Documentof THE WORLD BANK FOR OFFICIAL USE ONLY ReportNo. 26912-CD THE REPUBLIC OF CHAD POVERTY REDUCTIONSTRATEGYPAPER AND JOINT IDA-IMP STAFFASSESSMENT OCTOBER 07,2003 AFTP3 Africa Region This document has a restricted distributionand maybe usedby recipientsonly inthe performanceof their officialduties. Its contents maynototherwisebedisclosedwithout World Bankauthorization FOROFFI(TLAL,USE ONLY INTERNATIONALDEVELOPMENT ASSOCIATION AND INTERNATIONAL MONETARY FUND CHAD PovertyReductionStrategy Paper Joint StaffAssessment Prepared by the Staffs o f the InternationalDevelopment Association (IDA) and the International Monetary Fund(IMF) Approved by Messrs./Mmes. Paula Donovan and GobindNankani (IDA) Dona1Donovan and Michael Hadjimichael (IMF) October 06, 2003 I. OVERVIEW 1. Chad's nationalpoverty reduction strategy paper (PRSP) has progressed considerably when compared to the interimpoverty reduction strategy paper (I-PRSP) that was presented to the Executive Directors o f the IDA and IMFinJuly 2000. This progress i s built, inter alia, upon: (i)issues highlightedby the PRSP consultations, including a sharper focus on participatory approaches for implementation o f the PRSP; (ii) the urgentneed to plan for the transparent use of petroleum resources; and (iii) desire to reinforce partnerships with the donors. The PRSP was finalized at a time when the Chad-Cameroon oil pipeline was almost complete, andthe first petroleum exports are now expected inOctober 2003. The PRSP rightly emphasizes this unprecedented developmental opportunity, with aparticular focus on usingoil resources to promote growth andreduce poverty. Inthis context, sustained assistance from donors, including debt relief under the enhanced HIPC initiative, will be required for PRSP implementation. A strong focus on technical support will also be needed. 2. The PRSPhas several major strengths.First, manystakeholders stressedthe need to improve governance and security as prerequisites for effective implementation, especially inlighto fthe rapidly evolving oil sector. This is clearly reflectedthroughout the PRSP. Second, the strategy emphasizes the government's commitment to ensure that oil revenues are used for poverty reduction by adopting a legal framework which allocates the bulk o f oil revenues to key PRSP priority areas andpromotes transparency and accountability inpublic expenditure management. Third, inpreparing the PRSP, extensive consultations were undertaken that were instrumental inestablishing a participatory poverty diagnosis, identifying keypriorities andbuildingconsensus. These consultations were recently widened to include other important topics, such as thejudicial system and other structuralpolicies. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. I t s contents may not be otherwise disclosed without World Bank authorization. - 2 - 3. Nevertheless,the staffs note a number of key areas that could be further strengthened or documentedmore fully in the strategy. These include: (i) placing additional emphasis on reforms to promote governance and sustain support for agreed programs, including increasing transparency inpublic procurement; (ii) ensuringthat capacities are built both at the national and local level to implementthe priority programs, and that coordination i s improved among the public sector, private enterprises and civil society; (iii)increasingthe level o f poverty-reducing spendingand improving the quality o f public service delivery inpriority areas; (iv) ensuring that PRSP priorities are reflected inthe mediumterm expenditureframework currently under preparationand costed andtranslated into sector strategies andpoverty reductionprograms; v) improving the analysis o f the determinants o f poverty and the monitoring o f poverty and other outcomes; (vi) increasing non-oil revenueto ensure that resources for poverty reducing expenditures are adequate when oil revenue declines; and (vii) analyzing further the link betweenprojected growth rates and poverty reduction objectives. 11. COUNTRY OWNERSHIP AND PARTICIPATORY PROCESS 4. The PRSP processwas directed and undertakenby a SteeringCommittee,the ComitC de pilotagede la StratCgie nationale de rCductionde la pauvretC (CP). The CP has 33 members, including 15 from key ministriesandpublic sector institutions, 16from civil society and private sector groups and 2 parliamentarians. The CP was supported by a Permanent Secretariat, the Secritariat Permanent (SP), which eventually grew to a multi- disciplinary staff o f four full-timeprofessionals. The final PRSP was adopted by the High Interministerial Committee (HCI), chairedby the Prime Minister andresponsible for the approval and monitoring o f reform programs. Members o f the National Assembly were briefedon the PRSP, inaddition to beingrepresentedonthe CP. 5. Although the CP/SP frameworkwas broadly satisfactory,the staffs note that there were also some weaknesses. The memberso fthe CP were not always of a sufficiently high-levelto providea strong liaison betweentheir respective ministries,the PRSP andthe macroeconomic and sectoral actions and programs. The civil society membersoften lacked the resources to inform and consult withtheir own members andthe SP experienced difficulties inmobilizing financial resources. These constraints contributed significantly to the delays infinalizing the PRSP. Against this background, the CP/SP framework will need to be strengthenedto ensure satisfactory PRSP implementation (see para. 38). 6. The Chadianauthoritiesinvesteda considerableeffort in buildingnational ownershipof the PRSP, and in the view of the staffs, they were reasonablysuccessful.. The preparationofthe PRSP involved a novel and extensive consultativeandparticipatory process. Despite resource constraints and difficulties inaccessing some parts o f the country, the PRSP CP was able to consultwith groups inall regions o fthe country. Inevery region, consultations were held in secondary localities as well as inthe main town. These efforts notwithstanding, the CPjudgedthat urban groups, civil servants and menwere overrepresented inthe process, while rural groups, farmers, and women were underrepresented, and sought to compensate for this bias inthe formulation o f the report. The - 3 - staffs concur with thisjudgment and commend these efforts to ensure broad involvement o f the population. They consider the resultingPRSP as adequately reflecting Chadian realities, information on local situations, andthe marked differences among regions. The staffs also commend the efforts o f the CP to disseminate the information about the PRSP to civil society at the local level. Key PRSP messagesare beingrecorded inlocal languages and will be disseminated through the radio. The staffs believe that ownership o f the strategy by the population can be further enhanced by highlighting, inthe course o f PRSP implementation, how inputs from the participatory process were translated into actions for poverty reduction. 7. Although many elements o f the consultationprocess were novel to both local groups and the organizers, the authoritiesand the staffs believethat the approachwas very well receivedand resultedin the sending of clear messages.These messagespoint to the particular importance o f peace and good governance for reducing poverty and highlight the needfor thejudicious use o f oil resources and o fthe savings stemmingfrom the Initiative for the Heavily IndebtedCountries (HIPC) to reduce external indebtedness.The staffs believe that the participatory process provided operational priorities for bothpublic policies and donor-supported development programs. The participatory PRSP process has been instrumental inputtinginplace a new approach o f consultation by the government with stakeholders inChad. This approach i s illustrated by the extensive consultations with stakeholders on the judicial system, and inthe undertaking o f a Poverty and Social Impact Analysis (PSIA) o f the reforms inthe cotton sector, the latter o f which i s expected to help promote stakeholders' participation inpolicy discussions. Nevertheless, the staffs also believe that more extensive consultations on, and assessments of, macroeconomic and structural policies, as well as the poverty impact o f policy options, would have ensured greater endorsement o f policies and strategies by all stakeholders. Donorswere consulted during most stages of the PRSPpreparation.The CP specifically sought feedback from donors at workshops inWashington and Brussels, as well as on a bilateral basis. These exchanges enhanced national confidence inthe PRSP document and helpedto sharpen its operational focus. 111. POVERTY DIAGNOSIS AND IDENTIFICATION OF CONSTRAINTS 8. Quantitativedata on economic and social indicators,livingconditions,and povertyin Chad are sparse, and the povertydiagnosis in the PRSP has hadto be undertakenwith very limitedinformation.As highlightedinthe I-PRSP, Chad's statistical apparatus was woefully underfundedinthe early 1990s, and many of the normal statistical functions o f government were deferred, though the 1991population census was a notable exception. Inaddition, even the existing data are not readily available and fully used, and the launching o fthe first national household survey (ECOSIT II), for 2001,was delayed planned untilearly 2003. The long delays inlaunchingECOSIT I1aggravatedthe data problems.' ' The more-than-one-yeardelay inlaunchingthe ECOSITI1survey (Enquete sur la Consommationet le Secteur Informelau Tchad) was mainly due to the needto revisit several times its design and methodology. The poverty diagnosis was thus based on several surveys: (i) the 1995 ECOSITsurvey, which providedinformationon - 4 - Nevertheless, the staffs consider that, although there i s room for improvement, there i s a clear effort inthe PRSP to assess the determinants o f outcomes andtrends. The PRSP builds up a profile o fthe characteristics ofthe poor usingdata from the Demographic andHealth Survey andthe Migration Survey, althoughthis profile could have beenimproved. In addition, it makes good use o fthe informationfrom the consultations to diagnose the factors that undermineliving standards and perpetuate highlevels o f poverty. These factors include civil war; the circulation o f arms among uniformed and nonuniformed groups; still- unclearedminefields;poor governance and public resource management; competition for natural resources; geographic isolation and hightransport costs; the low returns to the farmer from cotton and other major products; the failure o f social services to reachmany groups; and the lack o f balance ingender roles. 9. Although there is no systematic analysis of past policy performance and the growth and distributional impacts of policies and programs, partly owing to the lack of data, the poverty diagnosis presents elements for the analysis o fthe determinants of poverty, which distinguishesthe factors pertaining to policy choices, social aspects, structural constraints, and other causes. As recommended inthe JSA o f I-PRSP, the results o f ECOSIT I1will be usedto deepenthe understanding ofpoverty andrelatedpolicy design, and to set a baseline for monitoring future progress. Inparticular, based on the results o f the household survey, adjustments to the poverty strategy should be made inthe nextPRSP update as regards the integration o f sector strategies into an overarching poverty reduction strategy and the explicit identificationoftrade-offs betweensectors. Furthermore, the PRSP proposes a time-bound program o f additional surveys to raise the database to more adequate standards. The staffs expect that the analysis o fpoverty and inequalitieswhich will be based onthe information from these planned surveys will strengthenthe diagnosis and actions inprogress reports and future updates o f the PRSP. IV. EVALUATION OF THE POVERTY REDUCTIONSTRATEGY A. Strategic Priorities and OverallFeasibility 10. The PRSPaims to reduce poverty to below half the estimated 1995 level by 2015, in linewith the MDGs.Targets are also set for other poverty reduction objectivesto be achieved by 2006. The staffs concur withthe strategic priorities o fthe PRSP, namely: (i) improved political, judicial, economic and social governance; (ii) and sustained strong growth; (iii) investmentsinhumancapital, including HIV/AIDS prevention and mitigation; (iv) improved livingconditions of vulnerable groups; and (v) the protectionand safeguarding o f ecosystems. The staffs consider that the proposed 2004-06 action program outlined inthe PRSP provides a sound and feasible first step. Most key actions are integrated into ongoing macroeconomic, sectoral, or thematic programs, often with donor support, and there i s thus an assurance that the strategy will receive the resources neededfor timely implementation. However, giventhe fragile institutional environment and weak capacities, achieving the householdliving conditions for parts of the country, mostly urban; (ii) the 1997 Demographic andHealth Survey; and(iii) the 1998 survey on migration. - 5 - main PRSP objective o f halving poverty by 2015 through inclusive growth will depend critically on the quality o f governance, pro-poor economic and social policy choices, and the judicious selection o f programs and projects. B. Macroeconomic Framework 11. The macroeconomic projections in the PRSP, which cover the period 2003-15, are relatively ambitious compared with historical levels, but they are deemed feasible thanks to Chad's unprecedented opportunity to produce oil. The PRSP clearly states that reaching these levels would require an optimal use o f oil revenues, inaccordance with the Law on Petroleum Revenue Management (LPRM) and its implementation decrees. The growth projections inthe PRSP are based on conservative assumptions regarding both the price o f oil and the volume and duration o f production. Specifically, the framework assumes that oil productionwould be limitedto the three Doba oil fields. Cautious assumptions were also usedfor the projection o f growth inthe non-oil sector. As further explorations are underway, it i s possible that new oil fields will become available for production. This factor, together with some uncertainty about the performance o f the non-oil sector and the existence o f risks relating to the use o f oil revenue, adequacy o f aid inflows, capacity to implement priority sector programs, andpotential political difficulties (as outlined inparagraph 39 below), suggests that the first PRSP progress report should discuss alternative growth scenarios and analyze their implications. 12. The PRSP argues persuasively that macroeconomic stability is key for the achievement of the economic rowth projections. The staffs concur with the mainpolicy objectives definedinthe PRSP. The macroeconomic framework inthe PRSP i s also s consistent with Chad meeting the Central African Economic and Monetary Community (CEMAC) convergence criteria for inflation, fiscal deficit, indebtedness, and the level o f foreign reserves. 13. The staffs agree with the PRSP vision that strong and sustainable economic growth is essential for poverty reduction. There i s still a need, however, to analyze further the link betweenthe projectedgrowth rates andpoverty reduction objectives, notably the MDGs. Currently, the document provides a limitedbasis for assessingthe extentto which projectedgrowth rates will enable the incidence o f poverty inChad to be halved by 2015. The staffs recommend that such a detailedanalysis be provided inthe PRSP progress report once the ongoing household survey has beencompleted. 14. The PRSP makes an effort to analyze the sources of growth of the non-oil sector. Inthis context, itpoints out the importance ofhumanresource development and infrastructure improvements for the growth o f that sector. The first PRSP progress report These objectives are (i)low inflation; (ii)an appropriate real effective exchange rate and, more generally, external competitiveness; (iii)a sustainable level o f indebtedness; and (iv) a comfortable level o f official foreign reserves. - 6 - could further explore and elaborate on these links. Invarious places, the PRSP refers to the development o f new industriesas the explanation for the projectedrobust growth rates in some sectors. The first PRSP progress report shouldassess whether such industries have effectively emergedand discuss further prospects. To this end, the staffs recommend that the planned studies on the sources o f the growth and the competitiveness o f the Chadian economy be undertaken quickly, with a view to identifying measures to strengthenthe performance o f traditional sectors and foster the development o f new industries. 15. The first PRSPprogressreportneeds to elaborate further on the growth impact of regional integration initiatives. While the PRSP adequately discusses the constraints on macroeconomic policy implementationimposed by CEMAC membership, progress reports could usefully discuss inmore detail the benefits associated with such membership.Progress reports and PRSP updates could also discuss the prospects for deeper CEMAC integration, particularly inthe context o f the convergence process, as well as the benefits to Chad from other regional initiatives, such as the New Partnership for African Development (NEPAD). 16. The PRSP draws a coherent connection betweenincreasesininvestment and economic growth, but it could benefit from a more explicit discussion of the underlying assumptions regarding productivity increases.Major boosts inproductivity appear to be underlyingthe long-term macroeconomic framework, an assumption that is consistent with the projected heavy government spending inpriority sectors, including infrastructure. However, the staffs understand that the lack o f reliable time-series data hinders a more in- depthdiscussion of growth accounting; PRSP progress reports could usefully include such a discussionwhen these data become available. 17. The PRSP discusses the risk of Dutch disease and some appropriate possible policy responses to it. However, a clearer analysis o f the nontradablekradable sectors in Chad i s requiredto ensure that risks are thoroughly identifiedand addressed. Improvements inthe quality ofprice data for individualproductsandregions, as well as ofwage data in various sectors and regions, would be particularly useful. 18. The staffs commendthe focus in the PRSP on the needto increase non-oil revenue to sustain pro-poor spendingwhen oil revenue dries up.3Inthis context, non-oil revenueis projectedto increase from 8 percent o f GDP in2002 to 15 percent by 2015, which i s still 3 percentage points lower than the current average in sub-Saharan Africa. While ambitious, this target i s achievable, provided that the authorities continue the steadfast implementation o f the measures currently identifiedinthe program supported by the IMF Poverty Reduction and Growth Facility (PRGF), including the full and timely implementation o f the customs action plan and the reduction inexemptions. Meetingthe above revenuetarget would also require additional measures to be identifiedand It is estimated that about 80 percent of the currently identifiedDoba reserves will already be extracted by 2015. - 7 - implementedover the longer term to ensure the continued widening ofthe tax base and increased efficiency o ftax administration. C. Governance and Public Resources Management 19. Reflecting the participatory consultations, the PRSP has made improved security and governanceone of its central priorities. An action-oriented governance strategy (StratCgie nationale de bonne gouvernance) has beenprepared inparallel with the PRSP and its key conclusions integrated inthe PRSP. The consultations found that, for the poor, some basic aspects o f governance are inneedo f reinforcement. These include respect for human and civic rights; basic security, including clearance o f minefields; respect for individual and community property rights; access to an impartial and effective justice system; and honest and transparent stewardship o f public resources. The PRSP reaffirms the government's commitment to good governance inthese areas. 20. The staffs support the emphasis on improving governance and concur with the governance-related priorities presentedinthe PRSP, including the focus on professionalizing security forces, strengthening the judiciary and parliament, reforming the civil service, and fighting corruption. Inthe views o f the staffs, however, it would be necessary to review inmore depththe issues pertainingto the legal andjudicial system, and spell out the strategy for this reform, which i s rightly identified as a key objective. A participatory Justice Roundtable (Etats GCnCraux de la Justice), heldinJune 2003, constitutes a move inthe right direction as it i s expected to serve as a basis for definingthejudicial reform. 21. The PRSP includesa special emphasis on efficiency, transparency, and accountability in the use of all public resources, including oil revenue, as key conditions for good governance. Inrecent years, there have beengovernance shortcomings, as for example inthe case o f the diversion to nonpriority sectors (including for defense) o f part o f the signingbonus for the exploitation ofthe Dobaoil, or procurement irregularities inthe expenditures financed with savings from the enhanced HIPC Initiative. Nevertheless, progress has been made inmanaging public resources and inparticular intransparency, as illustratedby the publication, by the Government, o f several important audit reports, including for the cases mentioned above. Inview o f the imminentinflow o f first oil revenues, there i s an urgentneedto further strengthenpublic resources management, oversight, and transparency. Inrecent months, the government has demonstrated policy initiative and ownership by making progress inthis area, by taking steps to ensure the operationality o f the independentPetroleum Revenue Oversight Committee (Colkge de ContrGle et de Surveillance des Ressources PCtrolieres). Similarly, major progress has beenmade inthe preparationfor the oil era with the adoption o f a comprehensive set o f modalities for sterilizing oil revenues which could not be effectively absorbed inpriority sectors, and sheltering spendingfrom the volatility and exhaustibility o f oil revenue. Inaddition, a presidential decree i s under preparationwith the objective o f guaranteeing the true intergenerational character o f the Fundfor Future Generations. - 8 - 22. In this context,the staffs support the PRSP's emphasis on and proposedactions to further improvepublic expendituremanagement(PEM) as an effectivevehicle for povertyreduction.The key PEM challenges concern how to improve accountability, better monitor outcomes and strengthenimplementation, and better deliver public services. The actions identifiedinthe PRSP to meetthese challenges are inline with the public financial management reforms undertaken inthe past two yearsa4Inaddition, the staffs recommendthe redistribution o f human resources to priority activities to complement spendingreallocation. 23. The introductionof the medium-termexpenditureframework(MTEF)and of programbudgetinginpriority sectors providesa sound frameworkfor prioritizing and monitoring public spending, as laid out inthe PRSP and sector strategies. Giventhe weak capacity, the MTEF process will continue to benefitfrom technical assistance, notably by the World Bank. Inthis context, the staffs recommend that program budgets should ensure an appropriate balance betweenrecurrent and investmentexpenditures. The staffs note that some progress has already beenmade inprioritizing the budget and monitoring expenditures, although the lack o f reliable statistics on budget outcomes still constitutes a significant impedimentto this process. Inthis respect, the staffs urgethe authorities to strengthenthe ongoing efforts supported by the UnitedNations Development Program (UNDP), the European Union, and other donors to improve the statistical work inkey ministries. 24. A preliminaryaggregate costingof the strategy over the nextthreeyears is done inthe PRSP.Inthis context, the complete list of programs andprojects for inclusioninthe MTEF andprogram budgetsfor the priority ministries,is currently beingpreparedfor 2004- 06. These MTEF and program budgetswill facilitate the monitoring o f the poverty reduction impact o f priority sector spending. The staffs recommend that the PRSP progress reports include detailedcost estimates o fthe strategy as well as the assessment o f their consistency with priorities andtargets, including the rationale for each sector's allocationas compared with other sectors, andthe balance betweeninvestmentand recurrent spending. 25. The PRSP correctly underscores the needto increaseabsorptivecapacityin priority sectors.Priority sector spendingis projected to increase by 15 percent annually in real terms over 2003-15, with its share intotal expenditure rising from 44 percent to 63 percent over the same period. As the PRSP rightly points out, the effective use o fthe rapidly growing resources will require significant and continuing increases inabsorptive capacity. Although the PRSP correctly identifies capacity-building inthe public sector as a key underlyingrequirement,the PRSP could have elaborated more onthe strategy that should be implementedto increase that capacity, bothat the central and local levels. Giventhe current weaknesses inbudget execution inpriority sector ministries,the staffs recommend that the These actions include: (i) flow of all accruingoil revenue intothe annualbudget; (ii) strictenforcementofthe PetroleumRevenueManagementLawandProgram;(iii)consistentimplementationof agreedsector strategies; (iv) better assessment ofthe impact ofpublic spending, notably interms of equity and efficiency; and (v) further prioritizationof expendituresbasedonthe conclusions of the Public ExpenditureReview process. - 9 - PRSP implementationprogress reports explicitly discuss the bottlenecks to absorptive capacity andtheir sources, and present measures to improve absorptive capacity further. D. SectoralPolicies and Actions 26. The PRSP reflects strategieddevelopment plans already underimplementationfor the main sectors, as well as additional actions identifiedduring the PRSP preparationprocess. 27. Private and financial sector development.The PRSP rightly identifies key structural constraints on private sector development inChad, such as the unfavorable business environment, weak financial intermediation, low productivity inagriculture, scarce skilled humanresources, and hightransport costs. The PRSP correctly links the underdeveloped state o f the banking system, and o f the financial system more generally, to the low level of saving inthe country. Nevertheless, the staffs findthe proposals inthis section of the PRSP to be tentative and urge the authorities to deepenthe proposals inthese key areas inthe first PRSP progress report andthe update o fthe PRSP. The PRSP proposes the promotion of local enterprises through a guarantee fund, long-term lines of credit, and a microfinance program. The staffs urge the authorities to review and learn from the experience o f other countries inthese areas. The first PRSP progress report and PRSP update could also usefully discuss inmore detail the current status of, and prospects for, microfinance inChad. 28. Agriculture and ruraldevelopment.The PRSP includes a general action planto promote agricultural and rural development. Many elements o f the plan address the needto improve access to agricultural inputs, technologies, and financing for the poor. Inthe view o f the staffs, the main issues pertaining to agricultural services have been addressed ina manner consistent with the current Agricultural Strategy and the framework being developed under the National RuralDevelopmentPlan(PIDR), bothinterms ofobjectives and implementation. The PRSP rightly emphasizes that the purpose o f the Agricultural Strategy i s to raise agricultural production and productivity, as well as improve marketing of agricultural products. The Local Development Program, to be implementedwith the support o f donors, also highlights the links betweenrural development and decentralizationplans. 29. Althoughthe PRSP strategyfor agriculture is broadly adequate,its proposals need, in the view of the staffs, to be made more specific.Inparticular, there i s a lack o f specificity on the constraints to agricultural growth and on the agriculture-private sector nexus, eventhough the private sector i s acknowledged to play a key role. Itis also important to identify the constraints on different sources o f rural livelihoods, and additional reflection would be useful on ways to promote more diversifiedrural economic activities. On livestock development, the authorities should consider actions to lower animal mortality rates, increase exports o f animal products, and engage the private sector inthe provision o f veterinary and export services. Regarding crops, greater private sector involvement insmall-scale irrigation should be considered. The promotion o f gum arabic and fisheries i s also important for their respective regions. Raising labor productivity through farm equipment i s a priority for the PRSP, but the specific actions to promote farm equipmentwill needto be clarified inthe - 10- PRSP updates. Furthermore, an overwhelming priority for agricultural and rural development i s to improve the quality o f the road network. It would be desirable to derive explicit criteria for upgrading the tracks included inthis network, taking into account their potential to benefitpoor areas. 30. Cottonsector reform.This is important for maintaining the competitiveness ofthe sector ina context o f low international prices for cotton. However, the PRSP lacks detail on the status of, andprospects for, the implementationof cotton sector reform. Nevertheless, the staffs note that this reform is presentlyadvancing with the support o fIDA andother donors, though at a cautious pace, inlight o f the vulnerability o f the 350,000 families that depend on cotton production. The PSIA process included inthe PRSP action plan, through a series o f ex-post quantitative surveys, will be instrumental inmonitoring the impact o f the reform process on the poor. 31. Infrastructure.The PRSP reflectsthe participatory consultations inemphasizing the importance o f sound transport infrastructurefor national reintegration and for the reduction o f poverty. The PRSP proposals are fully consistent with the 1999 Transport Sector Strategy. For a landlockedcountry, the options identifiedinthe PRSP rightly seek to improve accessibility and lower the costs o f transport internally and externally. There i s also an emphasis on ensuringthe use o f the road network along main axes and betweenregions throughout the year. Inaddition, institutional improvements are proposed to increase private sector and community involvement inthe construction, maintenance, and financing o f the local infrastructure. The key challenge will be to implementthe various proposals effectively as the country benefits from increased oil receipts. 32. Water supply and sanitation.Reflecting the feedback from the participatory consultations, the PRSP stresses the priority o f improvedwater supply and sanitation. However, the operational proposals to address this issue are relatively undeveloped. The national master plan (schCma directeur) .for water development presents a strategy, policy framework, action plan, and monitorable indicators. The staffs therefore suggest a continuing reviewo fthe master planand its integration into future updates o fthe PRSP. Similarly for sanitation, the staffs recommend achieving consistency and close integration o f existingplans withthe proposals inthe PRSP. 33. Health.The PRSP draws attentionto the importance ofhealth status as a determinant o f household living standards, as well as the vulnerability o f many Chadians giventhat the trap o f illhealth due to poverty results infurther impoverishment. The HIV/AIDS epidemic i s o f prime concern, even though it seems to have stabilized during the past three years. The prevalence o f malnutrition, malaria, tuberculosis, water-born diseases, as well as the frequency o f unattended pregnancies and deliveries, also pose catastrophic risks for the poor, especially mothers andyoung children. The PRSP presents a series o f actions to improve access to, andthe quality of, health care, and puts emphasis on the implementation of programs to address the main areas o f healthrisk indicated above. The staffs support the proposals o f the PRSP but also recommend that actions be taken to increase the demand for health care services, including by making affordable drugs available inall the health districts. - 11 - Emphasisshouldalso beput on motivating mothers to avail themselves ofprenatalvisits, as well as counselingandvoluntary testing for HIV.Inaddition, effective action needs to be taken to address the acute lack o f human resources inthe sector, especially as the decentralization and deconcentration o f healthcare facilities are placing new staffing demands on the system. Finally, the staffs note that the health section o f the PRSP could distinguishmore clearly objectives, actions and indicators. They also recommend closer integration betweenthe sector strategy and the health section o f the PRSP interms of emphasis and factual information infuture PRSP updates. 34. Education.The PRSP gives highpriority to the development of education, literacy, and skills formation. The Ministry o f Educationput a ten-year developmentprogram for educational reform inplace last year, and the donor community endorsed this at a roundtable meetinginMarch2002. Two key issues identified inboththis development program andthe PRSP are the needto improve the quality o f basic education, especially incommunity schools, and to increase school enrollment rates for girls. The PRSP shares the perspectives and objectives o f the plan. However, the staffs note differences inthe proposed action programs, notably with respect to the integrationo f community teachers into the civil service, the role o f the National Curriculum Center, the quantitative objectives for teacher training, and the plans for training the Ministry o f Education staff. Closer integration betweenthe two strategies will therefore be needed. The staffs also consider that the indicators to be monitored under the PRSP will not permit effective monitoring of the strategy incontrast with the education development program, which contains pertinent indicators, as reflected inthe Letter o f Education Sectoral Policy o f March 2003. The staffs therefore recommend (i) the introductioninthe PRSP o fappropriate budgetindicators; and (ii) definitionofspecificindicatorstomonitorprogressinsupportingParents' the Associations through the agency for promotion o f community initiatives (APICED). V. TARGETS, INDICATORS, MONITORING AND EVALUATION 35. Proposedindicators and targets and the way inwhich they will be monitored and evaluatedare set out inthe PRSP.The staffs endorse the approach set out inthe document. The PRSP notes that economic, sectoral, or thematic groups are already monitoring progress inmany areas o f interest and proposes that its own monitoring and evaluation effort build on these activities. A general principle underlyingthe monitoring system i s that actors (sectoral ministries,nongovernmental organizations, and private sector groups) should play an important role inevaluating their own achievements, a commendable effort to strengthenthe implementation culture. Inaddition, a number o f cross-cutting statistical or qualitative surveys are deemednecessary for the adequate tracking o f poverty outcomes. Also, since current data are weak inmany areas, targets and baseline values for several indicators will probably needto be revisedinthe future, once data from the 2003 ECOSIT I1survey become available. 36. The PRSP proposes trackinga range of indicatorscoveringpoverty and inequality; governance; economic growth; education results; health conditions, including HIV/AIDS; protectiono fvulnerable groups; housing; infrastructure; and external - 12- indebtedness.For each indicator, a current or recent value is given, as well as a target for 2005. Altogether, around 74 indicators are proposed. The staffs consider that not all these indicators are o f equal importance and recommendthat the CP keep a sharp focus on the most important indicators, according to the strategic objectives ineach area. 37. The PRSP includesa varied and ambitious time-bound list of new statistical surveys to be conducted over 2003-05, notably with the support o fthe World Bank. The staffs fully support this proposal. The National Statistics Institutewill be responsible for such surveys incoordinationwith the ministriesconcerned. Surveys will involve the collection o f qualitative as well as statistical data, and, as far as possible, these will be analyzedjointly with the results ofthe ECOSIT I1survey. However, to strengthen its performance and accomplish its mission, the National Statistics Instituteneeds greater human and financial resources. The staffs recommend that (i) an assessment be made o f the data neededto monitor policies and programs; and (ii) the authorities improve the collection of administrative data and make better use o f this inevaluating performance and policy options. This involves providing data accessto a broader circle o f decision makers, as well as to stakeholders, and making fuller use o f existingmonitoring systems, such as the rural monitoring system. To achieve these goals, the staffs note that the need for considerable external support will continue. Inthis context, it will be helpfulthat Chad i s a participant in the General DataDissemination System(GDDS), whichprovides a comprehensive framework for evaluating data improvement needs and measuring progress inpoverty reduction consistent with the MillenniumDevelopment Goals . 38. The PRSPprovidesa relatively detailed proposedinstitutional setting for its monitoring and evaluation. The CP will take the lead inoverall monitoring and evaluation and will report to the Interministerial HighCommittee (HCI). Itwill also leadthe preparation o f the PRSP implementation progress reports and PRSP updates. However, the staffs recommend that the composition and resources o f the CP be reviewedas it assumes responsibility for the implementation and monitoring stage. It i s also proposed inthe PRSP to put inplace local bodies for monitoring implementationprogress (comitds de coordination locaux). The CP has begundefiningthe role and composition o f these proposed elected local bodies. The staffs welcome this approach and commend the strong emphasis that the CP proposes to put on broadening stakeholder representation, notably o f women, inthese committees. The staffs also recommend that the CP have access to sufficient expertise in some key cross-cutting areas, notably the monitoring and evaluation o f actions pertaining to gender, which have beenidentifiedrelatively well inthe document.As regards implementation, the PRSP underlinesthe importance o f sequencing the actions appropriately, giventhe limitedresources and institutional and human capacities. As such, the PRSP rightly acknowledges the needto strengthencapacities andpromote cooperation among the state, civil society, and the private sector over time. The staffs urge the authorities to spell out more precisely the institutional setting for implementingthe strategy and monitoring progress, while ensuringthe increasedparticipation of all stakeholders. - 1 3 - VI. RISKANALYSIS 39. The PRSP does not contain an explicit section on risks to its effective implementation and successful outcome;however, various areas o f risk are clearly identifiedindifferent parts o fthe document, including up-front inthe feedback from the participatory consultations. The identifiedrisksinclude (i) political instability and/or difficulties insustaining political support for agreed programs; (ii) macroeconomic instability, including Dutch disease; (iii)volatility in oil revenue as a result o f changing world market conditions; (iv) the capture o f oil and/or HIPC resources by influential special interest groups; (v) insufficient capacity at the national or local level to implementthe priority programs inthe PRSP; and (vi) inadequate or delayed donor support. Inaddition, the PRSP notes that success in securing the well-being o f the poor will dependon effective programs to counter food insecurity, epidemic and endemic diseases, the spread o f HIV/AIDS, and the depletion o f natural resources. The staffs agree with the authorities that these are the most important risks. 40. At the same time, the staffs agree that the principalactions to counter these risks are already containedin the PRSP. These include, notably, (i) focus on institutional the strengtheninginthe context o fthe governance program; (ii) emphasis on capacity the building, especially at the local level; (iii) the arrangements for overseeing the use o f petroleum and HIPC Initiative resources; and (iv) the continuing strict monitoring o f economic developments and policies inthe context o f programs supported by the Bretton Woods institutions and other partners. VI. OVERALLASSESSMENT 41, Inthe view of the staffs, the proposedstrategy spells out ambitious but attainable objectives and a credible set of actions for poverty reduction. As oil revenue begins accruing and the HIPC Initiative completion point approaches, the key challenges will be to ensure that public resources are allocated and managed ina transparent and efficient way, and actually reach their beneficiaries. Inthis regard, the staffs recommend that, inthe future, PRSP progress reports be prepared intime to informthe budgetandMTEF preparationprocess, As underlinedinthe document, it will also be o f the utmost importance to pursuecapacity-building efforts inthe public sector, bothat the central and at the local levels. With the support o f its partners, Chad will also needto designand implementa strategy for reinforcing capacities inthe private sector and civil society, and to promote strong participation inthe implementationand monitoring o f the strategy. 