Conformed Copy - C1946 - Second Telecommunications Project - Development Credit Agreement

Page 1 CONFORMED COPY CREDIT NUMBER 1946 GH (Second Telecommunications Project) between REPUBLIC OF GHANA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated August 15, 1988 DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated August 15, 1988, between REPUBLIC OF GHANA (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 Borrower intends to obtain from the Overseas Economic Cooperation Fund of Japan (hereinafter called OECF) a loan (the OECF Loan) in an amount of 10.508 billion Yen to assist in financing the Project on the terms and conditions set forth in an agreement (the OECF Loan Agreement) to be entered into between the Borrower and OECF; (C) the Borrower intends to obtain additional financing towards the Project from other donors in the form of grants or loans; (D) the Project will be carried out by Ghana Posts and Tele- Page 2 communications Corporation (GPT) with the Borrower's assistance and, as part of such assistance, the Borrower will make available to GPT the proceeds of the Credit as provided in this Agreement; 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 forth in this Agreement and in the Project Agreement of even date herewith between the Association and GPT; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Develop- ment Credit Agreements" of the Association, dated January 1, 1985, with the last sentence of Section 3.02 deleted (the General Condi- tions) constitute an integral part of this Agreement. Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Project Agreement" means the agreement between the Association and GPT of even date herewith, as the same may be amended from time to time, and such term includes all schedules and agreements supplemental to the Project Agreement; (b) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and GPT pursuant to Section 3.01 (b) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the Subsidiary Loan Agreement; (c) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement; (d) "Project Preparation Advances" means the project preparation advances granted by the Association to the Borrower pursuant to an exchange of letters dated April 9, 1987 and May 29, 1987, and April 8, 1988 and May 20, 1988, respectively, between the Borrower and the Association; and (e) "Fiscal Year" and "FY" mean the period from January 1 to December 31 of each year. 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 Devel- opment Credit Agreement, an amount in various currencies equiva- lent to thirteen million eight hundred thousand Special Drawing Rights (SDR 13,800,000). 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 reason- able cost of goods and services required for the Project 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 account in a commercial bank on terms and conditions satisfactory to the Association. Deposits into, and payments out of, the Special Account shall be Page 3 made in accordance with the provisions of Schedule 3 to this Agreement. (c) Promptly after the Effective Date, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and pay to itself the amount required to repay the principal amounts of the Project Preparation Advances withdrawn and outstanding as of such date and to pay all unpaid charges thereon. The unwithdrawn balance of the authorized amounts of the Project Preparation Advances shall thereupon be cancelled. Section 2.03. The Closing Date shall be June 30, 1993 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 a 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 as of the next payment date in that year specified in Section 2.06 of this Agreement, except that the rate set as of June 30, 1988 shall be applied as of July 1, 1988. (c) The commitment charge shall be paid: (i) at such places as the Association shall reasonably request; (ii) without restric- tions 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 March 1 and September 1 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 March 1 and September 1 commencing September 1, 1998 and ending March 1, 2028. Each installment to and including the installment payable on March 1, 2008 shall be one percent (1%) of such principal amount, and each installment thereafter shall be two percent (2%) of such principal amount. (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 Page 4 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. 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, without any limitation or restriction upon any of its other obligations under the Development Credit Agreement, shall cause GPT to perform in accordance with the pro- visions of the Project Agreement all the obligations of GPT therein set forth, shall take and cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable GPT to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (b) The Borrower shall relend the proceeds of the Credit to GPT under a subsidiary loan agreement to be entered into between the Borrower and GPT, under terms and conditions which shall have been approved by the Association and which shall include repayment over 20 years, including five years of grace, interest at the rate of 7.72% per annum and the foreign exchange risk to be borne by GPT. (c) The Borrower shall exercise its rights under the Subsi- diary Loan 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 assign, amend, abrogate or waive the Subsi- diary Loan Agreement or any provision thereof. Section 3.02. Without any limitation upon any of its obliga- tions under Section 3.01 of this Agreement, the Borrower shall deposit in the project account referred to in Section 4.04 of the Project Agreement, promptly before the end of each quarter starting October 1, 1988, the Borrower's quarterly contribution to GPT's investment program as set forth in GPT's annual budgets for the Fiscal Years 1988 through 1990 against expenditures incurred by GPT during such quarter. Section 3.03. Except as the Association shall otherwise agree, procurement of the goods 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 1 to the Project Agreement. Section 3.04. The Borrower and the Association hereby agree that the obligations set forth in Sections 9.03, 9.04, 9.05, 9.06, 9.07 and 9.08 