US embassy cable - 05NDJAMENA1656

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, Oil Revenue Management 
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. 
 
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NEXT STEPS 
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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.) 
 
 
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WORLD BANK INITIATIVE 
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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. 
 
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CIVIL SOCIETY, POLITICAL PARTIES REJECT REVISION 
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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. 
 
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COMMENT 
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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 
 
 
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