Somalia - Farahaane Irrigation Rehabilitation Project : Credit 2063 - Credit Agreement - Conformed

OFFICIAL CREDIT NUMBER 2063 SO Development Credit Agreement (Farahaane Irrigation Rehabilitation Project) between SOMALIA DEMOCRATIC REPUBLIC and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated , 1989 CREDIT NUMBER 2063 SO DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated (Yoz w4eA o!# , 1989, between SOMALI DEMOCRATIC REPUBLIC (the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association). WHEREAS (A) the Borrower, having satisfied itself as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, has requested the Association to assist in the financing of the Project; 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) "CSBS" means the Commercial and Savings Bank of Somalia; (b) "Der Season" means the minor rain season (October to December) in the Borrower's territory; (c) "DILU" means the Directorate of Irrigation and Land Use af MOA; (d) "Farahaane Irrigation Scheme" means an area in the Borrower's territory bounded by the Shebelli river to the north, the Wadajir canal to the east, the village of Mudhulow and the Sisab canal to the south and the Bakore canal to the west; - 2 - (e) "Gu Season" means the main rain season (April to June) in the Borrower's territory; (f) "MOA" means the Ministry of Agriculture of the Borrower; (g) "MOH" means the Ministry of Health of the Borrower; (h) "Project Area" means the Farahaane Irrigation Scheme area and areas in the Borrower's territory served by the Qoryooley and Falkeerow barrages; (i) "Project Preparation Advances" means the project preparation advances granted by the Association to the Borrower pursuant to exchanges of letters dated September 4, 1984, and November 18, 1987, between the Borrower and the Association; (j) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement; and (k) "USAID" means the United States Agency for International Development. 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 the Development Credit Agreement, an amount in various currencies equivalent to twenty one million two hundred thousand Special Drawing Rights (SDR 21,200,000). 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 for expenditures made (or, if the Association shall so agree, to be made) in respect of the reason- abl. cost of goods and services required for the Project described in Schedule 2 to this Agreement and to be financed out of the proceeds of the Credit. (b) The Borrower shall, for the purposes of the Project, open and maintain in dollars a special account in a commercial bank on terms and conditions satisfactory to the Association. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 5 to this Agreement. - 3 - (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 amount of the Project Preparation Advances withdrawn and outstanding as of such date and to pay all unpaid charges thereon. The unwithdrawn balance of the authorized amount of the Project Preparation Advances shall thereupon be cancelled. Section 2.03. The Closing Date shall be June 30, 1996, 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 on the principal amount of the Credit not withdrawn from time to time at a rate to be set by the Association as of June 30 of each year, but not to exceed the rate of one-half of one percent (1/2 of 1%) per annum. (b) The commitment charge shall accrue: (i) from a date sixty days after the date of this Agreement (the accrual date) to the respective dates on which amounts shall be withdrawn by the Borrower from the Credit Account or cancelled; and (ii) at the rate set as of the June 30 immediately preceding the accrual date or at such other rates as may be set from time to time thereafter pursuant to paragraph (a) above. The rate set as of June 30 in each year shall be applied as of the next payment date in that year specified in Section 2.06 of this Agreement, except that the rate set as of June 30, 1988, shall be applied as of July 1, 1988. (c) 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 per cent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.06. Commitment charges and service charges shall be payable semiannually on February 15 and August 15 in each year. -4- Section 2.07. (a) Subject to paragraphs (b) and (c) below, the Borrower shall repay the principal amount of the Credit in semi-annual installments payable on each February 15 and August 15 commencing February 15, 2000, and ending August 15, 2029. Each installment to and including the installment payable on August 15, 2009, shall be one percent (1%) of such principal amount, and each installment thereafter shall be two percent (2%) of such principal amount. (b) Whenever: (i) the Borrower's gross national product per capita, as determined by the Association, shall have exceeded $790 in constant 1985 dollars for five consecutive years; and (ii) the Bank shall consider the Borrower creditworthy for Bank lending, the Association may, subsequent to the review and approval thereof by