Overcoming the Oil Curse--Chad and The World Bank

January 09, 2006

The World Bank announced Friday that it was suspending all loans to Chad, including one that helped finance a $4.2 billion oil pipeline, on the ground that it had broken an agreement to largely dedicate its oil revenues to alleviating the country's extreme poverty. According to the Celia Dugger in the NYT

In a conference call with reporters, Mr. Wolfowitz said he spent two hours on the phone on Thursday night with Chad's president, Idriss Déby. Mr. Wolfowitz said he saw no alternative to suspending the bank's $124 million in loans to Chad, even as he held open the door to further negotiations.
Will the suspension of loans make a difference? Not likely. In an Op-Ed published in the LA Times last week, CGD President Nancy Birdsall noted that the Bank supported the Chad project with its “eyes wide open” knowing in advance that it had little leverage for enforcing the agreement. She argues that in order for Chad and other poor countries cursed with oil riches to benefit from their black gold, the rich countries that run the World Bank (and buy nearly all of the oil) must help in three ways:
  • Each should enact legislation requiring total transparency of their oil and mining multinationals in financial dealings with the governments of developing countries.
  • The rich members of the Organization of Economic Cooperation and Development should agree on legislation allowing each nation to prosecute corporations that are involved in corruption in developing countries.
  • Private banks in OECD countries should be pushed to disclose their deposits from countries and rulers that have obviously been derived from natural resources. This would parallel efforts to track terrorism-related funds in the wake of 9/11.
  • This seems eminently sensible to me—and a logical step for rich countries that constantly scold poor countries about corruption. What will it take to make this happen?


    CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.