despite the 150 subscribers, the government was able to mobi- G20 Common Framework for Chad’s debt restructur- lize the total amount issued. The operation’s remu- ing, the debt service to revenue ratio is projected to neration is at a 6.50 percent annual rate with a one- average 17 percent in 2022–23, before falling signif- year deferral and a 6-year maturity, and is opened icantly to below the 14 percent threshold from 2024 to investors (any physical or legal entity resident or onward (Figure 1.8). not in the CEMAC). With this operation, the govern- The Government of Chad continues its ment4 hopes to implement major infrastructure proj- fundraising operations in the regional market to ects (urban development, road infrastructure and cover its financing needs while extending matu- energy and public works) initiated or in the process rity. With limited access to international financial of being initiated. markets due to its zero-non-concessional borrow- ing (NCB) agreement under the Sustainable Devel- 4 Despite fiscal surpluses, Chad’s government needs opment Finance Policy (SDPF), Chad has resorted fundings to finance infrastructure expenditures, which to the regional market for fundraising. Chad effec- are projected to increase by 204 percent in the 2023 tively raised CFAF 51.8 billion (0.7 percent of GDP) budget. ECONOMIC AND POVERTY DEVELOPMENTS AND OUTLOOK 5 BOX 1.3: OIL REVENUE MANAGEMENT IN CHAD An oil revenue management law (Law 001/PR/1999) was designed at the outset of the Chad-Cameroon pipeline project. The independent Collège de Contrôle et Surveillance des Revenus Petroliers was tasked with monitoring expenditures financed by oil revenues. The mechanism was built around expected direct oil revenue, namely royalties from the sale of oil, and dividends from the government’s participation in the two transportation companies (TOTCO and COTCO) that own and manage the Chad-Cameroon pipeline. In 2007, indirect oil revenue from resource rent and corporate rent taxes were added to the scope of application of the oil revenue management law, and the role of the Collège de Contrôle et Surveillance des Revenus Petroliers was expanded accordingly. In 2014, triggered by the tightening fiscal space, a new revenue management law was promulgated (Law 002/ PR/2014). However, without a stabilization or saving function, Law 002 simply became an earmarking mechanism to channel oil revenue to a list of priority sectors. Unexpected oil revenue shortfalls following the oil price shock in 2015 led Chad into a severe fiscal and economic crisis, including illiquidity, debt distress, and severe recession. To strengthen the government’s fiscal policy tools, an oil revenue management mechanism incorporating a stabilization function was reestablished in 2019. Law 0040/PR/2019 on the Smoothing of Petroleum Prices and Production, which incorporates the new oil revenue management mechanism, was enacted on November 27, 2019. Its key policy objectives were to set aside oil revenues to cushion the fiscal impact of unexpected oil revenue shortfalls. It features a ‘saving rule,’ in which the government saves parts of its oil revenues during periods of high oil prices, a ‘spending rule,’ in which the government uses savings when actual oil revenue falls short of budgeted oil revenues by 10 percent or more, and a formula for estimating oil revenue for budget purposes. Although the stabilization mechanism contributed to cushioning the effects of oil revenue shortfalls triggered by the sudden onset of the COVID-19 pandemic, it was not designed to insure against a major domestic and global economic crisis. Source: Chad’s Country Economic Memorandum, Forthcoming FIGURE 1.7   External debt is evenly distributed FIGURE 1.8    The external debt service to revenue across lender types ratio is projected to hover around the 14% threshold from 2026 onwards External Debt Composition Debt service-to-revenue ratio 25 20 Debt share (In percent) 15 33.1 32.8 28.2 5.9 10 5 0 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 Most extreme shock: One-time depreciation 0 10 20 30 40 50 60 70 80 90 100 Baseline Historical scenario Commercial Multilateral Bilateral Others Most extreme shock 1/ Threshold Source: WB-IMF Debt Sustainability Analysis (DSA), December 2022. Source: WB-IMF Debt Sustainability Analysis (DSA), December 2022. In November 2022, Chad became the first coun- a Memorandum of Understanding (MOU), which try to reach an agreement with its creditors under was finalized on November 30, 2022. The MOU pro- the G20 Common Framework (CF). vides no debt treatment to Chad but commits bilateral creditors to meet any financing gap that may emerge Chad’s official bilateral creditors (France, Saudi by the end of IMF Extended Credit Facility (ECF)-Pro- Arabia, India, and China) and the authorities signed gram in 2024. In parallel, the authorities signed an 6 2023 CHAD ECONOMIC UPDATE FIGURE 1.9    The trade balance surpassed pre- FIGURE 1.10    In 2022, the current account balance pandemic levels as exports exceeded recorded a positive value for the only imports in 2022 time between 2019 and 2025 Trade balance (percent of GDP) Current Account Balance and Foreign Direct Investment 50 10 4 1.2 45 5 2 1.0 40 0 0 35 0.8 In months of imports In percent of GDP In percent of GDP In percent of GDP 30 –2 –5 0.6 25 –4 –10 20 0.4 –6 15 –15 10 –8 0.2 –20 5 –10 2019 2020 2021 2022e 2023f 2024f 2025f 0.0 0 –25 2019 2020 2021 2022e 2023f 2024f 2025f Current account balance Foreign direct investment Exports Imports Trade balance (RHS) Source: Chadian authorities and World Bank staff estimates. Source: Chadian authorities and World Bank staff estimates. Note: FDI are shown as a negative sign. agreement in principle with the largest private creditor, scenario, other liquidity and solvency ratios remain Glencore. The conclusion of the CF paved the way for below their thresholds. the IMF to proceed with the first and second reviews of its ECF program with Chad, enabling the disbursement A first current account surplus in the recent past of SDR112.16 million (about US$149.3 million), and was facilitated by a strong performance in the oil bringing total disbursements under the arrangement to sector. SDR168.24 million (about US$224 million). Chad’s risk of external debt distress has The current account posted a 1.9 percent of GDP improved to a high rating in 2022 with further surplus in 2022 (versus a 6 percent of GDP def- progress is expected in the medium-term. Chad is icit in 2021) thanks to increased export receipts no longer in debt distress but is at high risk of external (Figure 1.10). Export value increased by 54.9 percent debt distress as the external debt service-to-revenue thanks to higher oil prices (a 41.8 percent increase from ratio breaches its threshold in 2022–23. This reflects 2021), the CFAF/USD exchange rate depreciation and the combined effect of higher oil prices and the debt higher oil production volumes (a 6.6 percent increase treatments agreed by official creditors and Glencore, from 2021) with the slow resumption of activities fol- Chad’s largest private creditor, under the G20 Com- lowing the fire disruption at ESSO (ExxonMobil com- mon Framework (CF). Only one external debt indica- pany) oil plants end-2021 and an increase in oil pro- tor—the external debt service-to-revenue—breaches duction from other operators. Total exports increased temporarily its 14 percent-threshold under the base- by 5 percent in volume terms. Import value decreased line scenario due to accelerated debt service to Glen- core in line with increases in oil prices. However, the 5 Glencore has committed to reprofile part of the debt debt treatment agreement provides assurances that service that is due in 2024 and G20 official creditors this ratio falls below its threshold in 2024 (including have committed to bring down the debt service to reve- should oil prices decline) and converges towards a nue ratio below the 14 percent threshold in 2024 should moderate risk of debt distress.5 Under the baseline Glencore’s contribution be insufficient. ECONOMIC AND POVERTY DEVELOPMENTS AND OUTLOOK 7 by 2.9 percent from lower services import from the than of its trade partners, an appreciation of the nomi- floods and moderate capital expenditure (Figure 1.9). nal effective exchange rate (NEER) of the CFAF against CEMAC regional external reserves have the currencies of CEMAC countries’ main trading part- started built up, although still short of the desired ners has contributed to the deterioration of their price level of 5 months of imports in 2022. Regional competitiveness. In the first two quarters of 2022, reserves increased from 3.4 months in 2021 to around Chad’s competitiveness exhibited a better standing 4 months of imports of goods and services at the end of as its REER depreciated by 2.2 in Q1-2022 and 0.7 in December 2022, thanks to tighter monetary policies at Q2-2022, benefiting from better trade positions thanks the regional level and rising oil prices. But the reserves to lower inflationary pressures and the depreciation of remained below the 5 months of imports level required the CFAF. Overall, the impact of the price competitive- for monetary stability in a resource-rich monetary union ness deterioration on Chad’s trade balance will be lim- with a fixed exchange rate. As oil prices peak, CEMAC ited due to the main export item being oil. regional reserves are projected to continue building up, Liquidity and loan quality of commercial banks although slowly reaching 4.5 months of imports in the weakened while credit slowed down during the first medium-term yet remaining below 5 months of imports. half of 2022. Credit to the private sector contracted slightly during the first half of 2022 following an increase To promote economic stability in the CEMAC region, by 17.1 percent in 2021. The commercial bank liquidity BEAC tightened monetary policy by increasing pol- weakened over the first half of 2022 but remained ade- icy rates and reducing liquidity injections over the quate. Loan quality is estimated to have further deteri- course of the year. orated in 2022 with non-performing loans (NPL) reach- ing 28.5 percent in Q1-2022. Moreover, the banking and Chad’s monetary and exchange rate policies are private sectors were constrained by a slower domestic managed by the regional Central Bank (BEAC), arrear repayment by the government in 2022 despite which continued to tighten its monetary condi- high oil revenue, owing to higher spending in response tions in 2022 to contain inflationary pressures to security, social and food security tensions. and support the external viability of the exchange rate arrangement. Regional monetary policy, tight- Poverty, particularly in rural areas, has increased, ened in 2016–19 to support regional reserve accu- largely due to high food inflation. mulation, was relaxed in March 2020 from a 3.5 to a 3.25 percent policy interest rate to mitigate the Poverty has increased in Chad and is more severe impact of COVID-19. The BEAC raised its policy rate in rural areas. Poverty in Chad, measured at the inter- in September 2022 from 4.0 to 4.5 percent, its second national extreme poverty line of US$2.15/day (per cap- increase in 2022. In March 2023, the policy rate was ita, 2017 PPP) is expected to have increased by 2.4 per- raised again to 5.0 percent. The BEAC also reduced centage points between 2021 and 2022. Poverty its weekly liquidity injections from CFAF 160 billion in incidence reached 38.7 percent in 2022, implying the April 2022 to CFAF 50 billion in December 2022. number of extreme poor population increased by over Chad’s price competitiveness deteriorated in 600,000 people to reach 6.8 million. Extreme poverty Q4–2022 as its real effective exchange rate (REER) in Chad is a rural phenomenon (47.4 percent of rural appreciated by 1.5 percent. This follows a general population are extreme poor) and is characterized by trend of competitiveness lost in the CEMAC where the significant regional disparities. For instance, poverty is regional REER appreciated by 2.2 percent in Q4-2022, 59 percent in Tandjile against 7 percent in Ennedi Ouest. following a decline by 1.7 percent in Q3-2022. The lost The change in poverty was largely driven in CEMAC countries’ competitiveness in international by high food inflation, which reached 12.2 percent markets in Q4-2022 is mainly due to the decline in their in 2022 compared to 5.1 percent in 2021 (Figure 1.11). exports position (+3.2 percent) and imports position Food products became scarce in local markets in 2022 (+1.9 percent). Despite a lower inflation in the CEMAC partly due to the uneven regional rains during the last 8 2023 CHAD ECONOMIC UPDATE FIGURE 1.11    Rising inflation and slightly negative FIGURE 1.12    The growth contraction in 2021–22 per capita growth induced an increase has affected the poorer population in poverty in 2022 less than the wealthier Poverty Trends in poverty, GDP growth and In ation Growth Incidence Curve 2021–2022 15 50 0.00 10 40 –0.02 5 30 0 –0.04 20 –5 10 –0.06 –10 0 20 40 60 80 100 –15 0 2018 2019 2020 2021 2022 2023 2024 2025 Percentile of income distribution in 2021 Real GDP per capita CPI Growth rate 2021–2022 Mean rate 2021–2022 Nominal Ag GDP per capita International poverty rate ($2.15) Linear tted value Source: World Bank staff based on Ecosit 4 data (2018). Source: World Bank staff based on Ecosit 4 data (2018). raining season. While the country experienced high kets. The non-oil GDP is projected to slightly increase overall nominal GDP growth at 18.5 percent in 2022, from 1.3 percent in 2022 to 2.4 percent in 2023, thanks nominal GDP growth in the primary sector (8.3 per- to the gradual elimination of the effects of the Covid-19 cent) was much lower, and in fact, below the food pandemic, the recovery in the services sector and inflation rate of 12.2 percent. As the majority of poor increased domestic revenue mobilization efforts. The households earn their livelihood in the primary sector, outlook assumes increased domestic revenue mobi- they ended up worse off. The growth incidence curve lization, with higher tax revenue collection as a result between 2021 and 2022 illustrates this (Figure 1.12). from the digitalization of public finances. While signifi- The average consumption growth rate is negative. The cant government investments are expected to be mobi- decline in consumption is less for the poorest house- lized, government consumption will be limited. Assum- holds than it is for better off households, suggesting ing ongoing global recovery in international trade, that the most vulnerable have been relatively protected moderate oil prices and increased government invest- from the inflation induced, decline in consumption. ment, economic growth is expected to remain relatively constant over 2024–25. Inflation is expected to fall slightly to 5.2 percent in 2023, declining to 3 percent in Economic and poverty outlook 2025, as food inflation gradually decreases thanks to government measures addressing food insecurity. The economy is expected to maintain moderate High oil revenue is expected