Chad

The year 2009 was marked by a slight decrease in economic activity owing to poor performance in the agricultural sector and the continuing effects of the international financial crisis on the economy. This resulted in total real gross domestic product (GDP) decreasing by 0.8%. Inflation accelerated and reached a yearly average of 10.5% by end-December 2009 owing to an increase in money supply and a weakening in agricultural yields. For 2010/11, government policy aims to keep average annual inflation within the regional target of 3% set by the Central African Economic and Monetary Community (CEMAC). The international financial crisis led to a depreciation in the country's fiscal and external position in 2009.

The overall fiscal balance (commitment basis, including grants) fell to -10.8% of gross domestic product (GDP), while the current account balance fell to -31.8%. With an economic recovery expected to begin in 2010, the overall fiscal balance could reach -9.6% of GDP in 2010 and -11.6% of GDP in 2011. The current account balance could fall slightly to -26.7% of GDP in 2010 before recovering to -22.8% of GDP in 2011.

Concerning the mobilisation of domestic resources and grants, total government revenue during the 2000-09 decade accounted for the equivalent of 25.7% of non-oil GDP, with tax revenue accounting for 19.8% of non-oil GDP and non-tax revenue (essentially grants, including official development assistance) accounting for 6%. Government revenue has increased, with the ratio of total revenue to non-oil GDP having risen from 12.3% in 2001 to 51.3% in 2008. This development reflects Chad's commencement of oil production in 2003, at which point corporate tax on the oil consortium companies was introduced. Since 2006, this tax has provided more than 50% of tax revenue.  

The Chadian government has continued its talks with the opposition. An electoral commission, the Commission électorale nationale indépendante, was set up in July 2009. The commission is composed of 15 members of the political parties that form the presidential majority and 15 members of opposition parties. An agreement in principle has been reached for parliamentary elections to be held in 2010 and presidential elections in 2011. This agreement was the direct result of dialogue between the governing parties and the opposition in accordance with the 13 August 2007 agreement to strengthen the democratic process in Chad.

The government has committed to devote a larger portion of public expenditure to promoting the social sectors. The aim is to increase the proportion of resources allocated to health and education for the 2009-11 period. Spending on health could thus rise from 14.6% to 15%, while spending on education could rise from 5.6% to 7%. Nevertheless, these additional resources seem to fall short of the levels necessary to deal with recent socio-political events in the country. On the Human Development Index (HDI), Chad was ranked 175^th among 182 countries in 2009, while on the Human Poverty Index (HPI), which was analysed as part of the United Nations Development Programme (UNDP) Human Development Report, it was ranked 132^nd out of 135 developing countries. 

In 2009, there was a small downturn in economic activity owing to the poor performance of the agricultural sector and the continuing effects of the global financial crisis on the economy. Because of these conditions, real overall GDP fell by 0.8% (-2.7% for the oil sector, but only -0.1% for the non-oil sector), while per capita GDP fell by 3.2%. With the start of construction work in the N'Djamena oil refinery in 2009 and the prospect of a recovery in global demand in 2010, the oil sector's contribution to growth could be strengthened by a rise in the price and the volume of exports of Chadian oil. Such a recovery would enable growth to expand from 2.1% in 2010 to 4.4% in 2011.

The primary sector accounted for 56.6% of GDP in 2009 (10.1% for agriculture, 9.8% for livestock, 2.4% for forestry, fisheries and mining, and 34.3% for oil). The primary sector shrank by 3.2% in 2009 because the agricultural and oil sectors did not perform as well as expected.

There was a sharp contraction in agricultural activity, with negative growth of 10.2% in 2009 (-11.4% for food crops and +7% for industrial crops). There was little diversification of agriculture. Cereal production, which accounts for more than half of agricultural production, reached 1.414 million tonnes (395 000 tonnes of pearl millet, 442 000 tonnes of sorghum, 109 000 tonnes of rice, 301 000 tonnes of berbere, 157 000 tonnes of maize, 8 000 tonnes of wheat and 2 000 tonnes of fonio). This figure represents a 27.5% reduction compared to the previous year, due mainly to low rainfall throughout 2009. The growth rate of livestock farming was 3.6%. This growth was the result of the continued efforts to enable a recovery in livestock levels following the 2005 and 2008 food crises, which destroyed part of the livestock. Growth in the fisheries sector expanded from 3% in 2008 to 4.4% in 2009, thanks to continuing state support for farmers. Real production rose to XAF 38.9 billion in 2008, against XAF 37.3 billion in 2008.

