World Bank Document

The World Bank 1818 H Street N.W. (202) 477-1234 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Washington, D.C. 20433 Cable Address: INTBAFRAD INTERNATIONAL DEVELOPMENT ASSOCIATION U.S.A. Cable Address: INDEVAS CONFORMED COPY July 11, 2003 Public Disclosure Authorized Dr. Waqar Masood Khan Secretary Economic Affairs Division Ministry of Finance and Economic Affairs Government of Pakistan Islamabad, Pakistan Re: Banking Sector Restructuring and Privatization Project: Cr.3571-PAK Amendment of Development Credit Agreement Dear Dr. Khan: Public Disclosure Authorized We refer to the Development Credit Agreement (DCA) between the Islamic Republic of Pakistan (the Borrower) and the International Development Association (the Association) dated October 24, 2001, for the above-referenced Project. We also refer to the letter dated March 27, 2003, from Mr. M.Tahsin Khan Iqbal, Additional Finance Secretary (Banking), Finance Division, Ministry of Finance & Economic Affairs, requesting the Association to include Allied Bank Limited (ABL) in the Project, which had been privatized but subsequently intervened by the State Bank of Pakistan (SBP) due to its financial and governance problems, and the letter dated May 9, 2003, from Ms. Nazrat Bashir, Joint Secretary (IF), Finance Division, Ministry of Finance & Economic Affairs, requesting the Association to amend the DCA to allow National Bank of Pakistan (NBP) to hire temporary workers as approved by its Board of Directors. The Association, after due consideration, has decided to accede to said request, and consequently hereby amends the DCA as follows: Public Disclosure Authorized 1. Paragraph B of the Preamble is amended to read as follows: “WHEREAS (B) the Association has received, from the Borrower, a Staff Rationalization Plan describing the terms and conditions and criteria for voluntary separation of the employees of the nationalized commercial banks, Allied Bank Limited and the National Development Finance Corporation (the Staff Rationalization Plan), and declaring the Borrower's commitment to the execution of the Staff Rationalization Plan; and 2. In Section 1.02: (a) paragraph (h) is amended to read as follows: “(h) "Staff Rationalization Plan" means collectively the plans adopted by the Public Disclosure Authorized NCBs, ABL (as hereinafter defined) and NDFC describing the terms and conditions and criteria for voluntary separation of the employees of the NCBs, ABL and NDFC, including severance payments thereunder;” RCA 248423. WUI 64145 FAX (202) 477-6391 Dr. Waqar Masood Khan -2- July 11, 2003 (b) paragraph (i) is amended to read as follows: “(i) "SBP" means the State Bank of Pakistan, being the Borrower's central bank established and existing under the Borrower's State Bank Act of 1956, as the same may be amended from time to time, or any successor thereto; and” (c) a new paragraph 1.02(j) is added to read as follows: “(j) “ABL” means the Allied Bank Limited, a commercial bank established under the laws of the Borrower.” 3. In Article III: (a) Section 3.01 is amended to read as follows: “Section 3.01. (a) The Borrower declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Agreement, and, to this end, shall carry out the Project through SBP, NCBs, ABL and NDFC with due diligence and efficiency and in conformity with appropriate administrative, financial, and banking practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the Project.” (b) Section 3.03 is amended to read as followS: “Section 3.03. The Borrower shall take all necessary measures to ensure that the NCBs and ABL will not hire any new staff over their normal attrition, so as to guarantee a zero staff growth, net of those separated under the Project in accordance with the Staff Rationalization Plan, except as the Association shall otherwise agree.” 4. In Article IV: Section 4.03 is amended to read as follows: “Section 4.03. The Borrower shall cause the NCBs and ABL to: (i) have their records, accounts, and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent, internationally recognized auditors; (ii) furnish to the Association as soon as available, but in any case not later than six (6) months after the end of each such year: (A) certified copies of its financial statements for such year so audited; and (B) the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and Dr. Waqar Masood Khan -3- July 11, 2003 (iii) furnish to the Association, such other information concerning such records, accounts and financial statements and the audit thereof as the Association shall from time to time reasonably request.” 5. In Schedule 1: paragraph 2 is amended to read as follows: “2. For the purposes of this Schedule, the term "Severance payments" means payments made by the NCBs, ABL and NDFC to their employees separated pursuant to the Staff Rationalization Plan.” 6. In Schedule 2: (a) sub-paragraph (a) is amended to read as follows: “(a) restructure the NCBs and ABL to improve their prospects for privatization to qualified strategic investors, and complete privatization of partially privatized banks;” (b) Part A is amended to read as follows: “Part A: NCB and ABL Staff Rationalization Implementation of the Staff Rationalization Plan including the payments of severance for approximately 50% staff of NCBs and ABL seeking voluntary separation, as a result of restructuring of the NCBs and ABL.” (c) Part B is amended to read as follows: “Carrying out of NCBs’ and ABL’s branch rationalization through the reduction of bank branches, including provision for real-estate costs resulting from the branch closure.” 7. In paragraph 1of Schedule 3: (a) sub-section (ii) is amended to read as follows: “(ii) the NCBs and ABL to be responsible for the design and implementation of their respective restructuring plans;” (b) sub-section (iv) is amended to read as follows: “(iv) the SBP to be responsible for: (a) resolution of issues at ABL; and (b) amalgamating NDFC into NBP in an orderly manner.” Please confirm your agreement to the above amendment by signing the form of confirmation set forth below, returning to us one fully executed original of this amendment letter, and retaining one original for your records. Dr. Waqar Masood Khan -4- July 11, 2003 Except as specifically amended by this amendment letter, all provisions of the Development Credit Agreement remain in full force and effect. Dr. Waqar Masood Khan -5- July 11, 2003 This amendment shall be effective as of date of this letter upon receipt by the Association of the countersigned copy of this letter. Sincerely INTERNATIONAL DEVELOPMENT ASSOCIATION /s Abdi Hasan Country Director, Pakistan South Asia Region CONFIRMED: ISLAMIC REPUBLIC OF PAKISTAN By /s/ Dr. Waqar Masood Khan Title: Secretary Economic Affairs Division Government of Pakistan Islamabad .

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