6 January 2006
In what some have described as Wolfowitz's first real test in his new position, the President announced the suspension of all World Bank loans to Chad on Friday.
The World Bank's highest profile extractive industry project, the Chad-Cameroon Oil Pipeline, appears to be falling apart. On Friday January 6 World Bank President Paul Wolfowitz announced that the Bank will suspend disbursement of approximately $124 million in loans to Chad and withold new loans and grants. The move is in response to the government of Chad's December decision to revise the Petroleum Revenue Management Law 001, the centerpiece of the Bank's experiment in converting petrodollars to poverty reduction. Specific changes included:
- Increasing from 15% to 30% the amount of direct petroleum revenues deposited into general government coffers, bypassing the joint government-civil society revenue oversight committee (the Collège)
- Eliminating the Future Generations Fund (FGF) (a fund that set money aside for the post-oil era) and using the money accumulated for immediate expenditures
- Redefining “priority sector” expenditures to include spending on security
The move follows failed attempts to resolve concerns through dialogue. "We've been trying for some time to open dialogue with the government of Chad ...instead of engaging in dialogue, they have proceeded unilaterally," Wolfowitz told Reuters. "We haven't given up on dialogue and hope in fact that perhaps if they stop and appreciate how serious the issue is from our point of view and not only from theirs, we can find some common ground.''
The risks of "high risk" investment
As human rights groups and civil society organizations warned before the project was approved in 2000, investing in oil in an unstable country with a history of human rights abuses and no effective democratic institutions is a dangerous undertaking. The risks associated with this "high-risk, high-reward" investment have become all too clear in the past weeks.
As the security situation in the country worsens, President Deby has sought to increase his access to oil money, prioritizing immediate spending on security over saving for the future and more targeted poverty-reduction programs.
The alteration of Law 001 not only violates Chad's agreement with the World Bank, but also reflects the weakness of technocratic solutions like Chad's much-lauded revenue management system in countries where people lack the means to hold their government accountable. The deteriorating security situation and deepening financial crisis in Chad--neither of which can be entirely dissociated from the country's growing oil sector--will ultimately take their toll on the people of Chad.
While the denial of donor support to the Chadian population is not desirable, there is little evidence that external financing provided to the government is benefiting the Chadian people. One hopes that the World Bank's decision to suspend lending to Chad will encourage the Chadian government to reconsider its scrapping of the revenue management provisions that represented some minimum safeguard against the abuse of oil money to the detriment of Chad's poor.
In the meantime, and perhaps more urgently, efforts need to focus on de-escalating the mounting tensions between Chad and Sudan, and within Chad itself, to avoid the outbreak of violence or war. Without greater security and political stability, no solution to the dispute over the use of oil money will suffice to ensure the welfare of the Chadian people.
Resources
Press
- World Bank Cuts Off Aid To Chad in Oil Dispute; Nation Won't Yield On Pipeline Revenue, by Paul Blustein, Washington Post, January 7, 2006 (Washington Post website)
- Wolfowitz suspends World Bank loans to Chad, by Reuters, January 6, 2006 (SwissInfo website)
- Wolfowitz suspending $124 million in Chad loans, by Harry Dunphy, Associated Press, January 6, 2006 (ABC News website)
- Chad May Alter Its Pledge on Oil Funds: Hard-Line Stance Tests World Bank, by Paul Blustein, Washington Post, December 30, 2006
- Chadians React to World Bank Loan Suspension, by Joe Bavier, Voice of America, January 8, 2006 (www.voanews.com)
Civil society
- Chad's Oil Revenue Experiment in Crisis, by the Bank Information Center, Friends of the Earth, Environmental Defense, and Oxfam International (Bank Information Center website)
- World Bank Suspends Loans to Chad, Oxfam International Statement on World Bank and Chad Oil Project, January 6, 2006 (MS Word 29KB)
- World Bank suspension of loans to Chad: What comes next? Statement by the Chadian Association for the Promotion and Defense of Human Rights, January 6, 2006 (Acrobat pdf 16 KB)
- La Banque Mondiale a suspendu tout ses décaissement en direction du Tchad : et après? l’Association Tchadienne pour la Promotion et la Défense des droits de l’homme, January 6, 2006 (Acrobat pdf 16 KB)