Zambia - Industrial Reorientation Project : Credit 1630 - Credit Agreement - 1 - Conformed

CREDIT NUMBER / 3 0 -ZA Development Credit Agreement (Industrial Reorientation Project) between THE REPUBLIC OF ZAMBIA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated 2 , 1985 DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated c0' , 1985, between THE REPUBLIC OF ZAMBIA (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 Borrower has also requested the Association in its capacity as Administrator of the Special facility for Sub-Saharan Africa (the African Facility) established by its Executive Direc- tors by Resolution No. IDA 85-1 of May 21, 1985 (the Resolution) to assist in the financing of the same Project by granting a special credit (hereinafter called the African Facility Credit) to the Borrower equivalent to forty-two million one hundred thousand Special Drawing Rights (SDR 42,100,000); and the Asso- ciation as such Administrator is willing to grant the African Facility Credit pursuant to the African Facility Credit Agreement of even date herewith between the Borrower and the Association as such Administrator; (C) the Borrower intends to obtain from the United Kingdom a grant in the amount of Pounds Sterling ten million (E10,000,Q00) equivalent out of the Special Joint Financing provided under paragraph 9 of the Resolution to assist in the financing of the same Project; (D) the Association has received a letter dated June 13, 1985 from the Borrower describing a program of actions designed to bring about appropriate changes in its industrial and trade policies (the Program) and declaring the Borrower's commitment to the execution of the Program; (E) pursuant to an exchange of letters dated February 18, 1985 and March 18, 1985 between the Borrower and the Association, the Association has granted to the Borrower an advance in various currencies equivalent to one hundred sixty thousand dollars ($160,000) (hereinafter called the Project Prepartion Advance) for the purpose of assisting the Borrower in the preparation of the Project; and -2- WHEREAS the Association has agreed, on the basis 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: ARTICLE I General Conditions; Definitions Section 1.01. The General Conditions Applicable to Development Credit Agreements of the International Development Association, dated January 1, 1985 (the General Conditions) constitute an integral part of this Agreement. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Bor- rower, on the terms and conditions set forth or referred to in the Development Credit Agreement, an amount in various currencies equivalent to twenty million one hundred thousand Special Drawing Rights (SDR 20,100,000). 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, as such Scheudle may be amended from time to time by agreement between the Borrower and the Association, for expenditures made (or, if the Association shall so agree, to be made) in respect of the reasonable 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 account in its Central Bank 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 6 to this Agreement. (c) Promptly after the Effective Date, the Association shall, on behalf of the Borrower, withdraw from the Credit - 3 - Account and pay to itself the amount required to repay the prin- cipal amount of the Project Preparation Advance withdrawn and outstanding as of such date and to pay all unpaid charges thereon. The unwithdrawn balance of the authorized amount of the Project Preparation Advance shall thereupon be cancelled. Section 2.03. The Closing Date shall be December 31, 1988 or tich later date as the Association shall establish. The Associa- tion shall promptly notify the Borrower of such later date. Section 2.04. (a) The Borrower shall pay to the Association a commitment charge at the rate of one-half of one per cent (1/2 of 1%) per annum on the principal amount of the Credit not with- drawn from time to time. The commitment charge shall accrue from a date sixty days after the date of the Development Credit Agree- ment to the respective dates on which amounts shall be withdrawn by the Borrower from the Credit Account or shall be cancelled. (b) 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-f ourths of one per cent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.06. Commitment charges and service charges shall be payable semiannually on May 1 and November 1 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semiannual installments payable on each May 1 and November 1 commencing November 1, 1995, and ending May 1, 2035. Each installment to and including the installment payable on May 1, 2005 shall be one-half of one per cent (1/2 of 1%) of such principal amount, and each installment thereafter shall be one and one-half per cent (1-1/2%) of such principal amount. Section 2.08. The currency of the United States of America is hereby specified for the purposes of Section 4.02 of the General Conditions. 