Zambia - Recovery Program : Credit 1720 - Credit Agreement - Conformed

OFFICIAL DOCUMENTS CREDIT NUMBER 1720 ZA Development Credit Agreement (Recovery Program) between THE REPUBLIC OF ZAMBIA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated (/e JA /, 1986 CREDIT NUMBER 1720 ZA DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated lF4,t&'&J' CO4 , 1986, between THE REPULIC 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, hqs requested the Association to assist in the financing of the Project; (B) the Association has received a letter dated April 23, 1986, from the Borrower describing a program of actions designed to bring about appropriate changes in its economy (the Program) and declaring the Borrower's commitment to the execution of the Program; and 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 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 Develop- ment Credit Agreements" of the Association dated January 1, 1985, with the modifications thereof set forth below (the General Conditions) constitute an integral part of this Agreement: (a) Section 9.06 (c) shall be modified to read: "(c) 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 of the program and the Project referred to in the Preamble to the Development Credit Agreement, the performance by the Borrower and the Association of their respective obligations under the Development Credit Agreement and the accomplishment of the purposes of the Credit."; and -2- (b) the last sentence of Section 3.02 is deleted, Section 1.02. 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 additional terms have the following meanings: (a) "SITC" means the United Nations Standard International Trade Classification, 1974 Revision (SITC, Rev. 2), published in Commodity Indexes for the Standard International Trade Classifi- cation, Revised, Statistical Papers, Series M, No. 38/Rev.2 (1981); (b) "Special Accounts" means the accounts referred to in Section 2.02 (b) of this Agreement; (c) "ZCCM" means the Zambia Consolidated Copper Mines Limited, a company incorporated under the Laws of Zambia; (d) "INDECO" means Industrial Development Corporation, a company incorporated under the Laws of Zambia; (e) "ZIMCO" means Zambia Industrial and Mining Corporation, Limited, a company incorporated under the Laws of Zambia; (f) "MAWD" means the Ministry of Agriculture and Water Development of the Borrower; and (g) "Fiscal Year" means the period from January 1 to December 31. 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 forty two million six hundred thousand Special Drawing Rights (SDR 42,600,000). 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 CREDIT NUMBER 1720 ZA DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated- , 1986, between THE REPULIC OF ZAMBIA (the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association). 14HERhIAS (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 Association has received a letter dated April 23, 1986, from the Borrower describing a program of actions designed to bring about appropriate changes in its economy (the Program) and declaring the Borrower's commitment to the execution of the Program; and 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 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 Develop- ment Credit Agreements" of the Association dated January 1, 1985, with the modifications thereof set forth below (the General Conditions) constitute an integral part of this Agreement: (a) Section 9.06 (c) shall be modified to read: "(c) 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 of the program and the Project referred to in the Preamble to the Development Credit Agreement, the performance by the Borrower and the Association of their respective obligations under the Development Credit Agreement and the accomplishment of the purposes of the Credit."; and -2- (b) the last sentence of Section 3.02 is deleted. Section 1.02. 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 additional terms have the following meanings: (a) "SITC" means the United Nations Standard International Trade Classification, 1974 Revision (SITC, Rev. 2), published in Commodity Indexes for the Standard International Trade Classifi- cation, Revised, Statistical Papers, Series M, No. 38/Rev.2 (1981); (b) "Special Accounts" means the accounts referred to in Section 2.02 (b) of this Agreement; (c) "ZCCM" means the Zambia Consolidated Copper Mines Limited, a company incorporated under the Laws of Zambia; (d) "INDECO" means Industrial Development Corporation, a company incorporated under the Laws of Zambia; (e) "ZIMCO" means Zambia Industrial and Mining Corporation, Limited, a company incorporated under the Laws of Zambia; (f) "MAWD" means the Ministry of Agriculture and Water Development of the Borrower; and (g) "Fiscal Year" means the period from January 1 to December 31. 