VZCZCXRO5444
OO RUEHGI RUEHMA RUEHROV
DE RUEHNJ #0501/01 3041301
ZNR UUUUU ZZH
O 311301Z OCT 09
FM AMEMBASSY NDJAMENA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7385
INFO RUCNFUR/DARFUR COLLECTIVE PRIORITY

UNCLAS SECTION 01 OF 04 NDJAMENA 000501 
 
SENSITIVE 
SIPDIS 
 
STATE FOR AF/C 
NSC FOR GAVIN 
LONDON FOR LORD 
PARIS FOR POL - BAIN AND KANEDA 
 
E.O. 12958: N/A 
TAGS: PREL EAID EPET CH
SUBJECT: CHAD:  WORLD BANK AND IMF REPS ON PUBLIC REVENUE 
MANAGEMENT AND 2010 BUDGET 
 
REF: NDJAMENA 424 
 
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SUMMARY 
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¶1.  (SBU)  In a series of meetings in recent days, World Bank 
and IMF representatives have commented on their in-country 
programs and on Chad's public revenue management, generally 
considered by both IFIs to be below par.  The IBRD's Mary 
Barton-Dock confirmed that the World Bank was ready to step 
up engagement with Chad once again in the sectors of health, 
education and water management, following President Deby's 
meetings in September with the World Bank Managing Director 
and subsequent meetings in Turkey with a technical Chadian 
delegation.  The IMF's Joseph Karangwa said that his 
organization was pleased to see Chad's 2010 final draft 
budget "not dramatically larger" than the version that the 
GoC discussed with the Fund in September.  But Karangwa was 
quick to add that improvements in composition -- with more 
spending for health and education and less on infrastructure 
-- would be desirable, and that the IMF would not be 
satisfied unless Chad "sticks to the figures it has laid 
out." 
 
¶2.  (SBU) The World Bank's decision to increase project 
activity in Chad is welcome news, especially given continued 
needs here with respect to poverty reduction.  Despite Chad's 
low rankings on international economic indices and uneven 
ability to stick with IFI-stipulated reforms, Barton-Dock and 
Karangwa, both professionals, are willing to give Chad its 
due.  The Bank and Fund will have to work closely to ensure 
that the GoC does not backslide on health and education 
commitments for 2010 and that Bank projects in health and 
education not "crowd out" or preempt GoC spending in those 
areas.  Efforts to combat corruption and push for 
transparency must accompany all projects, whether 
government-funded or donor-supported.  END SUMMARY. 
----------------------------- 
WORLD BANK: READY TO REENGAGE 
----------------------------- 
 
¶3.  (SBU)  World Bank Country Director for Chad (resident in 
Cameroon) Mary Barton-Dock told Ambassador and DCM October 27 
said that meetings between President Deby and IBRD Managing 
Director Ngozi Okonjo-Iweala in New York on the margins of 
the UNGA, and subsequent meetings in Istanbul between Chadian 
technical experts and the Managing Director, had both gone 
well enough that the two sides were poised to "get back to 
business," following the 2007 near-severance of working 
relations over Chad's mismanagement of oil revenues. 
Barton-Dock said that a team from the IBRD would travel to 
Chad shortly to discuss the GoC's "unimpressive" national 
strategy on how to restructure future relations with the 
Bank. 
 
¶4.  (SBU)  The World Bank was interested in assisting Chad's 
health, education and water sectors, and eager to see the GoC 
make progress toward adhering to IMF-agreed spending targets 
(reftel), particularly with respect to poverty reduction. 
Barton-Dock termed Infrastructure Minister Younousmi, 
considered by most in the IC as one of the most prone in the 
Chadian government to pursuing extra-budgetary spending, as 
"at least honest," as he did not promise adherence to the 
budget and then apologize for not getting there after the 
fact.  The World Bank had $28 million left from the time when 
it had curtailed assistance to Chad that it would like to 
devote to standing up clinics, hospitals, and schools.  In 
addition, it hoped to pursue an old project to split the 
water and electricity sectors, as the water sector had the 
potential to be properly managed, whereas the electricity 
sector was problem-riddled and likely to stay that way. 
 
¶5.  (SBU)  The Bank was considering making new money 
available for local development projects aimed at spurring 
decentralization.  The likelihood of such funding would 
increase if Chad pursued legislative and municipal elections 
in 2010.  Chad would also come in for a new tranche of 
International Development Association money in July 2011; it 
had not been in a position to spend much of its current IDA 
allotment.  Chad was probably eligible for IDA food security 
moneys, considering poor harvest projections, but whether it 
would submit an application or adhere to standards for 
spending such funding remained to be seen. 
 
