Chad has been a member of the BEAC since independence. The BEAC, with the backing of the French treasury, served as the central bank of its member states: Cameroon, Central African Republic, Chad, Congo, Equatorial Guinea, and Gabon. Consequently, Chad has adhered to the Franc Zone, using as currency the AÍÍÍÍfrican Financial Community franc, (Communauté Financière Africaine--CFA for value of the CFA franc--see Glossary). Use of the CFA franc, which was tied to the value of the French franc (FF) at CFA F50 to FF1, gave Chad a stable, convertible currency. This factor spurred trader confidence in the value of the currency and in the ability to convert to hard currency acceptable as payment for imports. It was particularly helpful to the economy to have a stable currency backed by regional and international cooperation and not subject to political whim as governments and coalitions fought for power in Chad. Reconstruction after 1982 would have been far slower and more difficult had currency value suffered the volatility, inflation, and distrust of traders so often encountered in other Third World nations.

All banking offices closed in 1979 and 1980 when N'Djamena was the scene of heavy fighting. The BEAC reopened in 1981 along with the BIAT, the BTCD, and the Development Bank of Chad (Banque de Développement du Tchad--BDT). Only the International Bank for Commerce and Industry in Chad (Banque Internationale pour le Commerce et l'Industrie du Tchad--BICIT) had failed to reopen by late 1987, leaving Chad with only three banks plus the central bank. Of the three banks, only the BIAT--the local subsidiary of the French-owned International Bank for West Africa (Banque Internationale pour l'Afrique Occidentale--BIAO) was totally under private ownership. The government and the French bank Crédit Lyonnais shared joint ownership of the BTCD, along with some other smaller investors. The BDT was the principal government-controlled bank for development purposes it received considerable support from the CCCE, a key arm of French foreign assistance programs.

In Chad the flow of credit and cash traditionally followed the rhythm of the cotton-growing season. Cotontchad, by law required to buy all cotton produced at preset prices, made short-term loans from the banks before planting each year to import materials for its cultivation improvement programs and to pay the producers for their crops at harvest. The credit portfolios of Chad's banks reflected this situation. In 1986 almost 90 percent of the claims on banks were short-term loans, more than 70 percent of which were consigned to Cotontchad. Overall, Cotontchad claimed 64 percent of all credit available to the economy. In 1984, with rising cotton production and good world prices, credit extended by the BEAC expanded quickly. This credit permitted an adequate level of industrial and consumer imports but drained the BEAC's exchange reserves. With the collapse of world cotton prices in 1985, Cotontchad's revenues dropped, and foreign exchange flowing into Chad declined. As a result, the BEAC's exchange ed2reserveses dropped precipitously in 1986. Operations in the banking sector ground to a halt as Cotontchad fell into arrears on repayments of its shortterm debt. In late 1986, the BEAC negotiated a rescheduling of some three-fourths of the short-term debt, allowing a ten-year maturity, including a five-year grace period with an interest rate of 6 percent. The solution neither reduced the exposure of the private banks for loans to Cotontchad nor directly improved the general credit situation for other potential borrowers, especially the small- and medium-sized enterprises that often were squeezed out of the market. It did, however, save Chad's banking structure and Cotontchad from immediate collapse by buying time for longer-term solutions to be formulated with the aid of foreign donors.

No mechanisms existed for extending credit directly to farmers beyond assistance for cotton production. Before the Chadian Civil War, the BDT and the ONDR extended credit on a limited basis, as did the government's Rural Action and Development Fund (Fonds de Développement et de l'Action Rurale--FDAR). But these credits for marketing agricultural products were not repaid, and the FDAR ceased operations in 1981. In 1985 the government created the Fund for Rural Intervention (Fonds d'Intervention Rurale--FIR) to replace the FDAR. Through 1987 the government was unable to fund the FIR, and the international donor community did not provide agricultural credit on a sectoral level other than for cotton, which impeded Chad's intention to diversify its agricultural economy. In 1986 the World Bank financed a study and a long-term technical assistance program to determine credit needs and options for the design of an appropriate system of rural credits. These actions were taken in cooperation with other institutions, such as the ONDR (extension services) and SIMAT under the authority of the Ministry of Agriculture and Rural Development.

In 1983 the government imposed a five-year moratorium that froze all deposits and outstanding credits before 1980. The moratorium's purpose was to prevent a run on banks and to staunch capital flight when banks restored operations in early 1983 under the new government. The impact of the moratorium was twofold. On the one hand, it served to reduce credit available to the economy because entrepreneurs were unable to withdraw assets for investment or operations. On the other hand, the amount of frozen credits was more than double that of frozen deposits, so the action protected other businesses from service on debts during the hard times of recovery.

The longer-term financial situation was bleak. The problem of interest payments to the BEAC for rediscounted credits, which made up the majority of frozen credits, compounded by Cotontchad's difficulties in meeting its debt obligations to the banks, seriously strained Chad's banking system.

Data as of December 1988