OFFICIAL DOCUMENTSi CREDIT NUMBER 5547-RW Financing Agreement (Public Sector Governance Program for Results) between REPUBLIC OF RWANDA and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated Verfl 6.r lu) 2014 CREDIT NUMBER 5547-RW FINANCING AGREEMENT AGREEMENT dated Ah.nty-)ler A114 , 2014, entered into between REPUBLIC OF IWANDA ("Recipient") and INTERNATIONAL DEVELOPMENT ASSOCIATION ("Association"). 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) constitute an integral 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 the Appendix to this Agreement. ARTICLE II - FINANCING 2.01. The Association agrees to extend to the Recipient, on the terms and conditions set forth or referred to in this Agreement, a credit in an amount equivalent to sixty-five million, nine hundred thousand Special Drawing Rights (SDR 65,900,000) (variously, "Credit" and "Financing"), to assist in financing the program described in Schedule 1 to this Agreement ("Program"). 2.02. The Recipient may withdraw the proceeds of the Financing in accordance with Section IV of Schedule 2 to this Agreement. All withdrawals from the Financing Account shall be deposited by the Association into an account specified by the Recipient and acceptable to the Association. 2.03. The Maximum Commitment Charge Rate payable by the Recipient on the Unwithdrawn Financing Balance shall be one-half of one percent (1/2 of 1%) per annum. 2.04. The Service Charge payable by the Recipient on the Withdrawn Credit Balance shall be equal to three-fourths of one percent (3/4 of 1%). 2.05. The Payment Dates are February 1 and August 1 in each year. 2.06. The principal amount of the Credit shall be repaid in accordance with the repayment schedule set forth in Schedule 3 to this Agreement. 2.07. The Payment Currency is Dollar. -2- ARTICLE III - PROGRAM 3.01. The Recipient declares its commitment to the objectives of the Program. To this -end,, the Recipient shall carry out the Program through the Ministry of Finance and Economic Planning (MINECOFIN) in accordance with the provisions of Article JV of the General Conditions. 3.02. Without limitation upon the provisions of Section 3.01 of this Agreement, and except as the Recipient and the Association shall otherwise agree, the Recipient shall ensure that the Program is carried out in accordance with the provisions of Schedule 2 to this Agreement. ARTICLE IV - EFFECTIVENESS; TERMINATION 4.01. The Effectiveness Deadline is the date ninety (90) days after the date of this Agreement. 4.02. For purposes of Section 8.05(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 date of this Agreement. ARTICLE V - REPRESENTATIVE; ADDRESSES 5.01. The Recipient's Representative is its minister responsible for finance. 5.02. The Recipient's Address is: Ministry of Finance and Economic Planning P. 0. Box 158 Kigali Rwanda Facsimile: 250-25257-75-81 5.03. The Association's Address is: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable: Telex: Facsimile: [NDEVAS 248423 (MCI) 1-202-477-6391 Washington, D.C. -3- AGREED at Kigali, Rwanda as of the day and year first above written. REPUBLIC OF RWANDA By Authorized Representative Name: dæv4- Title: n4r A,MP>CL 6tl é"«nie* INTERNATIONAL DEVELOPMENT ASSOCIATION By Authorized Representative Name: AJ4. Title:a oric -4- SCHEDULE 1 Program Description The objective of the Program is to enhance the Recipient's public financial management and statistics systems to improve transparency and accountability in the use of public funds, revenue mobilization and the quality and accessibility of development data for decision making. The Program consists of the following: A. Carrying out of a program of activities to implement the Public Financial Management Sector Strategic Plan 2013-2018 (PFM SSP), excluding activities provided for under the PFM SSP relating to legislative oversight, and the roll-out of integrated personnel and payroll systems. B. Carrying out of a program of activities to implement the second National Strategy for Development of Statistics 2014-2019 (NSDS 2), excluding activities provided for under the NSDS 2 relating to improvement of coordination, resource mobilization and the building of strategic partnerships within the national statistical system. -5- SCHEDULE 2 Program Execution Section I. Implementation Arrangements A. Program Fiduciary, Environmental and Social Systems Without limitation on the provisions of Article IV of the General Conditions, the Recipient shall carry