Conformed Copy - C2661 - District Primary Education Project - Development Credit Agreement

Page 1 CONFORMED COPY CREDIT NUMBER 2661 IN Development Credit Agreement (District Primary Education Project) between INDIA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated December 22, 1994 CREDIT NUMBER 2661 IN DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated December 22, 1994, between INDIA, acting by its President, (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 (B) the Project will be carried out by the States of Assam, Haryana, Karnataka, Kerala, Maharashtra and Tamil Nadu (the Project States) with the assistance respectively of the Assam Prathamik Shiksha Achani Parishad (APSAP); Haryana Prathamik Shiksha Pariyojana Parishad (HPSPP); Karnataka Prathamik Shiksha Vikas Yojana (KPSVY); Tamil Nadu State Mission of Education for All (TNE); Maharashtra Prathamik Shiksha Parishad (MPSP); and Primary Education Development Society of Kerala (PEDSK) (collectively referred to hereinafter as State Implementation Societies) as well as the assistance of the Borrower and, as part of such assistance, the Borrower will make available to the Project States and the State Implementation Societies the proceeds of the Credit as provided in this Agreement; and Page 2 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 and in the Project Agreement of even date between the Association of one part and the Project States of the other part; 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) "Assam" means the Borrower's state of Assam, or any successor thereto; (b) "Assam Society" means Assam Prathamik Shiksha Achani Parishad (APSAP), a registered society under the Borrower's Societies Registration Act; (c) "DIET" means District Institute for Education and Training; (d) "DPEP" means the Borrower's District Primary Education Program; (e) "ECE" means Early Childhood Education; (f) "Haryana" means the Borrower's state of Haryana, or any successor thereto; (g) "Haryana Society" means Haryana Prathamik Shiksha Pariyojana Parishad (HPSPP), a registered society under the Borrower's Societies Registration Act; (h) "Karnataka" means the Borrower's state of Karnataka, or any successor thereto; (i) "Karnataka Society" means Karnataka Prathamik Shiksha Vikas Yojana (KPSVY), a registered society under the Borrower's Societies Registration Act; (j) "Kerala" means the Borrower's state of Kerala, or any successor thereto; (k) "Kerala Society" means Primary Education Development Society of Kerala (PEDSK), a registered society under the Borrower's Societies Registration Act; (l) "Maharashtra" means the Borrower's state of Maharashtra, or any successor thereto; (m) "Maharashtra Society" means Maharashtra Prathamik Shiksha Parishad (MPSP); (n) "MIS" means management information system; (o) "MLL" means minimum levels of learning; (p) "NCERT" means the Borrower's National Council of Educational Research and Training; Page 3 (q) "primary education" means the lower section of elementary education (classes 1 through 4 or classes 1 through 5, depending upon State norms); (r) "Project Agreement" means the agreement of even date herewith between the Association of the one part and the Project States of the other part, as the same may be amended from time to time, and such term includes all schedules and agreements supplemental to the Project Agreement; (s) "Project Districts" means the districts in Project States designated as such by the Association; (t) "Project State" means Assam, Haryana, Karnataka, Kerala, Maharashtra or Tamil Nadu and "Project States" means all of these States collectively; (u) "SCERT" means a State Council of Educational Research and Training; (v) "SIEMT" means the State Institute for Educational Management and Training of a Project State to be established or strengthened pursuant to the Project; (w) "Scheduled Castes" refers to the population groups specified as "Scheduled Castes" pursuant to Article 341 of the Constitution of India; (x) "Scheduled Tribes" refers to the population groups specified as "Scheduled Tribes" pursuant to Article 342 of the Constitution of India; (y) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement; (z) "State" means a State of the Borrower; (aa) "State Implementation Society" means each of the following: the Assam Society, the Haryana Society, the Karnataka Society, the Kerala Society, the Maharashtra Society or the Tamil Nadu Society; and "State Implementation Societies" means all of them collectively; (ab) "Tamil Nadu" means the Borrower's state of Tamil Nadu, or any successor thereto; and (ac) "Tamil Nadu Society" means Tamil Nadu State Mission of Education for All (TNE), registered as a society under the Borrower's Societies Registration Act. 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 one hundred eighty million Special Drawing Rights (SDR 180,000,000). 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 cost of goods and services required for the Project 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 the Page 4 Reserve Bank of India on terms and conditions satisfactory to the Association. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 4 to this Agreement. Section 2.03. The Closing Date shall be March 31, 2002 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 and 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 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 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 semi-annually on April 1 and October 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 April 1 and October 1, commencing April 1, 2005 and ending October 1, 2029. Each installment to and including the installment payable on October 1, 2014 shall be one and one-fourth percent (1-1/4%) of such principal amount, and each installment thereafter shall be two and one-half percent (2-1/2%) 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 consideration 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. Page 5 (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. 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, without any limitation or restriction upon any of its other obligations under this Agreement, shall (i) cause the Project States and State Implementation Societies to perform in accordance with the provisions of the Project Agreement all the respective obliga- tions of the Project States and State Implementation Societies set forth therein, shall take and cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable the Project States and State Implementation Societies to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance; and (ii) carry out Part A of the Project with due diligence and efficiency and in conformity with appropriate administrative, financial and educational practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the Project. (b) The Borrower shall make the proceeds of the Credit available to the Project States in accordance with the Borrower's standard arrangements for developmental assistance to the States of India and to State Implementation Societies under terms and conditions acceptable to the Association. (c) Without prejudice to the generality of any other provision of this Agreement, the Borrower shall ensure that State Implementation Societies receive Project funds on a six monthly basis, in a timely manner, for anticipated expenditures under their approved annual work plans. (d) The Borrower shall cause the Project to be carried out, or carry out Part A of the Project, in accordance with the Implementation Program set forth in Schedule 3 to this Agreement. Section 3.02. Except as the Association shall otherwise agree, procurement of the goods, works and services required for the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of Schedule 1 to the Project Agreement. Section 3.03. The Borrower and the Association hereby agree that the obligations set forth in Sections 9.03, 9.04, 9.05, 9.06, 9.07 and 9.08 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) in respect of the Project shall be carried out jointly and severally by the Project States and the State Implementation Societies pursuant to Section 2.03 of the Project Agreement. Section 3.04. The Borrower shall carry out the District Page 6 Primary Education Program in the Project States and shall not make any change to such Program, including in respect of its financial and administrative procedures, that would, in the reasonable opinion of the Association, materially and adversely affect the ability of the Borrower or any Project State to carry out the Project. ARTICLE IV Financial and Other Covenants Section 4.01. (a) The Borrower shall maintain records and accounts adequate to reflect in accordance with sound accounting practices the operations, resources and expenditures in respect of activities related to 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 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, certified copies 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 sound accounting practices, records and accounts reflecting such expenditures; (ii) ensure that all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures are retained until at least one year after the Association has received the audit report for the fiscal year in which the last withdrawal from the Credit Account was made; and (iii) enable the Association's representatives to examine such records. (d) The Borrower shall: (i) have the records and accounts referred to in paragraph (a) (i) of this Section and 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 Page 7 months after the end of each such year the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested, including 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; and (iii) furnish to the Association such other information concerning said records and accounts and the audit thereof as the Association shall from time to time reasonably request. 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) Any Project State shall have failed to perform any of its respective obligations under the Project Agreement. (b) As a result of events which have occurred after the date of this Agreement, an extraordinary situation shall have arisen which shall make it improbable that a Project State will perform its respective obligations under the Project Agreement. (c) The Borrower or any Project State with respect to itself, shall have failed to carry out the District Primary Education Program in a manner that, in the reasonable opinion of the Association, materially and adversely affects the objectives or implementation of the Project. (d) Any Project State shall have reduced the level of its budgetary expenditure for primary education (net of Project expenditures) below the level, in constant terms, of such expenditure in the Borrower's financial year 1991-1992. Section 5.02. Pursuant to Section 7.01 (d) of the General Conditions, the following additional event is specified, namely, that the event specified in paragraph (a) of Section 5.01 of this Agreement shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Association to the Borrower and the concerned Project State. ARTICLE VI Effective Date; Termination Section 6.01. The following is specified as an additional matter, within the meaning of Section 12.02 (b) of the General Conditions, to be included in the opinion or opinions to be furnished to the Association, namely, that the Project Agreement has been duly authorized or ratified by each Project State respectively and is legally binding upon each of them in accordance with its terms. 