The announcement, made in a statement on Saturday from the government spokesman, followed a late night meeting between Idriss Deby, the president, and his cabinet ministers to discuss how to react following a rebel attack on the capital on Thursday.
The government gave the World Bank until Tuesday to unfreeze the bank account or else it would shut down the pipeline that carries Chadian oil through Cameroon to terminals on the Atlantic Ocean.
Separately, Chad's oil minister said on Saturday he wanted a US-led oil consortium to pay at least $100 million by Tuesday or else crude production would be halted.
The amount of oil Chad exports - 160,000 barrels per day - is very small by world standards, but the threat demonstrates the government's desperation for international intervention in the country.
The World Bank has frozen oil profits from a pipeline in Chad saved in a London escrow account in a dispute over how the revenues are spent. The savings include royalties from the pipeline's operator, Exxon Mobil.
"We want at least $100 million paid (by the oil consortium) by Tuesday midday," Mahamat Nasser Hassan, the oil minister, told Reuters in a telephone interview.
An Exxon-Mobil-led consortium
exports oil on Chad's behalf
"We have asked Exxon Mobil, Petronas and Chevron to put the money directly in the state treasury account. If they do not agree by Tuesday midday, we will stop oil production," he said.
The threat to cut off the oil puts pressure on the consortium to co-operate, since it has invested $4.2 billion in the pipeline.
Exxon Mobil said it was talking to the government, consortium members and other relevant parties about the demand but declined to comment on whether it would pay the money.
While a rebel attack on Thursday on the capital was defeated, the rebels are believed to be regrouping nearby and the threat of a violent overthrow of Deby's government has not diminished.
As Africa's newest oil producer, Chad had reached a deal with the World Bank for the financing of a pipeline on condition that most of the revenues would be used to alleviate poverty.
Earlier this year, Deby broke that deal so he could use the money to finance his military and the World Bank suspended $124 million in aid to his government.
The Exxon Mobil-led consortium exported 133 million barrels of oil from Chad between October 2003 and December 2005, according to the World Bank.
"We want at least $100 million paid (by the oil consortium) by Tuesday midday"
Mahamat Nasser Hassan,
Chad's Oil Minister
Chad, which receives a 12.5% royalty on each barrel exported, earned $307 million, the bank said.
Hourmadji Moussa Doumgor, the communications minister and government spokesman, said that attempts to restrict how the government spends its oil revenues was a violation of Chad's sovereignty.
The government also organised a peace rally in central N'djamena on Saturday to demonstrate Deby's popularity.
Deby had earlier announced that he was severing relations with neighbouring Sudan and he threatened to expel 200,000 Sudanese refugees from his country if the international community did not do more to stop what he claimed were Sudanese efforts to destabilise his government.
Deby repeatedly has accused Sudan of hiring mercenaries to overthrow his government.
Deby blames Sudan for recent
attacks staged by Chad rebels
Sudan has denied the accusation, and in turn has accused Chad of supporting fighters in its volatile Darfur region, where Arab militias and African rebels have fought for nearly three years.
"The international community has been totally deaf and dumb on the situation between Sudan and Chad," Deby said after an emergency cabinet meeting on Thursday.
They "need to understand the situation and that enough is enough".
But the Central African Republic said on Friday it was closing its border with Sudan after the rebels passed through the northern part of the country while on their way from Sudan to attack N'Djamena.
A key issue has been Deby's decision to change the constitution so he can run for a third term as president in elections set for May 3.
Al Jazeera reported on Saturday that Sudan deplored Chad's decision to break diplomatic relations with Khartoum.
A spokesman for the Sudanese Foreign Ministry, Jamal Mohammed Ibrahim, described Chad's decision to expel the Sudanese ambassador in Chad as "unilateral, hasty and not based on facts".
Khartoum has asked the Libyan embassy in Chad to look after Sudanese interests in Chad meanwhile.
For its part, the Chadian rebel movement, United Front for Change (FUC), has denied receiving support from Sudan and accused Deby of recruiting European mercenaries and rebel fighters from Sudan's Darfur region to stay in power.
Chad says Sudan is financing and
arming anti-government rebels
"Following the very serious accusations made against Sudan by Idriss Deby, we categorically deny any intervention by neighbouring countries," Al Jazeera quoted a rebel statement as saying.
Signficantly, Chad's charge d'affaires in Khartoum, Kabaro Hussein al-Soleil, says he has not received any notification from N'Djamena with regard to a ties cut-off and that the Chadian embassy continues to remain open.
Al Jazeera reported quoting him that he had not been contacted by the Sudanese authorities either.