Tunisia - Agricultural Credit Project

RESTRICTED Report No. P-943 This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PR ESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO BANQUE NATIONALE DE TUNISIE WITH THE GUARANTEE OF THE REPUBLIC OF TUNISIA AND A PROPOSED CREDIT TO THE REPUBLIC OF TUNISIA FOR AN AGRICULTURAL CREDIT PROJECT . May 18, 1971   INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF T1lE PRESIDENT TO 1Tll EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO BANQUE NATIONALE DE TUNISIE WIT1I I1E GUARANTEE OF TH1E REPUBLIC OF TUNISIA AND A PROPOSED CREDIT TO TIIE REPUBLIC OF TUNISIA FOR AN AGRICULTURAL CREDIT PROJECT 1. I submit the following report and recommendation on a proposed loan and a proposed credit totalling an amount in varlous currencies equivalent to $8.0 million for an agricultural credit project. The loan of $5.0 million would be made to Banque Nationale de Tunisie (BNT) withl the guarantee of the Republic of Tunisia. The credit of $3.0 million would be made to the Republic of Tunisia and its proceeds relent to BNT. PART I - HISTORICAL 2. The proposed loan and credit would be the Bank Group's second operation in Tunisia's agricultural sector. In 1967, the Bank and IDA financed the Cooperative Farm Project (Loan No. 484-TUN; Credit No. 99-TUN) wliiclh, after changes in Tunisia's agricultural policies affecting the character of the project, had to be revised. In late 1969, the Government asked for Bank Croup assistance in the private agricultural sector. This project was prepared with help from tlhe FAO/IBRD Cooperative Program and appraised in June/July 1970. 3. Negotiations for the proposed loan and credit were held in Washington from March 25 to 31, 1971. The Tunisian delegation was headed by Mr. Ghenima, President and Managing Director of BNT, and included Mr. M'rad, Ministry of Planning, Mr. Ben Khedlher, Ministry of Agriculture, Mr. Chatti, President and Managing Director of Societe Tunisienne d'Industrie Laitiere (STIL), Mr. Hamrda, BNT, and Mr. Badra from the Tunisian Embassy in Wasliington. 4. My Report and Recommendation dated May 17, 1971 on a proposed loan to Tunisia for a highway project (P-942) includes a summary state- ment of loans and credits to Tunisia at April 30, 1971 and conments on certain problems encountered on projects prcviously financed.  - 2 - PART II - DESCRIPTION OF THE PROPOSED LOAN AND CREDIT BANK LOAN Borrower: Banque Nationale de Tunisie (BNT) Guarantor: Republic of Tunisia Purpose: To be used by BNT for making loans to help finance development of cereal and dairy farming, and of date-palm plantations. Amount: The equivalent in various currencies of $5.0 million. Amortization: In 15 years including a 5-year period of grace, through semi-annual installments beginning September 15, 1976 and ending March 15, 1986. Interest Rate: 7-1/4 percent per annum. Commitment Charge 3/4 of 1 percent per annum. Estimated Economic Return on the Project: 22 percent IDA CREDIT Borrower: Republic of Tunisia Beneficiary: Banque Nationale de Tunisie (BNT) Purpose: The same as for the Bank loan. Amount: The equivalent in various currencies of $3.0 million. Amortization: In 50 years including a 10-year period of grace, through semi-annual installments of 1/2 of 1 percent from September 15, 1981 through March 15, 1991 and 1-1/2 percent from September 15, 1991 through March 15, 2021. Service charge: 3/4 of 1 percent per annum. Relending terms: 15 years including a 5-year grace period, at an interest rate of 1 percent per annum.  - 3 - PART III - TliE PROJECT 6. An appraisal report entitled "Agricultural Credit Project - Tunisia' (No. PA-79a) is attaclhed. 7. Measured in constant 1966 prices, the contrIhution of Tunisia's agricultural production to GDP has, despite a higli level of investmuent, dropped fro