OFFICIAL DOCU MENTS GRANT NUMBER D502-MZ Financing Agreement (Additional Financing for the Agriculture and Natural Resources Landscape Management Project) between REPUBLIC OF MOZAMBIQUE and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated,A qu6f 94 ,2019 GRANT NUMBER D502-MZ FINCING AGREEMENT AGREEMENT dated -24 , 2019, entered into between the REPUBLIC OF MOZAMBIQUE ("Recipient") and the 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) constitute an integral 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 grant, which is deemed as Concessional Financing for purposes of the General Conditions, in an amount equivalent to forty-three million three hundred thousand Special Drawing Rights (SDR 43,300,000) ("Financing"), to assist in financing the project described in Schedule 1 to this Agreement ("Project"). 2.02. The Recipient may withdraw the proceeds of the Financing in accordance with Section IV of Schedule 2 to this Agreement. 2.03. The Maximum Commitment Charge Rate is one-half of one percent (1/2 of 1%) per annum on the Unwithdrawn Financing Balance. 2.04. The Payment Dates are February 15 and August 15 in each year. 2.05. The Payment Currency is Dollar. ARTICLE III - PROJECT 3.01. The Recipient declares its commitment to the objective of the Project. To this end, the Recipient shall cause the Project to be carried out by the FNDS in accordance with the provisions of Article IV of the General Conditions. 3.02. Without limitation upon the provisions of Section 3.01 of this Agreement, and except as the Recipient and the Association shall otherwise agree, the Recipient shall ensure that the Project is carried out in accordance with the provisions of Schedule 2 to this Agreement. -2- ARTICLE IV - REMEDIES OF THE ASSOCIATION 4.01. The Additional Events of Suspension consist of the following: (a) FNDS' Statutes have been amended, suspended, abrogated, repealed or waived so as to affect the ability of FNDS to implement their respective parts of the Project. (b) FNDS has failed to perform any obligation under the Subsidiary Agreement. ARTICLE V -EFFECTIVENESS; TERMINATION 5.01. The Additional Conditions of Effectiveness consist of the following, namely that the Subsidiary Agreement has been executed on behalf of the Recipient and FNDS in accordance with terms and conditions satisfactory to the Association. 5. 02. The Effectiveness Deadline is the date ninety (90) days after the date of this Agreement. 5.03 The Additional Legal Matter consists of the following, namely that the Subsidiary Agreement has been duly authorized or ratified by the Recipient and is legally binding upon the Recipient and FNDS in accordance with its terms. 5.04. For purposes of Section 8.05(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 date of this Agreement. ARTICLE VI - REPRESENTATIVE; ADDRESSES 5.01. The Recipient's Representative is its minister in charge of economy and finance or any successor thereto. 5.02. The Recipient's Address is: Ministry of Economy and Finance Praqa da Marinha Popular Av. 10 de Novembro no 929 Maputo Republic of Mozambique Facsimile: +258 21313747 -3- 5.03. The Association's Address is: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Telex: Facsimile: 248423 (MCI) 1-202-477-6391 AGREED at , , as of the day and year first above written. REPUBLIC OF MOZAMBIQUE By: AuthoAzed Representative Title: VY".e2.~ ~i4 4-14 Date: -0 f. 0' r / INTERNATIONAL DEVELOPMENT ASSOCIATION By: Authorized Representative Name: H M I Title:-CoCwVT9k1 Pi(jc-g Date:-Av'u6 13 )/' -4- SCHEDULE1 Project Description The objective of the Project is to integrate rural households into sustainable agriculture and forest-based value chains in the Project Area and, in the event of an Eligible Crisis or Emergency, to provide immediate and effective response to said Eligible Crisis or Emergency. The Project consists of the following parts: Part A: Agriculture and Forest-Based Value Chain Development Increasing smallholder and SECF's participation in key agriculture and forest- based VCs in the Project Area including through: 1 . Support to SECFs and MSME agribusinesses to increase rural household's participation in VC development and building capacity of other VC actors benefiting smallholders, including through carrying out of Training for SECF, MSMEs, farmers' organizations and the hiring of a service provider to support SECFs. 2. Support to SECFs and other key MSMEs agribusinesses to access credit, including through: (a) implementing a matching grant "(Matching Grants)" scheme aimed at SECFs and MSME agribusinesses; (b) implementing a partial credit guarantee fund ("PCG Fund") aimed at lowering the risk exposure of participating financial institutions to cover SECFs and MSME agribusinesses financing needs, including through the hiring of an FSP to act as the administrator of the PCG Fund; and (c) implementing a weather-based agricultural index insurance scheme ("Index Insurance") for the purpose of providing weather-based insurance coverage in respect of weather risks impacting farmers' production. 3. Improvement of rural infrastructure in the Project Area including through: (a) identification of key infrastructure bottlenecks in the Project Area; and (b) carrying out of preparatory studies to identify the most critical links in the feeder road network; (c) rehabilitation and maintenance of critical rural roads needed to transport production to markets; and -5- (d) carrying out of feasibility and design studies for ground and surface water to assess and prioritize the more relevant irrigation infrastructure needed to support the development of selected VCs. Part B: Securing Land Tenure Rights and Increasing Natural Resources Resilience Promotion of integrated landscape management; securing land tenure regularization at the community and individual levels; and restoration of critical natural habitats, in the Project Area including through: 1. Supporting land tenure regularization, through: (a) issuance of DUATs; and (b) community land delimitation, including strengthening of CBOs, CGRNs and other community based informal associations. 2. Carrying out of Training of relevant staff at the Recipient's District and provincial level and provision of equipment within the Project Area. 3. Strengthening capacity on integrated landscape management, including through: (a) consolidating MSLFs at the Recipient's provincial level; (b) promoting the use of spatial tools that can inform land use planning and addressing equipment needs for Provinces and Districts within the Project Area for integrated landscape management; and (c) carrying out of Training to relevant Recipient's staff at provincial and district levels. 4. Restore degraded lands critical for the VCs in the Project Area through assisted natural regeneration and active planting with native and exotic species. Part C: Project Coordination and Management Support to the Fundo Nacional de Desenvolvimento Sustentavel (FNDS) and provincial implementation units (PIUs), to oversee the implementation of the Project in each of the Provinces in the Project Area comprising support for Project coordination and management, including fiduciary and safeguards management, monitoring and evaluation, and communications. Part D: Contingency Emergency Response Support the Recipient in case of a potential disaster-recovery need by providing immediate response to an Eligible Crisis or Emergency. -6- SCHEDULE2 Project Execution Section I. Implementation Arrangements A. Institutional Arrangements 1. Steering Committee The Recipient shall maintain a steering committee (the Steering Committee), at all times during Project implementation, with a structure, functions and responsibilities acceptable to the Association, which shall be responsible for overall Project oversight and guidance. The Steering Committee shall be chaired by the Recipient's Minister of Land, Environment and Rural Development ("MITADER") and shall include as members representatives from MITADER, MASA, ANE, INIR, MOPHRH and MIC. The provincial directors of DPTADER, the Director of the Regional Water Administration (ARA) Centro-Norte shall participate as observers, together with the FNDS CEO who shall serve as the Steering Committee's Secretary. 2. National Fund for Sustainable Development (FNDS) (a) The Recipient shall cause FNDS to maintain throughout Project implementation a structure, equipment, functions and responsibilities acceptable to the Association, including, inter alia, the responsibility of the FNDS to assist the Recipient in the day-to-day management of all Projects activities, including technical supervision and coordination, overall Project planning, quality oversight, communication, reporting, procurement, financial management, safeguards management, issuance of guarantee certificates under the PCG Fund, and monitoring of Project activities. (b) The Recipient shall cause FNDS to ensure its headed by a chief executing officer (CEO) and the Project has a coordinator and is staffed, at a minimum, with a financial management specialist, a procurement specialist, an accountant, a safeguards specialist, a monitoring and evaluation officer, a communications specialist and technical specialists for coordination of the following areas of expertise: land, forestry, value chains and rural development, and administrative staff, all hired with terms of reference, through competitive processes, in numbers and with qualifications and experience acceptable to the Association. 3. Provincial Implementation Units (PIUs) (a) The Recipient shall or shall cause FNDS to maintain PIUs in each -7- Province within the Project Area, with structure, equipment, functions and responsibilities acceptable to the Association, including inter alia, the responsibility of each PIU to coordinate and monitor Project implementation at the provincial level. (b) The Recipient shall cause FNDS to ensure that each PIU is headed by a Provincial Project field coordinator and staffed with technical specialists to carry out their responsibilities under the Project at the provincial level. 4. Provincial Multi-Stakeholder Landscape Forums (MSLFs) The Recipient shall cause FNDS to maintain its cooperation with MSLFs within the Project Area, with the responsibility to coordinate and integrate landscape management at the provincial level. 5. Matching Grant and Partial Credit Guarantee Fund Unit (MGU) and Investment Committee (a) The Recipient shall cause FNDS to maintain a Matching Grant and PCG Fund Unit (MGU) with structure, equipment, functions and responsibilities acceptable to the Association, including, inter alia, the responsibility of the MGU for the implementation of the Matching Grant scheme and the PCG Fund in accordance, inter alia, with the Principles for Public Credit Guarantee Schemes for MSMEs. (b) The Recipient shall cause FNDS to ensure that the MGU is headed by a competitively recruited MG manager who shall report to the Project Coordinator, and staffed with two competitively recruited grant advisors, a financial and administrative officer and additional staff depending on demand of the MG scheme; all recruited under terms of reference and in accordance with qualifications acceptable to the Association. (c) The Recipient shall cause FNDS to ensure that the PCG Fund is managed by a competitively recruited financial service provider (FSP) hired on a performance-based contract who shall report to the Project Coordinator and to the Steering Committee; such FSP to be recruited under terms of reference and in accordance with qualifications acceptable to the Association. (d) The Recipient shall cause FNDS to maintain an Investment Committee with structure, functions and responsibilities acceptable to the Association, including, inter alia, the responsibility of approving the Matching Grants and PCG Fund proposals in accordance, inter alia, with this Agreement, the MG Operational Manual and the PCG Fund Manual respectively. The Investment Committee shall be chaired by the MGU manager and shall -8- include as members the FNDS, PCG Fund FSP, an independent agricultural finance expert and a business community representative. 6. Except as the Recipient and the Association may otherwise agree in writing, the Recipient shall ensure that FNDS does not introduce changes in the number of positions of the FNDS, and shall cause FNDS to refrain from introducing changes in the number of positions of the PIUs and MGU or in the professional skills required for occupying such positions, unless said changes have been previously agreed to in writing with the Association. B. Project Implementation Manual 1 . The Recipient shall cause FNDS to ensure that the Project is implemented in accordance with the provisions of a manual satisfactory to the Association ("Project Implementation Manual"), which shall include the following provisions: (a) institutional coordination and day-to-day execution of the Project; (b) Project budgeting, disbursement and financial management; (c) procurement; (d) environmental and social safeguard guidelines; (e) monitoring, evaluation, reporting and communication of Project activities; (0 guidelines for the implementation of Part A (ii)(c) of the Project; and (g) such other administrative, financial, technical, and organizational arrangements and procedures as shall be required for the Project. 2. The Recipient shall cause FNDS to not amend, abrogate, waive or fail to enforce any provision of the Project Implementation Manual without the prior written agreement of the Bank; provided, however, that in case of any conflict between the arrangements and procedures set out in the Project Implementation Manual and the provisions of this Agreement, the provisions of this Agreement shall prevail. C. Matching Grant Operational Manual and Partial Credit Guarantee Fund Operational Manual (MG Manual and PCG Fund Manual) 1 . The Recipient shall cause FNDS to ensure that Part A(ii)(a) of the Project is implemented in accordance with the provisions of a manual satisfactory to the Association ("Matching Grant Operational Manual" or "MG Manual"), which shall include the following provisions: (a) eligibility criteria and procedures for extending Matching Grants; (b) approval processes for proposals for MG Investments, including a negative list of activities that cannot be carried out under MG Investments; (c) model form of the Matching Grant Agreement acceptable to the Association; and (d) such other administrative, financial, technical, and organizational arrangements and procedures as shall be required for the implementation of Part A(ii)(a) of the Project. 2. The Recipient shall cause FNDS to ensure that Part A(ii)(b) of the Project is implemented in accordance with the provisions of a manual satisfactory to the -9- Association ("Partial Credit Guarantee Fund Operational Manual" or "PCG Fund Manual"), which shall include the following provisions: (a) eligibility criteria and procedures for extending coverage under the PCG Fund to PCG Beneficiaries; (b) approval processes for proposals for PCG coverage, including a negative list of activities that cannot be covered by the PCG Fund; (c) model form of the PCG Fund Agreement acceptable to the Association; and (d) such other administrative, financial, technical, and organizational arrangements and procedures as shall be required for the implementation of Part A(ii)(b) of the Project. 3. The Recipient shall cause FNDS to not amend, abrogate, waive or fail to enforce any provision of the MG Manual or the PCG Fund Manual without the prior written agreement of the Association; provided, however, that in case of any conflict between the arrangements and procedures set out in the MG Manual or the PCG Manual and the provisions of this Agreement, the provisions of this Agreement shall prevail. D. Annual Work Plan and Budget 1 . The Recipient shall cause FNDS, not later than November 1 of each year of Project implementation, to prepare and furnish to the Association, an annual work plan and budget ("Annual Work Plan and Budget") containing all activities proposed to be included in the Project and a proposed financing plan for expenditures required for such activities, setting forth the proposed amounts and sources of financing. 2. The Recipient shall cause FNDS to afford the Association a reasonable opportunity to exchange views with the FNDS on such proposed Annual Work Plan and Budget and thereafter ensure that the Project is implemented in accordance with such Annual Work Plan and Budget as shall have been approved by the Association. E. Matching Grants 1. Eligibility Criteria and Procedures for Provision ofMatching Grants The Recipient shall cause FNDS to provide Matching Grants to MG Beneficiaries for purposes of undertaking Matching Grants Investments, in accordance with eligibility criteria and procedures acceptable to the Association and further elaborated in the Matching Grant Operational Manual, which shall include the following: (a) No proposed MG Beneficiary shall be eligible to receive a Matching Grant unless the proposed Beneficiary: (i) is an SECF and/or an MSME agribusiness; -10- (ii) has prepared a satisfactory business plan, including financing plan and budget, and a satisfactory implementation plan for the proposed MG Investment; (iii) has not previously benefited from a Matching Grant or, if it has benefited from a Matching Grant, it has completed the corresponding MG Investment in a manner satisfactory to the Recipient and the Association; and (iv) has provided satisfactory evidence of the ability to provide the required Beneficiary's contribution to the financing of its MG Investment, as stated in the Matching Grant Operational Manual, out of resources other than the Matching Grant. (b) No proposed MG Investment shall be eligible for financing under a Matching Grant unless FNDS shall have determined, on the basis of an appraisal carried out in accordance with guidelines acceptable to the Association and elaborated in the Matching Grant Operational Manual, that the proposed MG Investment: (i) is technically feasible and economically and financially viable; (ii) would have positive impacts on market demand for SECFs and MSME agribusiness; (iii) is potentially replicable and scalable for other SECFs and MSME agribusiness; and (iv) has fulfilled the requirements of any applicable Safeguard Instrument. (c) Without limitation on the provisions of sub-paragraph (b)(iv) immediately above, if, pursuant to the ESMF and/or RPF, one or more Safeguard Instruments for the MG Investment are required, such proposed MG Investment shall not be eligible for financing under a Matching Grant until such Safeguard Instruments have been prepared and approved by the Association in accordance with the provisions of paragraph (d) of this Section I.E.1, and all measures required to be carried out in accordance with Section I.I. of this Schedule prior to commencement of the activities covered by the Safeguard Instruments have been carried out. (d) Each Matching Grant for a MG Investment requiring a Safeguard Instrument shall be subject to the Association's prior written approval and shall only be eligible for financing under the Financing if and to the extent approved by Association. -11- 2. Terms and Conditions for Matching Grants The Recipient shall cause FNDS to provide each Matching Grant to a Beneficiary under a Matching Grant Agreement with the respective Beneficiary on terms and conditions approved by the Association, and consistent with the model form of the Matching Grant Agreement in the Matching Grant Operational Manual, which shall include, inter alia, the following: (a) The Recipient shall cause FNDS to obtain rights adequate to protect its interests and those of the Association, including the right to: (i) suspend or terminate the right of the Beneficiary to use the proceeds of the Matching Grant or obtain a refund of all or any part of the amount of the Matching Grant then withdrawn, upon the Beneficiary's failure to perform any of its obligations under the Matching Grant Agreement; and (ii) require each Beneficiary to: (A) carry out its Matching Grant Investment with due diligence and efficiency and in accordance with sound technical, economic, financial, managerial, environmental and social standards and practices satisfactory to the Association, including in accordance with: (1) the provisions of the Anti-Corruption Guidelines applicable to recipients of loan proceeds other than the Recipient; and (2) the Safeguard Instruments; (B) provide, promptly as needed, their counterpart resources required for the purpose; (C) procure the goods, works and services to be financed out of the Matching Grant in accordance with the provisions set forth in MG Manual; (D) maintain policies and procedures adequate to enable it to monitor and evaluate in accordance with indicators acceptable to the Association, the progress of the MG Investment and the achievement of its objectives; (E) enable the Recipient, FNDS and the Association to inspect the MG Investment, its operation and any relevant records and documents; and -12- (F) prepare and furnish to the FNDS and the Association all such information as FNDS or the Association shall reasonably request relating to the foregoing. (b) The Recipient shall cause FNDS to exercise its rights under each Matching Grant Agreement in such manner as to protect the interests of the Recipient, FNDS and the Association and to accomplish the purposes of the Financing. Except as the Association shall otherwise agree in writing, the Recipient or FNDS shall not assign, amend, abrogate or waive any Matching Grant Agreement or any of its provisions. F. Partial Credit Guarantee Fund 1 . The Recipient shall cause FNDS to provide coverage to PCG Fund Beneficiaries for purposes of providing: (a) long term credit for asset acquisition; and (b) working capital needed to enable the utilization of the assets acquired further to (a) of this paragraph, in accordance with eligibility criteria and procedures acceptable to the Association and further elaborated in the PCG Fund Manual. 2. The Recipient shall cause FNDS to ensure that the PCG Fund is implemented in accordance with this Agreement, the Principles for Public Credit Guarantee Schemes for MSMEs, and the PCG Fund Manual. G. Index Insurance Scheme The Recipient shall cause FNDS to ensure that Index Insurance Beneficiaries be provided weather-based insurance coverage in respect of weather risks impacting their production, in accordance with eligibility criteria and procedures acceptable to the Association and further elaborated in the Project Implementation Manual. H. Anti-Corruption The Recipient shall ensure that the Project is carried out in accordance with the provisions of the Anti-Corruption Guidelines. I. Subsidiary Agreement 1 . To facilitate the carrying out of the Project, the Recipient shall make the proceeds of the Financing, available to FNDS on grant terms under a subsidiary agreement between the Recipient and FNDS ("Subsidiary Agreement"), under terms and conditions approved by the Association, which shall include: (a) The Recipient's obligation to provide to FNDS the portion of the proceeds of the Financing. (b) FNDS's obligation to carry out the Project with due diligence and efficiency, in conformity with appropriate administrative, financial, technical, environmental and social practices, under the supervision of qualified and experienced management assisted by competent staff in adequate numbers, and in accordance with the provisions of this Agreement and the Project Operations Manual. (c) FNDS's obligation to procure goods, works and services required for carrying out the Project and to be financed out of the proceeds of the Financing, in accordance with the provisions of Section III of Schedule 2 to this Agreement, as said provisions may be further elaborated in the Project Operations Manual. (d) FNDS's obligation to implement the Project in accordance with the provisions of the Safeguards Instruments. (e) FNDS's obligation to implement the terms of the Anti-Corruption Guidelines. (f) FNDS's obligation to: (i) maintain a separate financial management system for implementing the Project; (ii) prepare financial statements in accordance with consistently applied accounting standards acceptable to the Association, adequate to reflect its operations and financial condition; and (iii) register separately the operations, resources and expenditures related the Project. (g) FNDS's obligation to promptly inform the Recipient and the Association of any condition which interferes or threatens to interfere with the progress of the Project and the performance of its obligations under the Subsidiary Agreement. (h) FNDS's obligation to neither take nor concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Agreement. 2. The Subsidiary Agreement shall include a provision stipulating that in the case of conflict between the Subsidiary Agreement and this Agreement, the provisions of this Agreement shall apply. 3. The Recipient shall exercise its rights under the Subsidiary Agreement in such manner as to protect the interests of the Recipient and the Association and to accomplish the purposes of the Financing. Except as the Association shall otherwise agree, the Recipient shall not assign, amend, abrogate or waive the Subsidiary Agreement or any of its provisions. -14- J. Safeguards 1. The Recipient shall cause FNDS to carry out the Project in accordance with the Safeguard Instruments, including guidelines, rules and procedures defined in the said Safeguard Instruments. 2. To this end, the Recipient shall cause FNDS to take, or cause to be taken, the following measures in a manner acceptable to the Association: (a) Project activities shall be screened in accordance with the ESMF and RPF to determine if any ESMP or RAP is needed. (b) Whenever an ESMP would be required on the basis of the ESMF: (i) each such ESMP shall be prepared in accordance with the requirements of the ESMF, adopted and disclosed by the Recipient/FNDS, and subject to prior approval by the Association; and (ii) the Recipient shall cause FNDS to refrain from financing any civil works contract during Project implementation unless and until such ESMP has been prepared in accordance with the ESMF, adopted and disclosed by the Recipient, and approved by the Association; and (c) Whenever a RAP would be required on the basis of the RPF: (i) each such RAP shall be prepared in accordance with the requirements of the RPF, adopted and disclosed by the Recipient/FNDS, and subject to prior approval by the Association; (ii) the Recipient shall cause FNDS to refrain from financing any civil works contract during Project implementation unless and until such RAP has been prepared in accordance with the RPF, adopted, disclosed and implemented by the Recipient/FNDS, and approved by the Association; and (iii) no works under the contract in respect of which a RAP is required shall commence until: (A) all measures required to be taken under said RAP prior to the initiation of said works have been taken; (B) FNDS has prepared and furnished to the Association a report in form and substance satisfactory to the Association, on the status of compliance with the requirements of said RAP; and (C) the Association has confirmed that said works may commence. 3. The Recipient shall cause FNDS to refrain from financing any works under the Project until FNDS has developed, and thereafter, adopted and implemented a GBV action plan in form and substance satisfactory to the Association, to manage any Project-related GBV risks under the Project. 4. The Recipient shall cause FNDS to take all measures necessary for carrying out the requirements of the Safeguard Instruments in a timely manner. -15- 5. Without limitation to paragraph 1(b) of Section IV.B of this Schedule, no works shall be eligible for financing unless prior to the commencement of such works: (a) an ESMP was prepared, adopted and disclosed by the Recipient/FNDS, and approved by the Association; and (b) in case such works are expected to cause Involuntary Resettlement, a RAP was prepared, adopted, disclosed and implemented by the Recipient/FNDS, and approved by the Association. 6. Without limitation to its other reporting obligations under this Agreement and under Section 4.08 of the General Conditions, the Recipient shall cause FNDS to include in the Project Reports referred to in Section II.A of this Schedule adequate information on the implementation of the Safeguard Instruments, giving details of: (a) measures taken in furtherance of such Safeguard Instruments; (b) conditions, if any, which interfere or threaten to interfere with the smooth implementation of such Safeguard Instruments; and (c) remedial measures taken or required to be taken to address such conditions and to ensure the continued efficient and effective implementation of such Safeguard Instruments. K. Immediate Response Mechanism In order to ensure the proper implementation of Part D of the Project ("Contingent Emergency Response") ("IRM Part"), the Recipient shall take the following measures: 1. The Recipient shall: (a) prepare and furnish to the Association for its review and approval, an operations manual which shall set forth detailed implementation arrangements for the IRM Part, including: (i) designation of, terms of reference for and resources to be allocated to, the entity to be responsible for coordinating and implementing the IRM Part ("Coordinating Authority"); (ii) specific activities which may be included in the IRM Part, Eligible Expenditures required therefore ("Emergency Expenditures"), and any procedures for such inclusion; (iii) financial management arrangements for the IRM Part; (iv) procurement methods and procedures for Emergency Expenditures to be financed under the IRM Part; (v) documentation required for withdrawals of Emergency Expenditures; (vi) environmental and social safeguard management frameworks for the IRM Part, consistent with the Association's policies on the matter; and (vii) any other arrangements necessary to ensure proper coordination and implementation of the IRM Part; -16- (b) afford the Association a reasonable opportunity to review said proposed operations manual; (c) promptly adopt such operations manual for the IRM Part as shall have been approved by the Association ("IRM Operations Manual"); (d) ensure that the IRM Part is carried out in accordance with the IRM Operations Manual; provided, however, that in the event of any inconsistency between the provisions of the IRM Operations Manual and this Agreement, the provisions of this Agreement shall prevail; and (e) not amend, suspend, abrogate, repeal or waive any provision of the IRM Operations Manual without prior approval by the Association. 2. The Recipient shall, throughout the implementation of the IRM Part, maintain the Coordinating Authority, with adequate staff and resources satisfactory to the Association. 3. The Recipient shall undertake no activities under the IRM Part (and no activities shall be included in the IRM Part) unless and until the following conditions have been met in respect of said activities: (a) The Recipient has determined that an Eligible Crisis or Emergency has occurred, has furnished to the Association a request to include said activities in the IRM Part in order to respond to said Eligible Crisis or Emergency, and the Association has agreed with such determination, accepted said request and notified the Recipient thereof. (b) The Recipient has prepared and disclosed all safeguards instruments required for said activities, in accordance with the IRM Operations Manual, the Association has approved all such instruments, and the Recipient has implemented any actions which are required to be taken under said instruments. Section II. Project Monitoring, Reporting and Evaluation A. Project Reports The Recipient shall monitor and evaluate the progress of the Project and prepare Project Reports in accordance with the provisions of Section 4.08 of the General Conditions and on the basis of indicators acceptable to the Association as set forth in the Project Implementation Manual. Each Project Report shall cover the period of one calendar semester and shall be furnished to the Association not later than one month after the end of the period covered by such report. -17- B. Financial Management, Financial Reports and Audits 1. The Recipient shall cause FNDS to maintain or cause to be maintained a financial management system in accordance with the provisions of Section 4.09 of the General Conditions. 2. Without limitation on the provisions of Part A of this Section, the Recipient shall cause FNDS to prepare and furnish to the Association as part of the Project Report not later than forty-five (45) days after the end of each calendar quarter, interim unaudited financial reports for the Project covering the quarter, in form and substance satisfactory to the Association. 3. The Recipient shall cause FNDS to have its Financial Statements audited in accordance with the provisions of Section 4.09(b) of the General Conditions. Each audit of the Financial Statements shall cover the period of one fiscal year of the Recipient, commencing with the fiscal year in which the first withdrawal was made under the Preparation Advance for the Project. The audited Financial Statements for each such period shall be furnished to the Association not later than six months after the end of such period. Section III. Withdrawal of the Proceeds of the Financing A. General 1. The Recipient cause FNDS to may withdraw the proceeds of the Financing in accordance with the provisions of Article II of the General Conditions, this Section, and such additional instructions as the Association shall specify by notice to the Recipient (including the "World Bank Disbursement Guidelines for Projects" dated May 2006, as revised from time to time by the Association and as made applicable to this Agreement pursuant to such instructions), to repay the Preparation Advance in accordance with Section 2.07 of the General Conditions. 2. The following table specifies the categories of Eligible Expenditures that may be financed out of the proceeds of the Financing ("Category"), the allocations of the amounts of the Financing to each Category, and the percentage of expenditures to be financed for Eligible Expenditures in each Category: -18- Percentage of Amount of the Grant Expenditures to be Allocated (expressed Financed Category in SDR) (inclusive of Taxes) (1) Goods, works, non- consulting services, consultants' services, Operating Costs and 13,000,000 100% Training for the Project except for Parts A(ii)(a) of the Project (2) Goods, Works, non- consulting services and consultants' services in respect of 30,300,000 100% Matching Grants under Part A(ii)(a) of the Project (3) Transfers in respect of the PCG Fund under Part A(ii)(b) of the Project (4) Transfers in respect of Premium under Part A(ii)(c) of the Project (5) Emergency Expenditures under 0 100% Part D of the Project TOTAL AMOUNTS 43,300,000 B. Withdrawal Conditions; Withdrawal Period 1. Notwithstanding the provisions of Part A of this Section, no withdrawal shall be made: (a) for payments made prior to the date of this Agreement. -19- (b) under Category (4) for Premia made in respect of the Index Insurance Scheme until the Recipient has received evidence of Premia billing issued by the Insurance Index Insurer in a manner satisfactory to the Association; or (c) under Category (5), for Emergency Expenditures under Part D of the Project, unless and until the Association is satisfied, and notified the Recipient of its satisfaction, that all of the following conditions have been met in respect of said activities: (i) the Recipient has determined that an Eligible Crisis or Emergency has occurred, has furnished to the Association a request to include said activities in the IRM Part in order to respond to said Eligible Crisis or Emergency, and the Association has agreed with such determination, accepted said request and notified the Recipient thereof; (ii) the Recipient has prepared and disclosed all Safeguards Instruments required for said activities, and the Recipient has implemented any actions which are required to be taken under said instruments, all in accordance with the provisions of Section I.K of Schedule 2 to this Agreement; (iii) the Recipient's Coordinating Authority has adequate staff and resources, in accordance with the provisions of Section I.K of this Schedule 2 to this Agreement, for the purposes of said activities; and (iv) the Recipient has adopted an IRM Operations Manual in form, substance and manner acceptable to the Association and the provisions of the IRM Operations Manual remain, or have been updated in accordance with the provisions of Section I.K of this Schedule 2 so as to be appropriate for the inclusion and implementation of said activities under the IRM Part 2. The Closing Date is October 31, 2023. -20- APPENDIX Definitions "Affected Person" means a person who as a result of: (a) the involuntary taking of land under the Project is affected in any of the following ways: (i) relocation or loss of shelter; (ii) loss of assets or access to assets; or (iii) loss of income sources or means of livelihood, whether or not the affected person must move to another location; or (b) the involuntary restriction of access to legally designated parks and protected areas suffers adverse impacts on his or her livelihood; and "Affected Persons" means more than one Affected Person. 2. "ANE" means the Recipient's National Road Administration, a financial and administrative autonomous public institution established pursuant to the Recipient's Decree number 15/99 number 20, dated May 23, 2003, as amended in April 3, 2007, published in the Recipient's Official Gazette number 22, dated May 30, 2007. 3. "Annual Work Plan and Budget" means the work plan and budget approved by the Association and adopted by the Recipient in accordance with the provisions of Section I.D of Schedule 2 to this Agreement, as said work plan and budget may be modified from time to time with the prior written agreement of the Association. 4. "Anti-Corruption Guidelines" means, for purposes of paragraph 5 of the Appendix to the General Conditions, the "Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants", dated October 15, 2006 and revised in January 2011 and as of July 1, 2016. 5. "Category" means a category set forth in the table in Section III of Schedule 2 to this Agreement. 6. "CBO" means community-based organization. 7. "CGRNs" means ComWits de Gestdo de Recursos Naturais, the natural resources management committees at community level, established further to Decree No. 12/2012 dated June 6, 2012, published in the Recipient's Official Gazette No. 22 dated June 6, 2012. 8. "Coordinating Authority" means the entity or entities designated by the Recipient in the IRM Operations Manual and approved by the Association pursuant to Section I.K of Schedule 2 to this Agreement, to be responsible for coordinating the IRM Part of the Project. -21- 9. "DPTADER" means Direcqijo Provincial de Terra, Ambiente e Desenvolvimento Rural, namely the provincial directorate of land, environment and rural development within MITADER. 10. "District" means a political sub-division of the Recipient' territory. 11. "DUAT" means Direito de Uso e Aproveitamento da Terra, namely, land use and benefit rights. 12. "Eligible Crisis or Emergency" means an event that has caused, or is likely to imminently cause, a major adverse economic and/or social impact to the Recipient, associated with a natural or man-made crisis or disaster. 13. "Emergency Expenditure" means any of the Eligible Expenditures, including goods, works, non-consulting services, consultants' services, Training, and Operating Costs set forth in the IRM Operations Manual in accordance with the provisions of Section I.K of Schedule 2 to this Agreement and required for the activities included in the IRM Part of the Project. 14. "Environmental and Social Management Framework" or "ESMF" means the environmental and social management framework disclosed by the Recipient and the Association on May 13, 2019, adopted by the Recipient and acceptable to the Association, setting forth the modalities for environmental and social screening, and outlining environmental and social implementation, mitigation and monitoring measures and procedures, including procedures for the preparation and implementation of ESMPs, and procedures to ensure the safety of new and existing dams, as the same may be amended from time to time with the prior written agreement of the Association, and such term includes any schedules to such document. 15. "Environmental and Social Management Plan" or "ESMP" means each site specific environmental and social management plan to be prepared by the Recipient pursuant to the ESMF, in each case setting forth appropriate mitigation, monitoring and institutional measures designed to mitigate the potential adverse environmental and social impacts of a proposed Project activity, offset them, reduce them to acceptable levels, or enhance positive impacts, including procedures to ensure the safety of new and existing dams, as the same may be amended from time to time with the prior written agreement of the Bank, and such term includes any schedules to such document; and "Environmental and Social Management Plans" and "ESMPs" mean more than one such plan. 16. "FNDS" means the Recipient's National Sustainable Development Fund, a collective person of public law, with legal capacity, and with administrative, financial and patrimonial autonomy under the Ministry of Environment, Land and -22- Rural Development, created by Decree 6/2016 published in the Boletim da Reptiblica of February 21, 2016. 17. "FSP" means financial service provider, referred to in Section I.A.5(c) of Schedule 2 to this Agreement, namely a financial institution which meets the criteria provided in the PCG Fund Operational Manual. 18. "GBV" means gender-based violence. 19. "General Conditions" means the "International Development Association General Conditions for IDA Financing, Investment Project Financing", dated July 14, 2017. 20. "Index Insurance Beneficiary" means a cotton farmer who has met the criteria specified in the PIM and, as a result, has been extended, or is to be extended, an insurance coverage under Part A(ii)(c) of the Project; and "Index Insurance Beneficiaries" means more than one of such Index Insurance Beneficiary. 21. "Index Insurer" means a local insurance company that has met the criteria provided in the PIM to provide insurance coverage to an Index Insurance Beneficiary under Part A(ii)(c) of the Project. 22. "Integrated Pest Management Plan" or "IPMP" means the integrated pest management plan disclosed by the Recipient and the Association on May 13, 2019, adopted by the Recipient and acceptable to the Association, setting forth mitigation, enhancement, monitoring, and institutional measures for integrated pest management and the safe handling of pesticides under activities to be implemented under the Project, and for minimizing any potential related adverse impacts, as the same may be amended from time to time with the prior written agreement of the Association, and such term includes any schedules or annexes to such document. 23. "Immediate Response Mechanism Operations Manual" or "IRM Operations Manual" means the operations manual referred to in Section I.K of Schedule 2 of this Agreement, to be adopted by the Recipient for the IRM Part of the Project in accordance with the provisions of said Section. 24. "INIR" means Instituto Nacional de IrrigaVdo, the Recipient's national irrigation institute established further to Decree No. 9/2012 approved by the Council of Ministers on May 26, 2012, and published in the Recipient's Official Gazette Nr.3 1 dated April 17, 2013. 25. "Investment Committee" means the committee established for the purpose of implementation of Part A(ii)(a) and (b) of the Project referred to in Section I.A.5 of Schedule 2 to this Agreement. -23- 26. "IRM Part of the Project" and "IRM Part" each means Part D of the Project. 27. "Junior SECF" means young emerging commercial farmers, under 35 years old. 28. "MASA" means the Recipient's ministry of Agriculture and Food Security or any successor thereto. 29. "Matching Grant" or "MG" means a grant made or proposed to be made out of the proceeds of the Financing to an MG Beneficiary, for the purpose of an MG Investment under Part A(ii)(a) of the Project, as described in Section I.E of Schedule 2 to this Agreement and in more detail in the MG Manual; and "Matching Grants" means more than one such Matching Grant. 30. "Matching Grant Agreement" means an agreement entered into between FNDS and a Matching Grant Beneficiary, in accordance with the provisions of Section I.E.2 of Schedule 2 to this Agreement, providing for a Matching Grant; and "Matching Grants" means more than one such Matching Grant. 31. "Matching Grant Beneficiary" means an SECF, an MSME and/or a Junior SECF agribusiness or any other individual or agribusiness that met the eligibility criteria specified in Section I.E of Schedule 2 to this Agreement and in the MG Operational Manual, and as a result, has been extended, or is to be extended, a Matching Grant for the carrying out of activities under Part A(ii)(a) of the Project; and "Matching Grants Beneficiaries" means more than one such Matching Grant Beneficiary. 32. "Matching Grant Investment" or "MG Investment" means a set of activities to be carried out under Part A(ii)(a) of the Project, in accordance with the requirements of the Matching Grant Operational Manual referred to in Section I.C. of Schedule 2 to this Agreement. 33. "Matching Grant Operational Manual" means the manual acceptable to the Association, referred to under Section I.C of Schedule 2 to this Agreement, as may be amended from time to time with the prior written agreement of the Association, and such term includes any schedules and annexes to the said manual. 34. "MIC" means the Recipient's ministry of industry and commerce or any successor thereto. 35. "MGU" means Matching Grant and Partial Credit Guarantee Fund Unit referred to under Section I.A.5 of Schedule 2 to this Agreement. 36. "MITADER" means the Recipient's ministry of land, environment and rural development or any successor thereto. 37. "MSLF" means Multi-Stakeholder Landscape Forums, entities created by the Nampula Province and the Zambezia Province to bring together stakeholders on -24- relevant issues in the landscape including natural resources management challenges and land-use trade-offs, as referred to in Section I.A.4 of Schedule 2 to this Agreement. 38. "MOPHRH" means the Recipient's ministry of public works, housing and water resources or any successor thereto. 39. "MSME" means micro, small and medium enterprise. 40. "Operating Costs" means the incremental expenditures incurred on account of the Project which would not exist absent the Project required for the day-to-day implementation of the Project including maintenance of vehicles and equipment, fuel, office supplies, utilities, consumables, office rental and maintenance, bank charges, notary charges, advertising expenses, travel, per diems, accommodation, support staff for the Project but excluding salaries of the Recipient's civil servants. 41. "PCG Fund Manual" or "Partial Credit Guarantee Fund Operational Manual" means the manual acceptable to the Association referred to under Section I.C of Schedule 2 to this Agreement, as may be amended from time to time with the prior written agreement of the Association, and such term includes any schedules and annexes to the said manual. 42. "PCG Fund Beneficiaries" means a participating financial institution which has met the eligibility criteria specified in the PCG Fund Operational Manual, and as a result, has been extended, or is to be extended, a coverage for the carrying out of activities under Part A(ii)(b) of the Project; and "PCG Fund Beneficiaries" means more than one such PCG Fund Beneficiary. 43. "PIUs" means provincial implementing units created by the Recipient through the adoption ofthe Project Implementation Manual, within the administrative structure of MITADER referred to in Section I.A.3 of Schedule 2 to this Agreement, and "PIU" means any one of such PIUs. 44. "Premium" means a payment to obtain insurance coverage under Part A(ii)(c) of the Project, and "Premia" means more than one such payments. 45. "Principles for Public Credit Guarantee Schemes for MSMEs" means the World Bank Group principles on designing partial credit guarantee schemes dated December 13, 2014, covering the governance, management, administration, sustainability and monitoring of PCGs adopted on February 23, 2015. 46. "Procurement Regulations" means, for purposes of paragraph 87 of the Appendix to the General Conditions, the "World Bank Procurement Regulations for IPF Borrowers", dated July 2016, revised November 2017 and August 2018 under the new Procurement framework. -25- 47. "Project Area" means the Provinces of Sofala, Manica, Nampula, Zambezia and Cabo Delgado, as the same may be modified (decreased or increased in numbers) according to criteria pre-established and agreed upon between the Recipient and the Association and reflected in the Project Implementation Manual. 48. "Project Implementation Manual" means the manual approved by MITADER consultative council on July 19, 2016, and found acceptable to the Association, and referred to in Section I.B of Schedule 2 to this Agreement, as may be amended from time to time with the prior written agreement of the Association, and such term includes any schedules and annexes to the said manual. 49. "Province" means a political sub-division of the Recipient' territory. 50. "Regulation" means the Recipient's rules on Procurement of Works, Provision of Goods and Services, (Regulamento de Contratacao de Empreitada de Obras Publicas, Fornecimento de Bens e Prestaqao de Servicos ao Estado) published in the Recipient's Official Gazette (Boletim da Republica) on May 24, 2010. 51. "Resettlement Action Plan" or "RAP" means, for a given Project activity, the resettlement action plan for said activity, to be prepared by the Recipient in accordance with the RPF, and describing the compensation and other resettlement assistance to be provided, consultation to be conducted with Affected Persons about acceptable alternatives, institutional responsibilities for the implementation and procedures for grievance redress, and arrangements for monitoring and evaluation, as the same may be amended from time to time with the prior written agreement of the Association, and such term includes any schedules to such document; and "Resettlement Action Plans" and "RAPs" mean more than one such plan. 52. "Resettlement Policy Framework" or "RPF" means the resettlement policy framework disclosed by the Recipient and by the Association on May 13, 2019, and adopted by the Recipient and acceptable to Association, containing guidelines, procedures, timetables and other specifications for the provision of compensation, rehabilitation and resettlement assistance to Affected Persons, and for the preparation and implementation of RAPs, as the same may be amended from time to time with the prior written agreement of the Bank, and such term includes all schedules to such document. 53. "Safeguard Instruments" means, collectively, the ESMF, ESMPs, IPMP, RPF, and RAPs; and "Safeguard Instrument" means any one of such instruments. 54. "SECF" means small emerging commercial farmer. 55. "Subsidiary Agreement" means the agreement referred to in Section I.I. of Schedule 2 to this Agreement pursuant to which the Recipient shall make part of -26- the proceeds of the Financing available to FNDS for implementation of Parts the Project. 56. "Training" means the reasonable costs of goods and services required for the participation of personnel involved in training activities, workshops and study tours under the Project, including travel and subsistence costs for training, workshops and study tour participants, costs associated with securing the services of trainers, rental of training and workshop facilities, preparation and reproduction of training and workshop materials, and other costs directly related to training courses, workshops or study tour preparation and implementation. 57. "VC" means value chain.