ECONOMIC UPDATE APRIL 2024 CHAD Special chapter PUBLIC DISCLOSURE AUTHORIZED Hosting Refugees in an Inclusive Manner © 2024 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 conclusions 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 Rights and Permissions of the data included in this work and does not assume responsibility for any The material in this work is subject to errors, omissions, or discrepancies in the copyright. 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Nothing herein shall constitute or be construed or considered to be a limitation Publication design and layout by Studio upon or waiver of the privileges and Nane. immunities of The World Bank, all of which are specifically reserved. Cover photo credit : Nako Madjiasra TABLE OF CONTENTS ABBREVIATIONS AND ACRONYMS 5 EXECUTIVE SUMMARY 7 1 . ECONOMIC AND POVERTY DEVELOPMENTS AND OUTLOOK 11 1.1 Recent Economic and Poverty Developments 12 1.2 Economic and Poverty Outlook 23 2. HOSTING REFUGEES IN AN INCLUSIVE MANNER 25 2.1 Inflow of refugees deepens existing vulnerabilities 25 2.2 Drivers of economic inclusion 30 2.3 Understanding refugees and host population dynamics fosters 32 socio economic inclusion 2.4 A national safety net tailored to the specificities of refugees and host 35 communities 2.5 Recommendations for the economic inclusion of refugees and host 38 populations 3 . ANNEX 41 4 . REFERENCES 43 2024 ECONOMIC UPDATE CHAD 3 TABLE OF BOXES, FIGURES, TABLES Box 1.1 The economic impact of the war in Sudan on Chad 13 Box 1.2 Ecosit survey, national poverty rate and international poverty line 17 Box 2.1 Economic participation reduces the cost of hosting refugees and 34 frees resources for investments in host communities Box 2.2 Productive inclusion package designed as part of the Sahel Adaptive 37 Social Protection Program Figure 1.1 GDP growth in 2023 was supported by both the oil and non-oil 13 sectors Figure 1.2 Food prices can vary much more than headline inflation 14 Figure 1.3 CPI inflation in Chad followed the CEMAC trend although slightly 14 lower Figure 1.4 Lower exports and higher imports led to a trade deficit in 2023 15 Figure 1.5 The current account returned to deficit in 2023, but the deficit was 15 largely financed by foreign direct investment Figure 1.6 In 2023, both expenditure and revenue significantly increased 16 Figure 1.7 Total government spending rose in 2023 due to higher capital 16 expenditures Figure 1.8 GDP growth could fall to 2.3 a downside scenario 18 Figure 1.9 The share of official creditors in external debt has increased in 2022 19 Figure 1.10 Official external financing, Net (US$ millions) 19 Figure 1.11 PV of Public Debt-to-Revenue Ratio 19 Figure 1.12 Public Debt Service-to-Revenue Ratio 19 Figure 1.13 Poverty profile and trends by region: 2018/19-2021/22 20 Figure 2.1 Chad refugee population 26 Figure 2.2 Map of Chad, neighbouring countries, and refugees’ numbers 26 Figure 2.3 Poverty and food insecurity in Chad 29 Table E.1 Policy options to strengthen macro-fiscal sustainability and resilience 10 to shocks, and mitigate the socioeconomic impacts of conflict Table 3.1 Selected economic and fiscal indicators 41 4 2024 ECONOMIC UPDATE CHAD ABBREVIATIONS AND ACRONYMS ANATS National Secured Titles Agency BEAC Banque des États de l’Afrique Centrale (Bank of Central African States) CAR Central African Republic CEMAC Communauté Économique des États de l’Afrique Centrale (Economic Community of Central African States) CFAF Franc de la communauté financière en Afrique (Franc of the Financial Community of Africa) CNARR Commission Nationale d’accueil de Réinsertion des Réfugies (Central for Asylum and Refugees) COBAC Commission Bancaire de l’Afrique Centrale DAO Dépenses avant ordonnancement (Expenditure before authorization) DIZA Développement Inclusif des Zones d’Accueil (Inclusive development of host areas) EDS-MICS Enquête Démographique et de Santé à Indicateurs Multiples (Multiple Indicator Demographic and Health Survey) FACT Front for Change and Concord in Chad FDI Foreign direct investment FGME Female genital mutilation and excision FY Fiscal year GDP Gross Domestic Product IDP Internally displaced persons IMF International Monetary Fund NPL Non-performing loans NGO Non-governmental organzation OCHA United Nations Office for the Coordination of Humanitarian Affairs ONASA Office National de Sécurité Alimentaire PARCA Projet d’Appui aux Réfugiés et Communautés d’Accueil (Support Project for Refugees and Host Communities) PIM Public Investment Management PPP Purchasing power parity REER Real effective exchange rate RSF Rapid Support Forces SAF Sudanese Armed Forces SIGFIP Système integré de gestion des finances publiques (Integrated public financial management system) TCL Temperature-Controlled Logistics UN United Nations UNHCR United Nations High Commissioner for Refugees VSLA Village savings and loans associations y/y year-on-year 2024 ECONOMIC UPDATE CHAD 5 ACKNOWLEDGMENTS The Chad Economic Update is a World Bank report series produced once a year that assesses recent economic and social developments and prospects in Chad. The Economic Update also provides an in-depth examination of a selected policy issue, outlining its current challenges and potential going forward. It is intended for a wide audience, including The report was prepared under the overall policy makers, business leaders, financial supervision of Clara De Sousa (Country market participants, and the community Director for Burkina Faso, Chad, Mali and of analysts and professionals engaged in Niger), Rasit Pertev (Country Manager for Chad’s evolving economy. Chad) and Hans Anand Beck (Practice Manager for Macroeconomics, Trade, and The report, led by Demet Kaya and Claudia Investment). Noumedem Temgoua, is part of a series of regional Economic Updates led by Daniel The findings, interpretations, and Pajank (Senior Economist). The team conclusions expressed in this report do included: Yue Man Lee, Aboudrahyme not necessarily reflect the views of the Savadogo, Yannik Strittmatter, Jean Louis Executive Directors of the World Bank or Martin, and Michael Evers. The special the governments they represent. The World focus topic on hosting refugees was written Bank does not guarantee the accuracy by Pantaleo Creti and Mahamane Maliki of the data included in this work. The Amadou, under the overall supervision boundaries, colors, denominations, and of Christian Bodewig (Practice Manager other information shown on any map in for Social Protection and Jobs). The team this work do not imply any judgment on the is grateful to the peer reviewers: Emilija part of the World Bank concerning the legal Timmis, Alex Sienaert, Raju Singh, Aly status of any territory or the endorsement Sanoh, and Claudia Zambra Taibo, and to or acceptance of such boundaries. Christophe Rockmore and Fulbert Tchana Tchana for their guidance and comments. For questions about this report please email cnoumedemtemgoua@worldbank. The team thanks Micky Ananth, Maude org and dkaya@worldbank.org. Jean-Baptiste, Theresa Bampoe and Ndolassem Christabelle Mbairo for their For information about the World Bank and administrative support. External and media its activities in Chad, please visit: https:// relations are managed by Nako Madjiasra. www.worldbank.org/en/country/chad. 6 2024 ECONOMIC UPDATE CHAD EXECUTIVE SUMMARY The 2024 Economic Update for Chad primarily government-driven, is the consists of two chapters. The first chapter main growth driver on the demand side, presents the economic and poverty contributing 7 ppts to growth. In contrast, developments observed in the country in private investment is estimated to have 2023 as well as the outlook from 2024 to fallen due to increased interest rates and 2026. The second chapter offers a deep crowding out effects. The boom in public dive on refugees and host communities in investment has led to a sharp increase in Eastern and Southern Chad, and suggests domestic demand, which in turn increased strategies and policy recommendations to imports by significantly more than exports, bolster the economic inclusion of refugees. resulting in a 2.4 percent of GDP current account deficit in 2023. Economic and poverty developments Inflation eased to 4.1 percent in 2023, and outlook owing to the base effect of high inflation in 2022 and the deceleration in Chad’s economy has proven resilient food inflation resulting from improved despite the war in neighboring Sudan, agricultural production. The Bank of although there has been spillover Central African States (BEAC) maintained effects on trade, public expenditure and its tight monetary policy stance during inflation. GDP growth in 2023 is estimated 2023 to contain inflationary pressures at 4.1 percent (1 percent per capita) This and support regional reserves and hence growth is underpinned by oil production, the external viability of the exchange rate which is estimated to have risen by arrangement. The BEAC policy rate was 4.4 percent. Non-oil GDP is estimated maintained at five percent following a to have grown by 4.1 percent, up from 2 cumulative increase by 175 basis points percent the previous year, and driven by between November 2021 and March 2023. public investment. After recovering from the 2022 floods, the agricultural sector is estimated to contribute 1.6 percentage points (ppts) to growth, followed by the services and industry sectors. Investment, 2024 ECONOMIC UPDATE CHAD 7 The extreme poverty rate in Chad is equivalent to an additional 237,000 people estimated to have decreased by 1.1 ppts falling into extreme poverty. to 29.7 percent in 2023; however, 5.4 million people continue living in extreme Reflecting lower oil prices and relatively poverty. Moreover, food insecurity remains high public spending, the fiscal balance a significant problem despite lower food is projected to turn into a 1.4 percent inflation, with around 2.1 million people, or of GDP deficit in 2024, remaining in 11.5 percent of the population, facing severe deficit through 2026. Public debt to GDP food insecurity as of December 2023. is projected to decline to 41.6 percent in 2025 due to accelerated debt servicing Chad maintained a fiscal surplus of 1.3 of commercial debt – as a cash-sweep percent of GDP in 2023 driven down clause provides that this debt service from a 5 percent of GDP surplus in increases with oil prices – and stabilize 2022 by public investment growth. in the medium term. The current account Despite high tax revenues growth of 14.4 deficit is expected to further deteriorate percent supported by tax administration to 3 percent of GDP in 2024, and average digitalization measures, the fiscal surplus 3.1 percent over 2025-2026, driven by declined, reflecting a sharp rise in public moderating oil prices. investment. The overall fiscal surplus of 1.3 percent of GDP equates to a non-oil fiscal The outlook is subject to multiple deficit of 15.8 percent. Total public debt downside risks, including lower oil prices, is estimated to decline to 44.8 percent of political instability during the upcoming GDP in 2023 from 47.4 percent in 2022. elections, heightened insecurity, and climate shocks. A prolonged Sudan war In 2024, economic growth is projected could worsen the humanitarian crisis, to decline to 2.7 percent (-0.4 percent strain public finances, and increase per capita) due to a projected reduction inflationary pressures. Moreover, an in oil production and public investment. escalation of tensions between Chad and During 2025-2026, growth is projected to Sudan could lead to considerable security average 3.1 percent (0.1 percent per capita), concerns. Enhancing Chad’s resilience in as new oil fields are brought onstream but the face of these challenges necessitates oil prices moderate further. Non-oil GDP the implementation of substantial fiscal growth is projected at around 3.5 percent (revenue and expenditure side) and 2024-2026. Government measures structural reforms. Chad could also addressing food insecurity should ease mitigate risks from continued large flows food inflation, with inflation projected of refugees by strengthening refugees’ to fall to 3.9 percent in 2024 as a result, inclusion in host communities – see below before declining to the BEAC’s 3 percent and Chapter 2. inflation target in 2026. A summary of the policy recommendations With few linkages to poor and vulnerable is presented in Table E.1 below. populations, oil-sector driven growth is not expected to lead to poverty reduction without significant structural Hosting refugees in an inclusive manner reforms, which are needed to improve non-oil GDP growth. Moreover, continued Forced displacement due to ongoing security restrictions and the ongoing Sudan conflicts has exacerbated cross-border crisis will create market disruption due to movements across the Sahel, leading to an increase in domestic demand and a the establishment of long-term refugee shortage in supplies of local and imported settlements in Chad. The Sudan crisis, goods in affected areas. This, combined which began in April 2023, has significantly with low social protection coverage will increased the refugee population in Chad, restrict poverty reduction. Extreme poverty and this trend is expected to continue. is projected to increase 0.4 ppt in 2024, In December 2023, there were 1.1 million 8 2024 ECONOMIC UPDATE CHAD refugees and asylum seekers in Chad. Out A national safety net system that of the total required funding of US$455 promotes economic inclusion must be million for refugee response, only US$151 adaptive, productive, and tailored to million was secured in 2023. The refugee the specificities of refugees and host response has been focused on covering communities, with a particular focus humanitarian needs of refugees settled in on women. To reinforce social cohesion large camps located in border areas. The and avoid further conflict, it is essential to host communities are characterized by develop programs and policies that benefit structural vulnerabilities, including poverty, both host communities and refugees, fragile livelihoods, and gender disparities. whether they have been in the country The influx of refugees, especially in border for a long time or have recently arrived. regions, has heightened food insecurity Integrated policies should target hosting and strained basic services and natural provinces, combining humanitarian and resources. Limited livelihood support has development efforts to support local been directed to either refugees or host development. communities with only a few programs integrating the two groups. Including refugees in national systems and in the economy requires predictable, To effectively promote the economic recurrent, and sustained donor funding. inclusion of refugees, it is crucial It also requires a strong national social to recognize refugees as economic registry that can serve as a unified contributors. Their inclusion can be platform for outreach and to identify the enhanced through improved mobility, most impoverished among nationals and restoration of assets, and integrated refugees, ensuring complementary and productive inclusion strategies. To this coordinated assistance. Moreover, a digital end, issuing them official identification payment platform is essential for the documents and providing them portable swift and transparent distribution of funds cash assistance is vital. Interaction to the most vulnerable, guaranteeing between refugees and host communities financial access for beneficiaries, including can enable access to land and create refugees, regardless of their location. opportunities for increased production and trade. Chad’s authorities have adopted an open stance with respect to welcoming refugees, with a strong support for refugee’s local integration as evidenced by Chad‘s Asylum law signed in 2023. The government’s policy of refugee integration and dispersion also aims to reduce potential conflict hotspots and maximize economic inclusion benefits. 