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. Section 6.03. The provisions of Section 5.02 of this Agreement shall cease and determine on the date on which this Agreement shall terminate or on the date twenty years after the date of this Agreement, whichever shall be the earlier. ARTICLE VII Page 8 Representatives of the Borrower; Addresses Section 7.01. The Secretary, Additional Secretary, Director, Deputy Secretary or Under Secretary of the Department of Economic Affairs in the Ministry of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: The Secretary to the Government of India Ministry of Finance Department of Economic Affairs New Delhi, India Cable address: Telex: ECOFAIRS 953-3166175 New Delhi For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 197688 (TRT) Washington, D.C. 248423 (RCA) 64145 (WUI) or 82987 (FTCC) 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. INDIA By /s/ N. Valluri Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Heinz Vergin Acting Regional Vice President South Asia SCHEDULE 1 Withdrawal of the Proceeds of the Credit 1. The table below sets forth the Categories of items to be Page 9 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 35,330,000 90% (2) Equipment, 20,680,000 100% of foreign vehicles, expenditures, books and 100% of local furniture expenditures (ex-factory cost) and 80% of local expenditures for other items procured locally (3) Consultant 35,950,000 100% services, fellowships and training Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (4) Incremental 73,290,000 90% of local salaries, honoraria expenditures for volunteers, incurred until consumable teaching September 30 materials and operation 1997; 80% of and maintenance costs expenditures incurred from October 1, 1997 until September 30, 2000; and 60% of expenditures incurred thereafter (5) Unallocated 14,750,000 ___________ TOTAL 180,000,000 =========== 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 "incremental operation and maintenance costs" means operation and maintenance costs for the Project pursuant to DPEP, incurred on or after March 1, 1994; and "incremental staff salaries" means salaries paid in respect of posts created for the Project pursuant to DPEP, including consulting or contractual services, on or after March 1, 1994. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for Page 10 expenditures incurred prior to the date of this Agreement except that withdrawals, in an aggregate amount not exceeding the equivalent of SDR 5,540,000, may be made on account of payments made for expenditures before that date but after March 1, 1994. 4. The Bank may require withdrawals from the Loan Account to be made on the basis of statements of expenditure for expenditures for: (a) goods and works under contracts not exceeding $300,000 equivalent; (b) services under contracts not exceeding $100,000 equivalent for employment of consulting firms and $50,000 equivalent for employment of individual consultants respectively; (c) training and fellowships; (d) works procured under force account; and (e) incremental salaries, incremental operational and maintenance costs and honoraria for volunteers, all under such terms and conditions as the Bank shall specify by notice to the Borrower. SCHEDULE 2 Description of the Project The main objectives of the Project are to build national, state and district level managerial and professional capacity for sustainable primary education development, decrease drop out rates, increase learning achievement, improve access to primary education, in particular for female students as well as scheduled caste and tribal students, and enhance community participation in primary education in the Project States and Project Districts. The Project consists of the following parts, subject to such modifications thereof as may be agreed upon between the Borrower and the Association from time to time: Part A: Building National Institutional Capacity (1) DPEP Bureau: (a) Establishment of a DPEP Bureau in the Borrower's Department of Education with responsibility for appraisal, technical assistance, implementation supervision, research, evaluation and monitoring; and (b) strengthening the DPEP Bureau's capacity for carrying out such technical and professional activities. (2) School Statistics and MIS: (a) Development of core specifications for computerized MIS systems, through specialized educational institutions, for adaptation by Project States, ensuring that State-level systems are mutually compatible; (b) developing prototype training courses for use in implementing such systems at national, State and district levels; and (c) training of master trainers at the State level for the implementation of such systems. (3) Teacher In-Service Training: Establishment of a National Training Resource Group in a specialized educational institution to