CONFORMED Public Disclosure Authorized CREDIT NUMBER 684 PAK Public Disclosure Authorized DEVELOPMENT CREDIT AGREEMENT (Tenth Railway Project) between ISLAMIC REPUBLIC OF PAKISTAN and INTERNATIONAL DEVELOPMENT ASSOCIATION Public Disclosure Authorized Public Disclosure Authorized Dated March 8, 197T DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated March 8, 1977, between ISLAMIC REPUBLIC OF PAKISTAN, acting by its President (hereinafter called the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association). WHEREAS (A) the Borrower has requested the Association to assist in the financing of the Project described in Schedule 2 to this Agreement by making the Credit as hereinafter provided; and (B) the Borrower has also requested the Bank to provide additional assistance towards the financing of the Project and by an agreement of even date herewith between the Borrower and the Bank (hereinafter called the Loan Agreement) the Bank is agreeing to provide such assistance in an aggregate principal amount equivalent to thirty-five million dollars ($35,000,000) (hereinafter called the Loan); and (C) the Borrower and the Association intend, to the extent practicable, that the proceeds of the Credit provided for in this Agreement be disbursed on account of expenditures on the Project before disbursements of the proceeds of the Loan provided for in the Loan Agreement are made. WHEREAS the Association has agreed, on the basis inter alia of the foregoing, to make the Credit to the Borrower upon the terms and conditions hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: -2- ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Development Credit Agreements of the Association, dated March 15, 1974, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Development Credit Agree- ments of the Association being hereinafter called the General Conditions). Section 1.02. Wherever used in this Agreement, 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) "Loan Agreement" means the agreement of even date here- with between the Borrower and the Bank for the purpose of the Project, as such agreement may be amended from time to time; and such term includes the General Conditions Applicable to Loan and Guarantee Agreements of the Bank, dated March 15, 1974, as made applicable to such agreement, all agreements supplemental to the Loan Agreement and all schedules to the Loan Agreement; (b) "PR" means Pakistan Railways, an agency of the Borrower administered by the Pakistan Railway Board and any successor thereto, and shall include any other agency of the Borrower charged with the administration and operation of railways in Pakistan; -3- (c) "Investment Plan" means PR's Investment Plan of even date herewith incorporating all capital expenditures planned by PR during the period covered by the fiscal years 1976/1977 through 1980/1981 as agreed between the Borrower, the Association and the Bank; (d) "Plan of Action" means the plan of action for the im- plementation of Part D of the Project, as set forth in the Annex to Schedule 2 to this Agreement; (e) "Prior Project Agreement" means the Project Agreement (Ninth Railway Project) Loan No. 621-PAK, between the Bank and the Borrower's former province of West Pakistan, dated June 26, 1969; (f) "capital-at-charge" means the capital provided by the Borrower to PR for the acquisition of its original installations, equipment and additions thereto, and appearing as such in PR's accounts as the Borrower's investment in PR; and (g) "Rupees" and the letters Rs mean the currency of the Borrower. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions in the Development Credit Agreement set forth or referred to, an amount in various currencies equiva- lent to twenty-five million dollars ($25,000,000). Section 2.02. The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Association, for expenditures made (or,.if the Association shall so agree, to be made) in respect of the reasonable cost of goods and services re- quired for the Project described in Schedule 2 to this Agreement and to be financed out of the proceeds of the Credit. Section 2.03. Except as the Association shall otherwise agree, contracts for the purchase of goods to be financed out of the proceeds of the Credit shall be procured in accordance with the provisions of Schedule 3 to this Agreement. Section 2.04. The Closing Date shall be June 30, 1982 or such later date as the Association shall establish. The Associa- tion shall promptly notify the Borrower of such later date. Section 2.05. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one per cent -5- (3/4 of 1%) per annum on the principal amount of the Credit with- drawn and outstanding from time to time. Section 2.06. Service charges shall be payable semi-annually on February 15 and August 15 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semi-annual installments payable on each February 15 and August 15 commencing February 15, 1987, and ending August 15, 2026, each installment to and including the installment payable on August 15, 1996 to be one-half of one per cent (1/2 of 1%) of such principal amount, and each installment thereafter to be one and one-half per cent (1-1/2%) of such principal amount, Section 2.08. The currency of the United States of America is hereby specified for the purposes of Section 4.02 of the Gen- eral Conditions. -6- ARTICLE III Execution of the Project Section 3.01. (a) The Borrower shall cause PR to carry out the Project with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and rail- road practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. (b) The Borrower shall relend the proceeds of the Credit and the Loan or the equivalent thereof in the currency of the Borrower to PR for the purposes of the Project at a rate of in- terest of eight and one-half per cent (8-1/2%) per annum on the principal amount of the Credit and the Loan so relent and out- standing from time to time, to be repaid to the Borrower in the currency in which it is so relent, after a period of grace of 4-1/2 years from the date of this Agreement in semi-annual in- stallments, the last such installment to be paid on or before August 15, 1996; except that with respect to such portion of the proceeds of the Credit and the Loan as shall be used for additions, unless the Association shall otherwise agree, such portion shall, at the time of scheduled repayment, become capital-at-charge not subject to amortization. Section 3.02. The Borrower shall make its best efforts to obtain credits to finance the cost of goods and services required for the Project and not financed under this Agreement, the Loan Agreement or out of the Borrower's or PR's own resources. -7- Section 3.03. In order to assist in carrying out Parts C and D of the Project, the Borrower shall cause PR: (a) to employ con- sultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association: (i) for Part C of the Project, and (ii) for Part D of the Project as agreed with the Association with regard to scope and area; and (b) to implement a staff training program acceptable to the Association. Section 3.04. The Borrower shall cause PR: (i) to carry out Part D of the Project substantially in accordance with the Plan of Action, as such plan may be amended from time to time by agreement between the Borrower and the Association, and (ii) to review the progress together with the Association made in carrying out the Plan of Action for each year, and decide in consultation with the Association on the basis of such review, the action to be taken in the following year for the purpose of attaining the targets included in the Plan of Action for such year. Section 3.05. (a) The Borrower shall ensure that no substan- tial changes are made in the Investment Plan except by agreement between the Borrower and the Association. (b) For the purposes of this Section, "substantial change" shall mean a change or changes which shall amount to more than thirty-five million Rupees (Rs.35,000,000) per annum in the Investment Plan or any part thereof for such year. Section 3.06. (a) The Borrower undertakes to insure, or make adequate provision for the insurance of, the imported goods to be - 8 - financed out of the proceeds of the Credit and the Loan against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by the Borrower to replace or repair such goods. (b) Except as the Association shall otherwise agree, the Borrower shall cause all goods and services financed out of the proceeds of the Credit and the Loan to be used exclusively for the Project.