Chad has signed a precedent-setting agreement with the World Bank that guarantees 70% of its oil revenues will be spent on poverty alleviation projects. Civil society hopes this will allow Chad to escape from the “paradox of plenty”, common in oil-producing nations, in which the majority of the impoverished population does not benefit from oil wealth.
But cynics question whether the government will keep its promises, after a similar agreement fell through last year. Last year, the government of Idris Deby diverted money earmarked for development projects to buy helicopters and tanks. The World Bank responded in January this year by suspending further loans to Chad.
Civil society members say Chad’s development prospects were undermined, not just by the government’s decision to increase military spending, but also the World Bank’s failure to heed the warning signs. “We agree[d] with the World Bank’s decision to suspend funding for Chad because new money would mainly be used for military purposes and increasing repression of the Chadian people,” said Delphine Djiraibe, a lawyer at the Chadian Association for the Promotion and Defence of Human Rights, last year. “But we regret that the bank did not listen to the warnings of civil society organisations earlier because now we face greater poverty and severe environmental problems as a result of this mega-project.”
In 1998, the World Bank lent Chad $4-billion to help the oil-rich nation use its black gold to roll out government services and improve living standards. The loan paid for a pipeline that made it profitable for multinational oil companies to extract Chad’s landlocked oil reserves, and the government agreed to use oil profits in socially beneficial ways.
The bank put oil royalties, taxes and dividends into a bank account in London and set aside 10% in a “future generations fund” while the remainder was divided between servicing the loan, spending on priority sectors, such as health and education, and direct revenue for the government.
The agreement established an oversight committee to watch over a government that Transparency International ranked the most corrupt country in the world along with Bangladesh last year. The committee comprised government officials and civil society representatives who were responsible for approving government spending of oil royalties and dividends. By 2005, the bank account held $306-million, two-thirds of which was to be used on building schools, hospitals and roads as part of the priority spending budget.
In December 2005, however, the Chad Parliament passed a law to scrap the “future generations” fund, increasing the amount of revenue that could be spent without approval of the oversight committee from 15% to 30%, and redefining priority sectors to include security and the military.
Robert Bates of Harvard University said that Chad’s decision to renege on its agreement was “exactly what would have been expected”. He said it is hard for people to negotiate positions unless there is a “commitment technology” that will ensure that pledges are fulfilled.
“The interesting thing here is that the World Bank behaved as if it could believe the Chadian promises,” he said.
While the World Bank suspended its loans to Chad in January this year it continued to negotiate, culminating in this month’s agreement. The new deal commits Chad to spending 70% of its 2007 budget on poverty reduction and 5% of oil revenues of citizens of the oil- producing region, as well as creating a stabilisation fund for the benefit of future generations. The government has pledged to support the oversight committee and the World Bank promises to ensure that the committee has sufficient resources to fulfil its mandate. While the oil revenues bank account held $400-million in 2005, this figure was expected to climb to $1,5-billion in 2007.
The government has also committed to working with the Bank, donors and civil society to prepare a poverty reduction strategy, which will be enacted as legislation and enforceable by law.
“The agreement gives Deby breathing space and is a face-saving device for the World Bank,” said Richard Cornwell of the Institute for Security Studies, who believes the World Bank wants to prevent Chad becoming a failed state and possible terrorist haven.
Rising oil prices may have encouraged Deby to renegotiate a deal with the bank, said Timothy Othieno of the Institute for Global Dialogue.
“The agreement is a major step forward it if is actually realised,” he said.
He explained that more money would go to development projects under the new deal because the government is committed to spending 70% of its total budget and not just oil royalties on poverty alleviation as was the case with the previous agreement. The new agreement also seeks to strengthen the role of civil society: “The World Bank has empowered the churches, trade unions and non-governmental organisations to have a role in the accountability and transparency of how Chad uses its oil.”
Oil and turmoil
Chad:
- Population size: 9 944 201
- GDP per capita: $1 500
- Percentage of the population below the poverty line: 80%
- Infant mortality rate: 91,45 deaths/1 000 live births
- Life expectancy: 48 years
- Literacy rate: 47,5%
- Proved oil reserves: 1-billion barrels
Nigeria:
- Population size: 131 859 731
- GDP per capita: $1 400
- Percentage of the population below the poverty line: 60%
- Infant mortality rate: 97,14 deaths/1 000 live births
- Life expectancy: 47,08 years
- Literacy rate: 68%
- Proved oil reserves: 36-billion barrels
- In the past 25 years, Nigeria has made more than $300-billion in oil revenues, but over 70% of its people have an income of less than $1 a day.
Angola:
- Population size: 12 127 071
- GDP per capita: $3 200
- Percentage of the population below the poverty line: 70%
- Infant mortality rate: 185,36 deaths/1 000 live births
- Life expectancy: 38,62 years
- Literacy rate: 66,8%
- Proved oil reserves: 25-billion barrels
- In 2004, 32% of Angola’s budget was allocated to defence and security, and social expenditure rose from 9% in 1999 to 22% in 2002.
Sudan:
- Population size: 41 236 378
- GDP per capita: $2 100
- Percentage of the population below the poverty line: 40%
- Infant mortality rate: 61,05 deaths/1 000 live births
- Life expectancy: 58,92 years
- Literacy rate: 61,1%
- Proved oil reserves: 1,6-billion barrels.
- Oil made up 8% of the government’s total revenue in 1999, but increased to 45% in 2002.
— Katie Wilter