Nicaragua - Health Sector Reform Project : Credit 2556 - Credit Agreement - Conformed

CREDIT NUMBER NI Development Credit Agreement (Health Sector Reform Project) between REPUBLIC OF NICARAGUA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated , 1993 CREDIT NUMBER'?S NI DEVELOPHMENT CREDIT AGREEMENT AGREEMENT, dated 1993, between REPUBLIC OF NICARAGUA (the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association). WHEREAS: (A) 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; (B) the Association has received a letter dated November 17, 1993 from the Borrower describing a program of actions, objectives and policies designed to achieve a reform of its health sector (hereinafter called the Program), declaring the Borrower's commitment to the execution of the Program, and requesting assistance from the Association in the financing of the Project; (C) the Borrower intends to receive from the Government of Norway (Norway) a grant (the Norway Grant) in an amount equivalent to $3,000,000 to assist in financing the Project on the terms and conditions set forth in an agreement (the Norway Grant Agreement) to be entered into between the Borrower and Norway; and (D) the Borrower, Norway and the Association intend to enter into an agreement (the Administration Agreement) making arrangements for the Association to process applications for withdrawal of the proceeds of the financing to be provided severally by Norway and the Association and regulating certain other matters of common interest in connection with such financing; and WHEREAS the Association has agreed, on the basis, inter alia, of the foregoing, to extend the Credit to the Borrower upon the terms and conditions set fErth in this Agreement; NOW THEREFORE the parvies hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Development 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. - 2 - Section 1.02. 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) "Beneficiary" means collectively an HRD Benefici-ry, an I&E Beneficiary and a Rehabilitation Beneficiary (all as defined below); (b) "Central Bank" means the Borrower's Banco Central de Nicaragua; (c) "Emergency Rehabilitation Operational Manual" means the manual to be adopted by MOH (as defined below), in form and substance satisfactory to the Association, establishing the procedures for the promotion, identification, appraisal, approval, implementation and monitoring of Emergency Rehabilitation Subprojects (as defined below) referred to in paragraph 3 (f) of Schedule I to this Agreement; (d) "Emergency Rehabilitation Subproject" means a subproject for the rehabilitation of any of MOH's (as defined below) hospitals which is eligible for financing by MOH in accordance with the provisions of the Emergency Rehabilitation Operational Manual; (e) "HRD Beneficiary" means a SILAIS (as defined below) or a department of MOH (as defined below) at headquarters which meets the eligibility criteria set forth in the HRD Operational Manual (as defined below) and which proposes to carry out or is carrying out an HRD Subproject (as defined below); (f) "IHRD Operational Manual" means the manual to be adopted by MOB (as defined below), in form and substance satisfactory to the Association, establishing the procedures for the promotion, identification, appraisal, approval, implementation and monitoring of HRD Subprojects (as defined below) referred to in paragraph 3 (d) of Schedule 1 to this Agreement; (g) "ERD Subproject" means the training or other communication activities which are eligible for financing by MOH (as defined below) in accordance with the provisions of the HRD Operational Manual; -3- (h) "I&E Beneficiary" means a PHC SILAIS (as defined below) which meets the eligibility criteria set forth in the I&E Operational Manual (as defined below); (i) "I&E Operational Manual" means the manual to be adopted by MOH (as defined below), in form and substance satisfactory to the Association, establishing the procedures for the promotion, identification, appraisal, approval, implementation and monitoring of I&E Subprojects (as defined below) referred to in paragraph 3 (e) of Schedule 1 to this Agreement; (j) "I&E Subproject" means a water and/or sanitation subproject or a subproject for the rehabilitation of health centers and/or health posts which is eligible for financing by MOH (as defined below) in accordance with the provisions of the I&E Operational Manual; (k) "INSSBI" means Instituto Nicaragfiense de Seguridad Social y Bienestar, the Borrower's social security institute established pursuant to the INSSBI Decree; (1) "INSSBI Decree" means the Borrower's decree law No. 4-90 published in the Official Gazette No. 87 on May 8, 1990; (m) "INSSBI Subsidiary Agreement" means the agreement to be entered into between the Borrower and INSSBI pursuant to Section 3.01 (c) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to such agreement; (n) "MOH" means the Borrower's Ministry of Health; (o) "PCU" means the Project coordinating unit established pursuant to Ministerial Resolution No. 28-93 dated November 5, 1993; (p) "PHC SILAIS" means any of the SILAIS (as defined below) with jurisdiction over the following departments: Boaco, Carazo, Granada, Masaya, Regi6n Aut6noma del Atlintico Norte, Rivas and Rio San Juan; (q) "Primary Health Care Model" or "PEC Model" means the health care model described in the document furnished by the Borrower to the Association on November 17, 1993; -4 (r) "Primary Health Care Supervision Manual" means the manual to be adopted by MOH, in form and substance satisfactory to the Association, establishing the procedures for supervision of Part B.5 of the Project referred to in paragraph 3 (h) of Schedule 1 to this Agreement; (s) "Rehabilitation Beneficiary" means any of MOH' s hospitals which meets the eligibility criteria set forth in the Emergency Rehabilitation Operational Manual; (t) "Service Provision Arrangement" means any of the arrangements to be made pursuant to the provisions of Section 3.07 of this Agreement; (u) "SILAIS" means any of MOH's departmental health units; and (v) "Subproject" means collectively an HRD Subproject, an I&E Subproject and an Emergency Rehabilitation Subproject. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Development Credit Agreement, an amount in various currencies equivalent to ten million eight hundred thousand Special Drawing Rights (SDR 10,800,000). Section 2.02. (a) The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to this Agreement 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. (b) The Borrower shall, for the purposes of the Project, open and maintain in dollars a special deposit account in the Central 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. -5- Section 2.03. The Closing Date shall be December 31, 1997 or such later date as the Association shall establish. The Association shall promptly notify the Borrower of such later date. Section 2.04. (a) The Borrower shall pay to the Association a commitment charge on the principal amount of the Credit not withdrawn from time to time at a rate to be set by the Association as of June 30 of each year, but not to exceed the rate of one-half of one percent (1/2 of 1%) per annum. (b) The commitment charge shall accrue: (i) from the date sixty days after the date of this Agreement (the accrual date) to the respective dates on which amounts shall be withdrawn by the Borrower from the Credit Account or cancelled; and (ii) at the rate set as of the June 30 immediately preceding the accrual date or at such other rates as may be set from time to time thereafter pursuant to paragraph (a) above. The rate set as of June 30 in each year shall be applied from the next payment date in that year specified in Section 2.06 of this Agreement. (c) 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 percent (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 April 15 and October 15 in each year. Section 2.07. (a) Subject to paragraphs (b) and (c) below, the Borrower shall repay the principal amount of the Credit in semi- annual installments payable on each April 15 and October 15 commencing April 15, 2004 and, ending October 15, 2033. Each installment to and including the installment payable on October 15, 2013 shall be one percent (1%) of such principal amount, and each installment thereafter shall be two percent (2%) of such principal amount. -6- (b) Whenever: (i) the Borrower's gross national product per capita, as determined by the Association, shall have exceeded $790 in constant 1985 dollars for five consecutive years; and (ii) the Bank shall consider the Borrower creditworthy for Bank lending, the Association may, subsequent to the review and approval thereof by the Executive Directors of the Association and after due consideration by them of the development of the Borrower's economy, modify the terms of repayment of installments under paragraph (a) above by requiring the Borrower to repay twice the amount of each such installment not yet due until the principal amount of the Credit shall have been repaid. If so requested by the Borrower, the Association may revise such modification to include, in lieu of some or all of the increase in the amounts of such installments, the payment of interest at an annual rate agreed with the Association on the principal amount of the Credit withdrawn and outstanding from time to time, provided that, in the judgment of the Association, such revision shall not change the grant element obtained under the above-mentioned repayment modification. (c) If, at any time after a modification of terms pursuant to paragraph (b) above, the Association determines- that the Borrower's economic condition has deteriorated significantly, the Association may, if so requested by the Borrower, further modify the terms of repayment to conform to the schedule of installments as provided in paragraph (a) above. 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. (a) The Minister of Health or any person he or she may designate in writing is designated as representative of the Borrower in respect of Parts A, B, C and D of the Project 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. (b) The Executive President of INSSBI or any person he or she may designate in writing is designated as representative of the Borrower in respect of Part E of the Project 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. - 7 - ARTICLE III Execution of the Project Section 3.01. (a) The Borrower declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Agreement, and, to this end: (i) shall carry out Parts A, B, C and D of the Project through MOH with due diligence and efficiency and in conformity with appropriate economic, financial, administrative, management, health and env,.ronmental practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for such Parts of the Project; and (ii) shall cause INSSBI, pursuant to the provisions of the Subsidiary Agreement, to carry out Part E of the Project with due diligence and efficiency and in conformity with appropriate economic, financial, administrative, management and environmental practices, shall take or cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable INSSBI to carry out Part E of the Project, and shall not take or permit to be taken any action which would prevent or interfere with the carrying out of Part E of the Project by INSSBI. (b) Without limitation upon the provisions of paragraph (a) of this Section and except as the Borrower and the Association shall otherwise agree, the Borrower shall carry out Parts A, B, C and D of the Project and shall cause INSSBI to carry out Part E of the Project, all in accordance with: (i) the Implementation Program set forth in Schedule 4 to this Agreement; and (ii) Project implementation and impact indicators acceptable to the Association. (c) The Borrower shall relend the proceeds of the Credit allocated for Part E of the Project to INSSBI under a subsidiary agreement to be entered into between the Borrower and INSSBI, under terms and conditions which shall have been approved by the Association, which shall include those set forth in Schedule 6 to this Agreement. -8- (d) The Borrower shall exercise its rights and comply with its obligations under the INSSBI 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 Association shall otherwise agree, the Borrower shall not change, assign, amend, abrogate or waive the INSSBI Subsidiary Agreement or any provision thereof. Section 3.02. Except as the Association shall otherwise agree, procurement of the goods, wnrks and consultants' services required for the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of Schedule 3 to this Agreement. Section 3.03. The Association and the Borrower hereby agree that the obligations set forth in Sections 9.04. 