out the Program, or cause the Program to be carried out, in accordance with financial management, procurement and environmental and social management systems acceptable to the Association ("Program Fiduciary, Environmental and Social Systems") which are designed to ensure that: I. The Financing proceeds are used for their intended purposes, with due attention to the principles of economy, efficiency, effectiveness, transparency, and accountability; and 2. The actual and potential adverse environmental and social impacts of the Program are identified, avoided, minimized, or mitigated, as the case may be, all through an informed decision-making process. B. Anti-Corruption Without limitation on the provisions of Part A of this Section, the Recipient shall carry out the Program, or cause the Program to be carried out, in accordance with the provisions of the Anti-Corruption Guidelines. C. Other Program Institutional and Implementation Arrangements 1. Program Institutions Without limitation on the generality of Part A of this Section I, the Recipient shall maintain, throughout the implementation of the Program, the offices, units and departments within MINECOFIN, Rwanda Revenue Authority (RRA), Rwanda Public Procurement Authority (RPPA), Office of the Auditor General (OAG) , the National Institute of Statistics of Rwanda (NISR), and other relevant ministries, agencies and departments, and ensure that they are assigned with technical, social and environmental safeguards, fiduciary and other responsibilities for implementing the Program, all with powers, functions, institutional capacity and staffing acceptable to the Association and with resources adequate to fulfill their respective functions under the Program. -6- 2. Program Action Plan (a) The Recipient shall carry out the Program in accordance with the Program Action Plan, and shall not amend, abrogate or suspend, or permit to be amended, abrogated or suspended any provision of the Program Action Plan without the prior written agreement of the Association. (b) Notwithstanding the foregoing, if any provision of any of said action plan is inconsistent with the provisions of this Agreement, the provisions of this Agreement shall prevail. 3. Annual Work Plan The Recipient shall, for each Fiscal Year, develop an Annual Work Plan detailing the Program activities to be carried in the following Fiscal Year ("FY") and furnish said plan to the Association not later than July 15 of each FY. Section II. Excluded Activities The Recipient shall ensure that the Program shall include no activities which: A. in the opinion of the Association are likely to have significant adverse impacts that are sensitive, diverse, or unprecedented on the environment and/or affected people; or B. involve procurement of: (1) works, estimated to cost $50 million equivalent or more per contract; (2) goods, estimated to cost $30 million equivalent or more per contract; (3) information technology system and non-consulting services, estimated to cost $20 million equivalent or more per contract; or (4) consultants' services, estimated to cost $15 million equivalent or more per contract. Section III. Program Monitoring, Reporting and Evaluation; Audits A. Program Reports The Recipient shall monitor and evaluate the progress of the Program and prepare Program Reports in accordance with the provisions of Section 4.08 of the General Conditions. Each Program Report shall cover the period of six (6) months, and shall be furnished to the Association not later than sixty (60) days after the end of the period covered by such report. B. Program Financial Audits Without limitation on the generality of Section LA of this Schedule 2 and Section 4.09 of the General Conditions, the Recipient shall have the Financial Statements -7- audited in accordance with the provisions of Section 4.09(b) of the General Conditions. Each audit of the Financial Statements shall cover the period of one fiscal year of the Recipient. The audited Financial Statements for each such period shall be furnished to the Association not later than nine (9) months after the end of such period. C. Assessment and Verification of Results Without limitation on the provisions of Part A of this Section 1II, the Recipient shall, prior to each payment under the Program: 1. cause the Auditor General to carry out in accordance with the Verification Protocol an assessment to determine the extent to which the Disbursement Linked Results ("DLR") for which payment