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CONFORMED COPY
CREDIT NUMBER 3230-EGT
Development Credit Agreement
(Third Social Fund for Development Project)
between
ARAB REPUBLIC OF EGYPT
and
INTERNATIONAL DEVELOPMENT ASSOCIATION
Dated August 9, 1999
CREDIT NUMBER 3230-EGT
DEVELOPMENT CREDIT AGREEMENT
AGREEMENT, dated August 9, 1999, between ARAB REPUBLIC OF EGYPT (the Borrower) 
and INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association).
WHEREAS (A) the Borrower, having satisfied itself as to the feasibility and 
priority of the Project described in Schedule 2 to this Agreement, has requested the 
Association to assist in the financing of the Project;
(B)
the Project will be carried out by the Social Fund for Development (SFD), 
established and operating under the Laws of the Borrower, with the Borrower's 
assistance, and as part of such assistance, the Borrower will make available to SFD 
the proceeds of the Credit as provided in this Agreement; 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 and in the Project Agreement of even date herewith between the Association 
and SFD.
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 (as amended through December 2, 
1997), with the modifications set forth below (the General Conditions) constitute an 
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integral part of this Agreement:
(a)
A new paragraph (12) is added to Section 2.01 to read as set forth below, 
and the existing paragraphs (12) through (14) of said Section are accordingly 
renumbered as paragraphs (13) through (15):
“12.
“Participating Country” means any country that the Association 
determines 
meets the requirements set forth in Section 10 of Resolution No. 
183 of the Board of 
Governors of the Associations, adopted on June 26, 
1996; and “Participating Countries” 
means, collectively, all such 
countries.”
(b)
The second sentence of Section 5.01 is modified to read:
“Except as the Association and the Borrower shall otherwise agree, no 
withdrawals 
shall be made: (a) on account of expenditures in the territories 
of any country which is not 
a Participating Country or for goods produced in, or 
services supplied from, such 
territories; or (b) for the purpose of 
any payment to persons or entities, or for any import 
of goods, if such payment 
or import, to the knowledge of the Association, is prohibited by a 
decision of 
the United Nations Security Council taken under Chapter VII of the Charter of 
the 
United Nations.”
Section 1.02. Unless the context otherwise requires, the several terms defined 
in the General Conditions and in the Preamble to this Agreement have the respective 
meanings therein set forth and the following additional terms have the following 
meanings:
(a)
“By-Laws” means the by-laws dated June 17, 1991, as amended in August 8, 
1993, governing the organization and functioning of SFD, as the same may be amended 
from time to time;
(b)
“CDP” means the Community Development Program of SFD;
(c)
“MOF” means the Borrower’s Ministry of Finance or any successor thereto.
(d)
"Project Agreement" means the agreement between the Association and SFD, 
of even date herewith, as the same may be amended from time to time, and such term 
includes all schedules and agreements supplemental to the Project Agreement;
(e)
“PWP” means the Public Works Program of SFD;
(f)
"Special Account" means the account referred to in Section 2.02 (b) of 
this Agreement;
(g)
"Statement of Policy" means the statement of operational policy approved 
by the Board of Directors of SFD on June 17, 1992, as amended to the date of this 
Agreement;
(h)
"Statutes" means Presidential Decree No. 40 of 1991 pertaining to the 
establishment and operation of SFD, as amended to the date of this Agreement;
(i)
“Sub-grant” means a grant made or proposed to be made by SFD out of the 
proceeds of the Credit for a Sub-project under the Project;
(j)
“Sub-project” means a specific project to be carried out under the 
Project utilizing the proceeds of a Sub-grant; and
(k)
"Subsidiary Loan Agreement" means the agreement to be entered into 
between the Borrower and SFD pursuant to Section 3.01 (b) of this Agreement, as the 
same may be amended from time to time, and such term includes all schedules 
supplemental to the Subsidiary Loan  Agreement.
ARTICLE II
The Credit
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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 thirty six million and nine hundred thousand Special 
Drawing Rights  (SDR36,900,000).
Section 2.02. (a) The amount of the Credit may be withdrawn from the Credit 
Account in accordance with the provisions of Schedule 1 to this Agreement for amounts 
paid (or, if the Association shall so agree, amounts to be paid) by SFD on account of 
withdrawals made under Sub-grants to meet the reasonable cost of works, goods and 
services required for Sub-projects in respect of which the withdrawal from the Credit 
Account is requested.
