OFFICIAL DOCUMENTS CREDIT NUMBER 6368-BD Financing Agreement (Strengthening Public Financial Management Program to Enable Service Delivery) between PEOPLE'S REPUBLIC OF BANGLADESH and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated June 27, 2019 CREDIT NUMBER 6368 - BD FINANCING AGREEMENT AGREEMENT dated as of the Signature Date between PEOPLE'S REPUBLIC OF BANGLADESH ("Recipient") and INTERNATIONAL DEVELOPMENT ASSOCIATION ("Association"). The Recipient and the Association hereby agree as follows: ARTICLE I - GENERAL CONDITIONS; DEFINITIONS 1.01. The General Conditions (as defined in the Appendix to this Agreement) apply to and form part of this Agreement. 1.02. Unless the context requires otherwise, the capitalized terms used in this Agreement have the meanings ascribed to them in the General Conditions or in the Appendix to this Agreement. ARTICLE II - FINANCING 2.01. The Association agrees to extend to the Recipient a credit, which is deemed as Concessional Financing for the purposes of the General Conditions, as set forth or referred to in this Agreement, in an amount equivalent to seventy two million three hundred thousand Special Drawing Rights (SDR 72,300,000) (variously, "Credit" and "Financing"), to assist in financing the program described in Schedule I to this Agreement ("Program"). 2.02. The Recipient may withdraw the proceeds of the Financing in accordance with Section IV of Schedule 2 to this Agreement. All withdrawals from the Financing Account shall be deposited by the Association into an account specified by the Recipient and acceptable to the Association. 2.03. The Maximum Commitment Charge Rate payable by the Recipient on the Unwithdrawn Financing Balance shall be one-half of one percent (1/2 of 1%) per annum. 2.04. The Service Charge payable by the Recipient on the Withdrawn Credit Balance shall be equal to three-fourths of one percent (3/4 of 1%) per annum. -2- 2.05. The Interest Charge is one and a quarter percent (1.25%) per annum on the Withdrawn Credit Balance. 2.06. The Payment Dates are January 15 and July 15 in each year. 2.07. The principal amount of the Credit shall be repaid in accordance with the repayment schedule set forth in Schedule 4 to this Agreement. 2.08. The Payment Currency is Dollar. ARTICLE III - PROGRAM 3.01. The Recipient declares its commitment to the objective of the Program. To this end, the Recipient shall carry out the Program in accordance with the provisions of Article V of the General Conditions and Schedule 2 to this Agreement. ARTICLE IV - EFFECTIVENESS 4.01. The Effectiveness Deadline is the date ninety (90) days after the Signature Date. 4.02 For purposes of Section 10.05 (b) of the General Conditions, the date on which the obligations of the Recipient under this Agreement (other than those providing for payment obligations) shall terminate is twenty (20) years after the Signature Date. ARTICLE V - REPRESENTATIVE; ADDRESSES 5.01. The Recipient's Representative is the Senior Secretary/Secretary, or any Additional Secretary, or Joint Secretary/Joint Chief, Deputy Secretary/Deputy Chief, Senior Assistant Secretary/Senior Assistant Chief, Assistant Secretary/ Assistant Chief of the Economic Relations Division of its Ministry of Finance. 5.02. For purposes of Section 11.01 of the General Conditions: (a) the Recipient's address is: Economic Relations Division Ministry of Finance Sher-e-Bangla Nagar Dhaka 1207 Bangladesh; and (b) the Recipient's Electronic Address is: -3- Facsimile: E-mail: +88029180788 secretary@erd.gov.bd 5.03. For purposes of Section 11.01 of the General Conditions: (a) The Association's address is: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America; and (b) the Association's Electronic Address is: Telex: Facsimile: 248423 (MCI) 1-202-477-6391 -4- AGREED as of the Signature Date. PEOPLE'S REPUBLIC OF BANGLADESH By Authorized Representative Name: Mu"waF Aiied Secretary Title: Economic Relations Division Minitry of Finance Gom of the Peopl's Repu l4ic of Bangl h Date: Z, a 2-, 2-0 INTERNATIONAL DEVELOPMENT ASSOCIATION By Authorized Representative Name: W bA AJ/ &/ Title: MTIAYA l/J Date: jllvF2-7 -5- SCHEDULE 1 Program Description The objective of the Program is to improve fiscal forecasting, budget preparation and execution, financial reporting and transparency to enable better resource availability for service delivery in selected ministries, departments and agencies. The Program consists of the following results areas and activities under the PFM Action Plan: Result Area 1: Improving fiscal forecasting and resource allocation consistent with the Recipient's priorities for spending in service delivery sectors through: (a) the development of a macroeconomic model and a medium-term debt strategy compatible with the Recipient's country context, to inform budget preparation and the MTMF; improving the capacity of BMCs and BWGs to support their respective line ministries during budget preparation for improved alignment of the national budget with sector strategies and targets, and government policy on social, gender, and climate issues; to effectively monitor the performance of budget execution; and to support consistent increases in social sector expenditures as a percentage of total national expenditure; and (b) supporting the expediting of the Budget Release process and facilitating the implementation and completion of projects and the effective management of programs by supporting the timely release and distribution of budgets to DDOs. Result Area 2: Improving budget execution in service delivery NIDAs through: (a) supporting