Malawi - National Agricultural Research Project : Credit 1549 - Credit Agreement - Conformed

CREDIT NUMBER 1549 MAI OFFICIAL Development Credit Agreement (National Agricultural Research Project) between REPUBLIC OF MALAWI and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated 3, 1985 CREDIT NUMBER 1549 MAI DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated , 1985, between REPUBLIC OF MALAWI (hereinafter caled the Borrower or Malawi) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association). WHEREAS (A) the Borrower has requested the Association to assist in the financing of the Project described in Schedule 2 to this Agreement by extending the Credit as hereinafter provided; and (B) the Borrower intends to reach agreement with the United States Agency for International Development (hereinafter called US-AID) for a grant (hereinafter called the US-AID Grant) in an amount of $9,200,000 to assist in financing the Project on the terms and conditions set forth in an agreement to be entered into between the Borrower and US-AID; 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 hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Development Credit Agreements of the Association, dated June 30, 1980, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Development Credit Agree- ments of the Association 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 and in the Preamble to this Agreement have the respective meanings therein set forth and the following addi- tional terms have the following meanings: (a) "Project Preparation Advance" means the project pre- paration advance granted by the Association to the Borrower -2- pursuant to an exchange of letters dated October 12, 1984 and November 14, 1984 between the Borrower and the Association. (b) "ARC" means the Borrower's Agricultural Research Coun- cil. (c) "DAR" means the Department of Agricultural Research within the Borrower's ministry responsible for agriculture. (d) "DOA" means the Department of Agriculture within the Borrower's ministry responsible for agriculture. (e) "TRF" means the Tea Research Foundation. (f) "Project Year" means any year of the execution of the Project computed as of May 1, 1985. (g) "Special Account" means the account referred to in Section 2.02 (c) hereof. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Bor- rower, on the terms and conditions in this Agreement set forth or referred to, an amount in various currencies equivalent to twenty-four million three hundred thousand Special Drawing Rights (SDR 24,300,000). 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, as such Schedule may be amended from time to time by agreement between the Borrower and the Asso- ciation, 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 and to be financed out of the proceeds of the Credit. (b) Promptly after the Effective Date, the Association shall, on behalf of the Borrower, withdraw from the Credit 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 there- on. The unwithdrawn balance of the authorized amount of the Pro- ject Preparation Advance shall thereupon be cancelled. -3- (c) The Borrower shall, for the purpose of the Project, open and thereafter maintain in the currency of the United States of America a Special Account at the Borrower's Reserve Bank (or at such other place as the Association may approve), 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. Except as the Association shall otherwise agree, procurement of the goods and civil works 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 Agree- ment. Section 2.04. The Closing Date shall be October 31, 1990 or such later date as the Association shall establish. The Associa- tion shall promptly notify the Borrower of such later date. Section 2.05. (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 this Agreement to the respec- tive 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 2.06. The Borrower shall pay to the Association a service charge at the rate of three-fourths 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 2.07. Commitment charges and service charges shall be payable semiannually on June 15 and December 15 in each year. Section 2.08. The Borrower shall repay the principal amount of the Credit in semiannual installments payable on each June 15 -4- and December 15 commencing June 15, 1995, and ending December 15, 2034, each installment to and including the installment payable on December 15, 2004, to be one-half of one per cent (1/2 of 1%) of such principal amount, and each installment thereafter to be one and one-half per cent (1-1/2%) of such principal amount. Section 2.09. 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 through DAR and ARC with due diligence and efficiency and in conformity with appropriate administrative, technical, financial, agricul- tural and research practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. (b) The Borrower shall, as a minimum, continue to sustain its annual contribution to DAR's operating expenditures at the level, in real terms, reached during its fiscal year 1984/1985. (c) The Borrower shall ensure that ARC Secretariat be staffed, at a minimum, according to the schedule agreed upon between the parties hereto prior to the date hereof. (d) The Borrower shall ensure that DAR shall: (i) employ (1) a qualified and experienced procurement officer, (2) by November 1, 1985 a qualified and experienced deputy chief agri- cultural research officer (administration and technical ser- vices), and (3) one qualified and experienced station administra- tive officer for each of the research stations at Chitedze, Bvumbwe and Lunyangwa; and (ii) more generally, be staffed at all times according to the schedule agreed upon between the parties hereto prior to the date hereof. (e) The