2024 ECONOMIC UPDATE CHAD 9 Policy options to strengthen macro-fiscal sustainability and resilience to shocks, and mitigate the TABLE E.1 socioeconomic impacts of conflict Policy Objectives Policy Options Feasible to implement in the short term (1 year) Improve public • Improve transparency and credibility by reducing the use of emergency spending procedures spending efficiency and (“Dépenses avant ordonnancement” or DAOs). allocation • Ensure that core social spending, such as for education, health, and transfers to the National Food Security Office (ONASA) is protected, and not crowded out by military spending. • Strengthen planning and monitoring of public investment projects by finalizing the three- year public investment plan, fully operationalizing the use of SIGFIP for investment spending, adopting PIM procedures, and establishing a single database of all projects. Improve non-oil domestic resource • Conduct a comprehensive assessment of current tax expenditures to identify and eliminate mobilization those that do not serve a strategic economic or social purpose, and publish the assessment as an annex of the annual budget law. • Implement a transparent and regular evaluation process for all tax expenditures to ensure they remain effective and justifiable. • Improve excise tax policy framework to maximize revenue generation, enhance targeting and streamline administrative measures for greater efficiency. • Strengthen core functions of the tax administration by leveraging digital data, especially through finalizing and fully deploying E-tax and SIGFIP. Mitigate food insecurity • Expand well-targeted subsidized food sales operations to regions outside N’Djamena in order and inflationary pressures to support the poor and most vulnerable. • Refill food banks with sufficient cereal stocks for periods of agricultural production deficit (the cereal production for 2022-2023 is estimated at 2.9 million tons, with a gross deficit of 443,950 tons). Enhance refugee mobility and • Ensure the issuance of identification cards to refugees, by fostering effective coordination economic inclusion and collaboration between the Central National Authority for Asylum and Refugees (CNAAR) and the National Secured Titles Agency (ANATS) • Improve refugees’ access to basic services, by strengthening the capacity of national health, education and social protection systems. • Scale-up economic inclusion programs for refugees and host communities as part of the national social protection system. Important to implement in the medium term (2 to 5 years)1 Strengthen economic • Promote the use of quality standards and certification in the meat sector and remove diversification and reduce impediments to investment in cold-chain infrastructure/Temperature-Controlled Logistics dependency on oil sector exports (TCL) services • Support the professionalization of the value chain of the gum arabic sector through collective action (such as for price negotiation, repayment collection, and community welfare). • For sesame seeds, promote the use of fertilizers, certified seeds, or herbicides, and diversification of farmers’ crop portfolio. • Improve transit infrastructure and backbone services along the N’Djamena-Douala Corridor, including road maintenance and safety. Improve agriculture resilience • Strengthen fertilizer distribution systems. to climate • Increase investment in water irrigation systems. • Enhance the use of groundwater resources. Build the resilience of poor and • Invest in a national safety net system that is adaptive, productive, and focused on women vulnerable households to help • Strengthen the national social registry to improve targeting of interventions and to coordinate them prepare, cope, and adapt to development assistance shocks • Secure predictable and sustained donor funding for the adaptive national safety net system 1 Chad Country Economic Memorandum (CEM) (World Bank, 2023a); Chad Agriculture Sector Review (World Banks, 2022); Chad Country Private Sector Diagnostic (CPSD) (World Bank, 2023b) and; the Synthesis report on refugees and host communities in Eastern and Southern Chad (World Bank). 10 2024 ECONOMIC UPDATE CHAD 1 ECONOMIC AND POVERTY DEVELOPMENTS AND OUTLOOK Chad’s development context is dominated by oil dependency, vulnerability to climate change, insecurity and political instability in recent years. Chad’s economic growth has been ranks 190th out of 191 countries on the volatile and weak, reflecting the 2021 Human Development Index. lack of economic diversification and dependence on the oil sector, which In addition, Chad is one of the world’s accounts for 85 percent of exports and most vulnerable countries to climate 56 percent of fiscal revenues. Annual change.2 Insufficient rains and frequent GDP growth has been subdued, averaging flooding have often reduced agricultural 0.9 percent over the past ten years, which, output, which, together with conflict given high population growth (3.3 percent and displacement, has led to chronic on average), translated into an average food insecurity and exacerbated poverty. annual decrease in per capita income According to the University of Notre- of 2.3 percent. Non-oil GDP grew by an Dame’s ND-GAIN index, which assesses a average of just 0.5 percent per year over country’s vulnerability to climate change the last decade, translated into an average and its capacity for resilience, Chad ranks annual decline of 2.7 percent in non-oil at the bottom of 182 countries. GDP per capita. Moreover, the volatility of oil revenues is a major source of fiscal and debt vulnerability. Political and security expenses and poor governance, particularly in oil revenue management, have constrained improvements in basic services and development of infrastructure across a vast territory. Indicative of the struggle to enhance living standards, Chad 2 World Bank (2022c) ECONOMIC AND POVERTY DEVELOPMENTS AND OUTLOOK 11 Security remains precarious with Chad has been marked by significant threats by Boko Haram in the Lake Chad political shifts and challenges in recent region, the armed FACT rebellion in the years. President Idriss Déby Itno died north, and escalating inter-community in April 2021 just hours after provisional tensions. According to UNHCR, Chad was election results set him on course for a hosting nearly one million forcibly displaced sixth term. This led to the establishment persons at the end of 2022, including of a Transitional Military Council headed by 593,000 refugees and nearly 400,000 IDPs. his son Mahamat Idriss Déby. The Council Since April 15, 2023, the war in Sudan has suspended the Constitution, and despite caused a mass influx of Sudanese refugees demonstrations, the initial 18-month and Chadian returnees to eastern Chad. The transition period was extended by two number of new arrivals was estimated at years. A constitutional referendum took 496,834 at early-January 2024. In addition place in December 2023, and in January to the humanitarian challenges, the war in 2024, Succès Masra, a key opposition Sudan has induced higher expenditures, figure was appointed Prime Minister. especially mostly military, and shortages The Government has set a date for the of goods (See Box 1.1 for details).3 presidential election in May 2024. 1.1 Recent Economic and Poverty Developments In 2023, GDP growth is estimated at 4.1 estimated to have been the main driver percent, enabling GDP per capita to rise on the demand side, contributing 7.0 for the first time since 2014. ppts to growth (8.6 ppts for government investment). In contrast, private Despite the ongoing humanitarian crisis investment is expected to have fallen due triggered by the war in Sudan, Chad’s to increased interest rates and crowding economy demonstrated considerable out effects. The boom in public investment resilience with 4.1 percent GDP growth (1 (+195.9 percent) led to a sharp increase percent in GDP per capita) in 2023. This in domestic demand (+9.5 percent). This economic expansion was supported by a in turn increased imports, along with modest increase in oil production, which other imports for humanitarian-related grew by 4.4 percent. In addition, the non- operations in support of the Sudanese oil sector rebounded, with an estimated 4.1 refugees (see Box 1.1), and by significantly percent growth, up from 2 percent in the more than exports (imports +16 percent previous year, driven by public investment. vs. exports +2.9 percent), resulting in a This marks the strongest performance current account deficit of 2.4 percent of since 2014, as illustrated in Figure 1.1. GDP in 2023. After recovering from the 2022 floods, the agricultural sector is estimated to contribute 1.6 percentage points (ppts) to growth, followed by the services sector (1.4 ppts) and industry (1 ppt). Thanks to high government spending on public works projects, gross fixed capital investment is 3 UNHCR (2024a). Tchad – Rapport opérationnel. 5 January, 2024. https://reporting.unhcr.org/chad-operational-update- french-6662. 12 2024 ECONOMIC UPDATE CHAD GDP growth in 2023 was supported by both the oil and non-oil sectors FIGURE 1.1 GDP growth (in %) GDP growth (in %) 6 6 8 8 6 6 4 4 4 4 2 2 2 2 0 0 0 0 -2 -2 -2 -2 -4 -4 -4 -4 -6 -6 -6 -6 -8 -8 -8 -8 Gambia Nigeria Angola Chad Cameroon Congo -10 -10 2021 2022 2023e 2024p 2025p Oil GDP Non-oil GDP 2026p Real GDP 2020 2021 2022 2023e 2024p-2026p Source: Chadian authorities and World Bank staff estimates Source: World Bank MPO Inflation moderated in 2023, to an base effect of high inflation in 2022 and annual average of 4.1 percent, but the slowdown in food inflation, which was remains sensitive to the fluctuations in 0.7 percent y/y in 2023 compared with food prices. 16.2 percent in 2022, thanks to improved agricultural production. In addition, the Following a surge in 2022, where a sharp Government, as part of its 2023 budget, rise in food prices drove annual average implemented a series of measures, such as inflation to 5.8 percent, inflation eased tax exemptions on imported agro-pastoral to 4.1 percent in 2023. In 2022, the global materials, inputs and equipment, and rise in food and energy prices triggered lowered custom duties for trucks coming by Russia’s invasion of Ukraine, coupled from outside the Economic Community with internal unrest and flooding that of Central African States (CEMAC). Chad’s disrupted agricultural production and inflation has converged towards the CEMAC transport, caused food prices to soar. countries’ average inflation, following the Inflation peaked year-on-year (y/y) to 10.3 2022 peak. (Figure 1.3). percent in November 2022 (Figure 1.2). The deceleration in 2023 was due to the ECONOMIC AND POVERTY DEVELOPMENTS AND OUTLOOK 13 Food prices can vary much more than CPI inflation in Chad followed the CEMAC FIGURE 1.2 headline inflation FIGURE 1.3 trend although slightly lower Inflation (y/y increase in %) CPI Inflation (in %) 25 25 7 7 20 20 6 6 5 5 15 15 4 4 10 10 3 3 5 5 2 2 0 0 1 1 -5 -5 0 0 2022 2023 2024 2020 2021 2022 2023e 2024p 2025p Headline Food Chad CEMAC average Source: Chadian authorities and World Bank staff estimates Source: Chadian authorities and World Bank staff estimates After recording a surplus amounting to CEMAC regional external reserves 2.9 percent of GDP in 2022, the current decreased to 4.1 months of imports account returned to a deficit of -2.4 coverage at end-2023, below the desired percent of GDP due to a sharp increase level of 5 months of imports. Thanks to tighter regional monetary policies and in imports. rising oil prices, regional reserves had The trade balance shifted from a surplus grown from 3 months of imports coverage of 3.3 percent of GDP in 2022 to a deficit in 2021 to 4.9 months at end-December of 10.3 percent of GDP (Figure 1.4), which 2022. However, the deterioration in the led to the current account returning to a current account constrained reserves deficit (Figure 1.5). The sharp rise in public accumulation in 2023, resulting in a investment in 2023, coupled with imports decrease to 4.1 months of coverage. for the humanitarian efforts in response Consequently, reserves remained below the to the war in Sudan led to a 26.7 percent 5-month threshold considered necessary increase (in current US$) in import value of for monetary stability in a resource-rich goods and services. In contrast, the value monetary union with a fixed exchange rate of exports fell by 6.0 percent, primarily due by the International Monetary Fund (IMF). to the 19.9 percent drop in the price of Despite this, projected peaks in oil prices exported oil, with the 4.5 percent increase suggest that CEMAC regional reserves are in export volumes insufficient to offset likely to continue their upward trend. the price drop. Notably, foreign direct investment to the oil sector remained the primary source of financing for the current account deficit. 