the reduction of cash held outside of the TSA and modernizing payment processes; (b) streamlining of pension processing and payment systems through (i) the establishment of a dedicated pension office; (ii) the use of EFT for pension payments; and (iii) strengthening accounting and monitoring systems; (c) strengthening the assessment, disclosure and monitoring of SOE information (including debt and contingent liabilities) and fiscal risks; and (d) supporting the design and implementation of an SOE performance evaluation system within the Finance Division; supporting the development of turnaround strategies for SOEs; and reducing funds transfers to SOEs as a percentage of total public expenditures. -6- Result Area 3: Promoting enhanced transparency of budget execution and enabling timely accountability through: (a) improving iBAS++, developing interfaces between iBAS++ and other priority government systems, promoting the effective use of iBAS++, and promoting the public dissemination of quarterly budget execution reports; and (b) the establishment of a modem internal audit function in selected departments and supporting the taking of rapid and effective action in response to audit observations and procurement post-reviews. Result Area 4: Establishing an enabling environment for improved PFM outcomes through: (a) the implementation of an effective change management approach and governance structure for PFM reform implementation, including the strengthening of the Recipient's Institute of Public Finance to enable it to function as a PFM Learning Hub. -7- SCHEDULE 2 Program Execution Section I. Implementation Arrangements A. Program Institutions 1. By no later than one (1) month after the Effective Date, the Recipient shall establish and thereafter maintain, throughout Program implementation, a steering committee: (a) headed by the Secretary of Finance; (b) vested with adequate functions, membership, powers, resources and competencies; and (c) responsible for providing policy guidance and strategic oversight, monitoring Program implementation, and serving as the highest-level coordinating entity participating ministries and implementing entities under the Program (the "Steering Committee"). 2. The Recipient, through MoF, shall: (a) by no later than three (3) months after the Effective Date, establish and thereafter maintain throughout Program implementation, a Program execution and coordination team, as the leading implementing directorate: (i) headed by the Additional Secretary in charge of Budget; (ii) vested with adequate functions, powers, resources and competencies; and (iii) responsible for implementing, coordinating and monitoring the Program at all levels following terms of reference agreed between the Recipient and the Association (the "PECT"); and (b) by no later than three (3) months after the Effective Date, establish and thereafter maintain throughout Program implementation, Program implementation teams within the relevant divisions of MoF leading the implementation of the Program: (i) consisting of dedicated teams of specialists in adequate number and vested with adequate functions, powers, resources and competencies; and (ii) responsible for implementation of their respective parts of the Program, following terms of reference agreed between the Recipient and the Association. B. Program Action Plan Unless otherwise agreed with the Association, the Recipient shall carry out the Program, or cause the Program to be carried out, in accordance with the provisions of the Program Action Plan. -8- Section H. Excluded Activities The Recipient shall ensure that the Program excludes any activities which: 1. in the opinion of the Association, are likely to have significant adverse impacts that are sensitive, diverse, or unprecedented on the environment and/or affected people; 2. involve the procurement of: (a) goods, estimated to cost US$30,000,000 equivalent or more per contract; (b) non-consulting services, estimated to cost US$30,000,000 equivalent or more per contract; or (c) consulting services, estimated to cost US$15,000,000 equivalent or more per contract; 3. involve carrying out of civil works for new construction; and/or 4. involve involuntary resettlement and/or land acquisition activities, including the procurement of land. Section III. Program Monitoring, Reporting and Evaluation A. Program Reports The Recipient shall furnish to the Association each Program Report not later than two (2) months after the end of each calendar semester, covering the semester. B. Independent Verification Agency The Recipient shall: (a) by no later than three (3) months after the Effective Date, appoint and enter into verification agreements with the Independent Verification Agencies, in a manner satisfactory to the Association and following terms of reference agreed between the Recipient and the Association; (b) undertake, at least annually, an independent verification process, in a manner and in substance satisfactory to the Association, through the Independent Verification Agencies, to ascertain whether the Disbursement Linked Results have been achieved for the period under review; and (c) furnish to the Association corresponding verification report(s) in form and substance agreed with the Association, and any information and/or documentation that the Independent Verification Agencies and/or the Association shall reasonably require for the monitoring, audit, analysis and/or verification of the achievement/fulfillment of the DLRs set forth in Schedule 3 to this Agreement. -9- Section IV. Withdrawal of Financing Proceeds A. General 1. Without limitation upon the provisions of Article II of the General Conditions and in accordance with the Disbursement and Financial Information Letter, the Recipient may withdraw the proceeds of the Financing to finance Program Expenditures, on the basis of the Disbursement Linked Results achieved by the Recipient, as measured against specific Disbursement Linked Indicators; all as set forth in paragraph 2 of this Section IV.A and the table in Schedule 3 to this Agreement. 