Nepal - Narayani III Irrigation Project : Credit 1715 - Credit Agreement - Conformed

OFFICIAL CREDIT NUMBER 1715 NEP Development Credit Agreement (Narayani III Irrigation Project) between KINGDOM OF NEPAL and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated , 1986 CREDIT NUMBER 1715 NEP DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated , 1986, between the KINGDOM OF NEPAL (the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association). WHEREAS the Borrower, having satisfied itself as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, has requested the Association to assist in the financing of the Project; WHEREAS the Borrower intends to obtain from the Government of the Swiss Confederation (hereinafter called Switzerland), a non-reimbursable contribution in an amount equivalent to Swiss Francs 15,000,000 (hereinafter called the Swiss Contribution) to assist in the financing of the Project on terms and conditions set forth in an agreement (hereinafter called the Swiss Contribu- tion Agreement) to be entered into between the Borrower and Switzerland; and WHEREAS the Association has agreed, on the basis, inter alia, of the foregoing, to extend the Credit to the Borrower upon Te terms and conditions set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Develop- ment Credit Agreements" of the Association, dated January 1, 1985, with the last sentence of Section 3.02 deleted (the General Conditions) constitute an integral part of this Agreement. Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement; - 2 - (b) "Project Area" means the cultivable command area of about 37,400 ha of the Nepal Eastern Canal irrigation scheme located in the Borrower's administrative districts of Parsa, Bara and Rautahat; (c) "NZIDB" means the Narayani Zone Irrigation Development Board established by the Borrower's Narayani Zone Irrigation Development Board Order, 2029 (1972), as amended to the date of this Agreement, issued pursuant to the Borrower's Development Board Act, 2013 (1956) as amended to the date of this Agreement; (d) "Nepal Rastra Bank" means the Borrower's central Bank established and operating pursuant to the Borrower's Nepal Rastra Bank Act, 2012 (1955), as amended to the date of this Agreement; (e) "NRs" means Nepalese rupees, the currency of the Borrower; (f) "Water Users' Group" means a group of farmers sharing water from a single canal outlet of the irrigation schemes in the Project Area; (g) "Swiss Contribution Account" means the account estab- lished by Switzerland for the purpose of the Swiss Contribution; and (h) "Birganj Tubewell Scheme" means the public groundwater development irrigation scheme located in the Borrower's adminis- trative districts of Parsa and Bara. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Bor- rower, on the terms and conditions set forth or referred to in the Development Credit Agreement, an amount in various currencies equivalent to twenty one million six hundred thousand Special Drawing Rights (SDR 21,600,000). Section 2.02. (a) The amount of the Credit and the Swiss Contribution may be withdrawn from the Credit Account and the Swiss Contribution Account, respectively, in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower, -3- the Association and Switzerland, 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 described in Schedule 2 to this Agreement and to be financed out of the proceeds of the Credit and the Swiss Contribution. (b) Except as the Association and Switzerland shall otherwise agree, the allocation and withdrawal of the Swiss Contribution shall be governed mutatis mutandi by the provisions of the General Conditions. (c) The Borrower shall, for the purposes of the Project, open and maintain in Dollars a special account in the Nepal Rastra Bank on terms and conditions satisfactory to the Association. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 5 to this Agreement. Section 2.03. The Closing Date shall be June 30, 1994 or such later date as the Association shall establish. The Associa- tion shall promptly notify the Borrower of such later date. Section 2.04. (a) The Borrower shall pay to the Association a commitment charge at the rate of one-half of one per cent (1/2 of 1%) per annum on the principal amount of the Credit not with- drawn from time to time. The commitment charge shall accrue from a date sixty days after the date of the Development Credit Agree- ment to the respective dates on which amounts shall be withdrawn by the Borrower from the Credit Account or shall be cancelled. (b) The commitment charge shall be paid: (i) at such places as the Association shall reasonably request; (ii) without restrictions of any kind imposed by, or in the territory of, the Borrower; and (iii) in the currency specified in this Agreement for the purposes of Section 4.02 of the General Conditions or in such other eligible currency or currencies as may from time to time be designated or selected pursuant to the provisions of that Section. 