CHAD'S OIL REVENUE OVERSIGHT BODY OVERSHADOWED BY

UNCLAS NDJAMENA 000178

SIPDIS

SENSITIVE, SIPDIS
DEPT PLEASE PASS TO TREASURY FOR OTA
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FOR FCS/GREENE

E.O. 12958: N/A
TAGS: ECON EFIN ENRG EPET CD
SUBJECT: CHAD'S OIL REVENUE OVERSIGHT BODY OVERSHADOWED BY
REGULAR BUDGET

REF: O6 NDJAMENA 1301


1. (SBU) Summary: Chad's oil revenue management body
(College de Control Pour le Surveillance de Resources
Petroliere - CCSRP) is expected to oversee some USD 204
million in oil royalties and fees in 2007. According to
CCSRP President Abdoulaye Lamana, half of this amount will
go for government salaries and other recurring expenditures;
the remainder will go to investments in the priority sectors
(health, education, etc). Lamana acknowledged that the
government's regular investment budget, flush with tax
revenues, far outstrips the CCSRP's budget and the CCSRP's
role in oversight (if any) is unclear. He also commented
that in the current environment, security-related purchases
could be expected to be a priority for funding from the
government's regular budget. Lamana regretted the sudden
departure of the U.S. funded Adviser and expressed
appreciation for U.S. technical assistance. End summary.


2. (SBU) The Ambassador met February 15 with Abdoulaye
Lamana, President of the CCSRP to discuss the College's
activities and prospects for 2007. Lamana noted that the
College was still waiting for the 2007 project proposals: he
was unhappy that the priority Ministries were not able to do
more work in advance to prepare projects. In any event,
since proposals were not expected before March or April,
College members were using the time to visit ongoing
projects in the field.

OIL COLLEGE ACTIVITIES FOR 2007
--------------

3. (SBU) Lamana stated that College would oversee some 102
billion CFA worth of projects in 2007 (about USD 204
million). Of this, 52 billion CFA (about USD 104 million)
would be used for investment in priority sectors; the
remainder would be used to pay for government salaries and
subsidies to government parastatals (cotton, electricity).
Lamana noted that this was similar to the payment split in
2005 and 2006. He admitted that this was far from ideal:
the government should be funding recurring expenditures such
as civil servant payroll from its own regular budget.

OIL COLLEGE ROLE IN LARGER INVESTMENT PICTURE
--------------


4. (SBU) Lamana pointed out that the Government's 2007
investment budget was in fact much larger than that of the
College. Taken altogether, the government was programming
some 200 billion CFA (about USD 400 million) for investment
in 2007. The role of the College was not clear vis a vis
these other funds. It was true that the College had not
been given explicit oversight in the Government's July 2006
agreement with the World Bank (which stipulated that 70
percent of all resources would be used for poverty
eradication); on the other hand, Lamana explained that
discussions were still ongoing as to whether the College
might have some role in overseeing dividends and other
resources from a proposed Stabilization Fund.


5. (SBU) Lamana acknowledged that the World Bank had in
fact queried the College as to whether it was able to take
on additional oversight responsibility; Lamana responded
that the whole chain of project preparation and execution
needed to be asked that very question. He felt that the
priority Ministries were not well prepared to take on the
additional investment, and needed to accelerate their work.
In fact, the need to speed up the "clearance process" by
which projects made their way through various Ministries
(and the Presidency) was an issue which the College had
raised with President Deby in a meeting earlier in the
month. In particular, Lamana pointed to the fact that the
Minister of Finance could only approve projects up to about
USD 400,000; the Prime Minister projects up to USD 1
million, but any project over that amount needed to be
approved by the Presidency (which slowed things down
considerably.) Lamana reported that the President had
agreed that project approval needed to be accelerated and
had agreed to look into the matter.

MILITARY SPENDING
--------------


6. (SBU) Asked by the Ambassador whether it was possible to
manage a budget as stipulated in the World Bank accords
given the pressure on spending created by the security
situation, Lamana commented ironically that, since
independence, "most of the budget had gone to military
spending." He recalled that during his tenure as Prime
Minister under the regime of President Tombalbaye, he had
questioned using half of the government budget for the
military. Tombalbaye's response had been: "If the military
needs it - they get it." Noting that College resources went
through a controlled system, but that indirect revenues
could not be similarly monitored, Lamana warned that so long
as the situation in Darfur was not resolved and Sudanese
aggression against Chad continued, "all of the resources
will go to the Army."

LAMANA COMMENTS ON U.S. ASSISTANCE
--------------


7. (SBU) Concerning the College's own technical capacity,
Lamana informed the Ambassador that they expected staff
reinforcement in 2007, as well as some material improvements
in their premises. He regretted the abrupt departure of the
U.S. Treasury Adviser and noted that the College had
received no formal communication from the U.S. Government
concerning her departure or on her expected return. He
expressed appreciation for U.S. technical assistance to the
College since the College's inception.

THOUGHTS ON BREAKING THE POLITICAL IMPASSE
--------------


8. (SBU) Turning to the political situation, Lamana
suggested that a two stage process was needed: first, the
government needed to talk to the opposition parties and
persuade them to participate in the upcoming elections; once
a new government with broader legislative representation was
in place (which included the traditional opposition),talks
with the armed opposition should take place. Taking this
step first would enable the government to negotiate from a
much stronger position; currently, the government's lack of
political support from opposition groups empowers the
Chadian rebellion.

COMMENT:
--------------


9. (SBU) Two and a half years of experience in managing oil
royalty revenues has given College president Lamana good
insight into the impediments (structural and political) to
effective use of oil revenues for poverty reduction
projects. As a member of the President's "Wisemans Group"
he is also well-placed to understand the depths of the
political crisis in Chad. Lamana's resignation would appear
to reflect the recognition that, while the College has not
been sidelined, it is clearly overshadowed by the
Government's larger (and less tightly controlled) investment
budget and not immune from the regime's more pressing
security needs. Wall