CHAD: GOVERNMENT MOVING AHEAD WITH OIL REVENUE

C O N F I D E N T I A L NDJAMENA 001656

SIPDIS


LONDON AND PARIS FOR AFRICA WATCHERS, TREASURY FOR OTA,
ENERGY FOR GPERSON AND CGAY

E.O. 12958: DECL: 11/09/2015
TAGS: CD ECON EFIN ENRG EPET PGOV
SUBJECT: CHAD: GOVERNMENT MOVING AHEAD WITH OIL REVENUE
MANAGEMENT LAW REVISIONS

REF: A. NDJAMENA 1592


B. NDJAMENA 1357

Classified By: Political/Economic Officer Kathleen FitzGibbon for reaso
ns 1.4 (b) and (d).


1. (C) Summary: The Government is moving ahead with its
plans to amend the revenue management law despite concern
among various donors, diplomatic missions, civil society
groups, and opposition parties. On November 9, the Council
of Ministers sent the revisions to the law to the National
Assembly. However, the draft was immediately retracted
reportedly so that the President could make his own changes.
The World Bank continues to consult with key donors and
diplomatic missions to maintain a united front to discourage
the Government from carrying out the revisions. A joint
letter from the World Bank and International Monetary Fund
(IMF) is reportedly forthcoming. It proposes technical
assistance and funding to overcome Chad's short-term cash
needs. Other donors and diplomats express concerns that
given the Army desertions, the Government's cash-flow
problems are likely to be a permanent, not temporary, state
of affairs. Civil society groups and opposition parties
argue the Government's cash-crunch should be resolved with
transparency and financial discipline, not a change in the
law. End Summary.

- - - - - -
NEXT STEPS
- - - - - -


2. (SBU) The proposed revisions to the oil revenue
management law were approved by the Council of Ministers on
November 8. The proposal was delivered to the National
Assembly on November 9, but promptly retracted, according to
National Assembly staff. The President reportedly wanted to
review the document. After the changes are sent back to the
National Assembly, legislative leaders will meet to determine
when to put the law on the calendar. The ruling Movement for
Patriotic Salvation (MPS) and its allies have an overwhelming
majority in the National Assembly. (Note: In May 2004, the
Government used a combination of threats and financial
inducements for legislators to secure the passage of the
amendments that allow unlimited presidential terms. The
amendments passed 123-0-1. The opposition walked out of the
session after the National Assembly President stifled debate.
End Note.)


- - - - - - - - - - -
WORLD BANK INITIATIVE
- - - - - - - - - - -


3. (C) The World Bank's position is that it is premature to
revise the law and has hosted meetings with key donors and
diplomatic missions to forge a united front. (Ref A) Marie
Francoise Marie-Nelly, the World Bank's petroleum sector
advisor, outlined for key donors the Bank's proposal for
staving off a precipitous change in the law on October 25.
They included: technical assistance to monitor budget
execution, a structural review of the Government's cash-flow
problems, and the mobilization of funds to resolve Chad's
short-term cash-crunch. The European Commission, African
Development Bank, French Embassy representatives, and P/E
officer shared concerns that the Government's need for cash
is no longer a short-term crisis, but a long-term problem
because the Government will continue to need funds to buy off
enemies to remain in power. Coupled with the costs of an
upcoming presidential election campaign, the Government's
priorities probably do not include transparency and financial
discipline. Francois Barateau, the French Deputy Chief of
Mission, was notably negative about the Government's
commitment to the oil revenue management process. He stated
that he supported the Bank's efforts, but emphasized that the
weaker the Government becomes, the greater its need for
armaments to remain in power.


4. (C) The World Bank continues its efforts to convince
government ministers and key ruling MPS members to support
its proposal. Marie-Nelly most recently met with MPS
Chairman Mahamat Hisseine and National Assembly Majority

Leader Idriss Ndele prior to their visit to see the President
in Abeche about the proposed revisions. She prepared for
them a listing of the types and amounts of assistance that
may be lost if the Government forges ahead on its own with
the proposed changes. Marie-Nelly remains concerned that the
Government will opt to go ahead with the revisions even if it
jeopardizes future donor funding. A World Bank team met with
National Assembly President Nassour on November 9 to explain
the implications of the proposed changes.

- - - - - - - - - - - - - - - - - - - - - - - - -
CIVIL SOCIETY, POLITICAL PARTIES REJECT REVISION
- - - - - - - - - - - - - - - - - - - - - - - - -


5. (SBU) The Government told civil society groups that
law's revision was necessary due to lack of revenues and
budgetary assistance from international partners, and the
need to revisit the priority sectors to include defense,
territorial administration, and justice. Ten major civil
society groups produced a joint response to the Government on
the proposed revisions. Chad's usually fractious political
party leaders also uniformly reject revisions to the law and
ignored the Government's invitation to consult on the issue
on October 19. Key opposition leaders state that the law
should not be revised because the Government finds itself in
a cash-crunch after having mismanaged state revenues. They
also point to the deficiencies identified by the College de
Controle et de Surveillance des Ressources Petroliers
(CCSRP-The College) (Ref B). Likewise, civil society groups
cite Chad's dubious designation as the world's most corrupt
country by Transparency International. They point out that
the use of the Future Generations Fund (20 million USD) to
pay current salaries would only cover three months of
salaries. Civil society groups agree that the Government
correctly self-diagnosed its Treasury problems as resulting
from disorganized revenue collection, corruption, and debt
accumulation. However, they believe that the solution to
Chad's budget problems are political will and financial
discipline. They argue that the Government was able to pay
salaries prior to the arrival of oil revenues.


6. (SBU) As an alternative to revising the law, civil
society and political parties recommend that a general audit
of government revenues, foreign assistance and other donor
funding be carried out and a plan to stabilize the
Government's financial situation be developed. In addition,
they recommend that corrupt officials be held accountable for
misuse of funds. Another recommendation is that the
Government follow up on the College's project verification
report and any initiatives to sanction corrupt official by
the Ministry of Moralization and State Control. In addition,
the Government should improve its budgetary process by
integrating its revenues and expenses in one database.

- - - -
COMMENT
- - - -


7. (C) We have raised the issue with key government
players, including the Prime Minister, Ministers of Petroleum
and Finance, and legislators Hisseine and Dr. Idriss. We
have a request in to see the President and will meet with the
Prime Minister and the National Assembly President on
November 10. We are concerned that the President, in the
aftermath of the recent army desertions, might not consider
the loss of donor support as important as finding the means
to remain in power. Despite public opposition, we have no
doubt that the Government will use its overwhelming
legislative majority to pass the revisions once introduced.
WALL


NNNN