Oil production fell by 4.3% in 2009 from the 2008 figure of 46.6 million barrels. This poor performance was due both to water in the oil layers caused by geological phenomena and to a pressure drop in the reservoirs. This downward trend is set to continue in 2010, with production expected to drop to 43 million barrels; in 2011, however, production is set to rise to 46.1 million barrels. This rebound in production will be supported by the opening of a new oilfields at Bongor, which will be exploited in partnership with China. These new sites are expected to have an annual production of 1 million tonnes, with a crude-oil processing capacity of 20 000 barrels per day, with the possibility of reaching a maximum of 60 000 barrels per day of oil and 250 000 m³ per day. In the medium term, the recent fall in production at the main existing oilfields can be compensated by the additional production from the new oilfields. This would result in an average annual increase in oil production of 7% for the period 2010-12. This upward trend could be strengthened by the upturn in crude oil prices in world markets, which brought the price of a barrel of Chadian crude oil to USD 51.1 in 2009. This trend may continue in 2010.  

The secondary sector accounted for 8.4% of GDP in 2009, having contracted by 4.9%. Industry shrank by 29.3% owing to the fall in cotton fibre production from 50 000 tonnes in 2008 to 14 000 tonnes in 2009. This in turn was a consequence of the decline in cottonseed production (37 000 tonnes) caused by the ongoing difficulties faced by the cotton sector. In the oil sector, production of oil derivatives remained at the same level as in 2008. Nevertheless, new investment for the development of new oilfields enabled growth in the sector to expand by 6.5%. The water, electricity and construction sectors also saw an upturn in growth, mainly due to the work on the new oilfields.

The government continued its support for the energy sector, notably by strengthening the structures of the 21-megawatt power station at Farcha and awarding an operating subsidy to the water and electric company Société Tchadienne d'Eau et d'Électricité (STEE). These initiatives increased electricity production by 17.8% in 2009. Thanks to the rehabilitation of STEE's distribution networks and the strengthening of the production and distribution infrastructure, energy production is expected to increase by half in 2010-11.

The tertiary sector accounted for 35.1% of GDP in 2009. The main tertiary sector activities were trade (14.6%) and public administration (12.3%). The tertiary sector grew by 5% in 2009, compared with 3.2% the previous year. This growth was driven mainly by the boom in transport and telecommunications, which grew by 7.7% in 2009. Public administration performed poorly in 2009, with a rate of growth of 3.6%. This underperformance was the result of the chronic insecurity in the country.

In 2009, total consumption was 95.6% of GDP, with private consumption at 70% of GDP. In real terms, taking into account the 54.8% rise in public consumption following the increase in purchases of goods and services by the public sector, total consumption grew by 25.8% compared with 2008. Private consumption also increased following the gradual recovery of the water, electricity and construction sectors. Given the upcoming election and the likely consolidation of the peace process during the 2010-11 period, consumption could continue to grow at around 5% per year, driven by private consumption.

In 2009, gross fixed capital formation grew slightly to reach 25% of GDP (7% for the public sector and 18% for the private sector, including 12% for the oil sector). This growth can be attributed to the additional investment in the oil sector, over 90% of which was in the form of foreign direct investment (FDI). According to forecasts for the 2009-11 period, oil and public-sector investment will grow slowly to reach an annual average of 25% and 8% of GDP respectively. This twofold increase in the level of investment in the oil sector is expected because oil production will commence at the Bangor oilfield in 2011.

The rise in private demand for consumer and investment goods has increased imports. Exports, meanwhile, have fallen owing to lower demand and lower oil prices as a result of the global financial crisis. The rise in imports and fall in exports thus led to a fall in GDP in 2009. Forecasts for 2010-11 predict the euro will continue to appreciate against other currencies. This situation means that, although Chadian oil production will increase, total export volumes could fall slightly in 2010 before rising again in 2011 as the global economy begins slowly to recover. Imports could also increase during 2010-11, since an upturn is expected in private consumption and investment in the oil sector is expected to continue.