14 2024 ECONOMIC UPDATE CHAD Lower exports and higher imports led to The current account returned to deficit in FIGURE 1.4 a trade deficit in 2023 FIGURE 1.5 2023, but the deficit was largely financed by foreign direct investment Trade Balance (% of GDP) Current Account Balance (% of GDP) 60 5 4 4 50 0 2 2 40 -5 0 0 30 -10 -2 -2 20 -15 -4 -4 10 -20 -6 -6 0 -25 -8 -8 2020 2021 2022 2023e 2024p 2025p 2026p 2020 2021 2022 2023e 2024p 2025p 2026p Exports Imports Trade balance (RHS) Current account balance Net FDI (negative = inflow) Source: Chadian authorities and World Bank staff estimates Source: Chadian authorities and World Bank staff estimates To promote economic stability in the into the third quarter of 2023, albeit less region, BEAC tightened monetary policy in Chad. The CEMAC’s REER appreciated by increasing policy rates and liquidity by 8.9 percent year-on-year. For Chad, absorption operations. the appreciation was much lower, at only 2.6 percent year-on-year, thanks to a 1.1 Chad’s monetary and exchange rate percent REER depreciation in the second policies are managed by the regional quarter and a stabilization in the third Central Bank (BEAC), which continued quarter. The appreciation of the REER was monetary tightening in 2023 in response not due to higher inflation in the CEMAC to rising inflation. Amid global and relative to its trading partners, but to an regional uncertainties, BEAC monetary appreciation of some bilateral exchange policy remained geared towards price rates, in particular vis-à-vis the Chinese and external stability, guided by the yuan and to a lesser extent, the US dollar. community’s medium-term objectives of maintaining an inflation rate around 3 The banking sector remains percent and a reserve coverage of money undercapitalized, although some supply in excess of 20 percent. In March progress has been made toward the 2023, policy rates were increased to 5 preparation of restructuring plans by the percent to contain inflationary pressures two systemic public banks. By the end of and to strengthen the region’s external June 2023, non-performing loans (NPLs) position. BEAC continued to mop up excess amounted to 29.8 percent of total loans. liquidity from the banking system through The sector’s capital adequacy ratio turned its weekly liquidity purchasing operations, negative at -1.6 percent while the liquidity leading to a 17.1 percent reduction in ratio (liquid assets relative to short-term banking system liquidity (excluding the liabilities) was recorded at 119 percent, central bank interventions) between May which is above the regional banking and August 2023. As a result of these supervisor’s (Commission Bancaire de actions, the reserve coverage of money is l’Afrique Centrale – COBAC) requirement. expected to have reached 71.1 percent by However, large differences exist between the end of 2023, well above the statutory private and public banks: the former largely floor of 20 percent. adhere to COBAC’s prudential regulations, while the latter have been dealing with The loss of competitiveness in CEMAC liquidity and/or solvency issues for years. since late 2022 in terms of real effective exchange rate appreciation continued ECONOMIC AND POVERTY DEVELOPMENTS AND OUTLOOK 15 The substantial budget surplus that GDP, the total revenue for 2023 hit a new Chad recorded in 2022 fell significantly high of 27.1 percent of GDP. Oil revenues in 2023 to 1.3 percent of GDP due to a continued to contribute over 60 percent considerable rise in public investment to the total, same as 2022. While revenue performance was robust, expenditure spending. soared to 25.9 percent of GDP, marking the Chad’s budget surplus contracted highest level in over a decade. While current significantly in 2023, decreasing to 1.3 expenditure saw a moderate rise from 15.3 percent of GDP from the substantial percent to 16.0 percent of GDP, largely 5 percent surplus in 2022. Oil revenue due to controlled wage spending, capital reached a peak of 17.1 percent of GDP,4 expenditure surged, from 3.2 percent of surpassing the previous high of 15.1 GDP in 2022 to 9.8 percent in 20235 (Figure percent recorded in 2022 (Figure 1.6). 1.7). Consequently, the primary surplus In addition, non-oil tax revenues saw a dropped from 6.5 percent of GDP in 2022 14.6 percent increase in 2023, supported to 3.0 percent of GDP in 2023, and the by advancements in tax administration non-oil deficit expanded, from 10.1 percent digitalization, reaching 7.9 percent of GDP. of GDP in 2022 to 15.8 percent in 2023. With grants also rising to 2.0 percent of In 2023, both expenditure and revenue Total government spending rose in 2023 FIGURE 1.6 significantly increased FIGURE 1.7 due to higher capital expenditures Fiscal Balance (% of GDP) Expenditures (% of GDP) 30 30 30 30 25 25 25 25 20 20 20 20 15 15 15 15 10 10 10 10 5 5 5 5 0 0 0 0 2024f 2025f 2026f 2024f 2025f 2020 2021 2022 2023e 2020 2021 2022 2023e Total revenues Total expenditures Oil revenues Current expenditures Capital expenditure Overall balance (RHS) Non-oil balance (RHS) Total expenditures Wages and compensation Source: Chadian authorities and World Bank staff estimates Source: Chadian authorities and World Bank staff estimates 5 The sharp increase in public spending stems from high in- vestment spending for major infrastructure projects, amid the ongoing political transition, which also induced significant expenditures such as those related to the December 2023 4 This reflects the 2022 oil sector performance as there referendum, and military equipment purchasing to address is a one-year lag in the main component of oi-revenue tax heightened security risks worsened by the Sudan war (see Box collection 1.1). 16 2024 ECONOMIC UPDATE CHAD BOX 1.1 THE ECONOMIC IMPACT OF THE WAR IN SUDAN ON CHAD The Sudan crisis and refugee influx Clashes erupted in Khartoum, Sudan on April 15, 2023 between the Sudanese Armed Forces (SAF) and the Rapid Support Forces (RSF), resulting in thousands dead and the displacement of over 1.4 million people into neighboring countries, including Chad. Despite international efforts to mediate, the conflict shows no signs of abating in the short term, resulting in extensive damage within Sudan and significant adverse effects to neighboring countries. Around 496,834 people (including about 131,425 Chadian returnees) are estimated to have entered the country since the outbreak of the Sudan crisis and the Chadian government predicts that the number of refugees could reach 910,000 by the end of 2024.6 The conflict has directly impacted about 2.9 million of Chadians living in the three bordering provinces (Wadi-Fira, Ouaddai and Sila). The crisis has triggered an alarming situation exacerbated by the limited resources in the face of the constant influx of refugees to Chad. Aid organizations are overstretched, struggling to support the refugees arriving in Chad. Humanitarian agencies have estimated a need for US$455 million for Chad under the Regional Refugee Response Plan for the Sudan situation. As of December 2023, only 33 percent of the plan had been funded. The Chadian government is also working on a national crisis response plan, aiming to be more inclusive of the Chadian local community. Reception capacity remains limited, access to basic social services difficult, and higher cost of living is impacting the already vulnerable local communities. The impacts of the Sudan crisis on Chad’s economy The war in Sudan is expected to have some economic impacts on Chad through various channels, namely: trade, public expenditure and inflation. The Sudan crisis has disrupted trade and trade routes in the region. As a landlocked country, Chad relies on its neighbors for its goods’ supplies. The crisis has led to the suspension of official trade between Chad and Sudan, causing significant disruptions in the supply of goods to the markets in Chad. In response, Chad has turned to alternative trade routes, mainly to Cameroon, which was already its main point of entry/exit for its exports and imports before the crisis. However, Eastern Chad communities were mostly supplied from Sudan through formal and informal trade. Imports from Sudan represented 4 percent of Chad’s total imports while exports to Sudan accounted for 1 percent of Chad’s total exports. In 2019, total bilateral trade volume between the two countries amounted to around US$ 260 million (2.2 percent of GDP). In addition, Sudan was the third largest destination for Chad’s livestock exports in 2019 (after Nigeria and Cameroon), with exports to Sudan accounting for 19.8 percent of total livestock exports. Yet, these numbers do not capture informal trade between both countries. The crisis has also intensified informal activities such as fuel and arms smuggling from Chad to Sudan. There has been a gradual resumption of cross-border trade since October 2023 following an agreement between local leaders from West Darfur and Eastern Chad. While trade routes have been disrupted, import volumes and values have still increased. The massive influx of refugees has led to an increase in the domestic demand for imported goods, mainly stemming from the humanitarian-related operations in support of the refugees. These operations are estimated to have led to an increase of imports by over US$ 100 million (around 1 percent of GDP) in 2023, which contributed to the current account turning into a deficit Public expenditure: The war in Sudan has escalated military spending amid heightened security risks. Chad has mobilized its troops to secure its 1,300 km border with Sudan. Since the outbreak of the conflict, the authorities have closed the border while allowing civilians fleeing the fighting to pass. Border security operations have induced substantial military expenses. Moreover, since mid-June Chad has been resorting to its military resources to aid refugees. These operations are expected to significantly strain the military budget. Moreover, the government estimates a total budget of US$ 200 million (around 1.5 percent of 2023 GDP) is required to cover their support operations over a six-month period in the four most impacted regions. According to the 2023 initial budget law, the military budget was projected to account for 18.5 percent of the total 2023 spending. Chad’s government estimates that the Sudan crisis has induced an additional US$8 million/month in military expenditures, which is likely to be an underestimation given the over-running budget execution as of September 2023. The rise in public expenditures has led to a narrowed fiscal surplus, which is estimated at 1.3 percent of GDP for 2023 (compared to the pre-crisis fiscal balance projection of 6.1 percent of GDP). Refugee integration into the host communities is expected to induce additional expenditures in the medium and long-run (see Box 2.1). All these spending pressures are expected to contribute to the fiscal balance turning into a deficit from 2024 onwards. With the official suspension of trade with Sudan, food and commodities prices have soared in the host communities in Eastern Chad. The scarcity of goods in local markets led to a tripling of prices for some food items. Moreover, the inflow of refugees has increased the local demand, creating additional pressures on the supply of food, goods and services and exacerbating food insecurity in those areas. Inflation was accentuated during the first months following the crisis outbreak in April 2023. However, overall inflation pressures have been eased by the re-opening of Chad-Sudan border in October 2023 to allow the flow of essential goods. Overall inflation is estimated to have averaged 4.1 percent, with food inflation averaging 4.8 percent in 2023. 6 Data as of January 4th, 2024 ECONOMIC AND POVERTY DEVELOPMENTS AND OUTLOOK 17 Overall, Chad economy has been resilient so far to the ongoing crisis in Sudan and related massive influx of refugees in Eastern Chad. However, a prolonged Sudan war spilling over to Chad could worsen the humanitarian crisis, strain public finances, increase inflation, and have an overall impact on growth. To understand the potential impacts, we analyze three scenarios and their corresponding growth trajectories. ▪ BASELINE SCENARIO (A): Fighting continues into 2024- GDP growth could fall to 2.3 percent under a 2026 but with diminishing intensity, leading to reduced FIGURE 1.8 downside scenario border stress and more controlled influx of refugees. Overall growth will be mainly driven by the oil sector and public expenditure. 2024 growth is expected to be moderate (at 2.7 Real GDP growth percent), mainly due to weaker oil sector performances and 6 to the decline in public investment. Growth is projected to 4.8 average 3.1 percent during 2025-2026, as new oil fields are brought onstream. 