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, shall carry out the Project with due diligence and efficiency and in conformity with appropriate administrative and financial practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the Project. (b) Without limitation upon the provisions of paragraph (a) of this Section, the Borrower shall carry out the Project in accordance with the Implementation Program set forth in Schedule 5 to this Agreement, as such Schedule may be amended from time to time between the Borrower and the Association. Section 3.02. Except as the Association shall otherwise agree, procurement of the goods, works and consultants' services required for the Project and to be financed out of the proceeds of the Credit shall be governed by the proisions of Schedule 3 to this Agreement. ARTICLE IV Other Covenants Section 4.01. (a) The Borrower shall maintain or cause to be maintained records and accounts adequate to reflect in accordance with sound accounting practices the operations, resources and expenditures in respect of the Project of the departments or agencies of the Borrower responsible for carrying out the Project or any part thereof. (b) The Borrower shall: (i) have the accounts referred to in paragraph (a) of this Section including the Special Account for each fiscal year audited, in accordance with appropriate 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 four months after -5 - the end of each such year, a certified copy of the report of such audit by the 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 the said accounts and the audit thereof and said records as the Association shall from time to time reasonably request. (c) For all expenditures with respect to which withdrawals are requested from the Credit Account on the basis of statements of expenditure, the Borrower shall: (i) maintain or cause to be maintained, in accordance with paragraph (a) of this Section, separate records and accounts reflecting such expenditures; (ii) retain, until one year after the Closing Date, 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 separate accounts are included in the annual audit referred to in paragraph (b) of this Section and that the report thereof contains, in respect of such separate accounts, a separate opinion by the said auditors as to whether the proceeds of the Credit withdrawn in respect of such expenditures have been used for the purpose for which they were provided. Section 4.02. The Borrower shall: (a) not later than Decem- ber 31, 1985, commence feasibility studies on the establishment of a credit insurance scheme and an export guarantee scheme under terms of reference acceptable to the Association; (b) not later than December 31, 1986 submit to the Association a plan of action for the implementation of the recommendations of the studies; and (c) in consultation with the Association implement the recommendations of the studies. Section 4.03. The Borrower shall: (a) not later than Decem- ber 31, 1985 establish or cause to be established within INDECO -6- an Economic Evaluation Unit to apply sound economic criteria for the appraisal of new investment projects and the performance of existing enterprises; (b) cause the Economic Evaluation Unit to carry out an appraisal, on terms and conditions satisfactory to the Association, of new investment projects and existing enter- prises; and (c) cause INDECO to discontinue by December 31, 1985 any new investment project costing one million dollars equivalent or more which is considered by the Borrower and the Association to be economically unsound. Section 4.04. The Borrower shall: (a) not later than December 31, 1985 submit to the Association an Action Program acceptable to the Association for (i) phasing out or otherwise disposing of on-going industrial activities and enterprises considered by the Borrower and the Association to be economically unsound; and (ii) restructuring and/or taking other appropriate measures to improve the performance of on-going industrial enterprises considered by the Borrower and the Association to be potentially economically viable; and (b) commence implementing such Program not later than April 1, 1986. Section 4.05. The Borrower shall cause INDECO to implement, not later than April 1, 1986, or such other date as the Associa- tion may agree, the Action Program acceptable to the Borrower and the Association on renumeration and other conditons of service of key professional and technical staff. Section 4.06. The Borrower shall, in consultation with the Association take not later than June 30, 1986 appropriate measures to ensure that its sales tax applies to such domestical- ly produced goods, to be agreed upon between the Borrower and the Association. Section 4.07. The Borrower and the Association shall from time to time, at the request of either party, exchange views on the progress achieved in carrying out the Program. To that end, the Borrower shall furnish to the Association for its review and comments a report on the progress achieved in carrying out the Program, in such detail as the Association shall reasonably request. ARTICLE V Remedies of the Association Section 5.01. Pursuant to Section 6.02 (h) of the General Conditions, the following additional events are specified: -7- (a) (i) Subject to subparagraph (ii) of this paragraph: (A) The right of the Borrower to withdraw the proceeds of the African Facility Credit 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) the African Facility Credit shall have become due and payable prior to the agreed maturity thereof. (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. Section 5.02. Pursuant to Section 7.01 (d) of the General Conditions, the following additional event is specified, namely that the event specified in paragraph (a) (i) (B) ot Section 5.01 of this Agreement shall occur, subject to the proviso of paragraph (a) (ii) of that Section. ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as addi- tional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions: (a) The auction system for determining the exchange rate, referred to in the Program, has been approved by the Borrower and has been put into operation. (b) The Borrower has submitted to the Association evidence satisfactory to the Association that necessary governmental -8- action has been taken: to modify the existing import licensing system towards an unrestricted import registration system; and (ii) to repeal all regulations for prohibiting imports for protective purposes. (c) The Borrower has submitted to the Association a list of items expected to attract zero import duty after December 31, 1985. (d) The Borrower has submitted to the Association evidence satisfactory to the Association that the naximum tariff rate on imports has been reduced from 150 per cent \;o 100 per cent. (e) All conditions precedent to the effectiveness of the African Facility Credit (other than the effectiveness of this Agreement) have been fulfilled. Section 6.02. The date sixty days after the date. of this Agreement is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VII Representative of the Borrower; Addresses Section 7.01. 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 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Ministry of Finance P.O. Box 50062 Lusaka Zambia Cable address: Telex: MINFIN MINFIN ZA 42221 Lusaka -9- For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) 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. THE REPUBLIC OF ZAMBIA By Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION ByjsjlelDc~ V / Regional Vice President Eastern and Southern Africa - 10 - 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,i 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) Industrial goods 17,200,000 100% of foreign and spare parts expenditures under Part A of the Project (2) Equipment and 160,000 100% of foreign vehicles under expenditures and Part D of the 75% of local ex- Project penditures (3) Consultants' ser- 2,190,000 100% vices under Part B of the Project (4) Training under 285,000 100% Part C of the Project (5) Refunding of 165,000 Amount due pur- Project Pre- suant to Section paration 2.02(c) of this Advance Agreement (6) Unallocated 100,000 TOTAL 20,100,000 - 11 - 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in a currency other than that of the Borrower for goods or services supplied from the territory of any country other than that of the Borrower; and (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. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of: (a) payments made for expenditures prior to the date of this Agreement; and (b) expen- ditures under Category (1), after the aggregate of the proceeds of the Credit withdrawn from such Category or committed under special commitments or under qualified agreements to reimburse shall have reached an amount of SDR 10,000,000 equivalent, unless the Association shall then have been provided with evidence satisfactory to the Association in compliance with Section 4.07 of this Agreement that the Borrower has achieved progress satis- factory to the Association in the carrying out of the Program and the provisions of Schedule 4 of this Agreement. - 12 - SCHEDULE 2 Description of the Project The objectives of the Project are to: (i) support important policy and institutional reforms designed to increase the effi- ciency and productivity of the private and public firms in the industrial sector; (ii) to encourage the reorientation of the industrial sector towards greater use of local resources and increased exports and (iii) to increase the capacity utilization of the most cost efficient among existing enterprises. 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: Industrial Imports A program for the importation of spare parts, raw materials and other inputs for private and public industrial enterprises. Part B: Technical Assistance Provision of technical assistance to: (a) the Ministry of Finance to set up the Tariff Commission included in the Program, draw up terms of reference and work program of the Commission and identify its staff requirements; (b) the Ministry of Commerce and Industries to establish the Export Promotion Board, included in the Program. (c) the Bank of Zambia to work on forecasts and budget of foreign exchange and to provide on-the-job staff train- ing to Zambia nationals in this area; and (d) INDECO to improve INDECO's capacity to appraise invest- ment projects and to improve the performance of exist- ing enterprises. Part C: Training Local and overseas training of INDECO staff in project apraisal and evaluation. - 13 - Part D: Equipment and Vehicles Provision of equipment and vehicles to assist in the estab- lishment of INDECO's Economic Evaluation Unit, included in