the Executive Directors of the Association and after due consi- deration by them of the development of the Borrower's economy, modify the terms of repayment of installments under paragraph (a) above by requiring the Borrower to repay twice the amount of each such installment not yet due until the principal amount of the Credit shall have been repaid. If so requested by the Borrower, the Association may revise such modification to include, in lieu of some or all of the increase in the amounts of such install- ments, the payment of interest at an annual rate agreed with the Association on the principal amount of the Credit withdrawn and outstanding from time to time, provided that, in the judgment of the Association, such revision shall not change the grant element obtained under the above-mentioned repayment modification. (c) If, at any time after a modification of terms pursuant to paragraph (b) above, the Association determines that the Borrower's economic condition has deteriorated significantly, the Association may, if so requested by the Borrower, fuzrher modify the terms of repayment to conform to the schedule of installments as provided in paragraph (a) above. 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 through -5- DILU with due diligence and efficiency and in conformity with appropriate agricultural, engineering 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) for purposes of assisting farmers to purchase agricultural inputs under the Project establish and thereafter maintain in CSBS a Fund, to be known as the Revolving Inputs Fund; an (b) cause CSBS to sell agricultural inputs using the Revolving Inputs Fund, at market prices. Section 3.04. The Borrower shall: (a) not later than December 31, 1992, submit to the Association for review the recommendations of a study as,..essing the functioning of the agricultural input supply mechanism; and (b) not later than June 30, 1993: (i) agree to an action plan relating to such study; and (ii) start implementing such action plan. Section 3.05. The Borrower shall: (a) open and maintain a Project Account in the Central Bank of Somalia and deposit therein a sum of Somali shillings fifty million; and (b) quarterly replenish the said account with amounts necessary to meet local costs not eligible for financing under the Credit. Section 3.06. The Borrower shall: (a) not later than September 30, 1989, complete formalities for the employment of consultants to supervise civil works; and (b) not later than December 31, 1989, submit to the Association for review the terms of reference for consultants required for the Project. -6 ARTICLE IV Financial Covenants Section 4.01. (a) The Borrower shall maintain or cause to b. 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 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 nine 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; (iii) furnish to the Association, as soon as available, but in any case not later than four months after the end of each such year, a copy of the report of unaudited accounts for the preceding year; and (iv) furnish to the Association such other information ccncerning 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; -7- (ii) retain, until at least one year after the Associa- tion has received 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 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 pre- paration, can be relied upon to support the related withdrawals. ARTICLE V Effective Date; Termination Section 5.01. The following events are specified as additional conditions to the effectiveness of this Agreement within the meaning of Section 12.01 (b) of the General Conditions: (a) that the Borrower has submitted to the Association documentary evidence satisfactory to the Association showing that the Project Account has been opened and a sum of Somali shillings fifty million deposited therein pursuant to Section 3.05 of this Agreement; and (b) that the Borrower has submitted to the Association documentary evidence satisfactory to the Association showing that a Project Manager with qualifications and experience acceptable to the Association has been appointed and has taken up his post. Section 5.02. The date ninety (90) days after the date of this Agreement is hereby specified for the purposes of Sec- tion 12.04 of the General Conditions. -8- ARTICLE VI Representatives 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 Condi- tions. 