42. The staffs of the World Bank and the IMFconsider that this PRSPpresentsa credible poverty reduction strategy and provides a sound basis for the World Bank and the IMF concessionalassistance. The staffs recommendthat the Executive Directors o f the World Bank and the IMF reach the same conclusion. REPUBLIC OF CHAD Unity - Work Progress - MINISTRY OF PLANNING, DEVELOPMENTAND COOPERATION PRSP Steering Committee N'Djamena-June 2003 1 PREFACE Poverty i s just as much a challenge today as it ever was, as the recent improvement in Africa's economic situation i s still insufficient and the continent remains relegated to the sidelines o f the world economy. Most reports produced recently stress the specificities o f sub-Saharan Africa where the number o f poor in absolute terms continues to increase, whereas progress has been made in other regions o f the world. Indeed, it seems that minimum growth rates of 5-8 percent will be needed to have an effective impact on economic and social development. Chad's main objective is to implement an economic policy that will bring about lasting and sustainable development, particularly in the oil era. This development must involve high growth rates holding steady over a relatively long period. The PRSP has proven to be the instrument o f choice in attaining this objective. This exercise i s not new; the Government o f Chad had already submitted a paper to the Geneva IV Round Table in 1998 outlining the key strategic options for development based on "poverty reduction." The Government wanted the preparation of the National Poverty Reduction Strategy (NPRS) to be participatory. For this reason, it set up a steering committee in April 2000 comprising some 30 members from the public sector, private sector, civil society associations (NGOs, women's organizations, youth organizations, the public and private media, etc.) andthe National Assembly. For three years, the steering committee worked tirelessly on the paper so that it would better reflect the concerns o f the Chadian population. A number o f different activities were carried out: a launching seminar (April25 -27,2000); a study on the perceptions o f well being and poverty (April-June 2000); 10 thematic and sectoral studies (May-July 2000); a civil society forum (November 2000); country-wide participatory consultations (December 2000-January 2001), an assessment o f typical intervention through some existing projects (February- March 2001) ; a a national seminar to define strategic areas andpriority actions (May 8-12, 2001); a regional seminars to re-establish strategic areas and priority actions and adopt performance indicators and a monitoring/assessment mechanism (March 19-21, 2002). All these components progressively refined the various versions o f the PRSP, which was also enhanced with the input o f Chad's development partners, particularly the UnitedNations System, World Bank, IMF, EuropeanUnion, France, and GTZ. 2 Having adopted the Millennium Development Goals (MDG), Chad shares the opinion of the rest of the world that the PRSP is, first and foremost, a strategy that reflects the expectations o f the general population and the resources that the Government must deploy to enable that population to increase its standard o f well-being. It i s possible that some data presented in this report may be incomplete or partial, however the strategic issues and priority actions are consistent overall, and the Government and its partners are adhering to them. Subsequent revisions o f the document will provide the opportunity to adjust certain quantitative indicators in light o f new data from current surveys, in particular ECOSIT (survey o f informal sector consumption), EDST (demographic and health survey), and the census. The document that the Government has just adopted will be submitted to the donor community in the coming months for them to sign on. Until then, the steering committee and the sectoral ministries (with the support o f partners represented on the ground) will undertake a thorough evaluation o f projects and programs by sector o f activity. The implementation and follow-up o f the PRSP will once again call for a more decentralized and participatory consensus-building approach. In the interest o f transparency and good governance, the structures to be created will work in conjunction with regional and local governments to ensure that the expenditure executed within the framework o f the PRSP will actually reach the targeted beneficiaries. The Government, for its part, will spare no effort to ensure that this strategy truly reduces poverty by 2015. N'Djamena, June 5,2003 Is/ Djimrangar Dadnadji Minister o f Plan, Development and Cooperation 3 TABLEOF CONTENTS Introduction .......................................................................................................................... 10 Chapter 1 Background and Processfor Preparationofthe PRSP 11 1.1 The International.RegionalandNationalBackground ..................................... .............................. 11 1.1.1 The Internationaland Regional Context .......................................................... 11 1.1.2 The National Context ....................................................................................... 12 1.2 Presentation of the ParticipatoryProcess 1.2.1 The SteeringCommittee inChare ofthe Strategy PreparationProcess...........15 ............................................................ 15 1.2.2 The Strategy PreparationProcess..................................................................... 16 Chapter 2 DiagnosticAssessmentof Poverty in Chad 18 2.1 2.1.Profileof Poverty in Chad ..................................................................................... .................................................. 19 1 Quantitative Analysis of Poverty...................................................................... 19 2.1.2 Qualitative Analysis o f Poverty........................................................................ 23 2.1.2.1 Poverty and Well-Being as Perceived by the Population.......................... 23 2.1.2.2 24 2.1.3 Typification o f Poor Households ..................................................................... Lessons Drawn from Participatory Consultations.................................... 28 2.2 VulnerableSocial Groups ...................................................................................... 32 Chapter 3 Determinantsof Poverty and OpportunitiesinChad ................................. 36 3.13.1.1. Determinantsof Poverty ........................................................................................ 36 Governance....................................................................................................... 36 3.1.2. Modest Economic Growth ............................................................................... 38 3.1.2.1 Low Productivity inthe Primary Sector ................................................... 38 3.1.2.2 A PracticallyNonexistent Processing Sector ........................................... 40 3.1.2.3 A Largely UnproductiveTertiary Sector.................................................. 41 3.1.3 HighlyDeficient HumanResources andLiving Conditions ............................ 41 3.1.3.1 Education. Training. and Literacy Classes ............................................... 3.1.3.2 Inadequate HealthCare Coverage and Hypothetical Nutrition................41 42 3.1.3.3 HIV/AIDS................................................................................................. 44 3.1.3.4 44 Lack o f Social Protection......................................................................... Status o f Women inChad......................................................................... 3.1.3.5 44 3.1.4 Inappropriate and Dilapidated Basic Economic Infrastructure ........................ 44 3.1.4.1 The RoadNetwork ................................................................................... 44 3.1.4.2 Telecommunication.................................................................................. 45 Energy....................................................................................................... 45 3.1.4.3 3.1.4.4. 46 3.1.5. Other Obstacles to Poverty Reduction ............................................................ The Banking System and Microfinance ................................................... -46 3.1.5.1 Debt .......................................................................................................... 46 3.1.5.2 Demographic Factors ............................................................................... 47 3.1.5.3 Explosive Remnants o f War. Factors Exacerbating Poverty.................... 47 3.2 Chad's Strengths .................................................................................................... 49 3.2.1 Opportunities.................................................................................................... 49 3.2.2 The Long-TermOutlook for Growth andDevelopment .................................. 51 3.2.2.1 The Oil Boom Era .................................................................................... 51 3.2.2.2 The Highly Indebted Poor Countries (HIPC) Initiative............................ 51 4 Chapter 4 The OverallOutlookfor Development Through2015 ................................ 52 4.1 An IntegratedVisionof PovertyReductionCombined with the Preparationof the Post-OilBoomEra ........................................................... 52 4.2 PovertyReductionTargets from 2003 to 2015 .................................................... 54 4.2.1 Promote Good Governance.............................................................................. 54 4.2.1.1 Consolidation ofthe Rule of Law ............................................................ 55 4.2.1.2 Role o fthe State, the Private Sector, and Civil Society........................... 55 4.2.1.3 60 4.2.2 EnsureStrong and SustainedEconomic Growth ............................................. Efficient and Transparent Managementof Public Affairs ....................... 60 4.2.2.1 Exploitation of the Sources of Growth..................................................... 61 4.2.2.2 Promotion of the Private Sector ............................................................... 61 4.2.2.3 Development ofBasic Infrastructure and Support for Growth ...............62 4.2.2.4 Achieve a SustainableIncreaseinRuralOutput ...................................... 64 4.2.3 ImprovingHuman Capital................................................................................ 66 4.2.3.1 Education, Training, andLiteracy Campaigns......................................... 66 4.2.3.2 68 HIV/AIDS................................................................................................. Health....................................................................................................... 4.2.3.3 68 4.2.4 Improvingthe Living Conditions ofVulnerable Groups ................................. 68 4.2.4.1 IntegratedUrbanDevelopment ................................................................ 68 4.2.4.2 Support for Microenterprises, SME, andEmployment............................ 69 4.2.4.3 Social Protection ...................................................................................... 70 4.2.5 Restoring and SafeguardingEcosystems......................................................... -70 4.2.5.1 Strengthenthe RegulatoryFramework andNatural Resource ManagementCapabilities..................................................................... 71 4.2.5.2 Improvement of Household EnergyManagement.................................... 71 Chapter 5 MacroeconomicFramework ................................................................................ .......................................................................... 72 5.1 Sources of EconomicGrowth 72 5.2 ConditionsNecessaryto Growthand Poverty Reduction .................................. 74 5.2.1 Macroeconomic Stability ................................................................................. 75 5.2.1.1 Objectives................................................................................................. 75 5.2.1.2 Economic Policies.................................................................................... 77 5.2.1.2.1 FiscalPolicies.................................................................................... 77 5.2.1.2.2 Monetary andFinancial Sector Policies............................................ 84 Chapter 6 Implementationof the PRSP ......................................................................... 87 6.1 Stagesof Implementation 87 6.2 Monitoring .............................................................................................................. ...................................................................................... 88 6.3 Assessment .............................................................................................................. 89 6.3.1 Preparationof the Program for 2006-10........................................................... 90 6.3.2 Updating........................................................................................................... 90 6.4 InstitutionalFramework ........................................................................................ 90 6.4.1 The HighInterministerial Committee for PRSP Supervision .......................... 90 6.4.2 The Govemment'Donors Committee ............................................................... 91 6.4.3 The SteeringCommittee................................................................................... 91 6.4.4 SectoralMonitoring andEvaluation Units....................................................... 91 6.4.5 Regional. Departmental. and Subprefectural Units.......................................... 92 5 Boxes 1. A Civil SocietyKeento ParticipateFullyinNational LifebutWithout 38 2. An IncipientPrivate Sector Facinga RegulatoryOffering itFew Incentives..........38 the RequiredSkills ............................................................................................... 78 4. 3. Oil Revenues, 2004-15 Projections.......................................................................... Principal Actions Underway to Strengthenthe Monitoring o f Expenditure inthe PrioritySectors.......................................................................................... -81 Charts 1. Distribution(inpercent) of HouseholdsAccording to Standard o f Living 29 2. and Level o f Education o f the Head of Household.............................................. Distribution o f Households with Access to Portable Water 29 3. (tap. public fountain. well) by Household Standard o f Living............................. NationalDistribution o f Householdsby Standard of Living and Gender 4. ofthe Head o f Household..................................................................................... 30 Percentage o f Children Under 5 years o f Age Sufferingfrom Malnutrition (Insufficient Weight) ............................................................................................ 31 31 6. 5. Infant and Child Mortality Rates by Households' Standard o f Living..................... Distribution(inpercent)of Childbirths by Place and Households' Standard o f Living ................................................................................................................... 32 Tables 2. 1 Food-Related and Overall Poverty Lines in 1995-96 Per Capita and Per Day.........20 Incidence and Deptho f Poverty inChad in 1995-96 (ECOSIT I) ............................ 20 4. 3. HDIEstimates. byRegion........................................................................................ Summary o f the Issues Raisedby People. by Zone. According to Priorities ...........22 24 34 6. 5. Distributiono f the Disabled. by Disability............................................................... Public Spendingby Sectors. 2003-06 ....................................................................... 83 Annexes 1. Matrix o f Priority Actions of PhaseIof the PRSP................................................... 93 2. Partial List o fNew Projects Identified on a Sector-by-Sector Basis. Financing for Which i s to be Sought inthe Context of the National Poverty Reduction Strategy................................................................................. 106 4. 3. Quantitative Poverty Reduction Objectives ........................................................... 115 Table 1 Detail o f Macroeconomic Framework............................................................ 120 Table 2 Gross Domestic Product by Sector, 2001-15 ................................................. 121 Table 3 Consolidated Government Operations, 2003-15 ............................................ 122 Table 4 Balance o f Payments, 2003-15 ....................................................................... 123 Table 5 Monetary Survey, 2003-15 ............................................................................. 124 6 ACRONYMSANDABBREVIATIONS ACBF ~~ African Capacity BuildingFoundation ADB African Development Bank AFD Agence Franqaise de Developpement APE Parents Associations APICED Agency to Support Community Initiatives inEducation B.E.T. / BET Borkou Ennedi Tibesti 1I DSIS ECOSIT II HealthInformationSvstem Division Survev on ConsumDtion and the Informal Sector inChad II III FER FGF 1II RoadMaintenance Fund Fundfor Future Generations GDP Gross Domestic Product III 7 I GNDI I Gross national disposable income H.I. Handicap International H C I HighInterministerial Committee for PRSP Supervision HPI HumanPoverty Index ICAO InternationalCivil Aviation 0. IDA InternationalDevelopment Association IEC Informationand Communication (outreach) ILO InternationalLabour Organization IITMF Tnternatinnal Monetarv Fund National Institute for Statistics and Economic and Population INSEED Research LGRP I Law on the management o f oil revenues I LRVZ Veterinary Research and Zootechnology Laboratory M.I.T. I1IntermediateMeans o f TransDort MA MinistryofAgriculture MASF MinistryofSocialAffairs of Chad MAT MinistryofTerritorial (Regional) Development MCT Manufacture des Cigarettes du Tchad (Chadian Cigarette Manufacturer) MD MinistryofDecentralization MDG Millennium Development Goals MEE MinistryofEnvironment andWater MEF MinistryofEconomyandFinance MEN National Education Ministry MFI Microfinance institution M J MinistryofJustice MMED MinistryofMiningandEnergy MPDC Ministry o f Planning, Development, and Cooperation MSP MinistryofPublic Health MTPT MinistrvofPublic TransDort inChad NEPAD I New PartnershiD for Africa's DeveloDment I NGO Nongovernmentalorganization OHADA Organization for the Harmonizationo f Business Law inAfrica OMVSD Office to Develop the SatCgui-DCrCssiaPlain ONDR National Office for RuralDevelopment PFIE Information for the Environment Training Promam 8 SNBG National Good Govemance Strategy STEE SociBt6 Tchadienne d'Eau et d'Electricit6 (Chadian Water and Electricity Company) UNDP UnitedNations DevelopmentProgramme UNICEF UnitedNations Children's Fund V R D S Sewer and drainage systems WHO World HealthOrganization WPDS Women inparticularly dire straits 9 Introduction The National Poverty Reduction Strategy (N.P.R.S.) i s the concrete manifestation of the Government's commitment with respect to Chad's eligibility under the Enhanced Highly Indebted Poor Countries (EHIPC) Initiative, establishedby the Bretton Woods institutions. To implement this strategy, the funds freed by debt relief (estimated at approximately US$260 million through 2015) will complement national resources, including revenue from Doba oil exploitation as of 2004. Apart from that commitment, the National Poverty Reduction Strategy will tie in and periodically update, on a more coherent and comprehensive scale, all the sectoral poverty reduction strategies to be implementedinthe country over the next fifteen years. The first stage o f implementation o f the strategy will cover the 2004-2006 period and should continue to benefit from a national, regional, and international environment that i s relatively favorable for a comprehensive and sustainable focus on poverty reduction issues. Inparticular, the participatory approach that was a key factor inpreparing the strategy shouldbe boostedby a consolidation o f democratic fundamentals as the institutions contemplated in the 1996 Constitution materialize, by ongoing efforts to implement decentralization and deconcentration policy, the strengthening of the legislature and the judiciary, national capacity-building in government institutions and civil society, and the development o f communication and consensus-building mechanisms at the national and local levels. As it moves from a period o f stagnation, or even economic and social decline causedby the war, to the start o f a petroleum-based era, the Chadian economy has experienced several years o f strong growth, thanks to oil-industry related investments. The new prospects opening up for Chad pose both a real opportunity and the challenge of eradicating poverty. The challenge consists o f creating the conditions for sustained growth by the end o fthe oil era, together with equitable distribution, both geographically and in terms o f the benefits to present and future generations, o f the fruits o f that sustained growth permitted by an appropriate and efficient use o fboth EHIPC Initiative and oil project funds. A series of activities have been undertaken since 2000 to seize this opportunity and take up this challenge. They have involvedall segmentsofthe populationand theresults are described inthisNational Poverty Reduction Strategy Paper. This document i s articulated around the followingpoints: Background andprocess for preparation o f the PRSP Diagnostic assessment o fpoverty inChad Determinants o fpoverty and opportunities inChad The overall outlook for development through 2015 Macroeconomic framework Implementation o f the PRSP. 10 Chapter 1 Background and processfor preparationof the PRSP 1.1 The international, regional and nationalbackground 1.1.1 Theinternational and regional context The ambivalent results of the adjustment programs implemented all over the world since the late 1970s, which at best induced growth but without reducing inequalities, led inthe 199Os, thanks to the major social policy summits organized by the United Nations, to increasing worldwide awareness o f the need for a new development paradigm. While acknowledging the importance o f growth in the fight against poverty, the new paradigm also emphasizes the need, in poverty eradication efforts, for a global strategy based on an efficient division o f labor between the state, the private sector, and civil society designed to ensure effective and accountable governance, as well as a more equitable allocation o f the fruits o f economic growth for social progress. Another issue that adjustment programs inSub-Saharan Africa have failed to solve i s the debt burden.Moreover, as a result of the various Paris Club member debt relief schemes for poor countries, multilateral financial institution loans now constitute a predominant part o f these countries' debt structure. This situation led the International Monetary Fund (IMF) and the World Bank to propose to their members a new initiative in 1996 designed to alleviate the unsustainable debt burden of poor countries. Thus, the alleged failure ofthe adjustment programs generally thought of as foreign constructs justifies the poverty reduction strategies that the IMF and the World Bank intend to support thereafter: strategies that, thanks to the participatory approach adopted inbothpreparation and implementation, are called upon to establish a close link between economic growth, on the one hand, and, on the other, poverty reduction and the debt relief granted by development partners. To that end, the IMF's Poverty Reduction and Growth Facility (PRGF), in coordination with the enhanced HIPC Initiative and the World Bank's Structural Adjustment Credit (SAC), take poverty reduction strategies as the basic framework for gamering the support of development partners for countries' own efforts to lead their populations out of poverty. Another feature o f the current international context i s the steady downward trend in government development assistance and the decline o f preferential treatment systems in intemational trade. Given this growing shortage o f low-cost funding and the dearth o f trading privileges, poverty reduction strategies have to be both efficient and capable of achieving sustainable solutions. Prepared with this backdrop in mind, the PRSP aims to consolidate the gains made with adjustment programs by integrating them with the new globalized economic order and taking into considerationworld development goals inthe third millennium. 11 Driven by relentless progress in information and communication technology, globalization liberalizes trade and integrates first capital markets, and then goods and services markets. Thus, in every country in the world, competitiveness has become -- for the private sector converted into the key source o f wealth and for the state as strategist - an absolute imperative. However, the liberalization o f markets and o f private initiative has also triggered and maintained expansion o f the so-called informal sector in countries such as Chad, in which it accounts for 70 percent o f GDP. The strengthening o f inter-African cooperation and integration i s expanding markets for businesses and combining the efforts o f African states to work more effectively for improvements in the well-being of their peoples. Key developments here include the establishment o f the Central African Economic and Monetary Community (CEMAC) in 1994, the Community o f Sahel and Saharan States (CEN-SAD) in 1998, and the African Union in July 2002. The New Partnership for Africa's Development (NEPAD) is the latest initiative. Its principal objective is to enable African economies to overcome their shortcomings in terms o f infrastructure and to boost their ability to participate more successfully inthe liberalization o f international trade in goods and services. This initiative i s sponsored, since 1995, by the World Trade Organization. Forged and promoted directly by the African Heads o f State, the new partnership is backed by Africa's development partners and characterized by a steadfast commitment to good governance and the strengthening o f democratic institutions designed to achieve sustainable human development in the Continent. The latter's support for the policies geared, in every sector, to broadening the options open to all people in a society -- development goals o f the third millennium had already paved the way for the pursuit o f menandwomen, the poor or members of vulnerable groups -who were henceforthplaced at the center o fthe development process. For this to materialize, each o f the initiatives undertaken at the national, subregional, or continental level, needs, above all in government administration, to be supported by a general environment conducive to institutions and individuals developing their knowledge and practical skills, as well as the necessary motivation and sense o f responsibility. Capacity buildingwas identified inthe 1990s as the missinglink indevelopment. Its importance for all African countries led the African Capacity BuildingFoundation, created in 1991, to take up the challenge at the continental level. Chad has recognized the urgent need to reinforce capacities and has entrusted the task to a National Capacity BuildingSecretariat (SENAREC). In both its contents and implementation mechanisms, the PRSP takes into account the implications o f the aforementioned broad initiatives undertaken at the international and regional level as well as new developments at the national level. 1.1.2 Thenational context Since independence in 1960, Chad has drawn up and implemented several national, economic and social development plans, in addition to structural adjustment programs since 1987. The overall stated objective o f these plans and programs has always been "to raise the standard o f living o f the population." This was to be achieved by developing the agricultural-forestry- 12 pastoral sector, which employs almost 80 percent o f the Chadian population, the creation o f social and economic infrastructure that would both open up the interior o f the country and link it with the rest of the world, human resource development for a more efficient workforce, etc. Specifically, those programs were to lead to enhanced access to educational, health, and sanitation services, safe water, food security, and so on. Nevertheless, although these programs were put in place, the population has been becoming increasingly poor for the past three decades. Chad's socio-economic indicators rank among the worst for countries in Sub-Saharan Africa. When the process of preparing the PRSP began, 54 percent o f the population lived below the poverty line. Epidemics and endemic diseases are still rampant (including HIV/AIDS, to which 1704 [Tr. SIC] people would succumb in 2000, taking the total number o f orphans to 55,000) and child vaccination coverage ranges from 16 to 20 percent. A large portion o f the population suffers from chronic food insecurity. Almost 90 percent o f the homes offer no protection against inclement weather. One percent o f the population has access to electricity and 30 percent have access to safe water. Less than 10 percent of the population has basic sanitation services and there is one telephone line per thousand inhabitants. At the same time, clear progress can be seen in the education sector, where the enrollment ratio was 67.4 percent in 1998/99. However, the percentage o f enrolled girls was low at every level o f education, depriving the economy and society o f the advantages associated with improvededucation for women. As the participatory consultations showed, there i s still not enough sensitization of parents regarding the importance o f educatinggirls, teenagers, and tomorrow's mothers. Furthermore, the above-mentioned programs have not led to a transformation of the national economy, which still suffers from: ----- Very low productivity; Extreme vulnerability to both domestic and external shocks; The lack o f a dynamic private sector; Insufficient infrastructure, especiallyroads; and An over-sizedinformal sector. In effect, the productive apparatus remains dominated by the primary and tertiary sectors in which technical progress i s slow, with a predominance of informal, low-productivity activities. The investment ratio i s therefore weak (still less than 10 percent), and most o f it i s government investmentat that. Indeed, the dearth o f savings and o f domestic credit i s still a major constraint on the growth o fprivate investment. Overall, in the 1980s and 1990s, the economy was characterized by a practically stagnant standard o f living for the population, with GDP per capita - one of the lowest inthe world - growing by barely 1.4 percent per annum for over 20 years. Thus, the tax base i s tiny (the tax burden averaged six percent between 1988 and 1998) and external trade yields a structural deficit because o f the low level o f exports. This creates enormous dependence on outside aid, while even a modest level o f debt inrelation to GDP turns out to be unsustainable for lack o f the domestic resources needed to service it. The upshot o f this whole set o f adverse conditions was a human development index o f 0.403 in 1999, a year inwhich six out of every 10Chadians sufferedahighdegree ofdeprivation in terms of life expectancy, health, education, and well-being. 13 Among the reasons for this failure o f the development programs are: 0 Political instability, which sometimes prevented these plans and programs from running their full course; 0 Poor planning o f certain actions, which took neither the local context nor the real needs o f the population into account; 0 Insufficient monitoring o f certain actions while they were being carried out; 0 Failure to involve grassroots groups in the preparation o f development programs and policies; and 0 The lack o f sustainability o f actions undertakenwith respect to infrastructure and training. To offset the negative impact o f these shortcomings on human resource development, implementation o f the PRSP should draw on lessons from previous successes and failures. To that end, it was prepared by national staff using a participatory approach, which made it possible to associate civil society and private sector groups with the entire process. The population living inboth towns and villages was closely involvedinthe diagnostic assessment through participatory consultations and the survey on perceptions o f well-being andpoverty. The national context has also improved as a result of remarkable progress on the democratic front. The process that got under way in 1990 and led to the emergence o f civil society and a dynamic, privately-owned press which plays an active part indemocratic debate culminated in the holdingofthe secondpresidential elections in2001 andparliamentary elections in2002. Ongoing decentralization should also enhance the degree to which the population runs its own affairs, especially during preparation, implementation, and monitoring and evaluation of development activities. That i s why the PRSP includes as one o f its priorities or prior conditions more expeditious restoration o f a climate o f peace, notably byboosting security for persons and property and generally strengthening the rule o f law. Effective judiciary that sees that justice i s done and court decisions are punctually enforced, combined with rehabilitation and complete reintegration into society o f demobilized military personnel will have a decisive impact on the creation o f conditions conducive to the success o f the PRSP. As regards economic and social developments, the structural reforms embarked upon in connection with the adjustment programs and the drive toward greater subregional integration, particularly following the devaluation o f the CFA franc inJanuary 1994, have ledto some key productive sectors being opened up to free competition inthe objective that they will become more competitive and the state more disengaged intrusive. At the same time, those reforms led to an improvement in public resource management, the liberalization o f trade, greater domestic capacity to manage development, etc. However, the results are not yet sufficient to stimulate the kind o f growth neededto bring about a sustainable improvement inthe standard o f living o f the population. Inparticular, current provisions for young people, who not only make up the bulk o f the population (over 48 percent o f the population i s under 15 years o f age) but also need to be prepared for their future responsibilities, for women, who act as a stabilizing force in the family and in society, and for the environment (when over half the country i s Sahelian desert) all fall far short o f PRSP targets. Thus, following the fourth round table in Geneva, sectoral consultations paved the way for programs focusing on poverty in the priority sectors (education, health and social services, rural development, infrastructure), which constituted a solid basis on which to build the national poverty reduction strategy. Nevertheless, successful implementation o f the strategy 14 remains indissolubly tied to the country's ability to raise domestic and external resources and to manage them effectively. Transparency inthe handling o f public funds will therefore be of the utmost important to ensure that they are used efficiently and in order to maintain the trust and the involvement of the different actors inthe PRSP. The mechanism employed to keep track o f HIPC Initiative resources will also be employed to the country's oil revenue. First, it will be up to the national authority responsible for strategic monitoringo f the poverty reduction programs -working with the operationalmonitoringunits in the various ministries, particularly those in charge of the priority sectors - to draw up a report every six months on implementation o f the PRSP, to be presented by the Minister of Planning, Development, and Cooperation to an Interministerial Council chaired by the Prime Minister. The first Interministerial Council o f the year to discuss the PRSP should be used to review execution of the PRSP in the year just ended and to make sure that the necessary resources are in place for activities falling due in the course o f the year. The second Interministerial Council o f the year on the PRSP should make it possible to draw up a list o f urgent measures requiredto carry out activities scheduled for the year and to update the PRSP paper, includingthe annexes, above all for the preparation o f the Budget Law. Representatives o f the private sector and o f civil society will also be invited to attend the meetings o f the Interministerial Council on the PRSP (for consultation purposes) either to inform them or because these two sets of partners will be involved in the implementation of parts of the PRSP Action Plan. It will also be sound practice for the Minister o f Planning, Development, and Cooperation to meet, after each Interministerial Council on the PRSP, with the representatives of development partners inN'DjamCna to keep them abreast of the overall picture with respect to implementation o f the PRSP and to hear what they have to say. Between the two meetings o f the Interministerial Council on the PRSP, the national authority responsible for strategic monitoring o f the PRSP helps the Minister o f Planning, Development, and Cooperation to keep the authorities, the people, and development partners informed regarding implementation o f the PRSP. To that end, it will be able to tap information provided spontaneously by the operational monitoring units set up by the various ministerial departments involved in executing the activities mentioned in the PRSP Action Plan. 1.2 Presentationof the participatory process 1.2.1 TheSteering Committee in charge of the strategypreparation process The PRSP was drawn up by a steering committee installed by the government in April 2000. It is ajoint committee which consists of 33 members: 15 representatives of the public sector, 16 representatives o f civil society organizations and the private sector, and 2 members o f parliament. The representatives o f international institutions and o f Chad's development partners take part inthe work of the committee as observers. The committee has apermanent secretariat, which i s the technical body in charge o f preparing the PRSP. The work of the steering committee i s validated by the Technical Committee and the High Interministerial Committee for the Structural Adjustment Program. 15 1.2.2 The strategypreparationprocess The process o f drafting the Poverty Reduction Strategy Paper began with an inaugural seminar held in N'DjamCna on April 25-27, 2000, which was attended by 200 invitees from all parts o f Chad and representing all social and occupational strata: public administration, the private sector, local government, religious communities, and civil society organizations (NGOs, women's associations, young people's associations, the government-owned and private media, etc. ). This seminar determinedwhat activities were needed to complete the drafting o f the strategy and established a timetable for them. The following activities were carried out: a) A survey o f people's perceptions of well-being and poverty (EPEP) was conducted in April-July 2000. It yielded data on the extent of poverty, the dynamics o f poverty, and the perception o f well-being by the poor. The purpose o f gathering this information was to enhance the relevance o f the priority actions to beproposed for the PRSP. b) Ten thematic and sectoral reviews were carriedout inMay-July, 2000, andaddressedthe following topics: e Poverty and rural development; 0 Poverty and employment; 0 Poverty, microfinance, and entrepreneurship; 0 Poverty, health, nutrition, andpopulation; 0 Poverty and education; e Poverty, safe water, and sanitation; e Poverty, housing, urbandevelopment, and transportation; a Poverty and vulnerable groups; a Poverty and macroeconomic environment; and e Poverty and governance. The aim was to gather information that could explain the relations between poverty and activities, situations, and parameters that represent a degree o f access to opportunities, assets, skills, and social services. c) A civil society forum was held in November 2000. This was an opportunity for associations and other NGOs to propose ideas to government and to suggest optimal ways to combat poverty. d) A countrywide participatory consultation process calledMacro Participation was conducted inDecember 2000 andJanuary 2001. Including all categories ofparticipants, acrossthe whole country, they involved 7,796 people. The purpose o f these participatory consultations i s to provide the government with qualitative data on how the associations, groups, traditional and religious authorities, etc. perceive poverty and the ways and means they advocate to improve their standard o f living. e) An evaluation o f standard programs which took place inFebruary was carried out inMarch, 2001. The idea was to become acquainted with development micro-projects and to draw 16 lessons from them that could prove useful for implementing the PRSP. To that end, six projects indifferent fields were selected and examined indepth with respect to their approach to the target populations and their impact onpoverty reduction. These projects were: 1) The Savings and Loans Club at Bissi Mafou (LCrC) ; 2) Cooperativemarkets inKoumra (capacity-building for the localpopulation) ; 3) Community health inBCbalem ; 4) Vocational training inN'Djamena ; 5) Oases farming project for Kanem (nutrition); 6) Environmental protectionproject inAbCchC. The outcome o f the evaluation highlightedthe positive impact o f these kinds o f programs on the living conditions of the populationinvolved, as well as their limits. r) A national seminar was held in N'DjamCna on May 8-12, 2001 to define strategic approaches and priority actions. Some 150 participants from N'DjamCna and other parts of Chad represented the different social strata and, based on the diagnostic assessment findings, contributed amendments to the proposals put forward by the Steering Committee regarding the strategic approaches, national goals, specific targets, and priority actions aimed at reducing poverty inChad. These strategic approaches and priority actions were then re-discussed at regional seminars held simultaneously inAbCchC, Bongor, Mao and Moundou on March 19-21, 2002. For each priority action, performance indicators were established for monitoring and evaluation purposes. A monitoringand evaluation mechanism was also developed and adopted. All these factors led to progressive improvements in the various drafts o f the PRSP, which was also enriched by contributions from Chad's development partners at meetings organized inWashington, D.C. inDecember 2001bythe WorldBankandthe IMF, andbythe European UnioninBrussels inMay 2002. 