to support economic growth as oil prices, albeit declining, fiscal surpluses while declining oil prices and remain at relatively high levels, resulting in a fur- increased imports are projected to lead to cur- ther expansion of the fiscal surplus in 2023. rent account deficits. Reflecting significantly higher oil prices in 2022 (due to the one-year lag in oil tax col- In 2023, growth is expected to moderately increase lection) and more controlled current spending, the fis- to 3.2 percent (almost no per capita growth), as oil cal surplus is projected to further expand to 6.1 per- prices decline but remain high in the global mar- cent of GDP in 2023 (with a non-oil fiscal deficit of ECONOMIC AND POVERTY DEVELOPMENTS AND OUTLOOK 9 6.5 percent of GDP), before gradually decreasing agriculture. Indeed, the low agricultural growth rate at to average 4 percent of GDP over 2024–25 as oil around 2 percent growth over the medium term is not prices decline. Total public debt is projected to drop enough to compensate the high population growth to 36.4 percent of GDP by end-2025. The current rate which is 3 percent a year. account is expected to deteriorate over the medium The services sector also employs an impor- term (from –1.8 percent of GDP in 2023 to an average tant part of working adults of richest households –4.6 percent of GDP over 2024–25) owing to the pro- (25 percent and 38 percent for deciles 9 and 10 jected decline in oil prices and increased imports to respectively). Services account for 40 percent of the support growing capital investment. total income of household in the 10th decile against 8 percent for households in the bottom 40 of the con- Poverty reduction is projected to be modest over sumption distribution (Figure 1.13). While many house- the next few years as inflation decreases but holds earn cash income by operating nonfarm enter- growth remains driven by the oil sector with lim- prises particularly in services, these enterprises tend ited linkages to the poor and vulnerable. to be small, informal, and driven by necessity rather than an opportunity. Given the structure of employ- Projections for the medium term find robust pov- ment and household income by sector of activities, erty reduction over the next 3 years, based on accounting for sectoral growth difference is important moderate GDP growth in the primary sector in analyzing poverty in Chad. and low inflation. The international poverty rate is High inflation deteriorated households’ expected to decrease from 38.7 percent in 2022 to livelihoods and increased poverty. High food price 34.4 percent in 2025. Inequality is expected to remain inflation meant that households who spend more on relatively stable, with the Gini hovering around 0.34. food are more affected. In Chad, the highest inflation Sectoral growth rates, particularly that in agriculture, rate during the period was observed in 2022, with a are more informative about changes in poverty, than CPI that would have increased by almost 5 percent- the overall growth rate. Sectoral growth rates, partic- age points compared to 2021. Inflation was mainly ularly that in agriculture, are more informative about driven by food inflation which was more than 12.2 per- changes in poverty, than the overall growth rate. cent in 2021–2022. Given that Chadian households The agricultural sector employs 8 out of 10 dedicate an average of about 60 percent of their working adults and provides 60 percent of house- budgets to food with cereals (rice, millet, sorghum, hold income. The agricultural sector is particu- and maize) representing the most consumed food in larly important for households in the bottom 40 per- Chad (29 percent of households’ food consumption), cent of the consumption distribution: 90 percent of it likely that inflation has seriously impacted them. working adults of these households are engaged in Inflation as measured by the CPI was much higher agriculture where they earn 76 percent of their total than the GDP deflator6 which was stable during the income. However, most of households rely on small- period at around 1 percent, meaning that household holder agriculture and pastoralism, activities that are purchasing power lagged far behind what would be marked by low productivity and extreme vulnerability suggested by the growth in real GDP. To assess the to shocks (droughts/floods/security issues). In addi- true impact of rising prices on household wellbeing, tion, the pervasive lack of investment in improved we construct an inflation index for each household, inputs, mechanization, and infrastructure keeps mar- ginal agricultural productivity low and variable, while 6 The GDP deflator is the ratio between the nominal GDP the livestock sector suffers from ecological vulnera- and the real GDP in constant factor prices. It is a form of price index in which the weights are based on the shares bility, limited uptake of veterinary medicine, and low of products in the GDP. In contrast, in the consumer price levels of value addition. These make households vul- index (CPI), the weights are based on shares in household nerable to food insecurity and highlight the need to consumption. The price of gold and raw cotton would be diversify for the poor household to diversify away from influential in the GDP deflator, but not at all in the CPI. 10 2023 CHAD ECONOMIC UPDATE FIGURE 1.13   Agriculture dominates the FIGURE 1.14   Secondary and tertiary sectors employment of the poorest welfare generate a higher share of income deciles than actual employment across welfare deciles Employment by Sector by Welfare Decile 100 Income by Sector by Welfare Decile 4 4 6 7 9 5 13 4 14 100 90 3 5 17 18 3 4 6 20 10 10 9 10 12 13 11 12 10 13 12 5 25 15 14 6 90 6 80 7 7 38 7 9 11 8 7 80 6 5 5 14 6 70 7 19 24 24 21 9 28 26 70 9 60 8 40 8 10 60 7 8 8 50 9 93 94 50 90 89 91 40 85 82 76 80 40 79 9 75 73 77 77 72 76 30 66 66 30 61 58 56 60 52 49 52 20 20 37 10 10 0 0 Poorest Decile 2 Decile 3 Decile 4 Decile 5 Decile 6 Decile 7 Decile 8 Decile 9 Richest Bottom 40 Top 60 National Poorest Decile 2 Decile 3 Decile 4 Decile 5 Decile 6 Decile 7 Decile 8 Decile 9 Richest Bottom 40 Top 60 National Agriculture Industry Services Agriculture Industry Services Non-labor Source: World Bank staff based on Ecosit 4 data (2018). Source: World Bank staff based on Ecosit 4 data (2018). based on food and non-food inflation (as measured The outlook is subject to significant downside by the CPI), weighted by the household’s own con- risks, including climate risks sumption weighted by the household’s own con- sumption shares (Figure 1.15).7 This outlook is subject to significant uncertainty Growth is expected to reduce poverty over and multiple downside risks related to recurrent the 2023–2025 but not inequality. Given mod- and emerging sources of vulnerability. Dampening erate growth projections in agriculture at around oil prices could exacerbate Chad’s fiscal and debt fis- 1.6 percent in real terms in 2024 and 2025 while high- cal sustainability. Managing the political transition and est growth rates are expected in services. The expec- related security risks could stress public finances and tation is that inflation will be much lower (indeed, infla- result in further cuts to critical social services such as tion, while still high, has been steadily declining since health and education. Besides, the risk of an increased a peak in mid-2022). As a result of higher growth and political instability as the political transition enters its lower inflation, poverty is expected to decline, falling final phase with the organization of elections remains to 37.1 percent in 2023, then 35.9 percent in 2024 and elevated. As for the country security situation, Boko 34.4 percent 2025. The combined impact of house- Haram remains a major threat in the Lake Chad, while hold-level estimates of nominal per capita growth inter-community clashes over access to and use of natu- (based on sectoral distribution of income) and infla- ral resources continue to degrade the local context and tion (based on share of food in consumption) allows social relations. Ongoing climate change contributes to projections of the impact on real per capita consump- tion across the distribution. Overall, poorer house- 7 This household-specific weighting has little overall holds are expected to see lower growth over the impact on poverty reduction, the main impact is adjust- medium term, largely because they do not participate ing household real consumption using inflation rather in the highest growing sectors (Figure 1.16). than assuming it grows proportional to real GDP. ECONOMIC AND POVERTY DEVELOPMENTS AND OUTLOOK 11 FIGURE 1.15    Given higher consumption, wealthiest FIGURE 1.16   Following a decline in income households were most impacted by inequality, growth is projected to rising inflation widen inequality in 2023–2025 Household Specific Inflation Rates Household welfare growth by decile and year 45 0.10 0.08 35 0.06 0.04 25 0.02 0.00 15 –0.02 –0.04 5 –0.06 –5 –0.08 –0.10 –15 –0.12 2019 2020 2021 2022 2023 2024 2025 2019 2020 2021 2022 2023 2024 2025 Poorest Decile 2 Decile 3 Decile 4 Decile 5 O cial CPI GDP de ator Decile 6 Decile 7 Decile 8 Decile 9 Richest Source: World Bank staff based on Ecosit 4 data (2018). Source: World Bank staff based on Ecosit 4 data (2018). desertification, erratic rainy seasons and severe floods should adopt institutional, regulatory, and administra- that reduce agricultural output and exacerbate poverty. tive reforms to promote investment in economic infra- High food and energy prices will continue to worsen food structure, in order to improve its regional integration. insecurity. Food insecurity may create social discon- Strengthening governance, including in the manage- tent and strikes due to delayed population assistance. ment of oil revenues will be essential to improve access Against this backdrop, adequate structural to basic services, which would in turn support human reforms are required to reinforce Chad’s resilience capital outcomes and inclusive growth. to global markets fluctuations, and measures should be implemented for a peaceful transition. Successful reforms have been implemented for a bet- Spotlight: Sahel Country Climate and ter management and transparency in public finance, Development Report notably of the tax administration. In the political land- scape, there has been progress in the inclusion of the This spotlight summarizes the key macroeco- opposition in the political landscape, following the con- nomic-poverty impact analyses for Chad in the clusion of the national dialogue in October 2022. How- Sahel Country Climate and Development Report ever, the progress in the general economic reform (CCDR) covering Burkina Faso, Chad, Mali, Mauri- has been slowed down by the ongoing political tran- tania, and Niger8 sition and its security risks implications. Chad should address underlying causes of insecurity by, for exam- 8 G5 Sahel Country Climate and Development Report ple, enhancing economic inclusion and strengthening (CCDR), World Bank, September 2022: https://openkno​ natural resource governance and inter-communal rec- wledge.worldbank.org/handle/10986/37620. The World onciliation. Chad should continue reducing its depen- Bank Group’s CCDRs are new analytical reports from the World Bank Group analyzing the linkages between dence on the oil industry through domestic revenue growth, development and climate change. CCDRs build mobilization. Chad’s infrastructure network increas- on data and rigorous research and identify main path- ingly lags that of peers and is characterized by regional ways to reduce GHG emissions and climate vulnerabili- inequality and limited access. Hence the country ties, including the costs and challenges as well as benefits 12 2023 CHAD ECONOMIC UPDATE Burkina Faso, Chad, Mali, Mauritania, and Niger presents estimates of economic and poverty impacts are among the world’s most vulnerable to climate under four of them: (i) pessimistic (higher temperature change9 while having some of the highest poverty increases and larger precipitation changes); (ii) opti- rates. Sustaining economic growth to reduce pov- mistic (lower temperature increases and smaller pre- erty is already a challenge in the Sahel with growth cipitation changes); (iii) wet (largest precipitation volatile and subject to multiple shocks, notably polit- increases); (iv) and dry (smallest (or decrease) precip- ical instability, insecurity, as well as climatic shocks, itation changes). See Annex 3.4 for details. including frequent and intense droughts and floods. All climate scenarios predict an increase According to the IPCC, most climate scenarios show in mean temperatures in Chad, with the size and that temperatures in the Sahel will rise by at least 2°C structure of the economy affecting the nature in the near term (2021 to 2040) while rainfall patterns and magnitude of the impacts of climate change. are projected to become more irregular, with sud- Mean temperature increases by 2050 are 0.8°C and den oscillations between very wet and very dry years. 1.4°C under the optimistic and pessimistic climate The Sahel CCDR projects that by 2050 the 5 coun- scenarios, respectively. Almost all climate scenar- tries’ annual GDP would be reduced by between 7 to ios predict an increase in precipitation compared to 12 percent with 13.5 million additional poor due to cli- average historical (1995–2020).10 Under the wet cli- mate change-related shocks if urgent investments in mate scenario, precipitation increases by 28 percent, climate adaptation are not taken. even under the dry climate scenario, precipitation still However, the CCDR shows that adaptation increases - by 5 percent. For each country, three base- measures can substantially reduce the economic line growth scenarios (where the economy is not sub- losses and that there are significant opportuni- ject to impacts of further climate change) were devel- ties for resilient growth and lower-carbon devel- oped: low, medium, and high growth.11 opment in the Sahel. With judicious pro-climate pol- icies and investments in priority areas, Chad and the and opportunities from doing so. The reports suggest con- other Sahel countries can stimulate growth, bolster crete, priority actions to support the low-carbon, resilient resilience and reverse environmental degradation and transition. As public documents, CCDRs aim to inform maximize the benefits of climate action for the poor. governments, citizens, the private sector and development The costs of inaction are far greater than the costs partners and enable engagements with the development of action. Chapter 2 takes a close look at the signifi- and climate agenda. CCDRs will feed into other core Bank Group diagnostics, country engagements and operations. cant economic impacts—past and future—of flooding 9 According to several global indices, including the Notre events in Chad, which will become more frequent and Dame Global Adaptation Initiative (ND-GAIN) Country intense due to climate change, and presents options Index which summarizes a country’s vulnerability to cli- for strengthening the country’s resilience to floods. mate change in combination with its readiness to improve resilience. Countries are ranked from 1 (lower risk) to All climate scenarios predict an increase in mean 182 (higher risk). Chad is ranked 182 (very high risk). temperature in Chad, and most predict more pre- 10 Higher precipitation does not necessarily mean greater water availability, since simultaneous higher tempera- cipitation than historical averages. tures can cause higher evaporation. 