Page 1 CONFORMED COPY CREDIT NUMBER 2399 ZIM (Emergency Drought Recovery and Mitigation Project) between REPUBLIC OF ZIMBABWE and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated June 30, 1992 CREDIT NUMBER 2399 ZIM DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated June 30, 1992, between REPUBLIC OF ZIMBABWE (the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association). WHEREAS (A) the Association has received a Letter of Emergency Drought Policy dated June 2, 1992, from the Borrower describing a program of actions, objectives and policies designed to assist in the economic recovery caused by the drought in the territory of the Borrower (the Program), declaring the Borrower's commitment to the execution of the Program and requesting assistance from the Association in the financing of urgently needed imports required during such execution; WHEREAS (B) the Borrower, having satisfied itself as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, has requested the Association to assist in the financing of the Project; and WHEREAS (C) the Borrower and the Government of the Kingdom of Norway (Norway) intend to enter into an agreement (the Norwegian Grant Agreement) for the purpose of making available to the Borrower Page 2 a grant equivalent to one million dollars ($1,000,000) (the Norwegian Grant) to assist in financing urgently needed technical advisory activities under the Project and, for that purpose, Norway has requested and the Association has agreed to administer the Norwegian Grant pursuant to the provisions of an Agreement to be entered into between Norway and the Association and a Development Grant Agreement to be entered into between the Borrower and the Association, as Administrator on behalf of Norway; WHEREAS the Association has agreed on the basis, inter alia, of the foregoing, to extend the Credit to the Borrower upon the terms and conditions set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Development Credit Agreements" of the Association, dated January 1, 1985, with the modifications thereof set forth below (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 respective meanings therein set forth and the following additional terms have the following meanings: (a) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement; and (b) "Economic Policy Reform Programme" means the Borrower's economic policy reform program adopted on January 28, 1991. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Development Credit Agreement, an amount in various currencies equivalent to one hundred and nine million five hundred thousand Special Drawing Rights (SDR 109,500,000). 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. (b) The Borrower shall, for the purposes of the Project, open and maintain in dollars a special deposit account in a commercial bank through the Reserve Bank of Zimbabwe on terms and conditions satisfactory to the Association, including appropriate protection against set-off, seizure or attachment. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 5 to this Agreement. Section 2.03. The Closing Date shall be March 31, 1994 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 Page 3 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 semiannually on March 15 and September 15 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 March 15 and September 15 commencing September 15, 2002 and ending March 15, 2027. Each installment to and including the installment payable on March 15, 2012 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. (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 Particular Covenants Section 3.01. The Borrower declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Agreement and, to this end, shall carry out the Project with due diligence and efficiency and in conformity with appropriate administrative and financial practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the Project. Section 3.02. Except as the Association shall otherwise agree, Page 4 procurement of the goods to be financed out of the proceeds of the Credit shall be governed by the provisions of Schedule 3 to this Agreement. Section 3.03. The Borrower shall maintain, until the completion of the Project, the National Civil Protection Coordination Committee which shall be responsible for the general oversight of the Program. Section 3.04. Until the completion of the Project, the Borrower shall continue to maintain the procurement units existing within its Project executing agencies which shall be responsible for undertaking procurement under the Project. Section 3.05 (a) Without limitation or restriction on the provisions of Section 3.01, the Borrower and the Association, at the request of either party, shall exchange views on the progress achieved in the carrying out of the Program, including the Project. The first such exchange of views shall take place not later than four months after the Effective Date. (b) Prior to each such exchange of views, the Borrower shall furnish to the Association for its review and comment a report on the progress achieved in carrying out the Program, in such detail as the Association shall reasonably request. Section 3.06. (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 nine months after the end of each such year, a certified copy of the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; 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 Association has received the audit for the fiscal year in which the last withdrawal from the Credit Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; Page 5 (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 IV Remedies of the Association Section 4.01. Pursuant to Section 6.02 (h) of the General Conditions, the following additional events are specified: (a) Subject to subparagraph (ii) of this paragraph: (i) the right of the Borrower to withdraw the proceeds of the Norway Grant made to the Borrower for the financing of part of the Program shall have been suspended, cancelled or terminated in whole or in part, pursuant to the terms of the agreement providing therefor, or (ii) Subparagraph (i) of this paragraph shall not apply if the Borrower establishes to the