Somalia - Second Agricultural Extension Project : Credit 1794 - Credit Agreement - Conformed

CREDIT NUMBER 1794-SO Development Credit Agreement (Second Agricultural Extension Project) between THE SOMALI DEMOCRATIC REPUBLIC and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated V&t & , 1987 CREDIT NUMBER 1794-SO DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated 0 9_ , 1987, between SOMALI DEMOCRATIC REPUBLIC (the Borrower) and the 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 intends to contract from the African Development Fund (ADF) a loan (the ADF Loan) in an amount not exceeding the equivalent of nine million dollars ($9,000,000) to assist in financing part of the Project on the terms and conditions set forth in an agreement (the ADF Loan Agreement) to be entered into between the Borrower and ADF; 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 last sentence of Section 3.02 deleted (the General Conditions) constitute an integral part of this Agreement. 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) "Special Accounts" mean the accounts referred to in Section 2.02 (b) of this Agreement; (b) "Project Preparation Advance" means the project prepara- tion advance granted by the Association to the Borrower pursuant to an exchange of letters dated June 18, 1986, and November 28, 1986, between the Borrower and the Association; -2- (c) "AFMET" means the Agricultural Farm Management and Extension Training Unit established pursuant to Presidential Decree Number 8; (d) "MOA" means the Borrower's Ministry of Agriculture; (e) "MOF" means the Borrower's Ministry of Finance; (f) "MFLR" means the Borrower's Ministry of Forestry, Livestock and Range; and (g) "Project Area" comprises eight regions of Lower Shebelli, Middle Shebelli, Bay, Lower Juba, Middle Juba, Gedo, Hiran and Bakool in Southern Somalia. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions set forth or referred to in this Agreement, an amount in various currencies equivalent to ten million one hundred thousand Special Drawing Rights (SDR 10,100,000). Section 2.02. (a) The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of this Section and of Schedule 1 to this Agreement 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 two special accounts in its central bank on terms and conditions satisfactory to the Association. The first account (the AFMET Special Account) shall be for purposes of expenditures under Part A of the Project, and the second account (the Research Directorate Special Account) shall be for expenditures under Part B of the Project. Deposits into, and payments out of, the Special Accounts shall be made in accordance with the provisions of Schedule 5 to this Agreement. (c) 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 principal - 3 - amount of the Project Preparation Advance withdrawn and outstand- ing as of such date and to pay all unpaid charges thereon. The unwithdrawn balance of the authorized amount of the Project Prep- aration Advance shall thereupon be cancelled. Section 2.03. The Closing Date shall be December 31, 1993 or such later date as the Association shall establish. The Asso- ciation 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 withdrawn from time to time. The commitment charge shall accrue from a date sixty days after the date of this 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 restric- tions 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 October 1 and April 1 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semiannual installments payable on each October 1 and April 1 commencing October 1, 1997, and ending April 1, 2037. Each installment to and including the installment payable on April 1, 2007 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. -4- 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 its Ministry of Agriculture with due diligence and efficiency and in conformity with appropriate agricultural 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 and except as the Borrower and the Association shall otherwise agree, the Borrower shall carry out the Project in accordance with the Implementation Program set forth in Schedule 4 to this Agreement. 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 provisions of Schedule 3 to this Agreement. Section 3.03. The Borrower shall: (a) maintain in operation the Project Management Unit (PMU) established under the Agriculture Extension and Farm Management Training Project (Credit 905-SO) with the same membership as provided therein which shall assist the Borrower in carrying out Part A of the Project; and (b) maintain in employment, during execution of the Project, the General Manager, Technical Manager and Financial Controller of PMU, whose qualification and experience shall be acceptable to the Association. Section 3.04. In order to assist the Borrower in carrying out Part B of the Project, the Borrower shall: (a) maintain in operation until the completion of the Project, the Research Directorate established in MOA which shall be responsible for coordinating all research activities under the