11 The low-growth scenario is one of stagnation or a min- There is considerable uncertainty on global emis- imal increase in per capita income, characterized by sion trajectory and differences across different cli- increased fragility, conflict and violence (FCV) with no mate models. The CCDR models the economic and structural transformation and high population growth. poverty impact of climate change through six impact The medium-growth scenario is based on historical epi- channels for each country for the period 2021–2050. sodes of sustained growth performance, with increase in labor productivity and some structural transformation. To account for uncertainty, the CCDR models the The higher-growth scenario has a growth rate 50–100 impact of climate change for each of the five coun- percent higher than the medium-growth scenario with tries under six different emission scenario and cli- significant structural transformation, reduction in FCV mate model combinations (“climate scenarios”) and and realization of the demographic dividend. ECONOMIC AND POVERTY DEVELOPMENTS AND OUTLOOK 13 MPACT CHANNELS – MODELING THE LINK BETWEEN CLIMATE CHANGE AND BOX 1.4: I THE ECONOMY The modelling of impact channels used country-specific climate scenarios and biophysical effects models to estimate economic damages for each channel. The damages were introduced as shocks into a macro-structural model developed for each country to estimate impact on GDP and other macroeconomic aggregates. The six impact channels modelled are as follows (for further details see Annex 3.4): Rainfed crop yields. Agricultural productivity shocks: Impact on annual crop yields, based on crop yield responses to changes in temperature and precipitation. Heat stress and labor productivity. Labor productivity shocks: Impact on labor productivity due to heat stress on outdoor work in the agriculture, industry, and service sectors Heat-related human health shock. Health shocks on labor productivity: Impact on total labor productivity from health shocks (disease) due to temperature changes. Livestock yields. Livestock productivity shocks: Impact due to heat stress on animals and reduced availability of pastures to graze due to temperature and precipitation changes. Inland flooding. Capital damages due to precipitation changes, considering floodplains, design flood events, spatial distribution of capital, and run-off dynamics. Roads and bridges. Capital damages to road and bridges due to temperature and precipitation changes, and flooding effects across paved, gravel, and dirt roads. Large GDP losses, growth volatility and significant the largest negative impacts come via the roads and increases in poverty and inequality are expected bridges channel (annual GDP loss of –2.5 percent by from climate change shocks if no adaptation mea- 2050), then the heat-labor productivity channel (annual sures are taken GDP loss of –1.9 percent by 2050), and then the inland flooding channel (annual GDP loss of –1.3 percent by In the Sahel, large economic output losses 2050). There is a positive impact via the livestock yields are expected from climate change, with losses channel. Under the dry and pessimistic climate scenar- increasing over time. The losses are significantly ios, all channels yield negative impacts, with the largest higher under the dry and pessimistic climate scenar- from the livestock yields channel (annual GDP losses ios. By 2050, annual GDP could be reduced by 7 to of –3.2 percent by 2050), then heat-labor productivity 12 percent across the Sahel if no adaptation measures channel (annual GDP losses of –2.9 percent by 2050), are taken. Figure 1.17 shows the annual GDP loss as and then the rainfed crop yields channel (annual GDP the percentage deviation from the baseline GDP by losses of –2.2 percent by 2050). Results are presented 2050. Importantly, these estimates are likely to under- for the medium-growth baseline scenario, other sce- estimate the impact from climate change because not narios are in the Annex 3.4. all impact channels are included and because they do Large annual variability in the shocks to not include the magnifying effects of climate-induced rainfed crop and livestock yields pose additional changes in ecosystems, increases in conflicts, and challenges for the agriculture sector and food migration shifts. security. Figure 1.18 shows rainfed crop yield shocks By 2050, annual GDP in Chad would be under dry and wet climate scenarios. In one year, the reduced by 4.2 percent under the wet and optimis- shock can be large and positive, while in the next it tic scenarios and 10.5 percent under the dry and can be large and negative. Even if across the entire pessimistic scenarios by 2050 (Figure 1.17). Chad period the net impact is small, the volatility creates could lose between 4.2 and 10.5 percent of GDP by challenges for households and the wider economy 2050). Under the wet and optimistic climate scenarios, and contributes to food insecurity. 14 2023 CHAD ECONOMIC UPDATE FIGURE 1.17    Chad could lose between 4.2 and 10.5 FIGURE 1.18    High annual variability in climate percent of GDP by 2050 shocks increases volatility of growth G5 Sahel Annual GDP loss by 2050 from climate change with no adaptation Chad: Annual rainfed crop yield shocks with no adaptation 0 20% –2 15% –2.2 –4 10% –3.5 % deviation from baseline –4.2 5% –6 –5.7 –6.4 0% –8 –6.8 –5% –10 –9.3 –10% –10.5 –10.7 –12 –15% –11.9 –14 –20% Burkina Faso Chad Mali Mauritania Niger 2021 2026 2031 2036 2041 2046 Wet and Optimistic Climate Scenarios Dry and Pessimistic Climate Scenarios Dry Annual Wet Annual Dry 5-yr Avg Wet 5-yr Avg Source: G5 Sahel CCDR. Source: G5 Sahel CCDR. FIGURE 1.19    Damages to roads and bridges FIGURE 1.20   Lower labor productivity due to heat (floods), lower labor productivity due stress and lower rainfed crops and to heat stress and inland flooding livestock yields drive GDP losses under drive GDP losses under a wet and a dry and optimistic climate scenario optimistic scenario Chad: Annual GDP loss from climate change with no adaptation (dry / pessimistic) Chad: Annual GDP loss from climate change with no adaptation (wet / optimistic) 6 6 6 6 4 4 4 4 2 2 2 2 0 0 0 0 –2 –2 –2 –0.5 –2 % GDP % GDP –4 –2.1 –4 % GDP % GDP –4 –4 –6 –2.2 –6 –6 –4.6 –6 –4.2 –8 –8 –8 –8 –10 –10 –10 –10 –12 –12 –12 –10.5 –12 –14 –14 –14 –14 2030 2040 2050 2030 2040 2050 Rainfed crops yield Livestock yield Rainfed crops yield Livestock yield Labor productivity (Heat stress) Labor productivity (Health impacts) Labor productivity (Heat stress) Labor productivity (Health impacts) Flooding Roads and Bridges Flooding Roads and Bridges Total GDP Impact Total GDP Impact Source: G5 Sahel CCDR. Source: G5 Sahel CCDR. The challenge of reducing poverty in the could be an increase in the poverty rate of the G5 Sahel given high population growth rates will be Sahel countries from 27 percent projected under exacerbated by climate change. By 2050 there the medium-growth baseline scenario (no climate ECONOMIC AND POVERTY DEVELOPMENTS AND OUTLOOK 15 change) to 29 percent under the wet and optimistic change and to enable the increase in GDP per capita scenarios and 34 percent under the dry and climate needed to reduce poverty. pessimistic scenarios. This translates to an additional The benefits of adaptation outweigh 4.1 to 13.5 million people falling into poverty. In Chad, the costs. The CCDR modelled potential adapta- by 2050, the poverty rate will increase relative to the tion interventions for three of the impact channels: medium-growth baseline by 3.3 percentage points (i) expanded irrigation for rainfed crops; (ii) improve- under the wet and optimistic scenarios and 10.6 per- ments in livestock feed practices; and (iii) and invest- centage points under the dry and pessimistic climate ments in climate resilient road and bridges. The anal- scenarios, which translates to an additional 3.34 mil- yses show that damages from climate change can be lion people falling into poverty. significantly reduced even with partial adaptation. In Inequality will increase and climate change Chad the loss from climate change is 10.5 percent of will have a heterogeneous spatial effect in the GDP by 2050 without adaptation and only 5.7 percent Sahel with higher poverty impacts in rural areas, of GDP with partial adaptation (i.e., the three interven- including in some of the most vulnerable border com- tions modelled) dry and pessimistic climate scenar- munities in Chad, Niger, and Mali. Given the large ios. In some cases, the adaptations could bring about negative impacts of climate change on poverty and gains above the losses avoided by addressing exist- the challenge to fully adapt, expanding adaptive ing large productivity gaps and infrastructure defi- safety nets and other poverty reduction programs will cits in the Sahel. For example, with expanded irriga- be critical. tion, rainfed crops yields could increase above the baseline (without climate change). See Annex 3.4 for The results highlight that accelerating economic more details. growth with significant investments in adaptation To accelerate resilient growth in the con- and climate resilience is essential for Chad and text of climate change, The G5 Sahel CCDR iden- the rest of Sahel. tifies measures, policies, and investments in five priority areas: (i) Institutions; (ii) Climate Financing Growth and structural transformation will make and Risk Mitigation; (iii) Energy (which highlights the economy more resilient to climate shocks. the opportunity to develop in a low-carbon pathway Agriculture is more affected by droughts, floods, and by making the most of the region’s large renewable extreme heat than other sectors so a shift to indus- energy potential while meeting increased demands try and services would reduce the impact of climate of a larger economy); (iv) Landscapes (integrated change. Moreover, the richer a country is, the more management of natural capital agriculture, water, and resources the government, firms, and households will environment); and (v) Cities (resilient urban develop- have to invest in adaptation and to cope with adverse ment). Chapter 2 presents recommendations across climate-related shocks. Finally, economic growth is these priority areas to strengthen Chad’s resilience essential to “offset” economic losses from climate to floods. 16 2023 CHAD ECONOMIC UPDATE 2 1 IMPROVING RESILIENCE TO FLOODS Floods are a recurring natural hazard in Chad heat. Access to basic services is well below the Sub- and anticipated to worsen with climate change Saharan Africa average with only 11 percent of the if proactive adaptation measures are not taken. total population having access to electricity and only The previous chapter identified vulnerability to climate 12 percent with access to basic sanitation services. change as one of the main constraints to Chad’s eco- Poor access to basic services, poverty, and poor gov- nomic and social development. Frequent flooding ernance limit the country’s coping capacity and mag- can severely affect the country’s agricultural produc- nify its vulnerability to natural hazards. The INFORM tion with significant impacts in areas with high con- Risk Index ranks Chad as the 6th most at-risk country centrations of population and assets. This chapter dis- in the world.12 cusses Chad’s disaster risk profile and the drivers that Chad has been repeatedly affected by make floods an increasingly important threat to eco- climate-related events, such as droughts and nomic growth, as well as policy options to reduce the floods. The frequency of drought events has slightly impact of floods and improve resilience. increased in the 2002–2022 period compared to the 1981–2001 period, with each drought event affecting on average 14.5 percent of the population. Triggered Context and evolving disaster risk profile 12 The INFORM Risk Index is a global, open-source risk assessment for humanitarian crises and disasters, rank- Chad’s development is challenged by high cli- ing countries by risk based on exposure, vulnerability, mate and disaster risk coupled with limited cop- and coping capacity against disasters. INFORM is a col- laboration of the Inter-Agency Standing Committee and ing capacity to manage adverse natural events the European Commission.; Joint Research Centre (JRC) as evidenced by the 2020 and 2022 floods. The European Commission (2022). INFORM Global Risk country is exposed to various types of hazards, includ- Index 2019 Mid-Year, v0.3.7. Palisades, New York: NASA ing droughts, floods, wildfires, storms, and extreme Socioeconomic Data and Applications Center (SEDAC). 17 FIGURE 2.1   Number of climate-related events (left) and proportion of population affected by floods (right) in Chad Drought Proportion of Population A ected by Floods (1985–2022) 7% 2001–2021 57.1% 6% 1980–2000 42.9% 5% 0 5 10 15 4% Flood 3% 2001–2021 71.4% 2% 1980–2000 28.6% 1% 0 5 10 15 0% 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 Number of events Source: World Bank staff based on CRED (2022), OCHA (2019), and IFRC (2021). by episodes of high temperature and low precipita- (Figure 2.1, right). In 2019, floods affected over 100,000 tion, droughts also exacerbate desertification and are people after overflow of the Logone River and Lake expected to remain a major threat to poverty reduction Maga.14 In 2020, over 190,000 people were affected efforts in rural areas. However, Chad’s rapid urban- by heavy floods across Chad.15 More recently, floods ization drives the increasing concentration of popu- in 2021 and 2022 affected over 1.3 million people, lation and assets in flood-prone urban areas. As the equivalent to 7.3 percent of the population.16 Impor- CCDR spotlight highlighted, both mean temperatures tantly, while droughts mainly affect agricultural output and precipitation is expected to increase (compared and rural household’s welfare, floods damage physi- to historical average) as a result of climate change. cal assets and infrastructure across sectors, generat- This then leads to an evolution of the disaster risk ing significant economic activity disruptions and nega- profile—from predominantly rural affecting population tive spillovers that affect the productivity of the capital through impact on food security—to urban with con- stock beyond the assets directly impacted. centrated recurrent impacts on economic activity due to floods. In fact, over the last 20 years, floods with a significant negative impact on physical assets have 13 This number corresponds exclusively to deaths reported occurred more frequently than droughts and have in an international disaster database. The actual number of deaths in this period is likely to be higher, as disaster been twice as frequent as compared to the 1981– statistics are often incomplete.; Centre for Research on 2001 period (Figure 2.1, left). the Epidemiology of Disasters (2022). EM-DAT: The Inter- The frequency and impact of flood events national Disaster Database. has intensified in recent years, and more attention 14 United Nations Office for the Coordination of Humanitar- is needed to ensure the sustainability of future ian Affairs (OCHA) (2019). Cameroon / Chad: Floods – development prospects. Deadly floods have been Oct 2019. 