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. Section 2.06. Commitment charges and service charges shall be payable semiannually on May 15 and November 15 in each year. - 5 - Section 3.03. Except as the Association and Switzerland shall otherwise agree, procurement of the goods, works and consultants' services required for the Project and to be financed out of the proceeds of the Credit and the Swiss Contribution shall be governed by the provisions of Schedule 3 to this Agreement. Section 3.04. The Borrower shall, or shall cause the NZIDB to, take all such measures as may be considered necessary to minimize the risk of malaria and other water-related diseases within the Project Area. ARTICLE IV Financial Covenants Section 4.01. (a) The Borrower shall maintain or cause to be maintained records and accounts adequate to reflect in accordance with sound accounting practices the operations, resources and expenditures in respect of the Project of NZIDB and of the departments and agencies of the Borrower responsible for carrying out the Project or any part thereof. (b) The Borrower shall: (i) have the accounts referred to in paragraph (a) of this Section, including the Special Account, for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Association, as soon as available, but in any case not later than nine months after the end of each such year, a certified copy of the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iii) furnish to the Association such other information concerning the said accounts and the audit thereof and said records as the Association shall from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the Credit Account were made on the basis of statements of expenditure, the Borrower shall: -6- (i) maintain or cause to be maintained, in accordance with paragraph (a) of this Section, separate records and accounts reflecting such expenditures; (ii) retain, until at least one year after the completion of the audit for the fiscal year in which the last withdrawal from the Credit Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Association's representatives to examine such records; and (iv) ensure that such separate accounts are included in the annual audit referred to in paragraph (b) of this Section and that the report thereof contains, in respect of such separate accounts, a separate opinion by said auditors as to whether the proceeds of the Credit withdrawn in respect of such expenditures were used for the purposes for which they were provided. Section 4.02. The Borrower shall, or shall cause NZIDB to: (a) by December 31, 1986, under terms of reference satis- factory to the Association, carry out a detailed study of the physical and budgetary requirements for operation and maintenance of the works under the Project; and (b) by June 30, 1987, furnish to the Association, for its review and comments, the results and recommendations of such detailed study, and thereafter, taking into account the Associa- tion's comments, if any, implement the results and recommenda- tions of such detailed study. Section 4.03. On March 31 of each year, commencing on March 31, 1987 and thereafter, the Borrower shall, or shall cause the NZIDB to, furnish to the Association, for its review and com- ments, its estimates for the forthcoming Fiscal Year of salaries and allowances of Project staff, and operation and maintenance costs (excluding establishment costs) of the irrigation schemes and related facilities in the Project Area, and, thereafter, taking into account the Association's comments, if any, make the required budgetary allocations to adequately cover such operation -7- and maintenance costs, including salaries and allowances of Project staff. Section 4.04. The Borrower shall: (a) by December 31, 1986 cause NZIDB to set water charges at a flat rate of not less than NRs 200 per hectare per year for surface irrigation in the Project Area and a rate of not less than NRs 400 per hectare per year for the Birganj Tubewell Scheme. (b) by July 16, 1987, assign its Revenue Department with the responsibility of collection of watercharges in the Project Area; (c) on August 31 of every second year, commencing on August 31, 1988, and thereafter: (i) review and, if required, revise the collection procedures of water charges in the Project Area to achieve full collection of such charges, and (ii) adjust, as required, the rates of such water charges to cover by Fiscal Year 1993 and thereafter, full costs of operation and maintenance of the surface irrigation scheme under the Project, and a reasonable portion of capital expenditures, taking into account farmers' payment capacity. Section 4.05. The Borrower shall, by April 1, 1989, prepare and furnish to the Association, for its review and comments, the results and recommendations of a study undertaken under terms of reference satisfactory to the Association, on all major irri- gation projects in Nepal for implementing therein the improved cost recovery measures provided for in Section 4.04 of this Agreement, and, thereafter, taking into account the Association's comments, if any, and on the basis of appropriate recommendations of such study, implement cost recovery measures for such major irrigation projects. Such terms of reference to include the need to rehabilitate the water distribution system, farmers' capacity to pay and availability of reliable