Afghanistan - Second Agricultural Credit Project : Credit 0539 - Credit Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 539 AF Development Credit Agreement (Second Agricultural Credit Project) BETWEEN REPUBLIC OF AFGHANISTAN AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED APRIL 25, 1975 CONFORMED COPY CREDIT NUMBER 539 AF Development Credit Agreement (Second Agricultural Credit Project) BETWEEN REPUBLIC OF AFGHANISTAN AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED APRIL 25, 1975 DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated April 25, 1975, between REPUBLIC OF AFGHANISTAN (hereinafter called the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association). WHEREAS (A) The Borrower has requested the Association to assist in the financing of the Project described in Schedule 2 to this Agreement by extending the Credit as hereinafter provided; (B) The Project will be carried out partly by the Agricultural Development Bank of Afghanistan, a joint-stock company organized inder the laws of the Borrower (hereinafter called the AGBANK) and partly by the Afghan Fertilizer Company, a joint-stock company organized under the laws of the Borrower (hereinafter called the AFC) with the Borrower's assistance and, as part of such assistance, the Borrower will make available to AGBANK the proceeds of the Credit as hereinafter provided; and (C) The Association is willing to make the Credit available to the Borrower upon the terms and conditions set forth hereinafter and in a project agreement of even date herewith between the Association, AGBANK and AFC; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Development Credit Agreements of the Association, dated March 15, 1974, with the same force and effect as if they were fully set forth herein, subject, however, to the following modifications thereof (said General Conditions Applicable to Development Credit Agreements of the Association, as so modified, being hereinafter called the General Conditions): (a) Paragraph (i) of Section 9.01 is deleted and the following paragraph is substituted therefor: "(i) exchange views through their representatives with regard to the progress of the Project, the benefits derived therefrom, the performance of their respective obligations tinder the Development Credit Agreement, the 4 performance by AGBANK and AFC of their respective obligations under the Project Agreement and the Subsidiary Agreements and other matters relating to the purposes of the Credit; and" (b) Paragraph (b) of Section 9.01 is deleted and the following paragraph is substituted therefor: "The Borrower and the Association shall promptly inform each other of any condition which interferes with, or threatens to interfere with, the progress of the Project, the accomplishment of the purposes of the Credit, the maintenance of the service thereof, the performance by any of them of its obligations under the Development Credit Agreement or the performance by AGBANK or AFC of their respective obligations under the Project Agreement and the Subsidiary Agreements." Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Project Agreement" means the agreement between the Association, AGBANK and AFC of even date herewith, as the same may be amended from time to time, and such term includes all schedules to the Project Agreement; (b) "First Subsidiary Agreement" means the agreement to be entered into between the Borrower and AGBANK pursuant to Section 3.01(b) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the First Subsidiary Agreement; (c) "Second Subsidiary Agreement" means the agreement to be entered into between AGBANK and AFC pursuant to Section 2.02(a) of the Project Agreement, as such agreement may be amended from time to time; and such term includes all schedules to the Second Subsidiary Agreement; (d) "Subsidiary Agreements" means the First Subsidiary Agreement and/or the Second Subsidiary Agreement as appropriate; (e) "Charter" means Charter of AGBANK as approved by the Afghan Government, Cabinet Resolution No. 2911 of January 19, 1970 (Afghan Calendar: Jaddi 29, 1348) confirmed by Decree No. 1032/3768 of January 21, 1970 (Afghan Calendar: Dalw 1, 1348) approved by AGBANK's Extraordinary General Assembly of Shareholders on February 1, 1970 (Dalw 12, 1348) and published in the Official 5 Gazette No. 150 of February 11, 1970 (Dalw 22, 1348) and as the same may be amended from time to time; (f) "Articles" means the Charter of Afghan Fertilizer Company of August 22, 1974 (Sunbula 1, 1353) and as the same may be amended from time to time; (g) "Afghani" means the currency of the Borro.wer; and (h) "subsidiary" means any company or entity of which a majority of the outstanding voting stock or other proprietary interest is owned, or which is effectively controlled, by AGBANK or by any one or more subsidiaries of AGBANK or by AGBANK and one or more of its subsidiaries. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions in the Development Credit Agreement set forth or referred to, an amount in various currencies equivalent to thirteen million dollars ($13,000,000). Section 2.02. The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time, for expenditures made (or, if the Association shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Credit. Section 2.03. Except as the Borrower and the Association shall otherwise agree, contracts for the purchase of goods or for the carrying out of works or services (other than consultants' services) for the Project to be financed out of the proceeds of the Credit, shall be awarded in accordance with the provisions set forth or referred to in Section 4.05 of the Project Agreement. Section 2.04. The Closing Date shall be December 31, 1979 or such other date as shall be agreed between the Borrower and the Association. Section 2.05. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. 6 Section 2.06. Service charges shall be payable semi-annually on June 15 and December 15 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semi-annual installments payable on each June 15 and December 15 commencing June 15, 1985 and ending December 15, 2024, each installment to and including the installment payable on December 15, 1994 to be one-half of one per cent (1/2 of 1%) of such principal amount, and each installment thereafter to be one and one-half per cent (1-1/2%) of such principal amount. Section 2.08. The currency of the United States of America is hereby specified -for the purposes of Section 4.02 of the General Conditions. Section 2.09. The Minister of Planning or the President or Vice-President of AGBANK is designated as representative of the Borrower for the purposes of taking any action required or permitted to be taken under the provisions of Section 2.02 of this Agreement and Article V of the General Conditions. ARTICLE III Execution of the Project Section 3.01. (a) Without any limitation or restriction upon any of its other obligations under the Development Credit Agreement, the Borrower shall cause: (i) AGBANK to perform in accordance with the provisions of the Project Agreement and the First Subsidiary Agreement and (ii) AFC to perform in accordance with the provisions of the Project Agreement and the Second Subsidiary Agreement all of their respective obligations therein set forth, shall take and cause to be taken all action including the provision of funds, facilities, services and other resources, necessary or appropriate to enable AGBANK and AFC to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (b) Except as the Borrower and the Association shall otherwise agree, the Borrower shall relend an amount in various currencies equivalent to $10,050,000 out of the proceeds of the Credit or such other amount as may be allocated to Categories I through 3 of the table set forth in Paragraph 1 of Schedule I to this Agreement, to AGBANK, under an agreement to be entered into between the Borrower and AGBANK on terms and conditions satisfactory to the Borrower and the Association. (c) The Borrower shall make available to AGBANK as Borrower's contribution to AGBANK's authorized capital an amount equivalent to $370,000 7 out of the proceeds of the Credit or such other amount as may be allocated to Categories 5 and 6 of the said table, under the First Subsidiary Agreement on terms and conditions satisfactory to the Borrower and the Association. (d) The Borrower shall make available to AGBANK an amount equivalent to $680,000 out of the proceeds of the Credit, or such other amount as may be allocated to Category 4 of the said table, under the First Subsidiary Agreement on terms and conditions satisfactory to the Borrower and the Association. (e) Without any limitation or restriction upon the generality of the provisions of Section 3.01(a) of this Agreement, the Borrower shall, within three years from the Effective Date, make available, to AGBANK an amount equal to Afghanis 43,100,000 (including the cost of land referred to in Section 3.07 of the Project Agreement) under the First Subsidiary Agreement on terms and conditions satisfactory to the Borrower and the Association. (f) Whenever in connection with this Section it shall be necessary to value the proceeds of the Credit in terms of Afghanis, such valuation shall be made on the basis of Da Afghanistan Bank free market rate of exchange. If, at any time, the Borrower or the Association considers that circumstances have arisen as a result of which such valuation has ceased to be possible, the parties shall consult together about what action is necessary for such valuation. (g) The Borrower shall exercise its rights under the First Subsidiary Agreement in such manner as to protect the interests of the Borrower and the Association and to accomplish the purposes of the Credit, and except as the Borrower and the Association shall otherwise agree, the Borrower shall not assign, nor amend, abrogate or waive the First Subsidiary Agreement or any provision thereof. Section 3.02. Until the completion of the Project, the Borrower shall (i) make arrangement for the provision of eight fellowships annually for training abroad, for periods varying from six to twelve months, of AGBANK's staff; (ii) make its best endeavours to ensure an annual recruitment of about 20 qualified university graduates by AGBANK; and (iii) second to AGBANK, on Borrower's expense, not less than 15 extension agents annually. Section 3.03. The Borrower shall continue to grant for a period of