(b)
The Borrower, through SFD, may, for the purposes of the Project, open and 
maintain in dollars a special deposit account in the Central Bank of Egypt on terms 
and conditions satisfactory to the Association. Deposits into, and payments out of, 
the Special Account shall be made in accordance with the provisions of Schedule 3 to 
this Agreement.
Section 2.03. The Closing Date shall be December 31, 2002, or such later date as 
the Association shall establish. The Asso\1fciation shall promptly notify the Borrower 
and SFD 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 (60) 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 canceled; and 
(ii) at the rate set as of the June 30 immediately preceding the accrual date or at 
such other rates as may be set from time to time thereafter pursuant to paragraph (a) 
above.  The rate set as of June 30 in each year shall be applied from the next payment 
date in that year specified in Section 2.06 of this Agreement.
(c)
The commitment charge shall be paid: (i) at such places as the 
Association shall reasonably request; (ii) without restrictions of any kind imposed 
by, or in the territory of, the Borrower; and (iii) in the currency specified in this 
Agreement for the purposes of Section 4.02 of the General Conditions or in such 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 February 1 and August 1 in each year.
Section 2.07. (a) Subject to paragraphs (b) and (c) below, the Borrower shall 
repay the principal amount of the Credit in semiannual installments payable on each 
February 1 and August 1 commencing August 2009 and ending February 2034. Each 
installment to and including the installment payable on February 1, 2019 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 per capita gross national product (GNP), as 
determined by the Association, shall have exceeded for three (3) consecutive years the 
level established annually by the Association for determining eligibility to access 
the Association's resources; 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 
repayment of installments under paragraph (a) above by: (A) 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; and (B) requiring the Borrower to commence 
repayment of the principal amount of the Credit as of the first semiannual payment 
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date referred to in paragraph (a) above falling six (6) months or more after the date 
on which the Association notifies the Borrower that the events set out in this 
paragraph (b) have occurred, provided, however, that there shall be a grace period of 
a minimum of five (5) years on such repayment of principal.
(c)
If so requested by the Borrower, the Association may revise the 
modification referred to in paragraph (b) above 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.
(d)
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.
Section 2.09. SFD is designated as representative of the Borrower for the 
purposes of taking any action required or permitted to be taken under the provisions 
of Section 2.02 of this Agreement and Article V of the General Conditions.
Section 2.10. The Borrower represents that it has designated its Ministry of 
Finance (MOF) for the purposes of handling, on behalf of the Borrower, debt service 
payments with respect of the Credit.
ARTICLE III
Execution of the Project;
Use of Proceeds of the Credit
Section 3.01. (a) The Borrower declares its commitment to the objectives of the 
Project as set forth in Schedule 2 to this Agreement, and, to this end, without any 
limitation or restriction upon any of its other obligations under this Agreement, 
shall cause SFD to perform, in accordance with the provisions of the Project 
Agreement, all the obligations of SFD therein set forth, shall take and cause to be 
taken all action, including the provision of funds, facilities, services and other 
resources necessary or appropriate to enable SFD to perform such obligations, and 
shall not take or permit to be taken any action which would prevent or interfere with 
such performance.
(b)
Without any limitation or restriction upon any of its obligations under 
this Agreement, the Borrower shall make available the proceeds of the Credit to SFD 
under a Subsidiary Loan Agreement to be entered into between the Borrower and SFD 
under terms and conditions which shall have been approved by the Association, 
including (i) payment of  a commitment and service charge at rates identical to those 
applicable to the Credit pursuant to the provisions of Sections 2.04 and 2.05 of this 
Agreement; and (ii) repayment of such amount over a period identical to that specified 
for the repayment of the Credit, pursuant to the provisions of Section 2.07 of this 
Agreement.
(c)
The Borrower shall exercise its rights under the Subsidiary Loan 
Agreement in such manner as to protect the interests of the Borrower and the 
Association and to accomplish the purposes of the Credit, and except as the 
Association shall otherwise agree, the Borrower shall not assign, amend, abrogate or 
waive the Subsidiary Loan Agreement or any provision thereof.
Section 3.02. Except as the Association shall otherwise agree, procurement of 
the goods, works and consultants' services required for the Project and to be financed 
out of the proceeds of the Credit shall be governed by the provisions of Schedule 2 to 
the Project Agreement.
Section 3.03. The Borrower and the Association hereby agree that the obligations 
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set forth in Sections 9.03, 9.04, 9.05, 9.06, 9.07 and 9.08 of Article IX of the 
General Conditions (relating to insurance, use of goods and services, plans and 
schedules, records and reports, maintenance and land acquisition, respectively) in 
respect of the Project shall be carried out by SFD pursuant to Section 2.03 of the 
Project Agreement.