Chad's fiscal policy has been influenced by the global financial crisis, particularly the fall in oil revenue, which accounts for more than 50% of state revenue. Given the financial situation, the government reviewed its 2009 budget by drafting the loi des finances rectificative (LFR), an act passed by the parliament in July 2009 to rectify the previous finance act. The LFR enabled the Chadian government to prepare a budget that would take into account the fall in oil revenue up to the end of the year. This budget formed the basis of a staff-monitored economic programme adopted by the government in March 2009 and monitored by the International Monetary Fund (IMF) from April to October 2009. A review of this programme in September 2009 showed that the authorities have striven to ensure that budgetary procedures were followed and to improve revenue collection from the non-oil sector, which increased by the equivalent of 2% of GDP between March and June 2009. Public spending clearly surpassed the objectives of the programme by the equivalent of 4% of GDP thanks to higher-than-expected spending on security and public investment. The results of the programme were deemed unsatisfactory, since the two main quantitative indicators on control of budget execution were not respected. Indeed, overruns in spending led to a failure to achieve the minimum non-oil fiscal surplus and a failure to keep net credit to government from the banking system below the ceiling. The government did, however, take measures in 2009 to strengthen its management of public spending. These measures included: (i) issuing, on 4 June 2009, a cabinet statement recalling the need to respect budget procedures and to stop launching investment projects without budget allocation; (ii) publishing, on 9 June 2009, a circular limiting the categories of expenditure that can be made using the budgetary procedure of expenditure before authorisation;(iii) adhering to a ceiling on civilian expenditure made by this budgetary procedure; (iv) completing and updating, with donor assistance, a comprehensive database of investment projects; and (v) updating the cash flow plan once a month on the basis of recommendations by IMF technical assistance missions.

The global financial crisis has heavily influenced public finance. At the end of June 2009, total revenue reached XAF 227.7, compared to XAF 406.3 billion in June 2007. This strong decrease was mainly due to lower oil revenue, which fell to XAF 98.2 billion following the global recession. Non-oil income, on the other hand, was XAF 9 billion higher than in the LFR forecasts. Total expenditure by the end of June 2009 reached XAF 477.9 billion, compared to XAF 258.7 billion a year earlier. This figure was XAF 82 billion higher than the LFR forecasts. The strong rise in expenditure was the result of investment expenditure (7.5% of GDP) and exceptional security expenditure (5.8% of GDP) resulting from the offensive against the rebel attack in May 2009.

Because of this situation, the overall fiscal balance (commitment basis, including grants) fell from 5.2% of GDP in 2008 to -10.8% of GDP in 2009, indicating an expansionist fiscal policy. The government was therefore obliged to draw upon its official reserves and use the statutory advances of the central bank to meet its financing requirements (between January and June 2009, this refinancing totalled almost XAF 200 billion, which is equivalent to 6% of GDP). Nevertheless, the fiscal balance could reach -9.6% of GDP in 2010 and -11.6% in 2011, given the expected recovery in oil demand and prices. This trend reveals the intention revealed by the government to strengthen its control over budget execution in order to minimise overspending from 2010, within the framework of the 2010 budget.

Chad is a member state of CEMAC. Its monetary policy is therefore determined by the Bank of Central African States (BEAC), which is the central bank for the region. BEAC 's mission is to issue currency and ensure its stability, define and steer monetary policy applicable to CEMAC member states, conduct exchange transactions, hold and manage the foreign exchange reserves of member countries, and ensure that CEMAC's payment system functions properly. BEAC 's monetary policy gives priority to controlling inflation and maintaining parity between the CFA franc and the euro. In schemes to maintain parity through a fixed exchange rate, central banks tend to follow the lead of the monetary authority responsible for controlling the value of the target currency. However, unlike the European Central Bank (ECB), BEAC aims to keep its rediscount rate relatively flat. As a result, BEAC will continue to rely on indirect instruments, such as refinancing and compulsory reserves, to control expansion of the money supply. 

