Zambia - Social Recovery Project : Credit 2273 - Credit Agreement - 1 - Conformed

OFFICIAL DOCUMEN\TS CREDIT NUMBER 2273 ZA Development Credit Agreement (Social Recovery Project) between REPUBLIC OF ZAMBIA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated 4 , 1991 CREDIT NUMBER 2273 ZA DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated Cw i ,T1991, between REPUBLIC OF ZAMBIA (the Borrower) d INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association). WHEREAS the Borrower, having satisfied itself as to the feasibility and priority of the Project described in Schedule 2 to this Agreemuent, has requested the Association to assist in the financing of the Project; 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 Development 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) "Appraisal Guide" means the document to be prepared by the Borrower for the appraisal of Sub-projects; (b) "MPU" means the Microprojects Unit established in the Borrower's Ministry of Finance for implementing Sub-projects; (c) "NGO" means the Non-Governmental Organizations; (d) "Sub-project" means projects to be funded by MPU and Financed from the proceeds of the Credit; (e) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement; -2- (f) "Sub-project Agreement" means agreements to be entered into between the Borrower and each Project Committee for financing of Sub-projects; (g) "PC" means the Project Committees to be established in each community for the purpose of carrying out Sub-projects. This term shall include, but not be limited to Parent-Teacher Associations, NGOs, Cooperatives or other associations established in accordance with the respective laws of the Borrower; (h) "Projer.t Preparation Advance" means the project preparation advance granted by the Association to the Borrower pursuant to an exchange of letters dated March 12, 1991, and May 6, 1991, between the Borrower and the Association; (i) "Large Sub-project" means any sub-project with a total cost equivalent to $100,000 or more; or sub-projects given a priority rating of "four" in the Appraisal Guide; or sub-projects not included in the list of eligible sub-projects in the Appraisal Guide; (j) "Self-Help Sub-project" means any Sub-project to be implemented by PCs using own-labor for, inter alia, rehabilitation of primary education and health facilities in remote areas. The total cost of each sub-project shall not exceed the equivalent of $20,000; and (k) "Social Service Sub-project" means any sub-project to be implemented by PCs for the delivery of preventative health programs, training, literacy and skills 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 this Agreement, an amount in various currencies equivalent to fourteen million eight hundred . thousand Special Drawing Rights (SDR 14,800,000). 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 reasonable -3- 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 deposit account in a commercial bank on terms and conditions satisfactory to the Association, including appropriate protection against set-off, seizure or attachment. Deposits into, and payments out of, the Special Account 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 amount of the Project Preparation Advance withdrawn and outstanding as of such date and to pay all unpaid charges thereon. The unwithdrawn balance of the authorized amount of the Project Preparation Advance shall thereupon be cancelled. Section 2.03. The Closing Date shall be July 31, 1997, 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 the 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 from the next payment date in that year specified in Section 2.06 of this Agreement. (c) 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 -4- 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 May 1 and November 1 in each year. 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 May 1 and November 1 commencing November 1, 2001, and ending May 1, 2031. Each installment to and including the installment payable on May 1, 2011, 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 con- sideration 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 installments, 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, further modify the terms of repayment to conform to the schedule of installments as provided in paragraph (a) above. 5- 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 MPU with due diligence and efficiency and in conformity with appropriate economic practices, shall take or cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable MPU to carry out the Project, and shall not take or permit to be taken any action which would prevent or interfere with the carrying out of the Project by MPU. (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 through MPU in accordance with the Implementation Program set forth in Schedule 4 to this Agreement. Section 3.02. Except as the Association shall otherwise agree, and except as provided in paragraph 4 (b) of Schedule 4 to this Agreement, 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, with effect from January 1992, until completion of the Project submit annually to the Association evidence satisfactory to the Association that the Borrower has increased in real terms the budgetary allocation for non-remuneration recurrent costs for health and education. Section 3.04. Without limitation to or restriction upon its other reporting requirements under the General Conditions and this Agreement the Borrower shall: (a) with effect from March 31, 1992, until completion of the Project submit annually to the Association for review progress reports on the implementation of the Project. Said progress reports -6- shall cover, inter alia, the results of the financial and technical audits, a review of procurement issues, a summary of monitoring activities and a summary of the impact of the sub-projects; and (b) with effect from September 30, 1992, until completion of the Project submit annually to the Association for review a progress report on activities under Part B of the Project covering, inter alia, a summary of surveys and statistical analysis undertaken, number and results of studies funded under the studies fund and the following year's work program. Section 