is requested has been achieved; 2. furnish said assessment to the Association for its review; and 3. for purposes of carrying out the assessment in respect of Disbursement Linked Indicators ("DLI") # 4, engage independent consultants with terms of reference, qualifications, and experience satisfactory to the Association. Section IV. Withdrawal of Financing Proceeds A. General 1. The Recipient may withdraw the proceeds of the Financing in accordance with the provisions of Article II of the General Conditions, this Section, and such additional instructions as the Association may specify from time to time by notice to the Recipient to finance the Program Expenditures, on the basis of the results ( "Disbursement Linked Results" or "DLRs" ) achieved by the Recipient as measured against specific indicators ("Disbursement Linked Indicators" or "DLls"); all as set forth in the table in paragraph 2 of this Part A. 2. The following table specifies each category of withdrawal of the proceeds of the Financing (including the Disbursement Linked Indicators as applicable) ("Category"), the Disbursement Linked Results for each Category (as applicable), and the allocation of the amounts of the Financing to each Category: -8- Category Disbursement Linked Amount of the Disbursement Calculation (including Result (as applicable) Financing Formula Disbursement Allocated Linked Indicator (expressed in as applicable) SDRJ (1) DLI #1: Extent DLR#1.1: One (1) pilot 8,237,500 DLR#1.1:SDR 3,295,000 to which investment ministry has submitted its for which an amount of plans of pilot investment plan in which SDR 3,295,000 is allocated ministries comply feasibility studies for new for the first pilot ministry with budget call projects have been prepared circulars in accordance with the budget call circular DLR#1.2: The number of DLR#1.2:SDR 2,965,750 pilot ministries that have for which an amount of submitted their investment SDR 1,481,842.49 is plans in which feasibility allocated for each compliant studies for new projects have ministry additional to the been prepared in accordance first compliant pilot with the budget call circular ministry increases to three (3) DLR#1.3: The number of DLR#1.3: SDR 1,976,750 pilot ministries that have for which an amount of submitted their investment SDR 987,894.99 is plans in which feasibility allocated for each compliant studies for new projects have ministry additional to the been prepared in accordance three compliant pilot with the budget call circular ministries increases to five (5) -9- Category Disbursement Linked Amount of the Disbursement Calculation (including Result (as applicable) Financing Formula Disbursement Allocated Linked Indicator (expressed in as applicable) SDRJ (2) DLI #2: Extent DLR#2. 1: The number of 8,237,500 DLR#2. 1: SDR 3,295,000 to which Districts Districts that have installed a for which an amount of have adopted the functional automated local SDR 1,097,661.10 is automated local govemment revenue allocated for each government revenue management system compliant District management system increases to three (3) DLR# 2.2: The number of DLR#2.2: SDR 2,635,750 Districts that have installed a for which an amount of functional automated local SDR 878,128.88 is government revenue allocated for each compliant management system District additional to the increases to six (6) three compliant Districts DLR#2.3: The number of DLR#2.3: SDR 2,306,750 Districts that have installed a for which an amount of functional automated local government revenueSD46,1.6i govenmen revnueallocated for each compliant management system District additional to the six increases to eleven (11) compliant Districts (3) DLI #3: Extent DLR#3.1: The Recipient has 8,237,500 DLR#3.1: SDR 3,295,000 to which the e- approved technical and procurement system financial proposals and has has been adopted a roadmap for the implemented roll out of the e-procurement system DLR#3.2: The Recipient has installed an operational DLR#3.2: SDR 2,306,750 e-procurement system with interface protocols with IFMIS -10- Category Disbursement Linked Amount of the Disbursement Calculation (including Result (as applicable) Financing Formula Disbursement Allocated Linked Indicator (expressed in as applicable) SDR] DLR#3.3: The number of DLR#3.3: SDR 2,635,750 budget entities that have for which an amount of installed a functional e- SDR 526,877.33 is procurement system with allocated for each budget interface protocols with entity that is