2. The following table specifies each category of withdrawal of the proceeds of the Financing corresponding to each Disbursement Linked Indicators ("Category"), and the allocation of the amounts of the Financing to each such Category. Notwithstanding the foregoing, the actual Allocated Amounts authorized for disbursement for each DLR and/or the formula for their determination upon the achievement of an individual DLR for any given DLI financed under such Category, are set forth in Schedule 3 to this Agreement. Category Amount of the Financing (including Disbursement Linked Allocated Indicator as applicable) (expressed in SDR) (1) DLI #1: Use of improved fiscal 7,250,000 projections for budget-making (2) DLI #2: Improved budget alignment 10,100,000 with development strategy and gender, social, and climate considerations through better performance of BMCs (3) DLI #3: Reduced number of days taken 4,350,000 for DDOs to receive budget in Selected MDAs (4) DLI#4: Timely and reliable payments of 6,500,000 salaries and vendor invoices with a strengthened TSA and automated payment system (5) DLI#5: Improved Pension Service 7,250,000 (disaggregated by gender) through facilitation of payments through EFT no later than the pension payment cycle following retirement (6) DLI#6: SOE and autonomous bodies' 5,050,000 debt and contingent liabilities statement prepared and submitted to policy makers -10- (7) DLI#7: Improved performance of the 7,950,000 SOE sector and reduced subsidies as a percentage of total public sector spending (8) DLI#8: Budget Holders in Selected 8,700,000 MDAs effectively and transparently use financial information (9) DLI#9: Action taken on internal and 5,050,000 external audit reports in Selected MDAs and post-procurement reviews in the Finance Division (10) DLI# 10: PFM Action Plan 10,100,000 implementation is effectively led through an adequate governance structure and an effective change management approach TOTAL AMOUNT 72,300,000 B. Withdrawal Conditions; Withdrawal Period Notwithstanding the provisions of Part A of this Section, no withdrawal shall be made: (a) on the basis of DLRs achieved prior to the Signature Date; and/or (b) for any DLRs under Categories (1) through (10), until and unless the Recipient has furnished evidence satisfactory to the Association that said DLR has been achieved, including the corresponding verification report(s) referred to in Section Ill.B of this Schedule. 2. Notwithstanding the provisions of Part B.1(b) of this Section IV, the Recipient may withdraw an amount not to exceed SDR 14,460,000 as an advance; provided, however, that if the DLR(s) in the opinion of the Association, is/are not achieved (or is/are only partially achieved) by the Closing Date, the Recipient shall refund such advance to the Association promptly upon notice thereof by the Association. Except as otherwise agreed with the Recipient, the Association shall cancel the amount so refunded. Any further withdrawals requested as an advance under any Category shall be permitted only on such terms and conditions as the Association shall specify by notice to the Recipient. 3. Notwithstanding the provisions of Part B.1(b) of this Section IV, if the Association is not satisfied that any one or more of the DLR(s) has/have been achieved by the date by which the said DLR(s) is/are set to be achieved as set forth in Schedule 3 to this Agreement, and/or the Allocated Amount(s) for such DLR(s) has/have not - 11 - been fully withdrawn, the Association may, at any time, by notice to the Recipient, decide at its sole discretion to: (a) for any DLR which is scalable, as indicated in the table in Schedule 3 to this Agreement, authorize the withdrawal of such lesser amount of the unwithdrawn proceeds of the Financing then allocated to said DLR which, in the opinion of the Association, corresponds to the extent of achievement of said DLR(s), said lesser amount to be calculated in accordance with the applicable scalability formula set out in the table in Schedule 3 to this Agreement; (b) withhold all or a portion of the proceeds of the Financing corresponding to the Allocated Amounts for the said DLR(s) until such DLR(s) is/are, in the opinion of the Association, satisfactorily met; (c) reallocate all or a portion of the proceeds of the Financing corresponding to the Allocated Amounts of the said DLR(s) to any other DLR(s); and/or (d) in the case of any DLRs not achieved by the Closing Date, cancel all or a portion of the proceeds of the Financing corresponding to the Allocated Amounts then allocated to said DLR(s), it being understood that the dates provided in Schedule 3 to this Agreement by which DLRs are set to be achieved are indicative and that DLRs may be achieved at any time prior to the Closing Date. 4. The Closing Date is June 30, 2024. - 12- SCHEDULE 3 Disbursement-Linked Indicators, Disbursement Linked Results and Allocated Amounts (expressed in Special Drawing Rights) Applicable to the Program DLI Disbursement Linked Results' Year 1 Year 2 Year 3 :Year 4 1. Use of improved fiscal DLR 1.1: The requirements DLR 1.2: The software DLR 1.4: The Macro- DLR 1.5: Projections from the projections for budget- for the Macro-Economic application to operationalize Economic Model has been upgraded Macro-Economic making Model have been finalized. the Macro-Economic Model completed, including the use Model have been used for has been procured and of updated databases. MTMF and budget preparation. configured with relevant data. DLR 1.3: An updated medium- term debt strategy (including a Debt Bulletin and DSA) have been developed. Allocated Amount DLR 1.1 DLR 1.2 DLR 1.4 DLR 1.5 7,250,000 Roll Over: Yes Roll Over: Yes Roll Over: Yes Roll Over: Yes 1,450,000 1,450,000 1,450,000 1,450,000 DLR 1.3 Roll Over: Yes 1,450,000 Scalability: 362,500 upon development of the Debt Bulletin. 362,500 upon completion of the DSA. 725,000 upon completion of DLRs are not time-bound. The Years in which they are expected to be achieved as per this Schedule are included for indicative purposes, and DLRs can accordingly be achieved at any time prior to the Closing Date. - 13 - DLI Disbursement Linked Resultsi Year 1 Year 2 Year 3 Year 4 an updated medium-term debt strategy. 2. Improved budget DLR 2.1: A monitoring DLR 2.2: 15% of BMCs have DLR 2.4: The average alignment with development framework (including a undertaken inter-ministerial performance score of BMCs strategy and gender, social, performance scorecard) for peer-reviews in accordance evaluated through inter- and climate considerations the BMCs has been drafted, with the protocols established ministerial peer-reviews has through better performance consulted on and issued. pursuant to the monitoring improved by at least 25%. of BMCs framework development under DLR 2.1. DLR 2.5: The Recipient's expenditure on Social Sectors DLR 2.3: The Recipient's has increased to 29.25% of total expenditure on Social Sectors actual public expenditure (in has increased to 29% of total the relevant Fiscal Year in actual public expenditure (in which the DLR is being the relevant Fiscal Year in assessed). which the DLR is being assessed). Allocated Amount DLR 2.1 DLR 2.2 DLR 2.4 10,100,000 Roll Over: Yes Roll Over: Yes Roll Over: Yes 2,150,000 2,150,000 1,825,000 Scalability: 716,666 upon Scalability: Subject to Scalability: Subject to drafting of the monitoring achievement of the Minimum achievement of the Minimum framework. 716,666 upon Threshold and calculated in Threshold and calculated in completion of consultations accordance with Formula X l. accordance with Formula X I. for the monitoring framework. 716,668 upon Baseline: Zero Baseline: Average performance issuance of the monitoring score from the inter-ministerial framework. DLR 2.3 peer reviews carried out under Roll Over: Yes DLR 2.2 2,150,000 DLR 2.5 - 14 - DLI Disbursement Linked Resultsl Year I Year 2 Year 3 Year 4 Scalability Subject to Roll Oher. Yes achie ement of the Minnimum Threshold and calculated in 1,825,000 accordance with Formula XI. Scalability: Subject to Baseline: 28.87% achievement of the Minimum Threshold and calculated in accordance with Formula Xl. Baseline: 29% 3. Reduced number of days DLR 3.1: The Finance DLR 3.2: 80% of DDOs taken for DDOs to receive Division has drafted and have had their budget budget in Selected MDAs issued a circular mandating released and distributed by the de-linkage of Budget July 31 (of the relevant Fiscal Releases from Fund Year in which the DLR is Utilization Report beine assessed) subnission. Allocated .-Imount DLR 3.1 DLR 3.2 4,350,000 Roll O%cr: Yes Roll O-her. Yes 2. I - 5.0001 I5. u00 Scalability: 725,000 upon the Scalability: Subject to drafting of the circular. achievement of the Minimum 1,450,000 upon the issuance Threshold and calculated in t)fthe circular accordance %ith Formula X1 Baseline: Zero 4. Timel) and reliable DLR 4.1: A stock-take of DLR 4.2: 5''s of go%ernment DLR 4.3: 40'o of DDOs DLR 4.4 The number of new payments of salaries and special accounts (including payment transactions (in the submit all bills (payment special accounts (outside the vendor invoices with a an assessment of the number relevant Fiscal Year in which requests) online (in the TSA) opened (in the relevant - 15- DLI Disbursement Linked Results' Year 1 Year 2 Year 3 Year 4 strengthened TSA and of special accounts opened the DLR is being assessed) are relevant Fiscal Year in which Fiscal Year in which the DLR automated payment system per year in prior years) and made through EFT. the DLR is being assessed). is being assessed) has been EBFs (outside the TSA) has reduced by 50%. been completed. Allocated Amount DLR 4.1 DLR 4.2 DLR 4.3 DLR 4.4 6,500,000 Roll Over: Yes Roll Over: Yes Roll Over: Yes Roll Over: Yes 1,450,000 2,150,000 1,450,000 1,450,000 Scalability: Subject to Scalability: Subject to achievement of the Minimum achievement of the Minimum Scalability: Subject to Threshold and calculated in Threshold and calculated in achievement of the Minimum accordance with Formula XI. accordance with Formula Xl. Threshold and calculated in accordance with Formula X . Baseline: Zero Baseline: Zero Baseline: To be determined from the stock-take and assessment carried out under DLR 4.1. 