The Chadian parliament on Thursday voted to scrap a fund set up to safeguard a portion of the country’s petrodollars for future generations, in a move the World Bank has called a ‘material breach’ of a ground-breaking contract with donors.
The trust fund was one pillar of a model plan aimed to ensure that oil revenues be used to reduce poverty – an effort to buck the trend of other African oil-producers where black gold has enriched none but an elite few.
Parliamentarians approved the changes by a 119 to 13 vote with one abstention, following a debate in which deputies repeatedly evoked the issue of Chad’s ‘sovereignty’ in the oil project scheme.
The World Bank provided essential backing for the Chad-Cameroon oil pipeline on condition that the government set up the ‘future generations’ fund.
“As a condition for its support for the project, the Bank worked with the Government of Chad to help it establish an unprecedented system of safeguards assuring that the revenues are used to reduce poverty,” a Bank document says.
The new law, once signed by President Idriss Deby, would mean that some US $30 million currently stashed in the future generations fund would go into the state coffers.
The amendments also add state security to the “priority sectors” to be allocated oil dollars – previously limited to poverty reduction areas like health, education and basic infrastructure.
World Bank president Paul Wolfowitz has expressed “strong opposition” to the amendments, according to a Bank statement released shortly after the general assembly vote on Thursday.
“If these amendments become law, it will harm the well-being of Chad’s poorest and most vulnerable citizens and represent a material breach of the original agreement,” Wolfowitz said.
Wolfowitz will meet with other partners and shareholders to decide the World Bank’s course of action, the statement said. The World Bank could either: suspend new credits or grants, halt the disbursement of funds for some or all ongoing operations or call for accelerated repayment of loans, the communique said.
The Chadian government has been voicing its intentions to change the oil revenue management law for months, and drew up a draft bill in October, insisting it needs the funds now to help fix a fiscal crisis and tackle lingering instability.
Since October Chad has seen sweeping desertions in the ranks of the armed forces, and recent rebel attacks in the east of the country have stoked tensions with neighbouring Sudan. Landlocked Chad, ranked by the UN as the world’s fifth poorest country, has also been blighted by labour strikes while the government has had difficulty paying civil servants.
During Thursday’s general assembly debate supporters of the amendments said Chad’s current situation demands the change.
Member of parliament closely allied to Deby, Kassire Coumakoye, said, “The [original] law is absurd. It does not take into account the reality.”
An opposition member, Ali Golhor, protested, “Chad’s problem is not a lack of resources. We have a problem of waste and mismanagement.”
Civil society groups in Chad have long denounced the government effort to change the law, saying that tapping into the oil funds will not solve Chad’s fiscal woes, which they say are purely due to bad governance.
Gilbert Maoundonodji, head of a civil society coalition monitoring the oil project, told IRIN on Thursday the Chadian government’s move puts pressure on the World Bank.
“It’s up the World Bank now to act,” he said. “The Bank’s very credibility will be on the line.”
The revenue management law, drawn up under guidance from the World Bank, stipulated that 10 percent of Chad’s direct oil revenues are placed in trust for future generations. Of the remainder 80 percent of royalties and 85 percent of dividends are devoted to so-called priority sectors – education, health and social services, rural development, infrastructure and environment and water resource management.
These procedures are monitored by a specially appointed group whose members would serve three-year terms.
But the new amendments prolong those mandates to nine years – a change Maoundonodji called another worrying step backwards, saying it will make it tougher to guard against graft.
“These changes mean more bad governance and more unchecked corruption.”