compliant IFMIS and have successfully carried out e-tendering using said systems (4) DL # 4: Extent DLR# 4.1: The percentage of 8,566,500 foR wi an amount0of to which MDAs MDAs receiving unqualified SDr 685.6 is have improved in audit opinions has increased a D for ec their compliance of to 37 percent financial percentage increase above management 32 percent requirements DLR#4.2: SDR 2,635,750 DLR#4.2: The percentage of for which an amount of MDAs receiving unqualified SDR 526,877.33 is audit opinions has increased allocated for each to 42 percent percentage increase above 37 percent DLR#4.3: The percentage of DLR#4.3: SDR 2,635,750 MDAs receiving unqualified for which an amount of audit opinions has increased SDR 526,877.33 is to 47 percent allocated for each percentage increase above 42 percent DLR#4.21: SDR 3295,70 (5) DLI #5: Extent DLR#5.1I: The percentage of 8,237,500 foR#5 whic anR amount0of to which Sectors are Sectors using SEAS has 3for which an amount of using SEAS increased to 30 percent peRcenaein for each percentage increase above 37 percent Category Disbursement Linked Amount of the Disbursement Calculation (including Result (as applicable) Financing Formula Disbursement Allocated Linked Indicator (expressed in as applicable) SDR DLR#5.2: The percentage of DLR#5.2: SDR 2,635,750 Sectors using SEAS has for which an amount of increased to 60 percent SDR 87,812.89 for each percentage increase above 30 percent DLR#5.3: The percentage of DLR#5.3: SDR 2,306,750 Sectors using SEAS has for which an amount of i s SDR 115,254.42 for each percentage increase above 60 percent (6) DLI # 6: Extent DLR#6. 1: The number of 8,237,500 foR wi an amount0of to which government financial for 58845 s aoated government management staff who foR each iallstaf financial achieve foundational level bon h nb 294wh management staff professional qualifications in aeve fuaia level are trained in public finance has increased to 350 profeson ations financial inofinae management i iac DLR#6.2: The number of 8,237,500 government financial for which an amount of management tal lee SDR 52,687.73 is allocated achieve foundational levelle professional qualifications in finance DLR#6.3: The number of DLR#6.3: SDR 2,306,750 government financial an amount of SDR 46, management who achieve 101.77 is allocated for each foundational level additional staff beyond the professional qualifications in number 400 who achieves finance has increased to 450 foundational level professional qualifications in finance -12- Category Disbursement Linked Amount of the Disbursement Calculation (including Result (as applicable) Financing Formula Disbursement Allocated Linked Indicator (expressed in as applicable) SDRJ (7) DLI # 7: Extent DLR#7.1: The Recipient has 8,237,500 DLR#7.1: SDR 3,295,000 to which the conducted a national production and agricultural survey and timeliness of disseminated the survey dissemination of report economic statistics DLR#7.2: The Recipient has 8,237,500 is enhanced conducted an integrated business enterprise survey and disseminated the survey report DLR# 7.3: The Recipient has rebased its GDP estimates on DLR#7.3: SDR 1,976,750 the basis of 2014 benchmarks and disseminated the rebased estimates DLR#8. 1: The Recipient has 7,908,500 DLR# 8.1: SDR3,295, 000 (8) DLI #8: Extent made the micro-data of the to which the variety experimental agricultural of data available on survey carried out in 2013 NADA is enhanced and the population and housing census carried out in 2012 available on3NADA DLR# 8.2: The Recipient has DLR# 8.2: SDR 2,306,750 made, the micro-data of EICV4 available on NADA -13- Category Disbursement Linked Amount of the Disbursement Calculation (including Result (as applicable) Financing Formula Disbursement Allocated Linked Indicator (expressed in as applicable) SDR] DLR#8.3: The Recipient has DLR#8.3:SDR 2,306,750 made the non-confidential administrative data collected by either MINISANTE or MINEDUC through its management information system available on said ministry's website TOTAL AMOUNT 65,900,0000 B. Withdrawal Conditions; Withdrawal Period 1. Notwithstanding the provisions of Part A of this Section, no withdrawal shall be made: (a) for purposes of Section 2.05 of the General Conditions, for payments for Program Expenditures made prior to the date of this Agreement except that withdrawals up to an aggregate amount not to exceed SDR 3,295,000 may be made for such payments made prior to this date but on or after May 12, 2014. (b) for any DLR under any of the Categories until and unless the Recipient has furnished evidence satisfactory to the Association that said DLR has been achieved and verified in accordance with the provisions of Section III.C of Schedule 2 to this Agreement. 