3 May 2006
On April 27th, the World Bank announced that it had reached an interim agreement with the Government of Chad to resume lending and unfreeze bank accounts containing the country's oil revenues. The accounts had been blocked since January of this year, when the Bank suspended lending to the country following the government's decision to rewrite the revenue management law and use oil money for security spending. World Bank press release on interim agreement
After months of dispute between the World Bank and the Government of Chad over the latter's decision to redirect oil revenues from poverty alleviation to security spending, the parties have reached an interim agreement that will enable the resumption of Bank lending for certain projects and free up millions of dollars of oil revenues, frozen in an off-shore escrow account since January of this year.
Some argue that Chad has clearly emerged as the victor in the dispute with the Bank, since the accord allows the government to retain 30% of direct oil revenues for discretionary use, including on security--more than double the amount permitted under the original law.
According to the interim agreement, the Chadian government's revised 2006 budget law must specify that 70% of direct oil revenues (principally royalties) will be used for priority poverty reduction sectors. Once the Exxon-led oil consortium deposits payments owed into the off-shore escrow account, the World Bank will release one third of the account balance to the government over a period of three months. It will also resume disbursements on approved projects.
Some lingering questions
The agreement makes no mention of how indirect revenues (taxes and duties on oil production and company profits) will be used, despite the fact that these will soon far outweigh direct oil revenues. In 2007, it is predicted that Chad may receive as much as $1 billion in indirect revenues from the petroleum sector.
The decision to resume lending to Chad and to release the oil revenues in escrow raises a fundamental question: is there any more guarantee today that oil revenues will be used to benefit the poor than there was the day that that the Bank suspended lending in January? Arguably, the politico-military crisis in Chad today is even more dire than it was in January, increasing the likelihood that oil money will be used for weapons.
The timing of this agreement has also been questioned, coming as it did on the heels of a US State Department visit to Chad and on the eve of national elections, scheduled to take place on May 3rd.
Chad in a state of turmoil
The agreement comes at a time when Chad is in a state of turmoil, with impending presidential elections set to be held on May 3. That President Deby has again apparently used the proceeds from Chad’s lucrative oil production to buy arms amidst the pre-election turmoil bodes ill for the chances of peaceful elections and development in Chad, one of the world’s poorest and least developed countries. That the World Bank has backed down from its hard line against the mismanagement of oil revenue immediately prior to the elections may be construed as a stamp of approval that the international community supports Deby despite his turbulent track record.
The situation in Chad has deteriorated over the past weeks after rebels based in the Darfur region of Sudan attacked Chadian towns and eventually stormed the capital city N’Djamena in a failed coup attempt against President Idriss Deby, who himself took power in 1990 in an armed uprising.
Critics of Deby’s regime insist that while the rebels coordinated their rebellion from the war-torn Darfur region of Sudan, the uprising was in fact a response to the Chadian government’s neglect of its people and President Deby’s accusations merely an attempt to deflect attention from his pressing domestic problems.
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