September 10, 2008 / 1:27 PM / 11 years ago

Chad plays down World Bank exit from oil accord

(Recasts, adds details, quotes, background)

By Moumine Ngarmbassa

N’DJAMENA, Sept 10 (Reuters) - Chad on Wednesday played down the World Bank’s scrapping of an oil pipeline agreement and said cooperation with the lender continued in non-oil sectors.

But the government of the landlocked African oil producer said its settling of a $65.7 million debt to the bank could stretch the state budget.

The World Bank announced on Tuesday it was withdrawing from the loan accord backing the operating pipeline, one of its biggest investments in Africa and billed as a test of how the continent’s oil wealth could benefit the poor if spent properly.

It said Chadian President Idriss Deby’s government had failed to comply with agreed commitments to set aside a chunk of its oil revenues for local communities, health and education.

Chad said the World Bank’s decision would not impact output from the $4 billion, 170,000-barrels per day Chad-Cameroon pipeline, operated by U.S. major Exxon Mobil Corp. (XOM.N).

Economy and Planning Minister Ousmane Matar Breme said the World Bank’s move had followed a visit to N’Djamena by the bank’s Vice-President for Africa, Obiageli Ezekwesili, in which she had discussed the oil accord with Chad’s government.

"This pull-out by the bank (from the oil accord) is practically consensual," Breme said, adding that this was why Chad had prepaid the outstanding balance of $65.7 million under the $140 million loan deal.

But he added: "This payment could have consequences for budgetary policy. We have planned our spending. At present our projections indicate we can get by. We will do our best to minimise the problem and make sure priority spending is not compromised".

Chad is expected to earn about $1.4 billion in oil revenues this year. World Bank backing was crucial to draw in the foreign investment for the oil exporting pipeline, which provided an overseas outlet for the landlocked country’s oil reserves.



COOPERATION MISSION EXPECTED

Breme said Chad would continue its cooperation with the World Bank, noting the country remained a shareholder in the institution.

"There are two aspects of our relations with the World Bank: a statutory cooperation which will continue and cooperation in the oil sector which is ending," he added.

"I am expecting a World Bank mission this evening, led by the operations director for central Africa, to present a new strategy for cooperation as usual," Breme said.

Eastern Chad has become a hub for international aid to refugees from war across the border in Sudan’s Darfur region. The pipeline carries oil from fields in southern Chad south westwards through Cameroon to the Atlantic port of Kribi.

Deby’s government has struggled to cope this year with successive attacks by eastern-based rebels and the presence of nearly half a million Sudanese and Chadian refugees displaced by violence on both sides of the Chad-Sudan border.

Chad accuses its eastern oil-producing neighbour Sudan of backing the rebels, a charge denied by Khartoum. (Reporting by Moumine Ngarmbassa; Writing by Pascal Fletcher and Alistair Thomson; Editing by Ron Askew)



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