Borrower shall, by April 30, 1987, develop and formally approve the necessary regulations to implement, and thereafter maintain, within DAR a scientific career stream, such career stream to be satisfactory to the Association. -5- (f) (i) The Borrower shall, by March 31, 1988, prepare and submit to the Association for its review and comments an agricultural research master plan. (ii) Promptly upon receipt of the Association's com- ments, the Borrower shall implement such plan, taking into account the Association's comments. (g) (i) The Borrower shall ensure that a Malawian counter- part will be assigned to the consultant who will fill the position of Financial Controller of DAR, such counterpart to have undergone, or to undergo, training at least at the level of an accounting technician and to have such a grade as the Asso- ciation and the Borrower shall consider satisfac- tory. (ii) By April 30, 1987, a review between the Borrower and the Association shall take place to ascertain whether the contract of such consultant should be renewed and, if renewed, whether that consultant would (A) continue to operate as the DAR Financial Controller in a "line capacity", or (B) operate as an advisor to that Controller from the beginning of that renewal period, or (C) begin to operate in such an advisory capacity at a certain point in time during such period. Section 3.02. In order to assist the Borrower in carrying out the Project, the Borrower shall, as and when needed, employ consultants whose qualifications, experience and terms and condi- tions of employment shall be satisfactory to the Association, such consultants to 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; it being specified that the training consultant to be hired to assist DAR and DOA in discharging their respective responsibilties under the Project shall be employed by July 31, 1985. 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 Credit 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) The Borrower shall cause all goods and services financed out of the proceeds of the Credit to be used exclusively for the purposes of the Project. Section 3.04. (a) The Borrower shall furnish to the Associa- tion, promptly upon their preparation, the plans, specifications, reports, contract documents and construction and procurement schedules for the Project, and any material modifications thereof or additions. thereto, in such detail as the Association shall reasonably request. (b) The Borrower shall: (i) maintain records and procedures adequate to record and monitor the progress of the Project (including its cost and the benefits to be derived from it), to identify the goods and services financed out of the proceeds of the Credit, and to disclose their use in the Project; (ii) enable the Association's representatives to visit the facilities and construction sites included in the Project and to examine the goods financed out of the proceeds of the Credit and' any relevant records and documents; and (iii) furnish to the Association at regular intervals all such information as the Association shall reasonably request concerning the Project, its cost and, where appropriate, the benefits to be derived from it, the expenditure of the proceeds of the Credit and the goods and services financed out of such proceeds; it being understood that such information shall include: (A) starting in 1985 (1) a report by DAR, by September 30 of each year, of its planning and review exercise of the past year, (2) a review by ARC, by October 31 of each year, of DAR's proposed program and budget for the Borrower's next fiscal year, and (3) a submission by DAR, by November 30 of each year, of a statement endorsing such program and budget and showing how priorities for DAR expenditures will be set; and (B) by March 31 every three-year, starting on March 31, 1988, an in-depth review by ARC of the DAR research program (including a review of the progress of adaptive research development). (c) Upon the award by the Borrower of any contract for goods, works or services to be financed out of the proceeds of the Credit, the Association may publish a description thereof, -7- the name and nationality of the party to whom the contract was awarded and the contract price. (d) Promptly after completion of the Project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Association, the Borrower shall prepare and furnish to the Association a report, of such scope and in such detail as the Association shall reasonably request, on the execution and ini- tial operation of the Project, its cost and the benefits derived and to be derived from it, the performance by the Borrower and the Association of their respective obligations under the Devel- opment Credit Agreement and the accomplishment of the purposes of the Credit. Section 3.05. The Borrower shall take, or cause to be taken, all such action as shall be necessary to acquire as and when needed all such land and rights in respect of land as shall be required for carrying out the Project and shall furnish to the Association, promptly after such acquisition, evidence satisfac- tory to the Association that such land and rights in respect of land are available for purposes related to the Project. ARTICLE IV Other Covenants Section 4.01. (a) The Borrower shall maintain, or cause to be maintained, records (including separate accounts) adequate to reflect in accordance with consistently maintained appropriate accounting practices the operations, resources and expenditures, in respect of the Project, of the departments or agencies of the Borrower (including DAR and ARC) responsible for carrying out the Project or any part thereof; in so doing, the Borrower shall ensure that all development expenditures shall be separated from recurrent