Madagascar - Agricultural Sector Adjustment Credit : Credit 1691 - Credit Agreement - 2 - Conformed

M ftc) AFRICAN FACILITY CREDIT NUNBER AF-16 MAG African Facility Credit Agreement (Agricultural Sector Adjustment Credit) between DEMOCRATIC REPUBLIC OF MADAGASCAR and INTERNATIONAL DEVELOPMENT ASSOCIATION as ADMINISTRATOR of the SPECIAL FACILITY FOR SUB-SAHARAN AFRICA Dated , 1986 AFRICAN FACILITY CREDIT NUM4181R AF-16 MAG AFRICAN FACILITY CREDIT AGREEMENT AGREEMENT, daced ' I , 1986, between DEMOCRATIC REPUBLIC OF MADAGASCA4 (the Borrower) and INTER- NATIONAL DEVELOPMENT ASSOCIATION as ADMINISTRATOR of the SPECIAL FACILITY FOR SUB-SAHARAN AFRICA (the Administrator). WHEREAS (A) the Executive Directors of the International Development Association (IDA) have established by Resolution No. IDA 85-1 of May 21, 1985 (the Resolution), the Special Facility for Sub-Saharan Africa (the African Facility) constituted by funds, which shall be contributed by the International Bank for Reconstruction and Development (the Bank) and other donors, and administered by IDA, acting as Administrator of the African Facility, for the purpose of, and in accordance with, the provisions of the Resolution; (B) the Administrator has received a letter, dated March 24, 1986, from the Borrower describing a program of actions, objectives and policies designed to improve the efficiency of the agricultural sector of Madagascar (hereinafter called the Program) and declaring the Borrower's commitment to the execution of the Program; (C) the Borrower has also requested IDA to provide addi- tional assistance towards the financing of the Program and, by an agreement of even date herewith between the Borrower and IDA (the Development Credit Agreement), IDA is agreeing to provide such assistance in an aggregate principal amount equivalent to nine- teen million Special Drawing Rights (SDR 19,000,000) (the IDA Credit); (D) the Borrower intends to contract from Kreditanstalt fUr Wiederaufbau (KfW) a financial contribution from the Federal Republic of Germany under the Special Joint Financing Agreement for the Special African Facility in an amount equivalent to ten million Deutsche Mark (DM 10,000,000) in support of the Program; (E) The Borrower intends to contract from the Association acting as Administrator on behalf of Japan (the Japanese Agree- ment) in accordance with the arrangement agreed upon by an exchange of letters, both dated November 20, 1985, between Japan and the Association to support the Joint Program of Action for Sub-Saharan Africa a grant in an amount equivalent to six hundred million Yen (Y 600,000,000) in support of the Program; -2- WHEREAS the Administrator has agreed, on the basis, inter alia, of the foregoing, to extend the African Facility Credit to the Borrower in support of the Program upon the 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 International Development Associa- tion, dated January 1, 1985, with the modifications set forth below (the General Conditions) constitute an integral part of this Agreement: (a) the term "Association", when used in the General Condi- tions, means the International Development Association acting as Administrator of the African Facility, except in the phrase "member of the Association" in Sections 2.01 (5), 4.02 (b) and 6.02 (e) thereof; (b) the terms "Development Credit Agreement", "Credit" and "Credit Account", when used in the General Conditions, are amended to read as "African Facility Credit Agreement", "African Facility Credit" and "African Facility Credit Account", res- pectively; (c) the last sentence of Sec '-on 3.02 and the second sen- tence of Section 5.01 are deleted; and (d) in Sections 6.02 and 7.01, the term "Association" shall also include the International Development Association acting in its own capacity. (e) Section 2.01, paragraph 9 shall be modified to read: "The term 'Project' means the imports that may be, fitanced out of the proceeds of the African Facility Credit pursuant to the provisions of Schedule 1 to the African Facility Credit Agreement". Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions and in the Pre- amble to'this Agreement have the respective meanings therein set -3- forth and the following additional terms have the following mea,n- ings: (a) "Part II member of IDA" means a member of IDA with res- pect to which the terms and conditions of membership are those prescribed in the Articles of Agreement of IDA for countries whose names are listed in Part II of Schedule A to those Articles; (b) "Special Account B" means the account referred to in Section 2.02 (c) of this Agreement; (c) "Reserved Areas" means the territories of the Fivondronana of Ambatondrazaka, Amparafaravol and Marovoay and of the Firaisana of Madirovalo; (d) "BNI" means Bankin'ny Industria; (e) "BTM" means Bankin'ny Tantsaha Mpamokatra; (f) "BFV" means Banky Fampandrosoana ny Varotra; and (g) "Intermediaries" means, collectively, BNI, BTM and BFV. ARTICLE II The African Facility Credit Section 2.01. The Administrator agrees to lend to the Bor- rower on the terms and conditions set forth or referred to in the African Facility Credit Agreement, an amount in various curren- cies equivalent to thirty-one million Special Drawing Rights (SDR 