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CONFORMED COPY
CREDIT NUMBER 3570 TA
Development Credit Agreement
(Primary Education Development Program)
between
THE UNITED REPUBLIC OF TANZANIA
and
INTERNATIONAL DEVELOPMENT ASSOCIATION
Dated October 18, 2001
CREDIT NUMBER 3570 TA
DEVELOPMENT CREDIT AGREEMENT
AGREEMENT, dated October 18, 2001, between THE UNITED REPUBLIC OF TANZANIA (the 
Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association).
WHEREAS the Association has received a letter (the Letter of Primary Education 
Subsector Development Policy), dated August 21, 2001, from the Borrower describing a 
program of actions, objectives and policies designed to achieve structural adjustment 
of the Borrower's education sector (hereinafter called the Program), declaring the 
Borrower's commitment to the execution of the Program, and requesting assistance from 
the Association in support of the Program during the execution thereof; and
WHEREAS on the basis, inter alia, of the foregoing, the Association has decided 
in support of the Program, to provide such assistance to the Borrower by making the 
Credit in three tranches as hereinafter provided;
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 October 6, 
1999), with the modifications thereof set forth below (the General Conditions) 
constitute an integral part of this Agreement:
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(a)
Section 2.01, paragraph 12, is modified to read:
"‘Project’ means the program, referred to in the Preamble to the 
Development Credit Agreement, in support of which the Credit is made.";
(b)
Section 4.01 is modified to read:
"Except as the Borrower and the Association shall otherwise agree, 
withdrawals from the Credit Account shall be made in the currency of the 
deposit account specified in Section 2.02 of the Development Credit 
Agreement.";
(c)
Section 5.01 is modified to read:
"The Borrower shall be entitled to withdraw the proceeds of the Credit 
from the Credit Account in accordance with the provisions of the Development 
Credit Agreement and of these General Conditions";
(d)
The last sentence of Section 5.03 is deleted;
(e)
Section 9.06 (c) is modified to read:
"(c) Not later than six months after the Closing Date or such later date 
as may be agreed for this purpose between the Borrower and the Association, 
the Borrower shall prepare and furnish to the Association a report, of such 
scope and in such detail as the Association shall reasonably request, on the 
execution of the program referred to in the Preamble to the Development Credit 
Agreement, the performance by the Borrower and the Association of their 
respective obligations under the Development Credit Agreement and the 
accomplishment of the purposes of the Credit."; and
(f)
Section 9.04 is deleted and Sections 9.05, 9.06 (as modified above), 9.07 
and 9.08 are renumbered, respectively, Sections 9.04, 9.05, 9.06 and 9.07.
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)
"BOT" means Bank of Tanzania, the Borrower’s Central Bank, established 
pursuant to the Bank of Tanzania Act Number 1 of 1995 of the laws of the Borrower;
(b)
"Capitation Grant" means a grant provided by the Borrower to a School 
Committee (as hereinafter defined) to meet necessary expenditures for recurrent school 
operations, including teaching and learning materials, textbooks, administration, 
school level teacher development, and maintenance;
(c)
"Deposit Account" means the account referred to in Section 2.02 (a) of 
this Agreement;
(d)
"Effectiveness Tranche" means the Tranche of the proceeds of the Credit 
allocated to Category (1) in the table set forth of paragraph 1 of Schedule 1 to this 
Agreement to be released by the Association on or after the Effective Date;
(e)
"FY" means the Borrower’s fiscal year beginning on July 1 of each year 
and ending on June 30 of the following year;
(f)
"IEC" means Information, Education and Communication;
(g)
"LDP" means the Letter of Primary Education Subsector Development Policy 
referred to in the first paragraph of the Preamble to this Agreement;
(h)
"Local Government Authority" means a district council, a town council, a 
municipal council, or a city council, established under the Local Government Act Nos. 
7 and 8 of 1982 of the Borrower;
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(i)
"PEDP" means the Borrower’s Primary Education Development Program, 
adopted on July 11, 2001;
(j)
"PMO" means the Borrower’s Prime Minister’s Office;
(k)
"PO-RALG" means President’s Office-Regional Administration and Local 
Government;
(l)
"School Committees" means  School Committees, established under Section 
39, Subsection 3 of the Education Act, 1978, of the Borrower;
(m)
"School Development Grant" means a grant provided by the Borrower to a 
School Committee to meet necessary expenditures for constructing, procuring and 
rehabilitating school infrastructure, furniture and equipment, based on Local 
Government Authority education plans;
(n)
"Second Tranche" means the Tranche of the proceeds of the Credit 
allocated to Category (2) in the table set forth in paragraph 1 of Schedule 1 to this 
Agreement;
(o)
"Tanzanian Shillings" means the currency of the Borrower;
(p)
"Third Tranche" means the Tranche of the proceeds of the Credit allocated 
to Category (3) in the table set forth in paragraph 1 of Schedule 1 to this Agreement;
(q)
"Tranche" means any of the following: the Effectiveness Tranche, the 
Second Tranche and the Third Tranche; and
(r)
"UPE" means universal primary education initiative, adopted by the 
Borrower in February of 1995.
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 this Agreement, an amount in various currencies 
equivalent to one hundred and nineteen million one hundred thousand Special Drawing 
Rights (SDR 119,100,000).
Section 2.02. (a) The Borrower shall open, prior to furnishing to the 
Association the first request for withdrawal from the Credit Account, and thereafter 
maintain in BOT, a Deposit Account in US dollars on terms and conditions satisfactory 
to the Association. All withdrawals from the Credit Account shall be deposited by the 
Association into the Deposit Account.
(b)
Subject to the provisions of paragraph (c) of this Section, the Borrower 
shall be entitled to use the proceeds of the Credit withdrawn from the Credit Account 
and deposited into the Deposit Account in support of the Program.
(c)
The Borrower undertakes that the proceeds of the Credit shall not be used 
to finance expenditures excluded pursuant to the provisions of Schedule 1 to this 
Agreement. If the Association shall have determined at any time that any proceeds of 
the Credit shall have been used to make a payment for an expenditure so excluded, the 
Borrower shall, promptly upon notice from the Association: (i) deposit into the 
Deposit Account an amount equal to the amount of said payment, or (ii) if the 
Association shall so request, refund such amount to the Association.  Amounts refunded 
to the Association upon such request shall be credited to the Credit Account for 
cancellation.
Section 2.03. The Closing Date shall be October 31, 2004, 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 
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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 canceled; 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 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 and service charges shall be payable semiannually on  
May 1 and November 1 in each year.
Section 2.07. (a)  Subject to paragraphs (b), (c) and (d) below, the Borrower 
shall repay the principal amount of the Credit in semiannual installments payable on 
each   May 1 and November 1 commencing November 1, 2011, and ending May 1, 2041. Each 
installment to and including the installment payable on May 1, 2021, shall be one 
percent (1%) of such principal amount, and each installment thereafter shall be two 
percent (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 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 
date referred to in paragraph (a) above falling six 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 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. BOT is designated as representative of the Borrower for the 
purposes of taking any action required or permitted to be taken under the provisions 
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of Section 2.02 of this Agreement and Article V of the General Conditions.
ARTICLE III
Particular Covenants
Section 3.01. (a) The Borrower and the Association shall from time to time, at 
the request of either party, exchange views on the progress achieved in carrying out 
the Program and the actions specified in Schedule 2 to this Agreement.
(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.
(c)
Without limitation upon the provisions of paragraph (a) of this Section, 
the Borrower shall exchange views with the Association on any proposed action to be 
taken after the disbursement of the Credit which would have the effect of materially 
reversing the objectives of the Program, or any action taken under the Program, 
including any action specified in Schedule 2 to this Agreement. 
(d)
If, after said exchange of views, the Association shall have given notice 
to the Borrower that the progress achieved and actions taken are not satisfactory and, 
within 90 days after such notice, the Borrower shall not have achieved progress and 
taken actions satisfactory to the Association, then the Association may, by notice to 
the Borrower, cancel the unwithdrawn amount of the Credit or any part thereof.
Section 3.02. Upon the Association’s request, the Borrower shall:
(a)
have the Deposit Account audited in accordance with appropriate auditing 
principles consistently applied, by independent auditors acceptable to the 
Association;
(b)
furnish to the Association as soon as available, but in any case not 
later than four months after the date of the Association’s request for such audit, 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
(c)
furnish to the Association such other information concerning the Deposit 
Account and the audit thereof as the Association shall have reasonably requested.
ARTICLE IV
Additional Event of Suspension
Section 4.01. Pursuant to Section 6.02 (l) of the General Conditions, the 
following additional event is specified, namely, that a situation has arisen which 
shall make it improbable that the Program, or a significant part thereof, will be 
carried out.
ARTICLE V
Effective Date; Termination
Section 5.01. 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 the General Conditions: 
The Borrower has furnished to the Association evidence that it has:
(i)
issued guidelines, satisfactory to the Association, for 
implementing its policy to admit all 7-10 year old children in 
primary schools by 2004;
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(ii)
prepared terms of reference, satisfactory to the Association, for 
revising the design of in-service and pre-service teacher training 
programs, primary school curriculum, and examinations to 
facilitate enhanced student learning and classroom interaction;
(iii)
issued instructions, satisfactory to the Association, for School 
Committees to establish and operate bank accounts into which 
Capitation and School Development Grants will be disbursed; and
(iv)
designated an official in PMO for PEDP coordination, and 
designated program coordinators, all satisfactory to the 
Association, in the Ministry of Education and Culture and in 
PO-RALG, to facilitate PEDP implementation.
Section 5.02. The date ninety (90) days after the date of this Agreement is 
hereby specified for the purposes of Section 12.04 of the General Conditions.
ARTICLE VI
Representative of the Borrower; Addresses
Section 6.01. Except as provided in Section 2.09 of this Agreement, the Minister 
of Finance of the Borrower is designated as the 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:
Ministry of Finance
P.O. Box 9111
Dar es Salaam
Tanzania
Cable address:
Telex:
Facsimile
TREASURY
41329
(255) 222 11 77 90
Dar es Salaam
For the Association:
International Development Association 
1818 H Street, N.W.
Washington, D.C. 20433
United States of America
Cable address:
Telex:
Facsimile:
INDEVAS
248423 (MCI) or
(202) 477 6391
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 
the District of Columbia, United States of America, as of the day and year first above 
written.
THE UNITED REPUBLIC OF TANZANIA
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By /s/ Mustafa Nyang’anyi
Authorized Representative
INTERNATIONAL DEVELOPMENT ASSOCIATION
By /s/ Callisto Madavo
Regional Vice President
Africa
SCHEDULE 1
Withdrawal of the Proceeds of the
Credit and Excluded Expenditures
1.
Subject to the provisions set forth or referred to in this Schedule, the table 
below sets forth the amounts allocated to specific Tranches to be withdrawn from the 
Credit Account:
 Amount of  the Credit
     % of
Allocated (Expressed in
 Expenditures
Categories
SDR Equivalent)
to be Financed
(1) Effectiveness  Tranche 39,700,000
100%
(2) Second Tranche
39,700,000
100%
(3) Third Tranche
39,700,000
100%
Total
     119,100,000
2.
Notwithstanding the provisions of paragraph 1 above, and for purposes of Section 
2.02 (c) of this Agreement, the proceeds of the Credit shall not be used to finance 
the following expenditures:
(a)
expenditures in the currency of the Borrower or for goods or services 
supplied from the territory of the Borrower;
(b)
expenditures for goods or services supplied under a contract which any 
national or international financing institution or agency other than the Bank or the 
Association shall have financed or agreed to finance, or which the Bank or the 
Association shall have financed or agreed to finance under another credit or a loan; 
(c)
expenditures for goods included in the following groups or subgroups of 
the Standard International Trade Classification, Revision 3 (SITC, Rev.3), published 
by the United Nations in Statistical Papers, Series M, No. 34/Rev.3 (1986) (the SITC), 
or any successor groups or subgroups under future revisions to the SITC, as designated 
by the Association by notice to the Borrower:
Group
Subgroup
Description of Items
112
-
Alcoholic beverages
121
-
Tobacco, unmanu-
factured, tobacco
refuse
122
-
Tobacco, manufactured 
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(whether or not
containing tobacco
substitutes)
525
-
Radioactive and 
associated materials
667
-
Pearls, precious and
semiprecious
stones, unworked
or worked
718
718.7
Nuclear reactors, and 
parts thereof; fuel 
elements (cartridges),
non-irradiated, for
nuclear reactors
728
728.43
Tobacco processing
machinery
897
897.3
Jewelry of gold, 
silver or platinum
group metals (except
watches and watch
cases) and
goldsmiths’ or 
silversmiths’
wares (including 
set gems)
971
-
Gold, non-monetary
(excluding gold
ores and concentrates);
(d)
expenditures for goods intended for a military or paramilitary purpose or 
for luxury consumption;
(e)
expenditures for environmentally hazardous goods (for purposes of this 
paragraph the term "environmentally hazardous goods" means goods, the manufacture, use 
or import of which is prohibited under the laws of the Borrower or international 
agreements to which the Borrower is a party, and any other goods designated as 
environmentally hazardous by agreement between the Borrower and the Association); 
(f)
expenditures: (i) in the territories of any country which is not a member 
of the Bank or for goods procured in, or services supplied from, such territories; or 
(ii) on account of any payment to persons or entities, or any import of goods, if such 
payment or import is prohibited by a decision of the United Nations Security Council 
taken under Chapter VII of the Charter of the United Nations; and
(g)
expenditures under a contract in respect of which the Association 
determines that corrupt or fraudulent practices were engaged in by representatives of 
the Borrower or of a beneficiary of the Credit during the procurement or execution of 
such contract, without the Borrower having taken timely and appropriate action 
satisfactory to the Association to remedy the situation.
3.
No withdrawals shall be made from the Credit Account under Category (2) of the 
table in paragraph 1 of this Schedule unless:
(a)
the full amount of the Effectiveness Tranche has been withdrawn by the 
Borrower under the Development Credit Agreement; and
(b)
the Association shall be satisfied, after an exchange of views as 
described in Section 3.01 of this Agreement based on evidence satisfactory to the 
Association: (i) that the macroeconomic policy framework of the Borrower is consistent 
with the objectives of the Program, (ii) with the progress achieved by the Borrower in 
the carrying out of the Program, and (iii) that the actions described in Part A of 
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Schedule 2 to this Agreement have been taken.
4.
No withdrawals shall be made from the Credit Account under Category (3) of the 
table in paragraph 1 of this Schedule unless: 
(a)
the full amount specified in Category (2) has been withdrawn by the 
Borrower; and 
(b)
the Association shall be satisfied, after an exchange of views as 
described in Section 3.01 of this Agreement based on evidence satisfactory to the 
Association: (i) that the macroeconomic policy framework of the Borrower is consistent 
with the objectives of the Program, (ii) with the progress achieved by the Borrower in 
the carrying out of the Program, and (iii) that the actions described in Part B of 
Schedule 2 to this Agreement have been taken.
SCHEDULE 2
Actions Referred to in Section 3.01 (a)
of this Agreement
Part A:
Conditions for the release of the Second Tranche
1.
The Borrower has, in accordance with the provisions of the Annex to the LDP, 
achieved progress on PEDP annual performance indicators, including but not limited to: 
(a) number of classrooms constructed; (b) number of teachers trained; (c) 
pupil/teacher ratios and children enrolled; and (d) primary education budget allocated 
to materials, supplies and textbooks.
2.
The Borrower has, in accordance with the provisions of paragraph 11 of the LDP, 
introduced double-shift teaching in at least 50 % of all primary school classrooms. 
3.
The Borrower has, in accordance with the provisions of paragraph 11 of the LDP: 
(a) approved a policy, including an incentive package, for the inter and intra 
district deployment of teachers, and (b) revised the design of in-service and 
pre-service teacher training programs, primary school curriculum and examinations, all 
satisfactory to the Association.
4.
The Borrower has, in accordance with the provisions of paragraph 4 of the LDP, 
issued a strategy for the implementation of the national policy of non-formal and 
adult education.
5.
The Borrower has, in accordance with the provisions of paragraph 10 of the LDP, 
issued guidelines and procedures to decentralize to the level of the School 
Committees, the procurement of textbooks, other learning materials and construction 
and furnishing of classrooms.
6.
The Borrower has, in accordance with the provisions of paragraph 13 of the LDP, 
allocated adequate budget to cover: (a) the Capitation Grants to School Committees, 
(b) administrative costs related to Capitation Grants to Local Government Authorities, 
and (c) costs related to the provision of teachers to primary schools on the basis of 
a 1:45 teacher/pupil ratio.
7.
The Borrower has, in accordance with the provisions of paragraph 11 of the LDP, 
issued detailed criteria for School Development Grant allocations among: (a) the Local 
Government Authorities; and (b) schools within the Local Government Authorities.
8.
The Borrower has, in accordance with the provisions of the Annex to the LDP. 
distributed to the Local Authorities, the regional secretariats and the School 
Committees’ financial management manuals related to the accounting, reporting and 
auditing of PEDP funds, including financial management manuals for the use of school 
committees and administrators at each level.
Part B:
Conditions for the release of the Third Tranche
1.
The Borrower has, in accordance with the provisions of the Annex to the LDP: (a) 
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achieved progress, satisfactory to the Association, on PEDP annual performance 
indicators as defined in the LDP; and (b) allocated at least 20 percent of the primary 
education budget to non-salary expenditures.
2.
The Borrower has, in accordance with the provisions of paragraph 11 of the LDP, 
introduced double-shift teaching in 80% of all schools with a classroom/pupil ratio of 
1:45.
3.
The Borrower has, in accordance with the provisions of paragraph 11 of the LDP, 
made progress, satisfactory to the Association, in the implementation of incentive 
schemes for teacher deployment to teacher deficit districts and schools.
4.
The Borrower has, in accordance with the provisions of paragraphs 9 and 11 of 
the LDP, made progress, satisfactory to the Association, in the implementation of  the 
revised in-service and pre-service teacher training programs, primary school 
curriculum, and examinations to facilitate enhanced student learning and classroom 
interaction.
5.
The Borrower has, in accordance with the provisions of paragraph 10 and the 
Annex of the LDP: (a) provided evidence that School Committees have completed school 
development plans, and that School Committees have fully operating bank accounts; and 
(b) trained staff with direct responsibility for PEDP management in participatory 
planning, implementation, monitoring and evaluation, as well as policy analysis and 
formulation.
6.
The Borrower has, in accordance with the provisions of paragraph 8 and the Annex 
to the LDP: (a) established an Improved Educational Management Information System 
(EMIS), satisfactory to the Association; (b) implemented a decentralized textbook 
procurement system in all local government authorities that permits schools to procure 
textbooks; (c) strengthened the school inspection system under which each school is 
inspected at a minimum once every two years.
7.
The Borrower has, in accordance with the provisions of paragraph 13 of the LDP, 
allocated adequate budget to cover: (a) the Capitation Grants and School Development 
Grants to School Committees, (b) administrative costs related to Capitation Grants and 
School Development Grants to Local Government Authorities, and (c) costs related to 
the provision of teachers to primary schools on the basis of a 1:45 teacher/pupil 
ratio.