GAFSP GRANT NUMBER TF0C1798 Global Agriculture and Food Security Program Grant Agreement (Food and Nutrition Security Enhancement Project II) between NEPAL and INTERNATIONAL DEVELOPMENT ASSOCIATION acting as Trustee and Supervising Entity of the Global Agriculture and Food Security Program GAFSP GRANT NUMBER TF0C1798 GLOBAL AGRICULTURE AND FOOD SECURITY PROGRAM GRANT AGREEMENT AGREEMENT dated as of the Signature Date between NEPAL (“Recipient”) and INTERNATIONAL DEVELOPMENT ASSOCIATION (“Bank”), acting as Trustee and Supervising Entity of the Global Agriculture and Food Security Program. The Recipient and the Bank hereby agree as follows: Article I Standard Conditions; Definitions 1.01. The Standard 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 Standard Conditions or in the Appendix this Agreement. Article II The Project 2.01. The Recipient declares its commitment to the objective of the project described in Schedule 1 to this Agreement (“Project”). To this end, the Recipient shall carry out the Project, through MoALD, in accordance with the provisions of Article II of the Standard Conditions and Schedule 2 to this Agreement. Article III The Grant 3.01. The Bank agrees to extend to the Recipient a grant in an amount not to exceed twenty million United States Dollars ($20,000,000) (“Grant”) to assist in financing the Project. 3.02. The Recipient may withdraw the proceeds of the Grant in accordance with Section III of Schedule 2 to this Agreement. 3.03. The Grant is funded out of the abovementioned trust fund for which the Bank receives periodic contributions from the donors to the trust fund. In accordance with Section 3.02 of the Standard Conditions, the Bank’s payment obligations in connection with this Agreement are limited to the amount of funds made available to it by the donors under the abovementioned trust fund, and the Recipient’s right to withdraw the Grant proceeds is subject to the availability of such funds. 2 Article IV Recipient’s Representative; Addresses 4.01. The Recipient’s Representative referred to in Section 7.02 of the Standard Conditions is its Secretary, Ministry of Finance or its Joint Secretary, International Economic Cooperation Coordination Division. 4.02. For purposes of Section 7.01 of the Standard Conditions: (a) the Recipient’s address is: Ministry of Finance Government of Nepal Singha Durbar Kathmandu, Nepal; and (b) the Recipient’s Electronic Address is: Facsimile: E-mail (977-1) 4211-165 secretary@mof.gov.np 4.03. For purposes of Section 7.01 of the Standard Conditions: (a) the Bank’s address is: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America; and (b) the Bank’s Electronic Address is: Facsimile: 1-202-477-6391 3 AGREED as of the Signature Date. NEPAL By ___________________________________ Authorized Representative Name: Shreekrishna Nepal Title: Joint Secretary, IECCD, Ministry of Finance 01-Dec-2023 Date: _____________________________ INTERNATIONAL DEVELOPMENT ASSOCIATION acting as Trustee and Supervising Entity of the Global Agriculture and Food Security Program By ___________________________________ Authorized Representative Name: Faris Hadad-Zervos Title: Country Director for Maldives, Nepal and Sri Lanka 01-Dec-2023 Date: _____________________________ 4 SCHEDULE 1 Project Description The objective of the Project is to enhance climate resilience and improve agricultural productivity and nutrition practices of targeted smallholder farming communities in selected areas of Nepal. The Project consists of the following parts: Part A: Climate and Nutrition Smart Agricultural Technology Adaptation and Dissemination 1. Technology adaptation and testing. Provision of support for the implementation of climate-smart agriculture technologies and practices through: (a) on-farm demonstrations; (b) provision of source seeds, improved seeds, and breeds; and (c) training and capacity development. 2. Technology dissemination and farmers’ skills development. Carrying out of a program of activities to enable farmers’ adoption of improved climate smart agriculture technologies by mastering the management skills (good agriculture practices) required to achieve climate resilience and mitigation, including: (a) organizing crop and livestock farmer field schools in Project rural Municipalities; (b) establishing artificial insemination units; (c) establishing and strengthening goat multiplier herds; (d) establishing community-based seed production groups and livestock promotion programs; (e) setting-up small-scale irrigation schemes; and (f) crop promotion programs. Part B: Income Generation and Diversification 1. Strengthening producer groups. Provision of technical assistance and capacity building to improve skills, including training on participatory design of business plans, knowledge, and business acumen of members of producer groups to make their farm operations more profitable and complement the agro-technical skills acquired under Part A of the Project. 2. Building market linkages through productive alliances. Carrying out of a program of activities to consolidate linkages between producer groups and market actors, including micro, small and medium-size enterprises, traders, and microfinance institutions, including through: (a) establishment of a multi-stakeholder dialogue platform among key actors in value chains; (b) provision of Matching Grants to cooperatives or groups of smallholder producers to finance the simple business plans developed under Part B.1; and (c) rehabilitation of critical market infrastructure and handling and processing units. 