IOFFICIAL D COCUMENTS CREDIT NUMBER 1755 PAK Development Credit Agreement (Third Technical Assistance Project) between ISLAMIC REPUBLIC OF PAKISTAN and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated cseq2F kO, 1987 CREDIT NUMBER 1755 PAK DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated FbIZLCut ( , 1987, between ISLAMIC REPUBLIC OF PAKISTAN acting by its President (the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association). WHEREAS the Borrower, having satisfied itself as to the feasibility and priority of the Project described in Schedule 1 to this Agreement, has requested the Association to assist in the financing of the Project; and WHEREAS the Association has agreed, on the basis, inter alia of the foregoing, to extend the Credit to the Borrower upon the terms and conditions set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Develop- ment Credit Agreements" of the Association, dated January 1, 1985, with the last sentence of Section 3.02 deleted (the General Conditions) constitute an integral part of this Agreement. Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions have the respec- tive meanings therein set forth and the following additional terms have the following meanings: (a) "Sub-project" means a particular study, a consulting service, training or provision of equipment to be financed out of the proceeds of the Credit; (b) "Special Account" means the account referred to in Section 2.02 (c) of this Agreement; and (c) "Planning and Development Division" means the Planning and Development Division of the Borrower's Ministry of Planning and Development. -2- ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Bor- rower, on the terms and conditions set forth or referred to in the Development Credit Agreement, an amount in various currencies equivalent to five million nine hundred thousand Special Drawing Rights (SDR 5,900,000). Section 2.02. (a) Subject to paragraph (b) below, the amount of the Credit may be withdrawn from the Credit Account in accor- dance with allocations of the proceeds of the Credit to be agreed between the Borrower and the Association pursuant to Section 3.01 of 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) Except as the Borrower and the Association may other- wise agree, withdrawals from the Credit Account shall be limited to: (i) studies, consulting services and training, 100% of expenditures; (ii) equipment, 100% of foreign expenditures, 100% of local expenditures (ex-factory cost) and 75% of local expenditures for items procured locally. For the purposes of this paragraph: (A) the term "foreign expenditures" means expenditures in the currency of any country other than that of the Borrower for goods and services supplied from the territory of any country other than that of the Borrower; and (B) the term "local expenditures" means expenditures in the currency of the Borrower or for goods or services supplied from the territory of the Bor- rower. (c) No withdrawals shall be made out of the Credit Account for payments made before the date of this Agreement except for those made between September 1, 1986 and said date to carry out -3- Sub-projects related to the work program of the Borrower's National Commission on Agriculture up to the amount of SDR 170,000 equivalent. (d) The Borrower shall, for the purposes of the Project, open and maintain in the National Bank of Pakistan a special account in United States dollars on terms and conditions satis- factory 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 December 31, 1990 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 at the rate of one-half of one per cent (1/2 of 1%) per annum on the principal amount of the Credit not with- drawn from time to time. The commitment charge shall accrue from a date sixty days after the date of the Development Credit Agree- ment to the respective dates on which amounts shall be withdrawn by the Borrower from the Credit Account or shall be cancelled.. (b) The commitment charge shall be paid: (i) at such places as the Association shall reasonably request; (ii) without 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 per cent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.06. Commitment charges and service charges shall be payable semiannually on June 15 and December 15 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semiannual installments payable on each June 15 and December 15 commencing June 15, 1997, and ending December 15, 2036. Each installment to and including the installment payable -4- on December 15, 2006 shall be one-half of one per cent (1/2 of 1%) of such principal amount, and each installment thereafter shall be one and one-half per cent (1-1/2%) of such principal amount. Section 2.08. The currency of the United States of America is hereby specified for the purposes of Section 4.02 of the General Conditions. 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 I to this Agreement, and, to this end, shall carry out the Project with due diligence and efficiency and in conformity with appropriate technical, financial and administrative practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the Project. (b) Without limitation upon the provisions of paragraph (a) of this Section: (i) Sub-projects and the allocation thereto of the proceeds of the Credit shall be determined by agreement between the Borrower and the Association, taking into consideration the eligibility criteria set forth in Schedule 1 to this Agreement; and (ii) except as the Borrower and the Association shall otherwise agree, the Borrower shall carry out the Project in accordance with the Implementation Program set forth in Schedule 3 to this Agreement. Section 3.02. Except as the Association shall otherwise agree, procurement of the goods 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 2 to this Agreement. -5- 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 six months after the end of each such year, a certified copy of the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iii) furnish to the Association such other information concerning said records, accounts and the audit thereof as the Association shall from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the Credit Account were made on the basis of statements of expenditure, the Borrower shall: (i) maintain or cause to be maintained, in accordance with paragraph (a) of this Section, records and accounts reflecting such expenditures; (ii) retain, until at least one year after the completion of the audit for the fiscal year in which the last withdrawal from the Credit Account -6- was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Association's representatives to examine such records; and (iv) ensure that such records and accounts are included in the annual audit referred to in paragraph (b) of this Section and that the report of such audit contains a separate opinion by said auditors as to whether the statements of expenditure submitted during such fiscal year, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. ARTICLE V Effective Date; Termination Section 5.01. The following event is specified as an additional condition to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions, namely that the Borrower shall have evaluated the consultants' proposals for Sub-projects to be implemented during the first year of the Project, selected appropriate consultants and negotiated contracts with such consultants. Section 5.02. 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 VI Representative of the Borrower; Addresses Section 6.01. The Secretary to the Government of Pakistan, Economic Affairs Division, or any Additional Secretary, Joint Secretary, Deputy Secretary or Section Officer of that Division of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 6.