ARTICLE IV
Financial Covenants
Section 4.01. (a) For all expenditures with respect to which withdrawals from 
the Credit Account were made on the basis of statements of expenditures, the Borrower 
shall, through SFD:
(i)
maintain or cause to be maintained in accordance with sound 
accounting 
practices, records and accounts reflecting such 
expenditures;
(ii)
ensure that all records (contracts, orders, invoices, bills, 
receipts and 
other documents) evidencing such expenditures are 
retained until at least one 
(1) year after the Association has 
received the audit report for the fiscal 
year in which the last 
withdrawal from the Credit Account was made; and
(iii)
enable the Association's representatives to examine such records.
(b)
The Borrower shall, through SFD:
(i)
have the records and accounts referred to in paragraph (a) (i) 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 (6) months after the end of each such year 
the report of such audit 
by said auditors, of such scope and in such 
detail as the Association shall 
have reasonably requested, including a 
separate opinion by said auditors as to 
whether the statements of 
expenditure submitted during such fiscal year, 
together with 
the procedures and internal controls involved in their 
preparation, can be relied upon to support the related withdrawals; and
(iii)
furnish to the Association such other information concerning said 
records and 
accounts and the audit thereof as the Association shall from 
time to time 
reasonably request.
ARTICLE V
Remedies of the Association
Section 5.01. Pursuant to Section 6.02 (h) of Article VI of the General 
Conditions, the following additional events are specified:
(a)
SFD shall have failed to perform any of its obligations under the Project 
Agreement.
(b)
As a result of events which have occurred after the date of the 
Development Credit Agreement, an extraordinary situation shall have arisen which shall 
make it improbable that SFD will be able to perform its obligations under the Project 
Agreement.
(c)
The Statutes, By-Laws or the Statement of Policy shall have been amended, 
suspended, abrogated, repealed or waived so as to affect materially and adversely the 
operations or financial condition of SFD or its ability to carry out the Project or to 
perform any of its obligations under the Project Agreement.
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(d)
The Borrower or any other authority having jurisdiction shall have taken 
any action for the dissolution or disestablishment of SFD or for the suspension of its 
operations.
Section 5.02. Pursuant to Section 7.01 (d) of Article VII of the General 
Conditions, the following additional events are specified:
(a)
the event specified in paragraph (a) of Section 5.01 of this Agreement 
shall occur and shall continue for a period of sixty (60) days after notice thereof 
shall have been given by the Association to the Borrower and SFD; and
(b)
any event specified in paragraph (c) or (d) of Section 5.01 of this 
Agreement shall occur.
ARTICLE VI
Effective Date; Termination
Section 6.01. The following events are specified as additional conditions to the 
effectiveness of the Development Credit Agreement within the meaning of Section 12.01 
(b) of Article XII of the General Conditions:
(a)
that SFD shall have established the financial management system referred 
to in Section 3.01 of the Project Agreement in a manner satisfactory to the 
Association;
(b)
that the Subsidiary Loan Agreement has been entered into by the Borrower 
and SFD respectively;
Section 6.02. The following are specified as additional matters, within the 
meaning of Section 12.02 (b) of Article XII of the General Conditions, to be included 
in the opinion or opinions to be furnished to the Association:
(a)
the Project Agreement has been duly authorized and approved by SFD’s 
Board of Directors and is legally binding upon SFD according to its terms; and
(b)
the Subsidiary Loan Agreement has been duly authorized and approved by, 
and legally binding upon, the Borrower and SFD in accordance with its terms.
Section 6.03. 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 Article XII of the 
General Conditions.
ARTICLE VII
Representatives of the Borrower; Addresses
Section 7.01. Except as provided in Section 2.09 of the Agreement, the Minister 
of State for Planning and International Cooperation and the Head of the Sector for 
International and Regional Finance Organizations of said Ministry of the Borrower are 
designated severally as representative of the Borrower for the purposes of Section 
11.03 of the General Conditions.
Section 7.02. The following addresses are specified for the purposes of Section 
11.01 of the General Conditions:
For the Borrower:
Ministry of International Cooperation
(Sector for International and Regional
  Finance Organizations)
8 Adly Street
Cairo, Arab Republic of Egypt
Cable address:
Fax: 
Ministry of International Cooperation 
(20-2) 391-5167
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Cairo, Arab Republic of Egypt
For the Association:
International Development Association
1818 H Street, N.W.
Washington, D.C. 20433
United States of America
Cable address:
Telex:
INDEVAS
248423 (MCI) or
Washington, D.C.