9.05, 9.06, 9.07, 9.08 and 9.09 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) in respect of Part E of the Project shall be carried out by INSSBI. Section 3.04. Without limitation to its obligations under the General Conditions and under Section 3.01 (a) of this Agreement, the Borrower shall: (a) allocate in its annual budget for calendar years 1994 through 1996, and each calendar year thereafter, the following minimum amounts, as counterpart funds for the financing of the Project: (i) $1,000,000 equivalent for calendar year 1994; (ii) $700,000 equivalent for calendar year 1995; and (iii) $400,000 equivalent for calendar year 1996 and each calendar year thereafter; and (b) advance, from the amounts referred to in paragraph (a) of this Section, and no later than the first day of each quarter, amounts sufficient to cover the counterpart funding requirements for the Project during such quarter. Section 3.05. The Borrower undertakes that, unless the Association shall otherwise agree: -9- (a) HRD Subprojects shall be promoted, identified, appraised, approved, carried out and monitored in accordance with the procedures set forth or rRferred to in the HRD Operational Manual; (b) Emergency Rehabilitation Subprojects shall be promoted, identified, appraised, approved, carried out and monitored in accordance with the procedures set forth or referred to in the Emergency Rehabilitation Operational Manual; (c) I&E Subprojects shall be promoted, identified, appraised, approved, carried out and monitored in accordance with the procedures set forth or referred to in the I&E Operational Manual; and (d) supervision under Part B.5 of the Project will be carried out in accordance with the procedures set forth or referred to in the Primary Health Care Supervision Manual. Section 3.06. Without limitation to its obligations under Article IX of the General Conditions, the Borrower shall, in respect of Parts A, B, C and D of the Project, and shall cause INSSBI in respect of Part E of the Project, to: (a) promptly inform the Association of any condition which interferes, or threatens to interfere, with the progress of the Project or the Subprojects, the accomplishment of the purposes of the Credit, or the performance of INSSBI of its obligations under the INSSBI Subsidiary Agreement; (b) not later than September 30 each year, furnish or cause to be furnished to the Association a report, in form and substance satisfactory to the Association, containing, inter alia: (i) a list of Subprojects approved by MOH; and (ii) the Borrower's and INSSBI's progress in carrying out the Program and the Project; (c) not later than September 30 each year, furnish or cause to be furnished to the Association for its approval, the operating plans for all parts of the Project proposed to be carried out during the following year including, as a part thereof, the corresponding budgets and the related Project implementation and impact indicators, and specifying the extent of compliance with the operating plans submitted the prior year, and implemented during that year; - 10 - (d) not later than November 30 each year, review with the Association its progress in the implementation of the Program and the Project; (e) not later than June 30, 1995, review with the Association, in addition to the matters referred to in paragraph (d) hereof: the progress made in the institutional strengthening of MOH and its impact on strengthening the SILAIS' decentralization process, the results and expansion of the SILAIS' decentralization mechanisms, the impact of the redefined PHC Model on the efficiency, quality and equity of the delivery of health care services, and the selection criteria for Emergency Rehabilitation Beneficiaries; and (f) if the results of any of the reviews referred to in paragraphs (d) and (e) hereof are not satisfactory to the Association: (i) not later than sixty days after the respective review, furnish to the Association an action plan, satisfactory to the Association, with the actions necessary to achieve adequate progress in the carrying out of the Project and in meeting the objectives of the Project and the performance and implementation indicators referred to in Section 3.01 (b) (ii) of this Agreement; and (ii) take promptly, all actions included in such action plan. Section 3.07. The Borrower shall, through MOH, make service provision arrangements with each of the PHC SILAIS participating in Part B of the Project, under the terms and conditions which shall have been approved by the Association. ARTICLE IV Financial Covenants Section 4.01. (a) The Borrower shall maintain or cause to be maintained, in respect of Parts A, B, C and D of the Project, and shall cause INSSBI in respect of Part E of the Project to maintain records and separate accounts adequate to reflect in accordance with sound accounting practices, the operations, resources and expenditures in respect of their respective Parts of the Project. (b) The Borrower shall, and shall cause INSSBI to: (i) have the records and accounts referred to in paragraph (a) of this Section including those for the Special Account for each fiscal year audited, in accordance with appropriate auditing - 11 - 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 four 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 said records, ac,counts and the audit thereof 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, and shall cause INSSBI to: (i) maintain in accordance with paragraph (a) of this Section, records and accounts reflecting such expenditures; (ii) retain, until at least one year after the Association has received 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 records and accounts are included in the annual audit referred to in paragraph (b) of this Section and that the report of such audit contains a separate opinion by said auditors as to whether the statements of expenditure submitted during such fiscal year, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. - 12 - ARTICLE V Other Covenants Section 5.01. The Borrower shall cause INSSBI: (a) to take out and maintain with responsible insurers, or to make other provisions satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practice; (b) to carry on its operations and conduct its affairs in accordance with sound administrative, financial, economic, management and environmental practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers; and (c) at all times to operate and to maintain its office buildings, equipment and other property. and from time to time, promptly as needed, to make all necessary repairs and renewals thereof, all in accordance with sound engineering and financial practices. ARTICLE VI Remedies of the Association Section 6.01. Pursuant to Section 6.02 (h) of the General Conditions, the following additional events are specified: (a) INSSBI shall have failed to perform any of its obligations under the INSSBI Subsidiary Agreement; (b) as a result of events which have occurred after the date of the Development Credit Agreement, an extraordinary situation shall have arisen which shall make it improbable that INSSBI will be able to perform its obligations under the INSSBI Subsidiary Agreement; (c) INSSBI Decree shall have been amended, suspended, abrogated, repealed or waived so as to affect, in the opinion of the Association, materially and adversely the operations or the financial condition of INSSBI or its ability to carry out Part E of the Project or to perform any of its obligations under the INSSBI Subsidiary Agreement; - 13 - (d) the HRD Operational Manual or the I&E Operational Manual or the Emergency Rehabilitation Operational Manual or the Primary Health Care Supervision Manual shall have been amended, suspended, abrogated, repealed or waived so as to affect, in