Paul Wolfowitz, the bank president, said in a statement: “If these amendments become law, it will harm the well-being of Chad‘s poorest and most vulnerable citizens and represent a material breach of the original agreement.”
The new legislation pushed through Chad‘s parliament, which is dominated by the party of Idriss Deby, the president, scraps a fund reserving 10% of oil revenue for future generations.
It also doubles the income earmarked for the state with no external checks, adds the judiciary and the security forces to priority sectors such as health and changes the make-up of the independent committee that monitors investments.
The World Bank said the 1999 Petroleum Revenue Management Law (PRML) was a legal condition of its agreeing to back a pipeline linking Chad to Cameroon‘s Atlantic coast.
It noted that in return for bank funding, the government of Chad had promised not to amend any provisions of the law in ways that would “materially and adversely affect” the poverty-reduction strategy contained in the PRML.
It said the 1999 agreement allowed the World Bank, in case of a breach of contract by Chad, to suspend new credits or grants, to halt disbursement of funds, and to demand accelerated repayment of loans.
If ratified by Deby, the changes to the PRML would “substantially weaken” the poverty reduction agenda mutually agreed by the World Bank and Chad, Wolfowitz said. “I am consulting with other partners and our shareholders on the appropriate next steps,” he said.
The World Bank said that it was ready to help Chad improve its fiscal management to address a budget crisis, but that changes to the petroleum law were short-sighted.
Chad‘s government has faced financial difficulties which prevented it paying state employees regularly. Deby has also said he wants to renegotiate the agreement with the companies extracting his country’s oil, complaining that “Chad gets only crumbs out of it”.
The agreement with the international consortium, comprising ExxonMobil and Chevron of the US and Petronas of Malaysia, gives Chad 12.5% of the income from its oil.