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) shall be carried out by GPT pursuant to Section 2.03 of the Project Agree- ment. Page 5 ARTICLE IV Financial and Other Covenants Section 4.01. (a) For all expenditures with respect to which withdrawals from the Credit Account were made on the basis of statements of expenditures, the Borrower shall: (i) maintain or cause to be maintained in accordance with sound accounting practices, records and accounts reflecting such expenditures; (ii) ensure that all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures are retained until at least one year after the Association has received the audit report for the fiscal year in which the last withdrawal from the Credit Account was made; and (iii) enable the Association's representatives to examine such records. (b) The Borrower shall: (i) have the records and accounts referred to in para- graph (a) (i) of this Section and those for the Special Account for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Association as soon as available, but in any case not later than six months after the end of each such year the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested, including a separate opinion by said auditors as to whether the statements of expenditure submitted during such fiscal year, together with the proce- dures and internal controls involved in their pre- paration, can be relied upon to support the related withdrawals; and (iii) furnish to the Association such other information concerning said records and accounts and the audit thereof as the Association shall from time to time reasonably request. Section 4.02. The Borrower shall: (a) formalize its moratorium on GPT's obligations to pay the principal and interest on loans made by the Borrower out of its own resources to GPT until GPT's financial restructuring plan referred to in paragraph 5 (f) of Schedule 2 to the Project Agree- ment has been completed; and (b) thereafter exchange views with the Association on the arrangements set forth in paragraph (a) of this Section in light of the financial restructuring plan. ARTICLE V Remedies of the Association Section 5.01. Pursuant to Section 6.02 (h) of the General Conditions, the following additional events are specified: (a) GPT shall have failed to perform any of its obligations under the Project Agreement. (b) As a result of events which have occurred after the date Page 6 of the Development Credit Agreement, an extraordinary situation shall have arisen which shall make it improbable that GPT will be able to perform its obligations under the Project Agreement. (c) Decree No. N.R.C.D. 311 as amended by N.R.C.D. 336 and S.M.C.D. 70 of the Borrower establishing GPT shall have been amended, suspended, abrogated, repealed or waived so as to affect materially and adversely the ability of GPT to perform any of its obligations under the Project Agreement. (d) The Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablish- ment of GPT or for the suspension of its operations. (e) (i) Subject to subparagraph (ii) of this paragraph: (A) The right of the Borrower to withdraw the proceeds of any grant, credit or loan 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 of the agreement providing therefor, or (B) any such loan or credit 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, cancel- lation, 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 consis- tent with the obligations of the Borrower under this Agreement. Section 5.02. Pursuant to Section 7.01 (d) of the General Conditions, the following additional events are specified: (a) the event specified in paragraph (a) of Section 5.01 of this Agreement shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Asso- ciation to the Borrower; (b) the events specified in paragraphs (c) and (d) of Section 5.01 of this Agreement shall occur; and (c) the event specified in paragraph (e) (i) (B) of Section 5.01 of this Agreement shall occur, subject to the proviso of paragraph (e) (ii) of that Section. ARTICLE VI Effective Date; Termination Section 6.01. 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 Subsidiary Loan Agreement has been executed on behalf of the Borrower and GPT; (b) GPT has furnished to the Association its audited financial statements for Fiscal Year 1986; (c) GPT has selected the consultants for the Project manage- ment team and the financial consultants in accordance with Sec- Page 7 tion II of Schedule 1 to the Project Agreement; and (d) all conditions precedent to the OECF Loan Agreement (other than the effectiveness of this Agreement) have been fulfilled. Section 6.02. The following are specified as additional matters, 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: (a) that the Project Agreement has been duly authorized or ratified by GPT, and is legally binding upon GPT in accordance with its terms; and (b) that the Subsidiary Loan Agreement has been duly autho- rized or ratified by the Borrower and GPT and is legally binding upon the Borrower and GPT in accordance with its terms. Section 6.03. The date ninety (90) days after the date of this Agreement is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VII Representative of the Borrower; Addresses Section 7.01. The PNDC Secretary for Finance and Economic Planning of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Condi- tions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: PNDC Secretary for Finance and Economic Planning Ministry of Finance and Economic Planning P.O. Box M40 Accra, Ghana Cable address: Telex: ECONOMICON 2205 MIFAEP GH Accra For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (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. Page 8 REPUBLIC OF GHANA By /s/ Eric Otoo Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Callisto E. Madavo Acting Regional Vice President Africa SCHEDULE 1 Withdrawal of the Proceeds of the Credit 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit, 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) Telecommunication 1,590,000 100% of foreign equipment expenditures (2) Building 3,040,000 100% of foreign materials, expenditures vehicles, com- puter, tools and power, air conditioning, training and testing equip- ment (3) Consultants' 6,360,000 100% services and fellowships (4) Refunding of 1,090,000 Amounts due pur- Project Prepara- suant to Section tion Advances 2.02 (c) of this Agreement (5) Unallocated 1,720,000 ___________ TOTAL 13,800,000 2. For the purposes of this Schedule the term "foreign expendi- tures" 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. 