OFFICIAL
DOCUMENTS
CREDIT NUMBER 6471-MN
Financing Agreement
(Economic Management Support Operation Second Development Policy Financing)
between
MONGOLIA
and
INTERNATIONAL DEVELOPMENT ASSOCIATION
CREDIT NUMBER 6471-MN
FINANCING AGREEMENT
AGREEMENT dated as of the Signature Date between MONGOLIA
("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).
WHEREAS (A) the Recipient has requested the Bank to provide a loan in support
of the Program in the amount of twenty million Dollars (US$ 20,000,000), pursuant to a
loan agreement of even date herewith between the Recipient and the Bank ("Loan
Agreement"); and
(B) The Association has decided to provide the financing provided for under this
Agreement and the Loan Agreement, 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 1 to this Agreement; and (ii) the Recipient's maintenance of an adequate
macroeconomic policy framework.
NOW THEREFORE, 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 this Agreement
(including the Preamble and Appendix hereto).
ARTICLE II - FINANCING
2.01. The Association agrees to extend to the Recipient a credit, which is deemed as
Concessional Financing for purposes of the General Conditions, in an amount
equivalent to fifty-eight million one hundred thousand Special Drawing Rights
(SDR 58,100,000) (variously, "Credit" and "Financing").
2.02. The Maximum Commitment Charge Rate is one-half of one percent (1/2 of 1%)
per annum on the Unwithdrawn Financing Balance.
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2.03. The Service Charge is three-fourths of one percent (3/4 of 1%) per annum on the
Withdrawn Credit Balance.
2.04. The Interest Charge is one and a quarter percent (1.25%) per annum on the
Withdrawn Credit Balance.
2.05. The Payment Dates are April 15 and October 15 in each year.
2.06. The principal amount of the Credit shall be repaid in accordance with the
repayment schedule set forth in Schedule 2 to this Agreement.
2.07. The Payment Currency is Dollar.
2.08. 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 including any action
specified in Section I of Schedule 1 to this Agreement.
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ARTICLE IV - REMEDIES OF THE ASSOCIATION
4.01. The Additional Event of Suspension is that a situation has arisen which shall make
it improbable that the Program, or a significant part of it, will be carried out.
ARTICLE V - EFFECTIVENESS; TERMINATION
5.01. The Additional Conditions of Effectiveness consist of the following:
(a) 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;
(b) the Association has received a copy of a duly executed contract between
BOM and an independent and external auditor under terms of reference
and with qualifications acceptable to the Association for carrying out
forensic audit of the recapitalization process of selected commercial banks
operating in the territory of the Recipient; and
(c) the Loan Agreement has been executed and delivered and all conditions
precedent to its effectiveness or to the right of the Recipient to make
withdrawals under it (other than the effectiveness of this Agreement) have
been fulfilled.
5.02. The Effectiveness Deadline is the date one hundred twenty (120) 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 (20) years after the Signature Date.
ARTICLE VI - REPRESENTATIVE; ADDRESSES
6.01. The Recipient's Representative is its Minister at the time responsible for finance.
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6.02.- -For purposes of Section 11.01 of the General Conditions: (a) the Recipient's
address is:
Ministry of Finance
Government Building II
S. Danzan Street 5/1 D
Ulaanbaatar 15160
Mongolia
and
(b) the Recipient's Electronic Address is:
Facsimile:
976-11-320247
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
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AGREED as of the Signature Date.
MONGOLIA
By
Authed Repesgtv
Name: & AC q -r
Title: r A rc A & .
Date: rl i
INTERNATIONAL DEVELOPMENT ASSOCIATION
By
lforAed Representative
Name: T`/7lrt &'&LCVe.
Title: [t, /Y"AA/
Date: &r /.20/9
IT
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SCHEDULE 1
Program Actions; Availability of Financing Proceeds
Section I. Actions under the Program
The actions taken by the Recipient under the Program include the following:
A. Restoring Debt Sustainability
1. The Recipient has publicly disclosed the comprehensive external special
review on DBM's operations from 2012 to 2017, as evidenced through the
Financial Diagnostic of the DBM dated December 4, 2018, accessible at the
official website of DBM visited on June 17, 2019.
2. The Recipient has restructured the Housing Mortgage Program to support
affordable housing in a more cost-effective way, and with a time-bound plan
for BOM to fully exit the Housing Mortgage Program, as evidenced through
the Joint Order Number 285/A-334 issued by Governor of BOM and the
Minister of Finance on December 20, 2018.
3. The Recipient has publicly disclosed the independent special external review
of BOM's quasi-fiscal operations, including the Housing Mortgage Program,
Price Stabilization Program, and financial support to companies, as evidenced
through the special review of quasi-fiscal operations of the BOM on November
15, 2018 accessible at the official website of BOM visited on June 17, 2019.
4. The Recipient has established a framework to evaluate the tax expenditure
system in terms of costs and benefits to reduce ineffective tax incentives and
exemptions, starting with the 2020 budget, as evidenced through the
Ministerial Order Number 99 issued by its Minister of Finance on
May 1, 2019.
5. The Recipient has initiated the reduction of costs for on-going and new
investment projects in the state budget, as evidenced through the Ministerial
Order Number 295 issued by its Minister of Finance dated December 25, 2018,
approving regulations and methodologies for appraisal, prioritization, and
selection of projects and activities financed from the state budget.
6. The Recipient has improved the legal, governance, and monitoring
frameworks of the Government Special Funds, as evidenced through the
adoption of the Cabinet Resolution Number 87 issued by the Cabinet on
February 27, 2019.