31,000,000). Section 2.02. (a) The amount of the African Facility Credit may be withdrawn from the African Facility Credit Account 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 and the Administrator, for expenditures made (or, if the Administrator shall so agree, to be madO) 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 African Facility Credit. -4- (b) Withdrawals shall be made only on account of expendi- tures for goods produced in, or services supplied from, the territories of: (i) any Part I member of IDA; (ii) any country designated by the Administrator as meeting the Provisions set forth in paragraphs 4 (f) (ii) and (iii) of the Resolution. (c) The Borrower shall, for the purposes of the Project, open and maintain in dollars a special account (Special Account B) in its Central Bank on terms and conditions satisfac- tory to the Administrator. Deposits into, and payments out of, Special Account B shall be made in accordance with the provisions of Schedule 3 to this Agreement. Section 2.03. The Closing Date shall be June 30, 1988 or such later date as the Administrator shall establish. The Admin- istrator shall promptly notify the Borrower of such later date. Section 2.04. (a) The Borrower shall pay to IDA a commitment charge at the rate of one-half of one percent (1/2 of 1%) per annum on the principal amount of the African Facility Credit not withdrawn from time to time. The commitment charge shall accrue from a date sixty days after the date of the African Facility Credit Agreement to the respective dates on which amounts shall be withdrawn by the Borrower from the African Facility Credit Account or shall be cancelled. (b) The commitment charge shall be paid: (i) at such places as IDA 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 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 IDA a service charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the amount withdrawn from the African Facility Credit Account and outstanding from time to time. Section 2.06. Commitment charges and service charges shall be payable semiannually on May 1 and November 1 in each year. Section 2.07. The Borrower shall repay to IDA the principal amount of the African Facility Credit in semiannual installments payable on each May 1 and November 1 commencing November 1, 1996 -5- and ending May 1, 2036. Each installment to and including the installment payable on May 1, 2006 shall be one-half of one percent (1/2 of 1%) of such principal amount, and each install- ment thereafter shall be one and one-half percent (1-1/2%) of such principal amount. Section 2.08. The currency of the United States of America is hereby specified for the purposes of Section 4.02 of the General Conditions. ARTICLE III Particular Covenants Section 3.01. The Borrower shall: (i) enter into agreements with the Intermediaries for the purpose of carrying into effect the imports in support of the Program to be financed out of the proceeds of the African Facility Credit, the terms and conditions of such agreements to include those set forth in Schedule 5 to this Agreement and the relevant provisions of the Manuel de Pro- cedure and to be acceptable to the Administrator; and (ii) issue, promptly, import permits for licensed importers for goods to be financed out of the proceeds of the Special Facility Credit and shall make available the foreign exchange needed therefor. Section 3.02. Except as the Administrator shall otherwise agree, procurement of the goods to be financed out of the pro- ceeds of the African Facility Credit shall be governed by the provisions of Schedule 2 to this Agreement. Section 3.03. The Borrower shall carry into effect an over- all rice management program, including marketing, distribution and import of rice, as such program was agreed upon by the Bor- rower and the Administrator. Section 3.04. (a) The Borrower shall ensure that, upon effectiveness of this Agreement and until the provisions of para- graph (b) of this Section shall apply and subject to the excep- tion set forth in paragraph (b) (ii) of this Section, subsidies on agricultural inputs shall not exceed 7% of the c.i.f. cost of any such inputs, or the equivalent thereof. (b) Upon release of the second tranche and thereafter, the Borrower shall ensure that: (i) subject to the exception set forth in (ii) of this paragraph, no subsidies are made for -6- agricultural inputs; and (ii) subsidies for pesticides shall not exceed 5% of the import parity price of any such pesticide, provided, however, that no limitation shall apply on subsidies for pesticides used for temporary demonstration purposes carried out in conjunction with agricultural extension services of the Borrower. Section 3.05. (a) The Borrower and the Administrator shall, from time to time, at the request of either party, exchange views on the progress achieved in carrying out the Program and the mea- sures specified in Schedule 4 to this Agreement. (b) Prior to each such exchange of views, the Borrower shall furnish to the Administrator for its review and comments a report on the progress achieved in carrying out the Program, in such detail as the Administrator shall reasonably request. Section 3.06. The Borrower shall: (i) consult with the Administrator on any change of the