expenditures. (b) Without limitation to the foregoing, the Borrower shall: (i) maintain or cause to be maintained separate accounts reflecting all expenditures on account of which withdrawals are requested from the Credit Account on the basis of statements of expenditure; (ii) retain, until one year after the Closing Date, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing the expenditures on account of which withdrawals are requested from the Credit Account on the basis of -8- statements of expenditure; and (iii) enable the Association's representatives to examine such records. (c) The Borrower shall: (i) have the accounts referred to in paragraphs (a) and (b) of this Section and 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 six months after the end of each such year, a certified copy of the report of such audit by such auditors, of such scope and in such detail as the Association shall have reasonably requested, including without limitation to the foregoing, a separate opinion by said auditors in respect of the expenditures and records referred to in paragraph (b) of this Section as to whether the proceeds of the Credit withdrawn from the Credit Account on the basis of statements of expenditure have been used for the purpose for which they were provided; and (iii) furnish to the Association such other information concerning said accounts, records and expenditures and the audit thereof as the Association shall from time to time reasonably request. Section 4.02. The Borrower shall adequately maintain, or cause to be maintained adequately, the installations and facili- ties constructed, improved, equipped or otherwise assisted under the Project in accordance with appropriate administrative, tech- nical, financial, agricultural and research practices, and pro- vide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the pur- pose. ARTICLE V Remedies of the Association Section 5.01. For the purposes of Section 6.02 of the General Conditions, the following additional event is specified pursuant to paragraph (h) thereof, namely, that: (a) Subject to paragraph (b) of this Section: (A) The right of the Borrower to withdraw the proceeds of any grant (including the US-AID Grant) or loan -9- made to the Borrower for the financing of the Pro- ject shall have been suspended, cancelled or ter- minated 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. (b) Paragraph (a) of this Section 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. For the purposes of Section 7.01 of the General Conditions, the following additional event is specified pursuant to paragraph (d) thereof, namely, that any event speci- fied in paragraph (a) (B) of Section 5.01 of this Agreement shall occur, subject to the proviso of paragraph (b) 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, namely, that: (a) The Special Account shall have been opened, as provided under Section 2.02 (c) hereof. (b) The ARC Secretariat shall have been staffed, as pro- vided under Section 3.01 (c) hereof. (c) The Borrower shall have employed, or cause to be employed: (i) all the consultants required to be employed pur- suant to Section 3.02 hereof for the activities to be carried out during the whole of Project Year 1, and whose list has been agreed upon between the parties hereto prior to the date hereof; and (ii) the personnel referred to in Section 3.01 (d) (i) (1) and (3) hereof. - 10 - Section 6.02. The date /4 JlAA&Z Q, 25, is hereby specified for the purposes of Section 12.04 of the General Condi- tions. Section 6.03. The obligations of the Borrower under Sec- tion 4.02 of this Agreement and the provisions of Section 5.02 of this Agreement shall cease and determine on the date on which the Development Credit Agreement shall terminate or on a date twenty (20) years after the date of this Agreement, whichever shall be the earlier. ARTICLE VII Representatives 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 30049 Capital City Lilongwe 3, Malawi Cable address: Telex: FINANCE 4407 MI Lilongwe 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) - 11 - IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, 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 MALAWI By Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By s B A AA- Regional Vice President Eastern and Southern Africa - 12 - 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) Civil works 9,590,000 100% (2) Staff relocation 102,000 100% (3) Equipment and 3,430,000 100% vehicles (4) (a) Consultants and 5,890,000 100% training (other than (b) below) (b) Contract Research 1,000,000 100% and small items of local training (5) Operating costs 1,220,000 In Project of new activities Years 1 and 2, introduced under 100% for all new the Project activities; in Project Year 3, 100% for Adap- tive Research, Research-Exten- sion Workshops, Contract Research and Incremental Building Mainte- nance and Re- pairs; in Pro- ject Year 4, 100% for Contract Re- search and Incre- mental Building Maintenance and Repairs - 13 - Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (6) Refunding of 600,000 Amount due under Project Prepara- Section 2.02 (b) tion Advance of this Agreement (7) Special Account 410,000 Amounts to be deposited pur- suant to Section 2.02 (c) of this Agreement (8) Unallocated 2,058,000 TOTAL 24,300,000 2. The disbursement percentages have been calculated in com- pliance with the policy of the Association that the proceeds of the Credit shall not be disbursed on account of payments for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importation, manufacture, procurement or supply thereof; on this basis, if the amount of any such taxes levied on or in respect of items in any Category decreases or increases, the Association may, by notice to the Borrower, increase or decrease the disbursement percentage then applicable to such Category as required to be consistent with the aforemen- tioned policy of the Association. 