4 2.9 ▪ UPSIDE SCENARIO (B): A peace agreement is signed, and fighting stops during first half of 2024, accompanied by a 2 2.3 stable government, with official border re-opening. As security risks slowly start to fade, refugee influx halts. A lower 0 security risk at the border means that Chad could allocate fewer resources into military, and increase investments in strategic sectors. These include boosting Chad’s production -2 2021 2022 2023e 2024p 2025p 2026p and exports of goods previously exported by Sudan before the crisis, such as processed meat, sesame seeds and Arabic gum. Hence Chad’s economy is projected to follow a higher growth path, at 3.4 percent in 2024, reaching 4.6 percent on Upside Downside Baseline average during 2025-2026. Source: WB staff projections ▪ DOWNSIDE SCENARIO (C): There is an escalation of the conflict in 2024, that will last into 2025-2026, spilling over into Chad and heightening security tensions. Most economic activities could be paralyzed along the Eastern Chad border Note: 1/ Products such as sesame and gum arabic have seen area and potentially across Chad. Tensions between host their prices double. There has been an increased demand for communities and Sudanese refugees could escalate. Chad and a surge in prices of cattle and processed meat where Sudan held a prominent position in the region. These sectors should would increase its military spendings to contain these risks, allow Chad to boost its agriculture and non-oil industry. at the expense of growth-boosting sectors. This could lead 2/ Tensions have escalated between Chad and Sudan in to growth slowing down to 1.9 percent in 2024, and averaging December 2023, over accusations by the Sudan’s government 2.3 percent in 2025-2026. of Chad interference in the current crisis. Chad continues to be at high risk of (DSA, January 2023), Chad is in high risk of external debt distress while the debt external and overall risk of debt distress, remains sustainable. but the debt remains sustainable. Chad’s debt ratios have improved since the last Chad’s external and overall public debts DSA in December 2021 due to higher oil remain sustainable with a high risk of prices and the debt treatment agreed by distress. Public debt continued to decline, official and commercial creditors under with the debt-to-GDP ratio reaching 44.8 the G20 Common Framework. External percent at end-2023. This reduction was debt service ratios relative to GDP and on account of high oil revenues as a cash- revenue are expected to decrease in sweep agreement mandates increased 2024 and stabilize thereafter External and debt service payments to the main private overall public debt remains at high risk of creditor when oil prices are high. Under debt distress, reflecting the country’s weak current oil revenue projections, public debt carrying capacity. Chad’s outlook sector debt is expected to further decline is subject to significant downside risks, in the coming years, dropping below 41.9 including uncertainties around oil price percent of GDP in 2026. The share of volatility, increased insecurity, and social commercial creditors in public debt has unrest due to the political transition, and fallen from 33 percent at end-2021 to 22.2 possible shortfalls in financing (Figure 1.10). percent at end-2022. In the absence of fiscal policy changes, the projected decrease in oil export revenues According to the latest Joint World Bank- over the very long term could reverse the IMF Debt Sustainability Assessment downward trend in debt, leading to an increase in the debt stock. 18 2024 ECONOMIC UPDATE CHAD The share of official creditors in external Official external financing, Net (US$ FIGURE 1.9 debt has increased in 2022 FIGURE 1.10 millions) Debt by type (% of total external debt) 400 350 300 250 7,2 Multilateral 200 22,2 150 38,3 Bilateral 100 Commercial 50 0 Others 2027 2022 2023 2024 2025 2026 2028 2029 2030 26,8 IMF IDA AfDB Other Official Creditors Source: Chadian authorities and World Bank staff estimates Source: WB-IMF Debt Sustainability Analysis (DSA), Jan 2023 PV of Public Debt-to-Revenue Ratio Public Debt Service-to-Revenue Ratio FIGURE 1.11 FIGURE 1.12 350 Most extreme shock: Commodity price 250 Most extreme shock: Growth 300 200 250 200 150 150 100 100 50 50 0 0 2022 2024 2026 2028 2030 2032 2022 2024 2026 2028 2030 2032 Historical scenario Most extreme shock Historical scenario Most extreme shock Baseline Baseline Source: WB-IMF Debt Sustainability Analysis (DSA), Jan. 2023 Source: WB-IMF Debt Sustainability Analysis (DSA), Jan. 2023 ECONOMIC AND POVERTY DEVELOPMENTS AND OUTLOOK 19 Poverty profile and trends by region: 2018/19-2021/22 FIGURE 1.13 Poverty incidence 2018 Poverty incidence 20121 Tibesti Tibesti Ennedi-Ouest Ennedi-Ouest Borkou Borkou Ennedi-Est Ennedi-Est Kanem Wadi Fira Kanem Wadi Fira Bahr El Gazel Bahr El Gazel Batha Batha Lac Ouadda• Lac Ouadda• Hadjer-Lamis Hadjer-Lamis Sila Sila (60.0,70.0] (60.0,70.0] Chari-Baguirmi Chari-Baguirmi GuŽra Salamat Salamat (45.0,60.0] (45.0,60.0] Mayo- Mayo- GuŽra Kebbi-Est Kebbi-Est (35.0,45.0] (35.0,45.0] (30.0,35.0] (30.0,35.0] TandjilŽ Moyen-Chari TandjilŽ Moyen-Chari Mayo- Mayo- Kebbi-Ouest (15.0,30.0] (15.0,30.0] Kebbi-Ouest Logone Logone Logone Logone Occidental Oriental [0.0,15.0] Occidental Oriental [0.0,15.0] Mandoul Mandoul Share of poor in 2018 Share of poor in 2021 Tibesti Tibesti Ennedi-Ouest Ennedi-Ouest Borkou Borkou Ennedi-Est Ennedi-Est Kanem Wadi Fira Kanem Wadi Fira Bahr El Gazel Bahr El Gazel Batha Batha Lac Ouadda• Lac Ouadda• Hadjer-Lamis Hadjer-Lamis Sila Sila (10.0,12.0] (10.0,12.0] Chari-Baguirmi Chari-Baguirmi Salamat Salamat (8.0,10.0] (8.0,10.0] Mayo- GuŽra Mayo- GuŽra Kebbi-Est Kebbi-Est (6.0,8.0] (6.0,8.0] (4.0,6.0] (4.0,6.0] TandjilŽ Moyen-Chari TandjilŽ Moyen-Chari Mayo- Mayo- (2.0,4.0] (2.0,4.0] Kebbi-Ouest Kebbi-Ouest Logone Logone Logone Logone Occidental Oriental [0.0,2.0] Occidental Oriental [0.0,2.0] Mandoul Mandoul Source: World Bank calculations based on ECOSIT 2018/2019 and 2021/2022’ Note: Poverty headcount ratio calculates the proportion of people living below the national poverty line. Poverty gap is the mean shortfall from the national poverty line (counting the nonpoor as having zero shortfall) as a percentage of the poverty line. This measure reflects the depth of poverty as well as its incidence. Poverty severity is an index describing the inequality among the population living below the poverty line, in other words it measures the severity of deprivation of those living in absolute poverty. 20 2024 ECONOMIC UPDATE CHAD Poverty, particularly in rural areas, has the Russia’s invasion of Ukraine increasing increased between 2018/19 and 2021/22, global food prices, and climatic events largely due to high food inflation. (floods) reducing agricultural production, fueled high food inflation. This was the Various shocks led to an increase in main driver of the poverty rate increasing poverty as measured by the national to 44.8 percent in 2022, corresponding to poverty rate and consumption 7.8 million Chadians living below the new inequality. The poverty incidence in 2018 national poverty line of 284,109 CFAF per was estimated at 42.3 percent, equivalent person per year. The Gini Index, which to 6.6 million people living below the measures consumption inequality, rose by national poverty line (Box 1.2) of 241,970 0.7 points during the same period, from CFA Francs (CFAF) per person per year. The 33.6 in 2018 to 34.3 in 2022. combination of the shocks of COVID-19, BOX 1.2 ECOSIT SURVEY, NATIONAL POVERTY RATE AND INTERNATIONAL POVERTY LINE The Fifth Survey on the Living Conditions of Households and the Informal Sector in Chad (ECOSIT5), conducted in 2022, is a comprehensive national survey designed to provide high-quality and updated data on indicators essential for monitoring poverty and household living conditions. The survey covers a range of topics, including education, health, income sources, consumption patterns, vulnerability to shocks, etc. ECOSIT5 was conducted in alignment with the harmonized framework of the West African Economic and Monetary Union (UEMOA) countries. The data collection for the survey was executed in two stages to capture the seasonal variations in household consumption. The initial phase spanned from February 2 to April 30, 2022, followed by a second phase from June 20 to September 20, 2022. The sample comprised 637 Enumeration Areas (EAs), representing 7,644 households, which included panel households from the previous ECOSIT4 survey (2018/2019). For comparability ECOSIT5 utilized the same methodology, sampling plan, technical tools, and advanced data collection methods as its predecessor, ECOSIT4. The national poverty rate measures the share of the population living below the national poverty line - that is, cannot meet the basic nutritional requirement of 2300 calories. The national poverty rate is calculated only using national poverty survey wherein periodicity is three or five years depending on each country. For the Ecosit 5 survey, a new national poverty line was constructed in 2022 instead of using inflation to update the 2018/19 line because the fixed CPI basket doesn’t allow for any substitution effects, which could overstate poverty rates given the price shocks experienced between 2018 and 2021. The poverty line is constructed in two stages. A basket of goods of the country’s food consumption that allows an individual to satisfy his daily nutritional needs of 2,300 calories is retained and valued to provide a food poverty line. The non-food-poverty line is a portion of the non-food consumption expenditure of households located around the food poverty line. The sum of the two poverty lines gives the national poverty line, estimated at 284,109 CFAF per person per year. The timing of the implementation of the 2018/19 and 2021/22 surveys was not identical. In addition, the 2021/22 welfare aggregate excludes hospitalization expenditures and the rent imputation method for rural areas differs from 2018/19. The international poverty measures the share of the population living below the international poverty line of $2.15 per person per day, 2017 PPP. Compared to the national poverty rate, the international poverty rate allows comparison between countries. It is estimated annually using a microsimulation tool based on macro and micro data. It allows us to analyze recent developments and poverty outlooks of countries. The increase in poverty has been much increased in urban areas. The increase in higher among households living in urban rural poverty can be partially explained by areas. Poverty rose by about 11 ppts (from unprecedented pluvial and fluvial flooding 23 to 34.2 percent) in urban areas, and (the worst since 1961), affecting 1.3 million by 1.1 ppts (from 49.7 to 50.8 percent) in people (7.3 percent of the population) in 19 rural areas. Economic growth in services of the 23 provinces of Chad. This damaged and industry activities in 2022 seems to over 350,000 hectares of agricultural have benefited households in N’Djamena, land, killed 20,000 head of livestock, and where poverty declined by 0.8 ppt (from destroyed 80,000 homes, along with 13.8 percent to 13 percent). However, many schools, health centers, and public poverty increased in other cities, so it infrastructure. ECONOMIC AND POVERTY DEVELOPMENTS AND OUTLOOK 21 Nevertheless, poverty remains a constraints include: (i) insecurity and the predominantly rural phenomenon, with risk of conflict over natural resources; (ii) risk significant regional disparities. 84.6 of climatic shocks; (iii) low levels of human percent of the country’s poor lived in rural capital; (iv) infrastructure deficits; (v) lack areas in 2021, compared to 88.8 percent of complementary services; and (vi) the in 2018. In 2021/22, one out of every two gender gap. Third, livelihoods, particularly in people living in rural areas was poor. The the rural areas, are increasingly at risk from region of Sila (60.2 percent) on the eastern drought due to declining levels of rainfall border with Sudan, as well as Mayo Kebbi and rising temperatures linked to climate East (56.6 percent) on the western border change. More recently, the COVID-19 global with Cameroon, and Kanem (54.2 percent) pandemic threatened to reverse progress bordering Niger, have more than half of in poverty reduction achieved in the last their population living below the national decade. Finally, the country continues to poverty line. Additionally, most of the poor experience low human capital with a child (50.8 percent in 2022) remain concentrated born today in Chad only being expected in the southern regions bordering the to attain 30 percent of his/her productive Central African Republic. The share of potential as an adult, the second lowest in poor Chadians living in the regions of Chari the world. Baguirmi increased by 2.5 ppts, marking the highest increase among all regions. Rising fuel prices and the forced Meanwhile, the region of Mayo Kebbi Est displacement resulting from the war in experienced the largest decline (2.4 ppts) Sudan are expected to exacerbate food in their share of poor Chadians, with the insecurity and increase poverty. The surge number of poor individuals declining by in fuel costs is likely to aggravate the poverty 68,847 people. crisis, leading to heightened food insecurity and increased vulnerability. The influx from There are a number of structural factors the war in Sudan is intensifying the risk of that may explain the observed poverty food insecurity, which already impacts 2.4 trends in the country. First, the lack of million individuals. Consequently, poverty economic diversification severely limits rates are estimated to have increased, as livelihood opportunities for households 80 percent of the 1.1 million refugees and and their ability of the economy to asylum seekers in Chad are poor, making withstand exogenous shocks. Second, low the total number of poor in the country at productivity smallholder agriculture and 9.3 million people including 8.4 Chadians pastoralism, which are the main sources and 0.9 million refugees in 2023. of livelihood (73 percent of household income). face severe constraints that keep their performance below potential. These 22 2024 ECONOMIC UPDATE CHAD 1.2 Economic and Poverty Outlook Economic growth is forecast to The lower oil revenues and exports decelerate in 2024, reaching 2.7 percent projected are expected to contribute to due to a slowdown in the oil sector and the fiscal deficits and current account anticipated to remain around 3 percent