2. Notwithstanding the provisions of Part B. 1(b) of this Section, the Recipient may withdraw: (i) an amount not to exceed SDR 3,295,000 as an advance under Category (1):(ii) an amount not to exceed SDR 3,295,000 as an advance under Category (2); (iii) an amount not to exceed SDR 3,295,000 as an advance under Category (4); (iv) an amount not to exceed SDR 3,295,000 as an advance under -14- Category (5); and (v) an amount not to exceed SDR 3,295,000 as an advance under Category (8); provided, however, in each case, that if the DLRs for said Category, in the opinion of the Association, are not achieved (or only partially achieved) by the date by which the said DLR is set to be achieved, the Recipient shall refund such advance (or portion of such advance as determined by the Association in accordance with the Disbursement Calculation Formula for said Category) to the Association promptly upon notice thereof by the Association. Except as otherwise agreed with the Recipient, the Association shall cancel the amount so refunded. Any further withdrawals requested as an advance under any Category shall be permitted only on such terms and conditions as the Association shall specify by notice to the Recipient. 3. Notwithstanding the provisions of Part B.1(b) of this Section, if the Association is not satisfied that any of the DLRs under any of the Categories has been achieved by the date by which the said DLR is set to be achieved, the Association may, at any time, by notice to the Recipient, decide, in its sole discretion, to (a) authorize the withdrawal of such lesser amount of the unwithdrawn proceeds of the Financing then allocated to said Category which, in the opinion of the Association, corresponds to the extent of achievement of said DLR, said lesser amount to be calculated in accordance with the formula set out in column 4 of the table set under Part A. I of this Section IV as applicable or otherwise communicated by the Association; (b) reallocate all or a portion of the proceeds of the Financing then allocated to said DLR to any other DLR; and/or (c) cancel all or a portion of the proceeds of the Financing then allocated to said DLR. 4. The Closing Date is December 31, 2018. 5. Notwithstanding the foregoing provisions of this Section IV, if at any time after the Closing Date the Recipient has failed to provide evidence satisfactory to the Association that the Withdrawn Financing Balance does not exceed the total amount of Program Expenditures paid by the Recipient, exclusive of any such expenditures financed by any other financier or by the Association or the Association under any other loan, credit or grant, the Recipient shall, promptly upon notice from the Association, refund to the Association such excess amount of the Withdrawn Financing Balance. The Association shall cancel the refunded amount of the Withdrawn Financing Balance. Section V. Other Undertakings Midterm Review The Recipient shall: 1 . Prepare and furnish to the Association, not later than December 31, 2016, a progress report on the implementation of the Program, of such scope and in such detail as shall be acceptable to the Association; and -15- 2. Review, jointly with the Association, and thereafter after the report referred to in paragraph I above and thereafter take all measures required to ensure the efficient completion of the Program and the achievement of the objectives thereof, based on the conclusions and recommendations of said report and the Association's views on the matter. -16- SCHEDULE 3 Repayment Schedule Principal Amount of the Credit repayable (expressed as a Date Payment Due percentage)* On each February 1 and August 1, commencing February 1, 2021 to and including August 1, 2052 1.5625% * 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 3.03 (b) of the General Conditions. -17- APPENDIX Section I. Definitions 1. "Annual Work Plan" means the Recipient's plan of Program activities to be implemented in the Fiscal Year and budget and referenced to in Section I.C.3 of Schedule 2 to this Agreement, as the same may be revised from time to time. 2. "Anti-Corruption Guidelines" means the Association's "Guidelines on Preventing and Combating Fraud and Corruption in Program-for-Results financing" dated February 1, 2012. 