5. Improved Pension Service DLR 5.1: The GP Fund DLR 5.2: A centralized DLR 5.3: A government- DLR 5.5: 90% of new (disaggregated by gender) Module and the Pension pension roll with EFT wide annual GPF and pensioners are paid through through facilitation of Service Module of iBAS++ payment capability has been Pension Service report has EFT no later than the pension payments through EFT no have been implemented and established and is operational. been produced (covering the payment cycle following their later than the pension are operational. relevant Fiscal Year in which retirement. payment cycle following the DLR is being assessed). retirement DLR 5.4: The number of cases of delayed pension payments is reduced by 50%. Allocated Amount DLR 5.1 DLR 5.2 DLR 5.3 DLR 5.5 7,250,000 Roll Over: Yes Roll Over: Yes Roll Over: Yes Roll Over: Yes 2,150,000 1,450,000 750,000 1,450,000 - 16- DLI Disbursement Linked Results' Year 1 Year 2 Year 3 Year 4 Scalability: 1,075,000 each DLR 5.4 Scalability: Subject to for the implementation and Roll Over: Yes achievement of the Minimum operationalization of the GP Threshold and calculated in Fund Module and Pension 1,450,000 accordance with Formula XL. Management Module, respectively Scalability: Subject to Baseline: Zero achievement of the Minimum Threshold and calculated in accordance with Formula Xl. Baseline: To be established through a stock-take exercise and agreed between the Recipient and the Association. 6. SOE and autonomous DLR 6.1: Policy and DLR 6.2: 100 SOEs and DLR 6.3: SOE debt and bodies' debt and contingent procedures to regulate SOEs' autonomous bodies have contingent liabilities liabilities statement debt and contingent liabilities published their audited statement (covering the prepared and submitted to (including an upgraded financial statements (covering relevant Fiscal Year for policy makers framework for reporting by the relevant Fiscal Year for which the DLR is being SOEs to the Finance which the DLR is being assessed) has been prepared Division) have been drafted assessed). by MoF for all SOEs and and issued by MoF. submitted to policy makers. Allocated Amount DLR 6.1 DLR 6.2 DLR 6.3 5,050,000 Roll Over: Yes Roll Over: Yes Roll Over: Yes 1,450,000 1,450,000 2,150,000 Scalability: 725,000 upon Scalability: Subject to Exception: Exception of up drafting of the policy and achievement of the Minimum to 5 SOEs in a given year in procedures (including the Threshold and calculated in the event that data required to | upgraded reporting accordance with Formula XI. - 17- DLI Disbursement Linked Results' Year 1 Year 2 Year 3 Year 4 framework). 725,000 upon achieve the DLR is issuance of the policy and Baseline: 47 SOEs and unavailable for such SOEs. procedures (including the autonomous bodies upgraded financial reporting framework) 7. Improved performance of DLR 7.1: SOE performance DLR 7.3: At least 10 SOEs DLR 7.4: Turnaround DLR 7.5: The ratio of SOE the SOE sector and reduced evaluation guidelines have have undergone an strategies have been transfers to total public subsidies as a percentage of been developed by the independent performance developed for at least 10 non- spending (in the relevant Fiscal total public sector spending Finance Division, with clear evaluation, in accordance with performing SOEs. Year in which the DLR is being scoring criteria. the SOE performance assessed) has been reduced by evaluation guidelines 15%. DLR 7.2: A policy and developed under DLR 7.1. procedures manual that enables an effective review of grants to SOEs has been drafted and issued by the Finance Division. Allocated Amount DLR 7.1 DLR 7.3 DLR 7.4 DLR 7.5 7,950,000 Roll Over: Yes Roll Over: Yes Roll Over: Yes Roll Over: Yes 1,450,000 1,450,000 1,450,000 2,150,000 Scalability: Scalability: Subject to Scalability: Subject to Scalability: Subject to 725,000 upon drafting of the achievement of the Minimum achievement of the Minimum achievement of the Minimum guidelines. 725,000 upon Threshold and calculated in Threshold and calculated in Threshold and calculated in issuance of the guidelines. accordance with Formula Xl accordance with Formula X1 accordance with Formula Xl DLR 7.2 Baseline: Zero Baseline: Zero Baseline: The average of the Roll Over: Yes ratio of SOE transfers to total -18- DLI Disbursement Linked Results' Year 1 Year 2 Year 3 Year 4 1,450,000 public spending in FY 2016, FY 2017 and FY 2018. Scalability: 725,000 upon drafting of the policy and procedures manual. 725,000 upon issuance of the policy and procedures manual 8. Budget Holders in DLR 8.1: The FY2018/2019 DLR 8.2: 3 Priority iBAS++ DLR 8.4: 4 SAEs are using DLR 8.6: 60% of Budget Selected MDAs effectively budget (or, if the DLR is Interfaces have been iBAS++. Holders generate 10 or more and transparently use rolled over, the budget for the implemented and are monthly iBAS++ reports for financial information relevant Fiscal Year for operational. DLR 8.5: Detailed budget budget execution decisions for which the DLR is being execution reports published the relevant Fiscal Year in assessed) has been released DLR 8.3: Government-wide by the Finance Division on which the DLR is being on the Recipient's new unaudited annual financial MoF's official website on a assessed. BACS. statements, including annual quarterly basis, i.e. four financial statements of SAEs reports published in the (covering the relevant Fiscal relevant year, (covering the Year in which the DLR is relevant Fiscal Year in which being assessed), have been the DLR is being assessed). submitted to OCAG within six months of the Fiscal Year-end. Allocated Amount DLR 8.1 DLR 8.2 DLR 8.4 DLR 8.6 8,700,000 Roll Over: Yes Roll Over: Yes Roll Over: Yes Roll Over: Yes 1,450,000 1,450,000 1,450,000 1,450,000 Scalability: Subject to Scalability: Subject to Scalability: Subject to achievement of the Minimum achievement of the Minimum achievement of the Minimum Threshold and calculated in Threshold and calculated in Threshold and calculated in accordance with Formula Xl accordance with Formula Xl accordance with Formula Xl Baseline: Zero Baseline: Zero Baseline: Zero - 19- DLI Disbursement Linked Results' Year 1 Year 2 Year 3 Year 4 DLR 8.3 DLR 8.5 Roll Over: Yes Roll Over: Yes Scalability: 1,450,000 1,450,000 upon achievement of target. 