15 International Federation of Red Cross and Red Crescent reported on average once every 2.5 years over the Societies (IFRC) (2021). Final Report Chad: Floods in last decade, with 358 deaths attributed to 22 flood N’Djamena DREF n. MDRTD018. events since 1981.13 Annual flood events have affected 16 Centre for Research on the Epidemiology of Disasters an increasing proportion of the population since 2019 (2022) 18 2023 CHAD ECONOMIC UPDATE FIGURE 2.2    Three main dynamics driving flood risk in Chad Loss of natural ood protections Environmental Increased migration due to which absorb and slow water degradation displacement of communities Increased runo , by reducing the Poor waste management water-holding capacity of soil leading to increased pollution and Weather events leading to land contamination degradation and biodiversity loss Vulnerability Flood Risk Hazard Exposure Poorly Climate planned change urbanization Concentration of residents in oodplains Increased greenhouse emissions Loss of natural green spaces Source: World Bank staff adapted from IPCC (2012). Chad is in a fragile and conflict-affected sit- (Figure 2.2). The frequency and intensity of hydro- uation (FCS), which together with an increasing meteorological hazards are expected to be altered flood risk heightens vulnerabilities and threatens under a changing climate. Secondly, environmental development prospects. These factors trigger sig- degradation can compound vulnerability conditions nificant internal displacements in Chad, with 367,000 and the sensitivity of the entire society to adverse nat- people displaced at the end of 2021 due to conflict ural events. Additionally, population growth mixed and violence, and a further 24,000 people displaced with continuous urban expansion with inadequate due to disasters.17 Refugees and Internally Displaced construction standards and poor development plan- Persons (IDPs) often settle in floodplains and face sig- ning could further boost the overall exposure of the nificant risks related to climate events, lack of basic country to these events. This section discusses the healthcare, food shortages and double displacement. major drivers of flood risk identified for Chad, and This also limits the ability of individuals and businesses how their interaction suggests that negative impacts to participate in local economic trade due to social, due to floods are set to worsen without adaptation ethnic, or legal barriers. Beyond affecting welfare and efforts and investments. economic recovery, disaster events create compound- ing shocks that threaten to exacerbate conflict-related Climate change will increase the frequency, i.e., security issues. Identifying and addressing the main the flood risks as well as the severity of floods drivers of flood risk in Chad is therefore critical to curb escalations of conflict-related risk. Climate modelling suggests that mean temper- atures in Chad will increase, with the magnitude of the increase depending upon global emissions Main drivers of flood risk in Chad pathways (Figure 2.3). Under high-warming scenar- ios (i.e., SSP 3-7.0 and above), maximum temperatures Climate and disaster risks are intrinsically linked to the development pathway of a country and, 17 Internal Displacement Monitoring Centre (2022). Chad as such, are influenced by three major drivers Country Profile. Improving Resilience to Floods 19 FIGURE 2.3    Projected departures from natural FIGURE 2.4    Projected change in distribution of variability of mean temperature in Chad largest 5-day cumulative precipitation, SSP2-4.5 38 3 36 34 Mean-Temperature (°C) 32 2 Distribution 30 28 1 26 24 2000 2020 2040 2060 2080 2100 Year 0 27 27.5 28 28.5 Historical Ref. 1995–2014 SSP1-1.9 SSP1-2.6 Mean-Temperature (°C) SSP2-4.5 SSP3-7.0 SSP5-8.5 Historical Ref. 1995–2014 2020–2039 2040–2059 Significant Change From Natural Variability 2060–2079 2080–2099 SSP1-1.9: 2010.84 (2007-2055.05) SSP1-2.6: 2012.75 (2008.33-2023.25) SSP2-4.5: 2012.86 (2008.66-2025.37) SSP3-7.0: 2014.39 (2009.21-2026.15) Source: World Bank (2022a). SSP5-8.5: 2013.96 (2008.55-2027.41) Note: The index describes the distribution of the annual maximum 5-day cumulative precipitation. It is used to describe changes in potential flood risk as heavy rain over several consecutive days can Source: World Bank (2022a). contribute to flood conditions. could exceed 45°C during summer months, rendering from flooding, and reduce infrastructure carrying outdoor activities almost impossible and generating capacities due to increased moisture from precipita- significant adverse impact on productivity and human tion. Furthermore, this trend is anticipated to worsen health. Increased temperatures may further accelerate flood-related damages in Chad if no risk reduction desertification and erode the soil, reducing its infiltra- and climate adaptation measures are taken. tion capacity and increasing the risk of floods. Liva- Climate projections were incorporated to bility in cities will be adversely affected, especially in flood risk models to assess the evolution of poten- N’Djamena—already one of the hottest cities in the tial losses under climate change scenarios and eval- world—as cities experience temperatures higher than uate adaptation investments. The analysis consists their surrounding rural areas due to the urban heat of two impact channels: roads and bridges, and inland island effect.18 Warmer temperatures will also impact flooding. The inland flooding impact channel assesses precipitation as the warmer the air is, the much more the effect on built-up capital from changes in the recur- moisture it can carry, and therefore if rain were to form, rence of flood events due to changing precipitation pat- much more water could be tapped into.19 terns translated to runoff using a flood model. The impact The frequency of heavy precipitation on roads and bridges of changes in temperature, precip- events is also projected to increase under cli- itation, and floods across the dry, wet, and hot climate mate change (Figure 2.4). Intensifying precipitation scenarios was analyzed (see also section Spotlight). events can damage infrastructure, disrupt economic activities, and lead to higher capital and Operation 18 World Bank Group (2021a). City Scan: N’Djamena, Chad and Maintenance (O&M) expenditures in the medium- – City Resilience Program. to long-term. For example, intensifying precipitation 19 The Clausius-Clapeyron relations dictates that for every patterns can inflict damage on culverts, gravel roads, 1°C of increased air temperature air’s potential to carry and dirt roads by causing washaways, overtopping moisture increases by about 7 percent. 20 2023 CHAD ECONOMIC UPDATE FIGURE 2.5   Additional share of built capital FIGURE 2.6   Expected damage increase of a range damage in a 1-in-50-year flood in Chad of flood events with and without under climate change adaptation, relative to historical conditions in N’Djamena, under an 5.0% RCP8.5 scenario 4.5% 40% Additional Expected Damages Relative to Historical 4.0% 30% Additional Share of built-Up Capital 20% 3.5% 10% 3.0% 0% 2.5% –10% –20% 2.0% –30% 1.5% –40% 1.0% –50% –60% 0.5% 5 10 20 50 100 500 1000 Storm Refund Period 0.0% RCP4.5 RCP8.5 2071–2100 No Adaptation 2071–2100 Resilient to 0.1m storm 2010–2039 2020–2049 2036–2065 2071–2100 2071–2100 Resilient to 0.25m storm Source: IEc (2022). Source: IEc (2022). Climate change will increase not just the aver- infrastructure to withstand flood depths of 0.1m and age annual flooding damages, but also the severity 0.25m can significantly reduce expected damages of more destructive and less frequent events under relative to a historical baseline (Figure 2.6 Expected climate change. While the Sahel CCDR indicates that damage increase of a range of flood events with and climate change will lead to the highest increase in aver- without adaptation, relative to historical conditions in age annual flooding damages in Chad amongst the five N’Djamena, under an RCP8.5 scenario). By the end Sahel countries analyzed, further inland flood model- of the century, more climate resilient infrastructure ling suggests the increasing severity of more destruc- could reduce the damage of frequent floods (1-in- tive, less frequent events, like those observed in 2022. 10-year return period), by up to 70 p.p., compared to Figure 2.5 shows the projected increase in the magni- a climate change scenario without adaptation mea- tude of the 1-in-50-year flood under climate change for sures. Although damages fall below baseline histor- built assets. The estimates correspond to country-scale ical levels with investments to withstand flood water expected share of assets damaged due to changes depths of 0.1m, these benefits diminish at higher in flooding recurrence, relative to a historic baseline return period events because the larger floods over- (1995 to 2020). The additional climate change impact top the flood protection measures.20 These estimates under a RCP-8.5 scenario of a 1-in-50-year event could destroy an additional 4.5 percent of the country’s build 20 Flood modelling and depth-damage functions were used capital by the end-of-century (2071–2100). These pro- to estimate infrastructure damages under future emis- jected impacts do not consider anticipated urbaniza- sions scenarios in N’Djamena. The approach involved a tion, deforestation, or land use change, all of which will 2-dimensional flood model that considers precipitation, soil moisture, land use, and topography to simulate flood further intensify flooding impacts. depths over space. Flood depths are overlain on detailed Proactive investments in flood protection infrastructure data from OpenStreetMap, and damages measures in urban areas can reduce the potential were then estimated based on infrastructure-specific damages to urban infrastructure. Strengthening functions that relate flood depth to infrastructure damage. Improving Resilience to Floods 21 highlight how, even in the absence of future urban pastureland, and forests account for 90 percent of expansion, investment to increase city resilience will the economic value of natural capital in Chad.23 Their be required to ensure that N’Djamena can contrib- total value increased until 2015, then slightly declined ute to a more diversified economy and a more sus- primarily due to the drop of oil prices; however, their tained growth. per capita value has steadily declined since 2010 Without adaptation, capital and O&M spend- (Figure 2.7). Today, natural resources in Chad are ings on roads and bridges could increase dra- depleted at a rate of 10.9 percent of the country’s matically. The cost of non-adaptation is estimated gross national income, which is more than double at US$600-$2,000 per km and year in the 2020s and that of Sub-Saharan Africa, estimated at 4.1 percent.24 rises to between US$2,000-US$6,000 per km and The total costs of environmental degradation in Chad year by the 2060s.21 If adaptation measures are taken, are estimated at US$2.6 billion in 2019, or 23 percent spending is projected to rise by US$1,000-US$2,500 of GDP.25 per km in the 2020s (about US$500 per km higher than in the no adaptation scenario), but would then 21 Beyond the effects of intensifying precipitation on roads, fall to below US$1,000 per km from the 2040s onward. damage also accounts for the accelerated aging of Assuming a current spending on roads in Chad of binder, rutting of asphalt, and bleeding of seals due to US$4,000 per km per year, this would suggest that temperature. The impacts on bridges are assessed in without adaptation measures, climate change could terms of closures due to flood exposure. Impacts are quantified based on capital and repair costs using unit increase spending by 50–150 percent between the cost assumptions, and the lost labor hours resulting 2020s and 2060s.22 Furthermore, additional dam- from delays and detours, all of which can in turn affect ages to roads and bridges due to climate change total factor productivity and growth. The without adapta- could increase travel times in Chad by 0.5 to 2.7 mil- tion scenario examines the impacts of climate change lion hours per year by the 2050s relative to baseline assuming that no proactive or anticipatory measures are conditions. taken to protect the road and bridge network against the impacts of climate change, whereas with adaptation A proactive approach to climate change anticipates the effects of climate change and builds new adaptation requires additional infrastructure in- and replacement infrastructure accordingly. vestment in the near term, but this translates into 22 Information on current road spending in Chad is not major savings in the medium to long term. Adap- readily available. These figures are under the assump- tation also greatly enhances climate resilience, mean- tion that Chad’s spending on roads is similar to Mala- ing that the variability of impacts across climate sce- wi’s, of US$4,000 per km of road spending per year; Foster, V., and M. Shkaratan (2011). Malawi’s Infrastruc- narios is much lower. More climate resilient roads ture: A Continental Perspective. Policy Research Work- and bridges would reduce the macro-fiscal impacts ing Papers. The World Bank. of floods, mitigating the effects of both infrastructure 23 Natural capital refers to natural assets (land, water, air, and capital losses as well as potential declines in pro- mineral, flora, and fauna) in their role of providing nat- ductivity of the remaining infrastructure (e.g., from dis- ural resource inputs and environmental services for ruptions to economic activities). economic production. The economic value of natu- ral capital in 2018 was US$75.4 million, including fossil fuels (US$26.6 million), forests (US$14 million), cropland Environmental degradation and inadequate waste (US$13.3 million), pastureland (US$13.7 million), and management increase flood risk protected areas (US$7.8 million) World Bank (2021e). 24 World Bank Group (2021b). Country Profile, World Environment and natural capital are of major Development Indicators database. importance to Chad. The economy depends heav- 25 Out of which about 39 percent correspond to inade- quate water, sanitation, and hygiene (WASH), 30 per- ily on natural resources, particularly agricultural land, cent to land degradation, 22 percent to air pollution, and rangelands, and oil production. Agriculture contrib- 9 percent to inappropriate waste management.; World utes 48 percent of GDP and employs more than Bank Group (2022d). Tchad - Diagnostic Environnemen- 75 percent of the workforce. Fossil fuels, cropland, tal Pays (French). Washington, D.C.: World Bank Group. 