Conformed Copy - C3218 - Second Structural Adjustment Credit - Supplemental Letter 4

Page 1 REPUBLIC OF MADAGASCAR June 10, 1999 International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Re: Credit No. 3218-MAG (Second Structural Adjustment Credit) Part A 1. of Schedule 2 to the Development Credit Agreement Final Settlement of BTM Privatization Dossier and Progress Indicators Dear Sirs: With reference to Part A 1. of Schedule 2 to the Development Credit Agreement of even date herewith, entered into between the Republic of Madagascar (hereafter referred to as the Borrower) and the International Development Association (hereafter referred to as the Association), and for the purposes of assessing the further progress to be made with a view to achieving a final settlement of the BTM privatization dossier, we wish to provide to you the following progress report and to confirm our undertaking to dispose of the BTM privatization process as set forth below: 1. On October 22, 1998, we hired KPMG/Progestion, an investment banking institution specializing in structuring offers for the sale of business ventures in the form of a going concern with a view to assisting us in the structuring of an offer for sale for BTM. 2. On November 1998, we launched a public offer for the sale of BTM. In response to that offer, we received an expression of interest to buy BTM from African Financial Holding/Bank of Africa (AFH/BOA), a fully qualified and experienced banking institution operating in several African countries and which has Cotonou, Benin as its headquarters and principal place of business. After a careful review and analysis of the offer to buy received from AFH/BOA, we invited AFH/BOA to send its representative to proceed to Antananarivo for the purposes of negotiating with the Malagasi government suitable terms and conditions for the proposed sale of BTM as a going concern. Those negotiations took place in Antananarivo from March 27 through April 2, 1999 and were concluded with the signing of an Interim Accord, a copy of which was dispatched to you on April 15, 1999. 3. According to the terms of this Interim Accord, AFH/BOA has extended an offer to buy subject to the conditions by the Malagasy government. We anticipate that all formalities pertaining to the final settlement of this transaction will be fulfilled expeditiously and AFH/BOA is expected to be vested with the full authority and powers as required to conduct banking operations in Madagascar during 1999. 4. However, if for any reasons whatsoever, AFH/BOA finds itself in a position not to proceed further with the completion of the BTM sale transaction in accordance with the terms of the Interim Accord, we will promptly inform you of this event. 5. If the event referred to in paragraph 4 above shall have occurred, we will promptly take all measures required on the part of the Malagasy government to wind down, in an orderly manner, BTM’s operations as required by law ; such measures will include, but are not limited to : (a) revoking BTM licence to carry out banking operations and (b) appointment of a liquidator . 6. It is our understanding that in assessing the progress to be made by us in the carrying out of the Program as provided for in Part A.1 of Schedule 2 to the Agreement you will rely on all pertinent and material facts available to you as well as on the indicators described above. We further undertake not to request the release of the Page 2 Second Tranche until we are mutually agreed with the Association that BTM privatization/divestiture process has been settled in a manner acceptable to the Association. Very truly yours, REPUBLIC OF MADAGASCAR By /s/ Tantely Andrianarivo Authorized Representative CONFIRMED: INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Jean-Lois Sarbib Regional Vice Predient, Africa