17 Chapter 2 Diagnosticassessmentof poverty in Chad Although the available data on poverty in Chad are patchy, they provide a fairly clear picture o f the situation in 1995-96, 1997 and 1998, a period during which the economy grew at an annual average rate o f 4.7 percent. The subsequent recession in 1999 and 2000 can be expected to have shaped the opinions expressed by persons interviewed for the Survey on Perceptions o f Well-Being and Poverty (EPBEP), which was conducted in the first half o f 2000. Data for 1999 suggest that at that time almost as many as six out o f every 10 Chadians suffered from one or more types of deprivation causing or caused by markedly low levels of life expectancy, health, education, and well-being, particularly inrural areas. The existence o f such a large proportion o f the population suffering conditions synonymous with poverty requires that a vast program be put in place to enable those affected, throughout the country, to cope with such harsh living conditions and to develop their own ability to tackle and improve them. Stable consumption habits, low productivity inthe primary and tertiary sectors which account for the income o f almost 80 percent o f the population, the downturn in output in 1999 and 2000, and the exogenous nature of the strong growth in 2001 and 2002, mean that the incidence o f poverty will undoubtedly not have fallen. Moreover, despite the new oil sector, and barring any new initiatives, there i s no reason to expect this situation simply to disappear byitselfinthe foreseeable future. The statistical data gathered so far inChad do not directly estimate the degree o f inequality in income distribution, which would make it possible to establish a more relevant link between changes inper capita GDP and changes inthe standard o f living o f the bulk o f the population. It suffices, instead, to link the large share of the rural population inthe total population (80 percent), on the one hand, to the share o f the rural economy in GDP, on the other, and to observe the share o f the informal sector (which includes the rural economy and the poorest segment o f the urban economy) in GDP (70 percent), to reach the conclusion that poverty i s a very pervasivephenomenon inChad. Living above the poverty line constitutes even more o f a privilege for a minority, when one considers that quantification o f that line according to the data available is lower than the income o f a one-dollar per personper day household usedfor international comparisons. With respect to income-generating activities, poverty i s both rural and urban. However, given the large proportion o f the population living in rural areas, rural development constitutes a priority. This finding underscores the importance o f primary activities, especially agriculture and livestock farming, and hence water management, inthe PRSP. Nevertheless, the historical contribution o f industrialization to modernization of economy and o f society, justifies already attempting to create the conditions required for a major development o f manufacturing activities within at most ten years. It emerges from the findings of the various activities undertaken in the participatory process that poverty - regardless o f whether it i s understood in terms o f income, standard o f living, capacities, or risks incurred -- i s a multidimensional phenomenon. Low productivity characterizes most market-based economic activities in Chad, reflecting a shortage or even lack o f capacities due to deficiencies inthe health and education systems. 18 Access to education, health care, safe water, a healthy environment, and housing are key factors in any enhancement o f well-being. The same i s true o f employment and income- generating activities, which were identified as appropriate means o f ensuring improved household living conditions, especially in an urban environment. In rural areas, people stressedthe importance o f farming equipment inraising both productivity and output, and the needto develop road networks inorder to put an end to the isolation o fproduction centers and o f the country as a whole and to allow households to tap the economic opportunities arising in a much larger area. At the same time, mention must be made of the adverse impact o f the climate of insecurity and impunity that has been fed for too long by the excessive frequency and scope o f armed conflicts in Chad. Undoubtedly, a conflict-ridden environment encourages hoarding in safe havens as much as, ifnot more than, a peacetime culture encourages investment inproductive activities. That i s why the PRSP covers not only production and living conditions, but also the institutional environment ingeneral. 2.1 Profileof povertyinChad 2.1.1 Quantitative analysisofpoverty Quantitative analysis o f poverty looks at three aspects: i)the poverty profile, ii)the characteristics o f poor households, and iii)the characteristics o f high-risk social groups. It i s based on data from three main surveys: the 1995-1996 Survey on Consumption and the Informal Sector in Chad (ECOSIT), which only covered four o f the 14 prefectures in the country, the 1997 Demography and Health Survey (EDST), and the 1998 nationwide Migration Survey (EMT). Supplementing these data are Human Development Index (HDI) data for the different regions. Food-related and overallpoverty lines Rural areas N'DjamCna Other towns ECOSIT3zone I Food-relatedpoverty line I 151(0.303) 311 (0.623) 213 (0.43) 194 (0.39) Overall poverty line 195 (0.39) I 414 (0.83) I 276 (0.55) I 253 (0.51)j Source :Directorate of Statistics, and Economic and Demographic Studies (DSEED). 1997. ' ForChad, the daily calorie requirement used (FAO, 1985) is 2,095 kilogram calories in urban areas and 2,175 inrural areas. * The figures inparenthesis are in US dollars at US$1= CFAF 499 in 1995. The whole ofthe area covered by ECOSIT. 19 For the whole o f the area covered by the ECOSIT survey, the food-related poverty line is estimated at CFAF 194 per head per day and the overall poverty line at CFAF 253, that i s to say, US$0.39 and US$0.5 1, respectively. Nationwide, the food-related and overall poverty lines are estimated as CFAF 173 and CFAF 218 per person per day. It should be pointed out that all these lines are well below the international standard poverty line o f one dollar per personper day (about CFAF 700). In absolute terms, the difference between the two lines is slight in rural areas and more marked in N'Djamha. In relation to the food-related poverty line, this difference i s 22.6 percent in rural areas and 33 percent in N'Djamkna, while in other towns the difference is greater (39 percent), a finding to be verified and, if need be, explained on the basis o f the findings of the nationwide survey currently being carried out, which will also permit dynamic comparative analysis o f poverty in rural and in urban areas. This survey was launched in January 2003, so that in December 2004 the lessons will be drawn from it and taken into account inthe annual review o f the PRSP. Incidence and depth of poverty The incidence o f poverty i s that proportion o f households spending less than the poverty line; it measures the percentage of poor households. The depth (or severity) of poverty is equal to the difference betweenthe poverty line and the average income o f poor households, inrelation to the poverty line; it measures the percentage by which the average poor household falls short o fthe poverty line. Table 2 shows poverty incidence and depth estimates based on the foregoing poverty lines and household consumption outlays in 1995-1996. Table 2 : Incidenceand depth o fpoverty inChad in 1995-1996 (ECOSIT I) Poverty indicator by zone Rural areas N'DjamCna Other towns Total Incidence o f food-relatedpoverty 46.2 33.8 38.0 41.6 Incidence o f overall poverty 48.6 35.0 39.3 43.4 Deptho f overall poverty 26.3 30.0 28.3 27.5 Tables 2 and 3 show that inthe zone covered by ECOSIT rural areas have the lowest poverty line and, nevertheless, the highest percentage o f poor persons and less severe poverty. Conversely, the country's capital, N'Djamena, has the highest poverty line; but, it also shows the lowest percentage o f poor persons and the most severe poverty. This finding i s true for both food-related poverty and overall poverty. Moreover, as regards incidence, there i s no great distance between these two types o f poverty. Furthermore, the more urban the zone studied is, the smaller the apparent difference. Tables 1 and 2 establish a scale, with one end related to the rural nature o f the zone under study and the other to the urban nature o f that zone. All along that scale, standard rural areas show a lower poverty line and less severe poverty, while both these are higher inurban areas. Thus, the incidence of poverty is more marked inrural areas than inurban areas, for the total zone covered by ECOSIT. However, the difference in living standards between the poor and their neighbors is more visible in urban areas than it i s in rural areas. Inequalities are more 20 marked in the towns than in the countryside. Poverty i s therefore more widespread in rural areas but poses more o f a threat o f exclusion to the poor in an urban environment. In conclusion, it i s necessary to attempt to reduce poverty in rural areas and also to mitigate the effects o f inequalities inurban areas. In absolute terms, the nationwide incidence and depth of poverty might be higher than the above-mentioned levels for two principal reasons: a) ECOSIT covered only 4 prefectures (Chari Baguirmi, Logone Occidental, Moyen Chari, and O~addaY)~. These prefectures, however, are at the top o f the list in terms of sustainable human development (Table 3). The poverty i s likely to be more widespread inthe other prefectures andthe incidenceofpoverty at the national level is likely to be higher than that estimated by ECOSITI; b) The poverty line was calculated on the basis of calorie needs of 2,163 kilogram calories per day per person, instead o f the 2,400 kilogram calories per day per person, which i s the currently accepted standard for countries in the sub-region. Adopting the new calorie standard would result in higher poverty lines and a higher incidence of poverty. Thus, if all prefectures were included and the 2,400 kilogram calories per person per day standard adopted, the estimated incidence o f poverty would be higher. This possibility could be verified inthe aforementionednationwide survey; meanwhile, it appears to be corroborated bythe humanpoverty index. Human development indicators Poverty i s experienced throughout Chad, albeit with substantial differences between regions. The qualitative analysis below illustrates this diversity in perceptions o f poverty from one regionto another, thereby confirmingthe quantitative analysis. According to the UNDP country report on human development in Chad (2000)5, in 1999 the human development index was estimated to be 0.403. The human poverty index (HPI)6 in Chad was estimated at 57 percent, meaning that in 1999 almost six out o f every 10 Chadians suffered deprivation in terms o f life expectancy, health, education, and well-being. Indeed, approximately 36 percent o f Chadians were at risk o f dying before they were 40 years old; only one third o f the population had access to basic health care; and almost eight out o f 10 people lacked access to safe water. A regional breakdown o f the human development index (Table 3) shows quite substantial disparities between the different prefectures in Chad. The prefectures that contain the three largest cities: Chari-Baguirmi (N'Djamena), Logone Occidental (Moundou), and Moyen Chari (Sarh) each have an HDIthat i s higher than the national average. That indicates that the The term "prefecture" inthis paper refers to the old administrative division. Inadditionto monetary aspects, this index includesother dimensionsofpoverty, especially life expectancyand levelofeducation. 6Themethods usedto calculatethese figures are described in the sustainable human developmentreport on Chad for 2000. 21 presence o f large development pole townskities raises the average HDI for the prefecture concerned, although, as noted above, at the cost o f more marked inequality. The prefectures with the lowest HDI are Salamat and Lac. Salamat has the lowest life expectancy at birth (approximately 40 years), that i s to say 10 years fewer that the national average, and one o f the lowest gross school enrollment ratio: 21 percent compared to the national average o f 65 percent. The prefecture with the lowest enrollment ratio (17 percent) i s Lac. Table 3: HDIestimates, byregion Prefecture HDI Prefecture Chari-Baguirmi 0.430 Logone Oriental 0.379 Logone Occidental 0.422 Biltine 0.378 Moyen Chari 0.413 Batha 0.368 TandjilC 0.396 Kanem 0.356 Ouaddal 0.395 GuCra 0.350 0.388 Lac 0.319 0.383 Salamat 0.259 ~ National : 0.406 I Source :Country report on human development in Chad, 2000 Existing statistics do not permit an in-depth analysis o f poverty by social and occupational categories. However, it can be said that those working in the primary sector (peasant farmers, herdsmen, fishermen) head the poorest households because they make up 78 percent o f the population but account for only 38 percent o f GDP. Next come households headed by persons working inthe urban informal sector, who, while not making up more than 20 percent of the population, account, in conjunction with the primary sector, for 70 percent o f GDP, o f which their part i s therefore 32 percent. 22 Another angle on how the different social and occupational categories experience poverty emerges from the participatory consultations carried out in all the regions. Participants in those consultations expressed concerns which went beyond direct access to credit and basic social services, insecurity, and the isolation o f certain regions, and addressed water management, the need for farming equipment, extension work, and support for local initiatives, as well as the dearth o f processing o f local products and the lack o f means o f production. The PRSP integrates rural development policy with urban development policy in order to respond to these concerns felt, inter alia, by people working in the primary sector in rural areas and by informal sector operators inurban areas. 2.1.2 Qualitative analysis ofpoverty The methodology applied to qualitative analysis aims principally at hearing the views o f individuals without necessarily seeking consensus. It relies on verbal communication in the participants' native language. Thus, these are group interviews, which were first recorded and then transcribed. The procedure consists o f getting together 10-15 people together, chosen on the basis o f certain social and occupational criteria in such a way as to form a relatively homogenous group. Under the supervision o f an outreach worker, participants are invited to discuss a specific topic. The outreach worker guides the discussions with the help o f a partly pre- established interview crib (grilled 'interview). Qualitative surveys do not necessarily yield definitive findings and the size o f the universe sampled inthese surveys i s not as important as it is inquantitative studies. The idea i s to grasp what people perceive inrelation to the subject being studied, which inthis case i s the poverty they live with and the strategies they intend to apply to combat it. The poverty-related factors and issues raised in the course of this analysis are some, but not necessarily all, the determinants involved. 2.1.2.1 Poverty and well-being as perceivedby the population The survey o f perceptions o f well-being and poverty, based on interviews with segments of the population selected according to social and demographic criteria (poor, nonpoor, young, and old, by gender), made it possible to discem the principal economic and social concerns o f the different segments of the population. Underprivileged households have few material goods to enable them to ease the tedium o f domestic tasks and their production (especially agricultural) activities. In this sense, households identified individual savings or access to financial services (microcredit) as the means to acquire the material goods that would help improve their living conditions. Most o f them established a link between their financial capacity, the cost o f living, and income- generating activities that could help them emerge from poverty. For these households, possession o f an asset i s considered a means to elicit financing or as collateral for a loan that will enable them to exercise income-generatingactivities. 23 Table 4 : Summary o f the issues raisedby people, by zone, according to priorities. Urban area Rural areas N'Djamena SaharaArea SahelArea Sahel-SudaneseArea SudaneseArea Health Transportation Agricultural equipment Agricultural equipment Transportation Education Agricultural Credit Transportation Agriculturalequipment equipment Environment Health Safe water Roadinfrastructure Health Credit Education Health Health Education Housing Food Livestock Safe water Food Safe water Safe water Education Credit Safe water 2.1.2.2 Lessons drawn from participatory consultations Participatory consultation interviews were conducted separately with the following social and occupational groups: young people by gender, stockbreeders' associations, farmers' o fNGOs, members o f parliament, and local heads of religious confessions . associations, women's groups, widows, orphans, the disabled, the retired, civil servants, heads The purpose o f the participatory consultations was to expand and refine the picture that emerged from the survey on perceptions of well-being and poverty and to enhance familiarity with specific regional aspects of the nature and causes of poverty. In fact, the consultations revealed a wide range o f perceptions that are listed in detail below. Moreover, it was through these consultations that governance concerns emerged. These regional specificities definitely need to be taken into account inthe strategies devised. GuBra-Salamat For people inthese two prefectures, poverty intheir region i s linked to the lack o f safe water, health structures, education, and a roadnetwork. Inaddition, they cite: 0 the lack o fmicrofinance facilities; 0 the absence of peace and security; 0 the lack o f adequate premises for government departments as well as extremely unstable housing; the lackoffacilities to support local development initiatives; the unavailability o f means o f communication; the lack ofproduction andprocessingunitsfor localproducts; poor governance; the lack o f agricultural equipment; the sanitationproblems inthe area; the poor state o f the roads and rural paths linking the different villages; the continuous environmental degradation; the underdevelopmento flandand subsoil inthe region; the lack o f trained teachers; the shortage o f healthpersonnel; the occasional famines; 24 0 the large number o f orphans and widows living inthe area. The absenceo f a social safety net greatly exacerbates the already precarious situation of these vulnerable groups; 0 the lack o fclothing is also amajor considerationinthe perception ofpoverty; 0 the irregular payment o f civil servants' wages; Mayo-Kebbi/Tandiilk Inthis area, poverty is defined as the status of an individual without physical or financial means. Poverty i s also perceived as the status of: 0 persons with no possessions, who cannot enroll their children in school and have no means of getting around. It i s the lack o f well-being, the lack o f everything that i s useful for life, namely, health, education, housing, food, and clothing; 0 a country unable to provide well trained teachers inits leaming institutions. There are many causes o f poverty, in particular drought, the lack of means o f production, ignorance (illiteracy), the poor quality o f the soil, the isolation o f villages, low prices for agricultural products, nonpayment of retirement pensions, alcoholism, parasitism, the lack of jobs for young people, the lack o f people's initiatives and organizations, insufficient health centers, the lack o f safe water, late rains, the lack o f technical support for peasants, and poor management o f the national resources. Opinions differed on one issue -- the status o f women. Many people think that women should enjoy freedom so as to be responsible for the management o f their activities. However, others prefer the status quo, which requires that women remain submissiveto their husbands. The second special issue i s that o f govemance, especially as relates to the conflict between farmers and stockbreeders. People want to have their say in political decisions; they see themselves as constantly being victims o f conflicts (farmers vs. stockbreeders) or o f discrimination by the political, administrative, and military authorities. Accordingly, they define poverty interms of a lack o f freedom o f action, security, and equity. To fight against poverty inthis region, people also suggest rehabilitating the OMVSD (Office to Develop the SatCgui-DCressia Plain) and the creation of other hydro-agricultural developments, the reopening o f the Cotontchad (Bongor, Guidari) factories, and the sensitization o f parents to the need to educate their daughters. Borkou EnnediTibesti(B.E.T.) For the people o f this region, poverty i s the status o f those who cannot eat their fill, who do not have the means to obtain care if they are sick, who cannot educate or clothe their children, who lack decent housing, and who have no security intheir homes. Additional factors are: 0 the problem ofa lack of safewater for people andlivestock; 0 illiteracy as a scourge and a major impairment to any development initiative; 0 the lack o f technical training for adults who have already grasped the point o f becoming organizedto fight against poverty intheir region; 25 the inadequacy o f health services and of qualified health personnel exacerbatesan already unstable health situation; the inability of oasis farmers to be productive because o f the lack o f training and appropriate equipment; the lack o f maintenance o f existing road infrastructures; the unavailability o f an access road to Libya; the unavailability o fbanking and agricultural credit institutions; the failure to supply ONC (National Grains Office) shops with grainproducts; the shortage o f wells near pastures; the lack o f dams for river water reservoirs; the unavailability o fanimal healthcare service structures inFada; and the lack o f security causedby the existence o f mines everywhere. Kamen-Lac The interviews with the people o f this region show that poverty i s perceived in terms of the lack or shortage o f resources to meet vital needs for food, housing, clothing, and health care, and especially to ensure the safety o f one's property and person. People described the following factors as causes o fpoverty intheir region: the region's isolatedlocation; the lack o f a credit scheme to enable farmers to procure the means o f production (automatic pumps, tractors, carts, etc.), for traders to increase their capital, and for stockbreeders to reconstitute their livestock; illiteracy, the lack o f school infrastructures, shortage o f teaching personnel, the lack o f equipment (tableddesks, blackboards, etc.), the lack o f school canteens to encourage girls to attend school; the lack o f sensitization o f the traditional and religious chiefs to sending children to school and especially to allowing girls to pursue their studies; and the lack o f adequate birth centers and laboratories for medical analyses, the lack o f ambulances for emergency evacuation of the sick, the shortage o f competent medical personnel, and the lack of activities to heighten awareness regarding personal and environmental hygiene. Chari-Bamirmi and Batha Poverty i s defined by the people o f Massakory as an absence o f the resources necessary to meet basic needs, such as health care, food, access to safe water, etc. Poverty i s also evidenced by occasional famine, water-related diseases, and the myriad social problems that people do not manage to solve. To these must be added drought, the numerous civil wars, the isolation o f the villages because o f the poor state o f roads, andpoor governance o f the country. In BOUSSO, main determinant of poverty is the lack of adequate school infrastructure, the resulting in greater ignorance among the people. Inaddition, health and road infrastructure i s 26 inadequate, there i s no social safety net, and the water i s not safe (the people drink river water). Ouaddai-Biltine In this region, poverty is defined as the lack of access to physical and financial resources. Among the causes identified are poor govemance, a lack o f security, lack o f rain, low wages, the lack o f means o f production, ignorance, insufficient wells in pasture lands and villages, nonpayment o f the pensions o f civilian andmilitary senior citizens, and the absence of support structures such as NGOs and public utilities. The population also points out that "the lawlessness o f bandit camel-drivers has struck fear into the heart o f the population living in the rural area of OuaddaY-Biltine. Besieged in their communities by cruel roadblock bandits and living like prisoners, the inhabitants cannot venture into the bush, evento collect gum arabic". They also named the following as causes o f poverty: 0 war and the conflicts between farmers and stockbreeders; 0 degradationof the environment; 0 illiteracy and laziness; 0 poor govemance, corruption, embezzlement. ..; 0 the lack ofwork materials andtools, androad connections; 0 impunity and declining moral standards; 0 the lack ofwater; 0 the lack of extension work; 0 the lack of health structures, especially for mothers and infants. Onthe other hand, women refuse to be examined or even interviewedby a male doctor; 0 the lack ofeducational structures: the few schools lackteachers and schoolbooks; 0 the lack of modem agricultural equipment and archaic cultivation techniques. Moyen-Chari and the two Logones Poverty i s perceived in this area as an inability to meet the basic needs o f people for food, health care and education for their children. The principal determinants o f poverty identified bythepeople are: the poor state ofthe roads; the lack o f agricultural and financial credit; increasing insecurity createdby roadblock bandits and stockbreeders; injustice as a result o f poor management o f the numerous conflicts between farmers and stockbreeders; 0 the theft of yoking oxen and the arbitrary fines imposed by the military and administrative authorities; the depletion and impoverishment o f arable land; mismanagement o f public property; the isolation o f production centers; alcoholism, which i s now a scourge inthe region; the lack o f school and training infrastructure; 27 0 the shortage o f teaching staff; 0 widespread inflation, inparticular with respect to the prices o f essential goods; and low purchasingpower. To stamp out poverty, the priority actions to be taken shouldbe focused on: 0 educationand vocational training; 0 good govemance with a view to creating an environment conducive to development; 0 peace and security as a prerequisite o f development and sufficient output; 0 moneyhredit as a basis for autonomy; and 0 road infrastructuresfor trade and for increasing agricultural production. N'Diamena Inthe capital city ofN'Djamena, the SteeringCommittee organizedseveralmeetings with the major administration, civil society, and private sector groups. According to the people in N'Djamena, poverty in Chad i s the result of bad govemance. Eradicating it, they say, will require a change o f mentality and o f behavior in public administration as well as sustained growth focused on sectors that can improve the lot o f the poor. Conclusion In conclusion, it can be said that poverty is to be found in the overwhelming majority of Chadian households, in both rural and urban areas. However, the data available appear to underestimate the pervasiveness o f the problem. The percentage of poor households i s likely to be inthe region o f 60 percent or more. Inboth percentage and absolute terms, the problem i s worse in rural areas, because the population o f Chad i s largely (approximately 80 percent) rural. Certain socio-economic groups are at highrisk.These are above all women and children needing special protection, the disabled, demobilized military personnel, senior citizens, and persons livingwith HIV. 2.1.3 Typification ofpoor households The analysis in this section i s based on an indirect method that, in the absence o f income and consumption data, enables the level o f well-being o f a household to be inferred from its capital goods and other factors, such as the quality o f the water it drinks. In effect, the principal component analytical technique makes it possible to classify households in ascending order from the first that possesses none o f these goods or fewer than the others to the last, which possesses all o f them or more than the others. For analytical purposes, the households are divided into five groups (quintiles) from the poorest to the most well-off, with each group representing 20 percent of the household in the sample. Between the Very Poor and the Well-off, on the national scale, there are the Poor, the Average, and the Fairly Well- Off. Level of education of the head of household 28 Level of education of the head of household Chart 1 shows a positive correlation between the level o f education o f the head o f household and the standard o f living o f the household. Inapproximately 85 percent o f the very poor (first quintile) households, the head of householdis illiterate, compared to 56.4 percent inthe best- off (last quintile) households. That suggests that education, which develops individuals' ability to seize socio-economic opportunities, limits the risk o f an individual and hisher dependents o f suffering the deprivations that go with poverty. Thus, the impact o f the mother's level of education i s decisive in determining the degree o f hygiene and health o f members o f the households, especially the children. Chart 1 Distribution(%) of households accordingto standard of livin andlevel of educationof the heado fhousehold W e l l Off 0% 20% 40% 60% 80% 100% Illiterate Primary school enrollment Secondary school enrollment Source :Migration Surveyfor Chad, 1998. Extent of access to safe water Chart 2 shows that poor households have practically no access to safe water (only 0.12 percent). They use almost exclusively water from traditional wells that are poorly protected ,from various kinds of contamination and water from marshlands and ponds that they often share with animals. On the other hand, 62 percent o f nonpoor households do have access to safe water. However, if one takes into account the fact that this water mightbe contaminated in a series of steps taken to transport and conserve it, the percentage of nonpoor houses actually usingsafe water i s likely to be low. Thus, avery highpercentage o fthe population is at risk for water-related epidemic diseases such as typhoid and cholera which stem from bad quality o f drinkingwater. 29 Chart 2: Distribution of householdswith access to potablewater (tap,ppubIicfountain, well) by householdstandard of living I VqPoor Poor Average FarlyWell- Well-off TMal Off I Source: Migration Surveyfor Chad, I998 Inruralareas inChadin2000, 17percent ofthepopulationhaspermanent access to safewater and 7 percent practice some form o f sanitation. In towns that have a potable water conveyance network, 9.7 percent o f the population have a connection to it, 27.5 percent fetch their water from the public fountain, and the rest (62.8 percent) use often traditional wells. Altogether only 23 percent o f the populationhas permanent access to safe water. As regards sanitation, no town has a functioning waste water evacuation system: collection networks are dilapidated. Less than two percent o f the inhabitants o f towns and cities have lavatories with running water while latrines are practically nonexistent in rural areas. As a result, the poor are frequently exposed to chronic diseases related to poor living conditions and lack o f access to water and sanitation. Moreover, water-related chores (which take four to five hours a day in certain areas) may, among other things, shorten the time spent on more productive and fulfilling activities. Poverty and gender According to Chart 3, households headed by a women are more prone to poverty than those in which the head o f household i s a man: 54 percent and 34 percent, respectively. This i s partly to be explained by the fact that most women heads o f household are widows or divorcees with dependent children and scant resources. Moreover, their principal occupations are in the informal sector, inwhich income i s low and irregular. 30 Women heads o f household usually lack a professional qualification that could open the door to better-paid employment. Inrural areas, most lack regular access to fertile land7 and live off minor food processing activities, the sale o f firewood, or community transfers. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Male Female Total Source:Migration Surveyfor Chad, 1998 Nutritional deficiencies Data for 1997 (EDST, 1997) show that 40 percent o f children under the age o f 5 suffer from chronic malnutrition (insufficient weight), half o f them in a severe form. According to Chart 4, this ratio i s higher in very poor households (46 percent) than in nonpoor households (34 percent). Chart 4: Percentage of children under 5 years of age suffering from malnutririon (insufficient weight) I 45-1t - I 40 35 30 25 20 15 10 5 0 Very Poor Poor Average Fairly Well-off Total Well-off Source :EDST, 1997 'Generally speaking, inheritage practices favor the sons, who divide their deceased parents' land among themselves. Moreover, in some regions the social hierarchy is such that first the head o f the canton and the rual headman (chefde terre) help themselves, followed by the others. In developed areas, rent has to be paid, which the poor can generally not afford. 31 Onthe other hand, the infant mortality rate (Chart 5) is roughly the same for poor and nonpoor households. The same i s true o f the child mortality rate. That would appear to indicate that the level o f income i s not the only factor determining infant and child mortality. In fact, the parents' level o f education, access to quality health care, breast-feeding, etc. are as important as monetary resources inensuringthe right living conditions for infants. Nutritional deficiencies stem above all from eating habits. Most Chadian households, even among those that do have the resources, generally eat food with little nutritional value. The average daily calorie intake i s estimated at 1,720, compared with an average o f 2,160 for Sub- Saharan Africa and 2,480 for all developing countries. Approximately 15 percent o f children are underweight at birth. Fifty-five percent of children between the ages o f 24 months and 35 months suffer from delayed growth. The figure i s higher (42 percent) in rural areas than in urban areas (32 percent). Twenty-one percent o f mothers are estimated to have a low body mass index.Fifty-five percent o f households use iodized salt; that explains why statistics once showed Chad with one o f the highestincidences o f goiter inthe world. Chart 5: Infant and childmortality rates by households'standardof living(per 1000I 200 150 100 50 0 Very poor Poor Average Fairly Well-off Well-off IElInfant mortality W Child mortality Source :EDST 1997 Access to health services Chart 6 shows that very few (less than 5 percent) women from poor households give birthat a health center, compared with approximately 20 percent o f women from nonpoor households. Giving birth at home, women run a greater risk of them or their infant dying inthe event o f complications. The low use made o f health facilities bywomen from poor households i s likely to be due either to the lack o f such facilities inthe vicinity andor the cost involved, or else to tradition. 32 Since the percentage o f women from well-off (last quintile) households giving birthat home i s relatively high (63.7 percent), the shortage o f such facilities appears to be the most plausible reason for the nonuse o f health services, although the problem o f the cost of services, which the poor cannot afford, should not be underestimated. Chart 6 Distribution(%) ofchildbirths by place andhouseholds' standardof living I 100% 80% 60% 40% 20% 0% Very Poor Poor Averag Nonpoor Well-off I HHealthfacility OAthome I Source :EDST 1997 Housing and urban development As regards housing, over 90 percent o f Chadians live in houses built of unstable materials, with no garbage disposal facilities. Inrural areas, the figure exceeds 98 percent. Inthe major towns, promiscuity and poor hygiene regularly expose the inhabitants to epidemics and endemic diseases (cholera, typhoid, meningitis, etc.). This situation i s perpetuated by the difficulty o f obtaining legal title to land and the high cost o f quality construction materials. The inability o f government departments to respond to demands from townspeople for plots of land to build on has led most inhabitants o f the towns to occupy land on the outskirts in an anarchic fashion, even though some o f the land may be unsuitable for construction (subsidence, swamps). 2.2 Vulnerable social groups - Certain social groups in Chad have a higher propensity to be poor than the rest o f the population: these are the vulnerable (or at-high-risk) groups. a) Women inparticularlv dire straits (WPDS) These are mainly widows, divorcees, and single mothers, whose precarious socio-economic circumstances place a huge constraint on their human development. In addition, women in general suffer other forms o f discrimination that impair their well-being, such as premature or forced marriage, exclusion from inheritance, and excision. With respect to premature marriage, positive law establishes 13 years of age as the minimum for a marriage to be considered valid, which concurs with common law (the findings o f the 1993 census showed the average age for first marriages as 15.8 years). As for forced marriages, 30 percent of the women surveyed (in 1999) stated that they were either married or were victims o f an attempt to make them marry against their will during their youth. 33 As regards inheritance, 33.9 percent o furbanwomen declared that they were unable to inherit from their parents because of their uncles (1999 survey). While the Civil Code has provisions favoring the right of women to inherit, animistic common law has established an unjust treatment o f women in this regard. Muslim customs treat women better in the sense o f allowing them a portion o f what their parents and next of kin leave them, even though they discriminate infavor o f boys. As for inheriting from a husband, only 5.8 percent o f the married women interviewed think they will be able to inheritor have actually obtainedan inheritance for themselves, as opposed to 29.7 percent thanks to their children. A number of women (4.3 percent) think they cannot inherit because they are sterile and 14.1 percent think it i s impossible because o f opposition from the husband's relatives. The Family and Individual Persons Code, which is currently being drafted, should aim at restoring gender equality inthis area. Excision, which i s an obligatory rite o f passage for girls in several ethnic groups, i s another form o f violence against women that damages their health. The justifications given for this practice are both cultural (above all, the quest for purity) and social, in the sense that it provides an opportunity for accelerated education and apprenticeship with regard to conjugal life and femininity. b) Children needingspecial protection{CNSP) These are children who have difficulty adapting or being re-inserted into family or social life. They lack access to basic services, and physical, moral, or legal protection. UNICEF .... estimates that there are 10,802 "children needing special protection." Of them, about 10 percent are under supervision. The "CNSP" are dividedinto several subgroups, including: "children of and on the street." This i s the largest group and comprises approximately 10,000 children; "child combatants," o f which there are some 600; "orphans and abandoned children," numbering approximately 590; "children who are victims o f crimes and political repression," who are estimated to number 110, most o f them located inthe capital. 34 c) The disabled The number o f disabledpeople, including all categories o f disability, was estimated in2000 as at least 487,0008 (Table 5). Most of the disabled are illiterate or unskilled and are therefore unemployed or reduced to begging. Nevertheless, they have formed several associations, which facilitate their reintegration into economic life, especially inrural areas inwhich there tends to be greater solidarity. Table5 : Distributionof the disabled,by disability Nature o f the disability Number o f disabled Physical (poliomyelitis) 163 000 Visual (river blindness, trachoma) 130 000 Hearing (meningitis, otitis) 70 000 Mental 16 000 Source :ILO, Mission Report to Chad, July 17, 1995 d) Retiredpersons The number of retired persons inChad rose from 4,500 in 1993 to 13,438 in2000. The retiree problem essentially consists o f failure to pay their pensions on a regular basis. Current fiscal constraints have prevented a solution to this problem, which, nevertheless, needs to ironed out as soon as possible. e) Demobilized military personnel The number o f demobilized military personnel i s currently estimated at 27,046. With help from its partners abroad,' the government has put inplace a program to reintegrate this group into the economy. Its pilot phase, which began in January 1999 in five o f the old prefectures (Chari-Baguirmi, BET, OuaddaY, Mayo-Kebbi and Moyen-Chari) has just concluded with some clearly discemible results: 399 projects funded for 2,777 reintegrated demobilized military personnel (out o f a projected total o f 3,500). However, the low level o f education o f the demobilized personnel (approximately 80 percent have had no schooling at all) makes it difficult to envisage their swift reintegration into society and the economy. The risk posed by this group for national peace and security requires a more resolute commitment to the implementation o f a rehabilitation and skills development program for the group to facilitate their integration. * IbrahimaN'Daye, Mission Report to Chad, June 18 to July 17, 1995, ILO. The World Bank and GermanCooperation. 