¶6.  (SBU)  Barton-Dock said she had not had a chance to study 
 
NDJAMENA 00000501  002 OF 004 
 
 
Chad's proposed 2010 budget in detail, but the Bank shared 
the concerns of the IMF that Chad's use of 2009 revenues had 
been troubling, particularly in that many health and 
education projects that existed in the budget were not being 
funded, and those health and education projects that did in 
the end receive money often received it late.  Localities 
tried to keep things going and then got in over their heads 
when money from the central government did not arrive.  Only 
eight per cent of health-related projects in the 2009 budget 
had been funded as planned, and 700 out of a planned-for 2000 
new teachers placed in classrooms -- money not having been 
spent on teacher training.  In general terms, the GoC tended 
to spend heavily on infrastructure, including building 
schools and hospitals, and neglect capacity-building of 
professionals. 
 
¶7.  (SBU)  Barton-Dock stressed that among Chad's problems 
with project management were weakness in pilot projects; lack 
of follow-up by interested ministries; the large number of 
actors involved in decisionmaking; slow start-up; and lack of 
capacity for coordination.  Human resource management also 
presented problems, with high turn-over and vacant positions 
in the bureaucracy.  There was sometimes a lack of coherence 
between specific project goals and national strategies, and 
often lack of capacity for evaluation.  Bureaucrats responded 
slowly to market activities.  The signature process usually 
involved delays.  Bid solicitation procedures were generally 
misunderstood.  Internal controls were weak, and filing and 
archiving were faulty.  Audit procedures were also frequently 
misunderstood.  The Bank intended to send more frequent field 
missions to Chad to help streamline project structures and 
engage in joint supervision where possible. 
 
¶8.  (SBU)  According to Barton-Dock, Infrastructure Minister 
Younousmi had told her that expenditures in the security area 
would likely remain high in the near term, as Chad did not 
plan to down-size its army on grounds that border control 
remained a priority.  Special new patrols of the Sudan border 
might be necessary, and problems with CAR seemed to be on the 
increase.  The need to incorporate Chadian rebels into the 
ANT was also a costly project.  In Barton-Dock's view, 
powerful ministries like Defense and Infrastructure found 
ways around the current spending freeze, whereas ministries 
such as Health and Education lost out because they adhered to 
it. 
 
¶9.  (SBU)  Regarding debt relief, said Barton-Dock, President 
Deby remained convinced, erroneously, that HIPC debt relief 
could be granted on purely political grounds, without regard 
to Chad's fulfillment of economic pledges.  The Bank shared 
the IMF's concerns that planned loans from Libya and China 
(reftel) would set Chad back even further in its quest for 
HIPC relief.  Countries including DRC and Cameroon had 
decided to forgo foreign loan packages when forced to choose 
between them and HIPC, but the process of walking such 
arrangements back was difficult. 
 
¶10.  (SBU)  Asked about the likelihood that President Deby 
might eventually take the advice of the IFIs and insist on 
budgetary stringency, Barton-Dock offered that Deby was 
assertive, unlike Cameroon's President Biya, who had 
essentially "stopped paying attention" to what went on in his 
nation, with the result that Cameroon was backsliding 
quickly.  Barton-Dock described Gabon as "the newest failed 
state" in economic terms.  CAR, by contrast, had an activist 
cabinet whose members recognized how serious their problems 
were and seemed to want to address them. 
 
¶11.  (SBU)  Asked what role increased oil revenues might have 
on Chad's budget, Barton-Dock said that sticking to the 
existing budget should be the rule, regardless of whether the 
price of oil went up.  Unfortunately, as soon as the GoC made 
more money, it spent it.  As for the task of gauging future 
spending possibilities based on oil price projections, this 
was supposed to have been the role of Chad's Petroleum 
College.  But that body had become so politicized that it was 
no longer independent. 
 
