Zambia - Second Program Loan : Loan 1322 - Loan Agreement - Conformed

CONFORKD COPY LOAN NUMBER 1322 ZA LOAN AGREEMENT (Second Program Loan) between REPUBLIC OF ZAMBIA and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated September 17, 1976 S LOAN AGREEMENT AGREEMENT, dated September 17, 1976, between REPUBLIC OF ZAMBIA (hereinafter called the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank). WHEREAS (A) the Borrower has taken and intends to take fur- ther measures designed to re-establish balance of payments equil- ibrium, expand and diversify the revenue base and reduce the drain on the budget from subsidies in the short term, while maintaining and strengthening its policies for achieving the long-term objec- tives of economic diversification generally and agricultural and rural development particularly; (B) the Borrower has requested the Bank to assist in the financing of the foreign exchange cost of the Project described in Schedule 2 to this Agreement by making the Loan as hereinafter provided; and WHEREAS the Bank has agreed, on the basis inter alia of the foregoing, to make the Loan to the Borrower upon the terms and conditions hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: -2- ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Loan and Guar- antee Agreements of the Bank, dated March 15, 1974, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Loan and Guarantee Agreements of the Bank being hereinafter called the General Conditions). Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Project Account" means the account to be established in accordance with Section 3.02 of this Agreement; (b) "SITC" means the United Nations Standard International Trade Classification, 1963 Revision, published in Commodity Indexes for the Standard International Trade Classification, Revised, Statistical Papers, Series M, No. 38 (ST/STAT/Ser.M,'38 (1963); (c) "the Borrower's Capital Estimates and Supplementary Estimates for 1976" means the "Estimates of Revenue and Expenditure (Including Capital and Constitutional and Statutory Expenditure) for the year 1st January, 1976, to 31st December, 1976" and the -3- "Supplementary Estimates for 1976", approved by the Borrower's appropriate authorities; (d) "Minister" means the member of the Cabinet of the Borrower responsible for finance under the Loans and Guarantees (Authorization) Act, Chapter 601 of the Laws of Zambia; (e) "local authority" means a city council, a municipal council, a township council, a rural council, or any other gov- ernmental authority of the Borrower (other than its central gov- ernment) which has power to raise revenues by taxation and to charge such revenues or any of its assets as security for external debt; and (f) "K" or "Kwacha" means the currency of the Borrower. ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions in the Loan Agreement set forth or re- ferred to, an amount in various currencies equivalent to thirty million dollars ($30,000,000). Section 2.02. The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Bank, for expendi- tures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of the imported goods included in such Schedule and to be financed out of the proceeds of the Loan. Section 2.03. Except as the Bank shall otherwise agree, im- ported goods to be financed out of the proceeds of the Loan shall be procured in accordance with the Borrower's usual procurement procedures acceptable to the Bank. Section 2.04. The Closing Date shall be June 30, 1977 or such later date as the 3ank shall establish. The Bank shall promptly notify the Borrower of such later date. Section 2.05. The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. -5- Section 2.06. The Borrower shall pay interest at the rate of eight and ninety hundredths per cent (8.90%) per annum on the principal amount of the Loan withdrawn and outstanding from time to time. Section 2.07. Interest and other charges shall be payable semi-annually on February 15 and August 15 in each year. Section 2.08. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. Section 2.09. The Governor of the Bank of Zambia or such other person or persons as the Governor shall designate in writing are designated as authorized representatives of the Borrower for purposes of Section 2.02 of this Agreement and Article V of the General Conditions. -6- ARTICLE III Execution of the Project Section 3.01. (a) The Borrower shall carry out the Project, or cause it to be carried out, with due diligence and efficiency. (b) The Borrower shall cause the Bank of Zambia to establish and maintain a unit for the purpose of reviewing relevant import documents and for preparing and submitting withdrawal applications under the Project. Section 3.02. (a) The Borrower shall establish, within its Ministry of Finance, an account (hereinafter called the Project Account) and shall credit to the Project Account, upon each with- drawal from the Loan Account, the equivalent in Kwacha of the currency or currencies withdrawn from the Loan Account (such equivalent to be determined as of the respective dates of such withdrawals). (b) Except as the Bank shall otherwise agree, and subject to the provisions of subsection (c) of this Section, the amounts credited to the Project Account shall be used exclusively to fi- nance expenditures included under the Categories of the Borrower's Capital Estimates and Supplementary Estimates for 1976 specified in Schedule 4 to this Agreement. (c) Except as the Bank shall otherwise agree, no withdrawal shall be made from the Project Account in respect of expenditures -7 which are for nondevelopmental purposes or for goods or services financed or to be financed from sources outside Zambia. (d) The Borrower shall furnish to the Bank on a monthly basis, a certification by its Chief Accountant, in