Timeout punishment for Chad

Chad urges World Bank to reverse loan suspension
Sat 7 Jan 2006 8:30 AM ET
By Dany DanzoumbeN'DJAMENA, Jan 7 (Reuters) - Chad said on Saturday it was shocked that the World Bank had suspended all of its loans in a row over how the central African country spends oil revenues and called on the global lender to reverse its decision.World Bank President Paul Wolfowitz told Reuters on Friday the bank was taking the step because Chad had breached a 1999 agreement by altering an oil revenue law meant to safeguard funds to fight poverty in the long term."The bank's decision, which current consultations in no way predicted, comes at an odd and difficult time for Chad and surprises us by its brutality," Chad's Economy Minister, Mahamat Ali Hassan, said in a statement."The government wishes the bank to reconsider its position and look again at this decision, which by its nature undermines the credibility of its action in Chad and blackens its reputation," he said.But he added the government remained open to dialogue and was ready to take measures to resolve the argument, without giving any further details.Chad's oil revenue law, agreed with the World Bank, had been touted as a test case in Africa to show petro-dollars can help the poor, with 10 percent of oil revenues meant to be saved in a special overseas fund for future generations.Chad's parliament approved legislation on Dec. 29 to access more of the profits from a 1,000 km (620 mile) pipeline, funded by the World Bank, which carries oil to Cameroon for export, in breach of the original agreement.TOUGH MOVEWolfowitz's decision to halt the loans, including $124 million in undisbursed funds, came after a two-hour telephone call with President Idriss Deby and is one of the most drastic steps the World Bank can take against a member country.Africa's newest oil producer has said it needs more flexibility in the way it manages its revenues to fight immediate poverty and insists that the changes to the law do not go against the spirit of its agreement with the bank."The modification ... was fully explained by the government which has always said it is ready to give a full explanation of the reasons which led to the change," Ali Hassan said.Wolfowitz said on Friday the bank had been trying for some time to open discussions with the Chadian government but said "regrettably instead of engaging in dialogue, they have proceeded unilaterally."Ali Hassan said aid had been suspended which was being used not only to fund the oil sector but also agriculture, education, health and transport projects.The row comes at a difficult time for Deby, who faces threats from rebel attacks on Chad's eastern frontier with Sudan and from army desertions at home.The former French colony said last month a "state of belligerence" existed between itself and Sudan and has accused Khartoum of backing Chadian rebels, a charge Khartoum denies.Last week several Chadian rebel groups opposing Deby -- a 53-year old former army commander who himself led a revolt from the east to seize power in 1990 -- announced the formation of a political and military alliance to try to oust him.