The rate of money supply growth increased at a solid rate of 9% in 2009 thanks to growth in domestic credit due to the state's use of its deposits and statutory advances issued by BEAC. Net external assets, however, fell by 28% from XAF 622.4 billion in 2008 to XAF 451.3 billion in 2009. Net domestic credit grew sharply, from  XAF -74 billion in 2008 to XAF +199.6 billion in 2009. Following the global financial crisis, BEAC continued with the policy it undertook in 2008 by lowering its official market rate from 4.75% to 4.5% in March 2009.

By the end of 2009, inflation had risen to an average of 10.5% for the year. This rise in inflation is attributable to the increase in the money supply and the rise in food prices due to poor agricultural yields. This phenomenon was intensified by the increase in demand for goods in the last six months of 2009. For 2010/11, state policy will aim to respect CEMAC's regional criterion of an average annual rate of inflation of 3%. Achieving this objective represents a major challenge, since inflation in Chad depends mainly on agricultural yields, which are influenced by exogenous factors, particularly the weather.

In the medium term, the financial sector is somewhat vulnerable to such factors. Nevertheless, BEAC 's monetary policy provides some lasting stability. The proportion of unproductive loans as a percentage of all bank loans in 2009 was 10%. Further, just as in 2008, approximately 60% of banks were deemed "solid or good" by BEAC and the Central African Banking Commission (COBAC), the body responsible for regulating and controlling the financial sector in the region. The financial sector is narrow and is only loosely connected to the international financial markets. Consequently, it was not directly affected by the global financial crisis. The country had eight banking institutions in 2009. These institutions are concentrated in the capital and in the three other major cities. They are heavily dependent upon public enterprises and the state. The interest rates of the middle market were relatively low in 2009 (2.18252%). The microfinance system remains fragile despite a trend towards development in recent years, especially in areas where cotton is cultivated. Like the other countries in the CEMAC, Chad's payment and clearing systems and systems for reporting on loans are fairly well developed and functional. In 2009, credit to the economy was approximately 10% of GDP, which represents a 13% increase on the 2008 figure. Overall, access to credit, especially investment loans, remains limited.

Exports accounted for 60% of GDP in 2009, while their volume increased slightly compared with 2008. Nevertheless, the value of exports fell to XAF 1.342 trillion as a result of the fall in oil prices during the first six months of the year. Oil exports accounted for more than 80% of total exports and approximately 50% of GDP in 2009. The upturn in oil prices during the second semester of 2009 should bring about an upturn in exports in 2010, despite the continuing strength of the euro against other currencies. Imports represented 42% of GDP in 2009. Both their volume and value increased considerably in 2009, in particular because of increased imports of goods and services when construction work began on the infrastructure for the new oilfield at Bongor. Higher private and public investment caused the net services account balance of payments to depreciate sharply to -29.8% of GDP in 2009, as against an annual average of -27% for the previous three years, as a result of oil activity.

This depreciation increased the current account deficit from 10.3% of GDP in 2008 to 31.8% of GDP in 2009. With the prospect of an economic recovery from 2010, the current account deficit is expected to persist but to contract slightly to 26.7% of GDP in 2010 and 22.8% of GDP in 2011.

Regarding public debt, Chad has considerably improved its external debt sustainability. The outstanding external debt as of 31 December 2009 was XAF 741.4 billion, or 22% of GDP, as against 23% of GDP in 2008. Debt service represented 3% of government revenue. The expected rise in oil revenue in the medium term should improve these indicators in 2010 and 2011. However, exogenous shocks (fall in oil prices) could cause Chad's debt indicators to worsen quickly, so it is essential for the country to reach the completion point as soon as possible to benefit from substantial debt reductions. This objective must be accompanied by compliance with budgetary discipline.