35 f) Victims o f HIV/AIDS The challenges to Chad's health services, which were already difficult to tackle in the short term, have been compounded by the wonyingly rapid spread o f HN/AIDS. Indeed, the number of confirmed cases of AIDS has risen from 10 in 1989 to 1,010 in 1993, to 1,343 in 1996, and to over 12,000 cases in 2000. The percentage o f people testing positive for HN/AIDSinrural and urban areas ranges between 4 and 10percent. The speed with which this disease spreads and the social and economic havoc it wreaks make it a development, as well as health, problem. According to World Bank report No.16567-CD (1997), approximately 8,000 pregnant women per year test positive for HIV, and 30 to 40 percent o f them transmit the disease to their child. This pandemic directly impairs economic growth because it mainly affects the economically active population: 56 percent o f detected cases are in the 15-49 year old population, inwhich women o f child-bearing age account for 31percent and men inthe same age group 32 percent. According to the Population and Fight against AIDS Program (Programme Population et Lutte contre le SIDA), the incidence o f HIV/AIDS i s approximately 4 percent. In some regions, the figure i s 6 percent, or even 10 percent. There are approximately 55,000 AIDS orphans (up from 38,000 in 1997. However, the statistics are dubious, inasmuch as surveillance o f the disease i s deficient due to the shortage o f equipment, reagents, and qualified staff. AIDS leads to marginalization. Its victims become a burden on their families and those who die o f it leave children that society has to take care of. Actions so far taken by the government, with assistance from external partners, aim to contain the spread o f HIV/AIDS; community-based and public care for AIDS victims and orphans i s still rudimentary. The speed with which this disease spreads and the social and economic havoc it wreaks make it a development, as well as health, problem. 36 Chapter 3 Determinantsof povertyandopportunities inChad The poverty described in the foregoing Chapter reflect Chad's modest and poorly distributed economic growth over the past four decades, and bad governance. Analysis o f these two broadly inter-related factors makes it possible to highlight the underlying causes, and hence the constraints onpoverty reduction. 3.1 Determinants of poverty 3.1.1 Governance The modest economic growth i s the result o f malfunctioning government on the one hand, civil society, and private sector institutions on the other hand, which inturn reflects a lack o f good governance. That lack i s evidenced by the difficulty the state has in ensuring sustained security for people and property by means o f a reliablejustice system and responsible defense and security forces, capable o f guaranteeing an environment that provides incentives for business and encourages the development o f the private sector; and by shortcomings in planning and macroeconomic management that explain the dearth of public infrastructure described above. Inaddition, the temporary accumulation o f government arrears following the payment problems places a constraint onbusiness activities. As perceivedbythe peopleof Chad, shortcomings include: A government apparatus that needs to be improved and currently suffers from qualitative and quantitative human resource deficiencies, as well as a lack o f infrastructure and operational tools; A poorly managed, ill-equipped, and ineffective administration, which pays little attention, in its human resource management system, to civil servants' qualifications and therefore demoralizes them. In addition to that, the Chadian government suffers from quantitative and qualitative human resource shortcomings, compared to some African countries. It also works under inappropriate physical conditions in run-down and ill-equipped premises. The govemment lacks the ability to devise social and economic policies. Despite the reforms embarked upon, the National Good Governance Strategy (SNBG) points to the persistence o f numerous forms o f inertia related to the working conditions and behavior o f government officials and civil servants, especially cormption, influence-peddling, and unfair competition practices. Daily violations o f human rights arejustified on the grounds that those rights are not observed by the government officials responsible for enforcing the laws and because o f the lack o f a democratic culture. Biased management o f the farmer- stockbreeder conflict by local govemments and political authorities is a case in point. According to grass roots groups, the lack o f tools provided for the national mediator actually casts doubt on the authorities' real intentions with regardto settlement of conflicts. At the same time, the people pointed out in no uncertain fashion that the government had failed to guarantee their safety and that o f their property in such a way as to allow them to devote themselves to increasing their wealth without fear o f having it taken away from them. For that reason they listed reform o f the security and defense forces among the priority actions needed to restore conditions conducive to a normal life. That reform should be coupled with 37 reform o f the judiciary in order to restore the justice system's credibility for those under its jurisdiction: an achievement that would also have a positive effect on the development of the private sector. After several decades o f armed conflict, the defense and security forces are disorganized and constitute, rather, a threat to the security of persons and property. Discriminatory treatment of these forces has led to a lack o f discipline within the different units made up o f both trained and untrained soldiers. The difficulties of reintegrating demobilized military personneland the irregularity with which pensions are paid are a source o f insecurity inthe country. The uneven distribution o f basic social services between the capital and other towns, and betweenrural andurban areas, is also a result of institutional and human shortcomings, as well as poor political choices. The Administration needs to re-establish trust between it and citizens as the only means by which the Government's political and economic signals can be correctly evaluated bythe different players innational life. Inthe health sector, most doctors practice inurban areas, especially the capital. The same concentration i s found in public health facilities. The percentage o f the population theoretically covered by first tier health centers i s 71 percent, but it should be noted that in 1996/1997 only 43 percent o f households lived within five kilometers o f a health center and 31percent lived more than 15 kilometers away. Inurban areas, 97 percent o f households were within the five-kilometer radius, compared to 40 percent in rural areas. Over half all rural women need two hours or more to reach the nearest health post and 70 percent o f them need to travel at least 70 kilometers to reach the nearest hospital. It i s not hard to imagine what that means for a peasant farmer required to travel so far to obtain medical care for himself or a memberofhis family. Furthermore, despite the shortage of physical and financial resources with which to make the infrastructure operational, 40 percent o f the budget and 20 percent o f foreign aid are spent on N'DjamBna and its surroundings, an area that i s home to approximately 20 percent o f the total population. Telephone services and electricity, water mains, courts, prisons, etc., are only to be found in urban areas. Inthe education and training sector, with the exception o f the centers o f higher education (universities, technical institutes, and colleges), buildings are put up in certain regions where there are no pupils, while in others where there i s a huge demand for education pupilsare onthe floor inmakeshift classrooms builtbytheir parents. The community teachers issue mentioned earlier applies to only a part o f the country, so that certain communities are more sought after than others as regards participation. The difficulties women face in obtaining loans and other resources, the low enrollment ratio for girls, and the modest number o f women in govemment and civil service and decision- makingbodies constitute further examples o f uneven distribution. 38 Box 1.A civil society keen toparticipate fully in national life but without the required skills The emergence of a proactive civil society is one of the most pleasingfacets of democraticprogress in Chad. In areas as essential as productive activities, above all in rural areas, the defense of social rights, and the press, the Chadian civil society has shown its commitment to working with the people. Unfortunately, it is undergoing financial and material strains and a shortage of humanresources that hamper its actions.It is encounteringmajor obstacles in its attemptsto collaboratewith administrative and political authorities. Since it plays a vital part in social mobilization, boosting its capabilities plays an important part in any poverty reduction strategy.That will, amongother things, help foster the entrepreneurialspirit. Box 2. An incipient private sectorfacing a regulatoryframework offering itfew incentives and bereft offinancial support Chad's private sector is incipient and consists mainly of small traders. The abovementionedlack of a sense of initiative is compounded by an unfavorable business environment and a banking and financial system incapable of servingthe private sector. Indeed, the banking system in Chadboils down to five commercialbanks and an agricultural bank with offices in only five towns. Moreover, it grants very few loans to the productive sector, and those that it does grant are mostly (72.5 percent) short-term. Long-term loansaccountfor only 2.2 percent of the banking system portfolio. In short, easing the major constraint on developmentof the private sector involves: i)improving the regulatory and tax framework; ii)developing initiative; iii)developing a banking and financial system in support of investment; and iv) guaranteeing long-term political stability to safeguard future investments and to attract private, and especiallyforeign, capital. 3.1.2 Modest economic growth Economic growth since independence has always been modest: the available data show real GDP per capita growing by only 1.4 percent per annum since the start o f the 1980s. Since 1995, real GDP has grown on average by 3.2 percent a year, that i s to say by 0.7 percent per capita per year. This low rate o f economic growth reflects low productivity in the economy, failure to create an appropriate institutional framework, a weak workforce, and the shortage o f basic economic infrastructure. The low level o f productivity, in turn, is a feature o f the primary sector in which almost 80 percent o f the economically active population works. It reflects the nonexistence o f any real processing, the fragmented nature o f the services sector, and the fact that economic agents are not engaged indeveloping Chadian agriculture. 3.1.2.1 Low productivityinthe primarysector Low productivity inthe primary sector reflects the use o f extensive farming and stockbreeding techniques, lack o f agricultural equipment, the whimsical nature o f the climate, poor organizationinrural areas, and environmental degradation. A low ratio of equipment and input supplies due to the lack ofjhancial resources 39 Farming methods have barely evolved in Chad, in either agriculture or stockbreeding, since the introduction of the plow at the end of the 1950s and of modem agricultural inputs (fertilizers and pesticides) inthe 1960s.Most farmers still use hoes. This i s partly the result of failure to sensitive farmers to the usefulness o f more modem techniques, because o f the low level o f peasant farmers' education and training, and partly also a reflection of the highcost of using those techniques. The fact is: without an appropriate credit system, farmers cannot afford to acquire agricultural equipment. Currently, the most widespread form o f credit takes the form o fprovisiono f agricultural machinery bythe NationalOffice for RuralDevelopment, some NGOs, and development projects and o f inputs provided on credit by Contontchad, which sometimes imposes difficult repayment terms. Noteworthy, too, i s the noninvolvement o f Chadian economic agents inagricultural activities. Failure to employ modem technology and lack o f equipment prevent productivity from increasing, thereby limitingaccess to adequate funding. That creates a vicious circle becauseit diminishes the ability of farmers to acquire modem equipment. It is also worth pointing out that the lack o f equipment and reliance on rudimentary farming methods means that the population in rural areas spends the bulk o f its time working the land, leaving little opportunity to diversify into activities that could become sources o f additional income. As for stockbreeders, extensive pasturing and herdingremain the norm and remain heavily dependent on the weather. Some specialists consider that there has not yet been a change in mentality toward more productive livestock farming, geared not only to the satisfaction of needs but also to raising income. Again it i s worth noting the only modest ability o f the rural training system (training and rural outreach centers, extension services) to reach the majority o fproducers and disseminate new techniques. Another constraint affecting farmers, stockbreeders, and mobility ingeneral i s the existence of explosive remnants o f war (mines and ammunition) in certain parts o f the country, as indicatedbelow. Over-dependence of output and hence income on the vagaries of the weather and on continuous degradation of the environment. Primary sector productivity i s also a function o f climatic shifts. This dependence i s exacerbated by lack o f control over water resources and impotence vis-a-vis pests and continuous degradation of the environment. Irrigation techniques and rational water resource management (collection and preservation o f water for subsequent use when it i s scarce) are practically unknown in Chad, even though they are widely used in certain countries at a similar stage o f development. That means that farm output i s heavily dependent on rainfall patterns. Primary sector output i s also vulnerable to pests: rodents, locusts, granivorous birds, as well as plant and animal diseases. The inhabitants o f rural areas are frequently powerless against these "enemies" for lack o f the products or appropriate technology needed to combat them. Finally, the continuous degradation of the environment in the form o f impoverishment o f the soil, desertification, and erosion from wind and water contributes to low productivity in the primary sector. Itmust be said that, on the whole, the people of Chadhave not yet really grasped the need for rational management o f the environment. The fact that there are still areas that have not been 40 developed creates the illusionthat there i s still substantial room for maneuver; so much so that they are not concerned for the time being about the long-term impact of their activities on natural resources and on the fate o f future generations. The scope o f the environmental problems exceeds the real capacity o f the departments concerned to solve them. The sheer size o f the country, the complexity o f the phenomenon, and the modest resources at the disposal o f the Ministry o f the Environment are daunting challenges to be overcome by any attempt to provide effective protection o f natural resources. Existinglaws and regulations on the environment are old, ill-adapted to reality, or simplynot applied, even when amended. Interdiction, exclusion, and repression are the favorite instruments used by the departments responsible for managing the environment to the detriment of a participatory, reasoned approach accepted by all the players. Actions taken so far to combat desertification are more like improvements to the environment (green belts) or efforts to promote agricultural and forestry output (gum arabic and shea nuts) and they are too limited inscope and time to have a significant impact on the desertification process. Untilenvironmental issues are grasped intheir entirety, notjust interms of natural resource management but also in terms o f economic growth and hence as a way to improve the standard o f living o f the population, it will not be possible to be rid o f this constraint. 3.1.2.2 A practically nonexistent processing sector Low productivity inthe primary sector i s accompanied by a lack o f processing facilities. The industrial sector is extremely limited and consists mainly o f the Chadian Cotton Company Breweries o f Logone (Brasseries du Logone - BdL), the Chadian Cigarette Manufacturer's (Cotontchad), the Chadian Sugar Company (Compagnie Sucribre du Tchad - CST), the (SociCtC Tchadienne d'Eau et d'Electricit6 - STEE), and the Chadian Soft Drinks and Coolers (Manufacture des Cigarettes du Tchad - MCT), the Chadian Water and Electricity Company Company (Boissons et Glacikres du Tchad - BGT). The rest o f the sector comprises above all small poorly controlled informal unitsthat generate very little value added. Food processing lines are barely developed, there being no industrial unit to process meat, milk, animal skins andhides, or eggs, so muchso that the mainline inthis sector is exports of live cattle. Of a huge range o f agricultural products, only the cotton and sugar industries are relatively well developed, while the textile mill has closed down. Thus many other lines remain to be developed to expand the productive base o f the country and exploit the subregional market for exports o f manufactured goods, a field in which Chad is totally inactive today. The development o f a processing industry would generate both jobs and income. Moreover, being less vulnerable to the vagaries o f the weather, this sector would be a more reliable source of steady growth, provided that other hurdles are overcome, especially regulatory problems, the lack o f basic economic infrastructure, and so on. The weakness o f the processing sector has to do with that of a private sector more inclined toward trade than toward productive activities. Chad's private sector labors under a still unattractive regulatory and legal framework, despite efforts already made to improve them. More entrepreneurial spirit is still needed to take full advantage o f existing opportunities. The Chamber o f Commerce, Industry, Agriculture, Mining and Crafts (CCIAMA), which ideally should act as the interface with the authorities, lacks the human, material, and financial resources it needs to fulfill its mission effectively. It rarely participates in major economic decisions. 41 3.1.2.3 A largely unproductive tertiary sector Tertiary sector activities also suffer from low productivity because they comprise very small units inthe informal sector that are essentially engaged incommerce and transportation. The sector's productivity i s heavily constrained by the narrowness o f the domestic market due to the modest purchasingpower o fthe population, the difficulty ofmarketing goods and services throughout such a vast country, and the dearth o f roads and other connections, which increases costs. The development o f services i s also hampered by contraband imports, which penalizes economic agents in the formal sector, who are heavily taxed in comparison with informal sector operators. 3.1.3 Highly deficient human resources and living conditions 3.1.3.1 Education, training, and literacy classes The modest economic growth also reflects the weakness of Chad's human resources, whose productivity i s limitedby the fact that over 80 percent o f the population i s illiterate and only a small percentage o f people over 15 years o f age has received an education. This creates a barrier to assimilation o f new technology that could improve working conditions and thereby improve the standard o f living o f the people. It also partly explains why ancestral methods continue to be used in the primary sector. A vast literacy campaign i s therefore urgently needed to raise the general level o f the population and induce changes in behavior and mentality, and to ease the constraint imposedbythe very highpercentage o f illiteracy. The human resource weakness i s also manifest in the almost complete absence o f the skills which form the basis for economic development; these are basic skills in the construction and public works sector, in crafts, clothes-making, carpentry, and as auxiliary personnel working incompanies, etc. This reflects the fact that technical training and vocational training are still incipient. Qualified instructors are few and far between (for technical and services branches), infrastructure and equipment is falling into neglect, and few scientific materials are available. Only the recently renovated industrial technical college in Sahr and the industrial technical school and apprenticeship centers in N'Djamha, Moundou, AbBchk, provide acceptable working conditions for students and trainers. The shortage o f such skills deprives the country o f the qualified labor force that i s crucial for development o f the private sector and free enterprise. Enhancement o f Chad's human capital will therefore necessarily imply reorienting the educational system and adapting it to labor market needs. At the same time, a disorderly boom in vocational training centers is harmful when what is taught in them i s not supervised by the various parent bodies. Such oversight bodies must establish a coordination mechanism that allows them to define the objectives, contents, and training methods for the courses, as well as the professional standards required for staff at all levels. The principal barrier to the development o f education in Chad i s the shortage o f educational facilities: there are on average 70 pupilsper classroom and at least as many per teacher. The dilapidated and precarious state o f school infrastructure and equipment i s a serious issue: 65 42 percent o f the shelters used provisionally as schools are made o f rudimentary ("secco" and "poto-poto") materials. They have a useful life of one school year. These makeshift classrooms, often built by the communities themselves, are bereft of classroom furniture. The pupils sit on the ground and teachers do without a chair or table. Ccommunities teachers, who are paid both by the Parents Associations (APE) and the communities, make up 56.31 percent o f the totals number o f teachers (school year 1999/2000). Generally speaking, these teachers have very little training compared to professional teachers and the risk o f them passing on their own shortcomings to the future players in Chad's development i s considerable, unless something i s done to enhance their skills. Curricula are ill-adapted to the circumstances and need to be updated. Supplies of schoolbooks and teaching materials are insufficient: one reading book for every three students, one mathbooks for every five, and one scientific textbook per dozen pupils. Inhighereducation, themainconstraintsare: . lack o f infrastructure, equipment, and materials; shortage o f qualified full-time teachers; a predominance o f general subjects that are insufficiently geared to the jobs offered by . private economic agents, with teaching programs that need to be checked as regards conformity to international standards; the lack of facilities for student life (campus, canteen, accommodation, sports equipment, workrooms, etc.). 3.1.3.2 Inadequate health care coverage and hypothetical nutrition Another aspect underlying Chad's modest economic growth i s the state o f health o f the population: a healthy labor force i s more productive than one that is not. Inthe absence o f a morbidity rate, the mortality rate may serve as an indicator o f the health status o f the population. The mortality rate in Chad in 1993 was 16.3 per thousand (18.6 per thousand for men and 14.2 per thousand for women). Infant mortality, estimated at 160 per thousand in 1964 (175 per thousand for boys and 144 per thousand for girls), declinedto 103 per thousand in 1997 (119.7 per thousand for boys and 99.8 per thousand for girls). The maternalmortality rate i s estimated at 827 deaths per 100,000 births. This health scenario i s the outcome o f several factors: a largely non-nutritious diet, inadequate personal and environmentalhygiene, and a shortage o f quality health care services As regards nutrition, the deficiencies are above all related to eating habits, which, for lack of education, disregard nutritional considerations. Most Chadian households, even among those that do have the resources, generally eat food with little nutritional value. The average daily calorie intake i s estimated at 1,720, compared with an average o f 2,160 for Sub-Saharan Africa and 2,480 for all developing countries. Data (EDST, 1997) show that 40 percent o f children under the age o f 5 suffer from chronic malnutrition(insufficient weight), halfo f them inasevere form. According to Ministry o f Health data (DSIS 1998), the principal diseases recorded at health centers are: malaria (18.6 o f new cases), diarrhea (7.7 percent), acute infections o f the lower respiratory tract (7.2 percent), and conjunctivitis (3.9 percent), almost all o f which are contracted as a result o f poor food hygiene or lack of sanitation. Inthat connection, it i s worth noting that only 27 percent o f households in Chad have access to safe water. Only 7 percent 43 have adequate toilet facilities or improved latrines, while 73 percent have no such facilities. Approximately 21 percent o f households have access to sanitary means o f human waste removal. To these, certain local endemic diseases have to be added (iodine deficiencies, leprosy, tuberculosis, river blindness, trypanosomiasis, dracunculosis, cholera), that persist despite implementation o f several programs aimed at eradicatingthem. . Finally, the very poor state o f health o f the population stems above all from a national health system with a number o f shortcomings, including the following: insufficient and poor quality health services. Theoretically coverage i s 71.2 percent o f the population, 64.2 percent with respect to first-tier facilities ("responsibility zones" for basic services delivery), and 78.8 percent for district hospitals (second- tier). There . i s one hospitalization facility per 165,000 inhabitants and 51 beddplaces per 1OO/OOO inhabitants, with marked disparities from one region to another. the low number and poor distribution of qualified healthpersonnelover the country as a whole: one doctor per 36,000 inhabitants (compared with an average of one doctor per 9,000 inhabitants in Sub-Saharan Africa and the WHO standard o f one for every 5,000 to lO,OOO), whereby 17 percent of those doctors are assigned to administrative work; one State-certified nurse per 28,502 inhabitants (Sub-Saharan Africa average: 1 per 2,000 inhabitants; WHO standard 1 per 3,000 inhabitants); and one qualified midwife per 13,692 women aged 15 to 49 (compared to the WHO standard o f 1 per 3,000). Only one-third o f doctors' positions and one-quarter o f nurse vacancies are filled. Despite the new medical staff (doctors and technicians) graduating each year, the shortfall is only gradually beingreduced; insufficient public health expenditure per inhabitant. The share o f public health . expenditure in total government expenditure increased from 3 percent in 1986 to 11.2 percent in2000; poor geographical distribution o f physical and financial resources. Annual operating ....expenditure not counting personnelranges, for instance, from CFAF 145 per inhabitant inSalamat to CFAF 1,890 inChari Baguirmi; little coordination in the management o f the department. It i s highly concentrated and short onplanning; the embryonic state o f partnership with the private sector; the ineffectiveness o f the areas responsible for fighting epidemics; shortages o f medicine in some health centers related to non-recovery o f the costs o f their mismanagement. 3.1.3.3 HIV/AIDS The real constraint with respect to HIV/AIDS is the lack o f awareness campaigns/prevention and hence o f protection. Over 72 percent of the population continues to believe that they run no risk o f contracting the disease, so that only few people use condoms. Only three percent of women and 13 percent o f men say they have usedthem. Illiteracy, poverty, and certain beliefs are amongthe principal factors helpingto spread this disease. 3.1.3.4 Status of women in Chad As a result, above all, o f socio-cultural inertia, women are still largely regarded as mothers, spouses, and housewives and therefore barely participate in decision-making at either the household or the national level. According to the survey on violence against women (October 44 1999), 30.5 percent o f housewives explain their situation by saying their husband prefers to have them at home; 21.1 percent say they cannot work because their husbandrefuses to allow it. This vision o f society leads parents to discriminate infavor o fboys when it comes to enrolling their children inschool. Most women therefore lack a modem education and, as a result, have a low level o f productivity. Since they make up a large part o f the labor force, that depresses national income. Gender-based discrimination also hampers women's access to employment and to economic, political, and social resources and opportunities, and in general their incorporation into socio-economic life. Discriminatory cultural practices prevent women owning land in their own right, so that the division o f land among members o f a family - an increasingly common practice as land becomes scarce - is often done at their expense. Nevertheless, one thing i s clear: given the social and economic importance o f women, Chad will never be able to develop untilit raises the average level o f educationo f Chadianwomen. 3.1.3.5 Lack of social protection The vulnerable groups identified inChapter 2 consist o f individuals at greater risk than others or who are less equipped to deal with those risks. They are disadvantaged with respect to access to sources o f income andor human capital formation. Their vulnerability i s interpreted as a certain sensitivity or insufficient ability to cope with life's hazards, income shocks, or a sharp decline inliving standards. 3.1.4 Inappropriate and dilapidated basic economic infrastructure 3.1.4.1 The road network The road network in Chad comprises 40,000 kilometers o f roads and tracks, 6,200 kilometers o f which are classified as priority, and approximately 33,000 kilometers o f rural roads. Inthe whole o f the country only 583 kilometers o f roads, between cities, are paved. Nonpriority roads are usable for 6-8 months a year and are inadequately or never maintained. The northern, desert region has few links with the rest o f the country. The eastem and southem- eastem parts o f the country are cut off during the rainy season, for lack o f permanent roads. Even within regions, transportation links between towns and the surrounding areas are unpredictable, although these roads and tracks do not include the rural paths linking one village to another. The poor state o f the roads means that vehicles are used mainly on the trunk roads linking N'Djamena to certain large towns or else only inside towns and cities. This means that the inhabitants o f rural areas face real difficulties in obtaining access to social and economic goods and services and are restricted intheir mobility. The lack o f transportation strategies in rural areas hampers the development o f Intermediate Means o f Transport (I.M.T.), such as carts, bicycles, and animals, as well as transportation infrastructure that could make it easier for the populationto get around. One o f the consequences o f this state o f affairs for poverty i s that isolated pockets o f famine persist even though the harvest might be good for the country as a whole. Transporting products from regions where there i s a surplusto regions where there i s a shortage i s relatively costly, so that the price o f transported products becomes prohibitive, not to mention the risk o f loss, deterioration, or destruction o f the merchandise or raw materials. To mitigate any 45 shortages that might arise under these circumstances, enterprises are forced to stock up on raw materials, which raises their costs and therefore pushes up market prices. On top o f that, Chad i s also isolated from other countries (the nearest sea port i s 1,700 km away). This is a substantial economic handicap, given the extra cost of importing and exporting. The competitiveness o f domestic products vis-a-vis foreign markets i s thus impaired. 3.1.4.2 Energy Energy resources are vital for a country's development, since they are a major production factor. Unlike most Sahelian countries, Chad uses only electric energy, apart from traditional sources, such as firewood and kerosene. Electricity i s not available for most of the population (only 1 percent o f total population, and 9 percent o f the households in N'Djamena, have access to it) because o f its exorbitant cost, poor management of the electricity producer and distributor, STEE, and the lack of a proactive policy inthe sector, especially as regards rural electrification, which i s a powerful means o f improving the lot o f the inhabitants of rural areas. The aforementionedpoor management o f electricity supplies severely penalizes the few enterprises that exist inChad. Nevertheless, altemative sources o f energy do exist and could ease the reliance on electricity: notably solar and wind-based energy. Moreover, promotion o f these sources o f energy could halt deforestation for firewood, increase access to energy for productive purposes, especially for farmers, and, at the same time, limit dependence on petroleum products, for which prices tendto bevery volatile inintemationalmarkets. 3.1.4.3 Telecommunication Development and, therefore, poverty reduction are impossible to achieve without efficient telecommunication infrastructure. Chad i s very poorly endowed in this area and the little it has is inadequately distributed. In 1998, Chad had fewer than 9,000 main telephone lines, 83 percent o f which were inN'Djamena, with the rest distributedinnine other towns. The recent development of mobile phones, while laudable, cannot change the underlying picture and the country's vast needs remain to be met. The establishment o f an attractive environment for the private sector and the dissemination o f information and technology necessarily require telecommunication infrastructure. It would be a mistake, therefore, to think that developing the internet is a luxury for Chad. On the contrary, that powerful vehicle for the transmission of knowledge represents an extraordinary opportunity. Properly used it could ease numerous constraints and lead, for instance, to the replacement o f age-old farming methods. 3.1.4.4 The banking system and microfinance As mentioned above, the banking system in Chad consists o f five commercial banks and one agricultural bank with offices in only five towns. That i s one reason why even the modest level o f domestic savings is under-mobilized. From the point o f view o f economic growth, a banking system's primary advantage i s usually to be able to finance the investment opportunities. However, in Chad, the terms governing access to credit are such that they restrict the demand for it to customers o f a certain standing. The bulk (72.5 percent) o f the credit granted is short-term and does not therefore finance long-term investments. 46 To make up for that shortcoming, microfinance has developed on the basis o f a number o f experiments, especially those relying on a savings and loan association philosophy, or others that stress distribution o f credit, and those that promote credit distribution as an auxiliary or supportive activity. However, there are a number o f impediments to promoting these pilot schemes: ... the low levelo f professionalism; the lack o f coordinatedand consistent rules and practices; the difficulty ofprogressingto financial and technical autonomy; the lack o fbridgesbetween these experiments and the traditional banking system; and the lack of a framework for consultatiodcooperation amongthese institutions. Thestate has not yet entirelyfu&lled its role as the guarantor of the common good The shortcomings with respect to infrastructure are the result o f inappropriate economic policies, which for many years failed to generate increased revenue to be allocated to infrastructure. Indeed, the needto endow the country with collective infrastructure never really emerged as a priority when it came to resource allocation. The poverty reduction strategy should lead to a better balance in the levels o f regional development by settling young people on the land and narrowing the development gaps betweenregions and social strata. 3.1.5 Other obstacles topoverty reduction 3.1.5.1 Debt In1998, Chad's outstandingexternal debt totaled CFAF 592 billion], equivalent to 65 percent o f GDP. Multilateral external debt accounted for 75 percent o f the total. In the same year, external debt servicing was equal to 10 percent o f exports and 31.4 percent o f tax revenue. The external debt servicing burden i s therefore what makes Chad's indebtedness unsustainable. With respect to the domestic debt, there is still a major payment arrears component, which needs to be rescheduled, above all in order to make the retirement pensions system financially viable. Part o f the domestic payment arrears penalizes Chad's private sector, which would at least like to be able to rely on a realistic timetable for settlement o f these arrears. 3.1.5.2 Demographic factors The 1993 general census o f the population and housing estimated the population as 6.28 million, with a natural growth rate o f 2.5 percent per annum, based on a synthetic fertility rate o f 5.6 children per woman o f child-bearing age. That demographic profile means that the population will have doubled by 2020 compared to 1997, with a highproportion o f young (48 percent o f the population was under 15 years o f age in 1993, and 50.3 percent in 1997). Strong economic growth is therefore neededto allow the productive apparatus to absorb each year's new contingent o f persons seeking jobs. They also have had to be given an education, training, and access to sports facilities. To combat poverty, 47 a robust growth strategy will have to be complemented by policies favoring the redistribution o f the fruits o f growthinfavor o f the least privileged segments of society. The second general demographic and housing census, scheduled for 2005, will make it possible to gauge with greater accuracy the natural rate o f growth o f the population and geographical mobility and thereby help to fine-tune programs associated with implementation o f the PRSP. 3.1.5.3 Explosive remnants of war, factors exacerbatingpoverty The findings o f the socio-economic survey o f the impact o f explosive remnants o f war on Chadian communities, carried out by Handicap International, a nongovernmental organization, in2000-2001,showed that 23 out ofChad's 28 departments were affected. The problem: k covers 1,081 Km2; k affects 2491° localities in51 sub-prefectures (including 91 inBorkou Ennedi") with 417 distinct "polluted" zones; k affectsthe lives of284,435 inhabitants, who livepermanentlythreatened byminesand > explosive remnants o f war (ERW); had caused, by the time of the impact study and not counting Tibesti, at least 1,688 knownvictims (339 over the previous 24 months12); k prevents access, inthe regions affected, to pasture land (51%), farmland (46%), roads and tracks (39%), watering places (37%), and dwellings (14%); k comprises anadditional 135 dangerous zones13and25 abandoned ammunition dumps; and k isresponsiblefor maintainingthe atmosphere ofinsecuritythatprevailsthroughoutthe affected areas, since it i s possible that certain evil-minded persons could recover the mines and place them inareas previously considered safe. The impact study also shows that there are marked differences among the regions surveyed in terms o f the number o f localities affected. The most striking case i s the Northern region, in which just the departments o f Borkou and Ennedi contain more than one third o f all the localities affected and one quarter o f the country's total population affected by this problem. At the other end of the scale, only 20 localities are affected inthe Southern region, where a majority o f the Chadianpopulation lives. Only 51 sub-prefectures are safe. According to the official national population estimate for 2000, 3,363,996 people live inthe affected sub-prefectures and 4,216,733 live inthe safe sub- prefectures. One can therefore conclude that a little less than halfthe population o f Chad lives ina sub-prefecture pollutedbyminesandother ERW. lo 49 (20%) are classified as severely impacted, 52 (21%) as moderately impacted and 148 (59%) as less Scbcrcly drfectcd. For securityreasons, HIdid not surveyTibesti. 110were childrenor adolescents handlingor playingwith the ERW. l3 That is to say, areas that are minedor polluted, butwhich had no direct impact on the life of the communities at the time o f the survey or were located inuninhabited areas. 48 At the same time, inthe affected zones, especially inBET, numerous minedroads have been abandoned. Certain areas have become isolated as a result; others have opened up new roads which are now used instead and do not appear on any map, which means that guides have to be used to move aroundthe minedareas. Any foray into these areas usingthe map would end up taking vehicles straight to the mined roads. This situation calls for two complementary actions: 9 Deminingofthe minedroadsat leastinareas inwhichthispollutionprevents accessto certain villages or forces travelers to make long and costly detours, whichreinforce the isolation o f the regions concerned, increase the prices of purchased foodstuffs, and makes it harder to sell local produce. 