22 2023 CHAD ECONOMIC UPDATE FIGURE 2.7    Total value (left) and per capita value (right) of natural resources in Chad 90,000 7,000 80,000 6,000 70,000 Constant 2018 US$, per capita 5,000 Constant 2018 US$, millions 60,000 50,000 4,000 40,000 3,000 30,000 2,000 20,000 1,000 10,000 0 0 1995 2000 2005 2010 2015 2018 1995 2000 2005 2010 2015 2018 Forests, timber Forests, ecosystem services Protected areas Forests, timber Forests, ecosystem services Protected areas Mangroves Fisheries Cropland Mangroves Fisheries Cropland Pastureland Fossil fuel energy Minerals Pastureland Fossil fuel energy Minerals Source: World Bank (2021e). Environmental degradation and more spe- verse climatic events. This includes accelerated cifically land degradation and inappropriate waste desertification alongside drought events drasti- management are significant causes of water pol- cally reduces the productive potential of soil and lution and flood risk. On the one hand, land degrada- worsens food insecurity, the effects of which will tion and deforestation weaken soil structure and lead be magnified by other events such as conflicts and to soil erosion (due to water and wind). Such erosion rapid-onset floods triggered by weather extremes. contributes to the silting of riverbeds, which is also ag- Without remedial actions, the impacts of environ- gravated by urbanization. For example, the Gassi riv- mental degradation will likely increase and so will erbank, which is non-forested, has suffered from great the impacts of floods. erosion since 2017 (one meter over five years). The silting of riverbeds increases riverine flood risk follow- Unplanned urbanization increases exposure and ing heavy precipitation.26 On the other hand, inappro- vulnerability to flood risk priate waste management is a significant cause of wa- ter pollution and increases urban flood risk. Disposal Chad’s urban population has more than dou- of solid waste in unsanitary sites, lack of wastewater bled between 1995 and 2015. Despite such high treatment, and discharges of human waste into nature growth in the urban population, only about 24 per- all contribute to polluting surface and groundwater cent of Chad’s population lives in urban areas as of and increase the proliferation of water-borne diseases. 2022, about half the Sub-Saharan Africa average. Moreover, plastic waste generates high damage in cer- tain areas of N’Djamena, in terms of illnesses, property depreciation, and floods. Improper disposal of waste 26 Siltation refers to the accumulation of silt or sediment often results in clogging of already insufficient drain- in a river, stream, or other water body. When siltation age systems. As a result, rainwater is not adequately occurs, the volume of water that the river or stream can hold decreases, as the channel becomes shallower and channeled in case of heavy rainfall, further increasing narrower. This means that when there is a large amount the likelihood and impacts of urban flash floods. of water flowing in the river, such as during heavy rainfall, Overall, environmental degradation am- the river is more likely to overflow its banks and cause plifies the negative cascading effects of ad- flooding. Improving Resilience to Floods 23 A large proportion of this urban population resides cities, N’Djamena is the one that is most exposed in N’Djamena, where the population has increased to floods, with the level of built-up exposure increas- with a growth rate of above 3 percent annually in ing rapidly (Figure 2.8, left). The city is located about the last decade. Today, the capital concentrates 100 km south of Lake Chad, at the border with Cam- more than a third of the country’s urban popula- eroon, in a flat alluvial plain at the confluence of the tion, hosting 1.5 million of the country’s 17.7 million Chari and Logone rivers. Most of the city is located population.27 on the right bank of the Chari, north of the river, with This fast-paced urbanization has been a declivity of about 4 m over 40 km, oriented towards poorly managed and has translated into an the north rather than the natural outlet constituted by increased exposure and vulnerability of assets the Chari. 14 percent and 74 percent of total built-up to flood. In 2019, approximately 18 percent of areas in N’Djamena are exposed to a 1-in-10- and a national built-up (61 percent of which are in urban 1-in-100-year flood respectively (Figure 2.8, right). This areas) and 13 percent of the population were large difference in flood exposure indicates that flood exposed to an extreme 1-in-100-year return period impacts may increase significantly as climate change flood.28 Urbanization has also brought significant exacerbates the severity and frequency of flood changes to land cover and prompted an increase events in the coming decades. in impervious areas, which interferes with the natu- ral process of infiltration. Consequently, in case of 27 United Nations Department of Economic and Social Affairs heavy rainfall, water runoff is amplified, exacerbating (UNDESA), Population Division (2018). World Urbanization the magnitude of floods and their adverse impacts. Prospects: The 2018 Revision, Online Edition. The annual average loss from fluvial floods was esti- 28 The return period is used to describe the magnitude of mated in 2017 at US$49.8 million or about 0.5 per- an event associated with a recurrence interval, which is cent of GDP.29 based on the probability that the event will be equalled Beyond direct damages to physical assets or exceeded in any given year. A 1-in-100-year return period flood refers to an event that has a 1 percent and infrastructure, disaster and climate-related chance of occurring in any given year. The estimates shocks could trigger amplified macroeconomic provided in text are computed using layers from the and welfare impacts. For example, disruptions to World Settlement Footprint Evolution, WorldPop, and transport networks triggered by inundation of roads Fathom datasets. and bridges will reduce the productivity of businesses 29 The average annual loss is the expected loss per year, and assets relying on this infrastructure—at least until averaged over many years. These correspond to phys- ical assets damages.; United Nations Disaster Risk connectivity is restored. In other words, floods not Reduction (2017). Global Assessment Report on Disas- only reduce the total stock of capital, but also the total ter Risk Reduction. Geneva, Switzerland, United Nations factor productivity of the remaining capital stock.30 Office for Disaster Risk Reduction (UNDRR). Similarly, welfare can be negatively affected by disas- 30 Dieppe, A., S. Kilic Celik, C. Okou (2020). Implications ters. It is estimated that each dollar of material losses of major adverse events on productivity. Working Paper due to riverine floods results in a consumption loss of 9411, The World Bank.; Hallegatte, S., and A. Vogt-Schilb (2019). Are losses from natural disasters more than just US$2.08 suffered by the Chadian population.31 Thus, asset losses? The role of capital aggregation, sector growth and welfare impacts associated with floods will interactions, and investment behaviors. In: Okuyama Y., be more severe than the value associated with assets Rose A. (eds) Advances in Spatial and Economic Mod- losses and these potential amplification effects must eling of Disaster Impacts. Advances in Spatial Science be factored-in when assessing the consequences of (The Regional Science Series). Springer, Cham. severe floods. 31 The losses are estimated as distributed over the entire population of the country.; Hallegatte, S., A. Vogt-Schilb, Urban areas, particularly N’Djamena, are M. Bangalore, J. Rozenberg (2017). Unbreakable: Build- highly exposed and vulnerable to floods. Areas ing the Resilience of the Poor in the Face of Natural classified as urban centers are the most exposed Disasters. Climate Change and Development. Washing- of all settlement classes in Chad. Out of all Chadian ton, DC: World Bank. 24 2023 CHAD ECONOMIC UPDATE FIGURE 2.8    Percentage of built-up areas exposed to a 1-in-100-year flood (left) and flood exposure by return period in Chad (right) Percentage of Built-up Area Exposed to a 100-year Flood in Chad Flood Exposure by Return Period in Chad 70% 80% 60% 70% 50% 60% Urban Built-up Areas Exposed 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 N'Djamena Sarh Moundou Am Timan Abeche Abeche Am Timan Moundou N'Djamena Sarh Return Period 10 100 Source: World Bank staff analysis based on Fathom (2015), DLR (2020), and OECD/SWAC (2020). The poor quality of urbanization has pro- continue increasing until 2090 in all simulated SSP vided limited economic returns and increased the scenarios, with SSP1 and SSP5 estimating a pla- vulnerability of the urban population. Inadequate teau after 2090 (Figure 2.9). Projections on built- urban infrastructure—including the lack of appropri- up area growth also see physical expansion in the ate stormwater drainage and flood management infra- country continuing up until 2100 under all scenar- structure—have resulted in increased vulnerability of ios (Figure 2.10). Incorporating climate and disaster the urban population to flood events. Likewise, the risks considerations into urban and land use plan- large influx of rural-to-urban migrants coupled with ref- ning policies and enforcing their implementation will ugees and IDP have fueled cities expansion, with new therefore play a key role in limiting flood exposure of urban dwellers settling in the immediate surround- future urban development. ings of urban centers, where land and housing tend to be cheaper but also more exposed to floods. As a result, approximately 87 percent of the urban popu- Selected policy options to reduce the lation is estimated to resides in informal settlements impact of floods and improve resilience and makeshift homes, which further exacerbates the vulnerability of the urban population to damage and The effects of climate change, environmental deg- destruction from floods.32 A self-reinforcing dynamic radation, and poorly planned urbanization inter- seems to emerge whereby poorly managed urban- act to worsen the impacts of floods and threatens ization exacerbated flood risk, while simultaneously development prospects in Chad. The observed in- more frequent and intense urban flood impair the role crease in temperature together with repeated droughts that cities could play to foster a more productive and events and unsustainable land use practices is leading diversified economy.33 Looking forward, cities are expected to 32 United Nations Human Settlements Program (UN-HABI- further expand, which will drive flood risk higher TAT) (2021). Population living in slums (% of urban pop- if urbanization is not better planned and man- ulation) [Data set]. UN-HABITAT. aged. Chad’s urban population is projected to 33 World Bank Group (2021a). Improving Resilience to Floods 25 FIGURE 2.9    Projection estimates for urban FIGURE 2.10    Projection estimates for national population built-up areas 45 14 40 12 35 10 Built-up Area (Index 2000=1) 30 Population (millions) 25 8 20 6 15 4 10 2 5 0 0 2000 2020 2040 2060 2080 2100 2000 2020 2040 2060 2080 2100 SSP1 SSP2 SSP3 SSP4 SSP5 WUP SSP1 SSP2 SSP3 SSP4 SSP5 Source: World Bank staff based on Gao and O’Neill (2020) and UNDESA (2018). Source: World Bank staff based on Gao and O’Neill (2020) and UNDESA (2018). to desertification and land degradation that disrupt ag- increase, solutions to strengthen emergency prepared- riculture and livestock economies. This contributes to a ness and response to increase the capacity of the coun- growing urban population as affected communities mi- try as well as the population to cope with future adverse grate to urban areas in search of new economic oppor- events will be critical to minimize negative impacts. tunities. In the absence of risk-informed urban planning The capacity, coordinating roles and finan- policies to accommodate this large influx of people, ru- cial responsibilities across the various ministries ral migrants often settle in the immediate surroundings and agencies could be strengthened and clari- of urban centers, where land and housing tend to be fied. The Ministry of Territorial Development, Urban cheaper but also more exposed to floods. In return, as Planning, and Housing (MATUH) and the Ministry of urban areas expand, the environment is affected across Water and Sanitation (MEA) oversee multiple aspects a wide array of dimensions, including the loss of ag- of urban planning and infrastructure works related ricultural land, reduced freshwater availability, and the to flood risk challenges. In urban areas such as in destruction of biodiversity hotspots and carbon sinks. N’Djamena, the municipality is in charge of the iden- The implementation of targeted policy tification and prioritization of investments, O&M of reforms can play an important role in strengthening flood protection infrastructure, and solid waste man- Chad’s ability to adapt to and reduce the impact of agement. Other agencies, such as the National Mete- floods. This requires the implementation of cross-cut- orological Agency (ANAM), the Water Resources ting policies structured along the three major drivers Department (DRE), and the Civil Protection Director- identified in this chapter. Measures to reduce physical ate (DPC) each play a role in supporting the imple- and social vulnerability and increase the resilience of mentation of the relevant disaster preparedness and populations and assets to floods are required to lessen early warning policies but have demonstrated very the economic impacts, while simultaneously promoting limited capacity to perform their mandates. A set of more productive cities. Addressing environmental deg- proposed policy actions is presented in Box 2.1. While radation and limiting the associated impacts will alle- a gradual approach is required, a high level of politi- viate compounding effects of risk drivers. Eventually, cal commitment and strong interagency coordination as the climate is already changing and the frequency will be critical to leverage the positive complementar- and intensity of extreme rainfall is expected to further ities between the proposed policy recommendations. 26 2023 CHAD ECONOMIC UPDATE BOX 2.1: SELECTED POLICY OPTIONS I.  