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 forty two million six hundred thousand Special Drav,ing Rights (SDR 42,600,000). Section 2.02. (a) The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule I to this Agreement, as such Schedule may be amended - 3 - 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 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 special accounts in its Central Bank on terms and conditions satisfactory to the Association. Deposits into, and payments out of, the Special Accounts shall be made in accordance with the provisions of Schedule 6 (Import Special Account) and Schedule 7 (Technical Assistance Special Account) to this Agreement. Section 2.03. The Closing Date shall be June 30, 1990 or such later date as the Association shall establish. The Association 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 percent (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 Agreement 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-fourths of one percent (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 March 1 and September 1 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semiannual installments payable on each March 1 and September 1 commencing September 1, 1996, and ending March 1, 2036. Each installment to and including the installment payable on March 1, 2006 shall be one-half of one percent (1/2 of 1%) of such principal amount, and each installment thereafter shall be one and one-half percent (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 Sched- ule 5 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Association. Section 3.02. Except as the Association shall otherwise agree, procurement of the goods and consultants' services 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 Agreement. Section 3.03. The Borrower shall, not later than March 31, 1987, submit to the Association a plan of action, acceptable to the Association, for implementing a tariff structure geared to achieve greater uniformity in effective protection. Section 3.04. The Borrower shall, not later than March 31, 1987, take appropriate measures to implement the recommendations of the study on the organization of MAWD carried out under the Agricultural Rehabilitation Project (Credit No. 1545-ZA). - 5 - Section 3.05. The Borrower shall, not later than March 31, 1987, take appropriate measures to institute a system for carry- ing out a periodic independent audit of ZCCM's mining operations under terms of reference acceptable to the Association. Section 3.06. The Borrower shall, not later than March 31, 1987, take appropriate measures to begin implementing a program of action, acceptable to the Association, for improving external debt management, including debt of the public sector enterprises. Section 3.07. The Borrower shall take appropriate measures to implement, with effect from its 1987 Budget, the recommenda- tions of the study currently being undertaken by the Borrower for modifying its tax structure, including ZCCM's tax struc- ture. Section 3.08. The Borrower shall, not later than January 31, 1987, commence implementation of an Action Program, acceptable to the Association for: (i) pha,ing out or otherwise disposing of on-going industrial activities and enterprises within the public sector 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. Section 3.09. The Borrower shall: (a) not later than March 31, 1987 complete a study on targeting maize subsidies to lower income groups; (b) not later than June 30, 1987, furnish to the Association a plan of action acceptable to the Association for implementing the recommendations of the study; and (c) not later than December 31, 1987, implement the plan of action whose objectives shall be, inter alia, the complete removal of sub- sidies on maize to higher income groups. Section 3.10. The Borrower shall: (a) not later than Marci. 31, 1987, take all appropriate measures to completely remove subsidies on maize used to produce livestock feed and opaque beer; and (b) take all appropriate measures to ensure that the level of remaining consumer subsidies on maize for Fiscal Year 1987 do not exceed in nominal terms the levels appropriated for Fiscal Year 1986. Section 3.11. The Borrower shall: (a) not later than Janu- ary 31, 1987, complete a review on the implications of broadening -6- the scope of the foreign exchange auction system to include transactions of the ministries and other agencies of the Bor- rower; (b) not later than April 30, 1987, furnish to the Association a plan of action acceptable to the Association for implementing the recommendations of the review; and (c) not later than July 31, 1987, commence implementing the plan of action. Section 3.12. 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 Project and the Pro- gram. To that end, the Borrower shall furnish to the Association for its review and comment a report on the progress achieved in carrying out the Project and the Program, in such detail and at such times as the Association shall reasonably request. ARTICLE IV Financial 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 six months after the end of each such year, a certified copy of the report of such audit by 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. - 7 - (c) For all expendioures with respect to which withdrawals from the Credit Account were made 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 at least one year after the com- pletion of the audit for the fiscal year in which the last withdrawal from the Credit Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable -he Association's rrr-esentatives 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 said auditors as to whether the pro- ceeds of the Credit withdrawn in respect of such expenditures were used for the purposes for which they were provided. ARTICLE V Termination Section 5.01. The date sixty (60) days after the date of this Agreement is hereby specified for the purposes of Sec- tion 12.04 of the General Conditions. ARTICLE VI Representative of the Borrower; Addresses Section 6.01. The minister of the Borrower at the time responsible for finance is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. -8- Section 6.02. 