such form and detail as shall be reasonably requested by the Bank, showing ex- penditures actually made under each Category of its Capital Esti- mates and Supplementary Estimates for 1976 specified in Schedule 4 to this Agreement, and the amounts withdrawn from the Project Account in respect of such expenditures. (e) The Borrower shall cause the Project Account to be audited by auditors acceptable to the Bank, and shall transmit to the Bank, not later than September 30, 1977, certified copies of the finan- cial statements in connection with the Project Account, and a signed copy of the said auditor's report. Section 3.03. (a) The Borrower undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Loan against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by the Borrower to replace or repair such goods. (b) Except as the Bank shall otherwise agree, the Borrower shall cause the proceeds of the Loan to be used exclusively for the Project. -8- Section 3.04. The Borrower: (a) shall maintain records ade- quate to record the progress of the Project (including the cost thereof) and to identify the imported goods financed out of the proceeds of the Loan, and to reflect in accordance with consis- tently maintained appropriate accounting practices, the operations j and financial conditions of the Project Account; (b) shall enable the Bank's accredited representatives to examine any relevant records and documents; and (c) shall furnish to the Bank all such information as the Bank shall reasonably request concerning the Project, the expenditure of the proceeds of the Loan and the goods financed out of such proceeds and the administration, operations Lai financial conditions of the Project Account. Section 3.05. (a) The Borrower shall (i) review, at regular intervals not exceeding one year each, the price structure of agricultural commodities and production inputs in the Borrower's territory; and (ii) based on the above, adopt and implement all measures which are necessary to maintain adequate price incentives for agricultural production. (b) The Borrower shall cause the prices of agricultural com- modities and production inputs to be established and announced each year sufficiently in advance of the planting season as to allow farmers the opportunity to take this into consideration in planning their crop production for that year. -9- ARTICLE IV Other Covenants Section 4.01. (a) It is the policy of the Bank, in making loans to, or with the guarantee of, its meubers not to seek, in normal circumstances, special security from the member concerned but to ensure that no other external debt shall have priority over its loans in the allocation, realization or distribution of for- eign exchange held under the control or for the benefit of such member. To that end, if any lien shall be created on any public assets (as hereinafter defined), as security for any external debt, which will or might result in a priority for the benefit of the creditor of such external debt in the allocation, realization or distribution of foreign exchange, such lien shall, unless the Bank shall otherwise agree, ipso facto and at no cost to the Bank, equally and ratably secure the principal of, and interest and other charges on, the Loan, and the Borrower, in creating or per- mitting the creation of such lien, shall make express provision to that effect; provided, however, that, if for any constitutional or other legal reason such provision cannot be made with respect to any lien created on assets of any of its local authorities, the Borrower shall promptly and at no cost to the Bank secure the principal of, and interest and other charges on, the Loan by an equivalent lien on other public assets satisfactory to the Bank. (b) The foregoing undertaking shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely as security for payment of the purchase price of such property; - 10 - and (ii) any lien arising in the ordinary course of banking trans- actions and securing a debt maturing not more than one year after its date. (c) As used in this Section, the term "public assets" means assets of the Borrower or any local authority or any agency of the Borrower or of any local authority, including gold and other foreign exchange assets held by any institution performing the functions of a central bank or exchange stabilization fund, or similar functions, for the Borrower. Section 4.02. The Borrower shall maintain, or cause to be maintained, records adequate to reflect in accordance with con- sistently maintained sound accounting practices the operations, resources and expenditures, in respect of the Project, of the departments or agencies of the Borrower responsible for carry- ing out the Project or any part thereof. 41 - 11 - ARTICLE V Termination Section 5.01. The date November 16, 1976, is hereby specified for the purposes of Section 12.04 of the General Conditions. - 12 - ARTICLE VI Representative of the Borrower; Addresses Section 6.01. The Minister of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 6.02. The following addresset; are specified for the purposes of Section 11.01 of the General Condit4ons! For the Borrower: Ministry of Finance P.O. Box R.W. 62 Ridgeway Lusaka, Zambia Cable address: /Telex: FINANCE, RIDGEWAY ZA4220/ Lusaka For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: /Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (wui)7 - 13 - IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agree- ment 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 ZAMBIA By Is/ Fidelis Fields Bwalya Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Willi A. Wapenhans Regional Vice President Eastern Africa - 1~4 - SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The items that may be financed out of the proceeds of the Loan shall be those imported