Nicaragua - Social Investment Fund : Credit 2434 - Credit Agreement - Conformed

CREDIT NUMBER 2434 NI Development Credit Agreement (Social Investment Fund Project) between REPUBLIC OF NICARAGUA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated Za0u. r 721 , 1993 CREDIT NUMBER 2434 NI DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated an vo r!j Z , 1993, between REPUBLIC OF NICARAGUA (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 Association has received a letter dated October 8, 1992, from the Borrower describing a program of actions, objectives and policies designed to improve its social sector (hereinafter called the Program), and declaring the Borrower's commitment to the execution of the Program; (C) the Borrower intends to contract from bilateral and multilateral aid and development organizations (Financiers) loans and grants (the Funding) in an amount equivalent to $33,600,000 to assist in financing the Program on the terms and conditions set forth in agreements to be entered into between the Borrower and each of the Financiers (the Funding Agreements); (D) the Borrower intends to contract from the Inter- American Development Bank (IDB) a loan in an amount equivalent to $16,000,000 to assist in the financing of the Project on the terms and conditions set forth in an agreement (the IDB Loan Agreement) o be entered into tetween the Borrower aad IDB; (E) the Borrower intends to contract from the United Nations Development Program (UNDP) technical assistance services to assist in the e-cecution of the Project on the terms and conditions set forth in a contract (the UNDP Technical Assistant Contract) to be entered into between the Borrower and UNDP; 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; NOW THEREFORE the parties hereto hereby agree as follows: -2- ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Development Credit Agreements" of the Association, dated January 1, 1985, with the last sentence of Section 3.02 deleted (the General Conditions) 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) "Decree No. 59-90" means the Borrower's decree No. 59-90 dated N1ovember 21, 1990 and published in the Official Gazette on December 13, 1990; (b) "INEC" means the Borrower's National Institute of Statistics and Census; (c) "MOE" means the Borrower's Ministry of Education; (d) "MOF" means the Borrower's Ministry of Finance; (e) "MOH" means the Borrower's Ministry of Health; (f) "Municipalities Targeting Plan" means the plan contained in the Borrower's document entitled Focalizaci6n y Distribuci6n de Recursos, Reporte Trimestral No. 2 al 31 de Julio de 1992 (Targeting and Distribution of Resources, Quarterly Report No. 2 as of July 31, 1992), which describes the procedures to be followed by SIF (as such term is hereinafter defined) in channelling funds through the financing of Subprojects (as such term is hereinafter defined) to the Borrower's municipalities and sets forth the estimated amounts to be channelled to each one of such municipalities; (g) "Operational Manual" means the manual to be adopted by SIF (as such term in hereinafter defined), in form and substance satisfactory to the Association, pursuant to the provisions of Section 7.01 (d) of this Agreement; -3- (h) "Requesting Entity" means a governmental or non- governmental entity which meets the eligibility criteria set forth in the Operational Manual and which proposes to carry out or is carrying out a Subproject (as such term is hereinafter defined); (i) "SIF" or "Social Investment Fund" means Fondo de Inversi6n Social de Emergencia, the Borrower's social investment fund established as a public decentralized entity with juridical personality purs;,ant to Decree No. 59-90; (j) "SIF Subsidiary Agreement" means the agreement to be entered into between the Borrower and SIF 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 such agreement; (k) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement; (1) "Subproject" means a social infrastructure subproject, an economic infrastructure subproject, a social services subproject or a subproject for training in infrastructure maintenance, which is eligible for financing by FIS in accordance with the provisions of the Operational Manual; and (m) "Subproject Agreement" means the agreement to be entered into, under terms and conditions satisfactory to the Association, between SIF and a Requesting Entity and, where applicable, a contractor or supplier as the same may be amended from time to time, and such term includes all schedules to the Subproject Agreement. 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 Development Credit Agreement, an amount in various currencies equivalent to seventeen million three hundred thousand Special Drawing Rights (SDR 17,300,000). 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 reasonable -4- 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 Credit. (b) The Borrower shall, for the purposes of the Project, open and maintain in dollars a special deposit account in a commercial bank satisfactory to the Association including appropriate protection against set-off seizure or attachment on terms and conditions satisfactory to the Association. 