Development Credit Agreement

Public Disclosure Authorized OPP CREDIT NUMBER 973 ZA Public Disclosure Authorized Development Credit Agreement (Third Railway Project) Public Disclosure Authorized between THE REPUBLIC OF ZAMBIA and INTERNATIONAL DEVELOPMENT ASSOCIATION Public Disclosure Authorized Dated, 1980

CREDIT NUMBER 973 ZA DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated, 1980, between THE REPUBLIC OF ZAMBIA (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 foreign exchange cost of the Project described in Schedule 2 to this Agreement by extending the Credit as hereinafter provided; (B) the Borrower has also requested the International Bank for Reconstruction and Development (hereinafter called 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 twenty-five million dollars ($25,000,000) (hereinafter called the Loan); (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; (D) by agreement of even date herewith (hereinafter called the Special Action Credit Agreement), the Association, as Administrator of the Special Action Account established by the Association with funds contributed by the Member States of the European Economic Community (hereinafter called the Administrator), has agreed to make a Special Action Credit (hereinafter called the Special Action Credit) to the Borrower in various currencies equivalent to five million dollars ($5,000,000) to assist in financing the Project; (E) the Borrower and the Swedish International Development Authority (hereinafter called SIDA) have entered into an agreement (hereinafter called the SIDA Agreement) providing for SIDA to make a grant to the Borrower in an amount of sixty million Swedish Kronor (SKr60,OOO,000) equivalent to about thirteen million dollars ($13,000,000) (hereinafter called the SIDA Grant), to assist in financing the Project;

-2- (F) the Borrower and Kreditanstalt fur Wiederaufbau (hereinafter called KfW) have entered into an agreement (hereinafter called the KfW Agreement) providing for KfW to make a loan to the Borrower in an amount of forty-four million Deutsche Mark (DM44,000,000) equivalent to about twenty-three million three hundred thousand dollars ($23,300,000) (hereinafter called the KfW Loan), for the same purpose; (G) the Borrower and the Opec Special Fund (hereinafter called the Opec Fund) have entered into a loan agreement (hereinafter called the Opec Fund Agreement) providing for the Opec Fund to make a loan to the Borrower in an amount of four million five hundred thousand dollars ($4,500,000) (hereinafter called the Opec Fund Loan) for the same purpose; (H) the Borrower intends to contract from the United Kingdom of Great Britain and Northern Ireland (hereinafter called UK) a loan (hereinafter called the UK ODA Loan) in an amount of seven million Pounds Sterling (7,000,000) equivalent to about fourteen million dollars ($14,000,000) for the same purpose on the terms and conditions set forth in an agreement (hereinafter called the UK ODA Agreement) to be entered into between the Borrower and UK; (I) the Borrower and the African Development Bank (hereinafter called ADB) propose to enter into an agreement (hereinafter called the ADB Agreement) providing for ADB to make a loan in an amount of eight million Units of Account (UA8,000,000) equivalent to about nine million seven hundred thousand dollars ($9,700,000) (hereinafter called the ADB Loan) for the same purpose; (J) the Borrower and the Japan Overseas Economic Cooperation Fund (hereinafter called the Japan Fund) have entered into an agreement (hereinafter called the Japan Fund Agreement) providing for the Japan Fund to make a loan to the Borrower in an amount of two billion eight hundred sixty-four million Japanese Yen (Y2,864,000,000) equivalent to.about sixteen million two hundred fifty thousand dollars ($16,250,000) (hereinafter called the Japan Fund Loan) for the same purpose; (K) the Borrower intends to contract from the European Economic Community a credit (hereinafter called the EEC Credit) in an amount of six million two hundred thousand European Units of Account (EUA6,200,000) equivalent to about eight million four hundred thousand dollars ($8,400,000) for the same purpose on the

- 3 - terms and conditions set forth in an agreement (hereinafter called the EEC Agreament) to be entered into between the Borrower and the European Economic Community; and (L) the Project will be carried out by Zambia Railways Board (hereinafter called ZR) with the assistance of Zambia Industrial and Mining Corporation Limited (hereinafter called ZIMCO) and the Borrower and, as part of such assistance, the Borrower will make available to ZR the proceeds of the Credit as hereinafter provided; WHEREAS the Association has agreed, on the basis inter alia of the foregoing, to extend the Credit to the Borrower upon the terms and conditions hereinafter set forth and in the Joint Project Agreement of even date herewith among the Association, the Administrator, the Bank, ZIMCO and ZR; NOW THEREFORE the parties hereto hereby agree a.7 follows: 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 Agreements 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) "Joint Project Agreement" means the agreement among the Association, the Administrator, the Bank, ZIMCO and ZR of even date herewith, as the same may be amended from time to time, and such term includes all schedules to the Joint Project Agreement and all agreements supplemental to the Joint Project Agreement; (b) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and ZR pursuant to Section

