News December 10, 2018 at 08:00 am

This African country is so broke, it took a $45m loan from France to pay its workers

Nduta Waweru December 10, 2018 at 08:00 am

December 10, 2018 at 08:00 am | News

Photo: Alwihda Info

Getting loans for development is one thing, but borrowing to pay your workers is a different thing entirely. And this is what Chad, one of Africa’s poorest countries is doing.

According to Eye of Africa, this African country is borrowing $45m from former colonial master, France, to pay its workers.

Information from French Development Agency state that a bulk of the loan will be used to pay December salaries of about 90,000 employees and the rest to pay three months worth of pensions. It further indicates that the loan is for “a 20-year term” with a preferential interest rate.

Additionally, the country is getting an $11 million loan for its health sector. It is apparently a part of an agreement between the two countries that was reached in 2017 at the National Development Program (PND), says Eye of Africa.

But how did Chad get here?

Chad is considered one of Africa’s poorest country, with the World Bank saying that “the combined effect of the 2014 drop in oil price and the weak security environment” has contributed to the country’s deep recession. Further, poverty levels are predicted to rise to 39.8% by 2019.

The country’s economy also suffered because of low foreign direct investment, and a loss of income due to cross-border trade disruption with Nigeria. An improvement in the agricultural sector did not improve matters.

Some of the measures Chad had put in place include cutting down expenditure and drop in salaries for government workers who lost some of their bonuses and allowances as part of fiscal adjustments by the government. This led to a 5-month strike by labour unions, which affected schools and hospitals.

The country also experiences corruption and is ranked 165 out of 180 in the Corruption Perception Index by Transparency International.

“The government is perceived as largely ineffective in a context where insecurity and weak maintenance of the rule of law perpetuate systemic corruption. Major international governance indicators suggest persistent, widespread and endemic forms of corruption, permeating all sectors of Chadian society, with little evidence of progress made in anti-corruption in recent years,” says Transparency International in 2014.

Although the country has a number of resources including Uranium and gold, it scored poorly in the World Economic Forum Global competitive index (2017-2018): 135/137  and the Human Development Index, ranked 186 out of 189 countries.

Currently, Chad has borrowed money from a number of countries and international organisations including the International Monetary Fund, which resumed its loans after the country reached an agreement to restructure its more than $1 billion debt to trading giant Glencore and four banks.

World Bank recommends that Chad has to further tighten its expenditure and look for ways to raise revenues, especially now that oil prices are still low. It also needs to establish a stabilization fund, economically diversify and mitigate regional security risks to stem further economic distress.

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