deficits. Reflecting lower oil prices and still in 2025-2026. elevated levels of government expenditures, the fiscal balance is projected to turn into In 2024, growth is projected to a 1.4 percent of GDP deficit in 2024, with decelerate to 2.7 percent (-0.4 percent a non-oil fiscal deficit of 12.8 percent of per capita) due to an expected decline in GDP, and remain in deficit through 2026. oil production and expectations of lower Public debt to GDP is projected to decline public investment. Oil GDP is expected to to 41.6 percent in 2025 with accelerated contract by 0.4 percent due to moderating debt servicing of debt linked to high oil oil production, while non-oil GDP growth revenue, and stabilize in the medium term. is projected to slow slightly to 3.4 percent The current account deficit is expected to in 2024. All sectors are anticipated to further deteriorate to 3 percent of GDP in experience a moderate slowdown in 2024, and average 3.1 percent over 2025- growth. A modest rebound is projected 2026, driven by moderating oil prices. for 2025-2026, with GDP growth averaging 3.1 percent, as new oil fields are brought With few linkages to poor and vulnerable onstream. populations, oil-sector driven growth is not expected to lead to poverty reduction Domestic demand is expected to contract without significant structural reforms. by 0.4 percent after a significant increase Moreover, continued security restrictions, of 9.5 percent in 2023. This slower low social protection coverage, and the growth is due to a 25.3 percent decline in ongoing Sudan crisis will restrict poverty public investment, compared to the very reduction. Using modeled estimates high levels of 2023, which is not offset of extreme poverty at the international by the growth in private consumption. line ($2.15 per person per day, 2017 PPP) This contraction in domestic demand is - see Box 1.2 - poverty is expected to expected to then lead to a contraction have decreased by 1.1 percentage points, in imports of 3.1 percent, while exports reaching 29.7 percent in 2023, before slightly are projected to increase by 3.8 percent. increasing by 0.4 ppt in 2024, equivalent However, these trends are not expected to to an additional 237,000 people falling into generate a trade surplus, due to adverse extreme poverty. The international poverty terms of trade. Accordingly, the current rate7 is expected to remain relatively stable account deficit is expected to widen slightly around 30 percent between 2024 and 2026 from 2.4 percent in 2023 to 3 percent of – based on assumptions of moderate GDP GDP in 2024. Government measures to growth in the primary sector and declining address food insecurity should ease food inflation. A slight increase in urban areas inflation, assuming average agricultural would be offset by a slight decrease in production, with inflation projected to fall rural areas. With high population growth, to 3.9 percent in 2024 as a result, before the number of extreme poor in the country declining to the BEAC 3 percent target by is expected to reach 6 million people. 2026. Inequality is expected to remain relatively stable at 34 on the Gini Index. 7 The International poverty rate is the percentage of population living in households with consumption or income per person below the poverty line at 2017 international prices. ECONOMIC AND POVERTY DEVELOPMENTS AND OUTLOOK 23 The outlook is subject to multiple Chad’s vulnerability to climate change downside risks and government actions will increasingly impede its growth are important to strengthen the outlook. potential and social stability. Climatic shocks, which reduce rain-fed crop and This outlook is subject to significant livestock yields or cause damages to uncertainty and multiple downside infrastructure, reduce economic activity risks, including lower oil prices, political and increase food inflation. The estimated instability amid elections, escalating impact of climate change on Chad’s GDP insecurity, and climatic shocks. increases over time; GDP could be lower Existing vulnerabilities would undermine by 10.5 percent by 2050 due to climate Chad’s fiscal and debt sustainability if change.8 High food prices are also likely oil prices were lower than expected. The to exacerbate food insecurity, increase management of the political transition and poverty, and potentially lead to social related security risks could exert pressure discontent and unrest. on public finances and potentially lead to further cuts in vital sectors such as Against this backdrop, policy measures health and education. The risk of increased and structural reforms are important to political instability remains elevated as the reinforce Chad’s resilience to external political transition enters its last phase. As and domestic shocks (see Table E.1), in for insecurity, Boko Haram remains a major addition to measures to support peaceful threat in the Lake Chad region, while inter- transition. Over the short run, Chad should community clashes over access to and take a set of actions in order to: (i) improve use of natural resources continue to fuel public spending efficiency and allocation; conflict and displacement in the region. (ii) improve non-oil domestic resource A prolonged Sudan war could worsen the mobilization; (iii) ensure fiscal transparency; humanitarian crisis, strain public finances, (iv) mitigate food insecurity and inflationary and increase inflationary pressures. Indeed, pressures; (v) build the resilience of poor nearly 500,000 people have entered the and vulnerable households to help them country since the start of the Sudan crisis prepare, cope, and adapt to shocks; and (vi) and the Chadian government predicts that enhance refugee mobility and economic the number could exceed 900,000 by the inclusion. In addition, in the medium run end of 2024. Moreover, an escalation of Chad should implement measures to: (i) tensions between Chad and Sudan could strengthen economic diversification and (ii) lead to considerable security concerns. improve agriculture resilience to climate. In addition and in light of the increased influx of refugees over the past years, Chad could also benefit from strengthening refugees’ inclusion in host communities. This has the potential to unlock some major socio- economic gains as detailed in Chapter 2. 8 World Bank. Sahel Country Climate and Development Report (2022). 24 2024 ECONOMIC UPDATE CHAD 2 HOSTING REFUGEES IN AN INCLUSIVE MANNER 2.1 Inflow of refugees the southern provinces and the Lake area.11 The repeated forced displacement waves deepens existing have recently culminated in the massive vulnerabilities. refugee inflow caused by the Sudan crisis in early 2023. The number of refugees in the country Forced displacement due to protracted increases as new arrivals add to long- conflicts has intensified cross-border term refugees who have few prospects of movements across Sahel countries and return. On December 11, 2023, there were created long-term refugee settlements 1.1 million refugees and asylum seekers in in Chad. Chad (Figure 2.1), including 911,000 from Sudan, 129,000 from CAR (mostly settled in Over the last 20 years, Chad has been the south), 26,000 from Cameroon (mostly affected by forced displacement settled in two camps around N’Djamena resulting from protracted conflicts in and on the banks of the Logone River), and neighboring countries. Chadian borders 21,000 from Nigeria (mainly distributed in have always been subject to natural the Dar Es Salam camp and host villages patterns of transhumance10 and cross- in the Lake region).12 Before the recent border movements for economic reasons refugee inflow in 2023, Sudanese refugees, among many ethnic groups scattered most of whom had fled the Darfur conflict in the area. These patterns have been in 2003, had been in Chadian camps for magnified by forced displacement due on average 15 years and Central Africans to protracted conflicts. A great number for 6 years. Due to security and economic of refugees arrived in Chad between problems in their countries of origin, their 2003 and 2004, after conflicts broke out prospects of return are remote, especially in Sudan (Darfur), South Sudan, and the among those who have lived most of their Central African Republic (CAR). Persistent lives in Chad.13 instability and the Boko Haram insurgency led to a continuous inflow of refugees into 11 Nguyen, N. T. V., Savadogo, A., & Tanaka, T. (2021). Refugees in Chad: The Road Forward. Washington, DC: World Bank. 12 UNHCR (2024b). Operational Data Portal – Chad Country Pro- 10 Transhumance is a type of pastoralism that consists in sea- file. https://data.unhcr.org/en/country/tcd. sonal and alternating movement of livestock between different 13 Nguyen, N. T. V., Savadogo, A., & Tanaka, T. (2021). Refugees in regions in search of suitable grazing grounds. Chad: The Road Forward. Washington, DC: World Bank. HOSTING REFUGEES IN AN INCLUSIVE MANNER 25 Chad refugee population FIGURE 2.1 Number of refugees (thousands, end of year) Origin of Refugees (% of total, 2023) 21 1200 27 0.3 1000 Sudan 800 129 CAR 600 Cameroon 400 Nigeria 200 911 26,8 0 DR Congo 2017 2012 2013 2014 2015 2016 2018 2019 2020 2021 2022 2023* Source: UNHCR (2024b) Note: 2023 data ends on December 11. Map of Chad, neighbouring countries, and refugees’ numbers FIGURE 2.2 Source: UNHCR (2024b) 26 2024 ECONOMIC UPDATE CHAD Since the outbreak of the Sudan crisis Host populations in the border areas in April 2023, the number of Sudanese are marked by structural vulnerabilities, refugees in Chad has more than doubled poverty, precarious livelihoods, and and is predicted to increase further. gender inequality. The Sudanese are the most numerous refugee group in the country, representing The combination of a vast national 84 percent of the total. More than half of territory with very poor infrastructure them have arrived in 2023, pushed by the intensifies the isolation of remote recent conflict. They have settled mainly border areas. Chad’s low road density in 13 camps and one site in the eastern (25.5km2/1,000 km2) and lack of all- provinces of Sila and Wadi Fira, but some season regional and local feeder roads of them are in urban areas.14 In the eastern hamper mobility and accessibility. Farms border town of Adré, the number of cannot regularly reach collection points for their production, conditioning and Sudanese refugees is four times that of the transformation services facilities, or local population, which strains the already wholesale markets. Neither can rural severely depleted livelihoods.15 If the populations easily arrive to basic public conflict continues in 2024, Sudanese will services and facilities, such as schools, likely continue to flee out of the country, hospitals, and local markets,18 which are with potentially an additional 600,000 often non-existent or of questionable Sudanese refugees seeking asylum in quality at village and ‘ferik’ (Pastoral neighboring countries, including Chad.16 encampment) level.19 The humanitarian needs of refugees, Poverty in host communities is higher returnees, and host communities are than at national level, and close to the escalating, yet the assistance provided refugees’ situation. Poverty is as prevalent struggles to keep pace with the growing in host communities20 as among Sudanese and Central African refugees, and twice demands. Out of the total required as high as among the general Chadian funding of $455 million for refugee population (Figure 2.3).21 About 80 percent response, only $151 million was secured of refugees and host community residents in 2023. This shortfall mirrors the broader are unable to satisfy basic food and non- funding challenges within the Chad food needs, compared to 42 percent of humanitarian response plan, which has a Chadians in general. Multidimensional total requirement of $920 million, but has poverty is also deep in host provinces, only reached 35 percent of that goal. When where over half of the adult population is considering funds beyond the humanitarian illiterate, wood or charcoal are the main response plan, Chad has received a total sources of energy, and unprotected wells of $479.7 million in funding.17 or surface water are the main sources of water. In terms of multidimensional poverty, refugees can be better off than their hosts due to facilitated access to education, health care, and essential services, provided mainly by humanitarian and development organizations.22 18 World Bank Group (2023). Chad Country Economic Memoran- dum. Boosting Growth and Reducing Vulnerability. Washington, D.C. : World Bank Group. http://documents.worldbank.org/cu- rated/en/099110723141052687/P1772530f4c3270c30ac45088b- 973c1a8e6. 19 Watson, C., Abdoulaye, Y., Minguemadji Zizoi, N. (2023). Re- fugees and host communities in eastern and southern Chad. Key findings from qualitative research on the dynamics of so- 14 HCR (2023). Tchad: Personnes Déplacées de Force et Apa- cio-economic integration in four provinces. trides. October 2023. 