- The World Bank has announced that a solution to its six-month row with Chadian authorities over the use of oil revenues is nearing. An "interim agreement" has been reached, allowing the besieged government of President Idriss Deby to spend some more of oil revenues and that will unfreeze the World Bank funding of projects in Chad.
While the government of Chad and the World Bank are yet to conclude a comprehensive and final agreement, they have reached an interim accord, the bank said in a statement issued in Washington last night. "Based on this, the World Bank has agreed to resume some loan disbursements for education, health, community development, HIV/AIDS, agriculture, electricity, water and infrastructure," the statement added.
The agreement is seen as a compromise, as it allows President Deby's government to spend a larger part of oil revenues for central government needs, while cutting down on investments into a savings fund and local expenditures in the oil producing southern region.
As agreed, the government of Chad is to pass a 2006 budget law that will specify that 70 percent of the oil revenues will be used for priority poverty programmes, the World Bank informed. "This allocation excludes security spending, which is to be funded from the Chadian Treasury's general revenues," the Bank emphasised. The N'djamena government currently faces several rebel groups - probably armed by Sudan - and has been forced to increase its military budgets.
The World Bank has a relatively high influence on the Chadian government due to its financing of the costly Chad-Cameroon pipeline that made Chadian oil production and exports possible in the first place. The credit was given on conditions of moderate and transparent spending of oil revenues, basically directed towards poverty reduction. The earlier Chad-World Bank agreement was approved as a special legislation by the N'djamena parliament.
Late last year, however, it became clear that the government of President Deby would present a national budget not complying with the oil spending legislation. Spending was higher than in the agreement with the World Bank, in particular due to a growing army budget. Also transparency standards did not meet the Bank's expectations, raising fears of corruption. Finally, parliament voted to abolish the "future generations fund", a savings fund that was to receive 10 percent of oil revenues.
The Bank reacted by freezing its payments to Chad. An account holding more than US$ 100 million of Chadian oil revenues was made inaccessible to N'djamena authorities and the Bank suspended US$ 124 million worth in loans. The action immediately had negative effects on the Chadian economy, where access to cash and credits is limited.
The "interim agreement" between Chad and the World Bank gives N'djamena a bigger access to its oil revenues. A greater part may be spent directly by the central government. Also, the Bank seems to have agreed to abolish the "future generations fund". In return, however, N'djamena authorities had agreed to "strengthen the monitoring, transparency and accountability of not only direct but also indirect oil revenues and development aid."
"Even before recent developments, the people of Chad were among the poorest of Africa, with the bleakest prospects," noted World Bank President Paul Wolfowitz in a statement. "Suspending aid was a difficult decision but one the Bank had to take given developments that undermined the original agreement to ensure that resources went to benefit the poor people of Chad," he added.
Mr Wolfowitz also noted that the government of Chad now had "agreed to take steps to restore the confidence of the international donor community, including specifying in a new budget law that 70 percent of oil proceeds in the escrow account will be used for poverty reduction. A final agreement is still to be reached but I welcome the government's efforts to address these issues," he added.
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