public investment program in agriculture for the years 1986 through 1988 and for the years 1987 through 1989; and (ii) furnish to the Administrator for approval any additional investment estimated to cost the equivalent of $5 million or more before initiating any such investment. Section 3.07. The Borrower shall: (a) by October 31, 1986 and October 3', 1987, submit to the Administrator for approval the rice import program for the following calendar year and a financing plan therefor; and (b) at the end of each quarter during implementation of the Program, furnish to the Administrator a report in such detail as the Administrator shall reasonably request on the actual rice imports made by the Borrower during the preceding twelve month period and on the disposition thereof. Section 3.08. The Borrower shall reduce the special commis- sion paid by the Borrower to publicly owned enterprises for their activities related to the exportation of agricultural products by at least three percentage points by April 30, 1987 and eliminate the remaining commission by April 30, 1988. In case the study on export crop referred to in paragraph (e) (ii) of Schedule 4 to this Agreement recommends a faster pace of elimination of such commission, the Borrower shall take all measures necessary to carry into effect such recommendations. -7- Section 3.09. By October 31, 1986, the Borrower shall submit to the Administrator for approval a program relating to the promotion of the participation of the private sector in the marketing of agricultural products and, thereafter, the Borrower shall take appropriate actions for its implementation. Section 3.10. (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 financed out of the proceeds of the African Facility Credit. (b) The Borrower shall: (i) have the accounts referred to in paragraph (a) of this Section including Special Account B for each fiscal year audited, in accordance with appro- priate auditing principles consistently applied, by independent auditors acceptable to the Adminis- trator; (ii) furnish to the Administrator, as soon as avail- able, but in any case not later than six 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 Administrator shall have ,easonably requested; and (iii) furnish to the Administrator such other informa- tion concerning said accounts and the audit thereof and said records as the Administrator shall from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the African Facility Credit Account were made on the basis of statements of expenditure, the Borrower shall: (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 comple- tion of the audit for the fiscal year in which the last withdrawal from the African Facility Credit Account was made, all records (contracts, orders, -8- invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Administrator's representatives to examine such records; and (iv) ensuee 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 pro- ceeds of the African Facility Credit withdrawn in respect of such expenditures were used for the purposes for which they were provided. ARTICLE IV Remedies of the Administrator Section 4.01. Pursuant to Section 6.02 (h) of the General Conditions, the following additional events are specified: (a) An event has occurred which shall make it improbable that the Program, or a significant part thereof, will be carried out. (b) (i) Subject to subparagraph (ii) of this paragraph: (A) the right of the Borrower to withdraw the proceeds of any grant or loan made to the Borrower for the financing of the Program shall have been suspended, cancelled or ter- minated in whole or in part, pursuant to the terms of the agreement providing therefor; or (B) any such loan shall have become due and pay- able prior to the agreed maturity thereof. (ii) Subparagraph (i) of this paragraph shall not apply if the Borrower establishes to the satisfaction of the Administrator that: (A) such suspension, can- cellation, 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 -9- to the Borrower from other sources on terms and conditions consistent with the obligations of the Borrower under this Agreement. Section 4.02. Pursuant to Section 7.01 (d) of the General Conditions, the following additional events are specified, namely that any event specified in paragraph (b) (i) (B) of Section 4.01 of this Agreement shall 6ecur, subject to the proviso of para- graph (b) (ii) of that Section. ARTICLE V Effective Date; Termination; Designation of Administrator Section 5.01. The following events are specified as addi- tional conditions to the effectiveness of the African Facility Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions: (a) all conditions precedent to the effectiveness of the Development Credit Agreement and the Japanese Agreement, other than the effectiveness of this Agreement have been fulfilled; (b) the Borrower has signed agreements with the Interme- diaries in compliance with the provisions of Section 3.01 of this Agreement; (c) the Borrower has: (i) made adequate arrangements for the carrying out of a study on local government finances; and (ii) employed consultants for the carrying out of a study on the disposition of the surplus generated by export crops including the future of the