water supply in each such major irrigation project. For purposes of this Section, the term "major irrigation" means an irrigation scheme with a command area of not less than 2,000 ha. Section 4.06. The provisions of Section 4.04 of this Agree- ment supersede the provisions of Section 4.02 of the Development Credit Agreement dated November 27, 1978, entered into between the Borrower and the Association for purposes of Credit No. 856-NEP. -8- ARTICLE V Remedies of the Association Section 5.01. Pursuant to Section 6.02 (h) of the General Conditions, the following additional events are specified: (a) The Borrower shall have taken any action to alter the organization or functions of NZIDB and such action shall have materially and adversely affected the carrying out of the Project. (b) (i) Subject to subparagraph (ii) of this paragraph, the right of the Borrower to withdraw the proceeds of the Swiss Contribution shall have been sus- pended, cancelled or terminated in whole or in part, pursuant to the terms of the Swiss Contribu- tion Agreement. (ii) The provisions of subparagraph (b) (i) above shall not apply if the Borrower establishes to the satisfaction of the Association that: (A) such suspension, cancellation or termination is not caused by the failure of the Borrower to perform aay of its obligations under such agreement; or (B) adequate funds for the Project are available to the, Borrower from other sources on terms and conditions consistent with the obliga- tions of the Borrower under this Agreement. Section 5.02. Pursuant to Section 7.01 (d) of the General Conditions, the following additional events are specified: (a) that the event specified in Section 5.01 of this Agreement shall occur; and (b) that the event specified in paragraph (b) (i) of Section 5.01 of this Agreement shall occur, subject to the proviso of subparagraph (ii) of that paragraph. - 9 - ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as addi- tional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions: (a) that the Borrower shall have furnished to the Associa- tion designs and contracting packages for the 1986-87 construc- tion season satisfactory to the Association; (b) that the Borrower has authorized all the required Pro- ject staff positions in a manner satisfactory to the Association; and (c) that all conditions precedent to the effectiveness of the Swiss Contribution Agreement (other than, if applicable, the effectiveness of this Agreement) have been fulfilled. Section 6.02. The date ninety (90) days after the date of this Agreement is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VII Representative of the Borrower; Addresses Section 7.01. The Secretary, Ministry of Finance of the Borrower, is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Ministry of Finance His Majesty's Government Kathmandu, Nepal Cable address: Telex: ARTHA 2249 Kathmandu, Nepal - 10 - For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WJI) IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. KINGDOM OF NEPAL By/S 4d2U Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By j5I Regional Vice President South Asia - 11 - 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 and the Swiss Contribution, the allocation of the amounts of the Credit to each Category and tlie percentage of expenditures for items so to be financed in each Category: Amount Amount of the of Swiss Con- Credit Allo- tribution Allo- cated (Expressed cated (Expressed % of in SDR in Swiss Francs Expenditure Category Equivalent) Equivalent) to be Financed (1) Civil Works 15,880,000 - 100% (2) Equipment 2,110,000 - 100% of foreign and vehicles, expenditures, including 100% of local workshop expenditures equipment (ex-factory cost) and 70% of local ex- penditures for other items procured locally (3) Technical services: (a) Consul- - 7,000,000 100% tancies - 12 - Amount Amount of the of Swiss Con- Credit Allo- tribution Allo- cated (Expressed cated (Expressed % of in SDR in Swiss Francs Expenditure Category Equivalent) Equivalent) to be Financed (b) Training, 360,000 - 100% agricul- tural re- search, and moni- toring and eval- uation (4) Project estab- - 4,800,000 FY 1987: 90% lishment, and FY 1988: 90% operation and FY 1989: 90% and maintenance FY 1990: 70% costs of the FY 1991: 70% facilities FY 1992: 50% under the Project ex- cluding sala- FY 1993: 25% ries and allow- ances (5) Salaries - 3,200,000 FY 1987: 90% and allow- FY 1988: 90% ances of FY 1989: 90% Project FY 1990: 70% staff FY 1991: 70% FY 1992: 50% FY 1993: 25% (representing in the aggre- gate about 85% of salaries and allowances of incremental staff) (6) Unallo- 3,250,000 - cated TOTAL 21,600,000 15,000,000 - 13 - 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than that of the Borrower for goods or services supplied from the territory of any country other than that of the Borrower; (b) the term "local expenditures" means expenditures in the currency of the Borrower or for goods or services supplied from the territory of the Borrower; (c) the acronym "FY" means the Borrower's Fiscal Year; (d) the term "incremental staff" means the Borrower's additional staff retained after the date of this Agreement for purposes of carrying out the investment and operation and maintenance work under the Project; and (e) the term "Project Establishment" means the engineering and administration costs incurred by the Borrower's Project staff for purposes of carrying out the Project, excluding expenditures incurred in the operation and maintenance of the irrigation schemes and related facilities under the Project. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expenditures prior to the date of this Agreement. - 14 - SCHEDULE 2 Description of the Project The objectives of the Project are to increase dry-season agricultural production by introducing a reliable irrigation system in the Project Area. The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Association may agree upon from time to time to achieve such objectives: Part A: Improvements to the Nepal Eastern Canal, including lining of selected canal reaches, canal slope protection, strengthening of canal embankments, upgrading of service roads, and construction of control and access structures. Part B: Rehabilitation of the Tilawe Barrage including the required structures. Part C: Construction of about 40 shallow tubewells and the secondary and tertiary canals and drainage system on about 8,700 ha in the Project Area. Part D: Upgrading of the existing conveyance and distribution irrigation systems on about 28,700 ha in the Project Area. Part E: Construction of the required flood protection and river training works on the Lal Bakeya, Bagmati, Uria, Sikta, Dhutaha, Dhongahi, Navrangia, Tilawe, Bangari and Pasaha rivers in the Project Area. Part F: Upgrading of the village and service roads in the Project Area. - 15 - Part G: Provision of equipment for the operation and maintenance of the irrigation schemes and related facilities in the Project Area. Part H: Provision of equipment for the establishment, operation and maintenance of a radio communication system in the Project Area. Part I: Establishing, operation and maintenance of a workshop for servicing operation and maintenance equipment of irrigation schemes in the Terai, including provision of the required build- ings and equipment. Part J: Monitoring and evaluation, and implementation of agricul- tural extension and research, and training programs in the Project Area. Part K: Management, operation and maintenance of the irrigation schemes and related facilities in the Project Area. Part L: Provision of technical assistance for carrying out the Project, including studies (planning and design) of suitable irrigation projects in the Terai. The Project is expected to be completed by December 31, 1993. - 16 - SCHEDULE 3 Procurement and Consultants' Services Section I. Procurement of Goods and Works Part A: International Competitive Bidding 1. Except as provided in Part D hereof, goods and works shall be procured under contracts awarded in accordance with procedures consistent with those set forth in Sections I and II of the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in May 1985 (the Guidelines). 2. Bidders for works estimated to cost the equivalent of $1,000,000 or more, shall be prequalified as described in para- graph 2.10 of the Guidelines. Part B: Preference for Domestic Manufacturers In the procurement of goods in accordance with the proce- dures described in Part A hereof, goods manufactured in Nepal may be granted a margin of preference in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraphs I through 4 of Appendix 2 thereto. Part C: Preference for Domestic Contractors In the procurement of works in accordance with the proce- dures described in Part A hereof, the Borrower may grant a margin of preference to domestic contractors in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraph 5 of Appendix 2 thereto. Part D: Other Procurement Procedures 1. Civil works contracts not to exceed in the aggregate the equivalent of $4,100,000, may be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Association. 2. Light equipment, including motorcycles, bicycles and diesel generators may be procured under contracts awarded through limited international bidding procedures on"'the basis of evalua- tion and comparison of bids invited from at least three qualified - 17 - suppliers eligible under the Guidelines and in accordance with the procedures set forth in Sections I and II of the Guidelines (excluding paragraphs 2.8, 2.9, 2.55 and 2.56 thereof). 3. Works not exceeding in the aggregate the equivalent of $1,000,000, may be carried out by force account. Part E: Review by the Association of Procurement Decisions 1. Review of prequalification: With respect to the prequalification of bidders as provided in Part A.2 hereof, the procedures set forth in paragraph 1 of Appendix 1 to the Guidelines shall apply. 2. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to each contract for works estimated to cost the equivalent of $500,000 or more, and for all contracts for goods, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, such proce- dures shall be modified to ensure that the two conformed copies of the contract required to be furnished to the Association pursuant to said paragraph 2 (d) shall be furnished to the Association prior to the making of the first payment out of the Special Account in respect of such contract. (b) With respect to each contract not governed by the pre- ceding paragraph, the procedures set forth in paragraphs 3 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract together with the other information required to be furnished to the Association pursuant to said paragraph 3 shall be furnished to the Association as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 5 to this Agreement. (c) The provisions of the preceding subparagraphs (a) and (b) shall not apply to contracts on account of which the Associa- tion has authorized withdrawals from the Credit Account on the basis of statements of expenditure. Such contracts shall be retained in accordance with Section 4.01 (c) (ii) of this Agree- ment. - 18 - 3. The figure of 15% is hereby specified for purposes of para- graph 4 of Appendix 1 to the Guidelines. Section II. Employment of Consultants In order to assist the Borrower in carrying out the Project, the Borrower shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satis- factory to the Association. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Association on the basis of the "Guidelines for the Use of Con- sultants by World Bank Borrowers and by the World Bank as Execut- ing Agency" published by the Bank in August 1981. - 19 - SCHEDULE 4 Implementation Program The Borrower shall: (a) issue or cause to be issued, all the necessary authorizations and permits to enable NZIDB to commence operation of the radio communication system under Part H of the Project, by July 1, 1987; (b) at all times, maintain the position of General Manager of the Project with an officer whose qualifications, experience and terms of reference shall be satisfactory to the Association; (c) on December 31 of every two years, commencing on December 31, 1987, in consultation with Lhe Association review and, if required, revise the Project General Manager limits of contractual commitments for the operation and management of the Project; (d) cause NZIDB to: (i) by January 1, 1987 furnish to the Association for its approval, an overall training program under Part J of the Project; (ii) by January 1 of each year, commencing on Jar.uary 1, 1987, furnish to the Association for its approval, the annual training program for the following Borrower's Fiscal Year; and (iii) thereafter on April 1 of each year, implement such training programs as so approved; (e) cause NZIDB to: (i) conduct base-line agro-economic surveys, under terms of reference satisfactory to the Associa- tion, not later than June 30, 1987, June 30, 1989, June 30, 1991 and June 30, 1993; (ii) within two months of finalizing each base-line agro-economic survey, furnish to the Association for its review and comments, the results and conclusions of each such base-line agro-economic survey; and (iii) thereafter, taking into account the Association's comments, if any, implement the conclu- sions of each base-line agro-economic survey; (f) for purposes of carrying out the agricultural extension activities under the Project, under terms of reference satis- factory to the Association, by June 30, 1987, appoint an addi- tional Assistant Agricultural Development Officer and a Subject Matter Specialist for irrigated agriculture to each of the dis- tricts in the Project Area, together with supporting office staff - 20 - and equipment, with functions and terms of reference satisfactory to the Association; (g) by June 30, 1987, establish and, thereafter, maintain an adaptive farm planning research program with terms of reference satisfactory to the Association, under the technical supervision and control of the Borrower's Department of Agricul- ture; (h) by December 31, 1986, establish Water Users' Groups in each tertiary command currently receiving irrigation water in the Project Area, and, not later than six months prior to commencing delivery of irrigation water to any tertiary command in the Project Area, establish a Water Users' Group; (i) by September 30, 1987, take all such action as shall be necessary to constitute the Water Users' Groups, established or to be established pursuant to paragraph (h) of this Schedule as statutory bodies with sufficient powers to: (i) supervise the distribution of water amongst its members in proportion to the size of their landholding; (ii) cause its members to construct and maintain the required field channels, including field drain- ages, adjoining their holdings and any other section of the field channels and field drainages that do not skirt commandable areas, and in case of default, arrange for such work to be done at the cost of the defaulters, provided, however, that in the event that a Water Users' Group does not carry out such construction and maintenance work, the Borrower shall, at the expense of such Water Users' Group, carry out the construction and maintenance work in question; (j) without limitation to the provisions of Section 3.02 of this Agreement, by July 1, 1991, prepare and furnish to the Association, for its review and comments, a proposal relating to the organizational arrangements for operation