Increase disaster preparedness and coping capacities of population and institutions Medium term (<5 years) • Strengthen the capacities of local stakeholders (e.g., province leaders, local governors) and communities by conducting community risk assessments to inform the preparation of flood early warning and emergency preparedness and response plans. • Develop a clear legal and institutional framework that defines the roles and responsibilities of local stakeholders and centralized agencies in the management of flood early warning systems. • Streamline the institutional landscape and establish clear protocols to improve coordination of agencies and entities producing, sharing, and validating weather and climate information. • Leverage collaborations with regional (e.g., the African Center for Meteorological Applications for Development and the AGRHYMET Regional Center) and global agencies to enable knowledge exchange of best practices, lessons learned, and adaptation solutions. • Strengthen and expand adaptive social protection programs to increase the climate resilience of vulnerable households and timely response in case of an adverse climate event. Longer term (>5 years) • Strengthen the financial and human resource capacities of the Civil Protection Directorate and ensure decentralization capacity across the country for effective emergency preparedness and response of adverse natural events. II.  Strengthen climate resilient urban planning and infrastructures Medium term (<5 years) • Develop targeted flood risk assessments in urban areas and sectors to quantify the potential economic impacts of floods and prioritize risk reduction interventions . • Develop and implement continuous communication strategies to sensitize the population to improve adequate handling and maintenance of drainage structures and sanitation equipment across the country. • Implement policies to ensure and enforce a risk-informed urban and territorial planning and building code to reduce existing and do not create new flood risk (e.g., review existing building code and techniques, enforce the use of urban and territorial planning instruments, ensure the use of improved housing construction materials for increased flood resistance). Longer term (>5 years) • Improve the drainage network and flood protection infrastructure to reduce pluvial and river flooding as part of existing initiatives (e.g., the Master Plan for Pluvial Drainage in major urban areas) and a broader integrated water resource management framework across the country. • Build institutional and financial capacity of local governments to enforce urban management and planning, mobilize local revenue, manage external aid, and provide adequate urban services. • Develop and enforce territorial planning instruments to reduce encroachment of floodplains and seasonal waterways, restricting development in flood-prone areas. • Incorporate disaster and climate-related risk considerations in public investment system to promote climate resilience of all new infrastructure and establish an effective compliance system. • Develop the capacity, regulations, and institutions to support the preparation of projects and programs that can access climate finance and benefit from revenues potentially available in carbon markets and leverage new private sector financing. III.  Limit environmental degradation and mitigate its impacts Medium term (<5 years) • Strengthen institutional capacities and infrastructure for appropriate waste management to mitigate spread of water-borne diseases during flood events. • Develop and implement erosion management plans. (continued on next page) Improving Resilience to Floods 27 BOX 2.1: SELECTED POLICY OPTIONS (continued) Longer term (>5 years) • Increase urban green cover and spaces, which can reduce rainwater runoff and increase flood water absorption. • Develop and implement urban river restoration plans. • Develop a comprehensive waste management policy that addresses issues related to waste collection, transport, disposal, and recycling, with contingent plans to manage waste during flood events and clear roles and responsibilities of different stakeholders. • Scale up the adoption of integrated landscape management and greening cities to prevent intensification of desertification. • Promote, finance, and implement nature-based solutions to improve Chad’s natural capital assets which enhance resilience and buffer against flood impacts. 28 2023 CHAD ECONOMIC UPDATE 3 1 ANNEX Selected economic indicators for Chad, 2020–2025 3.1.  2019 2020 2021 2022 2023 2024 2025 Estimates Projections Real Economy – (annual percentage change unless otherwise specified) Real GDP 3.2 –1.6 –1.2 2.2 3.2 3.4 3.1 Oil GDP 12.7 0.0 –8.2 6.6 6.4 2.3 2.1 Non-oil GDP 1.4 –2.0 0.4 1.3 2.4 3.6 3.2 Per Capita GDP (current US$) 702 644 686 721 710 719 726 GDP Deflator 2.9 –5.5 7.2 23.2 –0.5 –1.7 0.7 Consumer Price Inflation (ave.) –1.0 3.5 1.0 5.8 5.2 4.0 3.0 Oil Production for exports (m. barrels) 47.0 46.2 42.5 45.3 48.2 49.3 50.3 Fiscal Accounts – (percentage of GDP unless otherwise specified) Expenditures 13.9 19.1 18.5 14.7 15.9 15.4 15.8 Revenues and Grants 13.3 20.7 16.3 19.2 22.0 19.5 19.5 General Government Balance –0.6 1.7 –2.2 4.5 6.1 4.1 3.8 (incl. grants, commitment basis) Primary Balance –0.2 –0.4 –1.4 5.3 5.5 3.6 3.7 (commitment basis, exc. grants) Selected Monetary Accounts – (annual percentage change unless otherwise specified) Broad Money 5.9 11.1 12.6 9.2 7.4 8.8 6.7 Credit to the economy 1,4 17.1 6.0 2.1 9.5 11.3 5.5 Interest (BEAC key policy rate) 3,5 3.5 3.5 4.0 4.0 4.0 4.0 External Sector Exports of Goods and Services (GNFS) 6.0 1.1 –0.4 5.0 5.1 3.9 3.9 (continued on next page) 29 (continued) 2019 2020 2021 2022 2023 2024 2025 Estimates Projections Imports of Goods and Services (GNFS) 4.0 1.8 5.1 2.0 4.8 1.6 2.8 Terms of Trade 0.1 –34.1 45.3 43.4 –10.4 –9.3 –9.5 (percentage of GDP unless otherwise specified) Current Account Balance (incl. transfers) –4.9 –7.8 –6.0 1.9 –1.8 –4.7 –4.5 Gross Reserves (imputed, US$ billions) 0.4 0.4 0.2 0.7 1.0 1.2 1.6 Gross Reserves (regional, months of imports of goods 3.7 3.2 3.0 3.5 3.9 4.3 4.6 and services)b Public Debtc 51.1 49.9 52.1 49.6 43.4 40.0 36.4 Exchange Rate (period average) 586 576 555 621 638 637 634 Memorandum Items: Nominal Non-oil GDP (CFAF billions) 5,229 5,341 4,694 3,634 4,055 4,608 4,925 Nominal GDP (CFAF billions) 6,630 6,167 6,532 8,227 8,449 8,590 8,916 Sources: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. BOX 3.1: MAIN TAKEAWAYS OF THE 2023 BUDGET LAW The 2023 Finance Law was adopted by the National Transitional Council on December 29, 2022. • Oil and non-oil revenues are projected to increase by 68.3 percent and 12.2 percent respectively owing to the oil price and production recovery, and the expected improvements in the tax and customs administration. • Total expenditure (excluding debt amortization) is projected to increase by 29 percent. The largest increase is in capital spending (by almost 66 percent) to finance major infrastructure projects. Transfers and subsidies are projected to grow by 17.4 percent on account of expenditures related to the political transition. • The fiscal surplus is projected to increase from 2.1 percent of GDP in 2022 to 4.4 percent of GDP in 2023; this is being driven by oil as Chad’s non-oil primary balance deficit growing at the same time. • The surplus will be used to service public debt, particularly Glencore debt which is linked to oil revenues. As a result, the external debt is expected to decline from 17.9 percent of GDP to 16.8 percent of GDP. Similarly, the domestic debt is expected to decline from 20 percent of GDP to 16.9 percent of GDP. • The 2023 budget is not aligned with the IMF ECF program - in particular the projected increase in current and capital expenditures funded by the boost in oil revenues. The government may lack capacity to execute the expanded budget. Moreover, it would be desirable to save the oil revenue to create a fiscal buffer for periods of lower oil revenue. 3.2.  Note on Chad’s 2023 Budget Law A. Context of budget adoption and underlying assumptions This annex provides an overview of the approved bud- • Chad’s 2023 Budget was prepared in a get for 2023 as per the 2023 Finance Law. The note context marked by the implementation of provides comparisons to the projections in the budget phase II of the political transition. The transi- for 2022 as estimates for 2022 actual/realized budget tion will be devoted to the implementation of the figures are not yet available. Percentage increases are resolutions of the national dialogue as well as all in nominal terms. the recommendations of the Doha Agreement, 30 2023 CHAD ECONOMIC UPDATE culminating with the preparation and holding of the CEMAC zone in line with the African con- a Constitutional Referendum in 2023. The lat- tinental free trade area (ZLECAF), and in sup- ter is an essential step towards the presidential port of the floods’ victims; and v) introduction elections planned for 2024. of a new technology to digitalize tax collection • The Budget assumes a solid economic procedures. Chad’s revenue collection rate recovery in 2023 with a 5.1 percent growth, (percentage of initially projected revenue col- which is more optimistic than the 3.2 and lected) has been increasing from a modest 56 3.5 percent projected by the World Bank percent in 2021 to 80 percent in 2022, illus- and the IMF, respectively. Underlying this trating that Chad seems to be on the path of growth projection are these key assumptions: improving tax revenues. strong oil production and price; an increase • On the expenditure front, the Budget proj- production in cotton, food crops and oilseeds; ects a 29 percent in nominal terms and improvement in the political and security envi- an increase from 16.3 percent of GDP in ronment; and post-pandemic recovery. The 2022 to 20.2 percent of GDP in 2023. other assumptions, which are comparable to Almost all components of public expenditures the WB projections, include: (i) daily oil produc- are projected to increase, most notably capi- tion increasing from 136,599 barrels in 2022 to tal expenditure led by infrastructure spending 142,520 barrels in 2023; and iii) the Brent price (by 66 percent) and transfers and subsidies dropping from US$98.2 in 2022 to US$85.5 in led by transition spending (by 17.4 percent). 2023; iii) a price discount relative to the Brent Representing the second highest capital price of US$2/barrel, compared to US$3/bar- expenditure after infrastructure, military invest- rel in 2022. ments are expected to rise steeply (by 245 per- cent), while investments in health and educa- B. Revenue and expenditures tion is projected to decline by 23 percent and • On the revenue front, the Budget projects 21 percent, respectively. Transfers and subsi- a 6.2 percent of GDP increase from 18.4 dies are growing on account of the expendi- percent of GDP in 2022 to 24.6 percent tures related to the political transition (institu- of GDP in 2023, reflecting an increase in tions in charge of the constitution, elections, both oil and non-oil revenues. The signifi- implementation of the national dialogue res- cant increase in oil revenue (by 68.3 percent) olutions). It is difficult to judge the realism of reflects the oil price and production recovery these expenditures as the cost of the phase II in 2022, as oil taxes are collected with a one- political transition and the implementation of year lag. the resolutions of the national dialogue are not • On the non-oil revenue front, the Budget published. shows a 12.2 percent increase from 2022, which is due to ongoing and new tax and C. Fiscal balance and financing customs measures. The 2023 Budget intro- • The Budget project an increased over- duces a number of new revenue measures in all budget surplus of CFAF 336 billion tax, customs, public property, and resource (4.4 percent of GDP), compared to a sur- mobilization policy. The measures included : plus of CFAF 156 billion (2.1 percent of i) improved alignment of the personal income GDP) in 2022. The surplus is entirely driven tax (PIT) between the private and public sector; by the increase in oil revenues as the 2023 ii) tax exemption on the imports of agro-pasto- non-oil primary balance deficit is projected to ral materials, inputs and equipment, iii) custom grow from CFAF 373.3 billion (5.1 percent of duties reduction (by 75 percent) for trucks and GDP) in 2022 to CFAF 619.1 billion (8.1 percent cement coming from African countries outside of GDP) in 2023. Annex 31 FIGURE 3.1    Key Fiscal Indicators in the Finance law 2022 (LF22) and the Initial Finance Law of 2023 (LFI23) 40 37.9 35 33.7 30 25 24.6 22.1 20.2 20 20 18.4 17.916.8 16.1 15.7 16.3 16.9 15 12.1 11.4 12.4 10 7.8 6.3 6.1 6.7 4 4.9 4.4 5 3.1 2.3 2.5 1.6 1.4 0.7 1.3 2.9 2.1 0 TTotal Revenue and Grants Total Revenue Tax Revenue Non-tax Revenue Grants (incl. debt relief) Total Expenditures and Net Lending Current Expenditure Wages and Compensation Goods and Services Interest Payment Current Transfers Capital Expenditure Overall Fiscal Balance Primary Balance Overall PublicDebt External Public Debt Domestic Public Debt 2022 2023 Source: Chad’s government 2023 budget. • The Government will use the surplus to ser- Microsimulation model to account 3.3.  vice public debt, particularly Glencore debt for sectoral growth and food/non- which is linked to oil revenues. As a result, food inflation the external debt is expected to decline from 17.9 percent to 16.8 percent of GDP. Likewise, This note describes the methodology used to account the domestic debt is expected to decline from for the heterogenous effects of growth and inflation on 20 percent to 16.9 percent of GDP. poverty projections using the latest household budget TABLE 3.1    Key Fiscal Indicators in the Finance law 2022 (LF22) and the Initial Finance Law of 2023 (LFI23) LFI22 LFI23 Diff LFI23/LFI22 (ppt Value % GDP Value % GDP of GDP) Nominal GDP (CFAF billion)a 7,391.0 … 7,655.0 … … Total Revenues and Grants 1,359.0 18.4 1,884.8 24.6 6.23 Tax Revenue 897.6 12.1 1,205.3 15.7 3.60 o/w Oil Revenue 360.7 4.9 607.3 7.9 3.04 o/w Non-oil Revenue 536.9 7.3 598.0 7.8 0.50 Non-Tax Revenue 292.2 4.0 485.6 6.3 2.39 o/w Oil Revenue 273.2 3.7 459.6 6.0 2.30 o/w Non-oil Revenue 19.0 0.3 26.0 0.3 0.08 Grants 169.2 1.3 193.8 2.5 0.24 Expenditures 1,203.0 16.3 1,549.1 20.2 3.96 Current Expenditures 842.5 11.4 951.0 12.4 1.02 Wages and Compensation 454.4 6.1 510.0 6.7 0.51 (continued on next page) 32 2023 CHAD ECONOMIC UPDATE TABLE 3.1    Key Fiscal Indicators in the Finance law 2022 (LF22) and the Initial Finance Law of 2023 (LFI23) (continued) LFI22 LFI23 Diff LFI23/LFI22 (ppt Value % GDP Value % GDP of GDP) Goods and Services 119.5 1.6 103.8 1.4 –0.26 Interest Payments 54.7 0.7 99.0 1.3 0.55 Current transfers 213.9 2.9 238.2 3.1 0.22 Capital Expenditures 360.5 4.9 598.1 7.8 2.93 Externally financed 219.2 3.0 206.9 2.7 –0.26 Domestically financed 141.3 1.9 391.2 5.1 3.20 Overall fiscal balance (incl. grants) 156.0 2.1 336.0 4.4 2.28 Non-oil primary balance –373.3 –5.1 –619.1 –8.1 –3.04 Public debt 2,799.2 37.9 2,580.5 33.7 –4.16 External public debt 1,321.8 17.9 1,287.3 16.8 –1.07 Domestic public debt 1,477.4 20.0 1,293.2 16.9 –3.10 Source: Chad’s government 2023 budget. a The nominal GDP come from the IMF projections. TABLE 3.2   Budget allocation by ministry (in CFAF million) Sect Institutions and Ministries LF 2022 LFI 2023 Difference % 1 Presidency of the republic 38,960 43,613 4,653 12% 2 Prime minister office 4,849 5,706 857 18% 3 National transition council 21,508 30,264 8,756 41% 4 High authority of audio visual and media 1,215 1,678 462 38% 5 Supreme court 2,342 2,830 489 21% 7 Ministry of economic foresight and