Project and identifing areas requiring the application of adaptive research methods; and (b) maintain in employment, during executions of the Project, the Director General of Research whose qualifications and experience shall be acceptable to the Association. Section 3.05. With reference to Section 9.08 of the General Conditions the Borrower shall furnish to the Association, not later than June 30, 1987 documentary evidence showing that land has been allocated for the Project. -5- Section 3.06. (a) The Borrower shall or shall cause the prep- aration and submission to the Association for review and comments, not later than March 1 of each year, the Annual Work Program and Budget for the succeeding two agricultural seasons. (b) The Annual Work Program and Budget referred to in para- graph (a) of this Section shall include: (i) a review of Project implementation in the current year; (ii) a detailed description of work, expressed in terms of key indicators, to be carried out in the forthcoming two agricultural seasons, including objectives, deployment of staff and equipment; (iii) assessment of manpower resources, equipment, fuel and other material resources; (iv) a budget; and (v) a financing plan including foreign and local currency requirements and the Borrower's contribution to the Project. (c) The Borrower shall or shall cause the implementation of the Annual Work Program and Budget taking into account the Association's comments. Section 3.07. (a) The Borrower shall, not later than December 31, 1987, establish within MOA a Project Technical Coordination Committee whose chairman shall be the Vice Minister of Agriculture and whose other members shall include the General Manager, AFMET, the Director General of Research, the Research Advisor, the Directors of research stations, one representative each from MFLR and MOF, and the Technical Manager of AFMET who shall be the Secretary of the Committee. (b) The Project Technical Coordination Committee shall be responsible for: (i) reviewing Project implementation once every quarter; (ii) coordinating the research program and extension linkages; and (iii) coordinating the supply of inputs to farmers. Section 3.08. Without limitation upon its obligations under Section 3.01 of this Agreement, the Borrower shall: (a) for the purposes of the Project, open and thereafter maintain until the completion of the Project in the Central Bank of Somalia two Project Advance Accounts to be used for the purposes of meeting recurrent expenditures for Parts A and B of the Project respectively; (b) deposit in the said Accounts the sum of Somali Shillings thirty million (So.Sh. 30,000,000) and Somali Shillings fifteen million (So.Sh. 15,000,000) respectively; and (c) maintain at all times a minimum balance of Somali Shillings ten million (So.Sh. 10,000,000) and five million (So.Sh. 5,000,000) in each account respectively. -6- ARTTICLE IV Financial Covenants Section 4.01. (a) The Borrower shall maintain or cause to be maintained records and accounts adequat- 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 records and accounts referred to in para- graph (a) of this Section including those for 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 said records, accounts and the audit thereof as the Association shall from time to time reasonably request. (c) For all expenditures 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, 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 or payment out of the Special Accounts was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; -7- (iii) enable the Association's representatives to examine such records; and (iv) ensure that such records and accounts are included in the annual audit referred to in paragraph (b) of this Section and that the report of such audit contains a separate opinion by said auditors as to whether the statements of expenditure submitted during such fiscal year, together with the proce- dures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. 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: (a) the ADF Loan Agreement shall have failed to become effective by September 30, 1987, or such later date as the Association may agree; provided, however, that the provisions of this paragraph shall not apply if the Borrower establishes to the satisfaction of the Association that 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. (b) (i) Subject to paragraph (ii) of this paragraph: (A) the right of the Borrower to withdraw the proceeds of any loan 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) any such loan shall have become due and payable prior to the agreed maturity thereof. (ii) 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 -8- funds for the Project are available to the Borrower from other sources on terms and conditioYns 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 events are specified: (a) the event specified in Section 5.01 (b) (i) (A) of this Agreement shall occur and shall continue for a period of 60 days after notice thereof shall have been given by the Association to the Borrower; and (b) the event specified in Section 5.01 (b) (i) (B) of this Agreement shall occur. ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as additional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions: (a) the Project Advance Accounts have been opened and amounts deposited therein in accordance with Section 3.08 of this Agreement; and (b) the Borrower has submitted evidence satisfactory to the Association showing that the Director General of Research has been appointed and has taken up his post. Section 6.02. The date ninety (90) days after the date of this Agreement is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VII Representatives of the Borrower; Addresses Section 7.01. 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. -9- 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 Mogadishu Somalia Cable address: MINFIN Mogadishu 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) - 10 - 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. SOMALI DEMOCRATIC REPUBLIC Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION Regional Vice President Africa - 11 - 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) Consultants' 3,130,000 100% services and training under Part A of the Project (2) Consultants' Services under: (i) Part B.1 of 490,000 100% the Project (ii) Part B.2 of 1,000,000 100% the Project (3) Local Salaries (80% up to an and Operating (aggregate Costs: (amount of SDR (935,000; (a) for Part A 2,140,000 (thereafter of the Project (70% up to an (aggregate (amount of SDR (1,370,000; (thereafter (50% up to an (aggregate (amount of SDR (2,000,000; and (thereafter (20% up to an (aggregate amount (of SDR 2,140,000 - 12 - Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (b) for Part B 330,000 (80% up to an of the Project (aggregate (amount of SDR (145,000; (thereafter (70% up to an (aggregate (amount of SDR (210,000; (thereafter (50% up to an (aggregate (amount of SDR (310,000; and (thereafter (20% up to an (aggregate amount (of SDR 330,000 (4) Research Support 400,000 100% Fund under Part B.3 of the Project (5) Refunding of 950,000 Amount due pur- Project suant to Section Preparation 2.02 (c) of this Advance Agreement (6) Unallocated 1,060,000 TOTAL 10,100,000 2. For the purpose of this Schedule, the term "operating costs" means expenditures incurred for fuel, building maintenance, vehicle maintenance, stationary and other supplies, insurance premia, the payment of per diems to staff, rent, audit fees, farm inputs and other expenses and boarding expenses for trainees. - 13 - 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for: (a) expenditures prior to the date of this Agreement; and (b) expenditures under Category (4) unless the Association has approved the draft contracts for the sub-projects to be financed under the Research Support Fund. -14- SCHEDULE 2 Description of the Project The objectives of the Project are to sustain an increase in agricultural production in the Project Area through strengthening of the existing agricultural extension and research systems, and setting up an institutional mechanism for research program planning and coordination. 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: 1. Extension Strengthening the extension services based on the Training and Visit system in the Project Area through: (a) the provision of the following at the Afgoi Extension Headquarters: (i) additional extension staff; (ii) support services; (iii) houses and office buildings; (iv) vehicles and equipment; and (v) technical assistance in extension services and training; and (b) the provision of the following to the Field Extension Organizations in the other parts of the Project Area: (i) additional extension staff, (ii) equipment and vehicles, and (iii) operating costs. - 15 - 2. Training (a) Improving training facilities at the Farm Management and Extension Center at Afgoi and other Extension Training Centers through the provision of buildings, training facilities, equipment, vehicles, farm machinery, and operating costs. (b) Establishment of an Extension Training Center at Yontey. (c) Provision of technical assistance to the Farm Management and Extension Training Center for training and for carrying out farm trials. (d) Provision of local and overseas training to AFMET staff and local training for farmers in agriculture research and extension. Part B: Research Improving MOA's ability to carry out agricultural research activities through: 1. The establishment and operation of a Directorate of Research in MOA through the provision of: (a) additional research staff; (b) vehicles and office equipment; (c) operating costs; (d) technical assistance; and (e) materials and equipment for the research records library. 2. The maintenance and operation of the Bonka Research Station through the provision of: (a) vehicles and equipment; (b) operating costs; (c) rehabilitation of buildings; and (d) technical assistance. - 16 - 3. The establishment and maintenance of a Research Support Fund to finance sub-projects in adaptive research. The Project is expected to be completed by June 30, 1993.