seven years following the Closing Date, all necessary permits or licences to AGBANK for the importation of spare parts required for the operation, maintenance, service or repair of tractors under the Project. Section 3.04. The Borrower shall: (i) continue to assist AGBANK in the collection of overdue loans; and (ii) not later than 12 months from the due date 8 of any sub-loan under Category 3 of the table set forth in Paragraph I of Schedule 1 to this Agreement, reimburse AGBANK for the amount outstanding under such sub-loan. Section 3.05. (a) The Borrower shall make funds available to AFC to purchase lands referred to in Section 3.07(a) of the Project Agreement. (b) In the event AFC shall notify the Borrower that the land required for any warehouse is not available, the Borrower shall acquire all such land and rights in respect thereof, and shall make such land available, within the time limits set forth in Section 3.07(a) of the Project Agreement, to AFC for purposes of the construction of the warehouse. Section 3.06. The Borrower shall cause AGBANK to appoint, not later than March 21, 1976, or such other date as shall be agreed between the Borrower and the Association, at least seven duly qualified and competent staff members to the senior and medium management positions. ARTICLE IV Remedies of the Association Section 4.01. For the purposes of Section 6.02 of the General Conditions, the following additional events are specified: (a) The Charter or the Articles shall, without the prior approval of the Association, have been amended, suspended, abrogated, repealed, waived, or shall cease to be enforced, so as to materially and adversely affect the carrying out by AGBANK or AFC of its respective covenants, agreements and obligations set forth in the Project Agreement. (b) AGBANK or AFC shall have failed to perform any of its respective covenants, agreements or obligations under the Project Agreement. (c) AGBANK or AFC shall have failed to perform any covenant, agreement or obligation under the Subsidiary Agreements. Section 4.02. For the purposes of Section 7.01 of the General Conditions, the following additional event is specified: Any of the events specified in Section 4.01 of this Agreement shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Association to the Borrower, AGBANK and AFC. 9 ARTICLE V Effective Date; Termination Section 5.01. The following events are specified as additional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01(b) of the General Conditions: (a) the execution and delivery of the Project Agreement on behalf of AGBANK and AFC, respectively, have been duly authorized or ratified by all necessary corporate and governmental action; (b) the execution and delivery of the First Subsidiary Agreement on behalf of the Borrower and AGBANK, respectively, have been duly authorized or ratified by all necessary corporate and governmental action; and (c) the execution and delivery of the Second Subsidiary Agreement on behalf of AGBANK and AFC, respectively, have been duly authorized or ratified by all necessary corporate and governmental action. (d) AGBANK has appointed qualified personnel to the four senior management positions. Section 5.02. The following are specified as additional matters, within the meaning of Section 12.02(b) of the General Conditions, to be included in the opinion or opiaions to be furnished to the Association: (a) That the Project Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, AGBANK and AFC, and is legally binding upon AGBANK and AFC in accordance with its terms; (b) That the First Subsidiary Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, the Borrower and AGBANK, and is legally binding upon the Borrower and AGBANK in accordance with its terms; and (c) That the Second Subsidiary Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, AGBANK and AFC, and is legally binding upon AGBANK and AFC in accordance with its terms. Section 5.03. The date July 24, 1975 is hereby specified for the purposes of Section 12.04 of the General Conditions. 10 Section 5.04. The obligations of the Borrower under Section 3.01(g) of this Agreement and the provisions of Sections 4.01 and 4.02 of this Agreement shall cease and determine on the date on which the Development Credit Agreement shall terminate or on a date twenty years after the date of this Agreement, whichever shall be the earlier. ARTICLE VI Representative of the Borrower; Addresses Section 6.01. The Minister of Planning of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 6.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: The Ministry of Planning Kabul Afghanistan Cable address: Ministry of Planning Kabul For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: INDEVAS Washington, D.C. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed 11 in their respective names in the District of Columbia, United States of America, as of the day and year first above written. REPUBLIC OF AFGHANISTAN By /s/ A. Malikyar Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ M. P. Benjenk Regional Vice President Europe, Middle East and North Africa 12 SCHEDULE 1 Withdrawal of the Proceeds of the Credit 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit, the allocation of the amounts of the Credit to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Credit Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Tractors, attach- 2,800,000 100% of foreign ments and spares expenditures thereof, water pumps, sprayers (2) Oxen and animal 450,000 75% of amounts drawn equipment disbursed by and on-farm devel- AGBANK opment (3) Short-term sub-loans 6,800,000 71% of amounts for fertilizer, disbursed by pesticides and AGBANK during the improved seed first 12 months from the Effective Date and, thereafter, 71% of the amount representing the difference between the aggregate of amounts disbursed in any one year and the aggregate of the Credit disbursements under this Category on ac- count of sub-loans disbursed in previous years 13 Amount of the Credit Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (4) Storage Facilities 680,000 50% (excluding the cost of land) (5) Supporting Services (a) AGBANK field 40,000 100% of local allowances expenditures (b) Fellowships 75,000 100% of foreign expenditures (6) Imported vehicles 255,000 100% of foreign and equipment for expenditures or AGBANK 70% of local ex- penditures (7) Unallocated 1,900,000 TOTAL 13,000,000 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures for goods or services supplied from, the territory, and in the currency, of any country other than the Borrower; and (b) the term "local expenditures" means expenditures in the currency of the Borrower, and for goods or services supplied from, the territory of the Borrower. 3. The disbursement percentages have been calculated in compliance with the policy of the Association that no proceeds of the Credit shall be disbursed on account of payments for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importation, manufacture, procurement or supply 14 thereof; to that end, if any event occurs which shall affect the amount of any such taxes included in the cost of any item to be financed out of the proceeds of the Credit, the Association may, by notice to the Borrower, correspondingly adjust the disbursement percentage then applicable to such item. 4. Notwithstanding the provisions of paragraph I above, no withdrawals shall be made in respect of expenditures prior to the date of this Agreement, except that withdrawals may be made in respect of Category 1 on account of expenditures incurred after October 15, 1974 in an aggregate amount not exceeding the equivalent of $850,000. 5. Notwithstanding the allocation of an amount of the Credit set forth in the second column of the table in paragraph I above: (a) if the estimate of the expenditures under any Category shall decrease, the amount of the Credit then allocated to such Category and no longer required therefor will be reallocated by the Association by increasing correspondingly the Unallocated amount of the Credit; and (b) if the estimate of the expenditures under any Category shall increase, the percentage set forth in the third column of the table in paragraph I above in respect of such expenditures shall be applied to the amount of such increase, and a corresponding amount will be allocated by the Association, at the request of the Borrower, to such Category from the unallocated amount of the Credit, subject, however, to the requirements for contingencies, as determined by the Association, in respect of any other expenditures. 6. If the Association shall have reasonably determined that the procurement of any item in any Category is inconsistent with the procedures set forth or referred to in this Agreement, no expenditures for such item shall be financed out of the proceeds of the Credit and the Association may, without in any way restricting or limiting any other nght, power or remedy of the Association under the Development Credit Agreement, by notice to the Borrower, cancel such amount of the Credit as in the Association's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Credit. 7. Notwithstanding the percentages set forth in the third column of the table in paragraph I above, if the estimate of expenditures under Category 2, 3 or 4 or of local expenditures under Category 6 shall increase and no proceeds of the Credit are available for reallocation to such Category, the Association may, 15 by notice to the Borrower, adjust the percentage then applicable to such expenditures in order that further withdrawals under such Category may continue unti' all expenditures thereunder shall have been made. 16 SCHEDULE 2 Description of the Project The Project consists of the following: Loans by AGBANK to farmers for investments in: (a) farm mechanization including tractors and attachments, oxen, animal drawn implements, water pumps and sprayers; (b) on-farm development for the cultivation of among others, vineyards, apple, apricot, pomegranate, walnut, and almond including investments for bee-keeping, poultry, karakul and small dairy farms; and (c) modern farm inputs including fertilizer, pesticides and improved seeds. II. Consolidation and upgrading of AGBANK's management capabilities. III. Construction of fertilizer warehouses, with a capacity of 1,000 ton and/or 2,500 ton, as appropriate in about 24 locations. The Project is expected to be completed by June 30, 1979.