Paul Wolfowitz has ordered the suspension of World Bank loans to Chad, because of Chad's non-compliance with the "lock box" features of its offshore oil pipeline. The pipeline was financed by the World Bank on condition that funds be held in an offshore account and applied only for specified development-friendly purposes. This dispute bodes poorly for Liberia's GEMAP, which has similar features.
Wolfowitz is reported by Reuters to have said "This agreement ... has been very important to this institution and whole development community and that's why we're making enormous efforts to try to see if there can be an agreed basis in which we can go forward and also why we can't accept that one side unilaterally alters the terms of the agreement.''
Specifically, the GEMAP involves broader control of Liberian government expenditures by requiring foreign advisors to approve expenditures.
While both of these programs may be understood as constraints on sovereignty, they are better understood as constraints on bad governance. It would be a shame if these experiments fail due to a lack of resolve by the donors, and it is good to see the World Bank dig in its heels.