725,000 if unaudited Scalability: Subject to annual financial statements are achievement of the Minimum submitted to OCAG within 9 Threshold and calculated in months accordance with Formula XI Baseline: Zero 9. Action taken on internal DLR 9.1: The Model Internal DLR 9.3: Internal audit DLR 9.4 and external audit reports in Audit Charter and the Risk- reports, prepared in The relevant Audit Selected MDAs and post- based Internal Audit Manual accordance with the Model Committees resolve 50% of: procurement reviews in the have been issued by the Internal Audit Charter and the (i) audit recommendations Finance Division Finance Division. Risk-based Internal Audit for each of the Selected Manual issued under DLR 9.1, MDAs, other than the DLR 9.2 have been issued to the heads Finance Division and (ii) A system for annual of departments and principal audit recommendations and procurement planning and accounting officers of any two procurement post-reviews in post-review has been departments in any of the Finance Division, established by the Finance Selected MDAs. based on the stock of total Division and training on the audit recommendations and system has been conducted. procurement post-reviews, as applicable, pending for each of the relevant Selected MDAs and the Finance Division respectively, at the beginning of the relevant Fiscal Year in which the DLR is being assessed. - 20 - DLI Disbursement Linked Results' Year 1 Year 2 Year 3 Year 4 Allocated Amount DLR 9.1 and DLR 9.2 DLR 9.3 DLR 9.4 5,050,000 Roll Over: Yes Roll Over: Yes Roll Over: Yes 725,000 for each of DLR 9.1 1,100,000 2,500,000 (357,143 for each and DLR 9.2 of the Selected MDAs and Scalability: Subject to the Finance Division) achievement of the Minimum Threshold and calculated in Scalability: Subject to accordance with Formula X1 achievement of the Minimum Threshold and calculated in Baseline: Zero accordance with Formula X1 (applied to each of the Selected MDAs and the Finance Division) Baseline: Zero 10. PFM Action Plan DLR 10.1: Two PFM Action DLR 10.2: Two PFM Action DLR 10.4: DLR 10.6: implementation is effectively Plan progress reports Plan stakeholder retreats 6 field inspections to 100 civil servants (with data led through an adequate (prepared on a semi-annual conducted to review the government service delivery disaggregated by gender) have governance structure and an basis and covering the respective semi-annual PFM centers to identify PFM- completed specialized PFM- effective change relevant Fiscal Year for Action Plan progress reports related issues have been related courses/certifications. management approach which the DLR is being prepared under DLR 10.1 carried out. assessed) have been (covering the relevant Fiscal submitted by the PECT to the Year for which the DLR is DLR 10.5: The PECT has Steering Committee. being assessed). prepared a report evaluating the performance of coaches, DLR 10.3: The PFM Learning facilitators and/or Hub has produced at least 3 implementation support research papers on PFM consultants engaged to reform lessons and published support the implementation the said reports through its of the PFM Action Plan. website. ._| | -21- DLI Disbursement Linked Results' Year 1 Year 2 Year 3 Year 4 Allocated Amount DLR 10.1 DLR 10.2 DLR 10.4 DLR 10.6 10,100,000 Roll Over: Yes Roll Over: Yes Roll Over: Yes Roll Over: Yes 1,450,000 1,450,000 1,450,000 2,850,000 Scalability: Subject to Scalability: Subject to Scalability: Subject to Scalability: Subject to achievement of the Minimum achievement of the Minimum achievement of the Minimum achievement of the Minimum Threshold and calculated in Threshold and calculated in Threshold and calculated in Threshold and calculated in accordance with Formula Xl accordance with Formula Xl accordance with Formula Xl accordance with Formula Xl Baseline: Zero Baseline: Zero Baseline: Zero Baseline: Zero DLR 10.3 Roll Over: Yes DLR 10.5 Roll Over: Yes 1,450,000 1,450,000 Scalability: Subject to achievement of the Minimum Threshold and calculated in accordance with Formula X1 Baseline: Zero -20- SCHEDULE 4 Repayment Schedule Principal Amount of the Credit Date Payment Due repayable (expressed as a percentage)* On each January 15 and July 15: commencing July 15, 2024 to and including 1.65% January 15, 2044 commencing July 15, 2044 to and including 3.40% January 15, 2049 * The percentages represent the percentage of the principal amount of the Credit to be repaid, except as the Association may otherwise specify pursuant to Section 3.05 (b) of the General Conditions. -21 - APPENDIX Section I. Definitions 1. "Allocated Amount" means the amount allocated to each individual DLR, or determined for each DLR pursuant to Schedule 3 to this Agreement, as such amount might be increased, reallocated and/or cancelled (whether partially or in its entirety) by the Association, from time to time as the case may be, in accordance with the provisions of Section IV.B of Schedule 2 to this Agreement. 2. "Anti-Corruption Guidelines" means, for purposes of paragraph 5 of the Appendix to the General Conditions, the Association's "Guidelines on Preventing and Combating Fraud and Corruption in Program-for-Results Financing," dated February 1, 2012, and revised July 10, 2015. 3. "Audit Committee" means a committee within an MDA in charge of resolving audit and financial observations raised in internal audit reports and OCAG reports. 