9 Surveying and mapping of the new roads used, followed up by actual road marking and signposting o f those roads. P The least privileged segments of society andpoorest communities are those that bear the brunt o f the risks posedby mines and other explosive remnants o f war and o f the consequencesthey bring. This factor exacerbating poverty must be taken into account and everything possible shouldbe done to keep vulnerable groups safe from this scourge. Iti s a question, in fact: O f preventing those who have nothing from losing their life, or being maimed, or losing their autonomy, or else losing members o f their family or seeing them maimed and turned into a new burden on their family and community. What i s at stake i s also avoiding the loss o f a domestic animal, being able to travel, to obtain medical care, to access pasture land, water, education, or international aid - all o f which are impossible when the routes are dangerous or impassable becausethey are sown with landmines. O f making it possible to carry out rehabilitation, reconstruction, or development projects inareas currently out ofbounds becauseofthe presence ofmines and explosive remnants o f war. Ofenabling the inhabitants of the polluted areas to: omove freely along reopened and safe roads and tracks (an end to isolation, access to medical care, education, and markets inwhich to sell their products... ); ogo to their fields, grazing grounds, andwatering places, without risk; olive without the slaughter of children, adults, and domestic animals, which are often all these people have; o returnto their place of origin; and o live a normal life and avoid an exodus to more hospitableareas. O f ending the cost o f medical expenses resulting from accidents causedby the mines and other explosive remnant of war. Such accidents cripple the meager health budgets in the affected areas. And, finally, of clearing and destroying the mines andother ERWplaced or abandoned on the ground or in dumps, in areas without surveillance, from where they can be recovered by evil-minded individuals. These mines and other ERW aggravate the insecurity prevailing in the polluted areas, so that destroying them will reduce the insecurity and consolidate peace. The National Strategic Plan to Combat Mines and ERW, aimed at freeing Chad from all the negative impacts o f pollution o f this kind, fits inperfectly with the national poverty reduction strategy. The negative effects o f these remnants exacerbate poverty, so that efforts to clear them, which in most cases will have to precede the implementation of new projects in the minedareas, constitute one o fthe cross-cutting axes ofthe poverty reduction strategy. 49 3.2 Chad's strengths 3.2.1 Opportunities Chad has considerable potential, above all in connection with its natural resources (water, farmland, stockbreeding, minerals, etc.), but it i s the upcoming exploitation o f its oil resources that could bring a major poverty reduction breakthrough. Another major contribution will come from resources resulting from the Heavily IndebtedPoor Countries (HIPC) Initiative. Under-exploited land and water resources Almost one third (30 percent) o f Chad, or 39 million hectares, could be used to grow crops. However, each year, only approximately 2.2 million hectares (5.6 percent) are used for that purpose. Some 5.6 million hectares could be irrigated, but today only 7,000 hectares are. In other words, the country's farmland resources are hugely under-exploited. Chad's water resources consist o f permanent and semi-permanent waterways, groundwater, and surface water. Almost three-quarters of the country consist o f sedimentary basins with several layers o f groundwater. The volume o f subterranean water ranges between 263 and 455 billion cubic meters per year, with a replacement volume o f 20.6 billion cubic meters. So Chad has, unlike other Sahelian countries, sufficient water resources, although harnessing them is still aproblem. Judicious useof that water would helpsecure agricultural production. Abundant mineral resources Chad's underground has an abundance of minerals: salt, natron , uranium, gold, diamonds, kaolin , etc., most o f which are not exploited, but the most important i s oil. Indeed, oil production will generate substantial revenue for the Treasury: during the life o f the project, Chad will earn, on average, CFAF 50 billion a year. These funds will be allocated to the different economic sectors, especially to priority areas in order to raise the standard o f living o f the population. The petroleum era will provide numerous opportunities for the private sector, via subcontracting and the development o f service industries. Spin-offs from the oil investments can already be seen inthe transportation and catering sectors. There i s likely to be considerable diversification inthe economy and a substantial increase inhousehold income. With respect to oil revenue, it is worth noting the - in terms of governance - unique arrangement made regardingmanagement o f the funds, which is another strong point. Inorder to guarantee that future revenue i s wisely spent, on November 30, 1998 the National Assembly adopted a law on management of oil revenue (Law No. OOl/PR/99). This law provides that 10 percent o f the revenue from royalties and dividends will be earmarked for a fund for future generations; that 80 percent o f the balance will be assigned to the priority sectors, which are health, and social services, education, mral development (agriculture and stockbreeding), infrastructure, the environment, and water resources; and that 5 percent o f the royalties will be assigned to development o f the productive region (on top o f that region's share o fbudgetary outlays). The law on management o f the oil revenue also contemplates the establishment o f a committee to monitor it called the "College de Contrdle et de Surveillance des Ressources PCtrolibres (CCSRP)" and comprised o f representatives o f the government, parliament, the judiciary, and civil society. 50 An international community willing to support the country The international community has become convinced that only a concerted effort bydonors and creditors will make it possible to combat poverty effectively through government development aid and the promotion of private investment. Greater synergies have to be sought in the contributions o f the various partners to the National Poverty Reduction Strategy. One o f the instruments with which to finance that strategy i s the HIPC initiative. Other programs under way in specific sectors and involving several donors offer further financing opportunities for those sectors, especially for rural development and transportation, provided that they are well coordinated and complementary to one another. Increasingly organized segments of thepopulation, keen toparticipate in development The accountability o f local people for the choice and execution o f development activities i s becoming increasingly essential. InChad, that trend has become palpable with the emergence and expansion o f associations and movements, especially in rural areas. These organized movements have helpedto embed the notion of participation, so much so that inall spheres o f action the population appears to be manifestly interested in taking part in development activities. Thus, on the training side, one can cite the spectacular growth of community schools, the dynamic activities o f Teachers and Parents' Associations (PTAs), and so on. Communities teachers, who are paid by the PTAs, account for 54 percent o f the total number o f teachers. In the health sector, people have shown their readiness to "own" health facilities through the cost recovery system, an experiment that has yielded fairly convincing results, This i s a great opportunity that, extended over the rest of the country, would provide a means o f supplying medicine to health centers and makingthem financially viable. At the same time, the deconcentratioddecentralizationprocess under way inthe Ministry of Public Health (decentralized budgetary planning, delegation o f budgetary decisions to the prefecture level, the training center for health professionals, the expectation that hospitals are to be autonomous) provides an opportunity to expedite decisions and enhance the efficiency o f the correct health care system. 3.2.2 Thelong-term outlookfor growth and development The national poverty reduction strategy (PRSP) for the next 12 years begins at a time when the government has decided to continue efforts to restore macroeconomic stability that began with the 1995-1998 Structural Adjustment Program (SAP) combined with an Enhanced Structural Adjustment Facility (ESAF).While this approach has brought some major gains, the impact on the living conditions o f the population as a whole, and o f the poor, inparticular, has been modest. Nonetheless, it i s worth pointing out that the latest developments, especially exploitation o f Chad's oil resources and the willingness o f the international community to help the country attains the millennium development goals (MDG), as well as the Heavily Indebted Poor Countries (HIPC) Initiative, offer real grounds for hope that poverty can be reduced. 51 3.2.2.1 The oil boom era The oil boom opens up the possibility o f enormous growth in GDP per capita. The macroeconomic framework projections show oil revenue projections by 2015, on the conservative assumption that no more oil finds occur. The principal goal inrelation to oil exploitation consists o f devisingpolicies and actions that maximize the impact o f growth on poverty reduction. Oil revenue will indeed provide the government with the resources it needs to carry out the actions listed inthe PRSP, which will inturn improve conditions for production, especially inruralareas. Likewise, the creation ofa favorable environment for the private sector will help to diversify the economy. 3.2.2.2 The Highly Indebted Poor Countries (HIPC) Initiative Chad has been eligible for the HIPC since June 2001 and that year received CFAF 8.7 billion ininterimassistance. The debt reliefitselfwill follow evaluationofoneyear's implementation of the PRSP. The net present value of the total debt reliefunder the HIPC Initiativei s US$260 million, which will serve to finance the actions envisaged inthe PRSP. 52 Chapter 4 The overall outlook for development through 2015 A landlockedcountry, Chadhas three large geo-climatic areas: 0 . a Sahara area o f 780,000 km2 covering the whole northern part o f the country, with hardly any rainfall, almost continuous dry winds, and high temperatures during the day. The main activities are farming near watering places and camel breeding. This i s date palm country; 0 a Sahelian area of 374,000 km2 inthe center o f the country, with between 300 mmand 650 mm o f rain per year. People earn a living by growing cereals (millet) and oleaginous plants (groundnuts), and from extensive livestock farming. This i s where Chad's gum Arabic comes from and the region has a long-established merchant trade. Because o f the climate, Sahel area farmers face two constraints: the range o f rain- based crops i s limitedandmore intensive farming requires irrigation; 0 a Sudanese area covering 130,000 km2 inthe south, with between 650 mm and 1,000 mmo frainperyear. The climate inthis regionis "tropical." Itallows for intensive and diversified rain crops: cotton i s cultivated on 200,000 hectares, oleaginous and vegetable plants (groundnuts, cowpea, sesame, voandzeia, and, more recently, soya) on 200,000 to 300,000 hectares, cereals (millet) on 450,000 to 800,000 hectares, tubers (cassava, sweet potato, yam, taro), and vegetable crops. Low-water level crops (cultures de ddcrue) are grown on 100,000 hectares. The inhabitants o f this area also practice small animal breeding. This zone also serves as an area where cattle come from the center o f Chad as they migrate to summer pastures. Chad's principal oilfield i s at Doba, in the Sudanese area. Production i s expected to come on stream in 2003 and to last at least 25 years, duringwhich time a billionbarrels of crude oil are to be extracted. Doba oil offers the country a real opportunity but also poses a developmental challenge for the Sudanese area and for the country as a whole. Taking up this challenge, the outlook for Chad through to 2015 envisages halving the incidence o f extreme poverty and the creation o f a diversified and competitive post-oil boom economy. 4.1 An integratedvision of poverty reduction combined with the preparation of the post-oilboomera Incircumstances such as those described inthe foregoing paragraphs, inwhich everything is urgent in every sector, defining a "vision" boils down to formulating a shared response to three challenges. 0 First, an ecological challenge, the protection o fthe environment prerequisite, without which Chad's strength interms o f its abundance o f still under-exploited land andwater resources, animals and pastures would not infact become a major asset. 0 Thenthere is the political challenge, identifiedas the consolidationof democracy, peace, and security. Given civil society's commitment to playinga part inthe running o fthe country, effective decentralization o f power will help builda new balance between the representative democracy organized byrepublican institutions and the direct participation o f the people inthe affairs that concernthem. 53 0 Finallythere i s the economic challenge, inthe form o f the sustainable development imperative, without which social progress can only be ephemeral. Growth will be sustainable because it will go hand inhand with protection o f the environment and because the form it takes will be acceptedby a populationhungering for security of bothproperty and persons, better governance, and multifaceted support for grassroots initiatives. The oil boom opportunity rounds off this scenario with a developmental challenge. By 2015, the public sector, the private sector, civil society, and the people have to have halved the poverty that existed in 1997 and to have consolidated the foundations o f an economy diversified enough to withstand the shock o f the end o f the oil boom as well as the foundations o f a society reconciledunto itself inwhich each individualhas an opportunity and grasps it. For this to materialize, the PRSP relies on an integrated sectoral policies approach aimed at reducing poverty. This approach i s expected to have a swift and lasting impact on the incidence and depth o f poverty. At the start of this millennium, farming, stockbreeding, and fishing account for 40 percent of GDP, employ 80 percent o f the active population, generate over 59 percent o f household income in rural areas, and provide 80 percent o f export revenue. Spin-offs from the oil economy will allow these three sectors to exploit their still considerable room for expansion, as they respond, in competition with imports, to a more solvent domestic market. They will therefore be calledupon to substantiallyboost their currently modest productivity. Moreover, in order to compete in a more openly competitive national, subregional, and international environment the post-oil boom economy must be able to rely on more qualified labor given the wage component in the local products on the different markets. Technical education and vocational training centers for skilled workers in the diversification sectors must be in a position to enhance the knowledge and skills developed at the basic education level. Hence the emphasis on adaptingcurricula to meet human capital development needs. Increased exploitation o f the potential in existing branches o f activity and the introduction o f new lines will undoubtedly require mobility by economic agents over even vaster tracts o f the country. The road network infrastructure will have to adapt to these trends in the context o f growing demands for comfort and quality services. Inthe social sector, it will bea questionof focusing on: > expediting and implementingsocial policies (health, education, social protection), with a view to rapidly extending coverage in basic services, raising the quality o f those > services, and narrowing current gaps; intense cross-cutting programs (training, labor intensive activities, support for cooperatives, etc) and sectoral initiatives (agriculture, stockbreeding, transportation), which would form part o f an overall attack on poverty and share the goal o f increasing productivity and employment; P implementation of specific actions, especially in the areas of nutrition, food security, hygiene, and social protection, geared to improving the lot o f the most vulnerable segments of the population. At the political and institutionallevel, the focus will be on: > consolidating the foundations o f democracy by completing the establishment o f the institutions contemplated in the Constitution; implementing decentralization; 54 strengthening the judiciary and parliament; and developing access to information and mechanisms to reach social consensus. 9 Consolidating national unity and at the same time seeking better ways to exploit the potential of each social and economic opportunity the country affords; 9 strengthening domestic capabilities in government institutions and among the representatives o f civil society. Inthe economicand financialsphere,efforts will focus on: 9 sustainability andlessvulnerability to shocksofdomestic output; 9 increasing mobilizationof domestic resources to finance development and manage it rationally; 9 National skill-building in both the private sector and in government departments dealing directly with economic agents; 9 Integration and internal organization of the productive system, including overcoming the country's isolation and the promotion o f domestic trade; and 9 Cutting back onmilitary expenditure and reintegratingdemobilized military personnel (and their dependents) into civilian life. The participatory and comprehensive approach pursued in drafting the PRSP and the development strategies o f the priority sectors allows for simultaneous consideration and appropriate weighting o f the resources to be managed or needs to be satisfied, human and institutional resources, and economic, technological, and ecological aspects, along with social and cultural factors. 4.2 Povertyreductiontargets from2003 to 2015 The PRSP revolves around five principal strategies, namely: (i) Promoting good governance (ii) Ensuringstrongand sustained economic growth (iii)Improving human capital (iv)Improvingthe livingconditions of vulnerable groups (v) Restoringand safeguarding ecosystems These strategies aim to generate an overall momentum for poverty reduction in all spheres o f the public administration and civil society, while highlighting a nucleus o f priority sectors based on the poverty profile and its determinant, namely the health sector, rural development (including water resources and the environment), infrastructure, andthe educationandtraining sector 4.2.1 Promotegood governance This strategy lends support to all the actions designed to meet the political challenge in all its dimensions. To that end, these actions target a number o f national objectives: consolidation o f the rule o f law, promotion o f an efficient, motivated, and more capable public administration, decentralization o f power and deconcentration, promotion o f efficient and transparent management of public affairs, strengthening o f the capacity o f the private sector and of civil society, security for property and individuals, the fight against corruption and impunity, and judicial reform. 55 The National Good Governance Strategy (SNBG) adopted in August 2002 defines good governance as transparent and participatory management o f economic and social development, based on the primacy of law and accountability. This definition combines responsibility, the quest for efficiency, effective action, and justice for all. It addresses both central and decentralized government, but also the private sector and civil society. As definedabove, good governance supports the fight against poverty inasmuch as it involves people in .the making o f decisions that affect them and their environment, while raising citizens' awareness o f and trust in the legal provisions that safeguard their rights and in the fairness o f the obligations imposed upon them. Thus good govemance ensures that the interests o f the population are taken into account to a greater degree and creates the conditions for greater participation bythe people inefforts to develop the country. Since the "sovereign national conference" held in 1993, an institutional framework has been gradually built up through a series o f laws on supervision and surveillance, economic liberalization, public security, decentralization, and the promotion o f fundamental freedoms and human rights. Nevertheless, there i s still a long way to go before the rule of law i s consolidated and much remains to be done to strengthen the civil service, increase efficiency and transparency in the management o f public affairs, and boost capabilities in the private sector and in civil society, as they serve as intermediaries o f the people in enhancing govemance. 4.2.1.1 Consolidation of the rule of law Under the rule of law, as opposed to dictatorship, the state forces itselfto define the laws that will govem its behavior and that o f individuals and to respect those laws in order to set an example. Thus, the focus i s on strengthening parliament as an institution, reforming the judiciary, andpromoting humanrights. To increase participation by public debate stakeholders, steps have been taken to strengthen partnership among them, such as the preliminary project to strengthen human rights and governance, as well as launching the project related to the strengthening o f the economic and financial analytical capacity of the National Assembly. In addition, the Action Program adopted by the Ministry o f Justice i s gearedto promoting the rule o f law, access to justice, and justice as a factor indevelopment. Concerning human rights, new initiatives are needed with respect to the status o f women, protection o f children, national mediation and settlement o f conflicts, security for people and property, and the public andprivate media. 4.2.1.2 Role of the state, the private sector, and civil society Inthe current context ofpolitical and economic liberalization, governance of a country relies on a division o f roles between the state, the private sector, and civil society. The state i s delegated political power by the people on terms established in the Constitution. The private sector generates wealth, and therefore holds economic power. Civil society acts as the intermediary o f the people. Each o f these entities seeks to improve its economic well-being, the free exercise o f its freedoms, observance o f the rights guaranteed under the Constitution, and fairness inthe obligations imposed upon it. Role of theState 56 Inthe aforementioned divisionofroles, as the politicalpower counterpart, the State's mission i s to defend the general interest; which means that it i s under the obligation to protect constitutional freedoms and to guarantee the conditions required for ongoing consolidation o f the economic power o f the nation as a whole while safeguarding a balance among the interests o f the members o f that national collective entity. To that end, since the end o f the 197Os, the State as strategist (1'Etat strat2ge) has gradually replaced the state as Provider (1'Etat- Providence), while the aspirations o f the people for a Constitutional State have been manifested with increasing clarity since the end o f the 1980s. Finally, since the end o f the 1990s, the worldwide consensus infavor o f combatingpoverty has established a purpose for a conjunction o f the State as strategist and the State as provider: sustainable human development. As a result, it has become increasingly important to strengthen the capacity of the state to define, for each strategic period, an overall approach, priority sectors, and appropriate policies, and to intervene effectively and efficiently. Inparticular, ifpoverty i s to be reduced, there has to be not only an efficient allocation o f public funds, but also a use o f such funds that can be verified by the people themselves or their duly authorizedrepresentatives. The situation described above testifies to a widespread lack o f capacity o f the public administration to fulfill its mandates, particularly as regards the allocation and planned use of human resources, but also inother spheres. With a view to creating the best possible conditions for a successful PRSP, capacity-building needs already shape the human capital development programs (especially education, training, and literacy campaigns). However, such programs will be complemented by an overall capacity-building program, especially inthe ministries responsible for the priority sectors. The idea i s to develop both institutional and individual capabilities inthe ministerial departments and inthe directorates and technical units attached to eachministry. The civil service reform program aims to promote, at both the central and the decentralized level, a professional, better motivated public administration, endowed with the necessary theoretical knowledge and technical skills it needs. The integrated vision through 2015 on which the PRSP i s based indicates that Chad now has the opportunity to overcome in 10 years a 30-year lag in its development. For that to happen, however, the state and the civil service have to prove their commitment not only to a more deep-seated democracy but also to a strengthening o f capabilities in all spheres o f economic and social life. Inparticular, special attention needs to be paid to the priority sectors already established inthe law on management o f oil revenues, to good governance, and the oil sector itself. The oil boom poses a development challenge that can be met by proven ability to manage an economy driven, in terms o f expansion, by one sector. Inthis case, it i s important to ensure effective and appropriate absorption o f the resources at the social and environmental level, in the oil-producing region itself and at the national level. The ministries responsible for the priority sectors need to strengthen their own technical and general coordination skills, as well as their ability to coordinate the steps they take to: 0 bear in mind the impact o f oil extraction on the surrounding areas and communities, particularly as regards health, sanitation, and water resources; 57 establish a specific program to support development activities in the oil-producing region in order to involve the local people directly, through their grassroots communities and NGOs, in bringing about the spin-offs that they rightly expect from the exploitation o f oil resources. Within the framework o f efforts to combat poverty, a local development fund will be set up in the oil-producing region, fed by a part of the oil revenue and co-managed by the people o f the area; include a specific development program for the oil-producing region in a national development plan, insuch a way as to limit migrationto the oil-producing areas and to plan the development o f those areas as well as urbanization innearby towns; strengthen the capabilities of the competent government departments to handle the legal, technical, and financial implications o f oil extraction, inaddition to the ability of the Finance and Planning Ministries to guaranteemacroeconomic management tailored to absorption of both the oil and the HIPC Initiative revenues, without a disrupting effect on fiscal management, control o f inflation, and preservation of a competitive non-oil economy; establish an information and communication system covering all impacts o f the oil project, that may serve as an example for all other miningprojects. Particularly in the case o f the oil project, it will be necessary to develop legal, institutional, and individual skills to manage the environmental impact o f oil exploration and extraction activities. There are several dimensions to the state's responsibilities in developing mineral resources: 0 monitoring and controlling the negative impact o f mining exploration and production on the environment and onthe population; 0 monitoring and supervising the health and safety o f persons exposed to the direct and indirect effects o f miningprojects; 0 putting in place programs for relocating people displaced by mining exploration or extraction activities; 0 maintaining, as far as possible, access to hunting, farming, and forestry areas; 0 protecting the environment. To meet these responsibilities, itwill benecessaryto: Strengthen the capabilities o f the staff in the competent departments, at both the central government and decentralized levels; Draw up and periodically test emergency rescue plans inthe event of an oil leak or other oil industry-related accidents; Applythe provisions of the Environmental Code inpractice; Endow the National Technical Monitoring and Control Committee (CTNSC) with all the legal, technical, material, logistical, and financial facilities it needs to carry out its mandates to monitor and control the social and environmental impacts o f the Doba and any other oil project in Chad. To that end, a study will be carried out aimed at eventually replicating the experience acquired by the CTNSC through a permanent entity. Monitor migration flows attracted by the revenue generated bythe Doba project and put inplace a rapidresponseplanbasedon any needto expand social and economic infrastructure (schools and health posts, centers to combat HIV/AIDS, sanitation and water supply systems, procurement facilities, electricity) and to protect the environment o f the area, which is already subject to intense demographic pressure; Use the Doba region and the oil revenue assigned to it to test a coordinated and integrated regional development approach, especially one using a participatory 58 approach to define priorities for the Local Initiatives Concerted Action Fund (FACE) and financial and technical mechanisms to support micro development activities. The coordinated and integrated regional development approach should enable central government, the deconcentrated and decentralized agencies, grassroots communities, NGOs, and the local population to combine their efforts to carry out a regional project through participatory preparationand implementation o f a regional development plan that incorporates the investment programs o f communes or rural communities. The preparation and implementation o f this regional project will provide an opportunity to reproduce, at the regional level, all the stages built into the PRSP. The first objective will be to organize "ownership" o f the PRSP in its current version by the people, then to update it shortly thereafter on the basis o f regional experiences. National priorities will thereby be reflected at the regional level, especially in the health, education, transportation and public works, and safe water and sanitation sectors. Preparation and implementation o f the regional project will also provide an opportunity to re-launch implementation o f decentralization policy. Once regional institutions have been put in place and responsibility has been handed over to the representatives o f the people, participatory management of the local development Fund will provide an opportunity to promote consensual rules and arrangements with the active participation o f localinterest groups with a view to: 0 expanding access to basic infrastructure and services; 0 promoting employment and income-generatingactivities; 0 strengthening the capacities o fmicro and small-scale enterprises; 0 coordinating actions taken bythe government and development partners at the regional level. Role of deconcentration and decentralization In the PRSP framework, decentralization acts as a catalyst for local initiatives and deconcentration aims to make government activities more effective at the grassroots level. As provided for inthe 1996 Constitution, decentralization enables democracy to be practiced right down to the level of small communities. Apart from being enshrined in Chad's Constitution, decentralization will play a part in good governance through: i)the accountability o f local governments, with autonomous budgets; and ii)election o f local officials by the people. Decentralizationpolicy is expected to make a substantial contribution to civil peace, strengthen the people's direct involvement in efforts to combat poverty on the basis o f local initiatives. For the population concerned, local government constitute an appropriate framework for participation indevelopment activities, first because they are small and, second, because their proximity tends to make them more inclined to respect the obligation to account locally for their management o f public funds. The fact that they have their own bylaws expedites the mobilization o f funds for the provision o f services to the people, in addition to the fact that they are better informed than central government regarding the difficulties people face. 59 Despite the administrative divisions created in 1999 and 2002, the country i s under- administered because o f the size of certain administrative districts, administrative arrangements that have not been adapted to local circumstances, the lack o f competent officials and working tools. Inregional administration, instability in executive positions and the absence o f a master plan are hampering decentralization of the state. To remedy these defects, it is expected to: 0 strengthen the human and institutional capacity o f the central and deconcentrated departments responsible for steering decentralization efforts; a draw up a decentralizationmaster plan; 0 draw up and adopt the regulationsneeded to implementthe already validated bill; a draw up and complete the various laws and regulations allowing local governments to become financially autonomous; 0 ensure that officials and the personnel responsible for decentralization are properly trained for thejob; a seek an appropriate solution to land ownership issues in the decentralization framework; a strengthen the resources o f deconcentrated outside agencies inorder to enable them to operate insupport o f the future decentralized govemments; and a strengthenthe technical and logistical capabilities o f Chad's land registry to enable it to perform its task o f buildingand analyzing a landowner data base. Role of theprivate sector The private sector acts as the intermediary o f the people when it comes to looking with the government at the conditions required to expand economic opportunities and wealth. It therefore questions the government, in particular, about trade, industrial, and privatization policies. It must, inparticular, be able to express its point o f view and advise the government ininternational negotiations, inthe context ofAfrican economic integrationand inconnection with bilateral and multilateral cooperation, whenever the development and strength of the national economy i s at stake. For its part, inorder to encourage investment andjobs inthe public interest, and specifically in order to foster the goal o f diversification o f primary activities over the next 10 years inChad, the government must be able to question the private sector. Thus, what is needed is a consensus-building framework that, institutionally speaking, needgo no further than that offered by the CCIAMA, which has the legal means but is bereft of all other resources. Role of civil society As mentioned above, the emergence o f civil society has facilitated social movements calling for economic and social development. However, civil society also plays an important part in galvanizing support for good governance, the fight against corruption and impunity, deeper respect for the rule o f law and the foundations o f democracy, transparency, and accountability, all o f which makes it a healthy countervailing power to the public and private sectors and one that aims for a fairer distribution o f the fruits o f growth promised in the PRSP. Thus, public administration must be prepared to accept the role of civil society, which, for its part, must 60 strengthen its ability to perform this role professionally, impartially, and with a highdegree o f responsibility. Strengthening the capacity o fcivil society involves: 0 drafting a reference guide onthe participatory approach for grassroots communities; 0 preparinga communication strategy inconnection with the PRSP; 0 strengtheningthe technical skills o f government officials inapplying a participatory approach and developing a culture ofparticipation; 0 strengthening the technical and organizational skills incivil society organizations. 4.2.1.3 Efficient and transparentmanagementof public affairs For the past ten years or so, the government has been directing its efforts to a number o f sectors. Thus, it has identified four priority sectors, namely health and social services, education, rural development, and infrastructure. Funds have been channeled to these sectors via 20 percent annual increases in their operating budgets. Nevertheless, these efforts have fallen short o f what i s needed, partly because o f debt servicing, which rose from CFAF 17 billion in 1995 to CFAF 28.3 billion in 2001, an annual increase of approximately nine percent. Substantial efforts must be made in the priority sectors, the list o f which will be expanded inorder to bringabout an effective reduction o f poverty inChadianhouseholds. The lifting o f financial constraints as a result o f the upcoming oil boom, Chad's eligibility for the HIPC Initiative, and international assistance in general, must be accompanied and sustained by an improvement in governance, implementation o f a skills-building program, and, also, efforts to combat corruption. 4.2.2 Ensure strong and sustained economicgrowth This strategy concerns the economic challenge, in which the four national objectives are: exploitation o f growth-generating mineral deposits; promotion of the private sector, development o f the priority infrastructure sector; and creation o f the conditions needed to trigger a self-sustainingdevelopment momentum. As regards fiscal policy, the strategy for the coming years will be gearedto: 0 keeping strictly to the budget, especially the 1993 budget, so as to get through this transitional year in good shape and avoid any slippage that might place a strain on future economic management; 0 prudent management of oil revenue in order to contain the negative impact of fluctuations inthese funds onpublic finance and the economy; 0 usingthe oil revenue as specifiedinthe PRSPand the provisions o fLaw 001/PFU99 on management o f oil resources, which assigns the bulk o f oil revenue to the priority sectors; 0 continuing to strengthen the fiscal mechanisms and tools for scheduling and monitoring expenditure in order to ensure that the oil revenue earmarked for the priority sectors i s usedeffectively; 0 increasing non-oil revenue inorder to protect the economy from excessive dependence on petroleum, which i s a resource subject to volatile prices and to be able to devote sufficient funds to ensure that government departments operate efficiently. 61 4.2.2.1 Exploitation of the sources of growth As mentioned earlier, exploitation of its oil fiends constitutes an important opportunity for Chad. The commencement o f oil exports in 2003 will radically alter the structure of the Chadian economy. Nevertheless, agriculture and stockbreeding will remain the principal sources o f medium and long-term growth. The challenge facing Chad is to make the most o f the oil revenue to diversify the national economy. The secondary sector i s also expected to benefit from this opportunity, especially the cotton, construction and public works, and mining-related subsectors. The tertiary sector will also benefit, especially in transportation, commerce, and services. 4.2.2.2 Promotion of the private sector The regulatory and legal framework, which i s still unappealing despite efforts to improve it, will be revised inresponse to demands for reform expressedbynational and foreign investors, especially inorder to elicit and support the development o f the entrepreneurial spirit called up to diversify the productive apparatus beyond the bounds o f the services sector. The focus will be on South-South cooperation to promote business initiatives, while a study on the obstacles facing investors will make it possible to identify and lift the major baniers to private investment. Assistance will be sought for efforts to boost the capabilities o f the Chamber o f Commerce, Industry,Agriculture, Miningand Crafts (CCIAMA) so that it can act as the interfacebetween the government and the private sector. So far it i s not playing as active a part inthe making o f keyeconomic decisions as hadbeenexpected. Within the overall goal of increasing incomes, and parallel to sectoral policies, the government intends to embark on a policy o f support for promotion o f the private and cooperative sector, backed by consolidation and diversification o f activities that generate productive employment. To that end, the strategies and specific objectives o f the government inpromoting theprivate sector come under three components, accordingto the revised 1998- 2005 Guideline Plan. The first component involves improving the legal and administrative framework for enterprises. Here, the priorities are: streamlining o f administrative procedures for establishing private companies; implementation o f all the rules adopted at the regional level under the treaty establishing the Organization for the Harmonization o f Business Law in Africa (OHADA) and in accordance with the harmonization of the rules in force in the Central African Economic and Monetary Community (CAEMC); expeditingjudicial reform; reducing labor market rigidities, and so on. The second component concerns direct support for the development o f local enterprises. It addresses above all issues related to the financing o f enterprises thanks to the setting up o f a guarantee fund, the opening o f lines o f credit for long-term funds, the promotion o f microfinance, economic and tax incentives inconnection with the training and hiring of young people, etc. Also part o f this component are: strengthening o f the technical facilities for (public and private) specialized training o f economic agents and civil servants involved in promoting the private sector, and support for consular agencies to develop technical assistance capabilities for SMEs. 62 The third component comprises actions designed to develop information for economic agents and consensus building between them and the authorities. It includes, inter alia, developing mechanisms tailored for different types o f economic agent for detecting and seizing market opportunities, costs and technologies, the economic and financial situation, business regulations, and development of the potential to be found in different branches of the economy, etc. Inthe PRSP framework, promotion oftheprivate sector is basedonthe followingprinciples: 0 give more importance to the managerial staff and representatives o f the private sector; 0 pay all due attention to training and know-how; 0 promote dialogue and consensus-building between the private sector and the public sector; 0 combine initiatives and coordinate assistance to the private sector in order to strengthen synergies and act consistently; 0 strengthen the capacity o f the private sector to be incontrol o f its role; 0 integrate promotion o f the sector in the process o f regional and subregional integration and encourage it, and through it the national economy, to compete inan increasingly competitive environment; 0 consolidate gains and develop new initiatives; and 0 establish an agile system for coordinating actions and activities with representatives o f the private sector. 