Conformed Copy - C2150 - Agricultural Extension Pilot Project - Amendment

Page 1 May 27, 1992 His Excellency Evariste Marson Minister of Finance Ministry of Finance Antananarivo, Madagascar Excellency: Re: Agricultural Extension Pilot Project (Credit No. 2150-MAG) Amendments to the Development Credit Agreement We refer to the above-mentioned Development Credit Agreement dated July 18, 1990; the letter No. 0936- MINFIN/SG/DGT/DDPOF/RO dated March 18, 1992 from your services (copy enclosed herewith), requesting an increase of the percentage of expenditures to be financed, out of the proceeds of the Credit, for field allowances during 1991 from 50% to 100%; and to the discussions relating thereto held between your representatives and our recent supervision mission. Further to these discussions, we wish to inform you that the Association is not in a position to agree to said request for 1991, since it considers that the high increase of the level of field allowances since September 1991 is partly the cause of your present difficulties and that field allowances should be reduced to a reasonable level. A level of FMG 10,000 per day for upper level field staff and of FMG 6,000 per day for medium level staff, as recently agreed with the Government under the Education Sector Project, would be deemed reasonable. In order to cover field allowances arrears related to 1991, the Government should increase its contribution to the 1992 budget from FMG 549 million to FMG 1,071 million, as suggested by the recent supervision mission in its Aide memoire. Nevertheless, the Association agrees to your request to increase the financing percentage for field allowances to 100% for 1992 and 1993, subject to a reduction of the level of field allowances and an increase of the Goverrunent contribution to the 1992 budget, as indicated above. Consequently, the Association hereby agrees to the following, concerning the table set forth in paragraph I of Schedule 1 to the Development Credit Agreement: (a) two new categories (c) and (d) are added to Category (5) Field allowances of said table, to read "(c) 1992" and "(d) 1993 and subsequent years," with a respective percentage of 100% of expenditures to be financed; (b) Category (1) is now to read "Civil works" and an amount of SDR 140,000 from that Category is reallocated to Category (2) Vehicles, motorcycles, bicycles, spare parts and equipment other than under Category (3); (c) the amount of SDR 50,000 under Category (3) (a), being no longer needed for civil works for the CIRVA of Amparafaravola, an amount of SDR 100,000 from Category (3)(b) Vehicles, motorcycles, bicycles, spare parts and equipment for the CIRVA of Amparafaravola, and an amount of SDR 100,000 from Category (4) Consultants' services, studies and training, are reallocated to the new sub-Category (5) (c) for field allowances during 1992; and (d) an amount of SDR I 10,000 from Category (4) and an amount of SDR 90,000 from Category (7) Unallocated are reallocated to the new sub-Category (5) (d) for field allowances during 1993 and subsequent years. The revised table resulting from the above changes is set forth in the Attachment to this letter. We wish to point out Page 2 that the financing of field allowances on the basis of 100% during 1992 and 1993 until the completion of the Project does not entail any commitment for the Association to cover such recurrent expenditures beyond the Closing Date of the Credit. Such financing, according to Bank policies, is to be on a declining basis in order to allow the continuous operation of services once external aid is exhausted. Please confirm your agreement to the above by signing and dating the form of confirmation on the enclosed copy of this letter and returning it to us. It is understood that these amendments to the Development Credit Agreement shall come into force upon: (i) confirmation of your agreement as indicated above; (ii) receipt of your agreement on the reduction at an appropriate level of field allowances; and (iii) confirmation of an increase of the Government contribution to the 1992 budget to FMG 1,071 million, with payment of the arrears of field allowances related to 1991. Very Yours, Acting DirectorSouth-Central and Indian Ocean Department Africa Region CONFIRMED: DEMOCRATIC REPUBLIC By: Ministre des Finances Authorized Representative Date: 1 Aug 10, 1992 SCHEDULE I (Revised as of May 27, 1992) Withdrawal of the Proceeds of the Credit 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. Category Amount of the Credit Allocated (Expressed in % of Expenditures SDR Equivalent) to be financed (1) Civil Works 350,000 80% (2) Vehicles, motorcycles, bicycles, spare parts and equipment other than under Category (3) 500,000 100% (3) (a) Civil Works for the CIRVA of Amparafaravola 0 0 (b) Vehicles, motorcycles, bicycles, spare parts and equipment for the CIRVA of Amparafaravola 50,000 100% (4) Consultants' services, studies and training 300,000 100% (5) Field allowances during: Page 3 (a) 1990 60,000 100% (b) 1991 60,000 50% (c) 1992 250,000 100% (d) 1993 and subsequent years 200,000 100% (6) Refunding of Project Amount due pur- Preparation Advance 760,000 suant to Section 2.02(c) of this Agreement (7) Unallocated 270,000 TOTAL 2,800,000