Private sector development has been held back by insufficient basic infrastructure and a lack of quality public services. The absence and lack of quality of infrastructure, especially transport infrastructure, are an obstacle to the development of trade and private sector growth as a driving force of economic and social development. The poor national road network hinders the transport of agricultural production to the markets. Also, because Chad is a landlocked country, the limited number of transport links with other countries in the region makes it difficult to transport products imported by Chadian operators and to distribute Chadian exports (livestock, cotton, gum arabic, etc.). In addition, community infrastructure for water, electricity and livestock management in rural areas is insufficient. This situation limits the possibilities of diversification of the agricultural sector, efforts to create jobs and the reduction of poverty in rural areas. Concerning the quality of public services, the progress made in reforming the public sector have remained below expectations and remain short of the country's needs. This situation is largely due to the state's weak capacity, which is exacerbated by the political instability and lack of security that are inherent in the country. These weaknesses have limited the state's capacity to fulfil its role as a facilitator and regulator for the creation of an environment that would encourage private sector development. As in other sub-Saharan countries, Chad's business environment remains unattractive to the private sector. Indeed, the World Bank's 2010 Doing Business report ranked Chad 178^th among 183 countries in 2009, two places below its position in 2008. The situation is exacerbated by numerous factors, especially the recurring insecurity, slow bureaucratic procedures, deficiencies in the legal framework and system, delays in the settlement of payments, and the accumulation of arrears in the public and parapublic sectors, as well as the difficulties associated with access to credit.

Given the embryonic structure of the Chadian private sector, the effects of the global financial crisis on activity in this sector were almost unnoticeable. The private sector is mostly informal and provides employment to a relatively low-qualified workforce. The operators in the sector have little access to credit and must therefore resort to self-financing or mutual aid systems, which limit their capacity to invest in large-scale projects.  

In order to improve the business climate, the government adopted a national charter on investment that complied with CEMAC regulations and passed a law to create a national agency to promote investment and exports. These measures aim to modernise the system of tax and customs benefits and other mechanisms that promote private investment. The Chamber of Commerce, Industry, Agriculture, Mining and Handicrafts (CCIAMA) has also taken initiatives to improve the business climate. The organisation is responsible for the development and dynamism of the private sector and offers to provide support to small and medium-sized enterprises (SMEs) and to create a permanent forum for dialogue between the public and private sectors. Among the measures already taken by the government is the passing of a law aimed at improving the legal and fiscal system in the oil sector. This law envisages the setting up of a production-sharing agreement, state participation in the research phase and consideration for environmental aspects from the very beginning of any oil project. Concerning public contracts, institutional and organisational market management structures have been set up but need strengthening.

As part of the implementation of the SNRP II poverty-reduction strategy (Stratégie nationale de réduction de la pauvreté deuxième génération), the government intends introducing several measures, including: (i) setting up a forum for permanent dialogue between the state and the private sector in order to better understand the aspirations of the private sector and integrate them into national policies, as well as to resolve practical problems affecting specific activities; (ii) reforming commercial legislation and effectively and fully implementing the texts produced by the Organisation for the Harmonisation of Business Law in Africa (OHADA); (iii) passing a land act that is coherent with legislation on contracts and strengthening commercial courts;(iv) simplifying the tax and customs system to increase state resources and eliminate factors that encourage fraud and corruption; and (v) pursuing reform of public contracts to facilitate transparency in the awarding of such contracts and fair competition between all economic operators.

The government has pursued its policy of decentralisation, enabling the restructuring of local and regional public services into 22 regions, 62 départements (counties) and 252 subprefectures (local level). This reform was adopted with the aim of bringing public services closer to the people and preparing for decentralisation. In accordance with the SNRP II strategy for the 2008-12 period the authorities plan to provide decentralised structures with additional human and material resources and to put competent officials at the helm of those structures. Regarding decentralisation, the government is committed to implementing the laws and regulations and the master plan that has already been approved. The main action undertaken has involved completing the regulatory and legal framework, building the capacity of those involved in decentralisation, providing information and generating awareness regarding the issues raised by decentralisation, and making preparations for the local elections.

Chad's main economic constraint is its lack of direct access to a port, resulting in inflated prices for imports. This problem is exacerbated by the lack of adequate infrastructure and ineffective domestic logistical resources. In order to counter these shortfalls, the government has maintained a road maintenance fund, which has enabled periodic maintenance of 3 749 km (525 km of asphalt roads and 3 224 km of earth roads) of Chad's 4 000 km network. The continued asphalting of the major road links has brought the length of asphalted roads up to 1 089 km. By 2011, the government hopes to build 1 554 km of asphalted national trunk roads and 4 000 km of maintained earth trunk roads, and to rehabilitate 4 000 km of rural tracks.

