Tanzania - Second Highway Project

RESTRICTED Report No. P-751 FILE Cop This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSAL TO AMEND DEVELOPMENT CREDIT NO. 142 TA TO THE UNITED REPUBLIC OF TANZANIA FOR THE SECOND HIGHWAY PROJECT October 30, 1969  INTEITMATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOIENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSAL TO AMEND DEVELOPIvIENT CREDIT NO. 142 TA TO THE UNITED REPUBLIC OF TANZANIA FOR THE SECOND HIGHWAY PROJECT 1. I submit the following report and recommendation on a proposed amendment to Development Credit No. 142 TA to the United Republic of Tanzania, to increase the amount of the credit by the equivalent of $7.5 million to $15.5 million. PART I - HISTORICAL 2. On February 18, 1969, the Executive Directors approved Bank Loan No. 586 TA of $7.0 million and IDA Credit No. 142 TA of $8.0 million to help finance a Second Highway Project in Tanzania comprising the reconstruction of the Morogoro-Iyaya section (310 miles) of the Tanzania- Zambia Highway. The Swedish International Development Agency (SIDA) participated in the financing of the project by extending a credit of $15.0 million on IDA terms, of which half was intended as permanent financing and half as interim financing in the sense described below. 3. At the time of approval of the Bank/IDA financing for the pro- ject, the Executive Directors were informed that a part of the Swedish financing was being provided on the understanding that once the Second Replenishment of IDA's resources or other arrangements providing the Association with at least the equivalent of $500 million from contribu- tions by member countries prior to December 31, 1970 became effective, Tanzania would apply to the Association for a further credit in an amount of $7.5 million for the Second Highway Project, and, if this supplemental credit were granted by the Association, 39,000,000 kroner (approximately $7.5 million) of the Swedish credit would be cancelled. The Executive Directors agreed that such a further credit for this pro- ject, on terms and conditions similar to those of the first credit, was acceptable in principle, provided that the Association's usual lending requirements were satisfied by Tanzania at the time the supplemental credit was presented to the Executive Directors for final approval. 4. Following the effectiveness of the Second Replenishment in July this year and in accordance with the understanding reached between the Bank, the Association and SIDA, the Government of Tanzania made a formal request to the Association in September to replace the equivalent of $7.5 million of the Swedish credit. Negotiations for the proposed increase in the IDA Credit for the Second Highway Project have been conducted by correspondence.  - 2 - PART II - DESCRIPTION OF THE PROPOSED ADDITIONAL FINANCING BORROWER: The United Republic of Tanzania. AMOUNT: US$ 7.5 million equivalent in various currencies. PURPOSE: To help finance the reconstruction of the Morogoro-Iyaya section of the Tanzania-Zambia Highway in replacement of an equivalent amount of the credit extended by Sweden. AMORTIZATION: To conform with IDA Credit No. 142 TA, through semi-annual installments of 1/2 of 1% from Mlarch 1, 1979 through September 1, 1988, and of 1-1/2% from March 1, 1989 through September 1, 2018. SERVICE CHARGE: 3/4 of 1% per annum. PART III - THE PROJECT 5. An appraisal report entitled "Tanzania - Appraisal of the Second Highway Project" (Report No. TO-690a) was circulated to the Executive Directors on February 6, 1969. There have been no changes in the project since that date. A supervision mission which visited Tanzania in late September has reported that progress in implementing the project is satisfactory. All contracts for the project have been let. PART IV - LEGAL INSTRUIE TS AND AUTHORITY 6. A draft Agreement Amending Development Credit Agreement No. 142 TA is being distributed separately. The draft agreement provides for the increase of the credit amount from $8 million to $15.5 million. All other covenants of the existing Development Credit Agreement would remain in force. A draft Agreement Amending Agreement on Allocation and Disburse- ment of Proceeds of Financing between Tanzania, Sweden, IDA and the Bank, reflecting the increase of the IDA credit amount, is also being distributed separately. The Recommendation of the Committee provided for in Article V, Section 1 (d) of the Articles of Agreement and the text of a draft resolu- tion approving the proposed amendments are being distributed separately.  PART V - COMPLIAINCE WITH ARTICLES OF AGRE31ET 7. I am satisfied that the proposed amendment to IDA Credit No. 142 TA would comply with the Articles of Agreement of the Association. PART VI - RECOMMENDATION 8. I recommend that the Executive Directors approve the proposed amendment to IDA Credit No. 142 TA. Robert S. McNamara President Washington, D. C. October 30, 1969