3. Notwithstanding the provisions of paragraph 1 above (a) no withdrawals shall be made in respect of payments made for expen- ditures prior to the date of this Agreement, and (b) no with- drawals shall be made in respect of Categories (1) through (5) for the estate coffee research contract included in Part E of the Project, unless the Borrower shall have provided the Association with all appropriate information concerning the execution of such contract (including all appropriate information regarding the support to be provided by TRF and the staffing pattern envisaged to carry out such research). 4. Notwithstanding the allocation of an amount of the Credit or the disbursement percentages set forth in the table in para- graph 1 above, if the Association has reasonably estimated that - 14 - the amount of the Credit then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Category, the Association may, by notice to the Borrower: (i) reallocate to such Category, to the extent required to meet the estimated shortfall, proceeds of the Credit which are then allocated to another Category and which in the opinion of the Association are not needed to meet other expenditures; and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the disbursement percentage then applicable to such expen- ditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 5. If the Association shall have reasonably determined that the procurement of any item in any Category is inconsistent with the procedures set forth or referred to in this Agreement, no expen- diture for such item shall be financed out of the proceeds of the Credit, and the Association may, without in any way restricting or limiting any other right, power or remedy of the Association under the Development Credit Agreement, by notice to the Bor- rower, cancel such amount of the Credit as, in the Association's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Credit. - 15 - SCHEDULE 2 Description of the Projnct The Project's major objectives are to: (i) improve the focus and quality of Malawi's smallholder-oriented agricultural research program; (ii) strengthen critical linkages, particularly between its research and extension programs; and (iii) improve the efficiency and economy of DAR's on-going activities. To that end, the Project consists of the following Parts: Part A Establishment of ARC. Part B Reduction in DAR's station network and improvement in its physical facilities (including investments in civil works and equipment and staff relocation). Part C Reorganization of DAR into multidisciplinary research teams, and improvements of management systems (including task planning and budgeting, improved data processing and retrieval, and insti- tution of routine planning and evaluation exercises to improve cost-effectiveness). Part D Improvement of DAR's technical capacity (including an im- provement of career stream for DAR's scientists, an improvement of the staff evaluation system linked to the development of work and training programs, an improvement in the assessment of train- ing needs and the planning of training, and an improvement in the delivery of training and technical assistance). Part E Improvement of the collaboration with international agricul- tural research centers and regional research institutes, and introduction of a contract research program with national non- governmental research institutions. - 16 - Part F Improvement of linkages between the Borrower's research and extension services and of the relevance of extension messages through establishment of adaptive research teams, research-exten- sion workshops, and locally-specific extension recommendations. Part G Improvement in the economy and efficiency of on-going DAR's activities, through reduction in administrative costs, overheads and vehicle running costs, and reallocation of DAR's budgetting proceeds to sustain the above new activities. The Project is expected to be completed by April 30, 1990. - 17 - SCHEDULE 3 Procurement A. International Competitive Bidding Except as provided in Part C hereof, civil works and goods shall be procured under contracts awarded in accordance with pro- cedures 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 August 1984 (the Guidelines). B. Preference for Domestic Manufacturers In the procurement of goods in accordance with the proce- dures described in Part A of this Schedule, goods manufactured in Malawi may be granted a margin of preference in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraphs 1 through 4 of Appendix 2 thereto. C. Other Procurement Procedures 1. Contracts for civil works (other than the civil works for the construction and renovation of the Chitedze Research Station and the Lilongwe Adaptation Research Center, and at Lunyangwa, Mkondezi, Baka, Meru, Nchenachena, Chitala, Lifuwu and Bembeke, all of which shall be grouped into one contract to be awarded as provided in paragraph A of this Schedule) may be awarded in accordance with local procedures acceptable to the Association, provided that their estimated individual cost is less than $1,000,000 equivalent. 2. (a) Contracts for scientific equipment, farm equipment and machinery, vehicles, and office equipment and furniture, the estimated individual cost of which contract is less than $150,000 and more than $25,000 equivalent, may be awarded in accordance with local procedures acceptable to the Association, provided that the total value of the contracts so awarded shall not exceed $500,000 equivalent. (b) Contracts for the same items, whose estimated indivi- dual cost is less than $25,000 equivalent, may be awarded (i) either by obtaining at least three price quotations, or (ii) through the offices of the Controller of Stores of the Central Government Stores Department. - 18 - 3. Books and publications may be procured through (i) either direct purchase from sole suppliers, or (ii) competitive shopping where several qualified suppliers are available. 