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 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 B y /' 16A/Y Regional Vice President Eastern and Southern Africa -9 - 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) Imported Goods 41,500,000 100% of foreign and materials expenditures (2) Consultants' 930,000 100% Services (3) Training 170,000 100% TOTAL 42,600,000 2. For the purposes of this Schedule 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. 3. Notwithstanding the provisions of paragraph 1 above and except and to the extent as the Association shall otherwise agree, no withdrawals shall be made from Category 1 in respect of: (a) expenditures for goods included in the following SITC groups or sub-groups: Groups Sub-Groups Description of Items 112 Alcoholic Beverages 121 Tobacco, unmanufactured, tobacco refuse - 10 - Groups Sub-Groups Description of Items 122 Tobacco, manufactured 667 Pearls, precious and semi- precious stones unworked or worked 668 Uranium depleted in U235 and thorium, and their alloys, un- wrought or wrought and articles thereof, n.e.s., waste and scrap of uranium depleted in U235 and of thorium 718 718.7 Nuclear reactors, and parts thereof, n.e.s. 897 897.3 Jewelry of gold, silver or platinum group metals (except watches and watch cases) and goldsmiths' or silversmiths' wares (including set gems) - 971.0 Gold, non-monetary (excluding gold ores and concentrates) (b) payments made for expenditures prior to the date of this Agreement; and (c) expenditures for goods intended for a military or paramilitary purpose or for private or public luxury consumption. 4. No withdrawals shall be made and no commitment shall be entered into to pay amounts to the Borrower or others in respect of expenditures under Category (1) after the aggregate of the proceeds of the Credit withdrawn from the Credit Account and the total amount of such commitments shall have reached the equiva- lent of SDR 20,750,000 unless the Association shall be satisfied, after an exchange of views as described in Section 3.12 of this Agreement: (i) with the progress achieved by the Borrower in the carrying out of the Project and the Program; and (ii) that the actions described in Schedule 4 to this Agreement have been taken. - 11 - SCHEDULE 2 Description of the Project The objectives of the Project are to: (a) sustain the macro-economic policy reform initiatives already undertaken by the Borrower by contributing to the availability of foreign exchange for the importation of necessary inputs; and (b) support additional and more detailed policy actions, sectoral and macro-economic, to implement the reform program satisfactorily. 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: Imports A program for the importation of goods and materials. Parc B: Technical Assistance and Training 1. Provision of technical assistance to: (a) the Ministry of Finance to assist in: (i) improving procedures, practices and systems for external debt management; and (ii) carrying out periodic independent mining audits to ensure effective implementation of the Five-Year Production and Investment Plan for the Mining Sector; (b) the Bank of Zambia to assist in reviewing its operations, in particular procedures and systems relating to management of foreign exchange and to make recommendations for improvement; and (c) MAWD to assist in carrying out a study on subsidies on maize and making recommendations on a system to target consumer subsidies to lower income groups and to elimi- nate subsidies on livestock feed. 2. Provision of local and overseas training to Bank of Zambia staff in various Central Bank operations. The Project is expected to be completed by December 31, 1989. - 12 - SCHEDULE 3 Procurement and Consultants' Services Section I. Procurement of Goods Part A. Modified International Competitive Bidding Contracts for the procurement of goods and materials 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 Gui0elines), 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 cir- culation; 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: "As a further alternative, bidding documents may require the bidder to state the bid price in a single - 13 - 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 goods and materials 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 procurement proce- dures of the purchaser of such goods. 2. Contracts for procurement of goods and materials shall be bulked whenever reasonably practicable. 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 goods and materials estimated to cost the equivalent of $2,000,000 or more, the procedures set forth in paragraphs 2 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 required to be furnished to the Association pursuant to para- graph 2 (d) of said Appendix shall be furnished to the Associa- tion 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 preceding 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 Import Special Account Schedule) to this Agreement. - 14 - (c) The provisions of the preceding subparagraphs (a) and (b) shall not apply to contracts on account of which the Association 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 Agreement. 