20 Host communities refer to villages within a 15-kilometer ra- 15 FEWSNET (2023). Tchad - Perspectives sur la sécurité ali- dius of a refugee camp. mentaire Octobre 2023 - Mai 2024: Les faibles productions 21 The latest national poverty survey (ECOSIT-4) dates to 2018. agricoles et la pression sur les moyens d’existence détériorent 22 World Bank Group (2021). Chad Poverty Assessment. Inves- la sécurité alimentaire au Lac et à L’Est du pays. ting in rural income growth, human capital, and resilience to 16 OCHA (2023). CHAD: Overview of inter/intra-community support sustainable poverty reduction. https://documents1. conflicts. July 2023. https://www.unocha.org/publications/re- worldbank.org/curated/en/623761633424786706/pdf/Chad- port/chad/chad-overview-interintra-community-conflicts-ja- Poverty-Assessment-Investing-in-Rural-Income-Growth-Hu- nuary-2024. man-Capital-and-Resilience-to-Support-Sustainable-Poverty- 17 OCHA (2023) Chad plan de reponse humanitaire 2023. Reduction.pdf. Washington, DC: World Bank. HOSTING REFUGEES IN AN INCLUSIVE MANNER 27 Host populations rely on farming Disruptions to economic activities has and herding, which are associated worsened food insecurity and the large with different constraints. In eastern presence of refugees has put pressure provinces characterized by water scarcity on basic services and natural resources. and environmental fragility, pastoral activities are dominant. Herders raise Trade and agriculture disruptions have and trade camels and small ruminants exacerbated food insecurity in border and rely on transhumance during the dry areas affected by the refugee crisis. In season. In southern provinces, farming is 2023, Chad was hit by high severe food predominant thanks to a more abundant insecurity for the fourth consecutive natural capital. Livelihoods rely mainly on year. Some 2.1 million people, about one cash crops but also on small livestock, out of ten Chadians, were acutely food fruits, and fishing. In both areas, livelihood insecure (Figure 2.3) in 2023, 40 percent opportunities are constrained by isolation, of them in the crisis-affected eastern and poor infrastructure, underdeveloped supply southern provinces29. In these provinces, chains, the high cost of fuel, absence of the decline in production combined with technical assistance and microfinance the disruption of the fragile supply chain institutions.23 determined staple shortage and inflation in the local markets. In October 2023, Women and girls lack autonomy and are the price of millet in Abéché (east) and of disadvantaged across all spheres. They sorghum in Mondoul (south) increased by encounter significant obstacles resulting 50 percent compared to the previous five- from the compounding impact of poverty year average. As a result, food insecurity and the cultural perception of women and is expected to worsen, with 3.4 million girls in Chadian society.24 Female illiteracy acutely food insecure during the 2024 lean is high, reaching 90 percent in eastern season, especially in the east provinces of provinces, a likely consequence of a gender Ouaddaï, Sila and Wadi Fira.30 gap in school enrollment that increases with age.25 Enrollment and retention of girls in primary schools have notably declined, especially in provinces affected by humanitarian crises.26 Women are also largely deprived of access to information through radio or mobile phones. Over three quarters of women in southern provinces and up to half of them in eastern provinces report to have no ability to decide on matters that concern their lives.27 A quarter of women in southern provinces and half of them in eastern provinces are married before 18. From 40 to 50 percent of women are in polygamous unions. Female genital mutilation and excision (FGME), associated with child marriage and high maternal mortality, affect from 40 percent of women in eastern provinces to 80 percent in southern provinces.28 23 Watson, C., Abdoulaye, Y., Minguemadji Zizoi, N. (2023). Re- fugees and host communities in eastern and southern Chad. 29 FEWS NET (2023). Tchad - Perspectives sur la sécurité ali- Key findings from qualitative research on the dynamics of so- mentaire Octobre 2023 - Mai 2024: Les faibles productions cio-economic integration in four provinces. agricoles et la pression sur les moyens d’existence détériorent 24 WFP (2023). la sécurité alimentaire au Lac et à L’Est du pays. 25 Watson, C., et al. (2023). 30 FEWS NET(2023). Tchad - Perspectives sur la sécurité ali- 26 WFP (2023). mentaire Octobre 2023 - Mai 2024: Les faibles productions 27 Watson, C., et al. (2023). agricoles et la pression sur les moyens d’existence détériorent 28 World Bank (2021). la sécurité alimentaire au Lac et à L’Est du pays. 28 2024 ECONOMIC UPDATE CHAD Poverty and food insecurity in Chad FIGURE 2.3 Poverty of refugees and host communities (% of total) Population in acute food insecurity (in millions) 3.5 3.5 100 100 3.0 3.0 80 80 2.5 2.5 60 60 2.0 2.0 40 40 1.5 1.5 20 20 1.0 1.0 0 0 0.5 0.5 CAR Sudanese Nearby host Distant host Chadian refugees refugees communities communities population 0.0 0.0 Jun-Aug 2021 Jun-Aug 2022 Jun-Aug 2023 Headcount ratio Depth Severity Source: World Bank Group (2021) using ECOSIT-4 2018 data Source: Cadres Harmonisés 2021, 2022, 2023 The refugee inflow has increased the Chadians in host communities.34 Although demand for basic services, which are basic services created by humanitarian often scarce in host areas. Over 61 percent assistance have to some extent benefitted of Chadians opt not to seek medical help in host communities, the focus has been case of illness, primarily due to the cost of mostly on refugees.35 health care. Distance from health facilities also appears as an important barrier to Population displacement has heightened accessing care, particularly in rural regions. pressure on and conflict over scarce Local education services are strained and natural resources. Shared resources limited to urban centers, with classes are becoming increasingly scarce due to reaching up to 130 children, inadequate climate change, and the inflow of refugees facilities and insufficient teaching staff.31 along with the sedentarism of former More than half (54 percent) of the refugees nomadic or transhumant pastoralists are children, and the share is comparable now practicing agro-pastoralism, have in host communities, underlying the created intense pressure on and conflict increased need for health and education around these resources. The negative services.32 Assistance programs have environmental impact is widespread, created conditions where refugees can leading to the depletion of resources such have better access to basic services than as firewood and foraging products. Host local populations.33 The last poverty survey populations often blame refugees for the (2018) found that primary school enrollment degradation of natural resources and the was higher among refugees than among rising difficulties in their living conditions.36 Chadian children, and that nearly 80 Particularly in the South, these tensions are percent of Sudanese and Central African exacerbated by the complex phenomenon refugees were able to seek health care of neo-pastoralism, that is unrelated to when needed, compared to 55 percent of the forced displacement yet adds an additional dimension of conflict risk. 34 Nguyen, N. T. V., et al. (2021). 31 World Bank Group (2021). 35 Watson, C., Abdoulaye, Y., Minguemadji Zizoi, N. (2023). Re- 32 UNHCR (2023b). Tchad: Personnes Déplacées de Force et fugees and host communities in eastern and southern Chad. Apatrides. October 2023. Key findings from qualitative research on the dynamics of so- 33 Nguyen, N. T. V., Savadogo, A., & Tanaka, T. (2021). Refugees in cio-economic integration in four provinces. Chad: The Road Forward. Washington, DC: World Bank. 36 Watson, C. et al. (2023). HOSTING REFUGEES IN AN INCLUSIVE MANNER 29 2.2 Drivers of economic inclusion Successful economic inclusion of outcomes.38 The needs will be different, but refugees starts with seeing refugees investments in land, animals, and start-up as economic actors with productive capital are important to put refugees on a potential and ambitions. path to productive inclusivity. There is strong support among decision- Restoring refugees’ productive capacity makers that the best way to address a considerably increases their financial refugee crisis is by recognizing them as autonomy. Refugees from Sudan living economic actors. By empowering refugees in camps receive on average 7 percent to meet their basic needs independently of Chad’s national poverty line of CFAF of aid, and to contribute to the economy 684 per person per day in aid and earn of the host country, economic integration 61 percent through work. This illustrates has the potential to be a triple win: for the importance of self-sufficiency for the the host country which sees its economy current cohort of refugees, but also the advance, for refugees who gain autonomy shortcoming of both aid and income, as 32 and for international donors as the need percent of the poverty line is ‘contributed’ for humanitarian assistance decreases. by refugees by foregoing consumption. This thinking is reflected in the application Estimations show that if refugees would decree of Chad’s Asylum Law signed in become as productive as Chadians, their 2023,37 and the National Response Plan income share would rise to 89 percent of to the Impact of the Sudanese Crisis. the poverty line.39 Both the Law and the Plan promote local integration of refugees, aim to avoid settling in permanent camps and promote self- Despite large donors’ investments, the sufficiency. They offer refugees the right to prospect of promoting the economic own land, engage in formal employment inclusion of refugees in large camps and commercial activities, move freely, located in remote and poor areas is and access banking services. extremely limited. The overall asset endowment of refugees It is challenging to build a viable, non- determines their income-generating humanitarian, economy in remote border potential and needs to be restored. The regions as the World Development Report income refugees may be able to earn is on Economic Geography makes clear.40 primarily determined by the assets they Economic activity tends to concentrate own, the intensity with which these assets in certain locations and can rarely be are used, and the returns to their assets. successfully dispersed through policies. Productive assets include human capital Apart from investing in local economic (education; nutrition; capacity to work); development (most likely in the primary physical capital (land; animals; tools); and sector), it is more desirable to promote financial capital (savings; working capital). economic integration by focusing on Besides productive assets, refugees can investing in human capital, infrastructure also leverage social capital to support and accessibility, while allowing refugees their income generation capacity. For to move freely. instance, it is commonly found, including in Chad, that refugees that interact more with hosts have better socio-economic 38 Coulibaly, Hoogeveen, Jourdan and Savadogo (2024) find that the incomes earned by existing refugees from Sudan in Chad are higher when they maintain social connections outside the camp. 39 Coulibaly, M., Hoogeveen, J., Jourdan, E., and Savadogo, A. 37 Ministère de l’administration du territoire, de la décentrali- (2024). Responsibility Sharing and Refugee Inclusion in Chad. sation, et de la bonne gouvernance (2023). Décret No.0648/ Mimeo. PT/PM/MATDBG/2023. https://www.ecoi.net/en/file/lo- 40 World Bank Group (2009). Reshaping Economic Geography. cal/2091861/645b938a4.pdf. World Development Report 2009. 30 2024 ECONOMIC UPDATE CHAD The very nature of large refugee camps needs at their destination. Refugees limits the economic autonomy of are heterogenous with different levels of refugees. Ideally, camps (or “organized human capital, skills and needs. Farmers sites” as humanitarians now call them) and herders may want to settle in rural should be a temporary solution to cope locations outside the border regions, with massive arrivals. The size of the professionals may want to move to urban population in large camps in proportion to areas, those unable to work may want to the land available constrains agriculture remain in camps where food, nutrition to garden plots and limits animal rearing. and education services can be provided Living in remote areas, having limited skills efficiently. In the words of the 2023 World and few productive assets, refugees have Development Report on migration ,the their economic opportunities limited to challenge is to: “strengthen the match local trade and services, or casual labor. of all [..] skills and attributes with their Given the limited options for large scale destinations”.41 Chad’s Asylum Law creates primary production and trade with the the legal framework for such matching, outside world, camps will continue to but it will not happen automatically. rely on aid. If there are to be camps at all, they should be located in areas with Matching and movement benefit from economic potential, not in remote areas the portability of assistance. If assistance disconnected from markets and economic is only offered in and around camps, it will activity. act as a disincentive to move and seek a good match. It could also result in favoring Primary sector development is critical a behavior in which men move out of for refugee inclusion. A total of 87 the camp, while elderly and dependents percent of refugees recently arriving from remain in the camp. Portability of benefits Sudan were previously engaged in the is an important condition for the successful primary sector. This suggests that the vast economic integration of refugees. It majority may want to remain engaged in creates the condition for moving towards agriculture, herding or fishing. A potential a system of cash assistance that eligible risk associated with this is that it could lead beneficiaries can access anywhere. to conflicts over natural resources with the host population, which in turn could Issuance of official ID documents is affect the long-term support for economic a necessary condition for refugees to inclusion. This warrants investments in move freely and access the formal bringing new land under cultivation and productive sector. Ownership of a national in measures raising the productivity of the ID is required to open a business, access primary sector to the benefit of the host microfinance credit, or apply to formal population and refugees alike. Yet, in line employment. Refugee cards currently with the logic of territorial development, issued by the National Authority for Asylum these investments should primarily follow and Refugees (CNARR in French) are not refugees as and where they go, rather recognised by the financial or private than be focused on the desolate locations sectors, which excludes refugees from in which the refugee receiving sites are the formal sector. To overcome this