international partnership 28,934 21,392 –7,542 –26% 8 Ministry of communication 3,490 5,203 1,712 49% 9 Ministry of foreign affairs, Chadians abroad and international cooperation 17,915 17,136 –780 –4% 10 Ministry of finance, budget and public accounts 77,761 132,020 54,260 70% 11 Ministry of the public service, employment and social Dialogue 2,646 2,916 270 10% 12 Ministry of justice and human rights 13,869 17,075 3,206 23% 13 Ministry of territory administration, decentralization and governance 60,402 65,147 4,745 8% 14 Ministry of army, veterans and war victims 197,933 232,142 34,209 17% 15 Ministry of national education and civic promotion 166,046 156,443 –9,603 –6% 16 Ministry of health and prevention 103,033 100,830 –2,203 –2% 17 Ministry of gender and national solidarity 7,918 10,466 2,548 32% 18 Ministry of agriculture production and transformation 51,691 34,610 –17,081 –33% 19 Ministry of livestock and animal production 21,987 21,117 –870 –4% 20 Ministry of trade and industry 3,324 3,821 497 15% 21 Ministry of mines and geology 2,605 2,476 –129 –5% 22 Ministry of infrastructure and accessibility 91,964 279,677 187,714 204% 23 Ministry of youth, sports, recreation and entrepreneurial leadership 6,751 10,951 4,201 62% (continued on next page) Annex 33 TABLE 3.2   Budget allocation by ministry (in CFAF million) (continued) Sect Institutions and Ministries LF 2022 LFI 2023 Difference % 25 Ministry of posts and digital economy 6,009 13,684 7,675 128% 26 Ministry of the environment, fisheries and sustainable development 23,124 13,184 –9,939 –43% 26 Economic, social and cultural council 616 657 41 7% 27 Ministry of vocational training, trades and microfinance 6,649 5,563 –1,086 –16% 28 Ministry of civil aviation and national meteorology 4,861 13,761 8,899 183% 29 Ministry of national reconciliation and social cohesion 4,770 1,475 –3,295 –69% 30 High council of autonomous communities and traditional chiefdoms 0 1,235 1,235 100% 31 National human rights commission 840 1,359 519 62% 32 Ministry of transport and road safety 2,001 3,366 1,365 68% 33 Common expenditures 122,698 149,380 26,682 22% Total 1,203,000 1,549,050 346,050 29% Source: Chad’s government 2023 budget. survey. For economic growth, the methodological of each income component is estimated as the ratio A I S framework decomposes the contributions to household of component income to total income. Let Sh , Sh , Sh , N consumption of each worker in a household according and Sh , be the estimated share of incomes from agri- to their sector of economic activity. It then uses nominal culture, industry, services, and non-labor for house- per capita sectoral growth rates to estimate a house- hold h, respectively. Let gA , gI, gS , and gN (a A , a I, a S , hold-specific nominal growth rate of per capita con- and a N) be the corresponding nominal per capita sumption. Regarding inflation, the framework sepa- rately considers food and non-food CPI inflation with sectoral growth rates between t and t (pass-through rates). Sixth, the per capita consumption growth rates ´ households’ shares of food and non-food consumption for each household, gh, is equal to the weighted aver- to determine a household-specific measure of inflation. age of component growth rates, that is gA , gI, gS , et gN (a A , a I, a S , et a N). Finally, the projected nominal per Household per capita nominal consumption projection capita consumption of each household in t is given n by: ch,t = ch,t * (1+ gh ). ´ Projecting per capita consumption (in nominal terms) s L can be carried out in seven steps. LetCh, Th , Yh , and Deflating the projected nominal N Yh be household-level consumption, transfers sent, consumption labor incomes, and non-labor incomes, respectively. Separately, to consider food and non-food inflation, L First, household total labor income, Yh , is deduced the methodology deflates each household projected s L from its assumed budget constraint: Ch + Th = Yh + per capita nominal consumption by a household-spe- N L Yh . Second, the following Mincer equation log(Yh ) = cific inflation rate. This household-level inflation rate Xh b h + e h is estimated on the sample of average work- depends on the household’s food and non-food con- L ers within each household. Yh denotes the house- sumption shares. Let p f and p nf be the food and non- hold labor income per worker, Xh is a vector of covari- ates averaged across workers (age, education, etc.), food CPI inflation between t and t . The household- level inflation rate is then given by: ´ and e h is an error term. Third, the estimated model (1+ π f ) (1+ π n f ) is used to predict individual labor incomes for every- πh = –1, (1+ πnf ) Sh + (1+ π f ) (1– Sh ) f f one in the survey. Fourth, workers are classified by f their primary employment sector to construct total where Sh denotes the share of food consumption. sectoral incomes for each household. Fifth, the share Hence, the projected welfare aggregate, that is, the 34 2023 CHAD ECONOMIC UPDATE TABLE 3.3    Climate scenarios modeled Climate Scenario Description SSP3–7.0 Average - Pessimistic scenario Ensemble average of SSP3–7.0 GCMs -> Higher temperature increases and larger precipitation changes compared to Intermediate and Optimistic scenarios SSP2–4.5 Average - Intermediate scenario Ensemble average of SSP2–4.5 GCMs -> Higher temperature increases and larger precipitation changes compared to Optimistic scenario but lower than Pessimistic scenario SSP1–1.9 Average – Optimistic scenario Ensemble average of SSP1–1.9 GCMs -> The lowest temperature increases among the scenarios and smaller precipitation changes than Intermediate and Pessimistic scenarios Dry scenario 10th percentile of mean precipitation change across SSP3–7.0 and SSP5–8.5 GCMs -> The driest among all the scenarios (i.e., smallest (or decrease) precipitation changes) Wet scenario 90th percentile of mean precipitation change across SSP3–7.0 and SSP5–8.5 GCMs -> The wettest among all the scenarios (i.e., largest (increase) precipitation changes) Hot scenario 90th percentile of mean temperature change across SSP3–7.0 and SSP5–8.5 GCMs -> The highest temperature increases among all the scenarios deflated projected per capita consumption for every els (GCMs) from the Coupled Model Intercomparison household in t is: ´ Project 6 (CMIP6) suite of IPCC model outputs. On the CCKP, each GCM has up to five combinations /1+ π . n ch,t ch,t = h of Shared Socioeconomic Pathway (SSP) and Rep- resentative Concentration Pathway (RCP) emissions Projecting poverty scenario runs. These include SSP 1-RCP 1.9, 1-2.6, Finally, poverty projections can be derived based on 2-4.5, 3-7.0, and 5-8.5. For each GCM-SSP combina- the projected welfare aggregate and the poverty line tion, CCKP provided a modeled history from 1995 for the latest available survey. The framework uses to 2014 (the baseline) and projections from 2015 to realized (projected) macroeconomic growth rates and 2100, for monthly mean temperature and precipita- inflation rates for nowcasting (forecasting) poverty in tion. CCKP also rectified each projection to a com- 2022 (in 2023–2025). To the extent that nominal sec- mon 1x1 degree grid for the globe. The CCDR may toral growth of household income is lower than the refer to two generations of CMIP due to data availabil- household-specific inflation, the standard of living of ity constraints. While long-term GHG emissions in the the household will be in jeopardy, even if there is over- RCP8.5 are considered overly pessimistic, the CMIP5 all economic growth. climate change scenarios with RCP8.5 provide a use- ful (and not implausible) worst-case climate change scenario, which would be consistent with continued Modeling of climate change 3.4.  GHG emissions and high climate change sensitivity. It impacts is worth noting that the scenarios are not necessarily particularly “dry”, “wet” or “hot”, but rather represent Climate Scenario Modeling Details scenarios that are among the dryer, wetter, or hotter The emission scenarios and climate models were pro- of the ensemble of scenarios. These scenarios were vided by the World Bank’s Climate Change Knowl- selected to capture extremes, and by extension the edge Portal (CCKP) for 29 General Circulation Mod- range of climate impacts. Annex 35 BOX 3.2: IMPACT CHANNEL AND ADAPTATION MODELING DETAILS 1. Rainfed crop yields Impact Modelling: The effects of water availability and temperature changes for each of the GCM-SSP combinations are analyzed using crop yield models and combined for 6–8 representative crops (including sorghum, millet, maize, cowpeas, cotton, groundnuts) for each country that are selected based on their relevance in terms of harvested area, production, and export value. Crop-specific temperature thresholds are calibrated to the climatic conditions of each country. This means that when temperatures exceed those thresholds, yields fall based on a damage function. The resulting shocks to crop yield by crops are aggregated to a single shock to agriculture revenues based on the share of the total value of agricultural production that each crop represents. The spatial disaggregation of the crop production analysis corresponds to ½ degree x ½ degree grid cells, which is the resolution of the climate data available. The baseline annual crop yield is calculated by putting into the crop yield model the average historical temperature and precipitation to calculate the annual crop yield for each of the crops. The temperature and precipitation for each year for each of 6 climate scenarios are then used in the crop yield model to calculate the annual crop yield for each of the crops. The difference in total crop value from the baseline is the shock, expressed in percentage terms. Adaptation Intervention Modellinga: Expanded irrigation: (1) rehabilitation of irrigation infrastructure for cash crops; and (2) construction of new shallow groundwater-based irrigation for smallholders for cash crops and food crops. • Benefits: Increase water availability for rainfed crops that would have been reduced as a result of changes in precipitation. • Costs: US$8,200 per ha for 243,000 ha of rehabilitation, and US$4,700 for 1.8M ha of shallow groundwater-based smallholder irrigation in total for G5 Sahel. 2. Heat stress and labor productivity Impact Modelling: Impacts are based on a method/model that quantifies the percentage of a typical working hour that a person can work based on wet bulb globe temperatures (WBGT), which measures heat stress from temperature and humidity. The impacts intensify for labor types that are outdoors and with more intense physical work. Workers are split into indoors and outdoors and it is assumed that those who work indoors are not affected by heat. This likely underestimates the impacts of heat stress as some indoor workers - especially those not in temperature-controlled environments - may be affected. The baseline annual labor productivity is calculated by putting into the WBGT model the average historical temperature and precipitation to calculate the annual labor productivity for each of the three sectors. The temperature for each year for each of 6 climate scenarios are then used in the model to calculate labor productivity. The difference in labor productivity from the baseline is the shock, expressed in percentage terms. This approach is consistent with the recently released study by Purdue University: Saeed, Wajiha, Thomas Hertel, Qinqin Kong, and Matthew Huber. 2022. “Heat Stress in Human Labor and Poverty: The Case of West Africa.” 3. Heat-related human health shocks Impact Modelling: The effects are estimated using a statistical model that relates temperature increases to increased morbidity due to vector- borne diseases (malaria, dengue, diarrhea, and respiratory and cardiovascular heat-related diseases). The resulting output corresponds to country- scale annual impacts on total labor productivity for each climate scenario. Changes in morbidity are calculated using country-specific years-of-life lost data gathered from the Institute of Health Metrics and Evaluation global health dataset. The baseline annual labor productivity for the whole economy calculated by using the average historical temperature and precipitation to calculate the annual labor productivity for the whole economy. The temperature for each year for each of 6 climate scenarios are then used in the model to calculate labor productivity. The difference in labor productivity from the baseline is the shock, expressed in percentage terms. The approach follows the method outlined in: Roson, Roberto, and Martina Sartori. 2016. “Estimation of Climate Change Damage Functions for 140 Regions in the GTAP 9 Database.” Journal of Global Economic Analysis 1 (2): 38. 4. Livestock yields Impact Modelling: The effects under each climate scenario are analyzed using a grass yield model to impact feed availability, which affects the main ruminants (cattle, goats, and sheep); and animal-specific temperature-humidity thresholds to impact the productivity of ruminants, chicken, and swine. The effect on feed availability introduces a great deal of variability in this shock – livestock productivity is low in the baseline, so has considerable room to increase during wetter years when pasture productivity is high. The resulting shocks to livestock yield by species are aggregated to a single shock to agriculture revenues based on the share of the total value of livestock production that each species represents. The spatial disaggregation of the analysis corresponds to ½ degree x ½ degree grid cells, which is the resolution of the climate data available. (continued on next page) 36 2023 CHAD ECONOMIC UPDATE BOX 3.2: IMPACT CHANNEL AND ADAPTATION MODELING DETAILS (continued) The baseline annual livestock yield is calculated by putting into the livestock yield model the average historical temperature and precipitation to calculate the annual livestock yield for each of the animals. The temperature and precipitation for each year for each of 6 climate scenarios are then used in the livestock yield model to calculate the annual livestock yield for each of the animals. The difference in total livestock revenue value from the baseline is the shock, expressed in percentage terms. Adaptation Intervention Modellinga: Two livestock feed measures: (i) purchasing crop residues from in-country crop production to use as feed; and (2) investment in establishing fodder banks. • Benefits: To partially compensate for the reduced feed from pastures as a result of changes in temperature and precipitation. Annex Figure 1–13 shows the livestock yield shocks with adaptation. • Costs: US$48–70 per ton of residue (depending on residue mix by country) and US$10 per ton for fodder banks. Quantity varies according to scenario. 