-4-3.01 (b) of this Agreement, Section 3.01 (b) of the Special Action Credit Agreement and Article III of the Loan Agreement, as the same may be amended from time to time, and such term includes all schedules to the Subsidiary Loan Agreement; (c) "Loan Agreement" means the agreement of even date herewith between the Borrower and the Bank for the purpose of the Project, as sucn 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; (d) "Railways Act" means the Zambia Railways Act of the Borrower (Act No. 47 of 1967), as amended to the date of this Agreement, as the same may be further amended from time to time; (e) "MPTC" means the Borrower's Ministry of Power, Transport and Communications, or any successor thereto; and (f) "ZR" means Zambia Railways toard, a body established under the Railways Act or any successor thereto. 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 equivalent to fifteen million dollars ($15,000,000). Section 2.02. The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to thls Agreement, as such Schedule may be amended from time to time by agreement between the Borrower, the Association and the Bank, for expenditures made (or, if the Association shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Credit. Section 2.03. Except as the Association shall otherwise agree, procurement of the goods and civil works to be financed out of the proceeds of the Credit, shall be aoverned by the provisions of Schedule 1 to the Joint Project Agreement.

- 5- Section 2.04. The Closing Date shall be September 30, 1984 or such later date as the Association shall establish. The Association 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 (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.06. Service charges shall be payable semiannually on June 15 and December 15 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semiannual installments payable on each June 15 and December 15 commencing June 15, 1990, and ending December 15, 2029, each installment to and including the installment payable on December 15, 1999, 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 General Conditions. Section 2.09. The General Manager of ZR is designated as representative of the Borrower for the purposes of taking any action required or permitted to be taken under the provisions of Section 2.02 of this Agreement and Article V of the General Conditions. ARTICLE III Execution of the Project Section 3.01. (a) Without any limitation or restriction upon any of its other obligations under the Development Credit Agreement, the Borrower shall cause ZIMCO and ZR to perform in accordance with the provisions of the Joint Project Agreement and the Subsidiary Loan Agreement all their respective obligations therein set forth, shall take and cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable ZIMCO and ZR to perform such obligations, and shall not take or permit to be taken any action which would prevenit or interfere with such performance.

- 6 - (b) The Borrower shall relend the proceeds of the Credit to ZR, under a subsidiary loan agreement to be entered into between the Borrower and ZR under terms and conditions which shall have been approved by the Association, which shall include the following: repayment of principal in 20 years, inclusive of 5 years of grace; interest at a rate of not less than seven and ninety-five hundredths per cent (7.95%) per annum; and ZR to bear the foreign exchange risk. (c) The Borrower shall exercise its rights under the Subsidiary Loan Agreement in such manner as to protect the interests of the Borrower and the Association and to accomplish the purposes of the Credit, and except as the Association shall otherwise agree, the Borrower shall not assign, amend, abrogate or waive the Subsidiary Loan Agreement or any provision thereof. Section 3.02. The Borrower shall take, or cause to be taken, from time to time all measures required on its part in order to enable ZIMCO and ZR to adjust f.reight and other tariffs of ZR and to enable ZR to carry out its obligations under Section 4.05 of the Joint Project Agreement. Section 3.03. The Borrower shall take, or cause to be taken, all such measures as may be required to enable its departments and agencies, and all organizations, enterprises or corporations owned or controlled by the Borrower, to reduce all the outstanding dues and unpaid balances of debts owed by them to ZR, so that by December 31, 1980 and thereafter, ZR's average accounts receivable shall not exceed the equivalent of forty-five days revenue. Section 3.04. The Borrower shall continue to make funds available to ZR to cover ZR's operating deficits and the cost of construction of capital works arising out of operations undertaken by ZR at the direction of the Borrower. Section 3.05. The Borrower shall cause ZR to carry out, with the assistance of consultants, a feasibility study by December 31, 1981, to make recommendations concerning storage and handling facilities required by ZR and its major customers, to improve ZR's operations. Section 3.06. The Borrower shall take, or cause to be taken, all reasonable action required for the prompt issuance to ZR of such import and ocher permits and licenses as shall be necessary for the acquisition and importation of spare parts required for the maintenance and renewal of ZR's plant, equipment and property.