4.2.2.3 Developmentof basicinfrastructure and support for growth Transportation The government has drafted a National Transportation Program (PNT) for 2000-2009, the main purpose o f which i s to contribute to economic growth and poverty reduction. The strategy adopted consists o f 0 overcoming Chad's domestic and external isolation; 0 lowering the costs of transportation, both for traveling abroad and in international trade; 0 maintaining minimum access to all parts o f the country, especially in the rainy season; 0 achieve a sufficient number o f roads that can be used all year round and link the major towns; 0 continue liberalization o f the sector and streamlining o f management; 0 assist communities to develop rural transportation infrastructure and local forms o f transportation. Safe water and energy The Master Plan for Water and Sanitation, drafted for 2003-2020, follows the recommendations made at the United Nations Conference on integratedmanagement o f water resources Harare, 1998), which were confirmed at the World Summit on Sustainable Development (Johannesburg, 2002). In its participatory, comprehensive, and integrated approach, and inits focus on local activities, this plan fits inwith the PRSP inrelyingon: 63 0 a national consensus regarding a proactive but realistic policy o f expanded, efficient, fair, and affordable access to safe water andbasic sanitation; 0 information, education, and sensitization o f groups o f stakeholders, be they public or private, cooperative, national, regional or local, men or women, young or adult, to the need for sustainable management o f water resources; 0 strategies, activities, and basic investments with a lasting impact on other concerns o f the people and o f the authorities, such as safeguarding the health o f the people and o f the ecosystems needed to preserve biodiversity and enable a major part of the productive sector to operate. The safe water strategy revolves around expanding access to water in both urban and rural areas, and raisingpeople's accountability for its management. As regards energy, the strategy chosen consists of promoting alternative sources, such as solar and wind-based energy, in order to lessen the impact o f firewood cutting on the rehabilitation o f forestry resources and in order to expand the use o f energy for productive activities, especially inagriculture and industry. The goal of government policy i s to satisfy the whole of the Chadian population's energy needs, to the extent possible, and in particular to make electricity available at the lowest possible cost. Thus a policy and strategy framework for the electricity subsector in Chad (2002-2006) i s currently being implemented. An STEE emergency program to rehabilitate essential water and electricity services i s currently beingimplemented. There are also others, especially: 0 The national rural andperiurban electrification program currently under way; 0 The electricity grid interconnection program with Cameroon, which aims to bring electricity to Bongor, Pala, L6r6, Fianga, Gounougaya and Binder, for which financing i s being sought; 0 The program to bring electricity to 20 secondary schools, for which studies are at an advanced stage; 0 Promotion and exploitation o f solar and wind-based energy, for which the government i s seeking financing, etc. Postal and telecommunication services Inthe postal and telecommunication services sector, the aim is to guarantee coverage ofboth urban and rural areas, especially by developingmobile telephony. 4.2.2.4 Achieve a sustainable increase in rural output The government has prepared a national rural development strategy, which was presented to development partners at the time o f the sectoral consultations inJune 1999. The core objective o f this strategy i s to find a sustainable way o f increasing output in the rural economy while protecting the environment and strengthening human and institutional capacities. To achieve that goal, the government has opted for the following: 0 to induce and maintain sustainable growth infarm output; 0 to support rural organizations; 0 to develop emergingsub-sectors; 0 to improve natural resource management; 64 0 to decentralize the provisiono f agricultural services; 0 to enhancepublic sector effectiveness; and 0 to increase access to basic services for the rural population and the rural economy. At the root of this strategy, therefore, is an increase in the productivity o f primary sector activities and in rural incomes, along with preservation of natural resource capital. A sustainable increase in farm output presupposes diversification o f crops and an increase in agricultural productivity; diversification o f production systems and increased security in livestock farming; diversification o f ago-forestry products; and an increase in environmentally sound fishing and wildlife output. This increase in output remains dependent upon the ease with which producers can access the productive factors (agricultural equipment, seeds, fertilizers, and pesticides, etc. in the case o f agriculture; animal husbandry inputs and veterinary products and animal feed in the case of stockbreeding; fish farming inputs and equipment for the environment) as well as on water resource management. As part o f the strategy aimed at diversifylng sources o f income, the introduction o f new vegetable or animal species will be the subject o f studies and research, along with the processing and marketing o f farm produce or livestock products. The aim i s to increase the rate o f exploitation o f arable land and o f land that could be irrigated, as well animal and pasture resources. Studies and research will be carried out, regarding: the improvements to agricultural inputs and the way they are used; the need for new cultivation techniques in the targeted areas; the establishment o f viable agricultural services centers; and the introduction o f specific financial instruments for the rural sector, particularly instruments based on an overall approach to the financing requirements o fruralhouseholds. As regards farmers' organizations, a comprehensive capacity-building program shouldprovide producers with further information about the participatory approach, modem management techniques, and the importance o f accountability. Other activities for farmers' organizations could involve sharing experiences with farmers in other countries as well as training in performing representation functions in the steering committees set up by the government and civil society organizations. Community development and extension on topics o f interest to farmers may require the development o f training programs and a rural communication system, such as a rural radio network or a farmers' newsletter (lettrepaysanne). Like the farmers' organizations, government officials involved in rural development should benefit from appropriate capacity building programs at both the central government and decentralized levels. Inparticular, it would be useful to boost the ability o f the technical staff in the competent ministerial departments to present study reports that would facilitate decisions regarding research topics identified in consultation with farmers' organizations or specialized private sector studies. The ministries responsible for rural development should, in particular, develop their ability to coordinate their efforts to establish a reliable information system for monitoring and evaluating implementation o f the PRSP. Gathering the required information, analyzing and disseminating it on a regular basis are prerequisites for good governance inrespect o f rural development issues. 65 Increasing output also means developing lines o f activity. That will come about by processing products; strengthening negotiation, organization, and management skills; increasing the availability o f credit; and facilitating national and international trade. Regarding the emergence o f competitive lines o f activity, the challenge i s to develop marketing and the competitiveness of agricultural, forestry, and pastoral products by strengthening infrastructure and supporting institutions and by streamlining the legal framework. That will be achieved by facilitating exchanges o f information with respect to both logistics and the way markets operate, by adding value to products by processing and packaging them, and by actively promoting the economic activities providing forward and backward linkages. The emergence of these lines o f activity i s closely linkedto promotion of the private sector and to the strengthening o f the role o f women, as economic agents active in these new lines. Special attention i s currently beingpaid to cotton, which i s one o f the key sectors in Chad's socio-economic development. As part of the reform o f this branch o f activity, the government i s determined to divest itself of its oil and soap activities and will concentrate on installing effective management in Cotontchad and developing farmers' institutional and organizational capacities. To that end, inDecember 1999,the government adopted a reform strategy for the sector, aimedprincipallyat raising the income o f cotton growers. This strategy involves an institutional change geared to increasingthe cotton growers' bargainingpotential by (i) strengthening the role o f the cotton grower's associations, and (ii) havingthe state withdraw from cotton growing and revampingthe structure o f the cotton industry. As part o fthe planto boost the role ofthe cotton growers' organizations, the strategy involves the following: 0 strengthening the institutional and organizational capabilities o f cotton growers. 0 Improving access by cotton growers to information and knowledge regarding the economic situation, particularly as it affects cotton; 0 easier access o f cotton growers to inputsand management services; 0 active participation by cotton growers inpreparing and monitoringthe process o f the state's withdrawal from the cotton industryand the institutionalreformo f the industry. Giventhe state's withdrawal, the reformstrategy advocates: 0 a legal separationbetween Cotontchad and its oil and soap products division (DHS), followedbyprivatization o f the autonomous HS; 0 carrying out a study to identifyand analyze scenarios with respect to the privatization o f Cotontchad activities; 0 carrying out an ex-ante social impact analysis, including the impact onpoverty o f the privatization scenarios; 0 organizing a cotton growers' forum and an investors forum to make sure that their points o f view are taken into consideration; 0 selection and implementation o f a final privatization scenario; 0 initiating an ex-post follow-up on the impact o f the reformprogram. 66 4.2.3 Improving human capital This strategy directly addressesthe two priority sectors ofhealthand educationandtraining as national objectives. It also covers national goals with respect to combating HIV/AIDS. 4.2.3.1 Education, training, and literacy campaigns Inline with the strategic guidelines set at the time of the sectoral consultations in January 2000 for the 2000 - 2004 period, the government aims to ensure broader, fairer, and more effective access to the educational system. To that end, it proposes to adapt school infrastructure, curricula, and teaching methods and materials as well as pedagogical supervision, based on concerns regarding feasibility, sustainability, and efficiency. The national education strategy fits in with the goal o f universal education by 2015. At present, there are 3,653 primary schools, including 3,100 in rural areas, 209 junior high schools, and 36 higher secondary school (lycies). The net enrollment rate is 57 percent for children aged between 6 and 11. Fifty-six percent o f the teachers are also heads o f communities and there are 2,700 literacy centers. Increasing access to education with cost control involves rationalizing the supply side, , promoting the enrollment o f girls, the development of community schools, promotion o f bilingual education, and establishing short educationcourses. To improve both the teaching and learning experiences, education and training programs will be revamped, new schoolbooks will be issued, teacher skills will be enhanced and evaluation systems strengthened. ... Finally, strengthening institutional capabilities in administration, planning, management and direction will mean: reinforcing deconcentration and decentralizationo f the educational system; strengthening the information system, human resource management, and communication; boosting supervisory, control, and monitoringand evaluation capabilities. The first year admission rate i s expected to reach 90 percent for boys and 75 percent for girls by 2005-06 (compared with 82 percent for boys in 2000) and 96 percent for boys and 85 percent for girls by 2009-10. The improvements in the quality and effectiveness o f teaching will make it possible to achieve a retentionrate insixth grade o f 63 percent by 2006 and o f 82 percent by 2010. At the same time, the teacher-pupil ratio should reach one teacher per 50 pupils in 2010 in elementary school (compared with 1per 74 today) and 1 teacher per 40 pupils in2005 and 35 pupils in2010 insecondary school (compared with an average of 1teacher per 85 pupilsat the present time). A series o f steps will also be taken to improve the qualifications and motivation o f teachers. However, improving access to educationand the teacher-pupil ratios presupposesthe hiringo f a substantial number o f teachers. Thus, public expenditure on education will be kept under control at the primary school level by using more community heads. The proportion o f such teachers in the total teaching corps will increase from 56 percent in 2000 to 70 percent in 2,006, and 80 percent in2010. 67 Greater equity in access to education will be sought by supporting community initiatives and through their participation inthe management and financing o f education, as well by targeted interventions inunderprivilegedgeographical areas and social groups (girls, nomad children). To achieve universal quality education by 2015, pursuant to the Geneva IV Roundtable, a ten- year program to support the educational system was adopted by the government and its ...... partners inMarch 2002. It aims at: a marked improvement inthe retentionrate at the primary level; developing national curricula, training most community teachers, and drafting Chadian schoolbooks; developing innovative programs to combat illiteracy; improvingthe quality o f learning; experimenting with innovations in school health and meals, pre-school education, and distance education; a strong effort to promote the enrollment o f girls. To achieve this, the governmenthas committed itselfto taking the following key policy measures: a) A substantial increase o f the share o f GDP allocated to education, with a goal of at least 4 percent by 2015. b) Earmarking ofat least 50 percent ofthe educationbudget for basic education. c) An annual increase o f at least 20 percent in the operating budget o f the education sector, throughout the program. d) Registration each year inthe national budget and against HIPC resources o f the funds to be transferred to the FAIC account for the heads o f community and settingup of the Agency to Support Community Initiatives inEducation (APICED); e) Establishment o f the National Curricula Center to develop bilingualnational programs, leading to the production o f Chadian schoolbooks distributed free o f charge to all children by 2011. 4.2.3.2 Health The overall objective pursued by national health policy is "to ensure that the population has access to quality basic health care services," inkeeping with the World Health Organization's Health for All philosophy, in as short a timeframe as possible. The principal strategies in National Health Policy are: i) develop quality basic health care services for the population; ii) seek urgently for qualified human resources; iii) improvemanagementofthehealthsystem; iv) continue to combat endemic diseasesand epidemics. The intermediate goals are: 68 Guarantee health coverage; Develop apharmaceuticals policy; Continue and develop efforts to increase the frequency of visits to health centers; Train human resources; See that the health system i s well-managed; Put in place contractual arrangements governing the provision of health services by private providers; Make every effort to reduce the impact o f endemic and epidemic diseases; and Strengthen surveillance and early warning systems with respect to potentially epidemic diseases (cholera, meningitis, tuberculosis). 4.2.3.3 HIVIAIDS With regard to HIV/AIDS, actions to be taken will, in particular, address awareness campaigns for high-riskgroups but also children from primary school onwards. Arrangements will be made for pregnant women to be systematically screened and for victims of HIV to be treated. Infact, in addition to awareness campaigns, the government undertakes to take steps to care for patients and victims o f HIV/AIDS, including the provision of antiretroviral drugs. 4.2.4 Improvingthe living conditions of vulnerable groups This strategy targets the least privilegedgroups and thereby recognizes that general policies to promote economic growth are not enough to improve the lot o f the poor. In that sense, the PRSP i s based on integrated policies aimed at establishing the basic conditions for a continuous expansion o f economic opportunities and at ensuring equal access to those opportunities by opening markets and strengthening skills. Thus, given the poverty profile in Chad, the national goals identified in connection with this strategy are integrated urban development, support for microenterprises and SME, employment, and the setting up o f a social protection system. 4.2.4.1 Integrated urban development Consolidating democracy, reducing poverty, and diversifylng the non-oil economy are the basic pillars o f the PRSP, which focus during implementation on policies that include promoting the sectors in which the poor are active and target poor areas. Analysis o f the spatial dimensions o f poverty in Chadjustify geographic targeting o f all parts o f the country by developing infrastructure and promoting direct involvement of the rural population in implementation o f the PRSP. Inurbanareas the PRSP : will support an approach that seeks to see that medium-size towns are interconnected by a road network that can be used all year round and can be accessed from any satellite settlements; will support national and regional development plans, which will be complemented by urban developmentplans; will help to draft an appropriate regulatory framework; will concentrate on developinginfrastructure and urban services. 69 4.2.4.2 Support for microenterprises, SME, and employment Support for microenterprises, SME, and employment will consist o f 0 supporting the management and emergence of professional service providers. Support for the management o f small enterprises i s the key to sustainable development of the few really dynamic enterprises. To continue reducing the predominance o f informal activities, a mechanism will be gradually introduced to support the development o f a supply of professional services for formal sector enterprises that will assist them at various stages intheir activities; 0 the resumption o f the activities o f ATETIP (Chad Agency for the Execution Work o f Public Interest), l4which reconciles the distribution of income and the maintenance of basic and/or social infrastructure; 0 rehabilitating technical training and apprenticeship centers by anticipating training needs and, to that end, regularly collecting information from companies; 0 creating a documentation and economic and technological information center. 0 stimulating the financial system by establishing and developing financial instruments with a view to: (i) mobilizing local savings based on investment and placement I schemes; (ii)grouping together mutual insurance and micro-credit institutions; (iii) encouraging innovative projects: risk capital; (iv) facilitating equipment for small enterprises, via leasing; and (v) financing the productive cycle; 0 disseminating educational programs to promote business culture and sensitize young people to the advantages o f participating inprograms offered by the technical training and apprenticeship centers, as well as young people involvedinmicro-projects, micro- activities, or microenterprises. The aim i s to encourage creativity and facilitate insertion into the production circuit. 0 improving cooperation and coordination o f actions to support M F I s working in the field. 4.2.4.3 Social protection Social protection measures may be institutional (laws, regulations...) and/or programs and projects. Their function i s to lessen vulnerability and ease the poverty o f vulnerable groups. To that extent, they help to contain the excessive inequality and disparities between different social strata and to mitigate the possible negative impact of social and economic policy decisions and choices or o f social unrest. Infact, an efficient social protection system mustrely on a system providingexhaustive data on risks, vulnerable groups, actions taken, and the players involved. Thus a comprehensive social protection strategy should be based on three types o f intervention: prevention, foresight, and remedies, should risks materialize. As regards riskprevention, the social protection strategy mergeswith the PRSP inas much as the latter aims for strong, sustained, and employment-generating growth, sound monetary and fiscal policies, and an adequate supplyo fbasic social services. 14Enterprise in charge of implementing highly labor-intensive construction projects fot the central government and local entities. 70 Priority actions with regard to risk prevention revolve around three areas: 0 outreach (EC) campaigns on key measures to prevent risks, mainly to health, and educationregarding hygiene, nutrition, and the environment; 0 a review o f family law and land ownership laws in connection with improvements in the status o fwomen; 0 consolidation o f the cooperation between the government and grassroots communities aimed at increasingaccess to social services. With respect to foreseeing risks, where informal mechanisms are more numerous and more effective, the role o f the public sector should consist o f a) supporting existing and efficient informal mechanisms, such as mutual insurance o f risks and response mechanisms developed by communities to deal with disasters or chronic dangers; b) adjustingsocial securityandthe retirementpensions system. With respect to remedies, the aim is to: a) mitigate the pernicious effects of informal mechanisms for responding to crises by discouraging the worst forms o f childlabor; b) guarantee government assistance in the event of a major disaster, and to do so by rethinking: (i) assignment o f tasks among the different government departments; the (ii)budgetary procedures for allocating emergency funds inthe event of a disaster; (iii) the criteria governing eligibility for government aid andtheir enforcement; and (iv) the ways inwhich social assistance i s provided. 4.2.5 Restoring and safeguardingecosystems Inorder to permit integratedtreatment of the rural developmentpriority area, which includes water and the environment, the fifth strategy i s addressed through the national goal o f integratedrural development. The aim i s to address all environmental issues inthe form o f an integratedprogram, not only with respect to natural resource management, but also as a determinant of economic growth and hence o f improvements inthe livingconditions o fthe population. 4.2.5.1 Strengthen the regulatory framework and natural resource management capabilities Giventhe outdatednature ofthe laws and the lack ofhuman, physical, and financial resources that characterizes the departments responsible for the environment, strengthening the regulatory framework and capabilities i s a prerequisite for any actions to be carried out with respect to the environment. The Information for the Environment Training Program (PFJE), which aims to instill in primary school children habits designed to protect and preserve the environment, has been taken over by the government following the end o f its fundingby the EuropeanUnion. Over the next 15 years, the actions to be taken to reinforce capabilities are: 0 promulgate the laws transferring some natural resource management prerogatives to the users; 71 0 install localnaturalresource management committees; 0 strengthen the capacities o f the institutions responsible for natural resource management ; 0 establish an environmental information system; 0 draft a nationalprogram to galvanize the population indefense o f the environment. 4.2.5.2 Improvementof householdenergy management Within the PRSP framework, an evaluation is to be carried out of the detailed action plan adopted in 1993 following a participatory seminar on the subject o f domestic energy in connection with global environmental protection objectives. It is important to update and consolidate existing initiatives aimed at: (i) promoting viable production o f firewood in rural areas surrounding the principal towns and cities, especially around N'DjamCna ; (ii)making forestry a source o f income for the rural population; (iii) further involvingthe ruralpopulation innatural resource management; (iv) use the taxation o f wood and products derived from it as an incentive-based regulation system; and (v) enhancing the efficiency o f domestic energy consumption by promoting stoves and other more efficient domestic energy-generating instruments. 72 Chapter 5 Macroeconomic Framework This chapter examines the factors underlying the growth projections set forth inthe medium- and long-term macroeconomic framework for the poverty reduction strategy. It also examines the various conditions affecting the achievement and maintenance o f the envisaged growth rates, particularly as regards macroeconomic stability and the economic policies whereby it canbe guaranteed. 5.1 Sources of economic growth Oil sector. The development of the Doba oil fields, which began in 2001 with the construction of the Chad-Cameroon pipeline, i s modifjmg the structure o f the Chadian economy, which until 2000 was dominated by farming and grazing activity and the services sector. Preparation of the project triggered a spectacular increase in foreign direct investment (FDI). This investment has had a positive impact on the secondary and tertiary sectors, especially because o f their impact on the construction and public works sector and the trade sector, where annual growth in real terms i s projected at 29 percent and 13 percent, respectively, over the 2001-03 period. Consequently, real GDP i s expected to grow by about 11percent a year in2001-03, after an annual average of 2.7 percent between 1995 and 2000. The beginningo f actual oil production toward the summer o f 2003 would boost GDP growth that year to 11.2 percent. Most of this production will be used to fill the pipeline to the Cameroon coast as well as the storage and export facilities at Kribi. For this reason, the projections show a sharp-but temporary-increase inthe rate of growth of national income, reflecting an increase inthe national savingrate. The startup o f oil exports projected for early 2004 will bring about a temporary surge inGDP growth. In 2004, initial production will represent 36 percentage points o f total GDP growth, boosting it to 42.4percent. However, using the conservative assumption that no other oil fields will be discovered, nearly 80 percent o f the existing reserves at Doba-estimated at 917 millionbarrels-will be extracted by 2015 (see Figure 1).Inthe present scenario, after the initial peak o f 2004, oil production i s expected to decline by 0.7 percent a year between 2005 and 2009 before dropping significantly by 14percent a year thereafter. Accordingly, the share o f oil inGDP would decline rapidly, from 31percent in2004-09 to 11percent in2010-15. Inadditionto the Dobaproject, which is runbyprivateoperators, the government is currently developing a small oil field in the SCdigui region where the reserves, estimated at 20 million barrels, are expected to last about 13 years starting in2004. The crude oil from SCgigui will be refined by a private company that has yet to be identified; it will be buildinga refinery whose output is expected to cover almost 50 percent o f the country's need for petroleum products. The government i s also considering various options to exploit also the natural gas associated with SCdigui oil, with aview to increasingfurther the domestic supply of energyproducts. The direct contribution o f oil production to poverty reduction i s expected to be limited, as this highly capital-intensive activity creates few jobs. Inaddition, a large share of the income from the oil sector will go to the private internationalconsortium, which would repatriate most o f it. This explains the fact that, despite the 42.4 percent expansion o f real GDP in 2004 after oil production comes on stream, real GNP (which takes net flows o f factor income into account) will rise by only 8.9 percent. Nevertheless, the indirect impact o f oil activity on growth and poverty reduction will be significant, first because of the increase in public spending in priority sectors made possible by oil revenue, and also owing to the increased demand for the 73 products o f other sectors by the oil industry and its employees. The government's oil revenue will make it possible to increase services to the poor, in particular in education and health, thereby contributing to the development o f human capital. Furthermore, the use o f oil revenue to develop infrastructures conducive to increased productivity will stimulate private investment and, in consequence, growth and employment in the non-oil sectors, which will benefit the poor. These factors should contribute to a lasting improvement in the living conditions o f the majority o f the population. Non-oil sectors. The major economic challenge o f the oil era will be to diversify and impart dynamism to all sectors o f activity by taking the appropriate macroeconomic and structural measures so as to avoid the all too frequent problem o f the emergence o f a dual economy, in which the oil sector appears to be a rich and technologically advanced enclave alongside inthe midst o f a non-oil sector that is lagging behind and stagnant, in a context of widespread poverty. One o f the primary causes o f this dualization is the loss o f competitiveness resulting from an unsought appreciation in the real exchange rate triggered by an unsterilized inflow of foreign exchange inthe form o f oil revenue. Measures that will make itpossible to avert this situation, and which the authorities intend to introduce, are examined below. At the same time, the government intends to: (i) apply the strategies envisaged in each sector, focusing inparticular on improving infrastructure (roads, communications, energy, and water resource management) and human capital; and (ii) accelerate the structural reforms in order to create incentives for the development o f the private sector and to promote diversification o f the economy. On these assumptions, non-oil GDP (that is, the value added produced by all sectors other than the oil industry) would grow at an average annual rate of 8.9 percent duringthe 2003-1 5 period. Primary sector GDP growth i s projected at 4.2 percent a year between 2003 and 2015. At the same time, the value added in the food crops subsector i s expected to grow at a 5.6 percent pace thanks to improvements ininfrastructure and services and improved access to inputs and modem production techniques. These factors should raise productivity and enhance diversification in the production o f food crops (mostly fruits and vegetables), as well as the use o f underutilized arable land that has good potential. The production of cash crops i s projected to increase by 4.6 percent a year on average between 2003 and 2015, in particular because o f the positive impact o f the ongoing reform o f the cotton sector. In addition, these factors favorable to food crop agriculture, as well as the maintenance o f external competitiveness, should stimulate the expansion o f other cash crops, inparticular gum arabic and shea nut. Livestock production should increase at a slower pace-averaging 2.9 percent a year between 2003 and 2015-and remain extensive for the most part. Nevertheless, productivity gains are expected in this area, especially because o f infrastructure improvements, the expansion o f veterinary services, and the gradual development o f short- cycle livestock rearing. The GDP o f the secondary sector i s projected to expand at an annual average o f 10.1percent between 2003 and 2015, as oil production constitutes part o f this sector. With oil production excluded, this sector is expected to grow by 7.2 percent a year in real terms over the same period. This good performance will result from: (i) the increasedproductionof cotton ginning plants, oil mills, and soap factories using cotton subproducts, thanks to the anticipated increase in the production o f seed cotton; (ii) the improved productivity o f all industrial units owing to the reduction in production costs arising from infrastructure improvements and the development o f human resources; (iii) the sustained growth o f the construction and public 74 works subsector resulting from the envisaged public and private investment ininfrastructure; (iv) the development of new industries,especially the processing of agricultural products and other manufacturing activities, thanks to an environment more conducive to private sector development and the increase in demand following the increase in household incomes; and (v) the anticipated development o f the miningsubsector, inparticular for gold, diamonds, and kaolin. The GDP o f the tertiary sector i s projected to grow by 6.5 percent a year on average in the 2003-15 period owing to the combined impact of the following factors: (i) sustained growth inthe primary and secondary sectors; (ii) significant productivity gains in transportation and trade thanks to the anticipated infrastructure improvements; (iii) the "catch-up" o f the financial sector, which at present i s relatively underdeveloped; and (iv) increased value added from public administration through the expansion o f public services, especially inthe priority sectors. Saving-investment equilibrium. The growth projections set forth in the macroeconomic framework depend upon an increase in investment as a percentage o f GDP. Inthis scenario, gross total investment (excluding petroleum project investment) i s projected to increase from 17.4percent o f GDP in2003 to 18.5 percent o f GDP in2015, and would be distributed almost equally between the public and private sectors. National saving i s expected to grow more rapidlythan investment,ina context markedby increased incomes and improved prospects for sustainable growth and macroeconomic stability. In a consistent manner, the balance o f current transactions would gradually improve thanks to the dynamic o f exports and imports (see annex below). Accordingly, national saving should increase from 6.5 percent o f GDP in 2003 to 13.6 percent o f GDP in 2015. Of this percentage, 6.5 points would be attributable to improved fiscal performanceduring this period. 5.2 Conditionsnecessaryto growth andpovertyreduction Several measures will be essential to achieving strong economic growth: (i) preserving macroeconomic stability and external competitiveness; (ii) enhancing good governance; (iii) successfully completing the necessary structural reforms; (iv) improving the country's infrastructure; and (v) improving the quality o f the labor supply through the development o f human resources. With a view to enhancing good governance, inAugust 2002 the government adopted a good governance strategy annexed to the PRSP. As regards infrastructure improvement, the initiatives envisaged are set forth in Chapter 4 o f the PRSP and are consistent with the fiscal policy discussed below in this chapter. Chapter 4 also presents the government's intentions with regard to education, health, and other social services which constitute the basis of the human resources development strategy, as well as the other structural reforms. The remainder o f this chapter will be devoted primarily to the last condition to be fulfilled in order to promote sustainable economic growth, namely macroeconomic stability and the measures neededto achieve it. 75 5.2.1 Macroeconomicstability 5.2.1.1 Objectives Macroeconomic stability i s characterized by: (i) inflation; (ii) appropriate real effective low an exchange rate; (iii)sustainable indebtedness; and (iv) adequate exchange reserves. Low and stable inflation will create a favorable environment for economic growthbyreducing the uncertainty surrounding price developments, thereby facilitating long-term planning and, as a result, investment. Moreover, it will create an environment conducive to the growth of private sector saving, as it makes the real return on financial assets less uncertain. The macroeconomic framework targets an inflationrate of about 3 percent a year over the 2003-1 5 period. A low rate of inflation i s also essential in order to maintain external competitiveness, especially in the case o f a country like Chad that has a fixed exchange rate owing to its participation inthe French franc zone. A higher inflation rate than that of trading partners and competitors would induce an appreciation of the real exchange rate and gradually reduce the competitiveness of existing sectors while impeding the emergence of new ones. Incontrast, a favorable real exchange rate will encourage rational resource allocation in favor o f the production of tradable goods and will make itpossible to develop existingand new activities inthe non-oil sector. Inaddition, a low inflation rate will have the effect of directly protecting the poor, most o f whom have incomes that are defined in nominal terms and who hold their financial assets, should they have any at all, inthe form o f cash. Hence a low inflation rate will make it possible to avoid a redistribution o f purchasingpower or wealth to the detriment o f the poor. Furthermore, a low and predictable inflationrate makes itpossible to avoid the shrinkage inreal terms ofthe budgetaryappropriationsthat benefitthe poor. Finally, because many o f the poor earn their subsistence from the production o f tradable agricultural goods-especially cotton and livestock-a deterioration in the real exchange rate would reduce their incomes and worsen poverty. External debt that i s high in relation to the country's capacity to repay would discourage potential national and foreign investors, who could be apprehensive about tax increases to finance debt service or about a financial crisis that would be harmful to the economy. The poor would suffer from excessive indebtedness not only because o f the effect on incomes that insufficient private investment would have, but also because o f reducedpublic expenditure in the priority sectors for combating poverty. Ineffect, it would be necessary to allocate more to debt service, the amount o f which would be affectedby the highlevel o f indebtedness and the excessive interest rates that creditors would impose on the country to cover the risk o f default. In the macroeconomic framework of the poverty reduction strategy, the debt sustainability indicators should improve considerably in the medium term thanks to oil production and exports and to debt relief under the HIPC Initiative. Total net external borrowing (disbursements minus amortizations) should gradually decline from US$172 million in 2003 to US$90 million in 2015, owing to the aforementioned improvement in the saving- investment balance. Over the same period, the ratio o f the net present value (NPV) of debt to exports i s projected to decline from 266 percent to about 50 percent in 2005-09, a period in which oil exports will be on the rise, before climbing back gradually to 120percent in 2015. 