Fitch assigns Chad ‘B-‘ IDR rating with stable outlook

Fitch Ratings assigned on Wednesday Chad a Long-Term Foreign-Currency Issuer Default Rating (IDR) of ‘B-‘ with a Stable Outlook.

The ratings agency highlighted the country’s low debt-to-GDP ratio and strong donor support against challenges of low GDP per capita, high informality, and heavy dependence on oil.

The recent election of President Mahamat Deby Itno after three years of transitional military rule suggests political stability, with continued international backing expected due to Chad’s counter-terrorism role.

Growth Forecast

Fitch expects Chad’s growth to slow to 2.4 per cent in 2024 and average 2.7 per cent over 2025-2026 (2023: 5.3%), impacted by stagnant oil production and a shift in focus toward non-oil growth.

“We anticipate oil sector growth to slow to 0.9% in 2024 (2023: 6.8%) as oil production stagnates, before picking up to an average 3.2% over 2025-2026 as new oil fields coming onstream bolster production.”

The country’s reliance on oil, comprising one-third of GDP and two-thirds of exports, remains a risk as global prices decline, pushing the government’s budget deficit to 2.4 per cent in 2024. Fiscal adjustments are anticipated with public spending cuts to mitigate lower oil revenue.

“We forecast the non-oil economy to grow by 3.0% in 2024 (2023: 4.7%), supported by sustained public spending. Non-oil growth will then ease to an average 2.5% over 2025-2026 as the government cuts capex to adjust for lower oil prices (Fitch Brent forecast: USD70/bbl in 2025 and USD65/bbl in 2026). Over the past decade, Chad’s real GDP growth averaged 1.8%, below the 3.5% average for the ‘B’ median, owing to high volatility in oil output.”

Fitch notes Chad’s low external debt burden, with most debt owed on concessional terms and commercial debt limited to one reprofiled loan with Glencore. Additionally, membership in the Economic and Monetary Community of Central Africa (CEMAC) provides stability, although Chad’s banking sector remains vulnerable, with a capital adequacy ratio of -1.4 per cent and significant non-performing loans.

The report underscores heightened regional security risks due to Sudan’s conflict and Chad’s fragile political environment, reflected in a low World Bank Governance Indicator ranking and an ESG score signaling weak governance.

Attribution: Fitch Ratings

Subediting: Y.Yasser