3.05. The Borrower shall enter into Sub-project Agreements, satisfactory to the Association with each PC providing, inter alia, for: (i) the transfer of part of the proceeds of the Credit on a grant basis to the PC for the purposes of carrying out Part A of the Project; and (ii) the obligations of the PC to carry out Part A of the Project in accordance with the terms and conditions set forth in this Agreement and in the Appraisal Guide. Section 3.06. The Borrower undertakes that, unless the Association shall otherwise agree, Sub-projects will be identified, appraised and carried out in accordance with the procedures and on the terms and conditions set forth or referred to in the Appraisal Guide and in Schedule 4 to this Agreement. Section 3.07. The Borrower shall, until completion of the Project, maintain the MPU for the purpose of financing sub-projects and carrying out the Project. Section 3.08. (a) Without limitation or restriction to the provisions of Section 9.01 of the General Conditions, the Borrower and the Association agree to -undertake not later than April 30, 1993, a review of the progress of the Project, based on performance indicators satisfactory to the Association and pursuant to the provision of this Agreement; and (b) the Borrower shall promptly undertake or cause MPU to promptly undertake such modifications in the execution of the Project as shall be necessary, in the Association's opinion, as a -7- result of the review referred to in paragraph (a) above, for the achievement of the objectives of the Project. 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 records and accounts referred to in paragraph (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 four 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, in accordance with paragraph (a) of this Section, records and accounts reflecting such expenditures; (ii) retain, until at least one year after the Bank has received the audit report for the fiscal year -8- in which the last withdrawal from the Credit Account or payment out of the Special Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Association's representatives co 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 procedures 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 event is specified, namely that as a result of events which have occurred after the date of this Agreement, a situation shall have arisen which shall make it improbable that MPU will be able to perform its obligations. Section 5.02. Pursuant to Section 7.01 (d) of the General Conditions the following additional event is specified, namely, that the event specified above shall occur. ARTICLE VI Effective Date; Termination Section 6.01. 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) the Borrower has submitted to the Association a Sub- project Appraisal Guide satisfactory to the Association; -9- (b) the Borrower has submitted to the Association final terms of reference of MPU staff and an action plan, satisfactory to the Association for hiring of staff; and (c) the Borrower has submitted to the Association Sub- project proposals sufficient to cover the activities of the first quarter of Project implementation. 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. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: The Ministry of Finance P.O. Box 50062 Lusaka Cable address: Telex: MINFIN 42221 Lusaka Telefax: 222440 For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America - 10 - Cable address: Telex: INDEVAS 248423 (RCA) Washington, D.C. 82987 (FTCC) 64145 (WUI) or 197688 (TRT) 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. REPUBLIC OF ZAMBIA Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /9/ 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) Civil works for: (a) Large 3,700,000 100% of foreign Sub-projects expenditures and 90% of local expenditures (b) Other Sub- 3,OO,000 100% of foreign projects expenditures and 90% of local expenditures (c) Self-help 1,500,000 80% of sub-project Sub-projects cost (2) Goods for 1,500,000 100% of foreign Sub-projects expenditures and 90% of local expenditures (3) Social Services 1,500,000 90% of sub-project Sub-projects cost (4) Consultants' 500,000 100% Services and studies - 12 - Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (5) Vehicles and 200,000 100% of foreign Equipment expenditures (6) Operating Costs 300,000 85% of MPU (7) Refunding of Project 300,000 Amount due pur- Preparation Advance suant to Section 2.02 (c) of this Agreement (7) Unallocated 1,500,000 TOTAL 14,800,000 2. For the purpose 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 incremental costs for strengthening MPU and shall include costs associated with the maintenance of vehicles and equipment, and staff travel. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of: (a) payments made for expenditures prior to the date of this Agreement; and (b) payments made for expenditures under Category (1) (a) unless the Association has reviewed and found acceptable the sub-project proposal prior to the signing of the respective Sub-project Agreement. - 13 - SCHEDULE 2 Description of the Project The objective of the Project is to assist the Borrower to fund community initiatives to help protect the poor during the imple- mentation of structural adjustment programs. 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 .uch objectives: Part A: Sub-projects Financing and carrying out Sub-projects in health, nutrition, education and economic infrastructure. Part B: Analysis and Monitoring Survey 1. Carrying out surveys, including household surveys, modules of an agricultural census, and other surveys related to social issues. 2. Provision of vehicles, computers and other equipment for collection and analyzing information. 3. Training of planning staff in economic analysis and computer use. Studies 4. Carrying out the following studies: (a) Beneficiary Assessment, (b) Poverty Analysis, (c) Price Mechanism Study, (d) Household Food Security under Structural Adjustment and (e) Vulnerability of Women under Structural Adjustment. 