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Chad Proposes Change in Poverty Reduction Agreement


Chad is a proposing to change a two-year-old agreement with the World Bank that requires the government to use most of its money from oil sales for poverty reduction and for a special fund set aside for “future generations.” Chad agreed to the restrictions, and in exchange, the World Bank lent 4.2 billion dollar for an underground pipeline carrying oil to a port in Cameroon. The pipeline began operating two years ago. Now, Chad says it wants to alter the agreement to give it more money to pay civil servants and the military. But the World Bank says it prefers to offer technical help to bring spending under control.

A spokesman for the development group Oxfam says Chad could improve its financial situation with better management practices. Ian Gary is the policy advisor for extractive industries at Oxfam America in Washington, D.C. He says a number of reports “highlight problems in the execution of projects using oil money, [for example] where projects didn’t exist and where there were unexplained cost overruns…. I think there is ample evidence to show money has not been used as well as it should be, and there could be a lot of savings if the government were more strict in financial management.”

He says international donors need to coordinate their approach to Chad: “The World Bank needs to outline the possible consequences [if Chad reneges on the original agreement]. It has a number of options: recall the loans that are outstanding and accelerate the payment of loans [by Chad] to the World Bank. They could also stop the flow of further loans to the government of Chad that are in the pipeline. This would also have a ripple effect with relations with IMF, EU and other donors and might put Chad in a worse financial situation than if they leave the law intact.”

Ian Gary of Oxfam America says the World Bank should have waited until democratic and transparent reforms were made by Chad’s government before signing the agreement to help build the pipeline.