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, 1995 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 the 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 from the next payment date in that year specified in Section 2.06 of this Agreement. (c) The commitment charge shall be paid: (i) at such places as the Association 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 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. -5- Section 2.06. Commitment charges and service charges shall be payable semiannually on May 15 and November 15 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 May 15 and November 15 commencing May 15, 2003 and ending November 15, 2032. Each installment to and including the installment payable on November 15, 2012 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 agreed with the Association on the principal amount of the Credit withdrawn and outstanding from time to time, prs ided 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 Condit-ons. -6- 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: (i) shall carry out: (A) Part B of the Project through INEC; (B) Part C of the Project through MOE and MOH; and (C) Part D of the Project through MOF, all with due diligence and efficiency and in conformity with appropriate financial, administrative and economic practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for such Parts of the Project; and (ii) shall cause SIF to carry out Part A of the Project with due diligence and efficiency and in conformity with appropriate economic, financial, administrative, managerial and environmental practices, shall take or cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable SIF to carry out Part A of the Project, and shall not take or permit to be taken any action which would prevent or interfere with the carrying out of such part of the Project. (b) The Borrower shall make the proceeds of the Credit allocated for Part A of the Project available to SIF under a subsidiary agreement to be entered into between the Borrower and SIF, under terms and conditions which shall have been approved by the Association, which shall include SIF's obligation to carry out Part A of the Project in accordance with the provisions of this Agreement and the Operational Manual. -7- (c) The Borrower shall exercise its rights and comply with its obligations under the SIF Subsidiary 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 change, assign, amend, abrogate or waive the SIF Subsidiary Agreement or any provision thereof. (d) Without limitation upon the provisions of paragraph (a) of this Section and except as the Borrower and the Association shall otherwise agree, the Borrower shall carry out Parts B, C and D of the Project, and shall cause SIF to carry out Part A of the Project, in accordance with performance targets and implementation indicators acceptable to the Association. Section 3.02. Except as the Association shall otherwise agree, procurement of the goods, works and consultantsO services required for the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of Schedule 3 to this Agreement. Section 3.03. The Association and the Borrower 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) in respect of Parts A of the Project shall be carried out by SIF. Section 3.04. The Borrower undertakes that, unless the Association shall otherwise agree, Subprojects shall be promoted, identified, appraised, approved, carried out and monitored in accordance with the procedures set forth or referred to in the Operational Manual. Section 3.05. Without limitation to its obligations under Article IX of the General Conditions, the Borrower shall and shall cause SIP in respect of Part A of the Project: (a) promptly inform the Association of any condition which interferes, or threatens to interfere, with the progress of the Project or the Subprojects, the accomplishment of the purposes of the Credit, or the performance of SIP of its obligations under the SIP Subsidiary Agreement, or the performance of SIP and the Requesting Entities (or a contractor or supplier where applicable) under their respective Subproject Agreements; and -8- (b) not later than June 30 and December 31 each year: (i) furnish to the Association a report, in form satisfactory to the Association, containing, inter alia: (A) a list of Subprojects approved by SIF; and (B) the Borrower's and SIF's progress made in meeting the performance targets and implementation indicators referred to in Section 3.01 (d) of this Agreement; and (ii) review with the Association the standard regionalized unit prices for goods and works adopted by SIF; Section 3.06. (a) Notwithstanding the provisions of Schedule 1 to this Agreement, the Association may refrain from approving requests for disbursements for Subprojects in excess of the following aggregate amounts financed out of the proceeds of the Credit: (i) SDR 4,600,000 equivalent, within the period ending on June 30, 1993; and (ii) SDR 9,200,000 equivalent, within the period ending on February 28, 1994; provided, however, that, without limitation to the provision of Section 6.02 of the General Conditions, any action under this paragraph shall not affect disbursements for Subprojects in respect of which any disbursements from the Credit Account have been made before the taking of any such action. (b) Not later than June 30, 1993, the Borrower and the Association shall review the progress made by the Borrower in the carrying out of the Program and the Project, such progress to include, inter alia, the achievement of the following: (i) imple- mentation of a targeting system, satisfactory to the Association, of Subprojects and the goals thereof; (ii) an appropriate structure for processing Subprojects including adequate staffing for evaluation and supervision of Subprojects; and (iii) efficiency in Subproject execution, procurement and contractual practices. (c) Not later than February 28, 1994, review with the Association the progress made in the carrying out of the Program and the Project, and in meeting the performance targets and imple- mentation indicators referred to in Section 3.01 (d) of this Agreement. -9- (d) If, at any of the reviews referred to in paragraphs (b) or (c) above, the Association shall have considered as non- satisfactory the progress made by the Borrower in the carrying out of the Project or the Program, the Association may refrain (subject to the proviso in paragraph (a) above) from approving requests for disbursement for Subprojects until the Borrower shall have: (A) prepared and furnished to the Association, an action plan, satis- factory to the Association, as shall be necessary to achieve such satisfactory progress, such action plan to be prepared: (i) not later than July 31, 1993, with respect to paragraph (b) above; and (ii) not later than March 31, 1994, with respect to paragraph (c) above; and (B) commenced implementation of such action plans in a manner satisfactory to the Association. Section 3.07. Without limitation to its obligations under the General Conditions and under Section 3.01 (a) of this Agreement, the Borrower shall: (a) allocate in its annual budget for SIF, and make available promptly as needed, for the years 1993 through 1995, the following minimum amounts, as counterpart funds for the financing of Part A of the Project: (i) $3,650,000 equivalent for calendar year 1993; (ii) $2,666,000 equivalent for calendar year 1994; and (iii) $2,666,000 equivalent for calendar year 1995; and (b) advance, from the amounts referred to in paragraph (a) of this Section, and no later than the first day of each quarter, amounts sufficient to cover the counterpart funding requirements for the Project during such quarter. Section 3.08. The Borrower shall cause SIF: (a) to carry out the Municipalities Targeting Plan in accordance with the terms of such plan; and (b) except as the Association shall otherwise agree: (i) not approve funding of new Subprojects for the benefit of: (A) Managua for amounts exceeding 18% of the total funds availabl;7 to FIS for the financing of Subprojects; and (B) the other medium poverty municipalities listed in the Municipalities Targeting Plan, for amounts exceeding 7% of the total funds available to FIS for the - 10 - financing of Subprojects; and (ii) not to change or waive the Municipalities Targeting Plan. Section 3.09. The Borrower shall, not later than March 31, 1993 conclude implementation of the survey referred to in Part B.1 of the Project. ARTICLE IV Financial Covenants Section 4.01. (a) The Borrower shall maintain or cause to be maintained and shall cause SIF to maintain (in respect of Part A of the Project) records and separate accounts adequate to reflect in accordance with sound accounting practices, the operations, resources and expenditures in respect of the Project. (b) The Borrower shall, and shall cause SIF to: (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 approporiate 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, a certified copy of the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iii) furnish to the Association such other information concerning said records, accounts and the audit thereof as the Association shall from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the Credit Account were made on the basis of statements of expenditure, the Borrower shall, and shall cause SIF to: (i) maintain or cause to be maintained, in accordance with paragraph (a) of this Section, - 11 - records and accounts reflecting such expenditures; (ii) retain, until at least one year after the Association has received the audit for the fiscal year in which the last withdrawal from the Credit Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Association's representatives to examine such records; and (iv) ensure that such records and accounts are included in the annual audit 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, carn be relied upon to support the related withdrawals. Section 4.02. Without limitation to the provisions of Section 4.01 of this Agreement, the Borrower shall cause: (a) SIF's operations to be audited every quarter during the execution of the Project, by independent auditors acceptable to the Association, such audits to include a financial review of Subprojects and a physical inspection of works in the field; and (b) SIF to furnish to the Association, as soon as available, but in any case not later than two months after the end of each such quarter, a certified copy of the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested. - 12 - ARTICLE V Other Covenants Section 5.01. The Borrower shall cause SIF: (a) to take out and maintain with responsible insurers, or to make other provision satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practice; (b) to carry on its operations and conduct its affairs in accordance with sound administrative, economic, financial, managerial and environmental practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers; (c) without limitation to the provisions of paragraph (b) above, to maintain a chairman of its board and an executive director whose experience and qualifications shall be at all times acceptable to the Association, and to obtain the Association's approval with respect to the replacement of such chairman and an executive director prior to any such replacement; and (d) at all times to operate and to maintain its plants, machinery, equipment and other property, and from time to time, promptly as needed, to make all necessary repairs and renewals thereof, all in accordance with sound engineering, financial and economic and environmental practices. ARTICLE VI Remedies of the Association Section 6.01. Pursuant to Section 6.02 (h) of the General Conditions, the following additional events are specified: (a) Decree No. 50-90 or any provision thereof or the legislation providing for the designation or establishment of a successor to SIF shall have