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: -7- For the Borrower: The Secretary to the Government of Pakistan Economic Affairs Division Islamabad Pakistan Cable address: Telex: ECONOMIC ECDIV-05-634 Islamabad For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) -8- 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. ISLAMIC REPUBLIC OF PAKISTAN / Authorilzed Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By 14 8 Regional Vice President South Asia -9- SCHEDULE 1 Description of the Project The objectives of the Project are to support the Borrower's structural and policy reform programs to be undertaken in various areas and sectors of the economy. The Project consists of various Sub-projects which would include, inter alia, ongoing support for the macro-economic management process, and support for the Borrower's structural and policy reform programs in industry, energy, agriculture, transport, education and urban sectors. The Sub-projects to be selected by agreement between the Borrower and the Association shall meet at least one of the following eligibility criteria, namely that the Sub-project will: (1) assist the Borrower in its macro-economic management; (2) review the policy reform framework and the process of policy reform; (3) identify specific policy reform measures in priority areas and sectors and analyze the probable impact of such policy reform measures; and (4) design strategies, programs or schedules, for the implementation of policy reform measures. The Project is expected to be completed by June 30, 1991. - 10 - SCHEDULE 2 Procurement and Consultants' Services Section I. Procurement of Goods Part A: International Competitive Bidding Equipment for upgrading the main frame computer of the Planning and Development Division 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). Part B: Preference for Domestic Manufacturers In the procurement of goods in accordance with the proce- dures described in Part A hereof, goods manufactured in Pakistan 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: Other Procurement Procedures Contracts for goods except for the equipment for upgrading the main frame computer of the Planning and Development Division shall be procured through prudent shopping. Part D: Review by the Association of Procurement Decisions 1. Review of proposed awards and final contracts: (a) the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply with respect toall contracts. 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) The provisions of the preceding subparagraph (a) shall not apply to contracts on account of which the Association has authorized withdrawals from the Credit Account on the basis of - 11 - statements of expenditure. Such contracts shall be retained in accordance with Section 4.01 (c) (ii) of this Agreement. 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 or cause to be employed consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. Such consultants shall be selected 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. - 12 - SCHEDULE 3 Implementation Program 1. Project Implementation Framework (a) The Borrower shall maintain the Unit established under the Technical Assistance Project (Credit 1256-PAK) in the Inter- national Economic Section of the Borrower's Ministry of Planning and Development, with duly qualified and experienced staff in sufficient numbers. (b) The Borrower shall: (i) review with the Association recommendations aris- ing from the evaluation program of the activities under the Technical Assistance Project (Credit 1256-PAK); and (ii) implement such recommendations, as appropriate, during the execution of the Project. 2. Borrower's Commitment to the Sub-projects The Borrower shall from time to time exchange views and review with the Association: (a) the objectives of the Sub-projects; (b) the structural and policy reform measures arising from the Sub-projects; and (c) the implementation schedules for such reform measures. 3. Reporting and Review Requirements (a) The Borrower shall furnish to the Association in compliance with a format to be agreed between the Borrower and the Association: (i) quarterly progress reports on the status of all Sub-projects; and (ii) annual reports on the overall progress of the Project including the fulfillment of the Project objectives set forth in Schedule 1 to this Agreement. (b) (i) The Association shall, in consultation with the Borrower: (A) select the Sub-projects for review; and (B) conduct - 13 - a review at least once during the implementation of the Sub-project. (ii) the Borrower shall incorporate the Association's comients arising from the review referred to in paragraph (i) above for the purpose of completing said Sub-projects. - 14 - SCHEDULE 4 Special Account 1. For the purposes of this Schedule: (a) the term "eligible expenditures" means expenditures in respect of the reasonable cost of goods and services required the Project and to be financed out of the proceeds of the Credit allocated from time to time to the Sub-projects in accordance with the provisions of Section 3.01 (b) of this Agreement; and (b) the term "Authorized Allocation" means an amount equivalent to $800,000 to be withdrawn from the Credit Account and deposited in the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. Except as the Association shall otherwise agree, 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 may be made as follows: (a) On the basis of a request or requests by the Borrower for a deposit or deposits which add up to the aggregate amount of the Authorized Allocation, 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) The Borrower shall furnish to the Association requests for replenishment of the Special Account at such intervals as the Association shall specify. On the basis of such requests, the Association shall withdraw from the Credit Account and deposit into the Special Account such amounts as shall be required to replenish the Special Account with amounts not exceeding the amount of payments made out of the Special Accoun: for eligible expenditures. All such deposits shall be withdrawn by the Association from the Credit Account under the respective Sub- projects, and in the respective equivalent amounts, as shall have been justified by the evidence supporting the request for such deposit furnished pursuant to paragraph 4 of this Schedule. - 15 - 4. For each payment made by the Borrower out of the Special Account for which the Borrower requests replenishment pursuant to paragraph 3 (b) of this Schedule, the Borrower shall furnish to the Association, prior to or at the time of such request, such documents and other evidence as the Association shall reasonably request, showing that such payment was made for eligible expen- ditures. 5. (a) Notwithstanding the provisions of paragraph 3 of this Schedule, no further deposit into the Special Account shall be made by the Association when either of the following situations first arises: (i) 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) the total unwithdrawn amount of the Credit allo- cated to the Sub-projects, minus 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 be equal to 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 Sub-projects 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 any expenditure or in any amount not eligible pursuant to paragraph 2 of this Schedule, or (ii) was not justified by the evidence Eurnished pursuant to paragraph 4 of this Schedule, the Borrower chall, promptly upon notice from the Association 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. No further - 16 - deposit by the Association into the Special Account shall be made until the Borrower has made such deposit or refund. (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 for crediting to the Credit Account. 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