the opinion of the Association, materially and adversely the ability of the Borrower to carry out Parts A.2 (b), B.4, D.1 and B.5 of the Project; (e) the Norway Grant Agreement shall have failed to become effective by June 30, 1994, or such later date as the Association may agree; provided, however, that the provisions of this paragraph shall not apply if the Borrower establishes to the satisfaction of the Association that adequate funds for the Project are available to the Borrower from other sources on terms and conditions consistent with the obligation of the Borrower under this Agreement; and (f) (i) Subject to subparagraph (ii) of this paragraph: (A) the right of the Borrower to withdraw the proceeds of any loan or grant made to the Borrower for the financing of the Project shall have been suspended, cancelled or terminated in whole or in part, pursuant to the terms thereof; or (B) any such loan shall have become due and payable prior to the agreed maturity thereof. (ii) subparagraph (i) of this paragraph shall not apply if the Borrower establishes to the satisfaction of the Association that: (A) such suspension, cancellation, termination or prematuring is not caused by the failure of the Borrower to perform any of its obligations under such agreement; and (B) adequate funds for the Project are available to the Borrower from other sources on terms and conditions consistent with the obligations of the Borrower under this Agreement. Section 6.02. Pursuant to Section 7.01 (d) of the General Conditions, the following additional events are specified: -14- (a) any event specified in paragraph (a) of Section 6.01 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; (b) any event specified in paragraphs (c) or (d) of Section 6.01 of this Agreement shall occur; and (c) any event specified in paragraph (f) (i) (B) of Section 6.01 of this Agreement shall occur, subject to the proviso of paragraph (f) (ii) of that Section. ARTICLE VII Effective Date; Termination Section 7.01. 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 INSSBI Subsidiary Agreement has been entered into between the Borrower and INSSBI; and (b) Service Provision Arrangements have been made with at least three PRC SILAIS. Section 7.02. The following is specified as an additional matter, within the meaning of Section 12.02 (b) of the General Conditions, to be included in the opinion or opinions to be furnished to the Association, namely that the INSSBI Subsidiary Agreement has been duly authorized or ratified by, and is legally binding upon the Borrower and INSSBI in accordance with its terms. Section 7.03. The date / 4/4p) /Z / is hereby specified for the purposes Qf Section 12.04 of the General Conditions. Section 7.04. The obligations of the Borrower under Sections 3.04, 3.05 and 3.06 of this Agreement shall cease and determine on the date on which this Agreement shall terminate or on the date 15 years after the date of this Agreement, whichever shall be the earlier. - 15 - ARTICLE VIII Representatives of the Borrower; Addresses Section 8.01. The Minister of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 8.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Ministerio de Finanzas Frente al Edificio de la Asamblea Nacional Managua, D.N. Nicaragua Telex: BCN NK 2460 For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America - 16 - Cable address: Telex: INDEVAS 248423 (RCA) Washington, D.C. 82987 (FTCC) 64145 (WUI) or 197688 (TRT) 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. REPUBLIC OF FICARAGUA Authorized Repre ntative INTERNATIONAL DEVELOPMENT ASSOCIATION By Regional Vice President Latin America and the Caribbean - 17 - SCHEDULE i 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 SDR Equivalent) to be Financed (1) Works under 431,000 90% Part C.2 (b) of the Project (2) Goods: (a) for Part C 287,000) 100% of foreign (other than ) expenditures, C.2 (c)) of ) 100% of local the Project ) expenditures ) (ex-factory (b) for Part E 72,000) cost) and 75% of the ) of local ex- Project ) penditures for ) other items ) procured ) locally (3) Medical 431,000 100% equipment under Part B.1 of the Project - 18 - Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (4) Pharmaceuticals 1,435,000 100% until with- drawals under this Category have reached an aggre- gate amount equi- valent to SDR570,000; there- after, 50% until withdrawals have reached an aggre- gate amount equivalent to SDR 860,000; and 25% thereafter (5) PCU Goods 215,000 100% of foreign expenditures, 100% of local expendi- tures (ex-factory cost) and 75% of expenditures for other items pro- cured locally (6) Training: (a) for Parts B.2 617,000) 90% and C.3 of ) the Project ) (b) for Part E of 172,000) the Project ) - 19 - Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (7) Consultants' ) 100% services: ) (a) for Parts A, 1,944,000) B, C and D of ) the Project ) (b) for Part E 402,000) of the Project ) (c) for the PCU 453,000) (8) MIS 646,000 90% (9) Subprojects: ) 90% of amounts ) disbursed by MOH (a) HRD Sub- 287,000) for each Sub- projects ) project approved ) by MOH on or (b) I&E Sub- 431,000) before June 30, projects ) 1996 ) (c) Emergency 1,866,000) Rehabili- ) tation Sub- ) projects ) (10) Unallocated 1,111,000 TOTAL 10,800,000 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; - 20 - (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 term "Pharmaceuticals" means pharmaceutical products and/or supplies to be purchased by MOH for the PHC SILAIS under Part B.1 of the Project; (d) "MIS" means the cost of hardware and software required for, and training of staff related to, the implementation of Part A.3 of the Project; and (e) the term "PCU Goods" means office equipment and supplies, including computers, for the PCU. 3. Notwithstanding the provisions of paragraph I above, no withdrawals shall be made in respect of: (a) payments made for expenditures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not to exceed SDR 540,000, may be made on account of payments made for expenditures before that date but after October 1, 1993; (b) any PHC SILAIS participating in Part A.1 of the Project, unless the Association has been furnished with the Service Provision Arrangement relating thereto; (c) computer hardware under Part A.3 of the Project, unless the Borrower shall have been furnished with the action plan referred to in paragraph 8 (b) of Schedule 4 to this Agreement; (d) Part A.2 (b) of the Project, unless the Borrower has adopted the HRD Operational Manual; (e) Part B.4 of the Project unless the Borrower has adopted the I&E Operational Manual; (f) Part D.1 of the Project unless the Borrower has adopted the Emergency Rehabilitation Operational Manual; (g) Categories (3) and (4) unless the Association shall have approved the related list of medical equipment and Pharmaceuticals to be financed out of the proceeds of the Credit; - 21 - (h) Part B of the Project unless the Borrower has adopted the Primary Health Care Supervision Manual; (i) payments made under the first two HRD Subprojects and any HRD Subproject costing more than the equivalent of $75,000 unless the Association shall have approved the respective HRD Subproject; (j) payments made under the first two Emergency Rehabilitation Subprojects and any Emergency Rehabilitation Subproject costing more than the equivalent of $100,000 unless the Association shall have approved the respective Emergency Rehabilitation Subproject; and (k) payments made under the first two I&E Subprojects unless the Association shall have approved the respective I&E Subproject. 