Real GDP rose by some 10 percent in 1994, aided by a good crop season and the return of internal confidence with the improvement in the political situation, and prices surged with the pass-through of the effects of the devaluation. In 1995 growth was sustained at 3.6 percent despite unfavorable weather conditions which constrained agricultural output, and inflation declined to an annual average of 9.5 percent. In 1996, the overall economic and financial situation of Chad continued to improve, although real GDP growth was only 2.7 percent, because unfavorable weather conditions in the northern region of the country affected severely the production of foodstuffs which dropped by 6 percent. In contrast, the cotton harvest was some 30 percent larger, as compared with the previous crop year, which reflected the strong producer price incentives. Inflation was higher than expected, as the effect of the drought and temporary bottlenecks in the supply of other goods, notably petroleum products, drove up prices by some 10 percent.
Public finances continue to improve.
The improvement in the fiscal accounts stems primarily from the satisfactory implementation of the tax and customs reforms, the strengthening of tax administration, and the streamlining of the revenue collection agencies. Revenues rose to some 10 percent of GDP in 1996 from 8.5 percent in 1995. Strong corrective measures were adopted in the supplementary budget for 1997 to address this problem and to boost revenue collections further. It is expected also that structural reform efforts will focus on the large parastatal enterprises in the cotton, sugar, electricity and water, and telecommunications sectors, on the privatization of the remaining two state-owned commercial banks, and on the restructuring of the civil service. Executive Board Assessment Executive Directors welcomed the continued improvement in Chad's overall economic performance since 1995 and the headway made in some structural reform areas, in particular the steady decline in the external current account deficit and the rebound of economic activity in the nonagricultural sectors.