4. "BACS" means Budget and Accounting Classification System an accounting structure used by the Recipient through which financial transactions, including budgets, are posted, stored, maintained and reported upon. 5. "BMC" means a Budget Management Committee, responsible for coordinating the development and operating budgets and monitoring key performance indicators in the Recipient's line ministries. 6. "Budget Holder" means an authorized person within a ministry or department, responsible for executing the budget of such ministry or department. 7. "Budget Release" means an authorization issued in iBAS++ by the relevant administrative ministry (MoF or a line ministry) for the release of budgeted funds required for the execution of projects or programs, as allocated in the relevant approved budget. 8. "BWG" means a Budget Working Group, responsible for providing secretarial support to a BMC. 9. "Category" means a category set forth in the table in Section IV.A.2 of Schedule 2 to this Agreement. 10. "DDO" means a Drawing and Disbursing Officer, a person authorized to draw bills (payment requests) to pay for services rendered or supplies made to the Recipient's government, in accordance with the Recipient's applicable financial regulations. -22- 11. "Debt Bulletin" means a bulletin providing an update on the debt position of the Recipient's government, highlighting the movement in domestic and external debt stocks. 12. "Disbursement Linked Indicator" or "DLI" means in respect of a given Category, the indicator related to said Category as set forth in the table in Section IV.A.2 of Schedule 2 to this Agreement. 13. "Disbursement Linked Result" or "DLR" means in respect of a given Category and DLI, the result set forth in the table in Schedule 3 to this Agreement, on the basis of the achievement of which, the amount of the Financing allocated to said result may be withdrawn in accordance with the provisions of said Section IV. 14. "DSA" means a framework for analyzing the sustainability of total public debt and that total external debt. 15. "EBF" means extra-budgetary funds which are general government entities with individual budgets not fully covered by the general budget. 16. "EFT" means electronic fund transfer, a transaction that takes place over a computerized network, either among accounts at the same financial institution or to different accounts at separate financial institutions. 17. "Finance Division" means the Finance Division within MoF. 18. "Fiscal Year" or "FY" means the Recipient's fiscal year commencing from July 1 and ending on June 30 of each year. 19. "Formula Xl" means the following formula used to calculate the scalability of a particular DLR: Allocated Amount multiplied by ((Actual Achievement minus (the higher of: the Baseline OR the Earlier Rewarded Achievement) divided by (DLR Target minus Baseline)), where: (a) "Allocated Amount" means the Allocated Amount assigned to the relevant DLR; (b) "Actual Achievement" means the actual result achieved by the Recipient in relation to the relevant DLR, which, for the avoidance of doubt and for purposes of this formula, shall not exceed the DLR Target; (c) "Baseline" means the baseline for the relevant DLR, as set forth in the table in Schedule 3 to this Agreement; (d) "DLR Target" the target result for the relevant DLR, as set forth in the table in Schedule 3 to this Agreement; and -23- (e) "Earlier Rewarded Achievement" means, in relation to a particular DLR, the results previously achieved by the Recipient, for which a portion of the Allocated Amount has previously been disbursed. 20. "Fund Utilization Report" means the consolidated statement of expenditure prepared by Budget Holders and submitted to the Finance Division for in advance of a quarterly budget release. 21. "General Conditions" means the "International Development Association General Conditions for IDA Financing, Program-for-Results Financing", dated July 14, 2017, with the modifications set forth in Section II of this Appendix. 22. "GP Fund Module" means an accounting and payment system for the GPF that is linked with iBAS++. 23. "GPF" means a provident fund, other than a railway provident fund, constituted by the authority of the Recipient's government for any class or classes of persons in the Recipient's service in accordance with the Recipient's Provident Funds Act 1925. 24. "iBAS++" means the Recipient's integrated budgetary accounting system 25. "ICT" means information, communications and technology. 26. "Independent Verification Agencies" means the independent institutions which have been selected by the Recipient under terms of reference satisfactory to the Association, to verify the achievement of the DLRs based on a detailed DLI verification protocol satisfactory to the Association. 27. "Macro-Economic Model" means the Recipient's tool developed for forecasting macro-economic fundamentals including, at a minimum, the capability to carry out short-term forecasting, change the endogeneity or exogeneity of variables, and test different shocks with different magnitude and scenarios. 28. "MDAs" means the Recipient's government ministries, departments and agencies. 