Identifier
Created
Classification
Origin
07NDJAMENA487
2007-06-12 08:15:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Ndjamena
Cable title:  

CHAD: WORLD BANK VIEWS ON EVE OF MULTIDONOR

Tags:  ECON EFIN PREL CD 
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TO RUEHC/SECSTATE WASHDC 5380
INFO RUEHAR/AMEMBASSY ACCRA 0488
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RUEHDK/AMEMBASSY DAKAR 1312
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RUCNDT/USMISSION USUN NEW YORK 0978
UNCLAS NDJAMENA 000487 

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON EFIN PREL CD
SUBJECT: CHAD: WORLD BANK VIEWS ON EVE OF MULTIDONOR
MEETING


UNCLAS NDJAMENA 000487

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON EFIN PREL CD
SUBJECT: CHAD: WORLD BANK VIEWS ON EVE OF MULTIDONOR
MEETING



1. (SBU) SUMMARY: On the eve of the multidonor meeting in
Ndjamena, World Bank experts assess that Chad's poverty
indicators are headed downward, despite a 2007 spike in oil
revenues. With most of its oil revenues consumed by military
expenditures already in the first quarter of 2007, Chad is
far from meeting the goal established with the World Bank in
July 2006 of 70 percent spending (all revenue sources) on
priority sectors. The World Bank hopes to focus its present
discussions in Chad on getting the government to rein in
expenditures and obey the Minister of Finance, who the World
Bank believes has a good grasp on revenues and what needs to
be done to right the expenditure hemorrhage. The greatest
challenge to rationalizing spending lies in the military
domain, but the military's demands are hard to foresee and
evaluate in a fluid crisis. Oil revenues will plummet next
year, according to World Bank projections, for reasons having
less to do with oil production than the vagaries of payment
schedules. END SUMMARY

World Bank's Objectives for Multidonor Mission
-------------- -


2. In a meeting with the Ambassador on the eve of a series
of multidonor meetings which begin in Ndjamena on June 12,
World Bank oil expert Marie-Francoise Marie Nelly and
Resident Representative Geoffrey Bergen said that indicators
of Chad's standard of living were pointing downward. Chad
was not remotely meeting its undertaking with the World Bank
in July 2006 to allocate 70 percent of all budgetary
resources to priority spending in 2007.


3. Bergen said that the World Bank had pondered the
appropriateness and feasibility of delving into Chad's
military expenditures, but it had decided that it was
essential to make the attempt. Efficiency was as much of an
issue as size of military purchases. For example, were tanks
a sensible purchase if they were used as artillery and there
was no adequate maintenance program? Meanwhile, salary
increases, as demanded by the unions, were sensible in
principle, but this year's money had already been spent on
the military.


4. The bottom line for the multidonor mission, Bergen
continued, was to help the Minister of Finance, Abbas Mahamat
Tolli. Tolli was very frustrated. Other ministers (not just

officials in charge of the military) were off the
reservation, spending in an off-budget, unauthorized way.
The World Bank's concept for the multidonor mission was an
in-depth series of seminars roping in all the ministers, led
by Tolli and the World Bank. The objective was to outline
concrete measures for spending in each sector and to convince
the government of the necessity for discipline. In early
July, the new World Bank vice president for Africa would
hopefully seal the deal with President Deby. There would be
no worthwhile deal without Deby.


5. Marie Nelly said that the World Bank could not just pull
out of Chad. If the World Bank were not present in Chad, its
increasingly impoverished citizens would be the ones to pay
the price. She said that oil revenues would plummet in 2008.
Oil revenues were 1.2 billion dollars in 2007 and would fall
to 460 million or even 380 million dollars in 2008 -- far
less than half of 2007's oil revenues. The reason had to do
largely with overpayment in 2007, which had seen a late
payment of tax from 2006 and an early payment from 2008. The
good news was that the oil revenues flowed into a single
account.


6. Marie Nelly said that, according to the Ministry of
Planning, salaries consumed 90 percent of revenues. The
unions' demand of a 300-percent raise was, therefore,
completely unsustainable. Bergen added that the fiscal
implications even of the proffered 15-percent raise were
serious, at 38 million dollars. However, that amount was
only half of the cost of all government travel. Moreover, an
audit of the civil-service payroll would probably show that
20-25 percent of it was fraudulent. The money could be found
but such cost-cutting was not necessarily politically doable.

