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Chad Government Finances
https://photius.com/countries/chad/economy/chad_economy_government_finances.html
Sources: The Library of Congress Country Studies; CIA World Factbook
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    In 1983 the Ministry of Finance produced its first central government budget in four years. By 1986 the government had adopted a standardized nomenclature that resulted in more effective management of revenues and expenditures throughout government ministries. The government also initiated measures to improve tax administration, including the reorganization of customs inspections in the capital, the creation of tax enforcement teams and tax offices in secondary cities, and greater control over records for the largest tax-paying enterprises. The State Control (ContrĂ´le d'Etat), an autonomous auditing unit directly attached to the presidency, performed audits and investigations throughout public agencies and enterprises to deter fraud and misuse of public funds.

    Chad's public sector was small compared with the size of the economy. In 1977 total government revenues amounted to about 9 percent of GDP. The deficit of 2.6 percent of GDP, although low when compared with such figures for other nations, was nevertheless significant because the figure represented one-third of total government revenues in that year. In absolute terms, revenues and expenditures were small but increasing from 1983 through 1985. The small size of government was a consequence of its reestablishment after the conflicts ended in 1982 and the limited resources of administration. The government's preference for a liberal economy, with the public sector a complement to, and not a substitute for, the private sector, also helped to hold down the size of the central administration. The sharp increases in expenditures and revenues from 1983 to 1985 reflect the reinstitution of government operations after 1982 and the increases in cotton-generated revenues during these years of good crops and high world cotton prices. The equally sharp decline in revenues in 1986 reflected the drop in world cotton prices and the halt in Cotontchad's contributions to the central treasury through duties on cotton exports. In the mid-1980s, expenditures, elevated by defense spending and the needs of a stable administration, first stagnated and then dropped somewhat. The reduction, however, did not keep pace with declining revenues, resulting in a 90 percent increase in the deficit in 1986.

    During the same year, under terms of the Emergency Cotton Program, Cotontchad ceased all fiscal contributions to the government. The government's challenge was to control the fiscal deficit in the absence of cotton revenues either by cutting expenditures or by generating additional revenues. There was little room for movement on the expenditure side. Military outlays and salaries of government employees were the largest budget items. Defense spending was highly unpredictable and unlikely to be reduced quickly in the face of continued insurgency in the north. The officially declared defense expenditures were between 34.5 and 37.6 percent of government spending from 1984 to 1986 (see Defense Expenditures , ch. 5). Clearly, however, such figures represented only a part of total military spending, which may have been as high as 70 percent of government expenditures.

    Government salaries were also difficult to reduce. The reinstitution of administrative government activities in 1982 brought the number of civil servants to between 20,000 and 23,000 by 1985. This increase reflected not only the government's renewal of operations but also its policy of national reconciliation. In part, that policy guaranteed positions to the most important former civil servants--largely those from the southern regions--who wanted to reenter government service. In the 1985-86 period, the government paid civil servants only 60 percent of their salaries, based on salary scales set in 1967. Although salaries for civil servants were low, the government was often unable to finance the whole wage bill without external budget support, and it often delayed payments until disbursements were covered by international donors.

    Expenditures on government goods and services were low, as evidenced by the general scarcity of basic equipment and supplies in government offices. Civil servants often functioned without desks, chairs, paper, and such office equipment as typewriters and copying machines. Moreover, cutting expenditures for parastatals achieved no savings because the government did not subsidize their operations directly. The parastatals relied on their own sources of local revenues or foreign donor support. Donors also financed public investment and a large part of recurrent costs associated with development projects.

    The government's financial resources consisted of fiscal revenues, special funds, and exceptional taxes. The small size of Chad's modern, monetary sector limited the tax base. With the fall of world cotton prices and reduced production and income both to Cotontchad and to peasant producers, the tax base shrank even more in 1985. In the mid-1980s, relatively few economic agents bore the tax load. Taxes were derived particularly from the five major industries--Cotontchad (exempted in 1986), the STT, the BdL, SONASUT, and the MCT. Their burden included (in order of importance) import-export duties, excise taxes, corporate taxes, and turnover taxes. In 1986 fiscal revenues amounted to 5 percent of GDP, compared with 9 percent in 1977 and 15 percent in the peak year of 1971. This percentage compared unfavorably with those in some other African states, such as Central African Republic (12 percent), Mauritania (22 percent), and Senegal (19.5 percent).

    In 1984 the government first imposed exceptional taxes to finance national reconstruction. All salaried employees, whether in government or in the private sector, were taxed one month's salary. In 1985 the government repeated the effort to combat the effects of drought and in 1987 introduced a variable tax to support the war effort. Although these taxes placed a burden on taxpayers, the government did not account for these taxes in the official budget.

    Several special funds either collected taxes on behalf of the government or derived revenues from their own activities. The two most important funds were the CSPC, and the Petroleum Products Fund (Fonds d'Intervention des Produits PĂ©troliers--FIPP). The CSPC's mandate included stabilizing producer prices for cotton furnished to Cotontchad, financing the deficit of Cotontchad, and playing a part in industrial and commercial operations of the cotton sector. The plan called for 80 percent of any Cotontchad surplus to go to the CSPC, with Cotontchad retaining the remainder. Any Cotontchad deficit was to be financed by the CSPC. From 1972 through 1984, Cotontchad transferred about CFA F21 billion to the CSPC. The CSPC, however, did not finance Cotontchad's deficits, which were particularly acute after 1985. Rather, the CSPC used its resources to subsidize the ONDR and the IRCT to invest in other public enterprises and to finance its own administrative costs. Since 1986, under the Emergency Cotton Program, Cotontchad ceased contributions to the CSPC, which no longer played its mandated role. FIPP was set up to equalize petroleum import prices from Nigerian and Cameroonian sources, so that Chad would not become overly dependent on either source for its fuel supplies. FIPP was to tax cheaper Nigerian imports, thereby subsidizing Cameroonian imports, breaking even in the process. But the system never worked properly and ultimately led to considerable fraud, with cheaper Nigerian imports often receiving subsidies after leaving Cameroon. Poor border control also contributed to FIPP's inability to stabilize and equalize imports and prices on petroleum. In 1987 the government, along with the donor community, were reviewing the roles of these two institutions.

    Data as of December 1988


    NOTE: The information regarding Chad on this page is re-published from The Library of Congress Country Studies and the CIA World Factbook. No claims are made regarding the accuracy of Chad Government Finances information contained here. All suggestions for corrections of any errors about Chad Government Finances should be addressed to the Library of Congress and the CIA.

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