been amended, suspended, abrogated, repealed or waived so as to affect materially and adversely, in the opinion of the Association, the ability of SIF or the successor to SIF to perform any of its obligations under the SIF Subsidiary Agreement or under any Subproject Agreement; - 13 - (b) as a result of events which have occurred after the date of this Agreement, a situation shall have arisen which shall make it improbable that SIF will be able to perform its obligations under the SIF Subsidiary Agreement or under any Subproject Agreement; (c) the Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of SIF, or for the suspension of its operations before November 20, 1995; (d) the Borrower shall have failed to designate or establish a successor to SIF, satisfactory to the Association, for purposes of carrying out Part A of the Project in the event that SIF shall cease to exist before completion of such Part of the Project or the Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of such successor of SIF, or for the suspension of its operations, before completion of such Part of the Project; (e) the Funding Agreements referred to in Section 7.01 (b) of this Agreement or the IDB Loan Agreement or the UNDP Technical Assistance Contract shall have failed to become effective by June 30, 1993, or such later date as the Association may agree, provided, however, that the provisions of this paragraph shall not apply if the Borrower establishes, to the satisfaction of the Association, that adequate funds for the Project or the technical assistance to be provided under the UNDP Technical Assistance Contract are available to the Borrower from other sources, on terms and conditions consistent with the obligations of the Borrower under the Funding Agreements, the IDB Loan Agreement and the UNDP Technical Assistance Contract; (f) (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 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 shall have become due and payable prior to the agreed maturity thereof; and - 14 - (ii) Subparagraph (i) of this paragraph shall not apply if the Borrower establishes to the satisfaction of the Association that: (A) such suspension, cancellation, 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 consistent with the obligations of the Borrower under this Agreement; (g) the Operational Manual shall have been amended, suspended, abrogated, repealed or waived so as to affect, in the opinion of the Association, materially and adversely the ability of SIF to carry out Part A of the Project or to perform its obligations under the SIF Subsidiary Agreement; and (h) SIF shall have failed to comply with any of its obligations under the SIF Subsidiary Agreement. Section 6.02. Pursuant to Section 7.01 (d) of the General Conditions, the following additional events are specified: (a) the events specified in paragraphs (d) or (g) or (h) of Section 6.01 of this Agreement shall occur and shall continue for a period of thirty days after notice thereof shall have been given by the Association to the Borrower; (b) the events specified in paragraphs (a) or (c) of Section 6.01 of this Agreement shall occur; and (c) any event specified in paragraph (f) (i) (A) of Section 6.01 of this Agreement shall occur, subject to the proviso of paragraph (f) (ii) of that Section. - 15 - ARTICLE VII Effective Date; Termination Section 7.01. 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 SIF Subsidiary Agreement has been entered into between the Borrower and SIF; (b) Funding Agreements have been entered into between the Borrower or SIF on the one hand and the Financiers on the other hand, under terms and conditions satisfactory to the Association, for an aggregate amount equivalent to $3,500,000; (c) the IDB Loan Agreement and the UNDP Technical Assistance Contract have been entered into between the Borrower or SIF on the one hand, and IDB and UNDP, respectively, on the other hand; (d) the Operational Manual has been adopted by SIF; and (e) SIF has established, in a manner satisfactory to the Association, a management information system satisfactory to the Association and has submitted to the Association the reports and performance indicators produced for use during the execution of the Project by such management information system as of the Effective Date. Section 7.02. 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 SIF Subsidiary Agreement has been duly authorized or ratified by, and is legally binding upon the Borrower and SIF in accordance with its terms; (b) that the Funding Agreements referred to in Section 7.01 (b) of this Agreement, the IDB Loan Agreement and the UNDP Technical Assistance Contract have been duly authorized or ratified by, and are legally binding upon the respective parties thereto, in accordance with their respective terms; and - 16 - (c) that the Operational Manual has been duly adopted by SIF. Section 7.03. The date Apnf 12, 1 is hereby specified for the purposes of Section 12.04 of the General Conditions. Section 7.04. The obligations of the Borrower under Sections 3.01 (c) and 3.04 of this Agreement shall cease and determine on the date on which this Agreement shall terminate or on the date 10 years after the date of this Agreement, whichever shall be the earlier. ARTICLE VIII Representatives of the Borrower; Addresses Section 8.01. The Minister of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 8.