and maintenance of the irrigation schemes and related facilities in the Project Area to be established within its Irrigation Department, and by July 1, 1992, or such other Oate as the Association may otherwise agree, adopt and implement such organizational arrangements, satisfactory to the Association; (k) without limitation to the provision of Section 9.06 of the General Conditions, commencing on January 1, 1987 and thereafter, until the completion of the Project, furnish to the Association semiannual reports of such scope and in such detail - 22 - SCHEDULE 5 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" are Categories (1) (a), (2), (3) (b) and (3) (c) set forth in the table in paragraph I of Schedule 1 to this Agreement; (b) the term "eligible expenditures" means expenditures 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 allocated from time to time to the eligible Categories in accord- ance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount equiv- alent to SDR 360,000 to be withdrawn from the Credit Account and deposited in the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. Except as the Association shall otherwise agree, payments out of the Special Account shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule. 3. After the Association has received evidence satisfactory to it that the Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the Special Account may be made as follows: (a) On the basis of a request or requests by the Borrower for a deposit or deposits which add up to the aggregate amount of the Authorized Allocation, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit in the Special Account such amount or amounts as the Borrower shall have requested. (b) The Borrower shall furnish to the Association requests for replenishment of the Special Account at such intervals as the Association shall specify. On the basis of such requests, the Association shall withdraw from the Credit Account and deposit into the Special Account such amounts as shall be required to replenish the Special Account with amounts not exceeding the amount of payments made out of the Special Account for eligible expenditures. All such deposits shall be withdrawn by the - 23 - Association from the Credit Account under the respective eligible Categories, and in the respective equivalent amounts, as shall have been justified by the evidence supporting the request for s.uch deposit furnished pursuant to paragraph 4 of this Schedule. 4. For each payment made by the Borrower out of the Special Account for which the Borrower requests replenishment pursuant to paragraph 3 (b) of this Schedule, the Borrower shall furnish to the Association, prior to or at the time of such request, such documents and other evidence as the Association shall reasonably request, showing that such payment was made for eligible expen- ditures. 5. (a) Notwithstanding the provisions of paragraph 3 of this Schedule, no further deposit into the Special Account shall be made by the Association when either of the following situations first arises: (i) the Association shall have determined that all further withdrawals should be made directly by the Borrower from the Credit Account in accordance with the provisions of paragraph (a) of Section 2.02 of this Agreement; or (ii) the total unwithdrawn amount of the Credit allocated to the eligible Categories, minus the amount of any outstanding special commitment entered into by the Association pursuant to Section 5.02 of the General Conditions with respect to the Project, shall be equal to the equivalent of twice the amount of the Authorized Allocation. (b) Thereafter, withdrawal from the Credit Account of the remaining unwithdrawn amount of the Credit allocated to the eligible Categories shall follow such procedures as the Associa- tion shall specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Association shall have been satisfied that all such amounts remaining on deposit in the Special Account as of the date of such notice have been or will be utilized in making payments for eligible expenditures. 6. (a) If the Association shall have determined at any time that any payment out of the Special Account: (i) was made for any - 24 - expenditure or in any amount not eligible pursuant to paragraph 2 of this Schedule, or (ii) was not justified by the evidence furnished pursuant to paragraph 4 of this Schedule, the Borrower shall, promptly upon notice from the Association deposit into the Special Account (or, if the Association shall so request, refund to the Association) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. No further deposit by the Association into the Special Account shall be made until the Borrower has made such deposit or refund. (b) If the Association shall have determined at any time that any amount outstanding in the Special Account will not be required to cover further payments for eligible expenditures, the Borrower shall, promptly upon notice from the Association, refund to the Association such outstanding amount for crediting to the Credit Account. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the International Development Association. FOR SECRETARY