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 for goods and civil works estimated to cost the equivalent of $150,000 and $1,000,000 or more, respectively, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply; provided, however, that where payments for such contract are to be made out of the proceeds of the Special Account, the two conformed copies of the contract required to be furnished to the Association, pursuant to paragraph 2 (d) of the Appendix to the Guidelines, 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; provided, however, that where payments for such contract are to be made out of the proceeds of the Special Account, the two conformed copies of the contract required to be furnished to the Association, pursuant to paragraph 3 of Appendix 1 to the Guidelines together with the other information specified therein, shall be furnished pursuant to paragraph 4 of Schedule 4 (the Special Account Schedule) to this Agreement. (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. 2. The figure of 10% is hereby specified for purposes of para- graph 4 of Appendix 1 to the Guidelines. - 19 - SCHEDULE 4 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 the Project and to be financed out of the proceeds of the Credit allocated from time to time to Categories (1) through (5) in accordance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount in the currency of the United States of America equivalent to the amount allocated to Category (7) which is to be withdrawn from the Cre- dit Account and deposited in the Special Account pursuant to paragraph 3 (a) to this Schedule. 2. Payments out of the Special Account shall be made exclu- sively for eligible expenditures in accordance with the provi- sions of this Schedule. 3. (a) For purposes of withdrawal of the Authorized Alloca- tion, the Association shall, on the basis of a request or re- quests by the Borrower and evidence satisfactory to the Associa- tion that the Special Account has been duly opened, withdraw on behalf of the Borrower from the Credit Account and deposit into the Special Account such amount or amounts of the Authorized Allocation as the Borrower shall have requested, up to the total of the Authorized Allocation. (b) For purposes of withdrawal of proceeds of the Credit to resplenish the Special, Account, the Association shall, on the basis of requests by the Borrower furnished to the Association at such intervals as the Association shall specify, 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. Except as the - 20 - Association may otherwise agree, each such deposit after the ini- tial deposit shall be withdrawn by the Association from the Cre- dit Account under the respective Categories (1) through (5), and in the respective equivalent amounts, as shall have been justi- fied by the evidence supporting the request for such deposit fur- nished pursuant to paragraph 4 of this Schedule. 4. Prior to or at the time of each request by the Borrower for a deposit by the Association into the Special Account pursuant to paragraph 3 (b) of this Schedule, the Borrower shall furnish to the Association in respect of each payment made by the Borrower out of the Special Account such documents and other evidence as the Association shall reasonably request, showing that such pay- ment was made for eligible expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Sche- dule, no further deposit into the Special Account shall be made by the Association (a) when the Association shall have determined at any time that all further withdrawals can be made directly by the Borrower from the Credit Account in accordance with the pro- visions of paragraph (a) of Section 2.02 (c) of this Agreement, or (b) unless otherwise agreed by the Association, when the total unwithdrawn amount of the Credit allocated to Categories (1) through (5) for the Project, minus the amount of any qualified agreement to reimburse made by the Association and of any special commitment entered into by the Association pursuant to Section 5.02 of the General Conditions with respect to the Project, shall be equal to the equivalent of twice the amount of the Authorized Allocation, whichever shall be sooner. Withdrawal from the Credit Account of the remaining unwithdrawn amount of the Credit allo- cated to Categories (1) through (5) for the Project shall follow such procedures as the Association shall specify by notice to the Borrower and shall, except as the Association shall otherwise agree, be made only after and to the extent 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 payments for eligible expenditures. 6. If the Association shall have determined at any time that: (a) any payment out of the Special Account (i) was made for any expenditure or in any amount not eligible pursuant to para- graph 2 of this Schedule, or (ii) was not justified by the evi- dence furnished pursuant to paragraph 4 of this Schedule, the Borrower shall, promptly upon notice from the Association and, - 21 - unless otherwise agreed by the Association, prior to any further deposit into the Special Account by 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; or (b) 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, and unless otherwise agreed by the Association, refund to the Association such amount then outstanding in the Special Account. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a 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 day of 198-S FOR SECRETARY