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 Government of the Somali Democratic Republic Mogadishu, Somalia Cable address: Telex: MINFIN 3612 MINFIN-MOG Mogadishu 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) 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 By // Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By 4 Regional Vice President Africa - 10 - SCHEDULE 1 Withdrawal of the Proceeds of the Credit 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit, the allocation 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: (a) under Parts A.1, 8,700,000 100% A.2 and A.3 of the Project (b) Other 1,560,000 50% (2) Vehicles, 1,980,000 ) 100% of foreign equipment and ) expenditures, materials ) 100% of local ) expenditures (3) Agricultural 630,000 ) (ex-factory) inputs ) and 65% of ) other local ) expenditures (4) Consultants' 4,760,000 100% services and training (5) Operating costs 1,150,000 60% through June 30, 1992, and 40% thereafter - 11 - Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR .Euivalent) to be Financed (6) Refunding of 1,120,000 Amount due pur- Project Prepara- suant to Section tion Advances 2.02 (c) of this Agreement (7) Unallocated 1,300,000 TOTAL 21,200,000 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than that of the Borrower for goods or services supplied from the territory of any country other than that of the Borrower; (b) the term "local expenditures" means expenditures in the currency of the Borrower or for goods or services supplied from the territory of the Borrower; and (c) the term "operating costs" means salaries of staff recruited for Project implementation, allowances, per diems and vehicle operation costs. 3. Notwithstanding the provisions of paragraph 1 above, no with- drawals shall be made in respect of: (a) payments made for expen- ditures prior to the date of this Agreement except that with- drawals, in an aggregate amount not exceeding the equivalent of SDR 60,000, may be made in respect of Categories (4) and (5) on account of payments made for expenditures before that date but after October 15, 1988; .and (b) payments made for expenditures under Category (3) unless the Borrower has entered into an agreement, satisfactory to the Association, with CSBS for the operation of the Revolving Inputs Fund established pursuant to Section 3.03 of this Agreement. - 12 - SCHEDULE 2 Description of the Project The objective of the Project is to improve food production by improving the productivity of smallholders in the Project Area through better irrigation management, higher cropping intensity and provision of agricultural facilities. 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: Irrigation Development 1. Rehabilitation of barrages at Qoryooley and Falkeerow and the repair of direct diversion structures on both river banks controlled by these barrages. 2. Rehabilitation of primary and secondary irrigation canals, including replacement of water control and distribution structures in the Project Area. 3. Construction of new primary and secondary canals and drains, including a drainage pumping station with the supply and installation of pumps and diesel engines in the Project Area. 4. Rehabilitation and/or construction of tertiary canals, tertiary drainage for the pilot demonstration area and two pilot water management demonstration tertiary units. 5. Construction of field offices, workshops, stores, staff houses and other civil works at various locations in the Project Area, including coral-surfacing of roads connecting villages within the Project Area. 6. Carrying out aerial photography, preparation of topographic maps for drainage master plan of the lower Shebelli area and tertiary system in the Project Area. Part B: Agriculture Development 1. Construction of an extension/training facility at Farahaane, extension-staff houses and the rehabilitation of stores and other buildings in the Project Area. - 13 - 2. Levelling of land and construction of concrete drying floors. 3. Carrying out cadastral surveys and preparation of maps, and land registration in the Farahaane Irrigation Scheme of the Project Area. 4. Carrying out base-line surveys covering agriculture, water management and social aspects of the Project. 5. Provision of agricultural inputs and implements. 6. Promotion of agroforestry in the Project Area. Part C: Health and Social Aspects 1. Construction of a field laboratory at Qoryooley, health posts and earth-filling of depressions around villages in the Project Area. 2. Installation of drinking water supply systems and acquisition of drugs and chemicals for spraying and treatment of diseases. 3. Acquisition of laboratory equipment and supplies for annual screening surveys. 4. Provision of tools and materials related to women development activities in three selected villages in the Project Area. Part D: Equipment, Vehicles and Materials Acquisition of operation and maintenance equipment, vehicles, and office equipment. Part E: Institutional Support and Training 1. Carrying out specialized services and studies related to water management, drainage effectiveness, drainage master-plan of the lower Shebelli, organization of water user's associations, assessment of water charges, assessment of future role of various agencies dealing with operation and maintenance activities, land tenure, input supplies, agronomical and on-farm trials and integrated pest management. - 14 - 2. Training of staff in irrigation engineering, water management and health. The Project is expected to be completed by December 31, 1995.