improve classroom teaching through in-service training by: (a) identifying best practices in-service teacher training in India, evaluating designs and materials and disseminating selected models to States; (b) developing field- tested prototype teacher in-service training designs and materials; and (c) assisting Project States with: (i) development of capacity for adapting prototype training designs and materials; (ii) developing State and district-specific designs and materials; and (iii) conducting formative evaluation activities aimed at improving in-service courses. (4) Program Evaluation and Research: Establishment of a national program for evaluation, research and studies administered through a specialized educational institution to: (a) improve the educational research and evaluation capacity of national and State-level research organizations; (b) organize international conferences and study tours on primary education Page 11 research and evaluation; (c) conduct or commission systematic studies and evaluations in primary education; and (d) disseminate the results of such studies to national, State and district Project management as well as internationally, through reports, seminars and newsletters. (5) Program for Improved Pedagogy: (a) Identification and dissemination of best practices, information and learning materials on pedagogical practices; (b) provision of access to, and dissemination of, international research on and new approaches to primary reading and mathematics competencies; (c) research into reading readiness and difficulties in classes 1 and 2 including identification of competencies on which performance is weak; (d) development of comprehensive, research-based, field-tested prototype packages of instructional materials based on MLL and of integrated and active learning techniques for reading and mathematics development in early primary grades; (e) provision of technical assistance to Project States and Project Districts for the implementation of improved pedagogy in relation to MLL; (f) improvement of design layout and production of instructional materials such as textbooks and teaching/learning materials; and (g) provision of training and technical assistance to strengthen the capacity of the Project States for instructional materials development and publication through State agencies. (6) Educational Planning and Management: Provision of technical support and consulting services to develop capacity of Project States in (a) establishing and strengthening State- level units/institutions of education planning and management; (b) developing prototype training packages and organizing training for Project planning and management; (c) strengthening district level education planning; and (d) developing skills in effective use of MIS for education planning and management. (7) Tribal Students: Carrying out national research and development activities to support programs of special emphasis for tribal students undertaken by Project States and Districts. (8) Project Preparation Facility: Establishment of a facility to support preparation of primary education projects outside Project States or Project Districts. (9) Innovative Activities: Establishment of a facility to support innovative but untested approaches to improve primary education. (10) International Cooperation: Strengthening international technical collaboration in the development of primary education inter alia through international conferences, international study tours and training and collaborative arrangements with international consultants. Part B: Building Institutional Capacity of Project States (1) Improved Instructional Materials Development and Production: Improving the quality and efficiency of textbook production and distribution inter alia by: (a) the preparation of instructional materials based on MLL; (b) field piloting of print materials prior to publication; (c) improvements in textbook design, illustration, layout and durability; (d) computerization of inventory management; and (e) professional training for textbook agency staff. (2) Improved Teaching: Strengthening the capacity of State Councils for Educational Research and Training (SCERTs) or equivalent organizations in Project States to support the development of improved classroom teaching models and teacher in-service training inter alia by: (a) provision of training and technical assistance to DIETs; (b) adaptation of national prototype training and classroom materials in regional languages; (c) training of master trainers; (d) adaptation, Page 12 development, testing and dissemination of early childhood education materials; and (e) development of learning materials in tribal languages. (3) Improved Planning and Management: Establishment and strengthening of SIEMTs or equivalent agencies, to provide technical assistance and training in education planning, management and monitoring to state and district level education staff. (4) Improved Educational Research and Evaluation: Strengthening and expansion of SCERTs to: (a) conduct program evaluation and research studies; and (b) build capacity in DIETs to conduct program evaluation and research studies. Part C: Improving Quality and Access in Primary Education: (1) Building District Level Institutional Capacity (a) Establishment of District Project Committees in Project Districts; (b) establishment of new school statistics MIS system at the district level system in Project Districts; (c) establishment and