5 Part C: Improving Nutrition Security 1. Support capacity building for government officials and stakeholders in agriculture and livestock development, including health and nutrition, through: (i) orientation on the current multi-sector nutrition plans; (ii) advocacy and technical support of nutrition-related investments in annual work plans and budgets; and (iii) assessment of healthcare facilities for readiness to deliver prescribed health and nutrition services. 2. Nutrition field school and home nutrition gardens: (a) Provision of support for the nutrition field schools and home nutrition gardens; (b) strengthening of community institutions, particularly women’s groups; and (c) provision of Small Grants to communities for investments in inputs, technologies, and services for home food production, processing, and preservation, and for reducing women’s labor and drudgery. Part D: Project management, communication and monitoring and evaluation Provision of support for the planning, implementation, coordination, management, communication, and monitoring and evaluation of Project activities and training for the Project Management Unit and the Project Cluster Units. 6 SCHEDULE 2 Project Execution Section I. Institutional and Other Arrangements A. Institutional Arrangements 1. For purposes of Project oversight, implementation and coordination, the Recipient shall maintain, throughout the period of Project implementation: (a) a Project Steering Committee, chaired by the Secretary, MoALD and having composition and functions satisfactory to the Recipient and the Bank, such functions to include facilitation of inter-agency/inter- ministerial cooperation and coordination, provision of oversight and policy guidance, approval of annual work plans, monitoring of Project implementation, and resolving of outstanding issues; (b) a Project Management Unit within MoALD, headed by a Project Director, supported by qualified staff in sufficient numbers under terms of reference satisfactory to the Recipient and the Bank, responsible for implementation, coordination, monitoring and evaluation, and reporting; (c) a Project Technical Coordination Committee chaired by the Joint Secretary of MoALD, with representation from Project Provinces, and having composition and functions satisfactory to the Recipient and the Bank, responsible for setting technical guidelines and norms for guiding Project implementation; and (d) a Project Cluster Unit in each Project Municipality Cluster, with composition satisfactory to the Recipient and the Bank, to be responsible for Project implementation, monitoring and coordination at the municipal level. B. Project Implementation Manual 1. The Recipient shall ensure that the Project is implemented in accordance with, the Project Implementation Manual, including the Matching Grant Manual and the Small Grant Manual annexed thereto, and shall not take or concur in any action which would have the effect of assigning, amending, abrogating, or waiving such documents or any provision thereof, without the prior written consent of the Bank. 2. In the event of a conflict between the provisions of this Agreement and the provisions of the Project Implementation Manual, the provisions of this Agreement shall prevail. 7 C. Environmental and Social Standards 1. The Recipient shall ensure that the Project is carried out in accordance with the Environmental and Social Standards, in a manner acceptable to the Bank. 2. Without limitation upon paragraph 1 above, the Recipient shall ensure that the Project is implemented in accordance with the Environmental and Social Commitment Plan (“ESCP”), in a manner acceptable to the Bank. To this end, the Recipient shall ensure that: (a) the measures and actions specified in the ESCP are implemented with due diligence and efficiency, as provided in the ESCP; (b) sufficient funds are available to cover the costs of implementing the ESCP; (c) policies and procedures are maintained, and qualified and experienced staff in adequate numbers are retained to implement the ESCP, as provided in the ESCP; and (d) the ESCP, or any provision thereof, is not amended, repealed, suspended, or waived, except as the Bank shall otherwise agree in writing, as specified in the ESCP, and ensure that the revised ESCP is disclosed promptly thereafter. 3. In case of any inconsistencies between the ESCP and the provisions of this Agreement, the provisions of this Agreement shall prevail. 4. The Recipient shall ensure that: (a) all measures necessary are taken to collect, compile, and furnish to the Bank through regular reports, with the frequency specified in the ESCP, and promptly in a separate report or reports, if so requested by the Bank, information on the status of compliance with the ESCP and the environmental and social instruments referred to therein, all such reports in form and substance acceptable to the Bank, setting out, inter alia: (i) the status of implementation of the ESCP; (ii) conditions, if any, which interfere or threaten to interfere with the implementation of the ESCP; and (iii) corrective and preventive measures taken or required to be taken to address such conditions; and (b) the Bank is promptly notified of any incident or accident related to or having an impact on the Project which has, or is likely to have, a significant adverse effect on the environment, the affected communities, the public or workers, in accordance with the ESCP, the environmental and social instruments referenced therein and the Environmental and Social Standards. 