World Bank set to release frozen oil funds

The World Bank is close to ending a six month spat by agreeing a compromise deal that would allow President Idriss Deby to access more of the country’s oil revenues, sparking fears that the cash will be spent on guns and not development projects as initially intended. Under the new deal the government of Chad, which this month fought off a rebel attack on the capital N’djamena, would be able to access 30 percent of oil revenues, compared to the previous limit of 10 percent, on condition that the remaining 70 percent go on “priority poverty programmes”. And the so-called “future generations fund” – a special account to guard 10 percent of oil income for future development projects – appears to have been scrapped by the World Bank, too. Last year the World Bank froze an escrow account holding more than US $100 million of Chadian petrodollars and suspended $124 million in loans to the cash-strapped country after parliament voted to abolish the future generations fund, a key component to initially securing World Bank backing for development of Chad’s burgeoning oil sector. The change of tack by the World Bank follows a threat from the Chadian government to stop pumping oil at the end of this month if a deal was not reached to free up its frozen oil accounts. “While the Government and the Bank are yet to conclude a comprehensive and final agreement, they have reached an interim accord,” said the World Bank in a statement issued in Washington DC late on Wednesday. According to the text of Wednesday’s agreement, the Chad government will make the necessary changes as part of 2006 budget legislation. If the bill is passed and implemented the World Bank said it will drip-feed Chad’s government the more than US $100 million on deposit in three tranches over the next three months. It has also agreed to restart lending to development projects. Analysts expect the money will be spent on weapons and security to bolster Deby’s government against heavily-armed rebels and army deserters who have been challenging his regime since 2005. “It’s really coming down to the wire for the Chadian government now”, said Jason Mosley, Africa Editor at the British research unit Oxford Analytica. “They needed the oil money to buy more weapons and spend on security measures. If Deby gets parliament to pass this budget measure and then misappropriates 30 percent of the first tranche, that still gives him several million dollars to spend on security equipment. Considering the precarious situation he’s in that must sound better than nothing,” added Mosley. The World Bank said in its statement that Chad has agreed not to spend any of the forthcoming millions on military equipment. “The Chadian authorities also agreed to parallel actions to strengthen the monitoring, transparency and accountability of not only direct but also indirect oil revenues and development aid”, the World Bank said in its statement. But according to Mosley its ability to enforce this is limited. “The Bank has already exercised its enforcement measures which are suspending the loans and freezing the money in their Citibank account. Once they give them the first tranche of money, all they can do then is freeze the rest. I’m not optimistic about this working because the situation in Chad is so unstable,” he said. World Bank backing for the US $3.7-billion oil pipeline that carries around 170,000 barrels of Chadian oil 1,600 km each day to waiting tankers docked in Cameroon, was touted as a model for making African natural resources work for the African people by providing guidelines and restrictions on how the oil money could be spent. But the project has been troubled from the start when Deby spent the first US $3 million of oil proceeds on guns in 2003. The Bank also said that Chad had committed to implement measures to “strengthen and expand” transparency and accountability measures, including expanding the role of the College – the independent body with oversight of the allocation and use of Chad’s oil revenues for poverty alleviation projects. A member of the College contacted by IRIN said he could not comment on the new transparency measures because the College had not been consulted on the new agreement or made aware of the new transparency measures. Chad, an arid desert country in north-central Africa, is the fifth poorest nation in the world, according to the UN. It has chronic development problems and has been fractured by civil war for most of the 46 years since its independence from France.