items included in SITC Divisions 2, 5, 6, and 7, excluding, however, the following Groups, Sub-groups or Items: SITC Code Description of Articles Division 2 (Crude Materials) 241 Wood for fuel, charcoal 267 Second-hand textiles, clothes Division 5 (Chemicals) 54 Medicinal and pharmaceutical products 55 Essential oils and perfume materials 56 Manufactured fertilizers 571-11 Propellant powders 571-40 Ammunition and parts thereof Division 6 (Manufactures) 629-101 Tires for road motor vehicles 629-102 Tires for pedal cycles 629-105 Tubes for RMV 629-106 Tubes for pedal cycles 629-109 Tires and tubes n.e.s. 629-300 Hygienic and pharmaceutical articles of rubber 629-900 Articles of rubber n.e.s. 642 Articles of paper pulp, paper or paperboard 655-409 Made-up articles of impregnated or coated textile fabrics 6 - 15 - SITC Code Description of Articles 656 Made-up articles wholly or chiefly of textiles n.e.s. 657 Floor coverings, carpets, etc. 665-200 Glass tableware 665-82 to 84 Decorative glass 666 Pottery 667 Pearls and precious stones 696 Cutlery 697 Household equipment of base materials Division 7 (Machinery and Transport Equipment) 711-501 Road motor vehicle engines 711-502 Road motor vehicle parts 711-503 Outboard motors 711-504 Internal combustion engines n.e.s. 711-505 Internal combustion parts n.e.s. 719-120 Airconditioning machines 719-410 Domestic food processing appliances 719-420 Domestic refrigerators, non- electrical 719-430 Domestic water heaters, non- electrical 724-100 TV broadcasting receivers 724-200 Radio receivers 724-920 Microphones, loudspeakers, amplifiers 724-990 Other telephonic equipment n.e.s. 725-010 Domestic refrigerators, electric 725-020 Domestic washing machines 725-031 Domestic electric fans 725-039 Electromagnetic domestic appli- ances, n.e.s. 725-040 Electric shavers 725-050 Electric space heating equipment 729-111 through Batteries 729-129 729-2 Lamps 729-410 Electrical equipment for 1/c engines SI - 16 - SITC Code Description of Articles 729-420 Electrical lighting equipment for motor vehicles 732-100 Passenger motor cars 732-910 Motor cycles 732-920 Motor cycle parts 733-110 Cycles 733-120 Cycle parts 733-310 Camping caravans 733-339 Other non-motorized vehicles and parts - 17 - 2. Notwithstanding the provisions of paragraph 1 above, no with- drawals shall be made in respect of: (a) expenditures prior to the date of this Agreement; (b) expenditures for goods procured under invoices for less than $5,000 equivalent; (c) expenditures for goods to be supplied under a con- tract which any official bilateral lender or any international development finance institution shall have agreed to finance; (d) expenditures for any goods in respect of which the Bank shall have reasonably determined that the pro- curement thereof has been inconsistent with the procedures referred to in Section 2.03 of this Agreement; and (e) payments for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importa- tion, manufacture, procurement or supply thereof. S1 - 18 - SCHEDULE 2 Description of the Project The Project consists of the provision by the Borrower of foreign exchange required for the import into Zambia of goods included in Schedule 1 to this Agreement. - 19 - SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each February 15 and August 15 beginning February 15, 1980 through February 15, 1993 1,070,000 On August 15, 1993 1,110,000 * To the extent that any portion of the Loan is repayable in a currency other than dollars (see General Conditions, Section 4.02), the figures in this column represent dollar equivalents determined as for purposes of withdrawal. - 20 - Premiums on Prepayment The following percentages are specified as the premiums pay- able on repayment in advance of maturity of any portion of the principal amount of the Loan pursuant to Section 3.05 (b) of the General Conditions: Time of Prepayment Premium* Not more than three years before matur1ty 1.55% More than three years but not more than six years before maturity 3.15% More than six years but not more than eleven years before maturity 5.75% More than eleven years but not more than fifteen years before maturity 7.85% More than fifteen years before maturity 8.90% Given as an indication only and based on an assumed rate of interest of 8.90% per annum. The final table will reflect the interest rate approved for the Loan by the Executive Directors of the Bank. I - 21 - SCHEDULE 4 List of Categories Referred to in Section 3.02 (b) of this Agreement 1976 Capital Estimates Category Description Estimates (Kwacha) 320/01 Loans and I vestments (Ministry of Local Government and Houqing) 7,470,000 321 Loans and Investments (Ministry of Finance) 45,269,000 325 Ministry of Local Government and Housing 3,130,000 346 Ministry of Health 6,497,900 351 Ministry of Power, Transport and Works 38,016,000 380 Ministry of Education 17,073,000 389 Ministry of Rural Development 11,078,000 391 Office of the Cabinet Minister, Copperbelt Province 1,225,000 392 Office of the Cabinet Minister, Central Province 1,390,000 393 Office of the Cabinet Minister, Northern Province 1,601,000 394 Office of the Cabinet Minister, Western Province 1,668,000 395 Office of the Cabinet Minister, Eastern Province 1,647,000 - 22 - 1976 Capital Estimates Category Descrirtion Estimates (Kwacha) 396 Office of the Cabinet Minister, Luapula Province 1,612,000 397 Office of the Cabinet Minister, North-Western Province 1,66o,oo 398 Office of the Cabinet Minister, Southern Province 1,624,000 1976 Supplementary Estimates Recurrent 89 Ministry of Rural Development 375,000 (excluding Grants, Subsidies and Other Payments under Headquarters - 89/01/3) Capital 389 Ministry of Rural Development 1,575,000 393/394/ Office of Cabinet Ministers- 750,000 397 Northern, Western and North-Western -- Feeder Roads