the Program The Project is expected to be completed by June 30, 1989. - 14 - SCHEDULE 3 Procurement and Consultants' Services Section I. Procurement of Goods Part A. Modified International Competitive Bidding Contracts for the procurement of industrial inputs and spare parts under Part A of the Project estimated to cost the equivalent of $2,000,000 or more each shall be awarded through international competitive bidding 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 1985 (hereinafter called the Guidelines), subject to the following modifications: (a) Paragraph 2.8 of the Guidelines is deleted and the following is substituted therefor: "2.8 Notification and Advertising The international community should be notified in a timely manner of the opportunity to bid. This will be done by advertising invitations to apply for inclusion in a bidder's invitation list, to apply for prequalification, or to bid; such advertisements should be placed in at least one newspaper of general circulation in the Borrower's country and, in addition, in at least one of the following forms: (i) a notice in the United Nations publication, Development Forum, Business Edition; or (ii) an advertisement in a newspaper, periodical or technical journal of wide international circula- tion; or (iii) a notice to local representatives of countries and territories referred to in the Guidelines, that are potential suppliers of the goods required." (b) The following is added at the end of paragraph 2.21 of the Guidelines: - 15 - "As a further alternative, bidding documents may require the bidder to state the bid price in a single currency widely used in international trade and specified in the bidding documents." (c) Paragraphs 2.55 and 2.56 of the Guidelines are deleted. Part B. Other Procurement Procedures 1. Contracts for industrial inputs and spare parts under Part A of the Project estimated to cost the equivalent of less than $2,000,000 each shall be awarded on the basis of normal procure- ment procedures of the purchaser of such goods. 2. Equipment and vehicles under Part B of the Project may be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Association. Part C. 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 for industrial imports and spare parts estimated to cost the equivalent of $2,000,000 or more, the procedures set forth in paragraphs 2 and 4 of Appen- dix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, such proce- dures 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 pre- ceding 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 6 (the Special Account Schedule) to this Agreement. - 16 - (c) The provisions of the preceding subparagraphs (a) and (b) shall not apply to contracts on account of which the Associa- tion has authorized withdrawals from the Credit Account on the basis of statements of expenditure. Such contracts shall be retained in accordance with Section 4.01 (c) (ii) of this Agree- ment. 2. The figure of 15% is hereby specified for purposes of para- graph 4 of Appendix 1 to the Guidelines. Section II. Employment of Consultants In order to assist the Borrower in carrying out Part B of the Project, the Borrower shall employ consultants whose qualifi- cations, experience and terms and conditions of employment shall be satisfactory to the Association. Such consultants shall be selected in accordance with principles and procedures satisfac- tory 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. - 17 - SCHEDULE 4 Tranche Release The measures to be specifically included in the review provided in paragraph 3 of Schedule 1 to this Agreement are as follows: The Borrower shall have: (a) taken appropriate measures to implement its Program for the removal of all controls on interest rates; (b) submitted to the Association INDECO's investment program acceptable to the Association for fiscal year 1986/1987; (c) completed the legislative process for enacting a new Investment Act; (d) commenced the implementation of a program of action acceptable to the Association for improving the forecasting and budgeting of foreign exchange; (e) taken appropriate measures to simplify its export procedures so that the current system of duty drawback shall be replaced by a system based on average drawbacks covering major groups of exports; and (f) taken appropriate measures to rationalize tariffs on imports so that with the exception of a restricted list of items submitted by the Borrower pursuant to Section 6.01 (c) of this Agreement, all other items with a zero import tariff shall be subject to a 10 per cent minimum tariff. - 18 - SCHEDULE 5 Implementation Program In carrying out Part A of the Project the Borrower shall sell foreign exchange to importers through the auction system as follows: 1. (i) A Foreign Exchange Auction Committee (FEAC) shall be established within the Bank of Zambia to administer the auction system. (ii) Requests for foreign exchange for all purposes shall be made to the FEAC through a commercial bank. (iii) A Secretariat shall be established within the Bank of Zambia to allocate foreign exchange available from different sources to successful bidders. The Borrower shall ensure that the Secretariat shall include a person qualified to advise on the eligibility of the goods to be financed under the Credit. (iv) The Bank of Zambia shall hold a weekly or bi-weekly auction of foreign exchange, the amount of which shall be announced in advance. (v) The exchange rate at each auction shall be determined by the marginal bid which exhausts the foreign exchange available in that particular auction and the rate shall apply to all foreign exchange transactions. (vi) Importers shall be required to receive the imports within a reasonable time of the purchase of foreign exchange and report accordingly to the Bank of Zambia. 