76 The ratio o f debt service to exports would have the same profile, dropping from 15.3 percent in2003 to about 2.6 percent in2004-09, and subsequently climbingback upto 7.2 percent in 2015. A comfortable level of official foreign exchange reserves will enhance the country's ability and credibility to cope with possible external shocks, especially since currently and for a number o f years to come the export base of the country will be limited to a few products traded in volatile international markets, and because o f the vulnerability o f Chad' food production to adverse weather developments. Building a cushion in the form o f reserves will have a salutary effect on both foreign and domestic private investment, as investors will be more confident that temporary adverse developments in the areas mentioned above will not severely affect macroeconomic stability and economic activity. These considerations imply that Chad will have to aggressively buildup its foreign exchange reserves inthe coming years, especially in the context of the longer-term macroeconomic projections. As the country's oil resources will dwindle in the middle o f the second decade o f the century, and before many export and import substitutingsectors have an opportunity to fully take hold and mature, Chad will need to draw for some years on its accumulated foreign exchange reserves to maintain an adequate rate o f growth o f imports, which would be essential for continuing growth and poverty reduction. Inorder to permitthese future outlays while always maintaining a level of reserves that i s adequate for confronting possible shocks, it will have to accumulate substantial reserves during the initial years o f the oil era. Thus the level o f reserves should increase from 5.2 months' imports o f goods and services excluding factor income in 2003 to 11.9 months o f such imports in 2010. Subsequently, it i s projected to decline gradually to 7.4 months at the 2015 horizon or thereabouts. Inkeepingwith the aforementioned objectives for the external debt andreserves, the current deficit (excluding current official transfers) should be brought down from the current high level o f 46.7 percent o f GDP in 2002-03, largely attributable to the highlevel of imports for the oil project, to 8.6 percent o f GDP in2004 when oil production will begin. In2005-09, the current deficit i s projected at 3.4 percent o f GDP on average, which would be more than offset by inflows of private and official capital, thus favoring the accumulation of gross official external reserves referred to earlier. The current external deficit i s then expected to increase as oil exports decline, reaching 5.2 percent by 2015. As no comparable increase in capital flows i s anticipated, reserves should gradually decline as noted above. Throughout the 2004-15 period, the volume o f non-oil exports i s expected to increase by 4.3 percent a year in keeping with the above-mentioned sectoral projections. In particular, traditional exports (cotton and livestock) are projected to increase by 3 percent a year on average over the period. The poverty reduction strategy also depends upon export growth in other areas, as noted above, assuming the anticipated maintenance o f an adequate real exchange rate, infrastructure and human capital improvements, and the pursuit o f good governance and other structural reforms. According to the macroeconomic framework, exports excluding oil, cotton, and livestock are projected to increase from US$52 million in 2003 to US$lOO million in 2010 and US$202.8 million in 2015 (or about 39 percent o f total exports that year). Following an annual drop o f 30 percent a year on average in2004-05, explained by the winding up o f the investments inthe Doba project, import volume i s expected to increase by4.6 percent a year in2006-15. This corresponds to a gradual decline inthe share ofimports in non-oil GDP as the Chadian import substitution sectors expand in the primary and secondary sectors, which i s likely inview o f the extremely low level o f development o f these areas at present, and o f the highlevel o f dependence on imports. 77 5.2.1.2 Economic policies 5.2.1.2.1 Fiscal policy As Chad is a member of the Central African Economic and Monetary Community (CEMAC), which has a fixed nominal exchange rate, fiscal policy will o f necessity play the main role in achieving macroeconomic stability and equitably distributed growth. Fiscal policy will thus have to meet the challenges inherent not only of a small, low-income, open economy that i s a member o f a monetary zone, but also those arising from an oil windfall which, while substantial, is relatively limited over time. Analysis o f the specific fiscal policy constraints induced by the existence of oil revenues yields the following findings: 0 Itis necessaryto ensure the stability ofexpenditure, inparticular inthe priority sectors, in view of the hypewolatility of oil revenues. Large and frequent changes in public expenditure would negatively affect demand conditions in general, as well as specific current and capital fiscal expenditures which may be crucial to the growth o f the non- oil sector. Moreover, service delivery to the poor and investment in human capital would be disrupted. All this would negatively affect the poverty reduction effort. Itis necessaryto avoid any pronouncedbudgetary imbalance which mightbe triggered by excessively optimistic projections of petroleum prices and the intrinsic volatility thereof. Imbalances o f this kind could engender excess indebtedness, with the negative effects described above. 0 Inview ofthe pronouncedincrease inbudgetary revenue associated with the period of oil production, it will be necessaryto ensure the optimal utilization o f these temporary resources so that they can be applied in a way that does the most to promote sustainable growth and poverty reduction while avoiding any waste. Special arrangements needs to be made to ensure that oil resources are used to increase only allocations in priority sectors beyond the level that would be achieved without the presence o f oil receipts. 0 Careful planning i s essential in order to ensure an adequate level o f budgetary expenditure after the oil era i s over, as income derived from petroleum i s by definition nonrenewable. This i s necessary in order to maximize the effect o f oil revenues on growthandpoverty reduction, as well as to preserve equity across generations. The problems referred to above have been observed inother oil-producing countries, inAfrica inparticular. Chad will be facing the same challenges, inparticular as regards the projected timingof oil revenues (Box 1, Chart 1) characterized by sizable resource inflowsbeginningin 2004, followed by a sharp decrease starting in2010, with a two-year bulge inthe middle o fthe second decade o f the millenniumand a steep drop-offthereafter. 78 Box 3-Oil revenues, 2004-15 projections Based on projections for oil extraction and a world market price on the order of US$17 per barrel for Chadian crude, the revenue accruing to the government from oil operations would amount to CFAF 118 billion annually (approximately US$180 million) over the 2004-1 5 period, of which CFAF 4 billionwould be from the S6digui field. The Doba receipts include production royalties, the tax on oil extraction companies, the tax on the company operating the pipeline over the portion in Chad (TOTCO), and the dividends paid by that company and COTCO, its Cameroonian counterpart, in which Chad i s a shareholder. However, the substantial amortization payments that the extraction companies and TOTCO will be facing should more than exceed their taxable income during the initial years o f operation. This factor, in conjunction with the production profile, means that the revenue the government will derive from oil operations will vary significantly from one year to the next, even if oil Dices are stable. To remedy the potential problems associated with oil production referred to above, Chad shouldpursue the following fiscal strategy: a. First, public oil revenues, which will flow in their entirety into the annual budget, will be the subject o f cautious estimation based on conservative price and exchange rate assumptions. Prudent projections o f available resources will make it possible, in periods o f declining oil prices, substantial budget deficits and the resulting macroeconomic disruptions, as well as the harmful and difficult substantial adjustments inpublic spending levels. b. Second, public expenditure programming will be carried out as part of the medium- term expenditure framework that will take the economy's absorptive capacity into account. Any surplus o f revenue over expenditure will be saved. Aligning the level of programmed expenditure with the government's capacity to implement projects, and with the economy's capacity to effectively use the goods and services pr~vided,'~ will contribute to reducing the risk o f any decline inthe quality and effectiveness o f public expenditure, and hence o fresource waste. C. Third, in order to ensure that oil revenues have a maximum impact on growth and poverty reduction, and to contain the risk o f massive unproductive capital expenditure or consumption expenditure, Chad will enforce the law on the management o f oil revenues (LGRP) passed in 1999, which stands as an unprecedented legislative provision in an oil-producing country. This law mandates the inclusion o f all oil revenues into the general budget and the earmarking o f direct receipts (royalties and dividends) to the following expenditures: (i) 10percent to the Fund for Future Generations (FGF); (ii) remaining 90 percent i s distributed as follows: 72 percent the for operating and capital expenditure in the priority sectors (health, education, infrastructure, and rural development), 13.5 percent for general operating and capital l5 This entails, for example, avoiding constructing schools without taking into account the time required for teacher training, or building roads without first attending to maintenance arrangements or without taking the steps necessary to prevent water runoff which could damage them duringthe rainy season. 79 expenditure, and 4.5 percent for expenditure relating to the Doba basin oil project. The Oil Revenue Control and Surveillance Boardwill play an active role incontrolling the proper use of oil revenues. d. Fourth, to ensure equitybetween generations, the resources ofthe FGFwill: (i) usedbe exclusively for the objectives targeted by the creation o f that Fund, namely, the accumulation o f financial assets for future generations; (ii) invested in low-risk be assets o f sufficient liquidity; (iii) not be mortgaged against loans to finance budgetary expenditure; (iv) be efficiently managed by having recourse as necessary to international expertise; and (v) only be used after the country's oil reserves have been depleted. The precise modalities for usingoil revenues consistent with these strategic principles will be finalized in the near future. To this end, a medium-termframework for current and capital expenditure is beingprepared for all the ministries inthe priority sectors. The preparation and implementation of the aforementioned fiscal strategy will require intensifylng the sizable effort to strengthen the capacities involved,16 inparticular as regards forecasting oil revenues and budget preparationandplanning. Duringthe oil era, the government will also have to ensure the continuance of the efforts to strengthen the underlyingbudget position and, in so doing, assure macroeconomic stability as well as adequate levels of financing for priority expenditures in the post-oil era. In this context, a significant reduction in the overall budget deficit (excluding grants) i s projected from 14.1 percent o f GDP in2002-03 to about 3.5 percent o f GDP on average over the 2004- 15 period. The primary base balance17 i s also expected to improve, from a deficit o f 2.7 percent o f GDP in 2002-03 to a surplus of 1.6 percent of GDP over the 2004-15 period. This i s consistent with the gradual increase in the share o f capital expenditure financed with domestic resources, in accordance with projections o f gradually reducing Chad's dependence on external assistance. The inflow o f massive amounts of oil revenue could potentially obscure the direction o f the underlyingfiscal policy stance. As a consequence, duringthe period of oil revenue inflows, it will be useful to use as the guiding instrument for formulating fiscal policy the primary balance excluding oil revenues, defined as the overall balance o f budgetary operations minus oil revenues and net interest income. The primarybudget balance excluding oil revenues could thus be assessed as a function of non-oil GDP and hence related to the tax base. The macroeconomic framework o f the poverty reduction strategy calls for gradual improvement in the non-oil primary balance as apercentage of non-oil GDP, from a deficit of 1.7 percent in 2004 to a surplus o f 0.6 percent in 2015. The surplus would be maintained in subsequent years. This budgetary orientation would contribute in many respects to affirming macroeconomic stability and, in consequence, economic growth and the efforts to combat poverty. First, through its effect on moderating aggregate demand, it will help to maintain the annual l6 efforthasbeeninitiated This with support from the World Bank, inthe form of animmense capacity building program launched in 1999, but additional technical assistance could prove necessaryinthese areas. Total government revenue (excluding grants) minus total public expenditure (excluding debt service payments andexternally financed capital expenditure). 80 inflation rate at a low level as desired, at around3 percent in the medium and long term. Second, an improvement in the fiscal position will facilitate the recovery o f the external accounts and permit the desired accumulation of foreign exchange reserves. Third, the reduction in fiscal deficits will limit domestic and external borrowing and thereby make it possible to perpetuate the improvement in debt sustainability resulting from the startup of oil exports, even afeer oil resources are depleted. Fourth, the reduced dependence on aid will build confidence on the part of investors, who will appreciate its fruits in terms of macroeconomic stability (in particular as regards the volatility and unpredictability o f aid flows). Finally, this fiscal strategy will contribute to protecting priority expenditures and keeping them at stable levels, giventhat it will be easier to absorb short-term economic shocks by permitting temporary higher deficits ina context inwhich the underlyingbudget deficit is small. The projected improvements in the underlying budget position will result from maintaining the increase in non-oil revenue, in particular through the strengthening o f tax administration and broadening the tax base. Accordingly, receipts from domestic taxes and levies would increase from 3.1 percent o f non-oil GDP in 2002 to 7.9 percent o f non-oil GDP in2015. At the same time, receipts from taxes on foreign trade are expected to increase in the medium term thanks to the introduction o f the customs administration reform plan recently adopted by the government, which could increase these receipts from 2.6 percent ofnon-oil GDP in2002 to 5.1 percent in 2015. Revision o f the current system o f exemptions and ad hoc waiver o f duties, as well as the exemptions granted under the investment code, will constitute an important aspect o f these efforts. In this connection, Chad may wish to request technical assistance from the IMF and other development partners. By virtue o f these efforts in the medium term and their continuance in the long term, total budgetary revenue i s projected gradually to increase from 8 percent o f non-oil GDP in 2002 to 15.2 percent o f non-oil GDP by2015. Although ambitious, this target is achievable. Moreover, the target levelis lower than the current averagerevenue-toGDPratio inthe countries of Sub-Saharan Africa (18 percent). Consistently with the budgetary orientation and revenue trend described above, total expenditure i s expected to increase by an annual average o f 6.8 percent inreal terms over the 2004-15 period. The macroeconomic scenario envisages an annual increase in the government's civilian wage bill o f about 8.3 percent inreal terms. This should not only allow government employees to receive adequate compensation, and thereby reduce embezzlement, but also should constitute a decisive factor in improving the delivery of public services, in particular by increasing public employment in the priority sectors. Budget appropriations for the procurement o f goods and services for nonmilitary purposes and for transfer outlays are expected to increase inreal terms by 12.9percent a year on average over the 2004-15 period. Public investment financed by domestic resources i s projected to increase by 18.2 percent in real terms over the same period, offsetting the virtual stagnation in real terms o f externally financed investment, thereby making it possible for total public investment to grow by 5.2 percent a year in real terms. The virtual stagnation o f externally financed investment i s dictated by the need to preserve debt sustainability in the long term, in an environment in which it i s unlikely that the degree o f concessionality o f the aid extended will increase given the projected improvement inthe fiscal situation. Over the same 2004-1 5 period, expenditure inthe priority sectors is projected to increase on average by 15percent a year inreal terms. Accordingly, the share o f priority expenditure in total public expenditure i s expected to rise from 44 percent in2003 to 68 percent in2015. This distribution o f budgetary expenditure will constitute an important measurement o f the achievement o f sustainable growth and equitable use of oil revenues benefiting disadvantaged social groups. In order best to guarantee this achievement, it will be advisable to continue the ongoing effort to strengthen budget 81 preparation and the monitoring o f budget execution, in particular in respect of expenditure aimed at reducingpoverty (see Box 2). Box 4. Principal actions underway to strengthen the monitoringof expenditure in the priority sectors Enhancedbudgetpreparation e Introduction in2003 o f the medium-term expenditure framework and program budgets inthe health, education, public works, ruraldevelopment, andjustice sectors e Budgetpreparationbynature, byfunction, and gradually, bygeographical distribution Enhancedbudget execution e Implementation of the streamlined expenditure circuit, and the temporary but full computerization ofthis circuit as from 2003 e Development o f the integratedexpenditure circuit, via a single computerized sequence (Burkinabk system), for implementation in2004 0 Gradual inclusion o f civil servants inthe banking system Improvedmonitoringof budget execution e Half-yearly preparation and publication o f reports on expenditure in the priority sectors for poverty reduction e Monthly production o f detailed tables delineating budget execution in the four stages o f the expenditureprocess 0 Annual review o f public expenditure in the priority sectors, the conclusions o f which will contribute, interalia, to updating the medium-term expenditure frameworks 0 Implementation of a short-term action plan for monitoring expenditure operations up untiltheir usageinthe healthandeducationsectors e Half-yearly audit by the Audit Office o f the Supreme Court o f the expenditure financed by the resources stemmingfrom the HIPC Initiative e Submission to Parliament o f the budget execution law for year n-1 prior to submission o f the draft finance and budget law for year n+l Inthe short andmediumterm, oilrevenueswill substantiallyexceedtheabsorptive capacities o f the priority sectors. Expenditure in these sectors is projected to increase by nearly 29 percent a year between 2004 and 2006.'* Inaccordance with the law on the management o f oil revenue (LGRP), oil revenue will finance only the share o f such expenditure which exceeds the level planned under the 2002 budget. In keeping with the principles referred to '*At this stage, the rates are indicative. They are currently being finalized inthe context of preparing the medium-term expenditure frameworks, for which one of the objectives i s to develop an accurate estimate o f the absorptive capacities o f each sector. 82 earlier, surplus oil revenues will be placed inreserves, largely for stabilizationpurposes. Over a three-year period (2004-06), these reserves would build up to about CFAF 100 billion. In 2004, expenditure inthe nonpriority sectors will be constrained, as in2003, by the amount of financing available (non-oil revenues, external budgetary support, and domestic bank and nonbank financing), which will also finance expenditure in the priority sectors up to the level projected in the 2002 budget. Despite an increase o f about 17percent in non-oil revenues in nominal terms, the projected reduction in external budgetary support will limit the growth o f expenditure inthe nonpriority sectors to 5.9 percent innominal terms. In2005 andbeyond, the gradual easing ofthe constraints limitingnonpriority expenditurewill make it possible for them to be increased in nominal terms by about 10percent a year on average in 2005 and 2006. The overall fiscal deficit excluding grants i s projected to remain stable at about 3.5 percent o f GDP from 2004 to 2006, a substantial improvement over the three preceding years during which it averaged 12.8 percent o f GDP. This deficit would be financed by external grants and loans in the context o f investment projects, growing by 4 percent in 2004 and by 1percent in 2005 and 2006, and in 2004 by continued budgetary support, in particular that from the European Union, which i s projected to come to 24 million. As indicated above, the envisaged budget orientation in the medium and long term is consistent with the objective o f keeping inflation low and preserving external competitiveness inacontext ofafixed exchange rate. Itisnotpossible, however, to rule out the possibilitythat the acceleration o f aggregate demand might sometimes exceed the projections in this macroeconomic framework for reasons that are independent from fiscal policy. For example, it is conceivable that there could be a massive inflow of private capital associated with positive expectations about Chad's economy. This could result in inflation that exceeds the level projected in this scenario and therefore an appreciation in the real exchange rate. The same result could be induced by less elasticity in the supply o f certain nontradable goods, in response to the increase in public expenditure or in household expenditure that exceeds current projections. In these cases, fiscal policy will have to be more restrictive in order to moderate the rate o f expansion o f aggregate demand and contribute to containing losses in competitiveness and avoiding triggering "Dutch disease." While it i s difficult to determine in advance the degree o f tightening that would be required, the fact remains that there i s a political commitment to do so. Failure to act in this manner could prove harmkl to the long- term prospects for economic growth andpoverty reductioninChad. 83 Table 6: Public Spendingby Sectors, 2003-06 (in billions of CFAfrancs) 2003 2004 2005 2006 Spending, excluding debt service 307.9 338.3 375.4 414.9 Of which: domestically financed 176.4 190.1 223.3 261.2 Priority sectors 87.9 102.2 120.9 148.3 Other sectors 88.5 87.9 102.4 112.9 Total domestically-financed spending 176.4 190.1 223.3 261.2 Priority spendingfor poverty reduction 87.9 102.2 120.9 148.3 Health and social affairs 22.9 26.6 31.4 38.6 Education 32.9 38.3 45.3 55.6 Rural development 16.9 19.7 23.3 28.5 Infrastructure 10.2 11.9 14.0 17.2 Good governance 5.0 5.8 6.8 8.4 Nonpriority spending 88.5 87.9 102.4 112.9 Nonprioritycivilian spending 65.8 64.1 76.4 83.5 Military spending 22.7 23.8 26.0 29.5 Current spending 133.8 146.4 168.6 197.0 Priority spending for poverty reduction 60.1 70.7 83.1 103.0 Health and social affairs 17.0 20.0 23.5 29.2 Education 30.0 35.2 41.4 51.3 Rural development 7.2 8.4 9.9 12.3 Infrastructure 2.9 3.4 4.0 5.0 Good governance 3.1 3.6 4.2 5.2 Nonpriorityspending 73.7 75.7 85.5 94.0 Nonpriority civilian spending 51.9 52.7 60.6 65.7 Military spending 21.7 23.0 24.9 28.3 Investment spending 42.6 43.7 54.7 64.3 Priority spending for poverty reduction 27.8 31.5 37.8 45.4 Health and social affairs 5.8 6.6 7.9 9.5 Education 3.0 3.4 4.0 4.9 Rural development 9.7 11.1 13.3 15.9 Infrastructure 7.3 8.3 10.0 12.0 Good governance 1.9 2.2 2.6 3.1 Nonpriority spending 14.9 12.2 16.9 18.9 Nonprioritycivilian spending 13.9 11.4 15.8 17.7 Military spending 0.9 0.8 1.1 1.2 Foreign-financed investment 131.5 148.2 152.1 153.6 Priority sectors 130.5 147.0 150.9 152.4 Other sectors 1.0 1.2 1.2 1.2 Note: In this table, the level offoreign-financed investment is theprojection of disbursements in 2003, and the desired level offnancing in 2004-06. A detailed breakdown in expected disbursements by sectors and by programs, andfinancing to be soughtfor new programs or projects yet to be taken into account is beingpreparedfor 2004-06. Annex 2 contains a partial relating list of such new programs/projects. 84 5.2.1.2.2 Monetary and financial sector policies The use o f monetary policy instruments may help fiscal policy keep inflationlow and preserve external competitiveness. First, maintaining prudentmonetary conditions within the CEMAC, o f which Chad i s a member, will make it possible to contain demand throughout the zone and will significantly contibute to controlling demand within Chad itself. Second, there may be some scope for monetary policy operations within each country if there exists some-albeit partial-segmentation by country of the market for money and credit, as well as the market for goods and services. In the absence of such segmentation, there would be little risk that inflation inChad would deviate on a lastingbasis from that inthe other counties o f the zone. Incurrent circumstances, inflationinChadcould deviate from the CEMAC averagebecausea substantial proportion o f Chad's output i s nontradable and the single price law does not apply to such products. Furthermore, Chad's credit market i s not completely integrated with that o f the other CEMAC countries. Hence, the supply o fbank credit inChad cannot easily be usedto meet the financing requirements of bank or nonbank entities inother CEMAC countries. As a consequence, possible massive capital inflows to Chad resulting in an excess supply o f credit and an excess liquidity situation in the country would not be propagated throughout the region, triggering excess demand and inflation in the country. If the effect i s limited to the country because the markets are not integrated, then monetary policy may have an impact at the country level. Inthese circumstances, monetary operations limited to the country will be actively used in order to keep inflation low and preserve external competitiveness in the period ahead. This could prove necessary, particularly in light o f the sizable amounts o f anticipated oil revenue which could, ifnot sterilized, result insurplus credit and excess liquidity inthe country. While it is true that the foreign exchange flows intended to finance the Fundfor Future Generations will make it possible to do this in part, this sterilization will not be sufficient on its own in view o f the magnitude o f the expected inflows. The difficulty arises from the fact that, for the time being, it i s planned to retain the residual oil revenues in the form o f deposits with commercial banks, which would generate substantial excess liquidity inChadianbanks. For this reason, the government i s examining with the BEAC the various measures that could be used to counter the negative effects o f the foreign exchange inflow. The simplest and least costly o f these would consist in the government holding the unused oil revenues in domestic currency accounts opened with the BEAC, and not with commercial banks. This would have the automatic effect o f sterilizing the funds and preventing the negative impact o f excess liquidity. However, that would require an amendment to the LGRP, which stipulates that the government i s to deposit oil revenues in accounts opened with Chadian commercial banks. Along the line o f thinking within the monetary zone, other measures could include: (i) raising the required reserves ratios set for Chadian banks; and (ii) having the BEAC issue securities directly to Chad in order to absorb the liquidity o f its banks. The first approach would be costly for banks, however, if the reserves are not remunerated, while the second would in all likelihood be onerous for the BEAC. An alternative approach would be for the government to 85 issue its own securities to absorb the excess liquidity and thereby directly cover the costs of sterilization.19,20 The macroeconomic framework aligned with the poverty reduction strategy calls for money supply expansion of 11.7percent a year on average over the 2004-1 5 period. This rate of expansion is compatible with the rate o f growth of gross national disposable income (GNDI), a better measure o f national income than GDP given the substantial transfers o f income abroad that will be made by foreign firms. The rate o f growth o f broad money should nevertheless be slightly greater than the rate of growth o f GNDI, owing to the anticipated gradual monetization o f the Chadian economy. As indicated above, the monetary program contemplates the building up o f exchange reserves during the peak oil production years, namely 2004-10, followed by a gradual slowdown inthis coverage. This would allow for an adequate rate of growth in domestic credit and imports, and help maintain high economic growth rates as oil exports decline. During the 2004-15 period, credit to the private sector i s therefore expected to increase at an average rate o f 10.5 percent a year, which should be sufficient to boost economic activity and domestic investmentto the projected levels. Chad's banking system i s still underdeveloped. The country currently has only five commercial banks and one agricultural bank that have branches inonly five cities. This i s one o f the causes o f the low mobilization of domestic saving and investment financing. It i s anticipatedthat the business opportunities presented inthe long-term macroeconomic scenario described above will enable the financial sector to grow and gradually expand its activities throughout the national territory, thus making it possible to promote saving and investment financing. A growing number o f bank branches throughout the country will facilitate greater monetization o f the economy inline with the gradual reduction inthe velocity o f circulation o f the currency as projected inthe macroeconomic scenario. As observed earlier, the level of development of the financial sector will depend upon the speedwith which the government, inconsultationwith the BEAC, will take concrete measures aimed at introducing financial instruments (treasury bills, government bonds, and shares in enterprises) and the development o f the interbank market for these securities. Indeed, while making it possible to sterilize the sizable inflows of foreign exchange, these new instruments will make it possible to mobilize domestic saving; this will also be strengthened by the planned reform o f the retirement system to improve its financial soundness and by the development o f the insurance sector. Financial sector development will also benefit from the establishment o f a legal framework promoting the development o f the private sector, in particular in the area o f collecting guarantees. The combination o f all these actions with a stable macroeconomic framework characterized by low inflationrates should enable the banks to extend long-term loans for financing investments. The financial soundness o f Chad's banking sector i s rather good at present; however, in light o f the anticipated increase in l9 This i s possible in the process o f gradually eliminating BEAC financing o f public expenditure and replacing it by bond issues or Treasury bills, which i s inprogress throughout the BEAC zone. 2o Intheory, Chadmight also consider the possibility ofaccelerating the pace ofrepaying its extemal debt, in accordance with the degree of concessionality o f the debt in question. However, such a solution would permanently reduce the amount o f reserves accumulated for stabilization purposes and would also runthe risk ofbeinginconsistentwith the regulations on the advanceearmarkingofoil revenues. 86 liquidityinthe economy, bank supervision will have to be strengthened inorder to preventthe granting of high-riskloans which would make the financial system as a whole fragile. Finally, following the government's recent adoption of the legal framework to govern microfinance activities, the development of this subsector will be accelerated in order to ensure that rural populations will have access to the saving and credit infrastructures. 87 Chapter 6 Implementationof the PRSP Year 2003 will be the first year o f the PRSP implementation. However, a number o f ongoing activities in he context o f the implementation o f the sectoral programs resulting from the Geneva N Roundtable will be taken into account, as well as the reforms proposed by the World Bank inits report on public expenditure for poverty reduction. The same holds true for the "good governance" actions inthe politicaland financial spheres. PRSP implementation will be entrusted to each ministry concerned, each within its own purview, but other partners such as NGOs and the private sector will be involved in the implementation o f actions in their respective areas and sectors o f intervention and will take care to draw the attention o f the authorities and the general public to requirements as well as problems, inparticular as regards respectinghuman rights. PRSP implementation will therefore call for close cooperation between the government and ,civil society, at boththe national and local levels. The PRSP will also require strengthening the institutional capacities o f the government and its nongovernmental partners. Indeed, one o f the causes for the failure o f previous programs has been the inadequate capacity o f technical and financial entities to implement the actions planned within prescribed deadlines and in the sectors and locations selected in advance. Accordingly, this raises the problem o f strengthening the capacities o f bothpublic and private structures that are expected to be involved inPRSP implementation. The actions programmed inthe National Good Governance Strategy should contribute to the gradual solution of these problems, so long as that strategy i s pursuedwith resolve. 6.1. Stagesof implementation The Poverty Reduction Strategy can only be carried out gradually and in stages. The first period, that of the effective launching o f the strategy, will cover 2003-05. Itwill be markedby the initial exploitation of oil resources as well as the initial availability of funds from the HIPC Initiative. It shouldmake itpossibleto: 0 launch preliminary priority actions by mobilizing the available resources (so long as they are allocated in such a way as to provide an effective response to the poverty reduction objectives); 0 initiate or move forward the essential institutional and organizational reforms; 0 mobilize and strengthen the capacities necessary for implementation o f the program, while ensuring greater coordination and consistency between those managing and carrying out activities; 0 provide steering for the program, assessing its adequacy and functionality, and identifylng and correcting the problems encountered; 0 prepare during 2005, while taking due account o f the lessons learned from activities already carried out, the program for the Second Period(2006-10). The second period (2006-10) will coincide with the increase in oil revenues, as well as the continued availability o f HIPC funding. In addition, this period will take advantage o f the reforms initiated since 2002 as regards three-year budgeting (of both current and operating 88 expenditure), government procurement and strengthened government-private sector-civil society cooperation, as well as decentralization. The third period (2011-15) will be programmed on the basis o f accumulated experience during the second period and an in-depth assessment, and will also take account of developments and changes nationally, regionally, and globally. A matrix of the priority actions corresponding to each of these subperiods is annexed hereto, and prepared on the basis of: 0 diagnostic components; e programs drawn up bythe key sectoral ministries;and e partners' commitments (or announced commitments) o f support. 6.2. Monitoring PRSP.implementation implies the introduction o f systematic and regular monitoring o f each focus (and action) selected, starting with the first year. This impliesinparticular that: 0 the necessaryresources are available for carrying out the priority actions selected; e the planned activities are carried out satisfactorily; and e the actions not carried out or for whichthere areproblems are revisedand corrected. The monitoring effort i s intended in particular to track outcome trends over time and for particular groups and zones, to gather information that will make it possible to assess the factors that determine or prevent outcomes, and to provide decision makers with information on the effectiveness or inadequacy o f the measures taken and on the corrections needed in order to achieve certain objectives. Monitoring will be conducted by activity and by strategic focus, usingmonitoringindicators determined inadvance and accepted by all stakeholders. The sources of quantitative data are: 0 Administrative data and data from other institutions e Population censuses 0 Household surveys, namely: o living conditions surveys o spendingandincome surveys o employment surveys o population andhealthsurveys o pinpoint observationandrequirements satisfactionsurveys o targeted surveys and topic-based surveys. The key concepts used in poverty comparisons, such as the relative poverty and absolute poverty thresholds, poverty incidence, the spread o f poverty, and the severity o f poverty, may only be definedon the basis o f quantitative data. Qualitative data cover the following subjects: e the priorities the poor attach to improvingtheir situation-disaggregated by gender and other characteristics o f importance to the community; 0 the perceptions o f the poor as to the causes and consequences o f poverty; 0 the opportunities the poor haveto improve their destiny; 0 the constraints and obstacles to be overcome inorder to improve the situation of the poor; 89 e differences between localities-differences between districts and between urban centers and rural areas; e the perceptions o f the poor regarding access to and the quality o f services, infrastructure, and governance at the local level. Monitoring the poverty reduction strategy therefore requires a combination o f the quantitative and qualitative methods. At the current stage o f programming, it i s planned to conduct the following surveys: e Second Survey on Consumption and the Informal Sector inChad (2003) e Survey o f village-level energy supply (2003) 0 Survey o f users o f customs services (2003) e Population and health survey o f Chad (2004) e Tracking o fpublic expenditure through delivery--health sector (2003) e Monitoringo f the cotton sector (2003) 0 Second general population census (2005). National statistical system The national statistical system, coordinated by the National Institute for Statistics and Economic and Demographic Studies Research (INSEED), will be requested for data gathering purposes.21This said, some qualitative surveys will be headed up by the Steering Committee in order to hear the opinions of the population regarding their perception of poverty. The macroparticipation type of information-gathering instruments will be used to enable the Steering Committee to hear the perceptions o f the people and o f organized groups (producers' organizations, women's groups, NGOs, traditional chiefdoms, etc.). Particular emphasis should be placed on information on regional inequalities and cross-cutting problems (AIDS, war, environment, etc.). 6.3. Assessment PRSP appraisal will consist in comparing the results obtained with the objectives first established, explaining any gaps identified, and proposing corrective measures. It will contribute to improving the effectiveness o f programs and policies while providing information and proposals for adjustments and improvements. The first PRSP appraisal i s scheduled for late 2004. This still summary appraisal will make it possible to measure the major trends identified by the indicators and vouch for the appropriateness or inadequacy o f the actions programmed and launched. As reference points, this appraisal will use the quantitative objectives anddata from the flash surveys conducted in 2002 and 2003. As for any appraisal, it would be desirable for it to be conducted by an independentteam so as to ensure objectivity. 21 Reference might also be made to the Multiyear Activities Program for 2002-07 prepared by INSEED (November 28, 200l), which inparticular includesa program on "sociodemographic and statisticaldata for monitoringhousehold livingconditions and poverty." 90 6.3.1 Preparation of the Program for 2006-10 Followingthe appraisal, andbeginning in2004, it will be necessaryto prepare the Program for the Second Period (2006-10) on the basis o f 0 lessons learned inthe appraisal; 0 developments and possible changes nationally, regionally, and globally; 0 the increase innationalresources thanks to oil revenues (and the application ofthe law mandating that 80percent thereof be used for the sectors essential to poverty reduction), as well as the impact o f the HIPC Initiative and the improvements in the publicexpenditure management system recommended bythe WorldBank, 0 progress and requirements as regards capacity buildingand good governance; 0 the effective strengthening of the partnership between government, members of Parliament, and civil society, as well as the coordinationo f external assistance. 6.3.2 Updating The PRSP was prepared on the basis o f partial and relatively outdated quantitative data. Itwill be updated annually in order to reflect the availability o f the data emerging from the various surveys programmed by the national statistical system. This updating will also relate to reframing the objectives inlight o f the results obtained. 6.4.Institutional framework The institutional framework to be established for monitoring and evaluation purposes will be based to the greatest extent possible on existing structures. Accordingly, the institutional framework for the PRSP provides for: 0 a HighInterministerial Committee for PRSP Supervision; 0 a GovernmeniYDonors Committee; 0 a Steering Committee; 0 sectoral units; and 0 departmental and subprefectural committees. 6.4.1. TheHigh Interministerial Committeefor PRSP Supervision; The High Interministerial Committee for PRSP Supervision (HCI) i s responsible for supervising the PRSP. It comprises members o f the government and is chaired by the Prime Minister. Its mission i s to ensure the observance of the policy guidelines for the program and to provide new orientations inresponse to the results obtained duringthe period. It meets once each half-year to monitor SNRP developments reported by the Steering Committee. 