Mozambique - Second Rehabilitation Project : Credit 1841 - Credit Agreement - 1 - Conformed

AFRICAN FACILITY CREDIT NUMBER MOZ African Facility Credit Agreement (Second Rehabilitation Credit) between PEOPLE'S REPUBLIC OF MOZAMBIQUE and INTERNATIONAL DEVELOPMENT ASSOCIATION as ADMINISTRATOR of the SPECIAL FACILITY FOR SUB-SAHARAN AFRICA Dated , 1987 AFRICAN FACILITY CREDIT NUMBER t4.mOZ AFRICAN FACILITY CREDIT AGREEMENT AGREEMENT, dated 4 , 1987, between PEOPLE'S REPUBLIC OF MO AIIQUE (the Borrower) and INTERNATIONAL 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 their Resolution No. IDA 85-1 of May 21, 1985, (the Resolution), a Special Facility for Sub-Saharan Africa (the African Facility) constituted by the 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 June 26, 1987, from the Borrower describing a program of actions, objec- tives and policies designed to achieve structural adjustment of the Borrower's economy (hereinafter called the Program), declaring the Borrower's commitment to the execution of the Program and requesting assistance from the Administrator in the financing of urgently needed imports required during such execution and the Administrator has determined that such assistance would be in accordance with the provisions of the Resolution; (C) the Borrower has also requested IDA to provide addi- tional assistance towards the financing of the Program in an aggregate principal amount equivalent to fifty-four million five hundred thousand Special Drawing Rights (SDR 54,500,000) (the IDA Credit) under an agreement (the Development Credit Agreement) to be entered into between the Borrower and IDA; (D) the Borrower has also requested IDA as Administrator of Special Joint Financing from the Swiss Confederation (the Swiss Grant Administrator) to provide additional assistance in support of the Program under the Special Joint Financing Agreement for the Special African Facility and by an agreement of even date herewith between the Borrower and the Swiss Grant Administrator, the Swiss Grant Administrator is agreeing to provide such assistance in an amount of sixteen million nine hundred thousand Swiss Francs (SwF 16,900,000) (the Swiss Grant); - 2 - (E) the Borrower and the Administrator intend, to the extent practicable, that the proceeds of the African Facility and the Swiss Grant be disbursed pro-rata on account of expenditures in respect of the Program, before disbursements of the proceeds of the Credit, to be provided for in the Development Credit Agreement, are made; and WHEREAS the Administrator has agreed on the basis, inter alia, of the foregoing, to extend the African Facility Credit to the Borrower 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 Development Credit Agreements" of the International Development Association, 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 Conditions, 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 "African Facility Credit Agreement", "African Facility Credit" and "African Facility Credit Account", respectively; (c) the last sentence of Section 3.02 is deleted; (d) in Sections 6.02 and 7.01, the term "Association" shall also include the International Development Association acting in its own capacity; - 3 - (e) Section 2.01, paragraph 9, shall be modified to read: "'Project' means the imports and other activities that may be financed out of the proceeds of the Credit pursuant to the provisions of Schedule 1 to the Development Credit Agreement."; and (f) Section 9.06 (c) shall be modified to read: "(c) Not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Association, the Borrower shall prepare and furnish to the Association a report, of such scope and in such detail as the Association shall reasonably request, on the execution of the Program referred to in the Preamble to the Development Lredit Agreement, the performance by the Borrower and the Association of their respective obligations under the Development Credit Agreement and the accomplishment of the purposes of the Credit." Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Development Credit Agreement" means the agreement to be entered into between the Borrower and IDA for the Project, as such agreement may be amended from time to time; and such term includes the "General Conditions Applicable to Development Credit Agreements" of IDA, dated January 1, 1985, as applied to such agreement, and all schedules and agreements supplemental to the Development Credit Agreement; (b) "SITC" means the United Nations Standard International Trade Classification, 1986 Revision (SITC, Rev. 3), published in Commodity Indexes for the Standard International Trade Classi- fication, Revised, Statistical Papers, Series M, No. 38/Rev. 3 (1986); and (c) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement. ARTICLE II The African Facility Credit Section 2.01. The Administrator agrees to lend to the Borrower on the terms and conditions set forth or referred to in the African Facility Credit Agreement, an amount in various currencies equivalent to fourteen million five hundred thousand Special Drawing Rights (SDR 14,500,000). 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. (b) The Borrower shall, for the purposes of the Program, open and maintain in U.S. dollars, a special account in a commercial bank on terms and conditions satisfactory to the Administrator. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 4 to this Agreement. Section 2.03. The Closing Date shall be December 31, 1988, or such later date as the Administrator shall establish. The Administrator 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. - 5 - (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 April 1 and October 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 April 1 and October 1, commencing October 1, 1997, and ending April 1, 2037. Each installment to and including the installment payable on April 1, 2007, shall be one-half of one percent (1/2 of 1%) of such principal amount, and each installment 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. (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 actions specified in Schedule 3 to this Agreement. (b) Prior to each such exchange of views, the Borrower shall furnish to the Administrator, for its review and comment, a report on the progress achieved in carrying out the Program, in such detail as the Administrator shall reasonably request. Section 3.02. Except as the Administrator shall otherwise agree, procurement of the goods to be financed out of the proceeds - 6 - of the African Facility Credit shall be governed by the provisions of Schedule 2 to this Agreement, subject to the eligibility restrictions set forth in Section 2.02 (b) of this Agreement. Section 3.03. (a) The Borrower shall maintain, or cause to be maintained, records and accounts adequate to reflect, in accordance with consistently maintained sound accounting practices, the expenditures financed out of the proceeds of the African Facility Credit. (b) The Borrower shall: (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 principles consistently applied by independent auditors acceptable to the Administrator; (ii) furnish to the Administrator 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 Administrator shall have reasonably requested; and (iii) furnish to the Administrator such other information concerning said records and accounts and the audit thereof, 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, records and accounts reflecting such expenditures; (ii) retain, until at least one year after the Administrator has received the audit report for the fiscal year in which the last withdrawal from the African Facility Credit Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; 7- (iii) enable the Administrator's representatives to examine such records; and (iv) ensure that such records and accounts are included in the annual audits 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. ARTICLE IV Remedies of the Administrator Section 4.01. Pursuant to Section 6.02 (h) of the General Conditions, the following additional event is specified, namely, that an event has occurred which shall make it improbable that the Program, or a significant part thereof, will be carried out. ARTICLE V Effective Date; Termination; Designation of Administrator Section 5.01. The following event is specified as an additional condition to the effectiveness of the African Facility Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions, namely, all conditions precedent to the effectiveness of the Swiss Grant Agreement, except for the effectiveness of this Agreement, have been fulfilled. Section 5.02. The date ninety (90) days after the date of this Agreement is hereby specified for the purposes of Section 12.04 of the General Conditions. Section 5.03. In the event that the Executive Directcls 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. - 8 - ARTICLE VI Representative of the Borrower; AddTesses Section 6.01. The Governor of Banco de Mocambique 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: Banco de Mocambique Avenida 25 de Setembro 1695 P.O. Box 423 Maputo People's Republic of Mozambique Cable address: Telex: MOBANCO 6355/7 BMMO Maputo For the Administrator: Administrator of the African Facility (International Development Association) 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) -9 - 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. PEOPLE'S REPUBLIC OF MOZAMBIQUE By 15/1~~~~4 2* Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION as Administrator of the Special Facility for Sub-Saharan Africa By / 4(4' Regional Vice President Africa - 10 - SCHEDULE 1 Withdrawal of the Proceeds of the African Facility Credit 1. Subject to the provisions set forth or referred to in this Schedule, the proceeds of the African Facility Credit may be withdrawn from the African Facility Credit Account for expenditures made (or, if the Administrator shall so agree, to be made) in respect of the reasonable cost of goods required during the execution of the Program and to be financed out of such proceeds. 2. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of: (a) expenditures for goods included in the following SITC groups or sub-groups: Group Sub-group Description of Items 112 - Alcoholic beverages 122 - Tobacco, manufactured (whether or not containing tobacco substitutes) 525 - Radioactive and associated materials 667 - Pearls, precious and semi- precious stones, unworked or worked 718.7 - Nuclear reactors, and part s thereof, fuel elements (cartridges), non- irradiated for nuclear reactors - 11 - Gxou Sub-zroup Description of Items - 897.3 Jewelry of gold, silver or platinum group metals (except watches and watch cases) and goldsmiths' or silversmiths' wares (including set gems) 971.0 - Gold, non-monetary (excluding gold ores and concentrates) (b) expenditures in the currency of the Borrower or for goods supplied from the territory of the Borrower; (c) payments made for expenditures prior to the date of this Agreement, except that withdrawals in an aggregate amount not exceeding the equivalent of SDR 3,000,000 may be made on account of payments made for such expenditures before that date but after January 1, 1987; (d) expenditures for goods procured under contracts costing less than $5,000 equivalent; (e) expenditures for goods supplied under a contract which any national or international financing institution or agency other than the Administrator shall have financed or agreed to finance; (f) expenditures for goods intended for a military or para- military purpose or for luxury consumption; and (g) expenditures for foodstuffs (other than edible oils, infant formula and sugar) and gasoline. - 12 - 3. 