-7- Section 3.07. The Borrower shall: (i) undertake a feasibility study by December 31, 1980, to determine whether a road could replace the railway line between Livingstone and Mulobezi; (ii) furnish to the Association a report of such feasibility study; and (iii) afford the Association a reasonable opportunity to review such report and to exchange views thereon with the Borrower. ARTICLE IV Remedies of the Association Section 4.01. For the purposes of Section 6.02 of the General Conditions the following additional events are specified pursuant to paragraph (h) thereof: (a) ZIMCO or ZR shall have failed to perform any of their respective obligations under the Joint Project Agreement; (b) an extraordinary situation shall have arisen which shall make it improbable that ZR or ZIMCO will be able to perform their respective obligations under the Joint Project Agreement; (c) a default shall occur in the performance of any obligations under the Subsidiary Loan Agreement by the parties thereto; (d) the Railways Act shall have been amended, suspended, abrogated, repealed or waived or ZR shall have been incorporated under the Companies Act of the Borrower, in such a way as to materially and adversely affect the ability of ZR to carry out the covenants, agreements and obligations set forth in the Joint Project Agreement; (e) the Borrower shall have taken any action for the dissolution or disestablishment of ZR or for the suspension of its operations; and (f) (i) Subject to subparagraph (ii) of this paragraph: (A) The right of the Borrower to withdraw the proceeds of any grant, credit or loan made to the Borrower for the financing of the Project shall have been suspended, cancelled or terminated in whole or in part, pursuant to the terms of the agreement providing therefor, or

- 8 - (B) any such credit or loan shall have become due and payable prior to the agreed maturity thereof. (ii) Subparagraph (i) of this paragraph shall not apply if: (A) such suspension, cancellation, termination or prematuring is not caused by the failure of the Borrower to perform any of its obligations under such agreement, and (B) adequate funds for the Project are available to the Borrower, ZR or ZIMCO from other sources on terms and conditions consistent with the obligations of the Borrower under this Agreement. Section 4.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified pursuant to paragraph (d) thereof: (a) any event specified in paragraphs (a) and (c) of Section 4.01 of this Agreement shall occur and shall continue for a period of 60 days after notice thereof shall have been given by the Association to the Borrower, ZIMCO and ZR; and (b) any event specified in paragraphs (d), (e) and (f) (i) (B) of Section 4.01 of this Agreement shall occur. 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: (a) the Subsidiary Loan Agreement has been executed cn behalf of the Borrower and ZR; (b) all conditions precedent to the effectiveness of, or the right to make wit*drawals under the agreements (excluding the UK ODA Agreement) referred to in the Preamble to this Agreement, except only the effectiveness of this Agreement, shall have been fulfilled; and (c) ZR shall have furnished to the Association a detailed program for the training of its senior and middle level staff.

- 9 - Section 5.02. The following are specified as additional matters, within the meaning of Section 12.02 (b) of the General Conditions, to be included in che opinion or opinions to be furnished to t,te Association: (a) that the Joint Project Agreement has been duly authorized or ratified by ZIMCO and ZR, and is legally binding upon ZIMCO and ZR in accordance with its terms; and (b) that the Subsidiary Loan Agreement has been duly authorized or ratified by the Borrowor and ZR and is legally binding upon the Borrower and ZR in accordance with its terms. Section 5.03. The date OcO/K 13, is hereby specified for the purposes of Section 12.04 of the General Conditions. Section 5.04. The obligations of the Borrower under the provisions of paragraphs (a) and (b) of Section 4.02 (excluding the reference to paragraph (f) (i) (B) of Section 4.01) of this Agreement shall cease and determine on the date on which the Development Credit Agreement shall terninate or on a date twenty years after the date of this Agreement, whichever shall be the earlier. ARTICLE VI Representative of the Borrower; Addresses Section 6.01. The Minister of the Borrower at the time responsible for Finance is designated as 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 purpose of Section 11.01 of the General Conditions: For the Borrower: Ministry of Finance P.O. Box R.W. 62 Ridgeway Lusaka, Zambia

- 10 - Cable address: Telex: FINANCE ZA 42221 Ridgeway Lusaka For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: INDEVAS Washington, D.C. Telex: 440098 (ITT) 248423 (RCA) or 64145 (WUI) IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, 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 wr-.ten. THE REPUBLIC OF ZAMBIA By Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By Regional Vice President Eastern Africa

- 11 - SCHEDULE 1 Withdrawal of the Proceeds of the Credit and of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit and of the Loan, the allocation of the amounts of such proceeds to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Credit and of the Loan % of Allocated (Expressed Expenditures Category in Dollar Equivalent) to be Financed (1) Track materials, 13,000,000 including track laying equipment: 100% of for- eign expenditures (a) directly imported (b) imported but locally procured 75% of local expenditures (2) Telecommunications 2,700,000 equipment 100% of for- eign expenditures (a) directly imported (b) imported but locally procured 75% of local expenditures (3) Wagons and spare 4,500,000 parts