export crop stabilization funds; (d) the Borrower has set producer prices for coffee in accordance with a methodology acceptable to the Administrator; and (e) the Borrower has introduced new quarantine regulations acceptable to the Administrator. Section 5.02. The date sixty (60) days after the date of this Agreement is hereby specified for the purposes of Sec- tion 12.04 of the General Conditions. - 10 - Section 5.03. The obligations of the Borrower under Sec- tion 3.04 (b) of this Agreement and the provisions of Sec- tion 4.02 of this Agreement shall cease and determine on the date on which the African Facility Credit Agreement shall terminate or on the date 10 years after the date of this Agreement, whichever shall be the earlier. Section 5.04. In the event that the Executive Directors of IDA decide to terminate the functions of IDA as Administrator of the African Facility pursuant to paragraph 10 of the Resolution, the Administrator may, by notice to the Borrower, designate another party which, on the date specified in such notice, shall assume part or all of the rights and obligations of the Admin- istrator under this Agreement in accordance with the Resolution and such decision of the Executive Directors, as specified in such notice. ARTICLE VI Representative of the Borrower; Addresses Section 6.01. The Minister of the Borrower responsible for Finance is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 6.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Ministere aupres de la Presidence de la R6publique charge des Finances et de l'Economie Antananarivo, Madagascar Cable address: Telex: MINFIN 224889 Antananarivo For the Administrator: Administrator of the African Facility (International Development Association) 1818 H Street, N.W. .Washington, D.C. 20433 United States of America - 11 - Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) 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. DEMOCRATIC REPUBLIC OF MADAGASCAR By JwI SL 01 Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION as ADMINISTRATOR of the SPECIAL FACILITY FOR SUB-SAHARAN AFRICA By IS L O_Qc C I% KV 2~ Regiona Vice President Eastern and Southern Africa - 12 - SCHEDULE 1 Withdrawal of the Proceeds of the African Facility Credit 1. The table below sets forth the Categories of items to be financed out of the proceeds of the African Facility Credit, the allocation of the amounts of the African Facility 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 Tranche I Tranche II (1) Seeds, fer- 10,850,000 10,850,000) tilizers ) pesticides, ) herbicides, ) agricultural ) tools, animal ) traction equip- ) ment and spares, ) natural fibers ) sacking for agri- ) cultural produce, ) 90% of foreign equipment and ) expenditures spares for pri- ) mary process- ) ing of agricul- ) tural produce, ) equipment and ) spares for ) artisanal fish- ) eries, forest ) industries and ) the medicinal ) plant industry, ) and rice ) - 13 - Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed Tranche I Tranche II (2) Veterinary pro- 775,000 775,000) ducts and sup- ) plies for animal ) protection ) (3) Lanterns, 2,480,000 ) hand pumps, ) hand sewing ) machines, ) outboard ) motors, and ) 90% of foreign transistor ) expenditures radios ) (4) Agricultural 2,635,000 2,635,000) tractors and ) related equip- ) ment and spares, ) and spare parts for ) transport equip- ) ment and tires ) TOTAL 16,740,000 14,260,000 2. For the purposes of this Schedule the term "foreign expendi- tures" means expenditures in a currency other than that of- the Borrower, and for goods produced in, or services supplied from, any country other than the Borrower which is (A) a Part II member of IDA, or (B) is designated by the Administrator as meeting the provisions set forth in paragraph 4 (f) (ii) or (iii) of the Resolution; 3. Notwithstanding the provisions of paragraph I above, no withdrawals shall be made in respect of: (a) payments made for expenditures prio- to the date of this Agreement; and - 14 - (b) no withdrawal shall be made and no commitment shall be entered into to pay amounts to the Borrower or others in respect of expenditures to be financed out of the proceeds of the Special Facility Credit allocated to Tranche II of the Special Facility Credit in the table set forth in paragraph 1 of this Schedule unless the Administrator shall be satisfied, after an exchange of views described in Section 3.05 of this Agreement, with the pro- gress achieved by the Borrower: (i) in the carrying out of the Program; and (ii) in taking the actions set forth in Schedule 4 to this Agreement; and (c) expenditures for rice imports unless the Borrower shall have established, to the satisfaction of thr Administrator, that additional financing is required for rice imports in excess of levels agreed upon with the Administrator in conformity with the provisions of Section 3.07 (a). 