8 5. The Recipient shall establish, publicize, maintain, and operate an accessible grievance mechanism, to receive and facilitate resolution of concerns and grievances of Project-affected people, and take all measures necessary and appropriate to resolve, or facilitate the resolution of, such concerns and grievances, in a manner acceptable to the Bank. 6. The Recipient shall ensure that all bidding documents and contracts for civil works under the Project include the obligation of contractors, subcontractors and supervising entities to: (a) comply with the relevant aspects of ESCP and the environmental and social instruments referred to therein; and (b) adopt and enforce codes of conduct that should be provided to and signed by all workers, detailing measures to address environmental, social, health and safety risks, and the risks of sexual exploitation and abuse, sexual harassment and violence against children, all as applicable to such civil works commissioned or carried out pursuant to said contracts. D. Selection Criteria, Terms and Conditions and Procedures for Matching Grants and Sub-projects under Part B.2(b) of the Project and Small Grants and Sub-projects under Part C.2(c) of the Project 1. The Recipient shall provide to Beneficiaries, Matching Grants to finance Sub- projects under Part B.2(b) of the Project or Small Grants to finance Sub-projects under Part C.2(c) of the Project in accordance with the selection and eligibility criteria, and procedures, as well as terms and conditions acceptable to the Bank, as further detailed in the Project Implementation Manual. 2. The Recipient shall make each Matching/Small Grant under a Matching/Small Grant Agreement with each Beneficiary using the form of the model matching/small grant agreement attached to the Project Implementation Manual and on the terms and conditions described in more detail in such Manual. 3. With respect to each Matching/Small Grant Agreement, the Recipient shall obtain rights adequate to protect its interests and those of the Bank, including the right to: (a) suspend or terminate the right of the Beneficiary to use the proceeds of the Matching/Small Grant, or obtain a refund of all or any part of the amount of the Matching/Small Grant then withdrawn, upon the Beneficiary’s failure to perform any of its obligations under the Matching/Small Grant Agreement; (b) require each Beneficiary to: (i) carry out the Sub-project with due diligence and efficiency and in accordance with sound technical, economic, financial, managerial, environmental and social standards and practices 9 satisfactory to the Bank, including in accordance with the provisions of the Project Implementation Manual and the Anti- Corruption Guidelines applicable to recipients of grant proceeds other than the Recipient; (ii) provide, promptly as needed, the resources required for the purpose of the Sub-project; (iii) procure the goods, works and services to be financed out of the Matching/Small Grant in accordance with the provisions of this Agreement; (iv) carry out the Sub-project activities prior to the Closing Date of this Agreement; (v) maintain policies and procedures adequate to enable it to monitor and evaluate in accordance with indicators acceptable to the Bank, the progress of the Sub-project and the achievement of its objectives; (vi) (A) maintain a financial management system and prepare financial statements in accordance with consistently applied accounting standards acceptable to the Bank, both in a manner adequate to reflect the operations, resources and expenditures related to the Sub-project; and (B) at the Bank’s or the Recipient’s request, have such financial statements audited by independent auditors, acceptable to the Bank, in accordance with consistently applied auditing standards acceptable to the Bank, and promptly furnish the statements as so audited to the Recipient and the Bank; (vii) enable the Recipient and the Bank to inspect the Sub-project, its operation and any relevant records and documents; and (viii) prepare and furnish to the Recipient and the Bank all such information as the Recipient or the Bank shall reasonably request relating to the foregoing. 4. The Recipient shall exercise its rights under each Matching/Small Grant Agreement in such manner as to protect the interests of the Recipient and the Bank and to accomplish the purposes of the respective Sub-project. Except as the Bank shall otherwise agree in writing, the Recipient shall not assign, amend, abrogate, or waive any Matching/Small Grant Agreement or any of its provisions. 