issue, located. CNARR must collaborate with the National Secured Titles Agency (ANATS in French), to ensure ID documents for refugees. By Refugees’ economic inclusion is law, ID cards should be issued to refugees optimized by greater mobility, for free. The ID problem also concerns endowment restoration, and skills host communities. ID coverage at national level is approximately 30-40 percent of the matching, but progress is gradual, adult population. ID card possession is hence assistance should be ensured even lower in rural and border areas. throughout the transition. The gains from economic inclusion 41 World Bank Group (2023). Chad Country Economic Memoran- are optimized when refugee skills dum. Boosting Growth and Reducing Vulnerability. Washington, and attributes are matched with the D.C. : World Bank Group. http://documents.worldbank.org/cu- rated/en/099110723141052687/P1772530f4c3270c30ac45088b- 973c1a8e6. HOSTING REFUGEES IN AN INCLUSIVE MANNER 31 2.3 Understanding refugees and host population dynamics fosters socio-economic inclusion44 The interaction between refugees and the adoption of the Asylum Law and its host communities poses challenges application decree (2023), refugees have but also creates socio-economic the right to own land. opportunities. Through a policy of integration and Existing social relations between dispersion, the Government of Chad refugees and host communities are intends to minimize the scope for dense and marked by a common cultural flashpoints and maximize the benefits of identity, the Chadian tradition around economic inclusion. Despite the positive hospitality, and mutual benefits. Refugees aspects regarding the integration of often share the same language and refugees and host communities, potential ethnical affiliation with host communities, flashpoints exist. Both groups face general like Zaghawa groups in eastern provinces.45 land scarcity, and productivity is impaired by Local populations hold memory of the lack of tools and inputs, and the limited reciprocal relations of support arising size of herds. The arrival of refugees has from earlier displacements of Chadians aggravated the pressure on the extensive- across the border. Joint participation in based agricultural model practiced by social ceremonies and networks, as well host communities. Local farmers often as intermarriage, are common practices, take advantage of the situation and particularly where refugees have been benefit from underpaid refugees’ work and present for long. Either in camps or in exploitative sharecropping arrangements. villages, refugees and local populations Limited opportunities available to refugees frequently meet at the market, attend the put them, especially when young, at risk same health centers and schools. of engagement in hazardous endeavours such as search for gold or illicit migration. Despite strong commonalities, when it Many of these flashpoints are associated comes to productive assets, constraints with the concentration of large numbers weigh more on refugees than on host of refugees in a reduced number of large communities. There is general lack of camps. pasture and agricultural plots, and land is not easily accessible and not very fertile. Host communities cultivate more The interaction between refugees and extensive areas and own larger sized herds. host communities poses challenges The interaction between refugees and host but also creates socio-economic communities facilitates land access and opportunities. generate opportunities linked to increased production and trade. Negotiations There is a high share of female-headed intermediated by local authorities have households among refugees and host allowed refugees to access plots of land populations. More than 50 percent of where they carry out subsistence farming. refugee households and 43 percent of Until recently, land could only be attributed host community households are headed to refugees on a temporary basis, but since by women.46 These shares are more than 44 This chapter is based on the qualitative study “Refugees and host communities in eastern and southern Chad. Key findings from qualitative research on the dynamics of socio-economic integration in four provinces”. The study was carried out in April 2023 to inform PARCA productive inclusion activities. 45 Nguyen, N. T. V., Savadogo, A., & Tanaka, T. (2021). Refugees in 46 Nguyen, N. T. V., Savadogo, A., & Tanaka, T. (2021). Refugees in Chad: The Road Forward. Washington, DC: World Bank. Chad: The Road Forward. Washington, DC: World Bank. 32 2024 ECONOMIC UPDATE CHAD double than the national average (22.1 in the category of male possessions.51 percent).47 There is global evidence that Women may sometimes own some small female-headed households tend to be stock and poultry or be allotted small plots more marginalized, more food insecure, of land to produce food for their children, and poorer. In Chad, refugee families but major assets always belong to men. headed by women are associated with higher poverty levels.48 Furthermore, Village savings and loans groups offer among refugees in Chad, 88 percent of women the opportunity to access credit refugees are women and children, and and can help refugee women to rebuild women represent 61 percent of the working social bonds. Village savings and loans age (18-59) population.49 groups or ‘tontines’ are present in host communities, and mixed participation is Both among refugees and in host increasing. In the east, these groups are communities, gender social norms keep called ‘sunduq’ and involve contributions women dependent and perpetuate that allow for supporting members in inequalities. Despite their extensive times of hardship (e.g., to meet health or child-rearing responsibilities, women funeral expenses) or important ceremonial lack control over productive resources, occasions (e.g., weddings). In the south, decision-making power and authority they are called ‘pares’ and involve pooling within the household and the community. resources to provide members with Traditionally, customary law limits women’s rotating credit that allows them to make inheritance rights, access to and control economic and social investments. These over land, which are reserved for men.50 groups represent an opportunity for women In both refugee and host community to get support for their small investments settings, men are considered the owners and help refugee women to engage in new of household property and assets, and social networks. women themselves are often included 47 EDS-MICS 2014-15 (2015). Enquête Démographique et de Santé et à Indicateurs Multiples au Tchad. 48 Nguyen, N. T. V., Savadogo, A., & Tanaka, T. (2021). Refugees in Chad: The Road Forward. Washington, DC: World Bank. 49 OCHA (2023). CHAD: Overview of inter/intra-community conflicts. July 2023. https://www.unocha.org/publications/re- port/chad/chad-overview-interintra-community-conflicts-ja- nuary-2024. 51 Watson, C., Abdoulaye, Y., Minguemadji Zizoi, N. (2023). Re- 50 Le Masson, V., Benoudji, C., Sotelo Reyes. S., Bernard, G. fugees and host communities in eastern and southern Chad. (2017). Violence against women and girls and resilience. Links, Key findings from qualitative research on the dynamics of so- impacts and perspectives from the Chadian context. BRACED. cio-economic integration in four provinces. HOSTING REFUGEES IN AN INCLUSIVE MANNER 33 BOX 2.1 ECONOMIC PARTICIPATION REDUCES THE COST OF HOSTING REFUGEES AND FREES RESOURCES FOR INVESTMENTS IN HOST COMMUNITIES An important component of the cost for caring for refugees are the costs for their subsistence.52 The point of departure for estimating subsistence costs is the identification of an acceptable minimum standard of living refugees should attain. How to define the amount needed for food, shelter, clothing, utilities, personal hygiene, and other critical expenses such as household contributions to the schooling of their children, or out of pocket payments for health care? This standard is found in the national poverty line, which in the case of Chad was set at CFAF 684 per person per day in 2018. Once the standard is agreed, the baseline costs are found by multiplying the number of refugees by the annual costs of providing the poverty line in assistance. Doing so implicitly assumes, however, that refugees do not earn any income. In practice, they do, even though the amount earned is constrained by a lack of assets and the isolated economic environment in which they operate. Still, because refugees earn incomes, less aid is needed to attain the poverty line. These savings on aid relative to the baseline scenario, can be considered Chad’s contribution to the global public good of hosting refugees and are labelled participation savings in the figure below. Refugees from Sudan who arrived in Chad prior to 2018 earn on average 54 percent of the poverty line, or CFAF 367 per person per day. Coulibaly et al. (2024) estimate that Cost of subsistence and participation savings (US$ million) if various constraints to economic participation would be lifted, earnings increase to 83 percent of the poverty line, or 600 CFAF 572 per person per day. 500 543 106 Thus, three scenarios can be defined: a baseline with no economic participation by refugees, one with restrained 400 437 291 economic participation and one with full economic participation. With a total of 1.17 million Sudanese refugees 300 454 252 who are in Chad (of whom 426,000 are existing refugees 200 and the remainder new arrivals), it translates into a need for aid to cover their subsistence of US$ 543 million per year. 100 Since existing Sudanese refugees already earn incomes, 89 this amount reduces to US$ 437 million. If all newly arrived 0 refugees would be as integrated as the existing refugees Baseline Baseline Restrained Full existing participation participation from Sudan the need for subsistence aid would be US$ and new 252 million per year. If all Sudanese refugees would be fully integrated economically, the need for assistance could drop to CFAF 112 per refugee per day or US$89 million per year. Chad’s contribution to the global public good of hosting refugees follows as it is the difference between the different scenarios and the baseline. It is US$ 106 million at present and increases to US$ 291 million if all new refugees work as the existing Sudanese refugees do. If refugee economic participation improves, participation savings increase to potentially US$ 454 million, in which case these savings would far exceed the need for humanitarian aid. The economic benefits of economic participation are evident. Participation increases the autonomy of refugees, reduces the need for humanitarian aid, and in doing so, frees up aid resources to invest in the host economy. Approached as a bargain from which all parties stand to gain, promoting refugee economic participation can become a tri-partite win. Source: Adapted from Coulibaly et al. 2024. 52 A full costing of refugee participation would cover more than the cost for subsistence and also include spending on spending health, education and other public goods. It would also cover investments needed as well as cost to address any externalities asso- ciated with refugee economic participation (refer to Hoogeveen and Knippenberg 2024). 34 2024 ECONOMIC UPDATE CHAD 2.4 A national safety net tailored to the specificities of refugees and host communities Livelihood support tends to be directed smaller-scale projects whose sustainability to either refugees or host populations, is challenged but their limited coverage, and the few programs that have started short-term duration, and lack of follow up. to target both groups do not promote refugees’ mobility. A few programs target both refugees and host communities. Partnerships Efforts are ongoing to support refugees involving the Government, UN agencies and to access productive assets and initiate stakeholders at bilateral and multilateral income generating activities in and levels facilitate the implementation of around camps. To support refugees’ the humanitarian-development-peace agricultural production, UNHCR facilitates nexus, through the inclusion of refugees negotiations with host communities in Chad’s National Development Plans around the camps to access small plots (PDN). For example, programs such as and to provide agricultural inputs. The DIZA54, PARCA55, and ResiTchad56 have an agency also supports income generating integrated approach towards refugees and activities in and around the camps with host communities. With pre-established micro-credit and revolving funds, as well rates of participation, they use mixed as through technical and professional committees, promote joint sensitization training. Cash for work and innovative and consultation, and facilitate projects involving poultry farming and negotiations involving local actors. They fishing are also in UNHCR’s portfolio. support extremely poor households with cash transfers, set-up and strengthen Host populations around camps are village savings and loans associations, and targeted by projects implemented by promote economic opportunities. PARCA different agencies. PROPAD, a World and ResiTchad improve access to basic Bank funded project implemented by the services and infrastructures, by facilitating government, one of the major projects the construction and rehabilitation of targeted at host populations.53 It supports health centers, schools, and water points. micro-project led by groups of local DIZA and UNHCR collaborate to strengthen producers, including women and youth local consultation mechanisms. Currently, groups. Supported projects revolve around there are no programs supporting refugee the intensification of rainfed agriculture mobility. but also include smart agriculture initiatives, such as community forestry and fishing, food transformation, and small animal husbandry. Several other projects are implemented by different agencies. Different agencies implement other 54 Financed by the Delegation of the European Union 55 Acronym for