4. Each application of the Borrower for withdrawal of funds from the Special Facility Credit Account shall be deemed to be a request to withdraw funds from the credit account established for the purposes of the Japanese Grant and the funds to be withdrawn pursuant to such application shall be apportioned by the Adminis- trator, as nearly as practicable in the circumstances between the African Facility Credit and the Japanese Grant in the ratio 9:1 or such other ratio as shall be agreed between the Administrator and Japan. - 15 - SCHEDULE 2 Procurement Part A: International Competitive Bidding 1. Except as provided in Part B 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 1985 (the Guidelines). For purposes of the African Facility Credit Agreement, all references in the Guidelines to the Bank and to loans shall be deemed to be references to the Administrator and to the African Facility Credit, respectively. 2. The eligibility requirements set forth in Section 2.02 (b) of this Agreement shall be stated in the tender documents for the procurement of such goods. Part B: Other Procurement Procedures 1. Contracts for goods other than spare parts and fertilizers estimated to cost less than the equivalent of $1,000,000 but more than $200,000 and contracts for tractors and tires may be pro- cured by seeking bids by direct invitation from at least five suppliers from three different countries eligible under the Guidelines. 2. Contracts for goods other than spare parts and fertilizers estimated to cost less than the equivalent of $200,000 may be procured on the basis of the normal procurement procedures of the purchaser of such goods. 3. Contracts for spare parts other than proprietary spare parts may be procured by seeking bids by direct invitation from a list of potential suppliers approved by the Association. 4. Contracts for fertilizers may be awarded on the basis of competitive bidding advertised locally. 5. Contracts for proprietary spare parts may be purchased directly from suppliers of such spare parts. 6. No pesticides shall be procured for the purpose of the Credit which shall be included in a negative list of pesticides agreed upon by the Borrower and the Association. - 16 - 7. Contracts for rice shall be procured in accordance with standard commercial practices. Part E: Review by the Administrator of Procurement Decisions 1. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to each contract estimated to cost the equivalent of $1,000,000 or more, 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 Special Account B, such procedures shall be modified to ensure that the two conformed copies of the contract required to be furnished to the Administrator pursuant to said paragraph 2 (d) shall be furnished to the Administrator prior to the making of the first payment out of Special Account B 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 Special Account B, such procedures shall be modified to ensure that the two conformed copies of the contract together with the other information re- quired to be furnished to the Administrator pursuant to paragraph 3 of said Appendix 1 shall be furnished to the Administrator as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 3 to this Agreement. (c) The provisions of the preceding subparagraphs (a) and (b) shall not apply to contracts on account of which the Admin- istrator has authorized withdrawals from the African Facility Credit Account on the basis of statements of expenditure. Such contracts shall be retained in accordance with Section 4.01 (c) (ii) of this Agreement. 2. The figure of 15% is hereby specified for purposes of para- graph 4 of Appendix 1 to the Guidelines. - 17 - SCHEDULE 3 Special Account B 1. For the purposes of this Schedule: (a) the term "Eligible Categories" means the Categories set forth in the table in paragraph 1 of Schedule 1 to this Agree- ment; (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 African Facility Credit allocated from time to time to the eligible Cate- gories in accordance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount equiv- alent to $7,000,000 to be withdrawn from the African Facility Credit Account and deposited into Special Account B pursuant to paragraph 3 (a) of this Schedule. 2. Except as the Administrator shall otherwise agree, payments out of Special Account B shall be made exclusively for Eligible Expenditures in accordance with the provisions of this Schedule. 3. After the Administrator has received evidence satisfactory to it that Special Account B has been duly opened, withdrawals of the Authorized Allocation and. subsequent withdrawals to replenish Special Account B 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 Authorized Allocation, the Administrator shall, on behalf of the Borrower, withdraw from the African Facility Credit Account and deposit into Special Account B such amount or amounts as the Borrower shall have requested. (b) The Borrower shall furnish to the Administrator re- quests for replenishment of Special Account B at such intervals as the Administrator shall specify. On the basis of such requests, the Administrator shall withdraw from the African Facility Credit Account and deposit into Special Account B such amounts as shall be required to replenish Special Account B - 18 - with amounts not exceeding the amount of payments made out of Special Account B for Eligible Expenditures. All such deposits shall be withdrawn by the Administrator from the African Facility 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 such deposit furnished pursuant to paragraph 4 of this Schedule. 