In the information and communication technology (ICT) sector, Chad's telecommunications market is among the least developed in the world. The penetration rates for all market sectors (fixed-line phones, mobile phones and Internet) are well below average for Africa. The country lacks the national infrastructure needed to support broadband services effectively. To raise the capital necessary to finance development of ICTs, the government plans to privatise the company Sotel-Tchad. However, the operator has the problem of very old equipment, preventing it from providing its clients with a high quality service. The Sotel-Tchad telecommunications network includes, at present, 21 000 main lines, 80% of which are in N'Djamena. Faced with competition as a result of the liberalisation of the ICT sector, Sotel-Tchad has developed new products and services, including the Lalékoum prepay payment system and the Tawali, which provides fixed-line telephone, mobile telephone and Internet services together. In the mobile telephone sector, the Sotel-Tchad subsidiary, Mobilsotel, has more than 13 000 subscribers. The arrival of new private mobile-phone operators on the market has enabled a rapid increase in the penetration rate in the sector. The number of subscribers rose to 1.6 million in 2009 (Celtel and Milicom having the most subscribers). The Internet market is shared between five operators (Soanet, Albidey, Soditel, Prestabist, Sotel), which have approximately 4 000 subscribers.

On average, total government revenue during the 2000-09 decade accounted for the equivalent of 25.7% of non-oil GDP (19.8% of non-oil GDP for tax revenue and 6% of non-oil GDP for non-tax revenue). The non-tax revenue consists mainly of grants, but also official development assistance. Government revenue has increased, with the ratio of total revenue to non-oil GDP having risen from 12.3% in 2001 to 51.3% in 2008. This development reflects Chad's commencement of oil production in 2003, with the introduction of corporate tax on the oil consortium. This specific tax has provided more than 50% of tax revenue since 2006. The onset of the financial crisis in mid-2008, coupled with the drastic fall in global oil demand, caused government revenue to fall to 17.3% of non-oil GDP in 2009. Government revenue collection could gradually improve to reach 27.2% and 34.4% of non-oil GDP in 2010 and 2012 respectively. This recovery depends on the expected global economic recovery taking place and on the commencement of oil production at the new sites, for which construction work began in mid-2009.

Regarding legislation defining the framework for fiscal policy, the key documents are the tax code, the fiscal procedure guide, the finance acts, tax agreements signed with other states or companies, decrees, orders and circulars. The administrative procedures required to set up certain companies are time-consuming and complex. To alleviate this constraint, a procedures centre was created, bringing together all the institutions involved in the procedures for setting up a company (the Tax and Customs Bureau, the Ministry of Justice, the Ministry of Trade and the Social Security Bureau). This one-stop shop meets periodically to examine the dossiers it receives.

Direct taxes, indirect taxes and taxes on international trade accounted for 4%, 1.3% and 2.6% of GDP respectively during the period under consideration. The tax base is determined by three main types of taxes: corporate tax (40% of annual profits of legal entities involved in an industrial, commercial, agricultural or non-commercial activity), value-added tax (VAT) (18% of turnover for production, imports and services) and income tax (progressive scale from 20% to 65% of collected or earned net annual income, irrespective of the source of that income). Tax exemptions are mainly for essential goods (medicines, milk, meat, poultry, bread, etc.), the oil sector and recently set up or launched companies during the launch phase.