 64145 (MCI)
IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized 
representatives, have caused this Agreement to be signed in their respective names in 
Cairo, Arab Republic of Egypt, as of the day and year first above written.
ARAB REPUBLIC OF EGYPT
By /s/ Zafer El-Bishry 
Authorized Representative
INTERNATIONAL DEVELOPMENT ASSOCIATION
By /s/ Khalid Ikram 
Acting Regional Vice President 
Middle East and North Africa
SCHEDULE 1
Withdrawal of the Proceeds of the Credit
1.
The proceeds of the Credit may be withdrawn from the Credit Account to finance 
100% of payments made by SFD on account of Sub-grants.
2.
Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be 
made in respect of payments by SFD prior to the date of this Agreement.
3.
The Association may require withdrawals from the Credit Account to be made on 
the basis of statements of expenditure for payments made by SFD on account of 
Sub-grants each  not exceeding $500,000, equivalent, under such terms and conditions 
as the Association shall specify by notice to the Borrower.
SCHEDULE 2
Description of the Project
The objective of the Project is, in building upon the accomplishments of the 
previous Social Development Fund Projects, to help create employment opportunities and 
provide community infrastructure and services.
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:
Employment Creation
Provision, in the context of the Public Works Program established under the 
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Social Development Fund, of grants for the carrying out by small local private 
enterprises, in partnership with regional authorities, local communities and 
non-governmental organizations, of specific projects to support small scale public 
works programs.
Part B:
Development of Community Support Infrastructure and Services
Provision, through the Community Development Program established under the 
Social Development Fund, of grants for the carrying out by regional authorities, local 
communities and non-governmental organization of specific projects for community 
support infrastructure, education, training, and health programs.
*     *     *
The Project is expected to be completed by June 30, 2002.
SCHEDULE 3
Special Account
1.
For the purposes of this Schedule:
(a)
the term "eligible expenditures" means expenditures in respect of  
amounts paid by SDF, as designated by  the Borrower under Section 2.09 of this 
Agreement, on account of Sub-grants to be financed out of the proceeds of the Credit 
in accordance with the provisions of Schedule 1 to this Agreement; and
(b)
the term "Authorized Allocation" means an amount equivalent to ten 
million dollars (US$10,000,000) to be withdrawn from the Credit Account and deposited 
into the Special Account pursuant to paragraph 3(a) of this Schedule, provided, 
however, that unless the Association shall otherwise agree, the Authorized Allocation 
shall be limited to an amount equivalent to five million dollars (US$5,000,000) until 
the aggregate amount of withdrawals from the Credit Account plus the total amount of 
all outstanding special commitments entered into by the Association pursuant to 
Section 5.02 of the General Conditions shall be equal to or exceed the equivalent of 
twenty million dollars (US$20,000,000).
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, through SFD, 
shall furnish to the Association a request or requests for deposit into the Special 
Account of an amount or amounts 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, through SFD, shall have 
requested.
(b)
(i)
For replenishment of the Special Account, the Borrower, through 
SFD, shall 
furnish to the Association requests for deposits into 
the Special Account at 
such intervals as the Association shall 
specify.
(ii)
Prior to or at the time of each such request, the Borrower, 
through SFD, 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, through SFD, 
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 
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Association from the 
Credit Account under the respective equivalent 
amounts, as shall have been 
justified by said documents and 
other evidence.
4.
For each payment made by the Borrower, through SFD, out of the Special Account, 
the Borrower, through SFD, 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;
(b)
if the Borrower shall have failed to furnish to the Association, within 
the period of time specified in Section 4.01 (b) (ii) of this Agreement, any of the 
audit reports required to be furnished to the Association pursuant to said Section in 
respect of the audit of the records and accounts for the Special Account;
(c)
if, at any time, the Association shall have notified the Borrower of its 
intention to suspend in whole or in part the right of the Borrower to make withdrawals 
from the Credit  Account pursuant to the provisions of Section 6.02 of the General 
Conditions; or
(d)
once the total unwithdrawn amount of the Credit allocated to the eligible 
Categories, minus the total amount of all outstanding special commitments 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 shall follow the 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 to the 
Association all or any portion of the funds on deposit in the Special Account.
(d)
Refunds to the Association made pursuant to paragraphs 6 (a), (b) and (c) 
of this Schedule shall be credited to the Credit Account for subsequent withdrawal or 
for cancellation in accordance with the relevant provisions of this Agreement, 
including the General Conditions.
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