(formerly IRIN News) Journalism from the heart of crises

Government to scrap unique measure for sharing oil wealth

[Chad] A maze of pipes moves crude oil around at Kome oilfield, southern Chad. The project is being touted as a test case to prove that petro-dollars can benefit the poor.
Esso Photo

Brushing aside international concern, cash-strapped Chad has decided to scrap a key component of its model law on oil revenues requiring the government to set aside petrodollars for the well-being of future generations.

The government of Chad, newcomer on the burgeoning African oil scene, approved draft legislation on Tuesday to amend law 001, which lays out unprecedented provisions for avoiding the misappropriation of oil revenues and ensuring funds go toward reducing poverty.

Despite concerns raised by the World Bank, sponsor of the Chad-Cameroon oil project, the government said it needed to tap the revenue now to deal with fiscal problems and bolster the country’s security.

President Idriss Deby late last month dissolved the presidential guard days after scores of troops deserted the army.

“Chad is facing great financial difficulties,” Communications Minister Hourmadji Moussa Doumgor told IRIN on Wednesday. “We need these funds now to assure development and peace in the country.”

Doumgor said the draft legislation now goes to parliament for debate and a vote.

A summary of the 8 November cabinet meeting, obtained by IRIN, said that “the changes aim to establish a realistic approach to the management of petrol revenues to include satisfying present priorities as well as preparing for the future.”

The amendment leaves intact the “fundamentals” of the law, the record said, “while taking into account the Chadian people’s impatience and expectations of concrete benefits to their living conditions from oil exploitation.”

But some analysts say the government is putting Chad's future financial position at grave risk by taking this step.

“This seems like a short-term survival strategy but one that will have long-term harmful consequences,” Ian Gary, Oxfam America policy advisor for extractive industries, told IRIN.

Chad’s oil revenue law was part of novel poverty-reduction measures required by the World Bank in return for financing part of the US $3.7-billion pipeline, which snakes 1,100 kilometres from the south of landlocked Chad through Cameroon to a mooring buoy in the Atlantic Ocean.

The law states in part that 10 percent of Chad’s oil revenues be put in a special fund for future use, with other portions earmarked for improving health, education, roads and water supply in the country - ranked 173rd of 177 in the latest UN human development index.

As of end September 2005, US $27.4 million was stashed in the future generations fund, according to the World Bank.

When the oil tap officially opened in 2003, the scheme to share out revenues was touted as one that would defy the bleak record of the continent’s other oil producers, where petrodollars have enriched an elite few while the masses see little to no benefit.

Still environmental and aid groups dubbed the event a “national day of mourning,” arguing that Chad’s troubles would only be exacerbated by the oil project.

Moving to quash concern over the planned change, Finance Minister Abbas Mahamat Tolli told Radio France Internationale on Wednesday that the authorities will put the money into projects that will help future generations.

“For us, the future of these generations is also a product of the efforts we make today,” he said. “For the future generations we want to leave a solid health infrastructure, massive investments in education; these are efforts the government is undertaking. . .that in the end will guarantee greater and greater improvement of living conditions.”

The amendment will also redefine priority sectors, change the way some funds are allocated and extend the law to apply to future oilfields, according to the records of the meeting.

World Bank officials were unavailable for immediate comment, but in a 25 October statement the agency expressed concern about Chad’s efforts to reshuffle oil revenues.

Responding to World Bank concerns, Communications Minister Doumgor said that “the World Bank knows perfectly well the situation Chad is facing. We are facing considerable difficulties and they must take this into account.”

The country has been hit in recent months with widespread labour strikes and the government regularly has problems paying civil servants’ salaries.

Chad recently was deemed the world’s most corrupt nation by the Berlin-based watchdog, Transparency International.

A civil society coalition monitoring the oil project says the social tensions and financial problems authorities want to fix with the extra petrodollars can be put down to one thing: bad governance.

By the close of September 2005, Chad had earned US $306 million in gross direct revenues, exporting 118 million barrels since production began, according to a World Bank website on the project.

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