Sudan vs. Chad

Sudan has experienced protracted social conflict and the loss of three quarters of its oil production due to the secession of South Sudan. The oil sector had driven much of Sudan's GDP growth since 1999. For nearly a decade, the economy boomed on the back of rising oil production, high oil prices, and significant inflows of foreign direct investment. Since the economic shock of South Sudan's secession, Sudan has struggled to stabilize its economy and make up for the loss of foreign exchange earnings. The interruption of oil production in South Sudan in 2012 for over a year and the consequent loss of oil transit fees further exacerbated the fragile state of Sudan's economy. Ongoing conflicts in Southern Kordofan, Darfur, and the Blue Nile states, lack of basic infrastructure in large areas, and reliance by much of the population on subsistence agriculture, keep close to half of the population at or below the poverty line.

Sudan was subject to comprehensive US sanctions, which were lifted in October 2017. Sudan is attempting to develop non-oil sources of revenues, such as gold mining and agriculture, while carrying out an austerity program to reduce expenditures. The world's largest exporter of gum Arabic, Sudan produces 75-80% of the world's total output. Agriculture continues to employ 80% of the work force.

Sudan introduced a new currency, still called the Sudanese pound, following South Sudan's secession, but the value of the currency has fallen since its introduction. Khartoum formally devalued the currency in June 2012, when it passed austerity measures that included gradually repealing fuel subsidies. Sudan also faces high inflation, which reached 47% on an annual basis in November 2012 but fell to about 35% per year in 2017.

Chad's landlocked location results in high transportation costs for imported goods and dependence on neighboring countries. Oil and agriculture are mainstays of Chad's economy. Oil provides about 60% of export revenues, while cotton, cattle, livestock, and gum arabic provide the bulk of Chad's non-oil export earnings. The services sector contributes less than one-third of GDP and has attracted foreign investment mostly through telecommunications and banking.

Nearly all of Chad's fuel is provided by one domestic refinery, and unanticipated shutdowns occasionally result in shortages. The country regulates the price of domestic fuel, providing an incentive for black market sales.

Although high oil prices and strong local harvests supported the economy in the past, low oil prices now stress Chad's fiscal position and have resulted in significant government cutbacks. Chad relies on foreign assistance and foreign capital for most of its public and private sector investment. Investment in Chad is difficult due to its limited infrastructure, lack of trained workers, extensive government bureaucracy, and corruption. Chad obtained a three-year extended credit facility from the IMF in 2014 and was granted debt relief under the Heavily Indebted Poor Countries Initiative in April 2015.

In 2018, economic policy will be driven by efforts that started in 2016 to reverse the recession and to repair damage to public finances and exports. The government is implementing an emergency action plan to counterbalance the drop in oil revenue and to diversify the economy. Chad's national development plan (NDP) cost just over $9 billion with a financing gap of $6.7 billion. The NDP emphasized the importance of private sector participation in Chad's development, as well as the need to improve the business environment, particularly in priority sectors such as mining and agriculture.

The Government of Chad reached a deal with Glencore and four other banks on the restructuring of a $1.45 billion oil-backed loan in February 2018, after a long negotiation. The new terms include an extension of the maturity to 2030 from 2022, a two-year grace period on principal repayments, and a lower interest rate of the London Inter-bank Offer Rate (Libor) plus 2% - down from Libor plus 7.5%. The original Glencore loan was to be repaid with crude oil assets, however, Chad's oil sales were hit by the downturn in the price of oil. Chad had secured a $312 million credit from the IMF in June 2017, but release of those funds hinged on restructuring the Glencore debt. Chad had already cut public spending to try to meet the terms of the IMF program, but that prompted strikes and protests in a country where nearly 40% of the population lives below the poverty line. Multinational partners, such as the African Development Bank, the EU, and the World Bank are likely to continue budget support in 2018, but Chad will remain at high debt risk, given its dependence on oil revenue and pressure to spend on subsidies and security.

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