In Chad, the structural problems that lie behind the lack of compliance with tax obligations are related to the difficulties encountered by the main financial authorities in accomplishing their missions. These authorities include the Inland Revenue (DGI), Customs and Excise (DGD), the Oil-tax Department (DFP) and the Treasury (DGT). For the DGI, the fundamental problem is its responsibilities and its organisation. According to the texts currently in force, the DGI is empowered simply to issue tax collection notices, which are payment orders but do not guarantee tax recovery (this is the responsibility of the DGT). This is despite the fact that collection is part of the monitoring, periodical evaluation and control process for tax collection notices. Thus taxes claimed through tax collection notices issued by the DGI are not always collected in full by the DGT. There is then a problem regarding communication and the exchange of information between the two services, particularly in terms of the DGI being informed of taxes collected by the DGT. Further, in terms of the effectiveness of the collection process and the monitoring and evaluation, current regulations in the CEMAC zone recommend that these two aspects – issue and collection – become the responsibility of the DGI. Moreover, the existence of the DFP as a body that is independent of the DGI prevents the tax revenue collection system from running correctly. The DGI also has major difficulties in collecting taxes (VAT, corporate tax and the annual minimum tax [IMF], etc.) on public contracts funded by oil resources and external resources. In fact, most service providers that benefit from public contracts do not pay the taxes due, which naturally results in an actual loss of a significant proportion of revenue that could be used to finance tate expenditure. One of the reasons for this situation is that some service providers are not known by the tax authorities, which means they are not registered. Another reason is that some service providers are reluctant to pay taxes. As for the DGD, this body has too few competences and too little know-how to make its full contribution to the collection of government revenue.

The main measures recently taken in terms of fiscal policy concern, among other aspects, broadening the tax base by increasing revenue, controlling exemptions and regulating taxation in the informal sector. To achieve these aims, the government plans to train fiscal agents, equip the tax authorities and simplify administrative procedures. Regarding income tax and corporate tax, various reforms are expected to be made: separate departments will be created for large corporations (DGE) and small and medium-sized enterprises (DPME), national laws will be amended to align them with the CEMAC texts, the tax authorities will be decentralised in the districts (arrondissements) of the city of N'Djamena. Concerning property tax, the government has introduced a real property tax and land tax as well as a local residence tax.

The Chadian government has continued its talks with the opposition.  These led to the creation of an electoral commission in July 2009, the Commission électorale nationale indépendante (CENI). This commission is composed of 15 members of the political parties that form the presidential majority and 15 members of opposition parties. An agreement in principle has been reached for parliamentary elections to be held in 2010 and presidential elections to be held in 2011.   This is the direct result of dialogue between the governing parties and the opposition in accordance with the 13 August 2007 agreement to strengthen the democratic process in Chad. The last rebel attack of note was carried out in February 2008. The attack went into N'Djamena and nearly overthrew the governing regime. The government has stepped up security by increasing military spending. This made it possible to hold off the most recent rebel attack, in May 2009, and significantly weaken the bases of the armed rebellion in the Darfur region of Sudan. Furthermore, the governments of Chad and Sudan have continued with talks aimed at improving relations between the two countries. These talks led to the signing of an agreement for the creation of a joint border security force on 20 February 2010. This initiative should help to reduce rebel attacks in 2010. In early 2009, the peacekeeping forces of the United Nations Mission in the Central African Republic and Chad (MINURCAT) have replaced the European EUFOR peacekeeping forces. Twice the size of the EUFOR forces, the MINURCAT has improved security at refugee camps in eastern Chad and elsewhere in the country.

 

As part of the Poverty Reduction Strategy (PRSP II), the government has promised to devote a larger portion of public expenditure to promoting the social sectors. The aim is to increase the proportion of resources dedicated to health and education, respectively, to 15% and 7% for the 2009-11 period, up from 14.6% and 5.6% during the previous period. Nevertheless, these additional resources seem to fall short of what is necessary to deal with the recent socio-political events. 

In 2009, Chad was ranked 175^th among 182 countries on the HDI and 132^nd out of 135 developing countries on the HPI (UNDP, Human Development Report, 2009).

In health, a review of the implementation of the government's health policy, the Politique nationale de santé (PNS), for the period 2005/06 reveals the system's incapacity to deal with the many health problems in the country. The lack of access to quality health services has been highlighted, among other problems. Furthermore, access to medical care is low and the country has been inundated with hundreds of thousands of refugees, mostly children, fleeing from conflicts in neighbouring countries. As a result, the death rate among children under age five is rising, and one child in five dies before reaching that age. Just 39% of pregnant women in Chad receive prenatal care and 86% of births occur at home without qualified assistance. The overall vaccination rate among children is 20% to 40%, but only 1% of the poorest children are fully vaccinated. In Chad, just 9% of poor women receive prenatal care (as opposed to 77% of women with the best access to services), and less than 2% give birth with assistance from qualified professionals (as opposed to 51% of those with the best access to services). One of the consequences of this is that 1 in 11 women dies during pregnancy or in childbirth.  