4. The Association may require withdrawals from the Credit Account to be made on the basis of statements of expenditure for expenditures under contracts for goods, works, and services not exceeding, respectively, $100,000, $200,000 and $50,000 equivalent, under such terms and conditions as the Association shall specify by notice to the Borrower. - 22 - SCHEDULE 2 Description of the Project The objectives of the Project are: (a) to improve the institutional capacity and management systems of MOH; (b) to increase the quality of the delivery of health services; and (c) to improve the financing of the sector. 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: Institutional Strengthening of MOH 1. SILAIS (a) Improvement of the mechanism for transfer of budgetary resources from MOH to the SILAIS, and development of the norms required therefor. (b) Improvement of MOH's resource allocation system so as to permit the allocation of budgetary resources to all SILAIS on a per capita basis. (c) Improvement of the accounting system of the SILAIS' headquarter offices and hospitals. (d) Study to assess the strengths and weaknesses of MOH's cost recovery practices, review the administrative costs of implementation of a user fee system in the health sector, and make recommendations for the improvement of MOH's cost recovery practices. 2. Human Resource Development (a) Inventory of MOH's personnel in 16 SILAIS, and study to analyze and simplify the job categories of the SILAIS, define the optimal staffing structure and prepare job description and directives thereof, analyze the salary and incentive structure, define a personnel planning system, review the Borrower's health labor market, and analyze the legal framework for human resource development in the SILAIS. (b) Carrying out of HRD Subprojects. - 23 - 3. Management Information System Development of a management information system for MOH, provision and utilization of the equipment and computer hardware and software required therefor, and training of MOH's staff involved in its operation. Part B: Primary Health Care Development and implementation of the Primary Health Care Model in the PHC SILAIS, including, inter alia: 1. Procurement and distribution of medical equipment, and pharmaceutical products and supplies to the PHC SILAIS. 2. Training of the PHC SILAIS' medical and paramedical staff, at the primary and secondary levels of health services delivery, in the prevention and treatment of basic health problems in the Borrower's territory. 3. Carrying out of a mass media and communications campaign to promote better health of the Borrower's population. 4. Carrying out of I&E Subprojects. 5. Supervision and evaluation of the Primary Health Care Model and its application by the PHC SILAIS. Part C: Pharmaceuticals Supply System 1. Policy and Regulations Studies to: (a) review the economic and financial impact of the Borrower's legislation on the marketing of pharmaceuticals, including the price controls thereof; (b) assess the legal changes required to allow for increased purchases of pharmaceuticals by the SILAIS and their health facilities, and for private sector distribution of such pharmaceuticals; and (c) propose a policy for the regulation of distribution of donations of medical drugs by extnrnal donors. 2. Supply and Distribution System (a) Improvement of the capabilities of pharmaceuticals inventory management of MOH's headquarter offices and the SILAIS. - 24 - (b) Rehabilitation and equipping of selected facilities of MOH for storage and shelving of pharmaceuticals in MOH' s offices and health units. (c) Distribution of pharmaceuticals to the SILAIS. 3. Rational Use of Medical Drugs Study to establish a baseline level of inefficient use of medical drugs and training of MOH's staff in the implementation of measures to improve efficiency in the use of such drugs. 4. Pharmacy Services Carrying out of a pilot program for the promotion of the delivery of pharmacy services by the private sector. Part D: Rehabilitation of Hospitals 1. Carrying out of Emergency Rehabilitation Subprojects. 2. Studies to: (a) design a maintenance system for the Borrower's health facilities; and (b) analyze the impact on the Borrower's recurrent costs of maintaining the equipment installed in MOH's hospitals, review the availability of recurrent cost financing, and improve future decisions on the purchase of equipment for hospitals and other medical facilities. Part E: INSSBI 1. Health Insurance Redesign of INSSBI's health insurance system and management information system, and training of INSSBI's staff in the implementation of such redesigned insurance model and information system. 2. Workmens' Compensation and Pension Fund (a) (i) Establishment of an insurance program designed to cover work-related injuries and illnesses; (ii) design of technical norms, an accreditation scheme for providers, a system to limit occupational risk, and incentives to encourage affiliation to the system; and (iii) training of INSSBI's technical specialists to facilitate implementation of the system. - 25 - (b) Analysis of the financial status of INSSBI's pension system and development of projections related to the financial equilibrium of such pension system over the medium-to-long term. The Project is expected to be completed by June 30, 1997. - 26 - SCHEDULE 3 Procurement and Consultants' Services Section I. Procurement of Goods and Works Part A: International Competitive Bidding 1. Except as provided in Part C hereof, goods 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 1992 (the Guidelines). (a) For fixed-price contracts, the invitation to bid referred to in paragraph 2.13 of the Guidelines shall provide that, when contract award is delayed beyond the original bid validity period, the successful bidder's bid price will be increased for each week of delay by two predisclosed correction factors acceptable to the Association, one to be applied to all foreign currency components and the other to the local currency component of the bid price. Such an increase shall not be taken into account in the bid evaluation. (b) In the procurement of goods in accordance with this Part A, the Borrower shall use the relevant standard bidding documents issued by the Bank, with such modifications thereto as the Association shall have agreed to be necessary for the purposes of the Project. Where no relevant standard bidding documents have been issued by the Bank, the Borrower shall use bidding documents based on other internationally recognized standard forms agreed with the Association. 