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B. Strengthening the Social Protection System
7. The Recipient has increased the 2019 budget allocation for the Food Stamp
Program and other poverty targeted programs, as evidenced through the
Ministerial Order Number 309 on the 2019 budget monthly plan issued by its
Minister of Finance on December 28, 2018.
C. Supporting Economic Competitiveness through Structural Reforms
8. The Recipient has submitted a revised Permit Law to the Parliament, listing all
licenses and permits granted by public administration and proposing a
reduction of selected licenses and permits to be granted, as evidenced through
the summary report dated April 30, 2019 accompanying with the draft Permit
Law jointly signed by its Cabinet Secretariat Minister and its Minister of
Justice.
9. The Recipient has approved a package of regulations, ordinances, and
guidelines to operationalize the Livestock .and Animal Health Law by
providing the modalities for: the animal disease free zone; international
quarantine procedures; major trans-boundary animal diseases control strategic
plans; and herders' obligations, as evidenced through: (a) the Ministerial Order
A-40 issued by its Minister of Food, Agriculture and Light Industry dated
February 20, 2019 enclosed with an Appendix on determination and
declaration of disease free status; (b) Government Resolution Number 266
issued by the Government dated August 22, 2018 enclosed with Attachment 2
on the activities to be implemented during the quarantine and restriction
regime; and (c) the Order A/17 issued by its Director of General Authority for
Veterinary Services on April 24, 2018 enclosed with an Appendix 1 providing
guidelines on veterinary and quarantine for transboundary animal disease free
compartment.
10. The Recipient has established an institutional framework for implementation
of Trade Facilitation Agreement ("TFA"), including: a time-bound action plan
for TFA implementation; an inter-agency coordination mechanism for the
TFA; and a trade information portal consisting of all regulations required for
trade activities, as evidenced through: (a) the Strategic Action Plan for the
period of 2018-2022 adopted by the National Committee on Trade Facilitation
on October 4, 2018; (b) the decision made by the National Committee on Trade
Facilitation at the fourth meeting session on January 10, 2019; and (c) the Joint
Order Number A/27/28 issued by its Minister of Foreign Affairs and Minister
of Finance on March 29, 2019.
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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:
.i Amount of the Financing Allocated
(expressed in SDR)
(1) Single Withdrawal Tranche SDR58,100,000
TOTAL AMOUNT SDR58,100,000
C. Withdrawal Tranche Release Conditions.
1. 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.
I. 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 account referred to in Section 2.03 (a) of the General Conditions; (b) the
details of the account to which the Mongolian Tugrug 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 account referred to in Section 2.03
(a) of the General Conditions.
E. Closing Date. The Closing Date is July 23, 2020.
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SCHEDULE 2
Repayment Schedule
Principal Amount of the Credit
Date Payment Due repayable
(expressed as a percentage) *
On each April 15 and October 15:
commencing October 15, 2024 to and 1.65%
including April 15, 2044
commencing October 15, 2044 to and 3.40%
including April 15, 2049
* 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.
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APPENDIX
Definitions
1. "BOM" means the Recipient's Bank of Mongolia; established and operating
pursuant to the Recipient's Law on Central Bank dated September 3, 1996, or any
successor thereto.
2. "Cabinet Resolution" means a resolution of the Recipient's cabinet of ministers.
3. "Cabinet Secretariat" means the secretariat of the Recipient's cabinet of ministers,
or any successor thereto.
4. "DBM" means the Recipient's Development Bank established and operating
pursuant to the Law on Development Bank dated February 10, 2011, or any
successor thereto.
5. "Food Stamp Program" means the Recipient's food stamp program established and
operating pursuant to the Social Welfare Law, which aims to provide nutrition
assistance to the poorest households.
6. "General Conditions" means the "International Development Association General
Conditions for IDA Financing, Development Policy Financing", dated December
14,2018.
7. "Government Special Funds" means the Recipient's state budget financed special
funds established and operating with the purpose of implementing particular
functions and objectives of the Government pursuant to the Law on Government
Special Funds.
8. "Housing Mortgage Program" means the Recipient's program of such name
established and operating pursuant to Joint Decree No. A-2/06, dated
January 9, 2013 issued by the Governor of the BOM and the Recipient's Minister
of Construction and Urban Development, which aims to provide subsidized loans
to mortgage borrowers.
9. "Law on Government Special Funds" means the Recipient's law of such name
issued by the Recipient's Parliament on June 29, 2006, as amended from time to
time.
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10. "Livestock and Animal Health Law" means the Recipient's law of such name
issued by the Recipient's Parliament on December 8, 2017, as amended from time
to time.
11. "Mongolian Tugrug" means the lawful currency of the Recipient.
12. "Parliament" means the Recipient's legislative branch of government, or any
successor thereto.
13. "Program" means: the program of objectives, policies, and actions set forth or
referred to in the letter dated June 17, 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.
14. "Price Stabilization Program" means the Recipient's program of such name
established and operating pursuant to a memorandum of understanding on joint
implementation of medium-term program to stabilize prices of key commodities
and products jointly signed by the Government of Mongolia and BOM in
October 2012, which aims to provides low-cost funding to corporations whose
price-setting behavior has a significant impact on the consumer price index.
15. "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.
16. "Social Welfare Law" means the Recipient's law of such name dated
January 19, 2012, as amended from time to time.
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 1 to this Agreement.
18. "Trade Facilitation Agreement" or "TFA" means the trade facilitation agreement
concluded at the World Trade Organization by all of its members, including the
Recipient which entered into force on February 22, 2017.