WASHINGTON, Nov 13 (Reuters) – The head of the International Monetary Fund on Sunday welcomed a debt deal long-awaited by Chad’s creditors and said it would reduce the African country’s risk of debt distress while protecting against downside risks, including lower oil prices. .
“We have been waiting for this day,” IMF Managing Director Kristalina Georgieva said in a statement.
She said the debt treatment agreed by creditors was in line with the objectives of Chad’s IMF-supported program and should pave the way for the completion of the first and second reviews that would allow the disbursement of IMF funds.
Chad announced on Friday that it had reached a debt agreement with Swiss commodities trader Glencore Plc (GLEN.L) and other creditors. Sources said the deal provided debt relief in 2024 in the form of a reprofiled debt service schedule, but added it would not reduce Chad’s overall debt level. Read more
The announcement drew criticism from World Bank President David Malpass, who said he remained deeply concerned about Chad’s long-term ability to pay its $3 billion in external debt, given the absence real debt reduction.
Sources close to the deal said it would protect Chad if oil prices fall again, while restoring confidence and opening the door to new resources. But they agreed that Chad’s overall development needs were immense and dwarfed its external debt.
Creditors, including Glencore, concluded there was no current funding gap, given rising oil prices that had buoyed the oil-producing nation’s revenues, but agreed to meet again if the price changed.
They also agreed, depending on oil prices and other factors, to stretch debt service payments from 2024 to ensure that Chad’s debt service-to-revenue ratio falls below 14% in 2024 from the current level of 20%. After 2025, the ratio is expected to drop to 12.4%, the sources said.
The automatic mechanism would protect Chad if oil prices fell again, eroding revenue, they said. It was also necessary to ensure the continuation of IMF loans, which is only possible if a country is below the threshold of moderate risk of debt distress.
The deal is expected to pave the way for Chad to receive $145 million in program funding from the IMF, once the board approves the first and second reviews, likely around December 22.
This should help unlock hundreds of millions of dollars in additional funds from the World Bank and bilateral lenders.
Reporting by Andrea Shalal; Editing by Daniel Wallis and Bradley Perrett
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