5. Establishment of a Study Fund to support a broad range of studies on poverty. The Project is expected to be completed by January 31, 1997. -14 - SCHEDULE 3 Procurement and Consultants' Services Section I. Procurement of Goods and Works Part A: International Competitive Bidding 1. Except as provided in Part D hereof, goods shall be procured under contracts awarded 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 (the Guidelines). 2. To the extent practicable, contracts for civil works shall be grouped into bid packages estimated to cost the equivalent of $250,000 or more. Part B: Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A.1 hereof, goods manufactured in Zambia 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. Part C: Preference for Domestic Contractors In the procurement of works in accordance with the procedures described in Part A.1 hereof, the Borrower may grant a margin of preference to domestic contractors in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraph 5 of Appendix 2 thereto. Part D: Other Procurement Procedures 1. Items or groups of items for goods estimated to cost the equivalent of betwoen $30,000 and $100,000 per contract, and contracts for civil works estimated to cost the equivalent of less than $250,000, may be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Association. 2. Civil works and items or groups of items for goods estimated to cost the equivalent of $30,000 or less per contract, may be - 15 - procured under contracts awarded on the basis of comparison of price quotations obtained from at least three suppliers or contractors eligible under the Guidelines, in accordance with procedures acceptable to the Association. Part E: 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 civil works estimated to cost the equivalent of $250,000 or more, and each contract for goods estimated to cost the equivalent of $100,000 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 said paragraph 2 (d) shall be furnished to the Association prior to the making of the first payment out of the Special Account in respect of such contract. (b) With respect to each contract not governed by the 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 5 to this Agreement. (c) The provisions of the preceding subparagraph (b) shall not apply to contracts on account of which the Association has authorized withdrawals on the basis of statements of expenditure. 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 the Project, the Borrower shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. Such consultants shall be selected - 16 - 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. - 17 - SCHEDULE 4 Implementation Program Except as the Association shall otherwise agree, in carrying out Part A of the Project, MPU will adopt the following guidelines: Eligibility of Sub-projects 1. To be eligible for financing under the Credit, Sub-projects must meet the following criteria: (a) have substantial community contribution; (b) be simple enough to be implemented without significant technical assistance from outside the community; and (c) beneficiaries must be poor or belong to vulnerable groups. Sub-projects 2. Sub-projects in the following areas will be eligible for financing under the Credit: A. Health and Nutrition (i) expansion, repair and a limited number of new construction of health posts; (ii) community child care programs; (iii) assistance in food production; (iv) development of weaning foods; (v) supplemental feeding schemes; and (vi) water supply and sanitation schemes (standpipes, wells, bore holes, drainage ditches and pit latrines). B. Education and Training (i) rehabilitation, expansion and a limited number of new construction of primary and secondary schools; and - 18 - (ii) training in skills development. C. Economic Infrastructure (i) construction, upgrading and rehabilitation of feeder roads, bridges, drainage works, small irrigation schemes and market places; and (ii) supporting NGO credit schemes. Sub-project Cycle 3. In carrying out the Project, MPU will adopt the following procedures in processing sub-projects: (a) Each beneficiary community will establish a Project Committee (PC) which will be responsible for sub-project implementation. The PC will submit proposals for sub-projects to the District Council (DC). The proposal will include information on the beneficiaries, a description of the sub-project with costs. (b) After giving its clearance on the sub-projects, the DC will submit the proposal to the Provincial Planning Unit (PPU) which will assess whether the sub-project was consistent with the Provinces' priorities. If the sub-project is approved, PPU will give a letter of commitment for staff and other recurrent costs for the sub-project. (c) (i) The cleared sub-project will then be submitted to MPU for appraisal and evaluation. After appraisal the sub-project proposal will be presented to the MPU Steering Committee for review and approval; and (ii) all large sub-projects and all sub-projects to be implemented within the first six months of Project implementation will be submitted to the Association for approval prior to the signing of the respective Sub-project Agreement. Sub-Project Agreements 4. After approval of the proposal by the MPU Steering Committee, the Borrower shall, through MPU enter into a Sub-project Agreement with the PC. Whenever appropriate, the DC shall sign the Sub-Project Agreement guaranteeing the obligations of the PC. The terms of the Sub-project Agreement shall be satisfactory to the Association and shall include, inter alia, MPU obtaining rights adequate to protect - 19 - the interests of the Borrower and the Association, including the right to: (a) require the PC to carry out the Sub-project with due diligence and efficiency and in accordance with sound technical, financial and managerial standards and to maintain adequate records; (b) the goods, civil works and services to be financed out of the proceeds of the Credit for the Self-Help Sub-projects and Social Services Sub-projects shall be purchased at a reasonable price, account being taken also of other relevant factors such as time of delivery and efficiency and reliability of the goods and availability of maintenance facilities and spare parts therefor, and, in the case of services, of their quality and the competence of the parties rendering them; and (ii) such goods and services shall be used exclusively in the carrying out of the sub-project. (c) MPU's right to inspect, by itself or jointly with the Association, such goods and the sites, works, plants and con- struction included in the Sub-project, the operation thereof and any relevant records and documents; (d) MPU's right to obtain all such information as MPU or the Association shall reasonably request regarding the foregoing, the administration, operations and financial condition of the Sub- project and the benefits to be derived from the Sub-project; (e) MPU's right to suspend or terminate the right of the PC to use the proceeds of the Credit for the Sub-project upon failure by any such PC to perform any of its respective obligations under the Sub-project Agreement; and (f) the obligation of the PC to report on the progress of implementing the Sub-project. 5. The Borrower shall: (a) prepare or cause MPU to prepare and, not later than March 31, 1992, submit to the Association for review and approval every year a report showing (i) the geographical and sectoral distribution of Sub-projects, (ii) procurement performance, (iii) results of monitoring activities, and (iv) a work program (including audits and monitoring) for the following year; and (b) put into effect the corrective actions thereof, in a manner satis- factory to the Association, to improve targeting of resources, or the procurement performance. - 20 - Terms and Conditions of Sub-projects 6. Sub-projects shall be financed on the following terms and conditions: (a) financing shall be provided on a grant basis; (b) a mobilization advance of 20%, or such higher percentage as the Association shall agree, of the estimated value of the Sub- project may be paid upon signing of the Sub-project Agreement. Subsequent payments may be made on the basis of a percentage, acceptable to the Association, of works completed or goods procured, and shall be evidenced by written documentation thereof. A retention of 10% of the estimated value of the Sub-project may be paid upon completion of the Sub-project, as evidenced by a certificate of completion, acceptable to the Association; and (c) MPU shall obtain prior approval of the Association before signing a Sub-project Agreement for any Sub-project whose cost is expected to exceed the equivalent of $100,000. - 21 - SCHEDULE 5 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories 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 the eligible Categories in accordance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount equivalent to $2,000,000 to be withdrawn from the Credit Account and deposited into the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. 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 it that the Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the Special Account shall be made as follows: (a) For withdrawals of the Authorized Allocation, the Borrower shall furnish to the Association a request or requests for a deposit or deposits which do not exceed the aggregate amount of the Authorized Allocation. On the basis of such request or requests, 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) (i) For replenishment of the Special Account, the Borrower shall furnish to the Association requests for deposits into the Special Account at such intervals as the Association shall specify. (ii) Prior to or at the time of each such request, the Borrower shall furnish to the Association the documents and other evidence required pursuant to - 22 - paragraph 4 of this Schedule for the payment or payments in respect of which replenishment is requested. On the basis of each such request, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit into the Special Account such amount as the Borrower shall have requested and as shall have been shown by said documents and other evidence to have been paid out of the Special Account for eligible expenditures. All such deposits shall be withdrawn by the Association from the Credit Account under the respective eligible Categories, and in the respective equivalent amounts, as shall have been justified by said documents and other evidence. 4. For each payment made by the Borrower out of the Special Account, the Borrower shall, at such time as the Association shall reasonably request, furnish to the Association such documents and other evidence showing that such payment was made exclusively for eligible expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Schedule, the Association shall not be required to make further deposits into the Special Account: (a) if, at any time, the Association shall have determined that all further withdrawals should be made by the Borrower directly from the Credit Account in accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement; or (b) once the total unwithdrawn amount of the Credit allocated to the eligible Categories, less 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 equal the equivalent of twice the amount of the Authorized Allocation. Thereafter, withdrawal from the Credit Account of the remaining unwithdrawn amount of the Credit allocated to the eligible Categories 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 - 23 - Special Account as of the date of such notice 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 an expenditure or in an amount not eligible pursuant to paragraph 2 of this Schedule; (ii) was not justified by the evidence furnished to the Association, the Borrower shall, promptly upon notice from the Association (A) provide such additional evidence as the Association may request, or (B) 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. Unless the Association shall otherwise agree, no further deposit by the Association into the Special Account shall be made until the Borrower has provided such evidence or made such deposit or refund, as the case may be. (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. (c) The Borrower may, upon notice to the Association, refund to the Association all or any portion of the funds on deposit in the Special Account. (d) Refunds to the Association made pursuant to paragraph 6 (a), (b) and (c) of this Schedule shall be credited to the Credit Account for subsequent withdrawal or for cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions. 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