Chad reached an agreement unlocking IMF finance to restructure its debt on 11 November. However, the agreement has been criticised for failing to reduce the country’s overall debt burden and increasing its dependence on oil revenues. It is the first deal agreed under the much-criticised Common Framework for Debt Treatments (see Observer Winter 2021, Winter 2020) created by the G20 in 2020, which will reschedule debt repayments due in 2024, ensuring Chad’s debt remains under the level of ‘moderate risk of debt distress’.
An initial agreement was made with bilateral creditors in 2021, but a final deal was delayed by Swiss commodities trader Glencore Plc, which holds approximately one-third of Chad’s nearly $3 billion external debt. Tim Jones of UK-based civil society organisation Debt Justice noted on Twitter, “Glencore has been rewarded for blocking debt relief for Chad over the last two years.”
While the IMF welcomed the deal, World Bank President David Malpass expressed concern, saying, “The agreement reached by the creditors provides no immediate debt reduction. As a result, the debt service burden of Chad remains heavy and is crowding out priority expenditures on food, health, education and climate.” However, the Bank has not supported broader calls for a UN debt restructuring mechanism, or offered to cancel its own debts.
Glencore and bilateral creditors agreed Chad did not need debt relief because high oil prices were boosting its revenues. If oil prices fall, bilateral creditors said they could reconvene and offer help. The deal also incentivises the maximisation of oil revenues when the world should be transitioning away from carbon-intensive fuels and countries at a time when the world and countries in the Global South like Chad are especially vulnerable to the effects of and increasingly suffering from climate change.