The budget for 2011 assumes total revenue of CFAfr1.17trn (US$2.2bn), up by 13% on the revised 2010 budget, and total spending of CFAfr1.26trn, equivalent to a 5% increase on 2010. The 2011 budget therefore envisions a deficit of CFAfr94bn (US$180m), compared with CFAfr169bn in 2010. Oil receipts are expected to account for just under two-thirds of domestic revenue. However, this is based on an optimistic official forecast that Chadian oil will sell for US$87/barrel; by contrast, we expect the country's crude to fetch around US$76/b (a significant discount on the US$90/b average expected for Brent blend). However, new oil supply from the Bongor basin is due to come on stream by the end of 2011, while reasonably rapid economic growth should support non-oil revenue. Spending will prioritise defence and infrastructure. Public-sector salaries are budgeted to stagnate in 2011 but we nonetheless expect the state wage bill to rise through ad hoc bonuses, given that it is an election year. Furthermore, sharp rises in global commodity prices in 2011, particularly for food and fuel, mean that the government is likely to increase spending on subsidies for staples.

In 2012 we expect non-oil revenue growth to remain strong, although this will be offset by dwindling oil production from the increasingly marginal Doba fields. Spending growth is expected to slow, in line with the improving security situation and the fact that the government will be spared election-related expenses-for both the organisation of the polls and pre-election spending-that year. Fiscal management is expected to remain opaque and erratic in 2011-12, with overspending and revised budgets likely in both years. In view of the outlook for buoyant world oil prices in 2011, we now expect the fiscal deficit to be equivalent to 11.7% in 2011 (previously 13.4%), before widening slightly, to 12.2% of GDP in 2012 (previously 14.7%). The government is likely to turn to China and domestic borrowing to cover the deficits.