World Bank revokes aid for Chad-Cameroon oil pipeline

Sources: BBC News: End to World Bank’s Chad oil deal

World Bank Statement on Chad-Cameroon Pipeline

Financial Times: World Bank quits Chad plan

The World Bank announced this week that it would no longer support the $4bn oil pipeline project between Chad and Cameroon.  Originally signed in 2001, the loan agreement between Chad and the World Bank gave Chad a total of $140m for the pipeline project, while the Chadian government agreed to use a significant part of its oil revenues to reduce poverty in the central African country. 

In a statement issued earlier this week, Michel Wormser, the World Bank’s director of African operations, said that Chad had repeatedly failed to abide by its part of the agreement over the years and that it had become “evident that the arrangements that had underpinned the Bank’s involvement...were not working.”  Indeed, almost as soon as the oil started flowing in 2003, Chadian President Idriss Déby funneled large portions of Chad’s estimated $1.4bn yearly oil revenues into arming his security forces, instead of putting it towards infrastructure, health care, education, or agriculture, as the agreement required.

Many at the World Bank considered the agreement with Chad to be a test case for how poverty could be reduced through effective allocation of oil revenues in other oil-rich African countries.  Not everyone was convinced, however.  Anti-poverty campaigners, against the project from its conception, said that the collapse of the agreement vindicated their assertion that the Bretton Woods Institutions’ support for oil and other natural resource development projects has further cemented autocratic African governments hold on power instead of reducing poverty.  

As of September 5, Chad had repaid its outstanding balance of $65.7m, officially ending the nation’s association with the World Bank on the pipeline project.  The two former partners parted on good terms however, and both said that relations would continue in other, non-oil, sectors. 

Discussion:

What are the pros and cons of World Bank and IMF involvement in natural resource development projects in less-than-democratic African nations?  Do the risks of misuse or corruption outweigh the potential benefits to society?

What can be done to convince African governments to channel oil wealth into a development program to reduce poverty?