The effects on foreign investment of years of civil war are still felt today, as investors who left Chad between 1979-82 have only recently begun to regain confidence in the country's future. The most important economic venture to date is the Doba Basin oil extraction project in southern Chad. Since late 2000, development of Chadís petroleum sector has stimulated economic growth by attracting major investment and increased levels of U.S. trade. It is hoped that this project will serve as a catalyst for the entire economy by helping to reduce energy costs and attracting additional trade and investment in other sectors. However, the question remains whether Chad will continue to consolidate its economic reforms and invest its oil revenues wisely in order to encourage a wider range of economic initiatives. Continuing political controversy surrounding past elections and a withering rebellion in northern Chad also dampen Chad's economic prospects somewhat by exposing the weaknesses in Chad's political institutions.

The Exxon Mobil-led pipeline pumps oil from reserves in Chad through an underground pipeline to coastal Cameroon, where it is loaded onto tankers. Following a crucial World Bank financing decision in June 2000, the Doba project officially began its construction phase in October 2000. From 2000 until 2003, an American-led consortium invested $3.7 billion into the project, approximately $2 billion of which was invested in Chad. The consortium was planning to produce approximately 225,000 barrels of oil a day from three fields in southern Chad by late 2004. The World Bank estimates that the project will provide a minimum of U.S. $80 million to $100 million in annual government revenues during the 25-year production phase. In the initial years, most of this government revenue is committed to priority development spending under an agreement with the World Bank. The consortium is continuing to explore other regions in Chad where initial exploration results have been encouraging.

Despite recent development of the petroleum sector, more than 80% of the work force is involved in agriculture (subsistence farming, herding, and fishing). Like many other developing countries, Chad has a small formal sector and a large, thriving informal sector. Government statistics indicate the following distribution: Agriculture--38%(farming, livestock, fishing); industry--13%; and services--49%. Chad is highly dependent on foreign assistance. Its principal donors include the European Union, France, and the multilateral lending agencies.

Primary markets for Chadian exports include neighboring Cameroon and Nigeria and France, Germany, and Portugal. Aside from oil, cotton remains a primary export, although exact figures are not available. Rehabilitation of CotonTchad, the major cotton company that suffered from a decline in world cotton prices, has been financed by France, the Netherlands, the European Economic Community (EC), and the International Bank for Reconstruction and Development (IBRD). The parastatal is now being privatized.

The other major export is livestock, herded to neighboring countries. Herdsmen in the Sudanic and Sahelian zones raise cattle, sheep, goats, and, among the non-Muslims, a few pigs. In the Saharan region, only camels and a few hardy goats can survive. Chad also sells smoked and dried fish to its neighbors and exports several million dollars worth of gum arabic to Europe and the United States each year. Other food crops include millet, sorghum, peanuts, rice, sweet potatoes, manioc, cassava, and yams.

After averaging 0.8% in 1999-2000, Chadís real GDP growth was estimated at 8.9% in 2001, and 10% in 2002 and 2003 as the Doba oil project accelerated. Inflation rose from 3.7% in 2000 to 12.4% in 2001, dropped to 5.2% in 2002, and was estimated to level out at 3% in 2004. These fluctuations were due in large part to increasing demand from the Doba project but also to fluctuations in agricultural production. After a disappointing agricultural campaign in 2000, increased production during the 2001-02 timeframe helped reduce inflation in 2002. In 2003, the contraction in investments, the 7% appreciation in the CFA Franc exchange rate, and bumper harvests combined to generate a 1% deflation in place of the projected 4.3% inflation. Chadís economic performance, at least until the onset of oil exports, continued to depend on fluctuations in rainfall and in prices of its principal export commodities, especially cotton.

Since 1995, the Government of Chad has made incremental progress in implementing structural reforms and improving government finances under two successive structural adjustment programs. Most state enterprises have been partially or completely privatized, non-priority public spending has been lessened, and the government has gradually liberalized some key sectors of the economy. Liberalization of the telecommunications, cotton, and energy sectors is expected to proceed over the next several years. Chad reached the enhanced Heavily Indebted Poor Countries (HIPC) initiative completion point in May 2001.