The main obstacles to improving the healthcare system are the lack of resources and the weak response to the population's extensive problems and needs, as well as poor capacity for planning, co-ordinating and monitoring programmes and projects, and the lack of qualified staff, who are concentrated in N'Djamena. Socio-cultural factors also hinder the performance of the health care system. In a country with a 61% illiteracy rate, the current health care information systems are ill-suited to the needs. Furthermore, armed conflicts displace families and disrupt health care services in the affected regions. The government has responded to these challenges by producing the PNS-II for the period 2007-15. In accordance with the Millennium Development Goals (MDGs), the overall objective of the PNS-II is to ensure that the entire population of Chad has access to quality basic services in order to accelerate the reduction of mortality and morbidity and thus contribute towards achieving the MDGs by 2015.

HIV/AIDS remains a substantial threat in Chad, with a national prevalence of about 3.3%, distributed unevenly across the country, with a prevalence rate that is lower in rural settings (2.3%) but potentially explosive in urban settings (7%). It affects more women than men (4% versus 2.6%) within the same age group. In 2007, an estimated 200 000 people had AIDS in Chad, including 14 400 under the age of 15. Reduced foreign support, increased social needs and the rising prices of consumer staples have worsened the population's socio-economic situation, and the impact of this disease is becoming noticeable in all segments of the population.

Concerning education, the economy's low productivity is heavily influenced by very limited training, with 95% of employment confined to the informal sector (of which 72% are in the agro-pastoral sector) and 74.2% of the labour force uneducated. Each year, the labour market can accommodate only 10% of those graduating from universities. Moreover, the rate of students repeating a year, the rate of students completing a course and the survival rate remain very poor, since about 62% of Chadians enter the labour force without receiving a complete primary education, and 47% of those who do complete primary education remain illiterate.

The Chadian economy does not create enough jobs to reduce unemployment, thus fostering the development of a poorly regulated informal sector that receives little state support. Over the last few years, the time it takes to enter the workforce in Chad has increased significantly. Integration into the workforce has become more complex owing to a combination of factors: the lack of job opportunities due to weak economic growth, the lack of private investment in the non-oil sector, and the inappropriateness of training for the employment market. These factors make it difficult to create jobs and stabilise employment, thus keeping unemployment high (the most recent figure available is 36% in 2004). The informal sector is therefore the only sector able to offer a large number of small jobs to a relatively unskilled workforce. Nevertheless, the development of the sector is limited by the lack of an appropriate regulatory framework to provide better support for the activities in the sector, protection against the stiff competition from Nigerian and Cameroonian industries, and access to credit.

To remedy these problems, the government announced a list of projects affecting the various phases of education. For primary education, the Chadian government aims to: increase the gross enrolment rate from 84% in 2005 to 98% in 2011; increase the ratio of girls to boys from 0.67 in 2005 to 0.87 in 2011; increase the proportion of students from the nomadic environment from 0.17% in 2004 to 0.5% by 2011; and provide 80 000 adults with literacy education, 80% of them women living in rural areas. In secondary education, the government intends to increase first-cycle enrolment from 30% in 2005 to 39% by 2011, and the parity ratio of girls to boys from 0.32 in 2005 to 0.61 by 2011. To improve education quality, the government hopes to reduce the drop-out rate from 17% in 2005 to 10% by 2011. To accomplish this, it intends to reduce the average class size from 64 in 2005 to 56 by 2011 and reduce the student-teacher ratio from 80 in 2005 to 62 by 2011. Finally, in higher education, the government has taken steps to make room for more than 15 000 young people. Thus, in 2007 and 2008, the Ministry of Higher Education, Scientific Research and Professional Training boosted infrastructure capacity by establishing three new universities and two higher institutes for science and technology. This brought the number of higher education institutions in Chad to five universities and eight institutes.