¶12.  (SBU)  Barton-Dock indicated that an Independent 
Assessment Group evaluation of the Chad-Cameroon pipeline 
project was forthcoming.  The document was somewhat critical 
of both Chad and the IBRD.  The IAG, who reviewed Bank 
projects in the way that the OIG assessed State Department 
programs, had not originally supported President Zoellick's 
decision to pull out of Chad, but the Group had agreed to 
revise this judgment in the final assessment report.  The 
 
NDJAMENA 00000501  003 OF 004 
 
 
document asserted that technical, environmental and social 
aspects of pipeline project had been successful, where as the 
revenue portion was a failure because of lack of ownership by 
the GoC.  Barton-Dock also noted that the Bank would shortly 
do a new survey of whether oil revenues had actually 
benefited the population of Chad.  This effort would measure 
the percentage of people who had moved from below a Bank-set 
"poverty line" -- 55 per cent in 2003 -- to above it in 2009. 
 
 
¶13.  (SBU)  Barton-Dock agreed to take back questions on how 
the U.S. could assist Chad with better public revenue 
management and anti-corruption efforts.  Public expenditure 
reviews, particularly in the security sector, might be an 
option, as might assistance to the justice sector (beyond 
what the UN was already providing in Eastern Chad). 
 
--------------------------- 
IMF:  STILL PLUGGING FOR 
STRINGENCY AND TRANSPARENCY 
--------------------------- 
 
¶14.  (SBU)  The IMF's representative in Chad, Joseph 
Karangwa, chatted with us October 29 about Chad's 2010 draft 
budget, which he termed "not a bad effort overall."  He made 
clear that the IMF would encourage Chad to reconsider the 
present composition of the budget, as more goods and services 
for  health and education were necessary.  Most importantly, 
Chad would need to stick to what it proposed in the budget -- 
which it had not managed to do in 2009.  Asked whether he 
believed Chad was in a position to reduce defense spending in 
order to make room for more expenditures in poverty 
reduction, Karangwa replied that the IMF "was willing to be 
reasonable on defense spending," given Chad's difficulties 
with neighbors and the need to reintegrate returning rebel 
troops.  The Fund was "looking for downward trends" rather 
than large-scale reductions in military spending the near 
term.  Also, the Fund hoped for greater transparency in the 
defense budget, as spending in this sector was particularly 
prone to embezzlement.  Karangwa advised that Chad aimed to 
devote 55 percent of its national budget to poverty reduction 
efforts, especially health, education and rural development. 
That many military expenditures were extra-budgetary made 
insisting that Chad adhere to this percentage something of a 
game. 
 
¶15.  (SBU)  Asked whether Chad's business and human 
development indices for 2009 might beat 2008 figures, 
Karangwa said he did not think so.  "TheChadians are hard to 
read," he continued.  "Theyare isolated, inward-looking and 
neglected interationally."  Eve if Chad stayed near the 
bottomof international measures of development, "the 
Chdians should not be treated like devils."  Many mebers of 
the Government, inluding the Finance Minister, "were trying 
hard" and needed more international support.  As for 
President Deby, he was indeed powerful, "but he is too 
reactive and suspicious to have a vision that will unite 
people."  Deby was "constantly on the look-out," and might be 
expected to change members of his entourage suddenly, despite 
what appeared for the moment to be a period of calm. 
 
¶16.  (SBU)  Karangwa said that he had spoken with the Deputy 
Finance Minister the day before about proposed loans from 
China and Libya (reftel), which the Fund continued to find 
very troubling in that their purposes were not clear and they 
appeared to be non-concessionary in nature.  The terms of the 
planned loan from China's CNPC Financial in Hong Kong to the 
Chadian Ministry of Petroleum were for LIBOR plus three 
percent, making it a commercial venture that would render 
Chad ineligible for HIPC debt relief.  The Ministry of 
Finance insisted that the loan had not yet been signed, 
contradicting other information that Karangwa had received 
regarding the status of the loan. 
 
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COMMENT 
------- 
 
¶17.  (SBU)  The World Bank's decision to increase project 
activity in Chad is welcome news, especially given continued 
needs here with respect to poverty reduction.  Despite Chad's 
low rankings on international economic indices and uneven 
ability to stick with IFI-stipulated reforms, Barton-Dock and 
Karangwa, both professionals, are willing to give Chad its 
due.  The Bank and Fund will have to work closely to ensure 
that the GoC does not backslide on health and education 
 
NDJAMENA 00000501  004 OF 004 
 
 
commitments for 2010 and that Bank projects in health and 
education not "crowd out" or preempt GoC spending in those 
areas.  Efforts to combat corruption and push for 
transparency must accompany all projects, whether 
government-funded or donor-supported. 
NIGRO