10 Section II. Project Monitoring, Reporting and Evaluation A. Project Reports The Recipient shall ensure that each Project Report is furnished to the Bank not later than forty-five (45) days after the end of each calendar quarter, covering the calendar quarter. Section III. Withdrawal of Grant Proceeds A. General 1. The Recipient may withdraw the proceeds of the Grant in accordance with the provisions of: (a) Article III of the Standard Conditions; and (b) this Section; to finance Eligible Expenditures in the amount allocated and, if applicable, up to the percentage set forth against each Category of the following table. Amount of the Percentage of Category Grant Allocated Expenditures to be (expressed in USD) Financed (inclusive of Taxes) (1) Goods, works, non-consulting 14,820,000 100% services, consulting services, Training and Incremental Operating Costs under Parts A, B.1, B.2(a), B.2(c), C.1, C.2(a), C.2(b) and D of the Project (2) Matching Grants under Part B.2(b) 3,500,000 100% of the Project (3) Small Grants under Part C.2(c) of 1,680,000 100% the Project TOTAL AMOUNT 20,000,000 B. Withdrawal Conditions; Withdrawal Period 1. Notwithstanding the provisions of Part A of this Section no withdrawal shall be made for payments made prior to the Signature Date. 2. The Closing Date is June 30, 2027. 11 APPENDIX Definitions 1. “Anti-Corruption Guidelines” means, for purposes of paragraph 2 of the Appendix to the Standard Conditions, the “Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants”, dated October 15, 2006, and revised in January 2011, and as of July 1, 2016. 2. “Beneficiary” means smallholder producers, farmers, cooperatives, community groups, and/or women’s groups, selected from the Project beneficiaries selection survey, who meet the eligibility criteria set out in the Project Implementation Manual, and who will receive a Matching Grant or a Small Grant, under a Matching Grant Agreement or a Small Grant Agreement or other Project interventions as set forth in the Project Implementation Manual. 3. “Category” means a category set forth in the table in Section III.A of Schedule 2 to this Agreement. 4. “Constitution” means the Recipient’s Constitution promulgated on September 20, 2015 (2072.6.3). 5. “Environmental and Social Commitment Plan” or “ESCP” means the environmental and social commitment plan for the Project, dated August 8, 2023, as the same may be amended from time to time in accordance with the provisions thereof, which sets out the material measures and actions that the Recipient shall carry out or cause to be carried out to address the potential environmental and social risks and impacts of the Project, including the timeframes of the actions and measures, institutional, staffing, training, monitoring and reporting arrangements, and any environmental and social instruments to be prepared thereunder. 6. “Environmental and Social Standards” or “ESSs” means, collectively: (i) “Environmental and Social Standard 1: Assessment and Management of Environmental and Social Risks and Impacts”; (ii) “Environmental and Social Standard 2: Labor and Working Conditions”; (iii) “Environmental and Social Standard 3: Resource Efficiency and Pollution Prevention and Management”; (iv) “Environmental and Social Standard 4: Community Health and Safety”; (v) “Environmental and Social Standard 5: Land Acquisition, Restrictions on Land Use and Involuntary Resettlement”; (vi) “Environmental and Social Standard 6: Biodiversity Conservation and Sustainable Management of Living Natural Resources”; (vii) “Environmental and Social Standard 7: Indigenous Peoples/Sub- Saharan African Historically Underserved Traditional Local Communities”; (viii) “Environmental and Social Standard 8: Cultural Heritage”; and (ix) “Environmental and Social Standard 9: Financial Intermediaries”; (x) “Environmental and Social Standard 10: Stakeholder Engagement and Information Disclosure”; effective on October 1, 2018, as published by the Bank. 12 7. “G20” means the group of finance ministers and central bank governors from nineteen of the world’s largest economies and the European Union, formed in 1999 as a forum for member nations to discuss key issues related to the global economy and whose mandate is to promote growth and economic development across the globe. 8. “Global Agriculture and Food Security Program” or “GAFSP” means the multilateral mechanism to assist in the implementation of pledges made by the G20 in Pittsburgh in September 2009, whose objective is to address the underfunding of country and regional agriculture and food security strategic investment plans that have been developed by countries in consultation with donors and other stakeholders at the country-level. 9. “Incremental Operating Costs” means reasonable costs incurred by the Recipient for purposes of the management and supervision of the Project for costs of office utilities and supplies, communication, printing services, bank charges, advertising expenses, vehicle rental, operation and maintenance of vehicles, office equipment and facilities, travel, lodging and per diem expenses, and salaries and allowances of contractual staff (other than consultants) for the Project; but excluding salaries and allowances of the Recipient’s civil servants or other regular government staff . 10. “Matching Grant Agreement” means the agreement referred to in Section I.D.2 of Schedule 2 to this Agreement to be entered into between the Recipient and a Beneficiary providing for the financing of a Sub-project through a Matching Grant and includes all appendices, schedules, and agreements supplemental to the Matching Grant Agreement; and “Matching Grant Agreements” means, collectively, all such agreements. 