2. The Borrower shall take appropriate measures to ensure that the proceeds of the Credit shall be allocated only for the importation of industrial goods and spare parts under Part A of the Project. 3. The Borrower shall take appropriate measures to ensure that the proceeds of the Credit sold under the auction system shall not exceed a cumulative average of $2 million equivalent per month or such other amount as the Association may agree.* * A Supplemental Letter shall provide a schedule of monthly cumulative ceilings of foreign exchange to be sold. - 19 - SCHEDULE 6 Special Account 1. For the purposes of this Schedule: (a) the term "Category" means a category of items to be financed out of the proceeds of the Credit as 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 Part A of the Project and to be financed out of the proceeds of the Credit allocated from time to time to Category 1 in accord- ance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount equi- valent to $6,000,000 to be withdrawn from the Credit Account and deposited in the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. Except as the Association shall otherwise agree, 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 the Association that the Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdra- wals to replenish the Special Account may be made as follows: (a) On the basis of a request or requests by the Borrower for a deposit or deposits which add up to the aggregate amount of the Authorized Allocation, 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) The Borrower shall furnish to the Association requests for replenishment of the Special Account at such intervals as the Association shall specify. On the basis of such requests, the Association shall withdraw from the Credit Account and deposit into the Special Account such amounts as shall be required to replenish the Special Account with amounts not exceeding the amount of payments made out of the Special Account for eligible expenditures. Each such deposit shall be withdrawn by the Asso- ciation from the Credit Account under the respective Category 1, - 20 - and in the respective equivalent amounts, as shall have been justified by the evidence supporting the request for such deposit furnished pursuant to paragraph 4 of this Schedule. 4. For each payment made by the Borrower out of the Special Account for which the Borrower requests replenishment pursuant to paragraph 3 (b) of this Schedule, the Borrower shall furnish to the Association, prior to or at the time of such request, such documents and other evidence as the Association shall reasonably request showing that such payment was made for eligible expen- ditures. 5. (a) Notwithstanding the provisions of paragraph 3 of this Schedule, no further deposit into the Special Account shall be made by the Association when either of the following situations first arises: (i) the Association shall have determined that all further withdrawals should be made directly by the Borrower from the Credit Account in accordance with the provisions of paragraph (a) of Section 2.02 of this Agreement; or (ii) the total unwithdrawn amount of the Credit allo- cated to Category 1 for Part A of the Project, minus the amount of any outstanding qualified agreement to reimburse made by the Association and of any outstanding special commitment entered into by the Association pursuant to Section 5.02 of the General Conditions with respect to Part A of the Project, shall be equal to the equivalent of twice the amount of the Authorized Allocation. (b) Thereafter, withdrawal from the Credit Account of the remaining unwithdrawn amount of the Credit allocated to Cate- gory 1 for Part A of the Project shall follow such procedures as the Association shall 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 have been or will be utilized in making pay- ments 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 any - 21 - expenditure or in any amount not eligible pursuant to paragraph 2 of this Schedule, or (ii) was not justified by the evidence fur- nished pursuant to paragraph 4 of this Schedule, the Borrower shall, promptly upon notice from the Association 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. No further deposit by the Association into the Special Account shall be made until the Borrower has made such deposit or refund. (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 for crediting to the Credit Account. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing ia true copy of the original in the archives of the Interna- tional Development Association. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Association thereunto the 3 day of 0_C__d 198 FOR SECRETARY