5. Inland flooding Impact Modelling: The analysis relies on projected changes in the return interval of precipitation events from the CCKP between current conditions and future projections, which are translated to runoff using a flooding model. CCKP provided gridded changes in precipitation recurrence intervals for four periods (2010–2039, 2020–2049, 2036–2065, and 2071–2100) and under two emissions scenarios in the CMIP5 climate model ensemble: RCP4.5 and RCP8.5. The two sets of changes from CCKP are developed from the full ensemble of GCMs within each emissions scenario, so the flooding results reflect the broad trend across climate models at each emissions level. The methodology considers shocks to three types of assets: built-up capital (i.e., any hard piece of infrastructures such as roads, bridges, and buildings), agricultural capital and agricultural land. The approach to generate these shocks distributes capital in two stages – first using 9-km gridded GDP data, and then to a finer scale using 100-meter gridded land cover data. Although these finer scale land cover data allowed us to identify capital within the floodplain, those data do not provide the productivity of that capital (i.e., whether the grid cell includes a residential home or factory). Because the flood plain is likely to contain lower productivity capital, we dampen the shocks by 50 percent as inputs to CC-MFMod. This factor produces a conservative estimate of inland flooding impacts. The baseline flooding impacts use baseline recurrence intervals to calculate damages to capital and agricultural land. The recurrence interval changes (i.e., events become more/less frequent) from CCKP for each period and under each of the two RCPs are then used in the model to calculate flood impacts. The difference in flood impacts from the baseline is the shock, expressed in percentage terms. 6. Roads and bridges Impact Modelling: The effects under each climate scenario are analyzed using the Infrastructure Planning Support System (IPSS), also used in the World Bank study Enhancing the Climate Resilience of Africa’s Infrastructure. This model analyzes impacts to paved, gravel, and dirt roads; culverts; and bridges, based on stressor-response functions that relate temperature and precipitation changes to repair and reconstruction costs, and traffic delays resulting from road and bridge disruption. This channel assumes that no proactive, anticipatory measures are taken to protect the roads and bridges network; it is assumed that the additional maintenance is not done so that the impact translates into a reduction in the capital stock of roads and bridges which then affects economic output. A factor of 0.5 is used to translate maintenance costs to reduction in capital stock to recognize that in the absence of maintenance, the infrastructure may still be partially usable. This factor produces a conservative estimate of damages. Adaptation Intervention Modellinga: Proactive adaptation requiring investments to make roads and bridges network climate resilient. Proactive measures vary depending on the road surface and stressor. • Benefits: Roads and bridges will be less damaged by changes in temperature, precipitation, and flooding events. This will reduce the losses in capital stock and labor productivity from delays and lower future O&M costs. • Costs: For roads, new and rehabilitated construction costs range from US$10,000 to US$818,115 per km, and annual routine maintenance range from US$750 to US$5,698 per km. For bridges, rip rap deployment is US$6,500 per pier lane and concrete strengthening is US$323 per m2. Source: G5 Sahel CCDR Annex a Choice of Adaptation Interventions: The three interventions were selected on the basis of high potential benefits for the G5 Sahel region and feasibility to model. The analysis is not meant to be comprehensive or a prioritization of adaptation measures, as not all adaptation measures can be modeled because of the nature of the action and the lack of data on the investment costs, benefits, and co-benefits. For the heat stress and labor productivity channel, structural transformation – shifting from agriculture (predominantly outdoors work) to industry and service sectors – is a form of adaptation. The impact of structural transformation in reducing economic losses can be seen by the lower (as a percentage of baseline) GDP losses in the higher-growth scenarios. Annex 37 Chad Estimates of Economic Losses by Low, Medium and High Baseline Growth Scenario FIGURE 3.2    Impact on annual GDP of combined effects of climate change shocks from six impact channels a. No Adaption, WET and OPTIMISTIC Climate Scenarios b. No Adaption, DRY and PESSIMISTIC Climate Scenarios 6 6 6 6 4 4 4 4 2 2 2 2 0 0 0 0 –2 –0.4 –0.5 –0.5 –2 –2 –2 % GDP % GDP % GDP % GDP –4 –4 –4 –2.2 –2.1 –2.0 –4 –6 –2.1 –2.2 –2.3 –4.0 –6 –6 –5.2 –4.6 –4.7 –6 –8 –4.3 –4.2 –8 –8 –8 –10 –10 –10 –10 –12 –12 –12 –10.5 –10.3 –12 –14 –14 –14 –12.4 –14 Low Medium High Low Medium High Low Medium High Low Medium High Low Medium High Low Medium High 2030 2040 2050 2030 2040 2050 Rainfed crops yield Livestock yield Labor productivity (Heat stress) Labor productivity (Health impacts) Flooding Roads and Bridges Total GDP Impact c. Partial Adaption, WET and OPTIMISTIC Climate Scenarios d. Partial Adaption, DRY and PESSIMISTIC Scenarios 6 6 6 6 4 1.4 1.2 1.1 2.4 2.0 4 4 4 1.4 1.1 2 1.1 0.9 2 2 2 0 0 0 0 –2 –2 –2 –0.1 –0.2 –0.2 –2 % GDP % GDP % GDP % GDP –4 –4 –4 –4 –0.1 –0.6 –0.8 –6 –6 –6 –6 –8 –8 –8 –6.2 –5.7 –5.8 –8 –10 –10 –10 –10 –12 –12 –12 –12 –14 –14 –14 –14 Low Medium High Low Medium High Low Medium High Low Medium High Low Medium High Low Medium High 2030 2040 2050 2030 2040 2050 Rainfed crops yield Livestock yield Labor productivity (Heat stress) Labor productivity (Health impacts) Flooding Roads and Bridges Total GDP Impact Source: G5 Sahel CCDR Annex Notes: The figures show the combined effects of climate change shocks from six impact channels as deviation from the Baseline/No climate change real GDP projected under low, medium and high baseline growth scenarios. Deviations are expressed as percent of Baseline/No climate change level of Real GDP projected under low, medium and high baseline growth scenarios. The impacts are shown for the years 2030, 2040 and 2050. Figures A and B show the impacts with NO adaption, under wet and optimistic climate scenarios and under dry and pessimistic climate scenarios. Figures C and D show the impacts with partial adaption to three of the six impact channels (rainfed crop yields, livestock yields and roads and bridges) under wet and optimistic climate scenarios and dry and pessimistic climate scenarios. The data labels refer to the total net impact on GDP. 38 2023 CHAD ECONOMIC UPDATE REFERENCES Centre for Research on the Epidemiology of Disas- -Extended-Credit-Facility-Arrangement-Reques​ ters (2022). EM-DAT: The International Disaster ts-for-528092. Database. www.emdat.be. Industrial Economics, Incorporated (IEc) (2022). G5 Dieppe, A., S. Kilic Celik, C. Okou (2020). Implications Sahel Country Climate Change Economic of major adverse events on productivity. Work- Damage Estimation: Final Report. ing Paper 9411, The World Bank. https://doi​ Institute for Health Metrics and Evaluation (2021). .org/10.1596/1813-9450-9411. Chad Profile. Seattle, WA: IHME, University of Foster, V., and M. Shkaratan (2011). Malawi’s Infra- Washington. http://www.healthdata.org/Chad. structure: A Continental Perspective. Policy Intergovernmental Panel on Climate Change (IPCC) Research Working Papers. The World Bank. (2012). Managing the Risks of Extreme Events https://doi.org/10.1596/1813-9450-5598 and Disasters to Advance Climate Change Gao, J., and B.C. O’Neill (2020). Mapping global urban Adaptation. A Special Report of Working land for the 21st century with data-driven simu- Groups I and II of the Intergovernmental Panel lations and Shared Socioeconomic Pathways. on Climate Change. Field, C.B., V. Barros, T.F. Nat Commun 11, 2302. https://doi.org/10.10​ Stocker, D. Qin, D.J. Dokken, K.L. Ebi, M.D. Mas- 38/s41467-020-15788-7. trandrea, K.J. Mach, G.K. Plattner, S.K. Allen, M. German Aerospace Center (DLR) (2020). World Set- Tignor and P.M. Midgley, eds. Cambridge Uni- tlement Footprint Evolution (WSF-Evo) product. versity Press, Cambridge and New York. Hallegatte, S., A. Vogt-Schilb, M. Bangalore, J. Rozen- Internal Displacement Monitoring Centre (2022). berg (2017). Unbreakable: Building the Resil- Chad Country Profile. https://www.internal-dis​ ience of the Poor in the Face of Natural Disas- placement.org/countries/chad ters. Climate Change and Development. International Federation of Red Cross and Red Cres- Washington, DC: World Bank. https://openkn​ cent Societies (IFRC) (2021). Final Report Chad: owledge.worldbank.org/handle/10986/25335 Floods in N’Djamena DREF n. MDRTD018. Hallegatte, S., and A. Vogt-Schilb (2019). Are losses https://reliefweb.int/report/chad/chad-floods​ from natural disasters more than just asset -ndjamena-final-report-dref-n-mdrtd018. losses? The role of capital aggregation, sec- Joint Research Centre (JRC) European Commis- tor interactions, and investment behaviors. In: sion (2022). INFORM Global Risk Index 2019 Okuyama Y., Rose A. (eds) Advances in Spatial Mid-Year, v0.3.7. Palisades, New York: NASA and Economic Modeling of Disaster Impacts. Socioeconomic Data and Applications Center Advances in Spatial Science (The Regional Sci- (SEDAC). https://doi.org/10.7927/yzp7-sm30. ence Series). Springer, Cham. https://doi.org​ Muthoni, N., F. Tchana Tchana, H. Dudu, O. M. Kassim, /10.1007/978-3-030-16237-5_2. R. Ahmed, K. Kabir, A. Decker (2020). “The Eco- IMF (2023). First and second reviews under the nomic Benefits of a Post-COVID-19 Gender-Equi- extended credit facility arrangement, requests table Society”. World Bank, Washington, DC. for waivers of nonobservance of performance https://openknowledge.worldbank.org/entities​ criteria and modification of performance crite- /publication/233c388e-485f-56c2-be03-b3eb91​ ria. IMF Country Report No. 23/7. https://www​ 1b9c23. .imf.org/en/Publications/CR/Issues/2023/01​ Njinkeu, D., F. Tchana Tchana, J. Saty Lohi, M. Olu- /12/Chad-First-and-Second-Reviews-Under-the​ kayodé Alli (2021). Chad’s Livestock: Securing 39 Cross-Border Value-Chain Under COVID-19. https://data.unhabitat.org/datasets/cd4e1de​ Mimeo. the World Bank. b72ea49bd8f3403f8a9edfe6d_0. OECD/SWAC (2020). Africa’s Urbanisation Dynamics United Nations Office for the Coordination of Human- 2020: Africapolis, Mapping a New Urban Geog- itarian Affairs (OCHA) (2019). Cameroon / raphy, West African Studies, OECD Publishing, Chad: Floods - Oct 2019. https://reliefweb.int​ Paris, https://doi.org/10.1787/b6bccb81-en. /disaster/fl-2019–000119-cm. Sampson, C. C., Smith, A. M., Bates, P. D., Neal, J. C., United Nations Office for the Coordination of Human- Alfieri, L., and Freer, J. E. (2015). A high-resolu- itarian Affairs (OCHA) (2022a). Chad latest tion global flood hazard model. Water Resour. report on an overview of community conflicts Res. 51, 7358– 7381. https://doi/10.1002/201​ (inter and intra-community) in November 2022. 5WR016954 https://reports.unocha.org/en/country/chad. Savadogo, A. and A. Sanoh (2021). Chad Poverty United Nations Office for the Coordination of Human- Assessment : Investing in Rural Income Growth, itarian Affairs (OCHA) (2022b). Chad: Flooding Human Capital, and Resilience to Support Sus- situation in N’Djamena - Situation Report No. tainable Poverty Reduction. World Bank, Wash- 05 (11/11/2022). https://reliefweb.int/report​ ington, DC. https://openknowledge.worldbank​ /chad/chad-flooding-situation-ndjamena-situat​ .org/entities/publication/1cc815b6-bf6e-5627​ ion-report-no-05–11112022. -a6ac-95b81efdc9f4. United Nations Office for the Coordination of Human- Tchana Tchana, F.; C. Noumedem Temgoua, A. Sava- itarian Affairs (OCHA) (2023). Chad: Flooding dogo (2021). Chad 2021 Economic Update : situation in N’Djamena - Situation Report No. Recovering from Shocks – Improving Macro- 09. https://reliefweb.int/report/chad/chad-fl​ Fiscal Sustainability to Rebuild Better (English). ooding-situation-ndjamena-situation-report-no​ Washington, D.C. : World Bank Group. http://​ -09–20012023?_gl=1*nqxoo4*_ga*MjA0NjQw​ documents.worldbank.org/curated/en/89836​ OTE3NC4xNjc3MzYwMDcw*_ga_E60ZNX2F6​ 1634761728026/Chad-2021-Economic-Upda​ 8*MTY3NzQ5NTgwMi4yLjAuMTY3NzQ5NTgw​ te-Recovering-from-Shocks-Improving-Macro-Fi​ Mi42MC4wLjA. scal-Sustainability-to-Rebuild-Better. World Bank Group (2018). “ESCAPING CHAD’S Tchana Tchana, F.; C. Noumedem Temgoua, A. Sava- GROWTH LABYRINTH.” World Bank. https://el​ dogo (2022). Chad 2022 Economic Update : ibrary.worldbank.org/doi/pdf/10.1596/30941. Resilience In Uncertain Times: Harnessing World Bank Group (2021a). City Scan: N’Djamena, Agriculture and Livestock Value Chains (Eng- Chad – City Resilience Program. lish). Washington, D.C. : World Bank Group. World Bank Group (2021b). Country Profile, World http://documents.worldbank.org/curated/en​ Development Indicators database. https://dat​ /099445105122222517/P1772540628423013​ abank.worldbank.org/views/reports/reportwid​ 0938f02d6a518fd2be. get.aspx?Report_Name=CountryProfile&Id=b​ United Nations Department of Economic and Social 450fd57&tbar=y&dd=y&inf=n&zm=n&country​ Affairs (UNDESA), Population Division (2018). =TCD. World Urbanization Prospects: The 2018 Revi- World Bank Group (2021c). Emergency Food and sion, Online Edition. Livestock Crisis Response Project (P151215). United Nations Disaster Risk Reduction (2017). Global https://documents1.worldbank.org/curated​ Assessment Report on Disaster Risk Reduc- /en/198781610768290409/pdf/Chad-Emerg​ tion. Geneva, Switzerland, United Nations ency-Food-and-Livestock-Crisis-Response-Proj​ Office for Disaster Risk Reduction (UNDRR). ect.pdf. United Nations Human Settlements Program (UN- World Bank Group. (2021d). Chad Poverty Assess- HABITAT) (2021). Population living in slums (% ment: Investing in Rural Income Growth, Human of urban population) [Data set]. UN-HABITAT. Capital, and Resilience to Support Sustainable 40 2023 CHAD ECONOMIC UPDATE Poverty Reduction. Washington, DC.: World World Bank Group (2022c). Sahel, The Urban Link: Bank. https://openknowledge.worldba​ Transforming Rural Economies and Address- nk.org/handle/10986/36443. ing Fragility. World Bank Group. (2021e). The Changing Wealth of World Bank Group (2022d). Tchad - Diagnostic Envi- Nations 2021. Managing Assets for the Future. ronnemental Pays (French). Washington, D.C.: Washington, DC: World Bank. https://openkno​ World Bank Group. http://documents.worldba​ wledge.worldbank.org/handle/10986/36400. nk.org/curated/en/099110008012236635/P1​ World Bank Group (2022a). Climate Change Knowl- 752900b05eb0020087310b0c3f6bf885a. edge Portal. https://climateknowledgeportal​ World Bank Group (2022e). THE REPUBLIC OF .worldbank.org/ CHAD -- Boosting Shared Prosperity in a Land- World Bank Group (2022b). Leveraging Cities and locked Country Beset by Fragility and Conflict. Towns in Sahel: Moving from analytics to oper- SYSTEMATIC COUNTRY DIAGNOSTIC, Docu- ations. Washington, D.C.: World Bank Group. ment of The World Bank, Report No. 169037- http://documents.worldbank.org/curated/en​ TD, forthcoming, 2022. /099750406292231519/P1756840200edb0f0​ World Bank Group-IMF (2022). “Debt Sustainability a0640e7edeb63b29f. Analysis”, December 2022. References 41 1818 H Street, NW Washington, DC 20433