Growth and Structure of the Economy

Growth and Structure of the Economy

Chad's remoteness, its inadequate infrastructure, its recent history of war, drought, and famine, and its dependency on a single cash crop--cotton--for export earnings made it one of the poorest nations of the world. In the mid-1980s, Chad's gross national product per capita was only US$160, which clearly reflected the extent of the nation's impoverishment. In the mid-1980s, Chad ranked among the five poorest nations of the world according to World Bank statistics.

Chad's economy was based almost entirely on agriculture and pastoralism. In 1986 the World Bank estimated that approximately 83 percent of the country's economically active population worked in agriculture, 5 percent worked in industry, and 12 percent were engaged in services, including government employment, trade, and other service activities. Cotton processing, which includes ginning raw cotton into fiber for export, some spinning and weaving, and producting edible oil from cotton seed for local consumption, dominated industry.

Figures for the gross domestic product (GDP) also reflected agriculture's importance. In 1986 the World Bank estimated that 46.3 percent of Chad's GDP came from agriculture and pastoralism. Industry and manufacturing accounted for only 17.9 percent of GDP, while services represented 35.7 percent of GDP.

Geography and climate played an influential role in Chad's economy. The country is divided into three major climatic zones-- Saharan, sahelian, and soudanian--which are distinguished by the level of annual average rainfall. There are only two productive zones--the soudanian cotton-producing zone of the south, sometimes called Le Tchad Utile (Useful Chad), and the central sahelian cattle-herding region. The northern Saharan region produces little.

In 1987 Chad's economy was dependent on a single cash crop-- cotton. Like most other single-crop economies in the Third World, when world commodity prices were high, conditions improved. When those prices fell, conditions worsened. Despite several important swings, during the 1970s and particularly in the early 1980s, cotton prices were good. Chad's cotton revenues peaked in 1983 and 1984, but in 1985 world cotton prices fell steeply, nearly crippling the cotton industry. This decline forced a major economic restructuring under the auspices of the World Bank and foreign donors. To revive the cotton industry, a 1986 restructuring program curtailed all cotton-derived revenues to the government until world prices rebounded. This program forced cutbacks on the production of raw cotton and limited the level of government support to producers for improved cropping methods, ginning, and other related industrial operations.

Cattle and beef exports followed cotton in economic importance. Estimates of the value of these exports varied greatly because large numbers of livestock left the country "on the hoof," totally outside the control of customs officials. Nevertheless, cattle and beef exports accounted for 30 to 60 percent of all exports from 1975 through 1985, depending on the value of the cotton crop in a given year. Approximately 29 percent of Chadians depended almost entirely on livestock for their livelihood in the early 1980s, and livestock and their by-products represented around 26 percent of GNP.

Chad's lack of resources limited the exploitation of mineral deposits. There were known deposits of bauxite in the southern regions, and reports indicated deposits of uranium and some other minerals in the Tibesti Mountains and Aozou Strip. Even in late 1987, however, no bauxite was being mined, and because of hostilities in the northern zones, claims of mineral deposits there had not been verified. Chad's only mining industry was the traditional exploitation of sodium carbonate (natron) in dried beds around Lake Chad.

Oil offered one of the few reasons for economic optimism. In 1974 a consortium of companies led by Conoco discovered oil near Rig Rig, north of Lake Chad. Plans to exploit these reserves, estimated at 438 million barrels, and to build a small refinery to serve Chad's domestic needs were delayed in the late 1970s and early 1980s because of The Chadian Civil War. In 1986 the government--with World Bank support--revived the idea, and plans called for operations to begin in the early 1990s. Nonetheless, these deposits would ensure only Chad's domestic needs, and no oil would be exported. In 1985 Exxon, which had become the leader of the exploratory consortium, discovered oil in southern Chad, near Doba. The size of the reserves was not known, although it was believed to be large. Exxon, however, suspended drilling in 1986 when world oil prices fell.

Remoteness and distance are prime features of economic life in Chad. Transportation and communications are difficult, both internally and externally. Douala, Cameroon, the nearest port from N'Djamena, is 1,700 kilometers away. By the mid-1980s, the only paved roads linking the capital to the interior, some 250 kilometers of hardtop, had disappeared because of insufficient maintenance. Of the estimated 31,000 kilometers of dirt roads and tracks, only 1,260 kilometers were all-weather roads. The remainder became impassable during the rainy season. There were no railroads in Chad.

Since independence, Chad has relied on outside donors and regional institutions for economic survival and development. Chad's principal sponsor has been France, which has subsidized the budget. Through the mechanisms of the Lomé Convention between the member of the European Economics Community (EEC) and their farmer colonies in Africa, the Caribbean, and the Pacific (ACP), France has also subsidized Chad's cotton production and exports. French companies have dominated trade, and French banks have controlled Chad's finances.

Information on Chadian government finances was fragmentary and inconsistent. The political instability from 1976 to 1982 left large sections of the country beyond any form of central control, and during this period the state had very few finances. After 1982, however, fragmentary estimates indicated a growing importance of donor finances and a decline in internally generated revenues. In addition, during the 1980s military spending was high. Although the proportion of real government expenditures for defense was difficult to assess, it could have represented as much as 70 percent of government spending. Despite a measure of political stability after 1982, the situation worsened in 1985 with the collapse of cotton revenues. In 1986 the World Bank and the International Monetary Fund (IMF) joined in efforts by other donors, including France, the EEC, and the United States, to stabilize Chad's financial and budget difficulties.

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