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 African Facility Credit, after the aggregate of the proceeds of the African Facility Credit withdrawn from the African Facility Credit Account and the total amount of such commitments shall have reached the equivalent of SDR 7,250,000, unless the Administrator shall be satisfied, after an exchange of views as described in Section 3.01 of this Agreement: (a) with the progress achieved by the Borrower in the carrying out of the Program; and (b) that the actions described in Schedule 3 to this Agreement have been taken. 4. If, after such exchange of views, the Administrator is not so satisfied and this situation shall not be rectified by the Borrower within 90 days after notice thereof by the Administrator, then the Administrator may, by notice to the Borrower, cancel the amount of the African Facility Credit unwithdrawn from the African Facility Credit Account or any part thereof. - 13 - SCHEDULE 2 Procurement 1. Contracts for the procurement of goods estimated to cost the equivalent of $2,000,000 or more each shall be awarded through international competitive bidding 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), subject to the following modifications: (a) For purposes of the African Facility Credit Agreement, all references in the Guidelines to the Bank and to loans shall be deemed references to the Administrator and to the African Facility Credit, respectively. (b) Paragraph 2.8 of the Guidelines is deleted and the following is substituted therefor: "2.8 Notification and Advertising The international community should be notified in a timely manner of the opportunity to bid. This will be done by advertising invitations to apply for inclusion in a bidder's invitation list, to apply for prequalification or to bid; such advertisements should be placed in at least one newspaper of general circulation in the Borrower's country and, in addition, in at least one of the following forms: (i) ; notice in the United Nations publication, Development Forum, Business Edition; or (ii) an advertisement in a newspaper, periodical or technical journal of wide international circulation; or (iii) a notice to local representatives of countries and territories referred to in the Guidelines, that are potential suppliers of the goods required." - 14 - (c) The following is added at the end of paragraph 2.21 of the Guidelines: "As a further alternative, bidding documents may require the bidder to state the bid price in a single currency widely used in international trade and specified in the bidding documents." (d) Paragraphs 2.55 and 2.56 of the Guidelines are deleted. 2. Contracts for goods estimated to cost the equivalent of less than $2,000,000 each shall be awarded on the basis of the normal procurement procedures of the purchaser of such goods. 3. With respect to each contract referred to in paragraph 1 of this Schedule, the Borrower shall furnish to the Administrator, prior to the submission to the Administrator of the first application for withdrawal of funds from the African Facility Credit Account in respect of such contract, two conformed copies of such contract, together with the analysis of the respective bids and recommendations for award, a description of the advertising and tendering procedures followed and such other information as the Administrator shall reasonably request. 4. With respect to each contract referred to in paragraph 2 of this Schedule, the Borrower shall furnish to the Administrator, prior to the submission to the Administrator of the first application for withdrawal of funds from the African Facility Credit Account in respect thereof, such documentation and information as the Administrator may reasonably request to support withdrawal applications in respect of such contract. 5. Notwithstanding the provisions of paragraphs 3 and 4 of this Schedule, where payments under a contract are to be made out of the proceeds of the Special Account, the copies of such contract or documentation and information to be furnished to the Administrator pursuant to the provisions of paragraph 3 or paragraph 4 of this Schedule, as the case may be, shall be furnished to the Administrator as part of the evidence required under paragraph 4 of Schedule 4 to this Agreement. 6. The provisions of the preceding paragraphs 3, 4 and 5 shall not apply to contracts on account of which the Administrator has authorized withdrawals from the African Facility Credit Account on the basis of statements of expenditure. - 15 - SCHEDULE 3 Actions Referred to in Paragraph 3 (b) of Schedule 1 to this Agreement 1. The Borrower shall: (i) reduce the number of product groups on its fixed price list from 46 to 37; and (ii) furnish to the Administrator a plan of action, satisfactory to the Administrator, for further reductions from 37 to 32. 