World Bank freezes loans, government urges rethink

Oil-producing Chad is urging the World Bank to rethink its decision to suspend all loans – a move that came after parliament scrapped a ground-breaking scheme where a chunk of petrodollars was set aside for future generations. The World Bank announced on Friday that it was withholding all new loans to Chad and was suspending US $124 million already earmarked for the country. Over the weekend, the Chadian government said it was shocked at the Bank’s decision, which affects a number of development projects besides the oil pipeline. “The government wishes the bank to reconsider its position and look again at this decision, which by its nature undermines the credibility of its action in Chad and harms its reputation,” the country’s economy minister, Mahamat Ali Hassan, said in a statement. “The Bank’s decision, which ongoing consultations in no way predicted, comes at a crucial and difficult time for Chad and surprises us by its brutality,” he added. The World Bank action came a week after politicians voted by a 119-13 margin to revise the oil laws. But the global financial watchdog had warned that it considered the legal tinkering a “material breach” of a 1999 agreement for managing Chad’s oil wealth and that loan suspensions might be a consequence. Chad was supposed to be an oil test case for the continent, and the 1999 agreement was to ensure the country bucked the trend of Africa’s other oil producers where petrodollars have enriched a few while the masses languish in poverty. Eighty percent of Chad’s oil profits from the 1,000-kilometre pipeline was to be pumped into education, health, infrastructure and rural development, and another 10 percent was supposed to be held in trust for future generations. But Chad’s parliament on 29 December approved legislation to access more of the revenues. Chadian President Idriss Deby has yet to ratify the law, which would do away with the future generations fund and funnel some “poverty reduction” money to state security. Difficult times for Deby The oil row comes as Deby faces a swelling rebel movement in the east and increasing tensions with Sudan, which Chad accuses of arming and financing dissident soldiers. Among the world’s five poorest countries, Chad regularly has difficulty paying its civil servants and regions in the east and south have had to absorb at least 240,000 refugees from neighbouring Sudan and Central African Republic. Economy Minister Hassan said Chad had “fully explained” its reasons for changing the oil revenue management law. In announcing the loans freeze, the World Bank said it had tried for some time to talk to the Chadian government about solving its fiscal problems while leaving intact the poverty reduction framework. “Regrettably instead of engaging in dialogue they have proceeded to alter fundamentally the law which was the basis of our original agreement,” Paul Wolfowitz, the head of the World Bank, said in a statement. The suspension is one of the most drastic moves the World Bank can take, but Wolfowitz said the lender was not slamming the door shut. “We haven’t given up on dialogue, and hope in fact that perhaps if they stop and appreciate how serious the issue is [for both sides], we can find common ground that addresses the legitimate concerns of the government of Chad and our objective of ensuring Chad’s oil revenues benefit that country’s poor.” The $3.7-billion oil development project is being run by an Exxon-Mobil consortium. The pipeline, inaugurated in 2003, runs through savannah and jungle from the Doba oilfields in southern Chad, across Cameroon to a mooring buoy in the Atlantic ocean. Some human rights and civil society groups declared the day the oil valves officially opened “a national day of mourning" and warned that mass corruption would follow. On the streets of the capital N’djamena at the weekend, views on the latest developments were mixed. “It’s unfortunately a decision we’re going to pay for, we the poor,” 29-year-old Madame Nepitimbaye said. However Mahamat Nour Goudar, 35, disagreed. “It (the World Bank move) is an attack on Chad’s sovereignty,” he said.