Military Conundrum
--------------



7. Marie Nelly said that at the World Bank spring meetings,
the Chadian representative had indicated that Chad had
already made exraordinary military expenditures of 160
million dollars in the first quarter of the year. The amount
that had been budgeted for such expenditures for the entire
year had been 42 million dollars. The amount expended did
not include military salaries or the costs of integrating the
rebel faction FUC. It was nearly equal to the entire amount
of extraordinary military expenditures for 2006 -- 172
million dollars -- which had already been a high number. It
was fair to expect that the 160 million would be far exceeded
in the last three quarters.


8. Marie Nelly acknowledged that the issue of military
expenditures would be extremely difficult to assess. In the
end, it was most essential simply to know what would be left
over for priority spending. She requested the Ambassador's
views on the question of whether the security situation was
calmer and how that calm would reflect on military spending.
The Ambassador said he did not see military spending letting
up any time soon. If the present calm prevailed for any
length of time, there would be less pressure for military
spending, but there remained a chance of rebel attacks in the
East at any time. If, following the French foreign
minister's visit to Chad and an eventual visit of Deby to
Paris, the French became more involved militarily, the
military demands on Chad would be reduced.


9. Marie Nelly noted that the president of the World Bank
had called upon the donors to commit military forces to peace
operations in Chad, as essential to freeing up Chad's
resources for priority spending. The Ambassador did not
anticipate direct U.S. support for the Chadian military,
beyond the existing counter-terrorism training effort, but
peacekeeping operations could be another matter. Marie Nelly
regretted that the effort by the French ambassador the
previous year to commence a holistic reform of the security
sector had been put on hold by the crisis in the East.

Regional Project
--------------


10. Marie Nelly urged American support of a
700-million-dollar regional project to rehabilitate roads
connecting Douala with Bangui and Ndjamena. The project, she
said, fit squarely in the priority sector; it was a part of
the solution, not the problem. However, the United States
Executive Director was seeking to postpone the Board meeting
to approve this project June 21 until after seeing the
results of the multidonor mission to Chad.

Minister of Finance is the Man on the Spot
--------------


11. In a subsequent meeting with the Ambassasdor, Finance
Minister Tolli said that he was in complete agreement with
the World Bank and IMF on steps that needed to be taken.
Military expenditures had been much higher than projected.
To the Ambassador's question whether the minister had a grasp
of military expenditures, he said that he did have such a
grasp, but the greater problem was the military's plans for
future spending and how to put a cap on it. War was
unforeseeable, as the United States knew first-hand in Iraq,
but the military needed to follow rules in its expenditures,
to minimize waste, and to comprehend the whole budgetary
picture.


12. Tolli said that he hoped that military officials would
be in the coming meetings with other ministers. All
ministers needed to understand that there was going to be a
serious diminution of revenues in 2008. The oil market would
go down, the level of production would go down, taxes and
revenues in particular would go down. The multidonor mission
needed to work with the ministers to underline the necessity
of transparency and to reevaluate priority needs. It was not
fair for some ministers to following procedures and others
not to. Finally, Tolli hoped that the World Bank, IMF, and
donors would help in the effort to reduce the unions' zeal in
the present lengthening strike.

IMF Comments
--------------


13. The IMF resident representative Wayne Camard, in a
separate conversation with poloff, offered a different view
on a few points. On the strike, he said, the unions had in
fact lowered their demand to a 200-percent salary increase.
Their demand was not as outlandish as it might seem, he said,
since a 200-percent increase would just about bring Chadian
civil servants in line with what they had been paid in 1979,
adjusted for inflation. By the same token, it was equally
true that Chad could not afford it.


14. Camard said that Chadian military expenditures had not
been unreasonable. Chad had faced, and continued to face, a
formidable military challenge in the East. It would not be
able to cope with rebels using four-wheel-drive vehicles if
all it had was four-wheel-drive vehicles. It had to have
helicopters, and it had bought those on the cheap from
eastern Europe. The only unreasonable military expense on
the horizon, in Camard's view, was the request for C-130s.


15. On a final note, Camard said that it was important not
to lose sight of all that the World Bank had accomplished in
Chad. The World Bank had failed to hold Chad to the standard
it had sought, but it had nonetheless promoted oil-revenue
transparency. The oil money went into an account and the
Minister of Finance knew what the revenues were. This
transparency of revenues was a step forward compared to other
oil-producing countries in Africa.
WALL