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Ministerio de Finanzas Frente al Edificio de la Asamblea Nacional Managua, D.N. Nicaragua c/o Ministerio de Economia y Desarrollo Carretera Masaya Frente al Camino de Oriente Apartado 8 Managua, D.N. Nicaragua Telex: 2410 For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America - 17 - Cable address: Telex: INDEVAS 248423 (RCA) Washington, D.C. 82987 (FTCC) 64145 (WUI) or 197688 (TRT) 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. REPUBLIC OF NICARAGUA By j/ ER S1To PALA2o Z 4r7.TADO Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION Regional Vice President Latin America and the Caribbean - 18 - 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) Subprojects ) 90% of amounts ) disbursed by (a) All Subprojects 14,510,000) SIF for each other than ) Subproject for Maintenance ) which a Sub- Training Sub- ) project Agreement projects ) has been signed ) on or before (b) Maintenance 620,000) December 31, 1994 Training Sub- ) projects ) (2) Consultants ) Services: ) (a) for Part A 70,000) of the ) Project ) (b) for Part B 140,000) of the ) 100% Project ) (c) for Part C 280,000) of the ) Project ) - 19 - Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (d) for Part D 490,000) of the ) Project ) (3) Auditor Services 140,000) 100% (4) Goods: ) 100% of foreign ) expenditures, 100% (a) for Part A 210,000) of local expendi- of the ) tures (ex-factory Project ) cost) and 75% of ) local expenditures (b) for Parts C 140,000) for other items and D of the ) procured locally Project ) (5) Unallocated 700,000 TOTAL 17,300,000 2. For the purposes of this Schedule: (a) the term "foreign expenditures" 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; (b) the term "local expenditures" means expenditures in the currency of the Borrower or for goods or services supplied from the territory of the Borrower; and (c) the term "Maintenance Training Subprojects" means subprojects for the training of groups and individuals in the maintenance of infrastructure works. 3. Notwithstanding the provisions of paragraph I above, no withdrawals shall be made in respect of: (a) payments made for - 20 - expenditures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not to exceed SDR 1,040,000, may be made on account of payments made for expenditures before that date but after July 1, 1992; and (b) payments made under any Subproject costing more than the equivalent of $250,000 and each of the first two Subprojects for social infractructure, social services, economic infrastructure and work maintenance training, unless the Association shall have approved the respective Subproject. - 21 - SCHEDULE 2 Description of the Project The objectives of the Project are: (a) to assist the Borrower sustain its poverty alleviation efforts and maintain social cohesion; and (b) to strengthen the institutional capacity of INEC, MOE and MOH. 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: SIF 1. Carrying out of Subprojects. 2. Strengthening of FIS' capabilities in the appraisal, approval and supervision of Subprojects. Part B: Living Standards Survey 1. Implementation of a living standard measurement survey and analysis of its results. 2. Creation of a system to monitor living standards data, including data on: (a) overall welfare levels in the different regions of the Borrower's territory; (b) employment and cost of labor; (c) price indexes; (d) preferences and functioning of the informal sector; and (e) migration. Part C: Institutional Strengthening of MOE and MOH 1. Strengthening MOE's and MOH's capabilities in: (a) preparing Subprojects; and (b) developing and implementing maintenance systems for its facilities. 2. Preparation of infrastructure maintenance manuals and organization and training of local community groups in such maintenance. - 22 - Part D: Social Sector Management Strengthening of the budgeting and financial management capabilities of selected institutions of the Borrower's social sector. The Project is expected to be completed by December 31, 1994. - 23 - SCHEDULE 3 Procurement and Consultants' Services Section I. Procurement of Works Part A: International Competitive Bidding 1. Except as provided in Part C hereof, works 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 1992 (the Guidelines). 2. To the extent practicable, contracts for works shall be grouped into bid packages estimated to cost the equivalent of $500,000 or more for works. Part B: Preference for Domestic Contractors In the procurement of works in accordance uith the procedures described in Part A.1 hereof, the Borrower may grant a margin of preference to domestic contractors in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraph 5 of Appendix 2 thereto. Part C: Other Procurement Procedures 1. Goods shall be procured under contracts awarded on the basis of comparison of price quotations obtained from at least three suppliers eligible under the Guidelines, in accordance with procedures acceptable to the Association. 2. Works estimated to cost the equivalent of $500,000 or less per contract, up to an aggregate amount not to exceed the equivalent of $17,500,000 may be procured under contracts awarded on the basis of competitive bidding advertised locally, in accordance with procedures satisfactory to the Association. 3. Works estimated to cost the equivalent of $50,000 or less per contract, up to an aggregate amount equivalent to $3,500,000, may be procured under contracts awarded on the basis of comparison of price quotations obtained from at least three contractors eligible under the Guidelines, in accordance with procedures acceptable to the Association. - 24 - 4. Works estimated to cost the equivalent of $30,000 or less per contract, up to an aggregate amount equivalent of $3,400,000, may be procured under contracts awarded through direct contracting, in accordance with procedures satisfactory to the Association, provided, however, that after any of the reviews by the Association of the standard regionalized unit prices adopted by SIF, the Association shall not find such prices unreasonable. Part D: Review by the Association of Procurement Decisions 1. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to each contract: (a) procured pursuant to the provisions of Part A hereof; (b) for works estimated to cost the equivalent of $250,000 or more and for goods estimated to cost the equivalent of $150,000 or more; and (c) the first two contracts procured pursuant to the provisions of Parts D.3 and D.4 hereof, 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 the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract required to be furnished to the Association pursuant to said paragraph 2 (d) shall be furnished to the Association prior to the making of the first payment out of the Special Account in respect of such contract. (b) With respect to each contract not governed by the preceding 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 the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract together with the other information required to be furnished to the Association pursuant to said paragraph 3 shall be furnished to the Association as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 4 to this Agreement. (c) The provisions of the preceding subparagraph (b) shall not apply to contracts on account of which withdrawals from the Credit Account are to be made on the basis of statements of expenditure. 2. The figure of 15% is hereby specified for purposes of paragraph 4 of Appendix 1 to the Guidelines. - 25 - Section II. Employment of Consultants In order to assist the Borrower in carrying out the Project, the Borrower shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Association on the basis of the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981. - 26 - SCHEDULE 4 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1) through (4) 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 the Project and to be financed out of the proceeds of the Credit allocated from time to time to the eligible Categories in accordance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount of $2,500,000 to be withdrawn from the Credit Account and deposited in the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. 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 shall be made as follows: (a) For withdrawals of the Authorized Allocation, the Borrower shall furnish to the Association a request or requests for a deposit or deposits which do not exceed the aggregate amount of the Authorized Allocation. On the basis of such request or requests, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit in the Special Account such amount or amounts as the Borrower shall have requested. (b) (i) For replenishment of the Special Account, the Borrower shall furnish to the Association requests for deposits into the Special Account at such intervals as the Association shall specify. - 27 - (ii) Prior to or at the time of each such request, the Borrower shall furnish to the Association the documents and other evidence required pursuant to paragraph 4 of this Schedule for the payment or payments in respect of which replenishment is requested. On the basis of each such request, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit into the Special Account such amount as the Borrower shall have requested and as shall have been shown by said documents and other evidence to have been paid out of the Special Account for eligible expenditures. All such deposits shall be withdrawn by the Association from the Credit Account under the respective eligible Categories, and in the respective equivalent amounts, as shall have been justified by said documents and other evidence. 4. For each payment made by the Borrower out of the Special Account, the Borrower shall, at such time as the Association shall reasonably request, furnish to the Association such documents and other evidence showing that such payment was made exclusively for eligible expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Schedule, the Association shall not be required to make further deposits into the Special Account: (a) if, at any time, 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 Conditions and paragraph (a) of Section 2.02 of this Agreement; or (b) once the total unwithdrawn amount of the Credit allocated to the eligible Categories, less 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 equal the equivalent of twice the amount of the Authorized Allocation. 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 Association shall - 28 - specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Association 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 Association shall have determined at any time that any payment out of the Special Account: (i) was made for an expenditure or in an 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: (A) provide such additional evidence as the Association may request; or (B) 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. Unless the Association shall otherwise agree, no further deposit by the Association into the Special Account shall be made until the Borrower has provided such evidence or made such deposit or refund, as the case may be. (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. (c) The Borrower may, upon notice to the Association, refund to the Association all or any portion of the funds on deposit in the Special Account. (d) Refunds to the Association made pursuant to paragraphs 6 (a), (b) and (c) of this Schedule shall be credited to the Credit Account for subsequent withdrawal or for cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions. 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