satisfaction of the Association that: (i) such suspension, cancellation or termination is not caused by the failure of the Borrower to perform any of its obligations under such agreement; and (ii) adequate funds for the activities to be financed are available to the Borrower from other sources on terms and conditions consistent with the obligations of the Borrower under this Agreement. Section 4.02. Pursuant to Section 7.01 (d) of the General Conditions, the following additional event is specified, namely, that the event specified in paragraph (a) (i) of Section 5.01 of this Agreement shall occur, subject to the proviso in paragraph (a) (ii) of that Section. ARTICLE V Termination Section 5.01. The date one hundred and twenty (120) 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 Minister responsible for Finance, Economic Planning and Development 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: For the Borrower: The Senior Secretary Ministry of Finance, Economic Planning and Development Page 6 Private Bag 7705 Causeway, Harare Cable address: Telex: MINFIN MINFIN 22141 ZW Harare Zimbabwe 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. REPUBLIC OF ZIMBABWE By /s/ Elisha Mushayakarara Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Edward V. K. Jaycox Regional Vice President Africa SCHEDULE 1 Withdrawal of the Proceeds of the Credit 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit, the allocation of the amounts of the Credit to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed Eligible Imports 109,500,000 100% of foreign required for the expenditures Project as specified in Schedule 4 to the Development Credit Agreement ___________ TOTAL 109,500,000 =========== 2. For the purposes of this Schedule, the term "foreign expenditures" means expenditures in the currency of any country Page 7 other than that of the Borrower for goods or services supplied from the territory of any country other than that of the Borrower. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of: (a) payments made for expenditures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not exceeding the equivalent of SDR 21,000,000, may be made on account of payments made for expenditures before that date but after April 1, 1992; and (b) expenditures in excess of an aggregate amount equivalent to $30,000,000 for petroleum products. SCHEDULE 2 Description of the Project The objectives of the Project are to assist the Borrower: (i) in the alleviation of the impact of the drought in the territory of the Borrower by restoring and enhancing the Borrower's productive capacity; (ii) in minimizing the effect of the drought on its Economic Policy Reform Programme; and (iii) in the development of measures for the mitigation of any future droughts. The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Association may agree upon from time to time to achieve such objectives: Part A: Carrying out a program for the assurance of the supply of water to the rural and urban areas, including the rehabilitation of water points and systems and the drilling of new boreholes. Part B: Carrying out a program designed to assist the recovery of the agricultural sector from the impact of the drought including the provisions of crop packs to smallholder farmers. Part C: Carrying out the Borrower's food-for-work program and public works program. Part D: Carrying out a program for the rehabilitation of the public and private transport fleet to assist in the distribution of goods under the Program. Part E: 1. Provision of assistance to the National Coordinating Unit of the Borrower's Ministry of Local Government and other project implementation agencies in the execution and monitoring of the Project. 2. Development of a strategy for urban water conservation. 3. Designing of a system to improve the Borrower's response to natural emergencies, including development of a sectoral and coordinated multi-sectoral strategies for emergency response as well as contingency plans. 4. Carrying out of a drought mitigation study. 5. Strengthening the capacity of the Borrower's institutions in the agricultural sector. Page 8 6. Development of a contingency plan for accelerated urban in migration, including the potential sources of required financing. 7. Provision of assistance to the Borrower's Department of Social Welfare for the management, monitoring, accounting, auditing and training related to Part C of the Project. 8. Provision of assistance to the Borrower's Ministry of Health in the planning, logistics and institutional surveillance to support its supplementary feeding program. * * * The Project is expected to be completed by September 30, 1993. SCHEDULE 3 Procurement Section I. Procurement of Goods Part A: International Competitive Bidding 1. Except as provided in Part B hereof, goods (agricultural inputs, petroleum products, construction materials, vehicles and spare parts, and water works equipment) 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), subject to the following modifications: (a) Paragraph 2.8 of the Guidelines is deleted and the following is substituted therefor: "2.8 Notification and Advertising The international community should be notified in a timely manner of the opportunity to bid. This will be done by advertising invitations to apply for inclusion in a bidder's invitation list, to apply for prequalification, or to bid; such advertisements should be placed in at least one newspaper of general circulation in the Borrower's country and, in addition, in at least one of the following forms: (i) a notice in the United Nations publication, Development Forum, Business Edition; or (ii) an advertisement in a newspaper, periodical or technical journal of wide international circulation; or (iii) a notice to local representatives of countries and territories referred to in the Guidelines, that are potential suppliers of the goods required." (b) The following is added at the end of paragraph 2.21 of the Guidelines: "As a further alternative, bidding documents may require the bidder to state the bid price in a single currency widely used in international trade and specified in the bidding documents." (c) Paragraphs 2.55 and 2.56 of the Guidelines are deleted. 