4. For each payment made by the Borrower out of Special Account B for which the Borrower requests replenishment pursuant to paragraph 3 (b) of this Schedule, the Borrower shall furnish to the Administrator, prior to or at the time of such request, such documents and other evidence as the Administrator shall rea- sonably request, showing that such payment was made for Eligible Expenditures. 5. (a) Notwithstanding the provisions of paragraph 3 of this Q. -dule, no further deposit into the Special Account B shall be made by the Administrator when either of the following situations first arises: (i) the Administrator shall have determined that all further withdrawals should be made directly by the Borrower from the African Facility 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 African Facility Credit allocated to the Eligible Catego- ries, minus the amount of any outstanding special commitment entered into by the Administrator pur- suant to Section 5.02 of the General Conditions with respect to Program, shall be equal to the equivalent of twice the amount of the Authorized Allocation.. (b) Thereafter, withdrawal from the African Facility Credit Account of the remaining unwithdrawn amount of the African Facility Credit allocated to the Eligible Categories shall fol- low such procedures as the Administrator shall specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Administrator shall have been satisfied that all such amounts remaining on deposit in Special Account B as of the date of such notice have been or will be utilized in making payments for Eligible Expenditures. - 19 - 6. (a) If the Administrator shall have determined at any time that any payment out of Special Account B (i) was made for any 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 Administrator, deposit into Special Account B (or, if the Administrator shall so request, refund to the Administrator) an amount equal to the amount of such payment or the portion thereof not so eligible or justi- fied. No further deposit by the Administrator into Special Account B shall be made until the Borrower has made such deposit or refund. (b) If the Administrator shall have determined at any time that any amount outstanding in Special Account B will not be required to cover further payments for Eligible Expenditures, the Borrower shall, promptly upon notice from the Administrator, refund to the Administrator such outstanding amount for crediting to the African Facility Credit Account. - 20 - SCHEDULE 4 Tranche Release Actions referred to in paragraph 3 (b) (ii) of Schedule I to this Agreement: (a) the Borrower has taken all measures necessary to ensure that no subsidies are paid for agricultural inputs with the ex- ception of pesticides; (b) the Borrower and the Administrator have agreed upon an action program for the implementation of the recommendations of the edible oil study and the Borrower has taken appropriate actions therefor; (c) the Borrower has adopted a public investment program in agriculture covering the years 1987 through 1989; such program to be acceptable to the Administrator; (d) the Borrower has carried out, in a manner acceptable to the Administrator, programs relating to: (i) the promotion of the role of commercial enterprises in the importation and marketing of agricultural inputs and veterinary products; (ii) improved pricing systems for major export crops; and (iii) the rice management program; (e) the Borrower has furnished to the Administrator its comments on, and an action plan for the implementation of the recommendations, of the following studies: (i) the study on Madagascar's potential and comparative advantage in coffee production; and (ii) the study on export crop administration; and (f) the Borrower has furnished to the Administrator the results of the following studies, including an action plan for the implementation of the recommendations thereof: (i) the study on local government finances; and (ii) the study referred to in Section 5.01 (c) (ii) of this Agreement. - 21 - SCHEDULE 5 The terms and conditions of agreements to be entered into between the Borrower and the Intermediaries shall include: (a) the following obligations of the Intermedaries: 1. to ensure that the imports to be financed out of the proceeds of the African Facility Credit shall be procured in compliance with the provisions of Schedule 2 to this Agreement; 2. to maintain and submit to the Borrower, on a quarterly basis, a summary of imports of goods financed out of the proceeds of the African Facility Credit; 3. to furnish to the Borrower, together with the application for an import license, proforma invoices showing specifications, quantities and unit prices of the goods to be imported; (b) the right of the Intermediaries to charge a commission amounting to 0.5% of the proceeds of the funds of the Credit passed on by the Intermediaries to importers; and (c) the right of the Borrower to terminate the agreement with the respective Intermediary if such Intermediary fails to perform its obligations under its agreement with the Borrower. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives (f the Interna- tional Development Association. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Association thereunto the J .I day of 198 . FOR SECRETARY