Projet d’Appui aux Réfugiés et Communautés 53 Acronym for Développement Inclusif des Zones d’Accueil, d’Accueil, also known as Refugees and Host Communities also known as Climate-Resilient Agriculture and Productivity Support Project Enhancement Project 56 Territorial Development and Resilience Project for Chad HOSTING REFUGEES IN AN INCLUSIVE MANNER 35 A national safety net system can provide The development of a digital payment a platform for efficiently delivering platform can increase program delivery productive inclusion measures targeted efficiency, while assuring portability and to refugees and host communities at enhancing opportunities for financial scale. inclusion and social connection. Digital payments have been successfully tested in The development of a safety nets system urban cash transfer programs targeted at that is both adaptive and productive refugees.57 The government, through PARCA, can improve the effectiveness of is planning to scale them up to deliver interventions aimed to reduce food cash transfers and productive subsidies to insecurity and poverty. The safety nets host communities and refugees across the system is still nascent in Chad, but the country. A well-developed digital payment government has formally expressed its platform can support the efficient and intention to expand its safety net program accountable delivery of safety nets, even in to over 1 million Chadians in situation of remote areas. It can help poor households extreme poverty. Its gradual expansion is to access financial services and connect linked to the need to deal with growing with market actors. It can also support climate events. Adaptive safety nets help remote monitoring and communication. vulnerable people to prepare, cope and Mobile payments reduce distances that adapt to shocks, building their resilience. By beneficiaries must walk, hence the risks including refugees, it is possible to reduce for women. Mobile phone ownership and the burden on the humanitarian sector use can help refugees to keep in touch and increase the financing of refugees’ with their families and places of origin. integration and economic inclusion. The national social registry strengthens Recent experiences with safety net government’s responsiveness to programs in other Sahelian countries the refugee crises, by enabling have been proven to be cost-effective rapid availability of data on eligible and impactful, while promoting households wherever they are. The social economic inclusion. registry has supported complementarity and coordination among programs and Evaluations of safety net programs in the has been paramount to deliver cash region have shown that they increase transfers and implement productive consumption and income among inclusion interventions benefiting both beneficiaries. Productive safety nets are host populations and refugees. In the tailored to address multiple constraints to present context of crisis, it facilitates the self-employment and productivity faced rapid identification of refugees, thanks to by the poorest populations. Productive coordination and interoperable systems inclusion packages have been tested shared with other agencies. It is, therefore, in Senegal, Mauritania, Chad, Niger, and a key coordination tool, as it helps to Burkina Faso, as part of the Sahel adaptive avoid duplication and overlapping, and safety net initiative. Packages include to rationalize interventions delivered by awareness and sensitization campaigns, different agencies and programs. In 2024, savings and credit groups, skills and the Social Registry database consists of entrepreneurship trainings, start-up around 600,000 households of which business capital and access to markets 12.3 percent are refugees spread over 15 (Box 2.1). Evaluations found high cost- provinces. This represents 19 percent of effectiveness, as the cost to deliver the the Chadian population, mainly the poorest productive package was lower than the households. The government’s vision is to economic benefits obtained.58 increase its coverage to 30 percent of the 57 PARCA response to COVID and Cameroon refugees in population by 2030. N’djamena 58 World Bank Group (2022). Atelier technique régional sur les programmes d’inclusion productives mis en œuvre par les filets sociaux adaptatifs dans le Sahel. 7-10 November 2022, Dakar. 36 2024 ECONOMIC UPDATE CHAD In Chad, the safety net program will to support refugees outside a camp be adapted to meet the specificities environment, wherever they reside. The of refugees and host communities. By development of savings and credit groups relying on mobile cash transfers, the safety can bring refugees and host communities net program will ensure the portability of together. assistance, creating unique possibilities BOX 2.2 PRODUCTIVE INCLUSION PACKAGE DESIGNED AS PART OF THE SAHEL ADAPTIVE SOCIAL PROTECTION PROGRAM Group formation and coaching: Formation of groups of about 20 beneficiaries. Coaches provide support to groups and individual beneficiaries. This activity runs throughout the duration of the program. Community sensitization on aspirations and social norms: Screening of a short video showing how a married couple overcomes tensions and works together to diversify their livelihoods. The screening is followed by a facilitated discussion with the larger community. Facilitation of village savings and loans associations (VSLA) with the distribution of shares (savings plus interest) after cycles of 9 to 12 months. Life-skills training: Group training spanning 3 to 7 half days. Covers topics such as self-confidence, gender relations, communication skills, risk-taking. Micro-entrepreneurship training: Group-based training spanning 3 to 7 half days. Covers fundamental skills in micro-business management, relevant for both agricultural and non- agricultural activities. Cash grants: One-off transfer of 140-275 US$ depending on the country Access to markets: Facilitation of group-buying of inputs with support from coaches. An integrated productive inclusion supported by DIZA59 were consistent with package targeted to host populations, spillover effects on non-beneficiaries refugees, and returnees has been found in the impact evaluation carried implemented in the southern and out in Chad. VSLA members were able to eastern provinces, with positive outputs. save USD 6.5 per month per person, which DIZA and PARCA have offered an integrated corresponds to about 26 percent of the productive package to support the set-up monthly transfer value delivered by PARCA of VSLAs and income generating activities. to the extremely poor. More than half of Poor individuals were identified through the savings were used as revolving funds the social registry, increasing coordination for small investments and social events, and programmatic efficiencies. Trickle such as weddings and funerals.60 down effects including the set-up of 59 Bucofore (2023). Etude d’impact des transferts monetaires spontaneous VSLAs besides those officially dans les provinces du Logone Oriental et du Ouaddai (Tchad). Bucofore. 60 Miangotar, Y. (2023). Preliminary findings of the mid-term im- pact evaluation. HOSTING REFUGEES IN AN INCLUSIVE MANNER 37 2.5 Recommendations for the economic inclusion of refugees and host populations To reinforce social cohesion and avoid Strengthen the social registry as the further conflict, it is essential to common platform to outreach and develop policies and programs that identify the poorest among host benefit host communities and refugees populations and refugees, favoring in an integrated manner, and bolster complementary and coordinated refugees’ integration through mobility. assistance. In the present context The aim of such policies should be to of crisis, the social registry has been enhance access to quality basic services, paramount to target host populations and and connect host communities and refugees with safety nets and productive refugees with economic nodes, boosting inclusion interventions. It has facilitated their economic inclusion and human the rapid and coordinated identification capital. Refugees’ integration should be of refugees and proven to be a key tool associated with measures that facilitate to avoid duplication and overlapping, their mobility, and the implementation of and rationalize interventions delivered by active labor market policies, including job different agencies and programs. intermediation services and monitoring, to encourage refugees to relocate to areas Advocate for predictable, recurrent, and where their skills and expertise are most sustained donor funding to support the suited. A gender perspective is imperative gradual inclusion of refugees in national to allow women and girls to overcome the systems and in the economy. Burden compound impact of poverty and cultural sharing suggests that fiscal spending on perception on their human development. refugee inclusion in health, education and social protection systems is covered by the Short-term (1 year). Increase economic international community. It also implies inclusion opportunities for refugees and that Chadian authorities, by including host communities. refugees in national systems and actively promoting their economic inclusion and Strengthen the institutional capacity self-reliance policies, minimize the cost to to deliver official ID cards to refugees, the international community. allowing them to move freely, apply to formal employment, access productive Medium-term (2-5 years). Invest in an and financial assets. Refugee identification adaptive and productive national safety cards currently issued by the Commission net system that integrates refugees Nationale d’Accueil de Réinsertion des and host communities, with a focus Réfugiés et des Rapatriées (CNARR) are on women (potability and mobility of not official ID documents; therefore, they refugees). are not recognized or accepted by formal institutions. A recent agreement between Gradually integrate refugees and host CNARR and ANATS foresees the provision of communities into the national safety official ID cards to refugees, ensuring them net program. The recent ‘Declaration on the rights accorded by the National Asylum the political program of the transition Law. The government and its partners government in Chad’, issued in January shall supervise and support the effective 2024, sets the objective to expand the implementation of this collaboration. safety net program to about 1 million Chadians in situation of extreme poverty. 38 2024 ECONOMIC UPDATE CHAD Combining regular cash assistance to meet minimum basic needs with efforts to promote economic inclusion, productive safety nets address the multiple constraints to self-employment and productivity. This approach is particularly relevant when dealing with refugees who have lost most of their productive asset base. The inclusion of refugees and host communities into the safety net program can contribute to reducing their poverty gap, hence easing the financial pressure of the refugee influx on the government and humanitarian and development partners. Develop a digital payment platform that ensures rapid and transparent delivery of funds to the most vulnerable, granting financial access, particularly to refugees wherever they reside. Refugee integration requires the portability of assistance. It implies a system which is nationwide, flexible, and focused on cash as opposed to in-kind assistance. The national social safety net system, which is under development, has the potential to meet these requirements through the creation of a national registry and the facilitation of mobile payments. Considering the limited infrastructure, coverage and uptake in remote areas, the digital payment platform should be developed gradually, Simultaneously, checks and balances should be envisaged to ensure accessibility and efficiency when scaling up digital solutions. HOSTING REFUGEES IN AN INCLUSIVE MANNER 39 40 2024 ECONOMIC UPDATE CHAD TABLE 3.1 Real Economy ANNEX Selected economic and fiscal indicators 2020 2021 2022 Estimates Annual percentage change, unless otherwise indicated 2023 3 2024 2025 Projections 2026 Real GDP -1,6 -1.2 2.8 4.1 2.7 3.3 2.9 Oil GDP 0.0 -8.2 6.6 4.4 -0.4 1.4 1.2 Non-oil GDP -2.0 0,4 2.0 4.1 3.4 3.7 3.3 Per Capita GDP (current US$) 643.8 685.7 699.5 722.4 719.4 726.2 738.9 GDP Deflator -5.5 7.2 15.1 -0.9 -0.5 0.4 1.7 Consumer Price Inflation (ave.) 3,5 1.0 5.8 4.1 3.9 3.6 3.0 Oil Production (m. barrels) 49.9 45.7 48.2 50.4 50.2 50.9 51.5 Percentage of GDP unless otherwise specified Fiscal accounts Expenditures 19.1 18.5 18.5 25.8 23.7 23.7 23.8 Revenues and Grants 20.7 16.3 23.5 27.1 22.3 22.6 21.8 General Government Balance 1.7 -2.2 5.0 1.3 -1.4 -1.2 -2.1 (incl. grants, commitment basis) Primary Balance (commitment basis, exc. grants) -0.4 -1.4 5.3 1.0 -2.5 -2.2 -3.1 Annual percentage change, unless otherwise indicated Selected Monetary Accounts Broad Money 11.1 12.6 9.2 8.3 9.7 6.3 6.3 Credit to the economy 0.1 11.7 9.4 21.0 9.3 6.8 5.7 Interest (BEAC key policy rate) 3.5 3.5 4.0 5.0 5.0 5.0 5.0 External Sector Exports of Goods and Services (GNFS) 1.1 -0.4 5.0 2.9 3.8 4.1 4.2 Imports of Goods and Services (GNFS) 1.8 5.1 2.0 16.0 -3.1 2.0 2.1 Terms of Trade -34.1 45.3 35.3 -16.4 -9.1 -8.0 -4.5 Percentage of GDP unless otherwise specified Current Account Balance (incl. transfers) -7.8 -6.0 2.9 2.4 -3.0 -3.3 -2.8 Gross Reserves (imputed, US$ billions) 0.4 0.2 1.0 1.1 1.3 1.5 1.6 Gross Reserves (regional, months of imports of goods and services)b 3.2 3.0 4.1 4.1 4.2 4.2 4.3 Public Debtc 49.9 52.1 47.4 44.8 42.3 41.6 41.9 Exchange Rate (period average) 576 555 624 604 601 599 598 Memorandum Items: Nominal Non-oil GDP (CFAF billions) 4,942 4,648 4,573 5,332 5,609 6.012 6,410 Nominal GDP (CFAF billions) 6,167 6,532 7.733 7,976 8.148 8.850 8.842 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices 2024 ECONOMIC UPDATE CHAD 41 42 2024 ECONOMIC UPDATE CHAD REFERENCES Betts, A., Chaara, I., Omata, N., & Sterck, O. 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