91 6.4.2. The Governmendllonors Committee This structure i s made up o f members o f the government and bilateral or multilateral donors and lenders. It i s chairedby the Minister of Planning, Development, and Cooperation. It meets once each quarter to evaluate the performance o f the activities carried out to reduce poverty, on the basis o f the progress report prepared by the PRSP Steering Committee, and ifneed be to resolve any problems associated with the financing o f these activities. 6.4.3. TheSteering Committee The PRSP Steering Committee is tasked with producing the PRSP and ensuring the monitoring and evaluation o f its implementation. It comprises representatives o f the various ministries, the National Assembly, and nongovernmentalstakeholders. The Steering Committee i s placed under the supervision o f the Minister of Planning, Development, and Cooperation (Decree No. 331 of July 26, 2002). It has a Permanent Secretariat staffed by one Coordinator and six experts. The Permanent Secretariat i s the Steering Committee`s technical organ. Given that implementation will be carried out sector by sector, the Steering Committee will work in close cooperation with the sectoral monitoring units in order to ensure better coordination. Inaddition, basedonthe quarterly reports ofthe sectoral units,theresults ofqualitative field surveys conducted by ad hoc groups, and the general data produced by the national statistical system, the Steering Committee proposes corrective measures to the HCI with a view to overcoming any deviations and weaknesses identified. There is no direct hierarchical connectionbetweenthe Steering Committee and the sectoral monitoringunits.This said, there are less formal interconnectionsbetweenthese structures. The Steering Committee will prepare a communication strategy that will allow it to broadly disseminate information on the implementation and monitoring o f the PRSP, making use o f media such as radio communiques, including on rural stations, as well as newspapers, the Internet, etc. Annual evaluation forums with participation by the various stakeholders, including associations o f the poor and development partners, are also planned. 6.4.4. Sectoral monitoring and evaluation units As part o f the sectoral meetingsassociated with the Geneva IV Roundtable, monitoring units have beencreated inthe priority sectors. Such structures may be created within ministries, and their mission will be enhanced by adding the "poverty reduction" aspect. Accordingly, their mission will be to ensure the relevance of PRSP activities intheir respective sector, the proper execution o f these activities in the field, the availability o f the budget allocated to the sector, and its conformity with poverty reduction objectives. Each unit will provide guidelines on the utilization o f that budget. The units will submit quarterly reports to the relevant minister and the Steering Committee, clearly indicating the obstacles encountered and proposingappropriate solutions. 92 6.4.5. Regional, Departmental, and subprefectural units The mission o f these local structures, composed similarly to the Steering Committee, i s to monitor the implementation o f the PRSP at the level o f each region. They prepare quarterly progress reports on the implementation status o f the various actions called for in the strategy. These reports are forwarded to the SteeringCommittee Inthe future, this monitoring arrangement will be extended to the canton andvillage levels in order to ensure that beneficiaries of the strategy are more thoroughly 'involved in its monitoring and evaluation. This will require strengthening the capacities of the people inthese decentralized localities. 93 1-p - I Q 9 b E 2 8 P L p, 38 28 3 VI I ,i v h l N 3 N .-M 2E I 6 Qc EP T f8 Y & N N 3 l i W .. P 8 I- -r x 8 f8 N - N 2 b B n 9 L I " I I e j c I i i ? I? E N tt !i c i EEi c P zI E fi iit J I i I 5 f ? I? A 0 0 N I?"8 ? I A , VI 8 8 8 " N N II3 Il % I a 1 II. EE II -rr T I T -r I I I I n I E P- i c c E n 3 3-0I C 3 .. f L ; L e c i ac -2 I t5 F c :i F aI t, E t:a 5 Ea fak6a -> 5 - Annex 2: Partial list of new projects identified on a sector-by-sector basis,financingfor which is to be sought in the context of the nationalpoverty reduction strate& Overall, the nationalpoverty reduction strategy will be funded through (i) external the assistance that has now been obtained, and (ii) the allocation o f oil revenues inaccordance with the law on oil revenuemanagementas projectedinthe government's financial operations table. Inaddition, new financing resources are being sought for investment projects; a partial list i s presentedbelow, by strategic area. These projects will not begin all at once; that will depend on their degree o fpreparation, and most will be spread out over a number o fyears. The Steering Committee and the sectoral ministries have undertaken a thorough evaluation o f the projects and programs on a sector-by-sector basis with a view to making a presentation to the partners, particularly at the round table on the nationalpoverty reduction strategy scheduled for the coming months. This task will be performedin such a way as to ensure consistency with the expenditure reviews, the programbudgets currentlybeing prepared at the priority ministries, and the macroeconomic framework for the PRSP. Focus 1: Promotion of good governance Proiect 1: Mine clearing and dealing with unexploded ordnance Description: Preventing those who have nothing from losing their lives, being handicapped, or losing their autonomy, losing family members or having them become handicapped and become additional financial burdens on their families and communities, losing a domesticated animal or the ability to travel, losing access to care, access to pastureland, water, education, or international assistance owing to the impossibility o f moving across areas made dangerous or intraversible by virtue o f the presence o f mines. Permitting the implementation o f rehabilitation, reconstruction, and development projects in areas where these are currently blocked owing to the presence of mines and/or unexploded ordnance. Permitting the residents o f areas affected by this pollutionto: omove freely on reopened and secure roads (opening access to isolated areas, access to care, accessto education, access to markets to sell their products, etc.); oaccess their fields, livestockraising areas, or water without incurringrisks; oput an end to the slaughter o f children, adults, and domesticated animals, which often constitute the only wealth o fthe affected populations; o returnto their area o forigin; oleada normallife andprevent an exodus towardmore hospitable areas. Putting an end to the health care expenditures attributable to accidents caused by mines and unexploded ordnance. Such accidents impose a cost which sorely taxes and undermines the scant healthbudgets o f the regions concerned. Collecting and destroying mines and unexploded ordinance, whether planted or simply abandoned, in the ground or in storage areas, in areas that are not monitored and from which they can be recovered by individuals who are not well intentioned. Because these 22 A thorough evaluation of projects and programs on a sector-by-sector basis is currently being finalized with a view to making a presentation to the partners, particularly at the round table on the national poverty reduction strategy scheduled for the coming months. 104 mines and ordnance, simply by being where they are, contribute to a worsened climate o f insecurity inthe affected regions, their destruction will contribute to reducing the lack o f security and consolidating peace. Duration: 14 years Project cost: CFAF 57,724,000,000 Project2: Demobilizationand reinsertion Description: Reinsertion of4,000 demobilizedmilitary personnelper year Duration: 5 years Project cost: CFAF 15,000,000,000 Project3: Collectinglightweapons and enhancingthe security of the Chadianpeople. Description: 0 Promoting a culture o fpeace and non-violence; 0 Strengthening the government's capacity to meet the challenge posedby the proliferation o f small arms and light weapons. Duration: 2 years. Cost o f the project: CFAF 162,400,000. Focus2: Ensure strongand sustainablegrowth Develop basic infrastructure Proiect4: Roadpaving,maintenance, and feasibilitystudies Description: 0 Pave 314 kilometers o f nationalroads 0 Periodicallymaintain 940 kilometers o f dirt roads 0 Buildfive civilengineering works (bridges) 0 Conduct technical and feasibility studies for 791kilometers o froads 0 Air transport (construction o fnorthemparking lot and BRETELLE,study o fsouthern parking lot, study of light plane parking area, and study o f ICAO standards conformance for Faya, Moundou, Sarh, and Abbche). Duration: 3 years Program cost: CFAF 101,320,000,000 Sustainably increase ruralproduction Project 5: Surveillance and preventive fight against crop pests Description: 105 0 Contribution to increased agricultural productivity through the reductiono f losses inducedbypests; 0 Decrease ineconomic and environmental impact o fdamage attributable to invasions o fmigrant pilgrimlocusts; e Reductiono f recrudescence risk; 0 Improved organization o f the effort thanks to early warning and bio-ecological knowledge o f major migrantpests; 0 Creation o f a national unitto combat migratory birds, based inN'Djamena and working inclose collaboration with the phytosanitarybases affected by these pests, namely small farmers, projects, agencies, development companies, and NGOs. Duration: 5 years Project cost: CFAF 3,101,000,000 Proiect6: Smallfarmer support with agriculturalequipment and inputs Description: 0 Creationo f a center for the large-scale production o f previously tested light materials 0 Provisiono f agricultural equipment to small farmers on credit 0 Ensuringfood self-sufficiency 0 Increasing crop yield and income per unit o f surface area 0 Training small farmers inthe upkeep, repair, and maintenance o f their agricultural equipment Duration: 6 years Project cost: CFAF 35,827,3 17,600 Proiect 7: Seeds Description: 0 Introduction o fthe structures, infrastructure, and equipment necessary to ensure the gradual and sustainable development o f seedproduction for the major crops 0 Enhancedhuman, material, and technical resources o f the seedproductioncenters 0 Introduction o f a central structure for leadership, coordination, programming, and quality control o f seed 0 Initial and in-service training o f staff, both inthe seedproduction area and inthe promotion of improved seed usage. Duration: 5 years Project cost: CFAF 4,000,000,000 Proiect8: Rehabilitationand organizationalsupport for Nya irrigatedrice Casier C Description: 0 Rehabilitationo fwater supply infrastructure 0 Organizingproducers to improve management of the casier 0 Support for rice farmers instructuring the subsector. 106 Duration: 5 years Project cost: CFAF 1,290,000,000 Proiect 9: Rural development of Kanem Description: 0 Support for promoting the rural environment 0 Establishment o f the Kanem Development Fund 0 Grassroots financial services 0 Coordinationand project management. Duration: 9 years Project cost: CFAF 10,800,000,000 Proiect 10: Creation of small irrigated perimeters inthe Chari Baguirmi, Moyen Chari, Salamat, Logone Oriental, Tangilet, and Mayo Kebbiregions Description: 0 Feasibility study (topographic studies, socioeconomic studies, and studies o f improvements necessary to develop perimeters manageable by small farmers) 0 Construction o fwater supply works, connecting roads, and storage warehouses 0 Support for subsector structuring. Duration: 3 years Project cost: CFAF 12,775,000,000 Proiect 11:Construct and equip water collection and storage facilities adapted to the Sahelian zone of the country Description: 0 Increase the availability o f water inrural areas 0 Ensurethe sustainable operation ofwater supply works. Duration: 5 years Project cost: CFAF 3,250,000,000 Proiect 12: Development of 14 pondsinthe Departments of Batha Ouest and Dababa Description: 0 Provide affected populations with ample water for livestock and humans 0 Improvemento f animal health 0 Permitpersons living nearby to engage in small-scale agricultural activities around the ponds. Duration: 3 years Project cost: CFAF 1,215,306,300 Proiect 13: Extension and advisory services inrural areas 107 Description: 0 Improvement of extension services 0 Enhancedprofessionalism in agriculture 0 Support for research and development 0 Support for professional agricultural organizations 0 Redeployment and strengthening o f structures. Duration: 5 years Project cost: CFAF 9,950,000,000 Proiect14: Strengtheningcapacitiesof central and decentralizedagriculturalservices Description: 0 Support for capacity buildinginthe design, control, and monitoring o f central services 0 Strengthened capacities inthe data gathering, analysis, and dissemination bythe Agricultural ProductionDirectorate 0 Enhanced capacities for the design and monitoring o f the water control policy 0 Support for the Agricultural Education, Training, and Rural PromotionDirectorate in the design, implementation, and monitoring o f training policies and programs 0 Support for the PlantProtection and Conditioning Directorate 0 Support for structuring research 0 Capacity buildinginthe Regional Agricultural Delegations. Duration: 3 years Project cost: CFAF 8,773,632,510 Proiect 15: Improvedcottonproduction Description: 0 Enhancing the technical knowledge of cotton producers 0 Availability and accessibility o f agricultural inputs and other productionfactors important to cottonproducers 0 Enhancing the professionalism of cottonproducer organizations. Duration: 5 years Project cost: CFAF 7,500,000,000 Proiect 16: Implementationof the village-levelwater supply componentof the master planfor water and sanitation Description: 0 Improvement o fwater supply at the village level 0 Strengthening o f institutional, legislative, and regulatory frameworks, and of national capacities 0 Rehabilitationo f water supplyworks Duration: 20 years Project cost: CFAF 103,043,000,000 108 Proiect17: Implementationof the rural sanitationcomponentof the master planfor water and sanitation Description: 0 Improvement o fbasic infrastructures for rural sanitation 0 Preparation and dissemination of campaigns on sanitation techniques inthe village- level environment and on the interrelationships between water, hygiene, and health 0 Preparation o f guides on sanitation techniques inrural areas 0 Strengthening national capacities, inparticular at the artisanal level. Duration: 20 years Project cost: CFAF 15,050,000,000 Proiect 18: Implementationof the agriculturalwater supply component of the master planfor water and sanitation Description: 0 Agricultural water supply improvements, support for small farmer organizations 0 Enhancing the knowledgebase o fthe sector 0 Strengthening o f institutional, legislative, and regulatory frameworks 0 Buildingofnationalcapacities. Duration: 20 years Project cost: CFAF 410,975,000,000 Proiect19: Implementationofthe water resourcescomponent of the masterplanfor water and sanitation Description: 0 Improved knowledge and monitoring o f surface water and its relationship with groundwater 0 Improved knowledge and monitoring of surface water 0 Strengthening o f institutional, legislative, and regulatory frameworks, and o fnational capacities 0 Study and implementationo f a warning system for accidental oil pollution incidents 0 Enhanced capacities for monitoring oil production Duration: 20 years Project cost: CFAF 14,575,000,000 Proiect20: Sustainablemanagementof trypanosomiasis(sleepingsickness), gastro- intestinalparasites, and tick-bornediseases inChad Description: 0 Determinethe effects o fthe various livestock-rearing methods on the health and productivity o f cattle and camel breeding 0 Identify the major vectors o f trypanosomiasis and ticks 109 0 Identifythe major factors responsible for disease transmission inthe various agricultural and ecological environments 0 Develop less costly systems for disease control and controlling disease vectors which are adaptable to rural communities 0 Buildnationalcapacities for better adapting such technologies. Duration: 3 years Project cost: CFAF 1,891,750,000 Proiect21: Capacitybuildingat the Veterinary ResearchandZootechnology Laboratory(LRVZ) Description: 0 Rehabilitationo f technical buildings 0 Rehabilitationand revampingo f animal space 0 Upgrading and revamping o f autopsy room 0 Construction o f subbranches (4) 0 Equippinglaboratory and subbranches 0 Construction o f conference room 0 Upgrading staffing, training, and specialization. Duration: 3 years Project cost: CFAF 1,780,000,000 Proiect22: Establishmentof aunitresponsiblefor improvingthe sanitary andhygienic quality of foodstuffs Description: 0 Modernization o f the legislative framework and regulations applicable to animal health and veterinary public health 0 Modernization o f the analytical control structure for animal health and foodstuff hygiene 0 Upgrading o fthe skills and capacities o f the Ministryo fLivestock staffresponsible for control inspections o f animal food products 0 Modernization o fproduction and marketing structures for animal food products 0 Increase the incomes o f Chadian professionals working inthe animal food product processing and marketing sectors 0 Marketing Chadianproducts, going to the market with products that meet international requirements interms o f trade and exchange. Duration: 3 years Project cost: CFAF 729,100,000 110 Proiect23: Strengthenedlive animalhealth coverage Description: 0 Conduct a census and evaluation o f the livestock rearing personnel already trained in previousprojects 0 Identification o fnew stock farmers to be trained 0 Initial and in-service training o f livestockrearingpersonnel 0 Training the trainers 0 Monitoring o f livestock rearing personnel 0 Technical monitoring o f livestockrearing personnel 0 Technical monitoring of the distributiono fveterinary medicines and poultry vaccines 0 Providing livestock rearing personnel via the distribution networks for veterinary medicines and poultry vaccines. Duration: 3 years Project cost: CFAF 4,045,000,000 Project 24: Carry out the pastoralwater supply component of the master plan for water Description: 0 Improvement o fknowledge and o f databases 0 Constructiono f PEPast and enhancing the security of transhumance 0 Strengthening the institutional, legislative, and regulatory frameworks 0 National capacity building. Duration: 20 years Project cost: CFAF 84,115,000,000 Focus4: Improve householdliving conditions Integrated urban development Proiect25: Carry out the urbanwater supply component of the master plan for water and sanitation Description: 0 Improvement o f water supply to sector not currently served 0 Improvement ofknowledge o f sector not currently served 0 Strengthening the institutional, legislative, and regulatory frameworks and national capacities. Duration: 20 years Project cost: CFAF 113,030,000,000 Focus 5: Restore and safeguard ecosystems Strengthen the regulatoryframework and management capacitiesfor natural resources 111 Proiect 26: Support capacitybuildinginrespectof environmentalmanagementfor sustainabledevelopment Description: e Finalizethe National EnvironmentalAction Planwith a view to its approval and adoption e Establish a mechanism for environmental management activity concertation, coordination, and monitoring e Strengthen nationalcapacities for the coordination, planning, direction, and monitoringof actions taken inthe area of environmental protection, restoration, and management e Finalize and ensure the implementationof targeted programs and projects relatingto environmental protection, restoration, and management e Intensify social mobilization and outreach efforts to promote the protection, safeguarding, and rationalmanagement o fthe environment. Duration: 5 years Project cost: CFAF 3,346, 103,750 112 Tr r I 8 2 m N v1 m ! T l-r T 5 5 5 .El .o .p l- r sR s s l-4: 2 !L - - 0 0 0 2 N m 3 3 m N 2 .-* cd 8 z" 5x 111 iE> 0 3 s! ? Annex 4: Detail of macroeconomicframework Annex 4 -Table 1: Selected Economlc and FinancialIndicators, 2003-15 2W3 2004 2W5 Lo06 2007 2008 2009 2010 2011 2012 2013 2014 2015 (Annualpcrcmlagc change,mlesothcnvisc specified) Nationalincome GDP at currmt prices I 65 58 I 12.9 7 0 6.4 6.3 3.5 0.9 4.2 3.9 6.8 7 0 7.7 GDP at conslantprices II2 42 4 15.3 4 4 4 3 4.1 1.1 -2.1 1.1 0.5 3 7 3 8 4.5 Excludingoil production 3 7 6.5 6.8 6 7 6.6 6.1 6.2 6.2 6 3 5 9 5.7 5.8 5.9 oilproduction 539 0 34 7 0 0 0.0 0 0 -104 -240 -181 -25 3 -9 9 -12 6 -9.2 GNDlat current price 11.3 16 7 13.4 104 9 4 101 123 6 0 7 6 8.3 8.0 85 8.4 Consumerpriceindex (average) 4.3 4 0 4 0 3 0 3 0 3 0 3 0 3 0 3 0 3.0 3.0 3.0 3.0 Moneyandcredit Netforeign assets 11 20.3 36.4 36.1 30 3 216 24.7 419 17.1 85 5 4 2.5 0 3 -1 6 Nstdamcstic msets 11 -8 9 -25.2 -20 4 -14.2 -7.8 -11.2 -27.2 -7.9 3 0 35 4 3 6 7 9 2 qwhich Damstic credit I1 -7.8 -24.6 -19.9 -13 7 -7.0 -11.1 -26.8 -7.6 3 5 3.6 4 5 6 9 9.6 Net claim on cenhl govcmmenl -125 -29 I .24.4 -18.1 -109 -14.7 -31.3 -107 0 4 0 0 1.0 23 3.0 Creditto nongovemmentsector 4 7 4.5 4.5 4.4 3.9 3 6 4 4 3.1 3 I 3.6 3 6 4 6 6.6 Broad moncy 103 11.3 15.7 16 I 13.8 13.4 148 9.2 I 15 8.9 6.8 7.0 7 6 GNDVbroadmoneyU 7.4 7.8 7.6 7.3 7.0 6.8 6 6 6.4 6 2 6.2 6.2 6.3 6 4 External sector (valuedin CPA francs) Exports, f.0.b 67 8 388.6 13.8 0.8 0.9 1.0 -7.8 -18.3 -122 -16.0 .3 4 -41 -1.0 Imparts, Lab. -21.7 -25.4 -18.6 8.6 5 I 8 0 9.3 10.0 8 5 7.2 6.6 6.2 6.0 Exponvolumes 37 0 244.8 26.0 1.0 1.1 1.0 .7.3 -17.1 -11 3 -14.8 -3 3 -4.0 .I3 Impallvolumcs -29 9 -30.6 -17.8 6.9 3.3 6.3 7.5 8.3 6 7 5.3 4.8 4.3 4.1 [InpercentofGDP, unless otheruisc specified) Basicratios Gross invcsment 42 I 18.2 13.1 13.6 13.3 13.7 14.6 16 I 17 1 18 0 18.4 18.8 19.1 C m m l govemment 109 7 6 7 2 7 1 7 2 7.3 78 8 4 9 0 9 5 9.7 9.9 10.0 Privatesector 31 2 10.6 5.9 65 6.1 6.4 6.8 7 7 8 1 8.4 8.7 89 9.1 ofwhich: oil scctor 22 8 5.8 0.7 0.8 0.2 0.2 0.2 0 2 0.I 0.I 0.1 0 1 0 1 Gross domestic savings 10.5 37.0 38 I 36 2 34 2 32 7 29 1 23 6 20 4 16.8 I 5 8 14 6 14.1 Cenual govcmment -08 2.9 3.5 3.2 3.5 4.4 7.I 5 6 4.9 5.5 5.8 6 0 6.3 Privatesector II3 34.1 34 6 32 9 30 8 28.2 22.0 I8 0 15.5 11.3 9.9 8.6 7 8 Gross ~ t savings ~ l i ~ 6 7 8.1 9 4 9.7 9.9 11.0 I 4 1 13 0 12.7 13.1 13.1 I3 3 13.5 C m m l govcmment -0 2 3.3 3 8 3 5 3.7 4.7 7.3 5 9 5.2 5.8 6.0 6.I 6.3 Privatescctor 6 9 4 8 5 6 6 2 6 2 6.3 68 7 1 7 6 7.3 7.I 7.2 7.2 C"l govement finance Revenue 8 3 9.2 9 9 10.1 10.7 11.8 15.2 14 5 14.3 15.3 I 5 6 16.2 16.7 ofwhich. oil rcvenw 0 5 3.2 3.5 3.2 3.2 3.7 6.3 4 4 3 2 3.I 2.6 2 5 2.3 Total expendihlrc 20 0 13 9 I3 6 I 4 0 I 44 148 I5 9 17 3 18.4 193 19.5 20.I 20.4 Cwent primary balance(. deficit) 31 -0 1 3 4 3.9 3.7 3.9 4 8 7.5 6 0 5 3 5 9 6 2 6.3 6 6 Primary basebalance,excludingoil revenue314151 -3 4 -2.3 -2.2 -2.5 -2.4 -2.4 -2.8 -2 8 -2 9 -2.6 -2.I -2.1 -I9 Primarybasebalance3141 -2 8 1.7 2 0 1.6 1.5 2.0 4.I 2 1 0 7 0.8 0.7 0.6 0 5 Ovcrall fiscal deficit (codtmcnt basis) 31 -11.7 -4.7 -3.8 -3.9 -3 7 -2.9 -0 7 -2 8 -4.I -4.0 -3.9 -3.9 .3 8 Overall fiscaldeficit (cashbasis) 31 -125 -4.9 -3.9 -3.9 -3 8 -2 9 -0.7 -2 8 -41 -4.0 -3.9 -3.9 -3 8 Domesticfinancing -0.3 -1 8 -1.4 -1.0 -0.8 -1.3 -3 4 -I3 0. I 0 0 0 1 0 3 0 4 Extemal financing 12.9 6.4 5.3 5.0 4 5 4.2 4 1 4 1 4 1 4.0 3.8 3.6 3 3 Financinggap (.) 0.0 -0.3 0.0 0 0 0.0 0.0 0.0 0 0 0 0 0 0 0.0 0.0 00 Overall fiscal deficit (com.basis, includinggrants) -7 0 -I6 .1.0 -1.3 -1 3 -06 1.6 -0 5 -I9 -1.8 -1.8 .1.9 -1.9 Extemal sector Currentaccount(- deficit) Excluding official transfers .36.1 -10.5 -40 -41 -3 7 .3.0 -0 7 -3 4 -46 -5 I -5.4 -5 7 -5 6 Excluding officialmnsfcrs andoil-rclatcdiqorts -13.3 -4.7 -3.3 -3.3 -3.5 -2.8 -0 6 -3 2 4.5 -5.0 -5.3 -5.5 -5 5 NPV ofdebt-to-sxportsrad0 61 221.9 86.7 53.0 40.3 40 9 43.1 46.7 53 8 65.2 80 9 94.9 107.7 115 I Gmss officialreservesin months of imports(cxcl 6.3 7.5 9.2 10.6 11.3 12.4 I5 0 15 3 I 5 2 I4 8 14.2 13 3 124 pipeline) 7/ (Inmillions 0fU.S. dollars,unles athenvisespsificd) NominalGDP 2,6546 4,200 5 4,751.2 5,096.6 5,4312 5,7792 5,9835 6,0349 6,2857 6,528.7 6,976.0 7,463 4 8,035 5 NominalGDP (inbillions of CFA francs) 1,600. I 2,529. I 2,856.0 3,056.6 3,251.2 3,4566 3,578.8 3,M)9.5 3,759.5 3,904.9 4,172.4 4,464.0 4,806 1 ofwhich oil GDP (in billions ofCFA francs) 104.5 8629 1,007.5 1,005.2 1,003.3 1,0025 898.5 6824 559.0 417.5 376.0 328.6 298 4 CFA bancsper U.S.dollar [ pmodaverage) 602.8 602.1 601.1 599.7 598.6 598 I 598.1 598 I 598.1 598.1 598.1 598 I 598 1 CPA francsper US. dollar (end ofmiod) 668.0 665.5 663 4 .. ... .. .. Population(midyear, inmillions) 8.1 8.3 8 5 8.7 8.9 9 1 9.3 9 6 9.8 10.1 10.3 106 10 8 NominalGDPpeercapita 329.6 508.9 561 6 587.7 611.0 634.3 640.7 6304 640.6 649.2 676.7 706 3 741 9 315.9 360.7 399 6 430.9 460.7 495.3 542.2 5604 587.2 620.7 654.8 693.4 734.2 NodnalGNP' ' 2,5443 2,977.2 3,3808 3,7370 4,095.4 4,5128 5,063.6 5,364.3 5,761.7 6,242.7 6,750.3 7,326.8 7,9519 I1 Changes ar percentofbroad money stockat beginningofperiod 2/ Ratio inpercent 31Excludinggrants. 41 Theprimary basebalanceis the overall fiscaldeficit cxcludingdebt-sewicepaymentsandforeign-financedinvcrmcnt 51Inpercentafnon-oil GDP 61Based on the kc-year, backward-lookingaverage ofexports of goodsand nanfielorscniccs. 71Inmonthof impartsofgoods andnonfaclorscnices. 117 Annex 4 Table 2: GrossDomesticProductby Sector,2001-15 - 2001-03 2004-10 2011-15 2003-15 (Annual growth rate, inpercent) Primary sector 2.9 4.2 4.1 4.2 Agriculture 3.2 5.5 5.2 5.4 Food crops 2.0 5.6 5.5 5.6 Industrial crops 8.7 4.9 4.0 4.6 Livestock 2.8 2.9 3.0 2.9 Fishing and mining 2.0 1.1 1.1 1.1 Secondary sector 26.2 16.4 -2.4 10.1 Secondary sector, excluding oil production 12.6 7.8 8.7 7.2 Manufacturing 6.5 7.7 8.3 8.0 Of which: cotton processing -1.1 5.2 4.0 4.9 Handicrafts 8.3 6.0 6.0 5.9 Electricity and water 13.0 7.8 5.0 6.9 Construction and public works 31.2 8.8 10.6 6.7 Oil production ... 28.7 -15.2 ... Tertiary sector 8.2 7.1 5.9 6.5 Commerce, transport 8.1 5.6 6.0 5.6 Commerce 8.1 5.6 6.0 5.6 Transport 8.1 5.6 6.0 5.6 General government 8.6 10.3 5.8 8.2 Other 8.2 6.6 6.0 6.6 Total GDP at market prices 9.8 9.1 2.7 6.8 GDP at market prices, excl. oil production 7.3 6.5 5.9 6.1 (Inpercent oftotal GDP) Primary sector 34.7 21.9 25.6 24.0 Agriculture 21.8 14.4 17.7 16.1 Food crops 19.1 12.6 15.6 14.2 Industrial crops 2.7 1.8 2.1 2.0 Livestock 10.3 6.1 6.5 6.4 Fishing and mining 2.6 1.4 1.4 1.4 Secondary sector 17.0 40.1 25.7 32.7 Secondary sector, excluding oil production 14.5 11.2 16.4 13.7 Manufacturing 7.6 6.2 8.9 7.5 Of which: cotton processing 1.1 0.8 0.9 0.9 Handicrafts 2.5 1.8 2.4 2.1 Electricity and water 0.6 0.5 0.6 0.6 Construction and public works 3.7 2.6 4.5 3.5 Oil production 2.5 28.9 9.4 19.0 Tertiary sector 45.1 34.8 45.6 40.2 Commerce, transport 25.0 17.9 22.9 20.5 Commerce 21.8 15.6 19.9 17.8 Transport 3.2 2.3 3.0 2.7 General government 11.0 9.8 13.5 11.5 Other 9.1 7.2 9.2 8.2 Duties and taxes on imports 3.1 3.1 3.1 Total GDP at market prices 100.0 100.0 100.0 100.0 GDP at market prices, excl. oil production 97.5 71.1 90.6 81.0 118 Annex 4 -Table 3: ConsolldatedGovernmentOperatlons, 2003-15 I/ (In billions of CFAfroncs) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Totalrevenue and5ants 207.9 310 I 359 0 387.8 425 0 488.9 625.5 607 0 621.8 682.3 735.7 812 8 888.8 Totalrevenue 1322 233.6 281 4 309.6 346 3 409.2 544.8 524 6 537.6 595.7 649.8 723 8 801.6 Tax revenue 110.5 133.9 158 7 186.1 215 5 247.9 284.6 326 0 372 9 424.4 481.6 545 9 618.4 Tax onrevenue 40.2 47.6 56 7 66 4 77 0 88.5 101.7 1164 133.2 151.6 172.0 I95 0 220.8 Tax on goods andseMces 29 2 34.1 36 6 42.9 49 7 57.2 65 6 75 1 86.0 97 8 111.0 125 8 142 5 Tax on internationaltrade 39.5 49.9 62 8 73.7 85 3 98.2 112.7 1290 147.6 168.0 190.6 216 1 244.8 Other 1 6 2.3 2 6 3.1 3 6 4.1 4 7 5 4 6.1 7 0 7.9 9 0 10.2 Oil revenue 7 2 81.5 99 5 98.9 102 6 129.2 223 8 1576 1185 1196 110.4 1134 111.3 Nontaxrevenue I 4 5 I 8 2 23 1 24 7 28 2 32 1 36 4 41 0 46.2 51 8 57 8 64 5 72 0 Total grant9 75 6 76 5 77 7 78 2 78 6 79 7 80.7 82 4 84.2 86 6 85 9 89 0 87 2 Current grants 0.0 0 0 0 0 0 0 0 0 0.0 0.0 0.0 0.0 0.0 0 0 0 0 0 0 HlPCInitiativeassistance 10.5 8.8 9 3 9 1 8 9 9.2 9.5 9.8 9.4 9 5 6.1 6 3 1.4 PrOJeCtgrants 65.I 67.7 68 4 69.1 69 8 70.5 71.2 72.6 74.8 77 2 79.8 82 7 85.8 Tom1expendihre 3195 351.5 388 5 428 2 467 5 5100 569 6 625 8 692 4 752 6 811.6 898 8 982 5 Current expenditure 1454 159 6 1818 210 4 234 1 257 0 292.1 321.1 353.0 3804 406 7 456 9 501 2 Currentprimaryexpenditure 133.8 146.4 I68 6 197.0 220 4 243.1 277 9 306.6 338 2 365.4 391 3 441 2 485 2 Wages andsalaries 57 6 65.4 74 3 84 4 96 0 106 8 118 3 128.6 I42 6 155.4 167.6 I85 9 206 1 Goods andservices 29.8 39 7 47 6 58.0 65 3 72.2 85 5 95.8 105.5 1135 1204 1409 156 7 Transfers 17.9 I 8 3 21 8 26.3 29 2 32.4 38 3 42.5 47.2 51.0 55 I 62 2 67.2 Defense 21 7 23.0 24 9 28.3 30 0 31.8 35.9 39.8 43.0 45.6 48.3 52 1 55.2 Salaries 14.0 I 5 0 162 I 8 8 I 9 9 21 1 23.8 26.4 28.5 30 2 32.1 34 6 36 7 Goods and services 7 8 8.1 8 8 9.5 10 1 10.7 12.0 13.4 14 4 15 3 I 6 2 I 7 5 18.6 Peace accordimplementation 3 1 0.0 0 0 0.0 0 0 0.0 0.0 0 0 0.0 0 0 0.0 0 0 0.0 Contingent current expenditure 3 7 0.0 00 0.0 0 0 0 0 0.0 0.0 0.0 0.0 0.0 0 0 0 0 Interest 11.6 13 2 13 1 I 3 4 13 6 13.9 14.2 14.4 14.7 15.0 15.4 I 5 7 15.9 Domestic 1.9 1.9 1 9 1.9 1 9 1.9 1.9 1.9 1.9 1.9 1 9 1 9 1.9 External 9.7 11.3 11 2 11.5 I 1 7 12.0 12.2 12.5 12.8 13.1 13.4 I 3 8 14.0 Currentbalance -13 1 74 0 99 6 99 3 1123 152.2 252.7 203 5 184.7 215 3 243.I 266 9 300.4 Investment expenditure 174.1 191.9 206 8 217.9 233 4 253.0 277.6 304.7 339.5 372.2 404.9 441 9 481.3 DOmeShcallyfinanced 42.6 43.7 54 7 64.3 78 2 96.3 119.3 143.3 173.2 200.6 227 5 258 1 290.5 Foreignfinanced 131.5 148.2 152 1 153.6 I55 2 156.7 158.3 161.4 166.3 171.6 177.4 I83 8 190.8 Primarybasebalance(commitmentbasis, excl grants) 21 -44.2 43.5 58 I 48.4 47 7 69.9 147.6 74.6 26.2 29.7 30.9 24 6 25.9 Overalldeficit(commitment basis,excl. grants) -187.3 -117.9 -107 1 -118.6 -121 1 -1008 -24.8 -101.2 -154.8 -156.9 -161.9 -175 0 -180.9 Overalldeficit(commitmentbasis, incl grants) -111.6 41.4 -29 5 40.5 -42 5 -21.1 55.9 -18.8 -70.6 -70.3 -75.9 -86 0 -93.6 Changeinpayments arrears -10.5 -5.0 4 0 -2 0 -I0 -1 0 -1.0 -1.0 -1.0 -1.0 -1.0 -I0 -1.0 External( interest) -0.4 0 0 0 0 0.0 0 0 0.0 0.0 0.0 0.0 0 0 0.0 00 0.0 Domestic -10 0 -5.0 4 0 -2.0 -1 0 -1.0 -1.0 -1 0 -1.0 -1.0 -1.0 -I0 -1.0 Float, errors, andomissions -2.7 0.0 0 0 0.0 0 0 0.0 0.0 0.0 0.0 0.0 0.0 0 0 0 0 Overallbalance (cashbasis, excludinggrants) -200.4 -122.9 -111 1 -120 6 -I22 1 -101 8 -25.8 -102.2 -155.8 -157.9 -162 9 -176 0 -181.9 Overallbalance (cashbasis, includinggrants) -124.8 46.4 -33 5 42.5 4 3 5 -22.1 54.9 -19.8 -71.6 -71.3 -76.9 -87 0 -94 6 Total financing 124.8 40 0 33 5 42 5 43 5 22.1 -54 9 19.8 71.6 71.3 76.9 87 0 94.6 Externalfinancing, excl exceptionalfinancing(net) 46.8 62 9 65 7 66.7 66 3 65.4 64 1 64.8 67.6 69.4 69.1 69 6 71 5 Loans 63.4 80.5 83 7 84.5 85 4 86 2 87 I 88.8 91 5 94.4 97.6 1012 105.0 Amortizationdue -17.0 -17.6 -18 0 -17.9 -19 1 -20 8 -23 0 -24.0 -23.9 -25.0 -28.6 -31 6 -33.5 Changeinexternalarrears(principal) -1.5 0.0 0 0 0 0 0 0 0 0 0 0 0.0 0.0 0.0 0.0 0 0 0.0 ReschedulingIdebt relief 2.0 0 0 0 0 0.0 0 0 0.0 0 0 0.0 0.0 0.0 0.0 0 0 0.0 Domestic financing(net) -5 2 4 5 4 -39 1 -30.8 -24 4 4 5 0 -120 8 4 6 8 2.1 -0.1 5.8 I 5 2 20 9 Bankingsystem31 -19 9 45.4 -39 1 -30.8 -24 4 4 5 0 -120 8 -46 8 2 1 -0 1 5.8 I 5 2 20 9 Centralbank -25 8 45.4 -39 1 -30.8 -24 4 4s 0 -I20 8 46.8 2.1 -0.1 5.8 I 5 2 20 9 Gfwhich: stabilizationaccount 4 2 .37 3 -18 7 -9.9 -7 1 -28.6 -106 2 -34 8 12.0 8.9 14.8 21 7 27.3 Fundfor FutureGenerations -0 7 -8.2 .9 9 -10.2 -10 5 -10.9 -10 3 -8 8 -7.9 -7.1 -6.9 -6 5 -6.4 Commercialbank 5 9 0 0 0 0 0.0 0 0 0.0 0 0 0.0 0.0 0.0 0.0 0 0 0.0 Nonbanldng s p t m 4.5 0 0 0 0 0.0 0 0 0.0 00 0 0 0.0 0 0 0.0 0 0 0.0 Sale ofassets 21.1 0.0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.0 0 0 0 0 0 0 Expectedadditionalfinancing 74.5 17.3 1 8 I 5 1 6 1.7 1 7 1.8 1 9 2.0 2 1 2 1 2.2 World Bank 39 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.0 EuropeanUnion 23.9 11.8 0 0 0.0 0 0 0.0 0 0 0.0 0 0 0 0 0 0 0 0 0 0 AfricanDevelopmentBank 6 7 3 3 0 0 0.0 0 0 0 0 0 0 0.0 0.0 0.0 0.0 0 0 0 0 Bilateraldonors 2.6 0 0 0 0 0 0 0 0 0.0 0 0 0.0 0.0 0.0 0.0 0 0 0.0 HIPC Initiativeexceptionalfinancing41 2 3 2.2 1 8 1.5 1 6 1.7 1.7 1.8 1 9 2.0 2.1 2 1 2.2 Other 0 0 0.0 0 0 0.0 0 0 0.0 0 0 0.0 0 0 0.0 0.0 0 0 0 0 Funddisbursement 8 6 5 2 5 2 5 1 0 0 0.0 0 0 0.0 0 0 0 0 0.0 0 0 0.0 Financing gap 0 0 6.3 0 0 0.0 0 0 0.0 0 0 0.0 00 0.0 0.0 0 0 0 0 I1 Excluding publiccontract taxation. 2/ Overall fiscalbalance,excluding debt-servicepaymentsandforeign-financedinvestment. 31Includesnet UIC ofgovernmentdeposits in the bankingsytem, andrepayment to the IMF. Startingin 2003, includes also money savedfar stabilizationpqoscr 41HlPC Initiativeassistancefrom bilateralcreditors 119 Annex 4 -Table 4: Balanceof Payments,ZW3-15 (In billions o/CfAfimc$ 2003 2004 2005 2006 2007 2W8 2009 2010 2011 2012 2013 2014 2015 Current account, incl official current transfers -5664 -257.1 -1060 -1175 -1112 -940 -173 -1141 -1652 -1899 -2204 -2464 -2694 Current account, excl.official current transfers -576.9 -265.9 -1153 -1266 -1201 -1032 -268 -1239 -1747 -199.4 -2265 -2527 -270.8 Current account, excl.pipelinc imports -201.6 -1092 -85.9 -93.2 -104.7 -87.7 -109 -1075 -1598 -1847 -2142 -2409 -264.8 Trade balance, incl oil Sector -268.7 653.1 8584 842.6 837.0 8222 697.8 4596 3149 1567 101.4 42.8 3 1 Trade balance, excl oil sector -1021 -1120 -1197 -130.3 -145.9 -1600 -1803 -2023 -2245 -241.3 -254.4 -266.1 -2761 Exports,t o b 206.1 1,007 1 1,1465 1,155.6 1,166.0 1,1776 1,0862 8870 7787 653.8 631 6 605.7 599.6 Ofwhich: oil exports 74.7 8629 991 3 989.0 987.2 9864 8823 6663 5429 401.4 3599 3125 282.3 Imports, fob. 474.8 354.0 288.2 3130 3290 3554 3884 4274 463.8 497.1 530.2 5629 5965 Formalimports 412 I 2883 2173 2365 2467 2670 293.5 325.4 3541 379.3 403.6 4270 4504 Ofwhich : pipeline-relatedimports 241.3 97.8 133 161 4 3 4.2 4.2 4.4 3.6 3.5 4.1 3.6 3 0 Informal 62.7 65 7 708 76.5 82.3 88 4 95.0 102.1 109.8 117.9 126.5 135.9 146 I Services,incl.oil sector (net) -2371 -177.9 -146.2 -1525 -157.6 -168.3 -1790 -1900 -191.9 -201.5 -210.9 -232.3 -243.6 Services,excl.oil sector (net) -113.6 -1279 -1394 -1443 -1554 -1661 -1768 -1878 -1901 -1997 -208.8 -230.5 -242.1 Credit 411 51.1 55.4 594 63.6 67.8 72.0 761 81.1 86.4 923 98.8 107.1 Debit 2782 229.0 201 5 211.9 221 2 236.1 250.9 2661 273.0 287.9 303.2 331.1 3507 ofwhich : pipelinerelated 1235 50.0 6 8 8.2 2.2 2.1 2.1 2 2 1.8 1.8 2.1 1.8 15 Factor income (net) -66.5 d36 5 -823 8 -8154 -799 6 -757.5 -5503 401 I 313 4 -171 I -135.0 -817 -50.0 Ofwhich oil-relateddebit ' -54.9 -722.2 -817.1 -817.6 -812.1 -7803 -583.1 -442.2 -363.4 -226.8 -196.0 -147.7 -120.7 Current transfers (net) 5.9 4 2 5.6 7 8 9.0 9 5 14.1 17.4 25.1 26.0 24.1 249 21.1 Official (net) 105 8.8 9.3 9.1 8.9 9.2 9.5 9.8 9.4 9.5 6.1 6.3 1 4 ofwhich: HIPCInitiativegrants I1 10.5 8.8 9.3 9 1 8 9 9 2 9 5 9 8 9 4 9 5 6 1 6 3 1 4 Pnvate (net) 4.6 -45 -3.7 -1.3 0.2 0.3 4.6 7.6 15.7 16.6 17.9 18.6 19.7 CapitalandfinancialBccount 524.9 297.8 182.9 189.9 177.9 179.9 183.0 192.7 208 7 219.7 233.7 246 1 256 2 Long- andmedium-tenncapital 5295 3099 1893 1975 1814 1839 1858 190.6 198.8 208.9 218.7 228.8 241.2 Public 114.6 130.6 134 1 135.8 136 1 135.9 135.3 137.4 142.4 146.6 148.9 152 3 157.3 Projectgrants 65.1 67.7 68.4 69.1 69.8 70.5 71.2 72.6 74.8 77.2 79.8 82.7 85.8 Projectloans 49.4 62.9 65.7 66 7 66.3 65.4 64.1 64.8 67 6 69.4 69 1 69.6 71.5 Drawings 66.4 805 83.7 84.5 854 862 87.1 888 91 5 944 976 1012 1050 Repayments -17.0 -17.6 -18.0 -17.9 -19.1 -20.8 -23.0 -24.0 -23.9 -25 0 -28.6 -31.6 -33 5 Private 414.9 179.3 55.2 61.7 45.4 48.0 505 532 56.4 62.2 69.8 76.5 83.9 Dircct investment 412.5 176.2 51.6 57.2 40.4 41.5 43.0 45.4 481 53.0 597 65.3 71.6 qCwhich directoil projectinveshnent ' 389.4 150.5 20.4 247 6 6 6 4 6.5 6 7 5 5 5 3 63 5 6 4 7 Other invesbnents 2.4 3.1 3 6 4 5 5.0 6 5 7.5 7.8 8.4 9.2 10.1 11.2 123 Short-termcapital 4.6 -12.1 -6.4 -7.5 -35 -4.0 -2.8 2.1 9.8 10.9 15.1 17.3 14.9 Privatescctor 2.4 2 6 3.0 3.4 3.8 4.2 5.6 7 1 12.3 11.9 15.6 17.3 14.9 Bankingsector -7.0 -14.7 -95 -109 -7.3 -82 -8.4 -5.0 -2.5 -1.0 -0.5 0.0 0.0 Neterrorsandomissions 0.0 00 0.0 0.0 0.0 0.0 0.0 00 0 0 0.0 0.0 0 0 0.0 Overallbalance -415 40.7 76.9 72.4 667 85.8 165.7 786 43.4 29.8 13.3 -0.3 -13.2 Financing -33 0 -644 -78.7 -73.9 -68.3 .875 -167.4 -80.4 -45.3 -31.8 -154 -1.8 11.0 Change inofficial netreserves -31 2 -60.9 -73.9 -700 -59.8 -78.8 -159.4 -73.7 -40 1 -29.2 -14.5 -1 8 11.0 Ofwhich: Fundfor Fume Generations -07 -8.2 -9.9 -102 -10.5 -10.9 -10.3 -8.8 -7.9 -7.1 -69 -6.5 -6.4 Changeinarrears -2.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Reschedulingofpublic debt andarrears 21 2.0 0.0 0.0 0.0 0 0 0 0 0.0 00 0 0 0.0 00 0.0 0.0 Use of Fundresources(net) -1.9 4.5 -48 -3.9 -8.5 -87 -8.0 -6.7 -5.2 -2.6 -0.9 0.0 0.0 Financingneed 74.5 23.7 1 8 1.5 1 6 1 7 1 7 1.8 1.9 2.0 2 1 2 I 2 2 Identifiedfinancing 74.5 17.3 1.8 1 5 1 6 1.7 1.7 1.8 1.9 2.0 2.1 2.1 2.2 EuropeanUnion 23.9 11.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0 0 00 0.0 0.0 WorldBank 39.0 0.0 0.0 0.0 0.0 0.0 0.0 00 0.0 0.0 0.0 0.0 0.0 AfricanDevelopment Bank 6 7 3 3 0 0 0 0 0.0 0.0 0 0 00 0 0 00 0.0 0 0 0 0 ProjectedHIPCInitiativeassistance 2.3 2.2 1.8 15 1 6 1.7 1.7 1.8 1.9 2.0 2.1 2.1 2.2 Other donors 2.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Financinggap 0.0 63 0 0 0.0 0.0 0 0 0.0 00 0.0 0.0 0.0 0.0 0 0 Memorandumitems: NominalGDP (in billionsof CFA francs) 1,600 2,529 2,856 3,057 3,251 3,457 3,579 3,610 3,760 3,905 4,172 4,464 4,806 Current accountbalance(incl official current transfers)lGDP31 -33 7 -97 -3.7 -3 8 -3 4 -2.7 -0.5 -3.2 -4.4 4.9 -5 3 -5 5 -5.6 Current accountbalance(excl.official current transfm)lGDP -36.1 -105 -4.0 -4.1 -3.7 -3.0 -0.7 -3.4 -4.6 -5.1 -5.4 -5.7 -5.6 Current accouni balancc(cxcl.off. transfersandoil sector)!GDP -13.3 -4.7 -3.3 -3.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Gross officialreserves(inbillionsof CFA francs) 170 231 305 375 435 513 673 747 787 816 830 832 821 Gross officialreswes (in months of imports(incl.pipeline))41 3.0 5.4 8.7 10.0 11.1 12.2 14.8 15.1 15.1 147 14.1 13.2 123 Gross ofiicial resmes (inmonthsof imports(excl pipeline))4/ 6 3 7 5 9 2 106 113 124 150 153 152 148 14.2 I 3 3 124 Debtoutstanding(inbillionsof CFA francs) 51 1,027 1,102 1,173 1,244 1,311 1,376 1,440 1,505 1,573 1,642 1,711 1,781 1,852 DebtoutstandingIGDP 51 57.2 38.6 36.1 35.5 350 34.5 34.8 36.1 36.3 36.6 35.8 35.0 33.9 Debtserviceiexports ofgwds and services 61 9.8 2.5 2.3 2.4 25 2.6 3.0 3.8 4.3 5.1 5.8 6.4 6.7 NF'V of debt-to-expomratio 71 221.9 86.7 53.0 40.3 40.9 43.1 46.7 538 65.2 80.9 94.9 107.7 115.1 l i HIPCinterimmistance Bommultilateralcreditors is recordedas current transfers inthe current presentation. 2l Includes onlyVaditional debt relief. 31Assuming that the budgetaiysupponexpectedfrom EuropeanUnionandbilateraldonors from 2003 onwardwill materialize. 41Inmonthsof imports ofgoods andservices. 51Before stock-of-debt operation. 61Debt sewice due. beforeHIPCInitiativeassistance 71Basedon the three-year, backward-lookingaverage of exports of goods andnonfactorservices. 120 Annex 4 -Table 5: Monetary Survey, 2003-15 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 (In billions oJCFAfrancs) Net foreignassets 119.5 195.1 278.5 359.4 426.5 513.6 681.4 760.1 802.7 832.9 847.9 849.8 838.8 Centralbank 102.8 163.7 237.6 307.6 367.4 446.2 605.7 679.4 719.5 748.7 763.2 765.0 754.0 Commercialbanks 16.7 31.4 40.9 51.8 59.1 67.3 75.8 80.8 83.3 84.3 84.8 84.8 84.8 Medium- and long-termliabilities -2.4 -2.4 -2.4 -2.4 -2.4 -2.4 -2.4 -2.4 -2.4 -2.4 -2.4 -2.4 -2.4 Net domestic assets 90.4 38.2 -8.9 -46.9 -71.0 -110.6 -219.4 -255.7 -240.5 -220.7 -194.5 -150.9 -87.1 Domestic credit 134.6 83.5 37.6 0.9 -21.0 -50.2 -167.6 -202.6 -184.9 -164.7 -136.9 -91.7 -25.2 Claims on the government(net) I/ 46.6 -13.8 -70.2 -118.6 -152.4 -204.4 -329.6 -378.8 -376.7 -376.8 -371.0 -355.7 -334.9 Treasuly(net) 56.7 -3.8 -60.2 -108.6 -142.4 -194.3 -319.6 -368.8 -366.7 -366.8 -360.9 -345.7 -324.8 Bankingsector -12.7 -65.6 -113.4 -153.0 -182.1 -230.6 -353.6 -401.6 -399.5 -399.6 -393.8 -378.6 -357.7 Fundposition 69.4 61.8 53.2 44.4 39.7 36.2 34.0 32.8 32.8 32.8 32.8 32.8 32.8 Other nonneasury -10.0 -10.0 -10.0 -10.0 -10.0 -10.0 -10.0 -10.0 -10.0 -10.0 -10.0 -10.0 -10.0 Creditto the economy 88.0 97.4 107.8 119.5 131.5 144.2 162.0 176.2 191.8 212.2 234.1 264.1 309.7 Other items (net) -44.2 45.4 46.6 -47.8 -50.1 -50.4 -51.7 -53.1 -55.6 -56.1 -57.6 -59.2 -61.9 Money and quasi money 207.5 230.9 267.2 310.2 353.1 400.6 459.7 502.0 559.9 609.8 651.0 696.5 749.3 Currency outside banks 120.3 117.5 131.6 149.0 169.8 187.9 215.4 234.9 268.7 288.2 304.6 318.2 326.1 Demanddeposits 71.7 93.3 111.5 132.5 150.8 174.9 200.9 219.6 239.4 264.5 284.8 311.1 348.0 Time and savings deposits 15.5 20.1 24.1 28.6 32.6 37.8 43.4 47.4 51.7 57.1 61.5 67.2 75.2 (In percenl of beginning-afperiadmoney stack) Net foreignassets 20.3 36.4 36.1 30.3 21.6 24.7 41.9 17.1 8.5 5.4 2.5 0.3 -1.6 Netdomestic assets -8.9 .25.2 -20.4 -14.2 -7.8 -11.2 -27.2 -7.9 3.0 3.5 4.3 6.7 9.2 Domestic credit -7.8 -24.6 -19.9 -13.7 -7.0 -11.1 -26.8 -7.6 3.5 3.6 4.5 6.9 9.6 Claimson the government (net) 11 -12.5 -29.1 -24.4 -18.1 -10.9 -14.7 -31.3 -10.7 0.4 0.0 1.0 2.3 , 3.0 Ofwhich: Treasury(net) -12.6 -29.1 -24.4 -18.1 -10.9 .14.7 -31.3 -10.7 0.4 0.0 I O 2.3 3.0 Creditto the economy 4.7 4.5 4.5 4.4 3.9 3.6 4.4 3.1 3.1 3.6 3.6 4.6 6.6 Creditto the economy (annual change) 11.2 10.7 10.8 10.8 10.0 9.6 12.4 8.8 8.9 10.6 10.3 12.8 17.3 Money and quasi money 10.3 11.3 15.7 16.1 13.8 13.4 14.8 9.2 11.5 8.9 6.8 7.0 7.6 Currency outside banks 1.8 -1.4 6.1 6.5 6.7 5.1 6.9 4.3 6.7 3.5 2.7 2.1 1.1 Demanddeposits 6.3 10.4 7.9 7.9 5.9 6.8 6.5 4.1 3.9 4.5 3.3 4.0 5.3 Time and savings deposits 2.1 2.2 1.7 1.7 1.3 1.5 1.4 0.9 0.9 1.0 0.7 0.9 1.1 Memorandumitem: NominalGDP (inbillions ofCFA fiancs) 1,600 2,529 2,856 3,057 3,251 3,457 3,579 3,610 3,760 3,905 4,172 4,464 4,806 Moneymultiplier (MZas a fractionofbae money) 1.4 1.6 1.6 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.8 Moneyvelocity(GDP relativeto M2) 7.7 11.0 10.7 9.9 9.2 8.6 7.8 7.2 6.7 6.4 6.4 6.4 6.4 Gross reserves(inpercent of M2) 82.0 100.1 114.1 120.9 123.1 128.2 146.4 148.7 140.5 133.8 127.6 119.5 109.6 11Includingnet use ofFundresources 121