CHAD: WORLD BANK PRESIDENT WOLFOWITZ'S VISIT

UNCLAS NDJAMENA 000981

SIPDIS

SENSITIVE

SIPDIS

DEPT FOR AF, EB, ENERGY FOR CAROLYN GAY AND GEORGE PEARSON,
TREASURY FOR OTA, LONDON AND PARIS FOR AFRICA WATCHERS

E.O. 12958: N/A
TAGS: ECON EFIN ENRG EPET PGOV CD
SUBJECT: CHAD: WORLD BANK PRESIDENT WOLFOWITZ'S VISIT

REF: NDJAMENA 908


1. (SBU) SUMMARY: In a lightning three hour visit to
N'djamena on July 20, World Bank President Paul Wolfowitz
agreed that the recent Memorandum of Understanding between
the World Bank and the GOC on the country's management of
its oil revenues is a positive first step in reaching an
overall agreement on oil revenue management. Nevertheless,
the development of a comprehensive agreement will require
continued dialogue between both parties on a national
strategy on poverty reduction. The management of indirect
and direct oil revenues through the country's public finance
system still requires further clarification from the GOC.
END SUMMARY.

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WOLFOWITZ: MOU IS A GOOD FIRST STEP, NOW COMES THE HARD PART
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2. (SBU) During his lightning visit to N'Djamena on July
20, World Bank President Paul Wolfowitz praised the
Memorandum of Understanding agreed to by Bank and GOC
negotiators on July 13 in his meetings with President Deby,
members of the Oil Revenue Management College and civil
society representatives. Wolfowitz told members of the
College that he planned to enhance the Bank's support to the
College's activities through financial and technical
assistance. During his meeting with the President,
Wolfowitz stated that more work needed to be done to achieve
a comprehensive agreement for poverty reduction in the
country, and encouraged the GOC to engage Chad's civil
society in the management of the country's oil revenues.
President Deby was receptive to President Wolfowitz's
comments, and stated that he intended to initiate a
political dialogue with the country's opposition, and
planned to have the first official meeting of the dialogue
on July 28.

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FINANCE MINISTER SHARES VIEWS, CONFIDENT OF AGREEMENT FOR
POVERTY REDUCTION
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3. (SBU) Minister of Finance Abbas Tolli voiced similar
views on the MOU with Ambassador Wall on July 21. According
to Tolli, the MOU, while difficult to negotiate, reflected
the dual-commitment by the Bank and the GOC to encourage
development in Chad. Tolli noted that unlike past
negotiations, both parties during his latest visit to
Washington appeared keen on reaching a compromise, and were
willing to move their negotiating position. The GOC
accepted the Bank's view on security spending, and dropped
their insistence on maintaining security as a priority
sector. The Bank agreed to include justice and demining as
sectors for oil revenue use.


4. (SBU) Tolli noted that the MOU, and President
Wolfowitz's visit, had motivated the GOC to take measures to
demonstrate its commitment to poverty reduction and
transparent oil revenue management. The National Assembly
recently passed the rectified 2006 budget that was developed
by a past IMF mission and GOC authorities. The GOC was also
in the process of organizing a committee to develop a
national strategy on poverty reduction (PRSP),which was
critical for a final global agreement on oil revenue
management between the GOC and the Bank. This final
agreement, according to the Finance Minister, was necessary
for Chad to be a beneficiary of other programs, such as the
Heavily Indebted Poor Countries (HIPC) Initiative and the
IMF's Poverty Reduction and Growth Facility (PRGF). Tolli
added that, as he understood it, the implementation of the
MOU was critical for the lifting of all restrictive measures
on the Citibank offshore account in London.

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AND IF THERE IS NO AGREEMENT?
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5. (SBU) The Minister indicated that the PRSP had to be
developed in time for the passage and implementation of the
2008 budget, to ensure that the country's budgetary
priorities focused on poverty reduction. When asked by the
Ambassador about the implications of an agreement not being
reached on the PRSP, the Minister said that if a strategy
was not developed in time for the 2008 budget, then the MOU
would require revision. But the Minister downplayed this
possibility, and stated that he was confident that the GOC
would develop as national poverty reduction strategy
acceptable to the Bank.

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QUESTION ON THE FLOW OF ALL OIL REVENUES
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6. (SBU) The Ambassador asked Minister Tolli if the
Citibank transit account would continue to act as the mode
of revenue allocation for all revenues (i.e., indirect taxes
as well as direct oil royalty payments),or simply direct
revenues (the Bank had maintained the principle in past
discussions that all revenue streams fall under the revenue
management process). Tolli said that while he understood
the importance of a transit account that would manage all
revenues, other members of the GOC did not. Therefore,
while the idea was accepted in principle, all indirect
payments had, to date, gone directly into the Public
Treasury. He then asserted that the larger problem was the
need to reform the Chadian budgetary system to simplify
budget formulation and execution. According to Tolli, the
development of a single national budget would assist in the
management of oil revenues that came from the transit
account.

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COMMENT
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7. (SBU) While the MOU is a positive step in improving
dialogue and cooperation between the Bank and GOC, questions
on future discussions between the two parties remain.
Progress will require firm commitments by the GOC to develop
a national strategy on poverty reduction. Any deviation
from this track could cause dialogue between the Bank and
GOC to deteriorate. Additionally, the Bank and GOC will
have to sort out the manner in which oil revenues flow
through the transit account, particularly before the tax
revenue windfall that is expected in early 2007.


WALL