An Open Letter to Catholic Relief Services and Bank Information Center in Response to the Report “Chad's Oil: Miracle or Mirage for the Poor?”

First, we welcome the report prepared by Catholic Relief Services and the Bank Information Center and appreciate the fact that the authors join us in pushing for the best possible results for the Chadian population, one of the poorest in the world.

The Chad Cameroon Pipeline Project is built around a series of safeguards designed to make sure that oil revenues help finance badly needed development and poverty-reduction programs. Crucial to the success of the project is a steady flow of information and an active accountability at all levels, involving civil society organizations in the country and around the world.

The CRS/BIC report touches on important issues surrounding the revenue management program. Let us address some of those here.

How are the oil revenues being used?

The report correctly opens with some of the fundamental questions underlying the project, beginning with the most critical: How are Chad’s oil revenues being used?

During 2004, a total of $84.6 million was transferred to Chad from the escrow accounts established at Citibank in London under the government’s agreement with the World Bank. These funds have been distributed as follows: US$ 67.7 million for the priority poverty-reduction sectors, US$4.2 million for the oil production region, and US$12.7 million for the general budget. Meanwhile, a Fund for Future Generations has been set up in the escrow account in London; as of end February, there was US$13.3 million in this account.

Within the priority sectors, allocations have followed Chad’s Poverty Reduction Strategy” and the annual budgeting process, with specific disbursements subject to approval by the oversight committee, the Collège de Contrôle et de Surveillance des Ressources Pétrolières (the College of Oversight and Control of Petrol Resources or Collège for short). In the transportation sector, CFAF 19.3 billion has been allocated to road improvements, with two major roads-- – Bisney-to-Goura (38 km) and Ngoura-to-Bokoro (104 km) --- slated to be fully paved. CFAF 4.9 billion in oil revenues have been allocated to primary, secondary and higher education, with the bulk of the resources going to construction of classrooms and purchase of school books, desks and supplies for students. Funds have also been allocated for water, agriculture, livestock management, family and community affairs, and urban and housing programs.

In all these sectors, the Collège has reviewed and approved specific outlays.  The highest rates of approval have been in the transport, education and urban sectors.

Is the oversight process working?

The World Bank helped establish the Collège and is committed to helping it strengthen itself as an independent institution. The Collège is established and has been able to meet its deadline of reviewing applications in four days. We also are pleased with the completion of an operating manual, and the strengthening of its review procedures.  The main challenge is now to meet increased requests resulting from the anticipated doubling of oil revenue expenditures this year. The Collège is seeking funding to add two staff members to support the review function.

What about the new oil fields that are under exploration, as well as indirect income such as taxes on oil?

The revenue management law applies only to the three fields of Miandoum, Kome and Bolobo. But a September 2004 declaration by the Council of Ministers of the Government of Chad reiterated that Chad will treat revenue from future oil development according to the same principles governing the current three fields, including allocating a portion to the producing region, and setting aside part for future generations.

With respect to tax revenues, income tax funds enter the Citibank escrow account the same as direct oil revenue, but from there are allocated to Chad’s general budget needs, where they are subject to priorities set out in the country’s national Poverty Reduction Strategy. 

Are capacity-building efforts helping to make the government more efficient and transparent?

Recently, the main efforts by the Bank have focused on strengthening public finance management, with an emphasis on training to improve the accountability and transparency in use of all public resources. The Bank has also provided support to the Collège. In addition, the Bank is working with local training institutes in Chad so they can expand their role in strengthening financial management skills. However, capacity-building is a long-term enterprise, and while we see clear progress, there remains much to do to strengthen the functioning of individuals and institutions in the government of Chad. In our view, it wouldn’t have been practical to complete all capacity-building efforts before putting the revenue-management program into operation, and experience has shown that learning is achieved through doing.