Source: World Bank ( Washington, DC)
29 December 2005
World Bank Group President Paul Wolfowitz expressed strong opposition to amendments to the Petroleum Revenue Management Law (PRML) passed today by the Chadian National Assembly. If ratified by Chad's president, the changes will substantially weaken the poverty reduction agenda mutually agreed to as a condition of lending.
The PRML was a deciding factor in the World Bank's support for the Chad-Cameroon Oil Pipeline Project. As part of the loan agreement with the bank, the Government of Chad specifically undertook not to amend or waive any provisions of the law in ways that would "materially and adversely affect" the revenue management program established under the 1999 law.
"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," Mr. Wolfowitz said today. "I am consulting with other partners and our shareholders on the appropriate next steps."
Under the 1999 loan agreement with Chad, the World Bank has the right to exercise remedies in the event of a breach of contract. These remedies could include: suspension of new credits or grants; a halt in disbursement of funds under some or all ongoing operations; and an accelerated repayment of loans extended to the Government of Chad.
The law provided that the bulk of the revenue from the Chad Cameroon Pipeline Project be applied to development and poverty-reduction priorities, and it set aside ten percent for a Future Generations Fund to ensure there would be some benefits to the population when the oil reserves have been exhausted.
As described in a December 8th statement, the World Bank has made clear its willingness to help the Government of Chad examine the cause of its financial circumstances and help it improve fiscal management. Similarly, Bank officials have offered to assist with the strengthening of safeguards on the use of public finances to ensure there is a lasting solution to the fiscal crisis while preserving the integrity of the oil revenue management system, so those revenues benefit the people of Chad.
The amendments, if fully enacted into law, would eliminate the Future Generations Fund, resulting in the transfer of more than $36 million to the general treasury, and also broaden the definition of "priority sectors" to include territorial administration and security activities. In addition, the amendments will more than double the share of royalties and dividends that can be allocated to non-priority sectors.