strengthening of DIETs; and (d) carrying out pilot projects to strengthen school supervision. (2) Reducing Dropout (a) Strengthening school/community organizations to facilitate operations of schools and non-formal education centers, conducting annual surveys of village children to identify non-enrollers and drop-outs and encouraging parents to send children to school and retain them in school; (b) repair, rehabilitation and maintenance of existing schools, including the installation and maintenance of toilets, water supply and electricity; and (c) carrying out awareness campaigns to increase awareness about primary education and its benefits to communities and schools. (3) Improving Learning Achievement: Improving the quality and effectiveness of classroom instruction to improve learning achievement by: (a) development of teacher in-service training to improve classroom practice for multi-grade teaching and preparation of teaching aids and instructional materials for teaching language and mathematics in early grades by development of initial designs and systems for training trainers and teachers; (b) development of the physical infrastructure needed to bring training to the block and school cluster level; (c) expansion of the variety of learning materials and teaching aids in schools through grants to school/community organizations; (d) development and implementation of targeted interventions on behalf of female students as well as scheduled caste and scheduled tribe students; and (e) expansion or introduction of early childhood education through evaluated pilot programs. (4) Improving Access Carrying out of the following in Project Districts: (a) Construction of new schools and classrooms as well as provision of teachers to create approximately 470,000 new student places in new schools and classrooms; (b) provision of teachers required by enrollment expansion in existing schools; and (c) establishment of non-formal primary classes for out-of-school Page 13 children who cannot be reached by formal schools. * * * The Project is expected to be completed by September 30, 2001. SCHEDULE 3 Implementation Program 1. The Borrower shall: (a) carry out, and shall cause the Project States and the State Implementation Societies to carry out, the District Primary Education Program; and (b) shall discuss with the Association any proposed change to the District Primary Education Program which may, in the reasonable opinion of the Association, adversely and materially affect the objectives or implementation of the Project. 2. (a) The Borrower shall carry out Parts A(5), A(6) and A(7) of the Project, with the assistance, where required, of institutions acceptable to the Association, under appropriate arrangements, including terms of reference, acceptable to the Association. (b) The Borrower shall select the institutions, and enter into the arrangements referred to in paragraph 2(a) of this Schedule by June 30, 1995. 3. The Borrower shall carry out Part A(8) of the Project in any district acceptable to the Association. 4. The Borrower shall carry out by December 1, 1997, a review of the management arrangements of State Societies, under terms of reference satisfactory to the Association. 5. The Borrower shall maintain the DPEP Bureau in its Department of Education, with adequate staff, resources and facilities, and with terms of reference acceptable to the Association. 6. The Borrower shall establish DIETs and appoint key staff at such DIETs by January 31, 1996. 7. Without limitation to the generality of any other provision of this Agreement, the Borrower shall: (i) review annually with the Association progress in Project implementation and Credit disbursements over the preceding twelve months; (ii) discuss with the Association by January 31 of each year, annual work plans and budgets for the next twelve months; (iii) ensure that assessment studies, with scope and content acceptable to the Association, are carried out in all Project Districts in the third and sixth calendar years following the calendar year in which Project implementation commenced; (iv) carry out, no later than June 30, 1998, or such later date as the Association shall establish, along with the Association, a mid-term review of the Project, with particular reference to improvements in dropout rates, learning achievement scores and enrollments; and (v) duly take into account the comments offered by the Association during such review, in the course of further implementation of the Project. Page 14 SCHEDULE 4 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1), (2), (3) and (4) 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 $12,000,000, 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 in 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 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. (a) Notwithstanding the provisions of paragraph 3 of this Schedule, the Association shall not be required to make further Page 15 deposits into the Special Account: (i) 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 (ii) 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 respective General Conditions with respect to the Project, shall equal the equivalent of twice the amount of the Authorized Allocation. (b) 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 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; and (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 paragraphs 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.