2. The figure of 15% is hereby specified for purposes of paragraph 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 quali- fications, experience and terms and conditions of employment shall be satisfactory to the Association. Such consultants shall be selected in accordance with principles and procedures satis- factory 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. - 15 - SCHEDULE 4 Conditions for the Second Tranche The measures to be specifically included in the review provided in paragraph 4 of Schedule 1 to this Agreement are as follows: The Borrower shall have: (a) submitted to the Association an action program, accept- able to the Association, for restructuring public expenditures; (b) completed a review for broadening the scope of the for- eign exchange auction system to include government transactions; (c) submitted to the Association a policy statement, acceptable to the Association, setting forth the circumstances and conditions under which the Borrower would consider absorbing the debts of the parastatal enterprises; (d) submitted to the Association a plan of action, accept- able to the Association, for implementing the recommendations of the agricultural marketing study carried out under the Agricul- tural Rehabilitation Project (Credit No. 1545-ZA); and (e) taken or caused INDECO to take measures, acceptable to the Association, for restructuring individual INDECO enterprises in accordance with a plan of action submitted under the Industrial Reorientation Project (Credit No. 1630-ZA). - 16 - SCHEDULE 5 Implementation Program 1. In carrying out Part A of the Project the Borrower shall sell foreign exchange to importers through the auction system as described in the Industrial Reorientation Project (Credit 1630-ZA). 2. The Borrower shall take appropriate measures to ensure that the proceeds of the Credit allocated to Category (1) shall be utilised only for the importation of goods and materials 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 $8,000,000 equivalent per month or such other amount as the Association may agree. - 17 - SCHEDULE 6 Import 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 Category (1) in accordance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount equivalent to SDR 20,750,000 to be withdrawn from the Credit Account and deposited into 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 expendit--es 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 with- drawals 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 into 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 - 18 - expenditures. Each such deposit shall be withdrawn by the Asso- ciation from the Credit Account under the respective Categories 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 expenditures. 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) of the Project, minus the amount of any outstanding 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 amount of the Authorized Allocation. (b) Thereafter, withdrawal from the Credit Account of the remaining unwithdrawn amount of the Credit allocated to Category (1) 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 payments 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 expenditure or in any amount not eligible pur.suant to paragraph 2 - 19 - of this Schedule, or (ii) was not justified by the evidence furnished 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. - 20 - SCHEDULE 7 Technical Assistance 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 (2) and (3) in accor- dance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount equivalent to $300,000 to be withdrawn from the Credit Account and deposited into the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. Except as th2 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 with- drawals 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 into 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 - 21 - amount of payments made out of the Special Account for eligible expenditures. Each such deposit shall be withdrawn by the Association from the Credit Account under the respective Categories 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 expenditures. 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 accor- dance 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 Categories (2) and (3) of the Project, minus the amount of any outstanding special com- mitment entered into by the Association pursuant to Section 5.02 of the General Conditions with respect to the Project, shall be equal to the amount of the Authorized Allocation. (b) Thereafter, withdrawal from the Credit Account of the remaining unwithdrawn amount of the Credit allocated to Catego- ries (2) and (3) 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 payments for eligible expenditures. - 22 - 6. (a) If the Association shall have determined at any time that any payment out of the Special Account (i) was made for any expenditure or in any amount not eligible pursuant to paragraph 2 of this Schedule, or (ii) was not justified by the evidence furnished 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 is a true copy of the original in the archives of the International Development Association. FOR SECRETARY