- 12 - Amount of the Credit and of the Loan % of Allocated (Expressed Expenditures Category in Dollar Equivalent) to be Financed 100% of for- eign expenditures (a) directly imported (b) imported but locally procured 75% of local expenditures (4) Workshop and re- 2,700,000 lated equipment 100% of for- eign expenditures (a) directly imported (b) imported but locally procured 75% of local expenditures (5) Data processing 2,000,000 100% of forfacilities eign expenditures (6) Technical advisory 8,400,000 100% of forservices, studies eign expendiand staff training tures (7) Unallocated 6,700,000 TOTAL 40,000,000

- 13-2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than the Borrower and for goods or services supplied from the territory of any country other than the Borrower; and (b) the term "local expenditures" means expenditures in the currency of the Borrower and for goods or services supplied from the territory of the Borrower. 3. The disbursement percentages have been calculated in compliance with the policy of the Association and the Bank that no proceeds of the Credit or the Loan shall be disbursed on account of payments for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importation, manufacture, procurement or supply thereof; to that end, if the amount of any such taxes levied on or in respect of any item to be financed out of the proceeds of the Credit or the Loan decreases or increases, the Association or the Bank may, by notice to the Borrower, increase or decrease the disbursement percentage then applicable to such item as required to be consistent with the aforementioned policy of the Association and the Bank. 4. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expenditures prior to the date of this Agreement. In addition, except as the Borrower, the Association and the Bank shall otherwise agree, and until all amounts of the Credit shall have been withdrawn or committed, no withdrawals shall be made from the Loan Account except under commitments entered into by the Bank pursuant to Section 5.02 of the General Conditions referred to in Section 1.01 of the Loan Agreement. 5. Notwithstanding the allocation of an amount of the Credit or the Loan or the disbursement percentages set forth in the table in paragraph 1 above, if the Association or the Bank has reasonably estimated that the amount of the Credit or the Loan then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Category, the Association or the Bank may, by notice to the Borrower: (i) reallocate to such Category, to the extent required to meet the estimated shortfall, proceeds of the Credit or the Loan which are then allocated to another Category and which in the opinion of the Association or

- 14 - the Bank are not needed to meet other expenditures; and (ii) if such reallocation cannot fully meet the estime-ed shortfall, reduce the disbursement percentage then applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 6. If the Association or the Bank shall have reasonably determined that the procurement of any item in any Category is inconsistent with the procedures set forth or referred to in this Agreement, no expenditures for such item shall be financed out of the proceeds of the Credit or the Loan and the Association or the Bank may, without in any way restricting or limiting any other right, power or remedy of the Association or the Bank under the Development Credit Agreement or the Loan AgrEement, respectively, by notice to the Borrower, cancel such amount of the Credit or the Loan as, in the Association's or the Bank's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Credit or the Loan.

- 15 - SCHEDULE 2 Description of the Project The Project is a part of ZR's investment plai for 1979-1983, for the modernization and improvement of its rolling stock and rehabilitation and improvement of maintenance facilities and track and consists of the following: Part A: The renewal and improvement of about 112 kilometers of track on the line between Mookamunga and Livingstone, including extension and re-spacing of crossing loops, completion of a concrete sleeper plant and replacement of Kafue Bridge. Part B: Installation of a new centralized traffic control signalling system and extension of ZR's telecommunications system. Part C: The acquisition and placing in service of about 10 diesel locomotives and the repair of about 4 diesel locomotives. Part D: The acquisition and placing in and 2 breakdown cranes. service of about 915 wagons Part E: The acquisition of spare parts for use in ZR's rehabilitation and maintenance program for locomotives, wagons, passenger coaches and railcars. Part F: 1. The acquisition of workshop machinery and tools for the repair of traction motors, generators, a wheel lathe and assembly of new freight wagons. 2. The extension of the diesel locomotive depot in Kabwe.

- 16-3. The rebuilding of repair track at Ndola, Kitwe, Kabwe and Livingstone, including equipping of such depot- Part G: The installation of handling equipment at major stations to improve the loading and unloading of wagons. Part H: The acquisition and installation of data processing facilities to improve the general operations of ZR. Part I: The construction of new housing for the staff of ZR and the improvement of existing housing. Part J: 1. The provision of technical advisory services to (i) ZR for operations and project implementation and (ii) MPTC and ZR for planning. 2. The carrying out of (i) a productivity study for a workshop for ZR, (ii) a railway electrification feasibility study, and (iii) a feasibility study to determine whether the railway line between Livingstone and Mulobezi should be upgraded or replaced by a road. 3. Staff training both locally and overseas, including the provision of equipment and materials for the Kabwe training school. The Project is expected to be completed by December 31, 1983.

INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the International Development Association. In witness whereof I have signed this Certificate and affixed the Seal of the Association thereunto the / day of, 198 02.. FOR SECRETARY