29. "Minimum Threshold" means, in relation to a particular DLR, the minimum threshold result required to be achieved by the Recipient, calculated as follows: Baseline (for the relevant DLR, as set forth in the table in Schedule 3 to this Agreement) plus (30% of(DLR Target (as defined in the definition of Formula XI)) minus Baseline)). -24- 30. "Model Internal Audit Charter" means a policy statement that clarifies and distinguishes the roles and responsibilities of principal accounting officers, internal auditors, and the audit committee, and addresses, among other topics, independence, procedures and requirements for audit reporting, unrestricted access to records and information, staff capacity and competency requirements, applicable audit standards, and the obligation of the audited entity to collaborate with the auditor, all in form and substance satisfactory to the Association. 31. "MoF" means the Recipient's Ministry of Finance, or any successor thereto. 32. "MTMF" means the Recipient's medium term macroeconomic framework. 33. "OCAG" means the Recipient's Office of the Comptroller and Auditor General, or any successor thereto. 34. "PECT" means the Program execution and coordination team to be established by the Recipient pursuant to Section I.A.2 of Schedule 2 to this Agreement. 35. "Pension Service" means the Recipient's pension processing and payment service. 36. "Pension Module" means a central processing, accounting and payment system for the Pension Service that is linked with iBAS++. 37. "PFM" means public financial management. 38. "PFM Action Plan" means the Recipient's Public Financial Management Action Plan for 2018-2023, adopted by MoF, of which the Program comprises a part, as described in Schedule 1 to this Agreement. 39. "PFM Learning Hub" means the Recipient's Institute of Public Finance performing enhanced functions as a PFM knowledge institute for government experts and supporting learning activities to identify, capture and share PFM reform implementation lessons among the Recipient's ministries and agencies and preparing related recommendations and reports. 40. "Priority iBAS++ Interface" means a software application connecting iBAS++ to any of the following institutions and systems: the Recipient's Social Protection System; the Bangladesh Bank Real Time Gross Settlement System (RTGS)/Automated Clearing House (ACH); the Recipient's e-government procurement (e-GP) system; the Recipient's Personnel Management Information System (PMIS); the Recipient's Debt Management and Financial Analysis System (DMFAS); the Recipient's National Board of Revenue (NBR); the Sonali Bank e- Payment Portal; the Recipient's Education Management Information System (EMIS); and the Recipient's Health Management Information System (HMIS). -25- 41. "Program Action Plan" means the Recipient's plan dated December 12, 2018, agreed between the Recipient and the Association, and referred to in Section I.B of Schedule 2 to this Agreement. 42. "Risk-Based Internal Audit Manual" means a manual that sets out an audit methodology which is primarily focused on the inherent risk involved in auditable activities or system, and which includes a risk scoring methodology, all in form and substance satisfactory to the Association. 43. "Roll Over" means, with respect to a DLR, that the disbursement of the undisbursed portion of the Allocated Amount corresponding to such DLR may be deferred to any subsequent Year up to the Closing Date. 44. "SAEs" means the Recipient's self-accounting entities, including the Recipient's Public Works Department, Roads and Highways Department, Ministry of Foreign Affairs, Department of Public Health Engineering, Forest Department, Bangladesh Telecommunication Company Limited, and Post Office. 45. "Selected MDAs" means the Finance Division and the Recipient's ministries responsible for primary education, secondary education, health, roads, public works and local government. 46. "Signature Date" means the later of the two dates on which the Recipient and the Association signed this Agreement and such definition applies to all references to "the date of the Financing Agreement" in the General Conditions. 47. "Social Sectors" means the health, education and family welfare sectors. 48. "SOE" means state-owned enterprise. 49. "Steering Committee" means the Steering Committee to be established by the Recipient pursuant to Section I.A.1 of Schedule 2 to this Agreement. 50. "TSA" means the Recipient's Treasury Single Account. 51. "Year" means any of the Years 0 through 5 of Program implementation as the context shall determine. 52. "Year 0" means the period (which may be shorter than 12 consecutive months) between the Signature Date and the end of the Fiscal Year during which this Agreement was signed by the Recipient and the Association. 53. "Year 1" means the first full Fiscal Year of implementation of Program activities, expected to be Fiscal Year 2018/19. -26- 54. "Year 2" means the second full Fiscal Year of implementation of Program activities, expected to be Fiscal Year 2019/20. 55. "Year 3" means the third full Fiscal Year of implementation of Program activities, expected to be Fiscal Year 2020/21. 56. "Year 4" means the fourth full Fiscal Year of implementation of Program activities, expected to be Fiscal Year 2021/22. 57. "Year 5" means the fifth full Fiscal Year of implementation of Program activities, expected to be Fiscal Year 2022/23. Section II. Modifications to the General Conditions In the Appendix, Definitions, the definition number 85 is modified to read: "85. "Program Expenditure" means an expenditure that meets the requirements of Section 2.03, incurred under the organizational code 1090101, under following economic codes of MoF: 3111, 3211, 3231, 3243, 3244, 3255, 3257, 3258, 3821125, 4112, 4113, as the numbering of such corresponding budget lines may be revised from time to time with the agreement of the Association but without affecting the description of the Program."