2. Contracts for goods shall be grouped to the maximum extent practicable for the purposes of bidding and procurement. 3. Goods shall be exempted from pre-shipment price inspection by Page 9 a third party inspection firm. Part B: Other Procurement Procedures 1. Geographically distinct crop seeds shall be procured on the basis of an evaluation and comparison of bids from at least three qualified suppliers or under other procedures satisfactory to the Association provided, however, that the aggregate amount of such contracts shall not exceed $4,900,000 equivalent. 2. Contracts for goods estimated to cost the equivalent of $500,000 may be procured under contracts awarded through limited international bidding procedures on the basis of evaluation and comparison of bids of at least three qualified suppliers from at least two countries eligible under the Guidelines and in accordance with the procedures set forth in Sections I and II of the Guidelines (excluding paragraphs 2.8, 2.9, 2.55 and 2.56 thereof). 3. Proprietary equipment and spare parts and standardized equipment shall be procured on a negotiated basis from the original manufacturers or authorized representatives, on terms satisfactory to the Association provided, however, that the aggregate amount of such contracts shall not exceed $500,000 equivalent. Part C: Review by the Association of Procurement Decisions 1. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to each contract estimated to cost the equivalent of $500,000 or more, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract required to be furnished to the Association pursuant to said paragraph 2 (d) shall be furnished to the Association prior to the making of the first payment out of the Special Account in respect of such contract. (b) With respect to each contract not governed by the pre- ceding paragraph, the procedures set forth in paragraphs 3 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract, together with the other information required to be furnished to the Association pursuant to said paragraph 3, shall be furnished to the Association as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 5 to this Agreement. (c) The provisions of the preceding subparagraph (b) shall not apply to contracts on account of which withdrawals from the Credit Account are to be made on the basis of statements of expenditure. 2. The figure of 15% is hereby specified for purposes of para- graph 4 of Appendix 1 to the Guidelines. SCHEDULE 4 List of Eligible Imports to be Financed under the Credit Petroleum Products petroleum products Vehicles trucks (5 tons and above) pickup trucks motorbikes Page 10 tractors agricultural equipment Spares trucks motorbikes tractors agricultural equipment Equipment pumps, pipes and related equipment for water works rehabilitation microcomputers, software and related equipment Construction materials emergency water rehabilitation emergency food-for-work program public works agricultural recovery Agricultural Inputs seed fertilizer chemicals livestock SCHEDULE 5 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Category" means the Category 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 Category in accordance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount of $10,000,000 to be withdrawn from the Credit Account and deposited into the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. Payments out of the Special Account shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule. 3. After the Association has received evidence satisfactory to it that the Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the Special Account shall be made as follows: (a) For withdrawals of the Authorized Allocation, the Borrower shall furnish to the Association a request or requests for a deposit or deposits which do not exceed the aggregate amount of the Authorized Allocation. On the basis of such request or requests, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit into the Special Account such amount or amounts as the Borrower shall have requested. (b) (i) For replenishment of the Special Account, the Borrower shall furnish to the Association requests for deposits into the Special Account at such intervals as the Association shall specify. Page 11 (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 eligible Category, and in the respective equivalent amounts, as shall have been justified by said documents and other evidence. 4. For each payment made by the Borrower out of the Special Account, the Borrower shall, at such time as the Association shall reasonably request, furnish to the Association such documents and other evidence showing that such payment was made exclusively for eligible expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Schedule, the Association shall not be required to make further deposits into the Special Account: (a) if, at any time, the Association shall have determined that all further withdrawals should be made by the Borrower directly from the Credit Account in accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement; or (b) once the total unwithdrawn amount of the Credit allocated to the eligible Category, less the amount of any outstanding special commitment entered into by the Association pursuant to Section 5.02 of the General Conditions with respect to the Project, shall equal the equivalent of twice the amount of the Authorized Allocation. Thereafter, withdrawal from the Credit Account of the remaining unwithdrawn amount of the Credit allocated to the eligible Categories shall follow such procedures as the Association shall specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Association shall have been satisfied that all such amounts remaining on deposit in the 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; or (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 Page 12 to the Association all or any portion of the funds on deposit in the Special Account. (d) Refunds to the Association made pursuant to paragraph 6 (a), (b) and (c) of this Schedule shall be credited to the Credit Account for subsequent withdrawal or for cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions.