OFFICIAL DOCUMENTS CREDIT NUMBER 6522-TG GRANT NUMBER D542-TG Financing Agreement (First Fiscal Management and Energy Reform Development Policy Financing) between REPUBLIC OF TOGO and INTERNATIONAL DEVELOPMENT ASSOCIATION CREDIT NUMBER 6522-TG GRANT NUMBER D542-TG FINANCING AGREEMENT AGREEMENT dated as of the Signature Date between REPUBLIC OF TOGO ("Recipient") and INTERNATIONAL DEVELOPMENT ASSOCIATION ("Association") for the purpose of providing financing in support of the Program (as defined in the Appendix to this Agreement). The Association has decided to provide this financing on the basis, inter alia, of: (i) the actions which the Recipient has already taken under the Program and which are described in Section I of Schedule I to this Agreement; and (ii) the Recipient's maintenance of an adequate macroeconomic policy framework. 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) apply to and form 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 and a credit, which are deemed as Concessional Financing for purposes of the General Conditions (collectively, "Financing") in the following amounts: (a) an amount equivalent to sixty-three million five hundred thousand Special Drawing Rights (SDR 63,500,000) ("Grant"); and (b) the amount of fifty-six million one hundred thousand Euros (EUR 56,100,000) ("Credit"). 2.02. The Maximum Commitment Charge Rate is one-half of one percent (1/2 of 1%) per annum on the Unwithdrawn Financing Balance. 2.03. The Service Charge is the greater of: (a) the sum of three-fourths of one percent (3/4 of 1%) per annum plus the Basis Adjustment to the Service Charge; and (b) three-fourths of one percent (3/4 of 1%) per annum; on the Withdrawn Credit Balance. 2.04. The Payment Dates are March 15 and September 15 in each year. -2- 2.05. The principal amount of the Credit shall be repaid in accordance with the repayment schedule set forth in Schedule 2 to this Agreement. 2.06. The Payment Currency is Euro. 2.07. Without limitation upon the provisions of Section 5.05 of the General Conditions, the Recipient shall promptly furnish to the Association such information relating to the provisions of this Article II as the Association may, from time to time, reasonably request. ARTICLE III - PROGRAM 3.01. The Recipient declares its commitment to the Program and its implementation. To this end, and further to Section 5.05 of the General Conditions: (a) the Recipient and the Association shall from time to time, at the request of either party, exchange views on the Recipient's macroeconomic policy framework and the progress achieved in carrying out the Program; (b) prior to each such exchange of views, the Recipient 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; and (c) without limitation upon the provisions of paragraphs (a) and (b) of this Section, the Recipient shall promptly inform the Association of any situation that would have the effect of materially reversing the objectives of the Program or any action taken under the Program. ARTICLE IV- REMEDIES OF THE ASSOCIATION 4.01. The Additional Event of Suspension consists of the following, namely that a situation has arisen which shall make it improbable that the Program, or a significant part of it, will be carried out. 4.02. The Additional Event of Acceleration consists of the following, namely that the event specified in Section 4.01 of this Agreement occurs and is continuing for a period of 60 days after notice of the event has been given by the Association to the Recipient. ARTICLE V - EFFECTIVENESS; TERMINATION 5.01. The Additional Condition of Effectiveness consists of the following, namely that the Association is satisfied with the progress achieved by the Recipient in carrying out the Program and with the adequacy of the Recipient's macroeconomic policy framework. 5.02. The Effectiveness Deadline is the date (90) days after the Signature Date. 5.03. For purposes of Section 10.05 (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 years after the Signature Date. ARTICLE V - REPRESENTATIVE; ADDRESSES 6.01. The Recipient's Representative is its minister at the time responsible for finance. 6.02. For purposes of Section 11.01 of the General Conditions: (a) the Recipient's address is: Ministere de l'Economie et des Finances Immeuble CASEF B.P.387 Lom6 - Togo; and (b) the Recipient's Electronic Address is: Facsimile: E-mail: (228) 22 21 0905 secretariat.ministre@economie.gouv.tg 6.03. For purposes of Section 11.01 of the General Conditions: (a) the Association's address is: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America; and (b) the Association's Electronic Address is: Telex: Facsimile: 248423 (MCI) 1-202-477-6391 AGREED as of the Signature Date. REPUBI Akuthorized Representative Date.- ENTERNATIONAL DV ELOPNIENT ASSOCIATION By Authorized Representative Name:~NK ite: ( Date: - A Zc\' -5- SCHEDULE I Program Actions; Availability of Financing Proceeds Section 1. Actions under the Proeram The actions taken by the Recipient under the Program include the following: 1. The Recipient has increased VAT revenues and improved tax administration by: (i) adopting one statutory VAT rate of 18 percent and eliminating the previous 10- percent-preferential VAT rate on certain products, through OTR's circular No. 003/2019/OTR/CI, dated January 14, 2019; (ii) suspending the use of VAT refund certificates, through OTR's decision No. 2019/064/OTR/CG/CI, dated June 19, 2019; and (iii) creating a dedicated single account for the payment of VAT credits in line with the new tax code of January 2019, through Recipient's letter No. 1496/MEF/SG/DGTCP/TGE/DC/2019, dated May 20, 2019, and BCEAO's letter No. 3268/CG/CB, dated June 17, 2019. 2. The Recipient has increased property tax revenues by: (i) merging the data from the land census with the data from the land title registry to create a single digital database on property, through OTR's report on the consolidation of land databases, dated June 2019; and (ii) updating the tax payer registry at the Togolese Revenue Authority based on the results of the land census, through OTR's report on the updated tax payer database, dated June 2019. 3. The Recipient has improved the efficiency and transparency of public investment procedures by: (i) adopting a code of professional ethics for the public procurement process, through the Recipient's decree No. 2019-097/PR, dated July 8, 2019; and (ii) strengthening the supervision of large infrastructure projects and the implementation of public projects delegated to third parties, through the Recipient's decree No. 2019-096/PR, dated July 8, 2019. 4. The Recipient has improved debt management and transparency by: (i) issuing its 2019-2023 Medium-Term Debt Management Strategy, updated in March 2019, with an analysis of the impact of potential liability management operations; and (ii) establishing a public debt portal on the Recipient's MEF website that consolidates in one website all information related to central government and publicly guaranteed debt, dated June 19, 2019. 5. The Recipient has secured the revenues of the energy sector by: (i) ensuring that all SOEs and central and local government entities have paid their outstanding arrears as of December 31, 2018, to CEET, through CEET's letter, dated June 27, 2019, Ecobank's letter No. 237/2019/CB/DCI, dated November 8, 2019, and Orabank's letter No. 225/OTG/DAF/DCP, dated November 8, 2019; (ii) ensuring that TdE, and TOGOCOM have established escrow accounts at a certified bank to -6- arrange timely payment of bills to CEET, through TdE's letter No. 535/FdE/DG/DAFC/2019, dated September 30, 2019, TOGOCOM's letter No. 1479/TGT/DG/DFC/STM, dated October 1, 2019, Orabank's balance certificate No. 224/OTG/DAF/DAI, dated November 6, 2019, and BTCI's balance certificate No. BTCI/2019/DE/DRE/DJE/GP/ALA, dated November 6, 2019, and; (iii) ensuring that CEET has paid its outstanding arrears as of December 31, 2018, to CEB, through CEB's letter No. 1025/CEB/DG/DGA/DFC/Ta/2019, dated June 25, 2019, and CEET's payment orders No. 0779/DFC/DG/CEET/2019, dated February 13, 2019, No. 1858/DFC/DG/CEET/2019, dated April 4, 2019, No. 3500/DFC/DG/CEET/2019, dated June 25,2019, No. 3388/DFC/DG/CEET/2019, dated June 17, 2019, and No. 3536/DFC/DG/CEET/2019, dated June 26, 2019. 6. The Recipient has strengthened the financial viability of the power sector by: (i) requiring CEET's clients to pay a fee for public lighting, through the Recipient's inter-ministerial arritd No. 009/MME/MEF/MCIDSPPCL/MATDCL dated March 1, 2019; and (ii) authorizing the Regulation Authority to determine the periodic adjustment of the revenue requirement for CEET to reach financial equilibrium, through the Recipient's inter-ministerial arritd No. 822/2019/MME/MEF, dated June 27, 2019. 7. The Recipient has promoted increased technical and cost efficiency in the power sector by ensuring that CEET and CEB have entered into a Transmission Service Agreement, dated July 15, 2019, establishing the obligations of each company to ensure an efficient and financially sustainable transmission of electricity. 8. The Recipient has promoted the use of renewable energy by strengthening the legal framework for renewable energy generation projects, through the issuance of the Recipient's decree No. 2019-018/PR and decree No. 2019-019/PR, both, dated February 6, 2019. Section II. Availability of Financing Proceeds A. General. The Recipient may withdraw the proceeds of the Financing in accordance with the provisions of this Section and such additional instructions as the Association may specify by notice to the Recipient. B. Allocation of Financing Amounts. The Financing is allocated in a single withdrawal tranche, from which the Recipient may make withdrawals of the Financing proceeds. The allocation of the amounts of the Financing to this end is set out in the table below: -7- Allocations Amount of the Credit Amount of the Grant Allocated Allocated (expressed in EUR) (expressed in DTS) (1) Single 56,100,000 63,500,000 Withdrawal Tranche TOTAL 56,100,000 63,500,000 AMOUNT C. Withdrawal Tranche Release Conditions. No withdrawal shall be made of the Single Withdrawal Tranche unless the Association is satisfied: (a) with the Program being carried out by the Recipient; and (b) with the adequacy of the Recipient's macroeconomic policy framework. D. Deposit of Financing Amounts. 1I Notwithstanding the provisions of Section 2.03 of the General Conditions: (a) the Recipient shall open, prior to furnishing to the Association the first request for withdrawal from the Financing Account, and thereafter maintain the following two dedicated accounts on terms and conditions satisfactory to the Association: (i) a dedicated account in Euro ("Foreign Currency Dedicated Account"); and (ii) a dedicated account in XOF ("Local Currency Dedicated Account"); and (b) all withdrawals from the Financing Account shall be deposited by the Association into the Foreign Currency Dedicated Account. Upon each deposit of an amount ofthe Financing into the Foreign Currency Dedicated Account, the Recipient shall deposit an equivalent amount into the Local Currency Dedicated Account. 2. The Recipient, within thirty (30) days after the withdrawal of the Financing from the Financing Account, shall report to the Association: (a) the exact sum received into the Foreign Currency Dedicated Account; (b) the details of the account to which the XOF equivalent of the Financing proceeds will be credited; (c) the record that an equivalent amount has been accounted for in the Recipient's budget management systems; and (d) the statement of receipts and disbursement of the Foreign Currency Dedicated Account. -8- E. Audit. Upon the Association's request the Recipient shall: I. have the Dedicated Accounts audited by independent auditors acceptable to the Association, in accordance with consistently applied auditing standards acceptable to the Association; 2. furnish to the Association as soon as available, but in any case not later than four (4) months after the date of the Association's request for such audit, a certified copy of the report of such audit, of such scope and in such detail as the Association shall reasonably request, and make such report publicly available in a timely fashion and in a manner acceptable to the Association and; 3. furnish to the Association such other information concerning the Dedicated Accounts and their audit as the Association shall reasonably request. F. Closing Date. The Closing Date is December 31, 2020. -9- SCHEDULE 2 Repayment Schedule Principal Amount of the Date Payment Due Credit repayable (expressed as a percentage)* On each March 15 and September 15, commencing 1.5625% March 15, 2026, to and including September 15, 2057. * The percentages represent the percentage of the principal amount of the Credit to be repaid, except as the Association may otherwise specify pursuant to Section 3.05 (b) of the General Conditions. -10- APPENDIX Definitions I. "Basis Adjustment to the Service Charge" means the Association's standard basis adjustment to the Service Charge for credits in the currency of denomination of the Credit, in effect at 12:01 a.m. Washington, D.C. time, on the date on which the Credit is approved by the Executive Directors of the Association, and expressed either as a positive or negative percentage per annum. 2. "BCEAO" means Banque Centrale des Etats de l'Afrique de I'Ouest, a regional central bank serving the eight west African countries sharing the common West African CFA franc currency, established pursuant to the international treaty, dated May 12, 1962. 3. "BTCI" means Banque Togolaise pour le Commerce et I'Investissement, a commercial bank, established on April 30, 1974. 4. "CEB" means the Republic of Benin's Electric Community established on July 27, 1968, by virtue of the International Agreement on the Beninese-Togolese Electricity Code, or any successor thereto. 5. "CEET" means the Compagnie Energie Electrique du Togo, a Recipient-owned power company, established pursuant to the Recipient's Ordonnance no. 63-13 du 20 mars 1963, and operating pursuant to the Recipient's Decret no. 613-152 du 11-12-63 portant approbation des statuts de la Compagnie Energie Electrique du Togo. 6. "Dedicated Accounts" means both the Foreign Currency Dedicated Account and the Local Currency Dedicated Account. 7. "Ecobank" means ECOBANK Transnational Incorporated, a commercial regional bank, established in 1985. 8. "Foreign Currency Dedicated Account" means the account referred to in Part D.1(a) of Section II of Schedule I to this Agreement. 9. "General Conditions" means the "International Development Association General Conditions for IDA Financing, Development Policy Financing", dated December 14,2018. 10. "Local Currency Dedicated Account" means the account referred to in Part D. I(b) of Section II of Schedule I to this Agreement. 11. "Medium-Term Debt Management Strategy" means the Recipient's framework guiding the decisions in terms of debt management (contracting debt at the lowest interest rate and longer maturity), dated June 19, 2019. 12. "MEF" means the Recipient's ministry in charge of economy and finance, or any successor thereto. 13. "Orabank" means ORABANK GROUP, a commercial regional bank, established in 2008. 14. "Program" means the program of objectives, policies, and actions set forth or referred to in the letter, dated August 16, 2019, from the Recipient to the Association declaring the Recipient's commitment to the execution of the Program, and requesting assistance from the Association in support of the Program during its execution and comprising actions taken, including those set forth in Section I of Schedule 1 to this Agreement, and actions to be taken consistent with the program's objectives. 15. "Regulation Authority" means the Recipient's Autoriti de Riglementation du Secteur de V Electricite, established pursuant to Law No. 2000-012, dated July 18, 2000. 16. "Signature Date" means the later of the two dates on which the Recipient and the Association signed this Agreement and such definition applies to all references to "the date of the Financing Agreement" in the General Conditions. 17. "Single Withdrawal Tranche" means the amount of the Financing allocated to the category entitled "Single Withdrawal Tranche" in the table set forth in Part B of Section II of Schedule I to this Agreement. 18. "SOEs" means state-owned enterprises. 19. "TdE" means Togolaise des Eaux, the Recipient's agency in charge of water management and sanitation, established pursuant to Law No. 63-26, dated January 15, 1964. 20. "TOGOCOM" means the Recipient's national electronic communications company, established pursuant to Decree No. 2017-083/PR, dated July 13, 2017, amended through Decree No. 2019-110/PR, dated August 8, 2019. 21. "'Togolese Revenue Authority" and "OTR" mean Office Togolais des Recettes, the Recipient's agency in charge of collecting taxes and customs revenues, established pursuant to Law 2012-016, dated December 14, 2012. -12- 22. "Transmission Service Agreement" means the agreement entered into between CEET and CEB, establishing the obligations of each company for the payment and transmission of electricity, dated July 15, 2019. 23. "VAT" means value-added tax (taxe sur la valeur ajoutee (TVA)).