2. To the *extent practicable, contracts for goods shall be grouped into bid packages estimated to cost the equivalent of $150,000 or more. 3. Bidders for pharmaceuticals and medical equipment and supplies shall be prequalified as provided in paragraph 2.10 of the Guidelines. Part B: Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A hereof, a margin of preference may be granted to - 27 - bids offering goods described in the accompanying specification which are manufactured to a substantial extent in any country, including Nicaragua, which is a party to the Mercado Comdn Centroamericano, the common market created by the General Treaty for Central American Economic Integration signed at Managua, Nicaragua on December 13, 1960 by Guatemala, El Salvador, Honduras, Nicaragua and Costa Rica (hereinafter called the CACM), in accordance with, and subject to, the following provisions: 1. For the purposes of Part B of this Schedule, the following definitions shall apply: (a) (i) the term "Qualified CACM Bid" means a bid submitted by a manufacturer established in the territories of member countries, including Nicaragua, of the CACM, for goods manufactured or processed in such territories and for which the bidders shall have established to the satisfaction of the entity or agency inviting bids that the manufacturing or processing cost of such goods include a value added in such territories equal to at least 20% of the ex- factory bid price of such goods; (ii) the term "non-Qualified CACM Bid" means a bid submitted by a manufacturer established in the territories of member countries, including Nicaragua, of the CACM, for goods manufactured or processed in such territories, other than any such bid classified as a Qualified CACM Bid; and (iii) the term "Foreign Bid" means any bid which is neither a Qualified CACM Bid or a Non-Qualified CACH Bid. 2. All bidding documents for the procurement of goods shall clearly indicate any preference which would be granted and shall set forth the information required to establish the eligibility of a bid for such preference. 3. Bidders are required to state in their bid the c.i.f. (port of entry) price of imported goods and the ex-factory price of locally manufactured goods. - 28 - 4. Except to the extent hereinafter provided, bids will be compared on the basis of their ex-factory or c.i.f. (port of entry) price adjusted in accordance with paragraphs 2.49 through 2.54 of the Guidelines. 5. After evaluation, responsive bids will be classified in one of the following groups: Qualified CACM Bids, Non-qualified CACM Bids or Foreign Bids. 6. All bids in each group will be first compared among themselves, to determine the lowest evaluated bid in each such group. The lowest evaluated bids of each group will then be compared with each other and if, as a result of this comparison, an evaluated Qualified CACM Bid or Non-Qualified CACM Bid is the lowest it will be selected for purpose of award. 7. If the lowest bid in the comparison under paragraph 6 above is a Foreign Bid, all Foreign Bids will be further compared with the lowest evaluated Qualified CACM Bid as determined under paragraph 6 above. For the purposes of this comparison only, each Foreign Bid will be compared on the basis of the sum of its c.i.f. (port of entry) price adjusted in accordance with the provisions of paragraph 4 above, plus an amount equal to the smaller of: (i) the difference between the amount of customs duties and other import taxes which a non-exempt importer would have to pay for the importation of goods offered in such Foreign Bid and that applicable to a Qualified CACM Bid; or (ii) 15% of the c.i.f. bid price of such goods. If the Qualified CACH Bid is the lowest evaluated bid in such comparison, it shall be selected for the purpose of award; otherwise, the lowest evaluated Foreign Bid as determined under paragraph 6 above shall be so selected. Part C: Other Procurement Procedures 1. (a) Subject to the provisions of paragraph (b) below, pharmaceuticals, medical equipment and supplies and vehicles, up to an aggregate amount equivalent to $2,800,000, may be procured under contracts awarded through limited international bidding procedures on the basis of evaluation and comparison of bids obtained from at least three qualified suppliers eligible under the Guidelines and in accordance with procedures set forth in Sections I and II of the Guidelines (excluding paragraphs 2.8, 2.9, 2.55, 2.56 thereof); and (b) the Borrower shall enter into a contract with United Nations Children Defense Fund (UNICEF) or other procurement agent - 29 - acceptable to the Association, for the procurement of the pharmaceuticals and medical equipment and supplies referred to in paragraph (a) above, under terms and conditions acceptable to the Association. 2. Except as provided in paragraph 4 below, works shall be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Association. 3. Goods estimated to cost less than the equivalent of $150,000 per contract, up to an aggregate amount equivalent to $600,000, may be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Association. 4. Goods (other than pharmaceuticals and medical equipment and supplies) estimated to cost less than the equivalent of $50,000 per contract, up to an aggregate amount equivalent to $600,000 and works estimated to cost less than the equivalent of $25,000 per contract, up to an aggregate amount equivalent to $2,100,000, may be procured under contracts awarded on the basis of comparison of price quotations obtained from at least three suppliers eligible under the Guidelines, in accordance with procedures acceptable to the Association. 5. Pharmaceuticals and medical equipment and supplies estimated to cost less than $25,000 per contract, up to an aggregate amount equivalent to $1,300,000, may be procured under contracts awarded on the basis of price quotations obtained from at least three suppliers from at least three different countries eligible under the Guidelines, in accordance with procedures acceptable to the Association. Part D: Review by the Association of Procurement Decisions 1. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to each contract procured pursuant to the provisions of Parts A.1 and C.1 hereof, the first contract for goods and works procured pursuant to the provisions of Parts C.2 and C.3 hereof, and each contract for works estimated to cost the equivalent of $200,000 or more, and for goods estimated to cost the equivalent of $100,000 or more, the procedures set forth in paragraphs 2 and 4 - 30 - of Appendix I 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 required to be furnished to the Association pursuant to said paragraph 2 (d) shall be furnished to the Association prior to the mak.ng of the first payment out of the Special Account in respect of such contract. (b) With respect to each contract not governed by the preceding 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 subparagraph (b) shall not apply to contracts on account of which withdrawals from the Credit Account are to be made on the basis of statements of expenditure. 2. The figure of 15% is hereby specified for purposes of paragraph 4 of Appendix 1 to the Guidelines. Section II. Employment of Consultants 1. In order to assist the Borrower in carrying out the Project, the Borrover shall employ, and cause INSSBI to employ, consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory 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 Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981 (the Consultant Guidelines). For complex, time-based assignments, the Borrower shall employ such consultants under contracts using the standard form of contract for consultants' services issued by the Bank, with such modifications as shall have been agreed by the Association. Where no relevant standard contract documents have been issued by the Bank, the Borrower shall use other standard forms agreed with the Association. - 31 - 2. Notwithstanding the provisions of paragraph I of this Section, the provisions of the Consultant Guidelines requiring prior Association review or approval of budgets, short lists, selection procedures, letters of invitation, proposals, evaluation reports and contracts shall not apply to contracts estimated to cost less than $50,000 equivalent each. However, this exception to prior Association review shall not apply to the terms of reference for such contracts or to the employment of individuals, to single source selection of firms, to assignments of a critical nature as reasonably determined by the Association or to amendments of contracts raising the contract value to $50,000 equivalent or above. - 32 - SCHEDULE 4 Implementation Program Actions Date (by) 1. Maintain the PCU wit.h structure and functions, and staffed with personnel At all times with qualifications and experience, during Project satisfactory to the Association. implementation 2. (a) Complete a review of the budget decentralization process being implemented by MOH so as to: (i) analyze the strengths and weaknesses of its implementation; (ii) assess whether the pace of budget decentralization is adequate considering the SILAIS capacity; and (iii) recommend improvements to the system; March 31, 1995 (b) based on the results of the review referred to in para- graph (a) above, prepare and furnish to the Association an action plan, satisfactory to the Association, for the decentrali- zation of MOH's human resources including therein the modalities and the timing thereof; and April 30, 1995 (c) commence implementation of such action plan. May 31, 1995 3. (a) Furnish to the Association a budgetary resource allocation system for the SILAIS, satis- factory to the Association, which would allocate such resources on a per capita basis with corrective factors to make it more equitable and efficient September 30, between the SILAIS; 1994 - 33 - Actions Date (by) (b) commence implementation of such budgetary allocation system on a pilot basis, in at least five SILAIS; January 1, 1995 (c) furnish to the Association the results of the pilot implementation referred to in 3 (b) above, its assessment of the feasibility of extending the system to all the SILAIS, and introducing, on a pilot basis, a resource allocation system for the SILAIS based exclusively on the cost per capita of delivering health care services; and June 31, 1995 (d) commence implementation of an action plan, satisfactory to the Association based on the results referred to in 3 (c) above. September 1, 1995 4. (a) Furnish to the Association the results of the review of the cost accounting system currently in use by MOH on a limited basis, and the feasibility of expanding such cost accounting system to all MOH's hospitals and SILAIS; and December 31, 1994 (b) commence implementation of an action plan, satisfactory to the Association, based on the results of the review referred to in paragraph 4 (a) above. February 1, 1995 5. (a) Review with the Association the results of the implementation of the Service Provision Arrangements; and October 31, 1994 - 34 - Actions Date (by) (b) commence implementation of the Service Provision Arrangements, modified as needed to take into account the results of the review referred to in paragraph 5 (a) above, in all the SILAIS. January 1, 1995 6. (a) Furnish to the Association the terms of reference for the study included in Part A.1 (d) of the Project; March 31, 1994 (b) discuss with the Association the December 31, recommendations of such study; and 1995 (c) commence implementation of the recommendations of the study referred to in 6 (a) above, taking into account the comments, if any, made by the Association thereon. February 1, 1995 7. (a) Furnish to the Association for its comments the results of the study on health labor market included in Part A.2 (a) of the Project; and October 31, 1994 (b) commence implementation of the recommendations of such study, taking into account the comments, if any, made by the Association thereon. January 1, 1995 8. Furnish to the Association: (a) The terms of reference for the consultants to be employed to develop the MOH's management information system included in Part A.3 of the Project; April 30, 1994 - 35 - Actions Date (by) (b) an action plan satisfactory to the Association for the develop- ment and implementation of such December 31, information system; and 1994 (c) commence implementation of such February 1, action plan. 1995 9. (a) Furnish to the Association the recommendations of the studies included in Part C.1 of the October 31, Project; and 1994 (b) commence implementation of the recommendations of the studies referred to in 9 (a) above, taking into account the comments if any, made by the Association December 1, thereon. 