The World Bank has suspended all loans to Chad, saying the Central African countrys government had breached an agreement over oil revenue controls, BBC Online reports Friday.
Bank president Paul Wolfowitz announced the move, one of the most drastic the bank can take against a member country. He accused Chad’s government of acting “unilaterally” after it voted to relax controls on the use of its oil profits.
The bank had lent Chad more than 39 million US dollar on condition that non-government groups checked its use of oil revenues. The private sector arm of the World Bank, the International Finance Corporation, also lent another 100 million dollar and mobilised a further 300 million for the pipeline.
The World Bank said the move aimed to ensure that money generated from oil was used to reduce poverty in the country, as the loan would be used to help build an oil pipeline with an estimated cost of 4 billion dollar.
However, the banks demands prompted protests from Chads government, which last month accused the organisation of acting like a coloniser and of using the poor countrys people as guinea pigs to test different types of management, BBC adds.
Background from the World Bank home page, www.worldbank.org
The Petroleum Revenue Management Law, adopted by the National Assembly and passed into law by the President of the Republic of Chad in 1999, was a deciding factor in the World Bank Groups support for the Chad-Cameroon Oil Pipeline Project, which represented a unique opportunity for Chad to use its oil revenues to finance desperately needed poverty reduction.
As part of the loan agreement with the World Bank, the Government of Chad specifically undertook not to amend or waive any provisions of the law in ways that would “materially and adversely affect” the revenue management program established under the law.
The law directed the bulk of direct revenue to the Government from the Chad Cameroon Pipeline Project to agreed-to “priority sectors,” such as health, education and rural development, that are linked to improved living standards and poverty reduction. The law also created a Future Generations Fund, to ensure there would be some benefits to the population once the oil reserves are exhausted.
The amendments endorsed by the Government and passed by the National Assembly would, among other changes, broaden the definition of priority sectors to include, among other sectors, territorial administration and security, and would eliminate the Future Generations Fund, allowing the transfer of more than 36 million US dollar already accumulated there to the general budget.
In addition, further changes in the definition of priority sectors could be made by decree. Also, the amendments more than double the share of royalties and dividends that can be allocated to non-priority sectors. Taken together, these changes to the revenue management program substantially weaken the poverty focus of the program and constitute a breach of the loan agreement entered with the World Bank.
In the run-up to the passage of the amendments, the Bank expressed its concern about the revisions and urged the Government of Chad to abide by the commitments it made in the loan agreement with the World Bank.