11. “Matching Grant Manual” means the Recipient’s manual annexed to the Project Implementation Manual, containing, inter alia: (i) the criteria, detailed rules and procedures for the selection and financing of Sub-projects; (ii) the procedures for procurement, financial management and audits under the Sub-projects; (iii) the indicators to be used in the monitoring and evaluation of the Sub-projects; (iv) the disbursement arrangements for Matching Grants; and (v) the model form to be used for the preparation of Matching Grant Agreements, as such manual may be revised from time to time with the Bank’s prior written approval. 12. “Matching Grant” means a grant made or proposed to be made under Part B.2(b) of the Schedule 1 to this Agreement to a Beneficiary for the financing of a Sub- project; and “Matching Grants” means, collectively, all such grants. 13. “Ministry of Agriculture and Livestock Development” or “MoALD” means the Recipient’s ministry responsible for agriculture development, or any successor thereto. 13 14. “Municipality” means one of the municipalities or rural municipalities referred to as local level in Article 56 of the Recipient’s Constitution. 15. “Procurement Regulations” means, for purposes of paragraph 20 of the Appendix to the Standard Conditions, the “World Bank Procurement Regulations for IPF Borrowers”, dated November 2020. 16. “Project Cluster Unit” means the unit referred to in paragraph 1(d) of Section I.A of Schedule 2 to this Agreement, and “Project Cluster Units” means, collectively, all such units. 17. “Project Implementation Manual” means the manual, acceptable to the Bank, which sets forth detailed arrangements and procedures for: (a) implementation; (b) institutional coordination and day-to-day execution of the Project; (c) procurement; (d) disbursement and financial management; (e) environmental and social standards; (f) monitoring and evaluation, reporting and communication; (g) performance indicators; (h) the Matching Grant Manual; (i) the Small Grant Manual; and (j) such other administrative, financial, technical and organizational arrangements and procedures as shall be required for the Project; as the same may be amended from time to time with the prior written agreement of the Bank, and such term includes any annexes or schedules or amendments to such manual. 18. “Project Management Unit” means the unit referred to in paragraph 1(b) of Section I.A of Schedule 2 to this Agreement. 19. “Project Municipality Cluster” means a Municipality cluster in the Recipient’s territory selected to participate in the implementation of the Project, acceptable to the Bank; and “Project Municipality Clusters” means, collectively, all such Municipality clusters. 20. “Project Province” means a Province in the Recipient’s territory selected to participate in the implementation of the Project, acceptable to the Bank. 21. “Project Steering Committee” means the committee referred to in paragraph 1(a) of Section I.A of Schedule 2 to this Agreement. 22. “Project Technical Coordination Committee” means the committee referred to in paragraph 1(c) of Section I.A of Schedule 2 to this Agreement. 23. “Province” means one of the main levels of government, as described under Article 56(3) of the Recipient’s Constitution. 24. “Signature Date” means the later of the two dates on which the Recipient and the Bank signed this Agreement and such definition applies to all references to “the date of the Grant Agreement” in the Standard Conditions. 14 25. “Small Grant Agreement” means the agreement referred to in Section I.D.2 of Schedule 2 to this Agreement to be entered into between the Recipient and a Beneficiary providing for the financing of a Sub-project through a Small Grant and includes all appendices, schedules, and agreements supplemental to the Small Grant Agreement; and “Small Grant Agreements” means, collectively, all such agreements. 26. “Small Grant Manual” means the Recipient’s manual annexed to the Project Implementation Manual, containing, inter alia: (i) the criteria, detailed rules and procedures for the selection and financing of Sub-projects; (ii) the procedures for procurement, financial management and audits under the Sub-projects; (iii) the indicators to be used in the monitoring and evaluation of the Sub-projects; (iv) the disbursement arrangements for Small Grants; and (v) the model form to be used for the preparation of Small Grant Agreements, as such manual may be revised from time to time with the Bank’s prior written approval. 27. “Small Grant” means a grant made or proposed to be made under Part C.2(c) of the Project to a Beneficiary for the financing of a Sub-project; and “Small Grants” means, collectively, all such grants. 28. “Standard Conditions” means the “International Bank for Reconstruction and Development and International Development Association Standard Conditions for Grant Financing Made by the Bank out of Trust Funds”, dated February 25, 2019. 29. “Sub-project” means an investment that meets the criteria established in the Project Implementation Manual and to be implemented by a Beneficiary under Part B.2(b) or Part C.2(c) of the Project. 30. “Training” means the training and workshops provided to and/or undertaken by the public officials of the Recipient and/or Project beneficiaries under the Project, including expenditures for the cost of design, planning and implementation of training, training materials, facilities, course fees, travel, accommodation, allowances, and subsistence for trainees in connection with these activities. 15