1994 10. (a) Furnish to the Association the recommendations of the study included in Part C.3 of the Project and an action plan, satisfactory to the Association, to improve the efficiency in the January 31, use of medical drugs; and 1995 (b) commence implementation of such action plan. March 1, 1995 11. (a) Complete implementation of the pilot program on the promotion of private sector participation in the delivery of pharmacy services included in Part C.4 of the Project and furnish to the Association an action plan, satisfactory to the Association, to expand such program; and June 30, 1995 (b) commence implementation of such August 1, 1995 action plan - 36 - Actions Date (by) 12. (a) Furnish to the Association the recommendations of the studies included in Part D.2 of the December 31, Project; and 1994 (b) commence implementation of the recommendations of the studies referred to in 12 (a) above taking into account the comments, f any, made by the Association thereon. March 1, 1995 13. Cause INSSBI to: (a) furnish to the Association an action plan, satisfactory to the Association, for the improvement of its health insurance program through the implementation of the re- designed insurance system referred to in Part E.1 December 31, of the Project; and 1994 (b) commence implementation of such January 1, action plan 1995 - 37 - SCHEDULE 5 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1) through (9) set forth in the table in paragraph 1 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 accordance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount equivalent to $1,500,000 to be withdrawn from the Credit Account and deposited in the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. 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 shall be made as follows: (a) For withdrawals of the Authorized Allocation, the Borrower shall furnish to the Association a request or requests for a deposit or deposits which do not exceed the aggregate amount of the Authorized Allocation. On the basis of such request or requests, 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) (i) For replenishment of the Special Account, the Borrower shall furnish to the Association requests for deposits into the Special Account at such intervals as the Association shall specify. (ii) Prior to or at the time of each such request, the Borrower shall furnish to the Association the - 38 - documents and other evidence required pursuant to paragraph 4 of this Schedule for the payment or payments in respect of which replenishment is requested. On the basis of each such request, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit into the Special Account such amount as the Borrower shall have requested and as shall have been shown by said documents and other evidence to have been paid out of the Special Account for eligible expenditures. All such deposits shall be withdrawn by the Association from the Credit Account under the respective eligible Categories, and in the respective equivalent amounts, as shall have been justified by said documents and other evidence. 4. For each payment made by the Borrower out of the Special Account, the Borrower shall, at such time as the Association shall reasonably request, furnish to the Association such documents and other evidence showing that such payment was made exclusively for eligible expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Schedule, the Association shall not be required to make further deposits into the Special Account: (a) if, at any time, the Association shall have determined that all further withdrawals should be made by the Borrower directly from the Credit Account in accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement; or (b) once the total unwithdrawn amount of the Credit allocated to the eligible Categories, less 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 equal the equivalent of twice the amount of the Authorized Allocation. 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 Association shall specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Association shall have - 39 - been satisfied that all such amounts remaining on deposit in the Special Account as of the date of such notice 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 an expenditure or in an amount not eligible pursuant to paragraph 2 of this Schedule; or (ii) was not justified by the evidence furnished to the Association, the Borrower shall, promptly upon notice from the Association: (A) provide such additional evidence as the Association may request; or (B) 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. Unless the Association shall otherwise agree, no further deposit by the Association into the Special Account shall be made until the Borrower has provided such evidence or made such deposit or refund, as the case may be. (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. (c) The Borrower may, upon notice to the Association, refund to the Association all or any portion of the funds on deposit in the Special Account. (d) Refunds to the Association made pursuant to paragraphs 6 (a), (b) and (c) of this Schedule shall be credited to the Credit Account for subsequent withdrawal or for cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions. - 40 - SCHEDULE 6 Terms and Conditions of the INSSBI Subsidiary Agreement The INSSBI Subsidiary Agreement shall provide, inter alia, the following rights and obligations: (a) the Borrower's obligation to relend the portion of the proceeds of the Credit allocated for Part E of the Project to INSSBI in dollars; (b) INSSBI's obligations: (i) to repay the portion of the proceeds of the Credit so relent and to pay charges on the amounts withdrawn and unwithdrawn mutatis mutandis on the same terms as those set forth or referred to in sections 2.04 through 2.07 of this Agreement; (ii) to carry out Part E of the Project with due diligence and efficiency and in accordance with sound financial, engineering, economic and environmental practices and standards; (iii) to maintain records and separate accounts adequate to reflect in accordance with sound accounting practices, the operations, resources and expenditures in respect of Part E of the Project; and (iv) to assist the Borrower in meeting its obligations under Sections 3.01, 3.02, 3.03, and 3.06, and Article IV and V of, and paragraph 13 of Schedule 4 to, this Agreement; (c) the requirement that: (i) the goods and services to be financed out of the proceeds of the Credit shall be procured in accordance with Schedule 3 to this Agreement; and (ii) such goods and services shall be used exclusively in the carrying out of Part E of the Project; and - 41 - (d) the right of the Borrower: (i) to inspect, by itself, or jointly with representatives of the Association, if the Association shall so request, INSSBI's facilities in respect of Part E of the Project and any relevant records and documents; (ii) to obtain all such information as the Borrower or the Association shall reasonably request regarding the foregoing, the administration, operations and financial condition of Part E of the Project and the benefits to be derived from it; and (iii) to suspend or terminate the right of INSSBI to use the proceeds of the Credit upon failure by INSSBI to perform any of its obligations under the INSSBI Subsidiary Agreement. 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