3. Notwithstanding the provisions of paragraph 1 above, no with- drawals shall be made in respect of payments made for expenditures prior to the date of this Agreement. SCHEDULE 2 Page 9 Description of the Project The objectives of the Project are: (i) to assist GPT in the implementation of its investment program for the period 1987-1992; and (ii) to support a program of institutional and management improvement for the telecommunication 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: Rehabilitation and expansion of the telecommunications network 1. Replacement of 23,400-lines of old exchanges and cables in Accra, Kumasi, Tema, Takoradi, Tamale, Koforidua and Cape Coast and expansion to meet excess demand in these towns. 2. Replacement of old manual exchanges by automatic exchanges in 26 rural towns, including external cable rehabilitation. 3. Installation of a 330-line international exchange and rehabi- litation of the satellite earth station. 4. Installation of a 1000-line telex exchange. 5. Acquisition of subscriber terminal equipment. 6. Acquisition of replacement equipment for digital trunk exchange, microwave equipment, multiplex equipment and power plant damaged by floods. 7. Replacement and expansion of transmission systems. 8. Acquisition of about 150 vehicles for planning, construction, operations and maintenance works. 9. Acquisition of building materials for GPT's housing scheme and construction of flood protection works. 10. Acquisition of tools, testing equipment and spare parts for existing telecommunications equipment. Part B: Institutional Support 1. Strengthening of GPT's management capabilities through a program for recruitment, manpower development and training, the provisions of consultants' services and fellowships and the acquisition of office and training equipment. 2. A program of studies to address operational and financial issues of GPT as well as telecommunication sector policy issues. * * * The Project is expected to be completed by December 31, 1992. SCHEDULE 3 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1) through (3) 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 Page 10 the Project and to be financed out of the proceeds of the Credit allocated from time to time to the eligible Categories in accor- dance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount of $2,000,000 to be withdrawn from the Credit Account and deposited into the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. Except as the Association shall otherwise agree, payments out of the Special Account shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule. 3. After the Association has received evidence satisfactory to it that the Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the Special Account may be made as follows: (a) On the basis of a request or requests by the Borrower for a deposit or deposits which add up to the aggregate amount of the Authorized Allocation, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit into the Special Account such amount or amounts as the Borrower shall have requested. (b) The Borrower shall furnish to the Association requests for replenishment of the Special Account at such intervals as the Association shall specify. On the basis of such requests, the Association shall withdraw from the Credit Account and deposit into the Special Account such amounts as shall be required to replenish the Special Account with amounts not exceeding the amount of payments made out of the Special Account for eligible expenditures. All such deposits shall be withdrawn by the Associa- tion from the Credit Account under the respective eligible Catego- ries, 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 the Special Account for which the Borrower requests replenishment pursuant to paragraph 3 (b) of this Schedule, the Borrower shall furnish to the Association, prior to or at the time of such request, such documents and other evidence as the Association shall reasonably request, showing that such payment was made for eligible expenditures. 5. (a) Notwithstanding the provisions of paragraph 3 of this Schedule, no further deposit into the Special Account shall be made by the Association when either of the following situations first arises: (i) the Association shall have determined that all further withdrawals should be made by the Borrower directly from the Credit Account in accordance with the provisions of Article V of the General Condi- tions and paragraph (a) of Section 2.02 of this Agreement; or (ii) the total unwithdrawn amount of the Credit allocated to the eligible Categories, minus the amount of any outstanding special commitment entered into by the Association pursuant to Section 5.02 of the General Conditions with respect to the Project, shall be equal to the equivalent of twice the amount of the Authorized Allocation. (b) Thereafter, withdrawal from the Credit Account of the remaining unwithdrawn amount of the Credit allocated to the eligible Categories shall follow such procedures as the Associa- tion shall specify by notice to the Borrower. Such further with- drawals shall be made only after and to the extent that the Asso- ciation shall have been satisfied that all such amounts remaining Page 11 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 any expenditure or in any 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, deposit into the Special Account (or, if the Association shall so request, refund to the Association) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. No further deposit by the Associa- tion into the Special Account shall be made until the Borrower has made such deposit or refund. (b) If the Association shall have determined at any time that any amount outstanding in the Special Account will not be required to cover further payments for eligible expenditures, the Borrower shall, promptly upon notice from the Association, refund to the Association such outstanding amount for crediting to the Credit Account.