2. The Borrower shall establish an improved foreign exchange allocation system, that will, inter alia, incorporate quarterly assessments of foreign exchange availability and demand, and take into account the overall economic efficiency of operations of proposed users according to criteria agreed by the Borrower and the Administrator. 3. The Borrower shall: (i) complete the study of the interim trading measures; and (ii) furnish to the Administrator a plan of action, satisfactory to the Administrator, to implement the results of such study. 4. The Borrower shall reduce the number of products which must be imported through only one trading corporation from eleven to five and the number of export commodities from three to one. 5. The Borrower shall: (i) complete the study of the 25 industrial and 15 agricultural enterprises; and (ii) furnish to the Administrator a plan of action, satisfactory to the Administrator, to implement the recommendations for restructuring (rehabilitation, divestiture or closure) of these enterprises. 6. The Borrower shall complete the study of the fruit and vegetable marketing system. 7. The Borrower shall make progress, satisfactory to the Administrator, in the carrying out of the study of the system by which goods are allocated domestically. - 16 - SCHEDULE 4 Special Account 1. For the purposes of this Schedule: (a) the term "Eligible Expenditures" means expenditures in respect of the reasonable cost of goods required during the execution of the Program and to be financed out of the proceeds of the African Facility Credit and the Swiss Grant in accordance with the provisions of Schedule 1 to this Agreement and Schedule 1 of the Swiss Grant Agreement; and (b) the term "Authorized Allocation" means an amount equivalent to $5,000,000 to be withdrawn from the African Facility Credit Account and deposited into the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. Except as the Administrator shall otherwise agree, payments out of the Special Account shall be made exclusively for Eligible Expenditures in accordance with the provisions of this Schedule. 3. After the Administrator has received evidence, satisfactory to it, that the Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the Special Account may be made as follows: (a) On the basis of a request or requests by the Borrower for a deposit or deposits which add up to the aggregate amount of the Authorized Allocation, the Administrator shall, on behalf of the Borrower, withdraw from the African Facility Credit Account and deposit into the Special Account such amount or amounts as the Borrower shall have requested. (b) The Borrower shall furnish to the Administrator requests for replenishment of the Special Account 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 the Swiss Grant Account and deposit into the Special Account such amounts as shall be required to replenish the Special Account with amounts not exceeding the amount of payments made out of the Special Account for Eligible Expenditures. Each such deposit shall be withdrawn by the Administrator from the African Facility Credit Account and the Swiss Grant Account 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. - 17 - 4. For each payment made by the Borrower out of the Special Account, for which the Borrower requests replenishment pursuant to paragraph 3 (b) of this Schedule, the Borrower shall furnish to the Administrator, prior to or at the time of such request, such documents and other evidence, as the Administrator shall reasonably request, showing that such payment was made for Eligible Expenditures. 5. (a) Notwithstanding the provisions of paragraph 3 of this Schedule, no further deposit into the Special Account shall be made by the Administrator when either of the following situations first arises: (i) the Administrator shall have determined that all further withdrawals can be made by the Borrower directly from the African Facility Credit Account and the Swiss Grant Account in accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement; or (ii) the total unwithdrawn amount of the African Facility Credit and the Swiss Grant Account, minus the amount of any outstanding special commitment entered into by the Administrator pursuant to Section 5.02 of the General Conditions with respect to the Program, shall be equal to the equivalent of twice the amount of the Authorized Allocation. (b) Thereafter, withdrawal from the African Facility Credit Account and the Swiss Grant Account of the remaining unwithdrawn amount of the African Facility Credit and the Swiss Grant, respsctively, shall follow such procedures as the Administrator shall specify by notice tv 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 the Special Account as of the date of such notice will be utilized in making payments for Eligible Expenditures. 6. (a) If the Administrator shall have determined at any time that any payment out of the Special Account: (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 the Special Account (or, if the Administrator shall so request, refund to the Administrator) an amount equal to the amount of such - 18 - payment or the portion thereof not so eligible or justified. No further deposit by the Administrator into the Special Account 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 the Special Account 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 and the Swiss Grant Account. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the International Development Association. FOR SECRETARY