3. "Category" means a category set forth in the table in Section IV.A.2 of Schedule 2 to this Agreement. 4. "Disbursement Calculation Formula" means the formula for determining further allocation of the financing allocated to each Category to each DLR within said Category and as relevant, the further allocation of the amount of the Financing allocated to each DLR in proportion to the DLR obtained. 5. "Disbursement Linked Indicator" or "DLI" means in respect of a given Category, the indicator related to said Category as set forth in the table in Section IV.A.2 of Schedule 2 to this Agreement. 6. "Disbursement Linked Result" or "DLR" means in respect of a given Category, the result under said Category as set forth in the table in Section IV.A.2 of Schedule 2 to this Agreement, on the basis of the achievement of which, the amount of the Financing allocated to said result may be withdrawn in accordance with the provisions of said Section IV. 7. "District" means an administrative area of the Recipient, established pursuant to the Recipient's Law No. 29/2005 of December 31, 2005, representing a designated area and population within the territory of the Recipient. 8. "EICV 4" means the Integrated Household Living Conditions Survey (Phase 4) conducted during 2013/14. 9. "Fiscal Year" or "FY" means the financial year of the Recipient commencing July1 of every calendar year and ending June 30 of the subsequent year. 10. "General Conditions" means the "International Development Association General Conditions for Credits and Grants", dated July 31, 2010, with the modifications set forth in Section II of this Appendix. I1. "IFMIS" means Integrated Financial Management Information System. -18- 12. "MDAs" means ministries, Districts, the City of Kigali, Provinces, projects of the Recipient, business enterprises of the Recipient, boards and other semi- autonomous agencies of the Recipient. 13. "Ministry of Education" or "MINEDUC" means the Recipient's ministry responsible for matter relating to education, or the successor thereto. 14. "Ministry of Finance and Economic Planning" or "MINECOFIN" means the Recipient's ministry responsible for matters relating to finances, or the successor thereto. 15. "Ministry of Health" or "MINISANTE" means the Recipient's ministry responsible for matters relating to health, or the successor thereto. 16. "National Data Archive" or "NADA" means the Recipient's electronic and web based national data archive. 17. "National Institute of Statistics of Rwanda" or "NISR" means the Recipient's agency responsible for the development and maintenance of national statistics and established and operating under the Recipient's Law No. 53bis/2013 of 28/06/2013, or the successor thereto. 18. "Office of the Auditor General" or "OAG" means the Recipient's supreme audit institution established under Chapter VIII of the Recipient's Constitution as read together with Law No 79/2013 of 11/09/2013. 19. "Program Action Plan" means the Recipient's plan dated September 17, 2014, and referred to in Section I.C.2 of Schedule 2 to this Agreement, as may be amended from time to time with the agreement of the Association. 20. "Program Fiduciary and Environmental and Social Systems" means the Recipient's systems for the Program referred to in Section L.A of Schedule 2 to this Agreement. 21. "Rwanda Public Procurement Authority" or "RPPA" means the Recipient's agency responsible for overseeing public procurement matters and established and operating under the Recipient's Law No. 25/2011 of 30/06/2011, or the successor thereto. 22. "Rwanda Revenue Authority" or "RRA" means the Recipient's lead agency responsible for revenue matters and established and operating under the Recipient's Law No. 08/2009 of 27/04/2009, or the successor thereto. 23. "SEAS" means Subsidiary Entities Accounting and Financial Reporting Systems. 24. "Sector" means an administrative subdivision of the Recipient, established pursuant to its Organic Law No. 29/2005 of December 31, 2005. 25. "Verification Protocol" means the Recipient's protocol entitled 'DLI Verification Protocol Table' dated September 17, 2014 detailing the means by which the -19- fulfillment of the Disbursement Linked Results will be verified under the Program. Section II. Modifications to the General Conditions The modifications to the General Conditions are as follows: 1 . Wherever used throughout the General Conditions, the term "the Project" is modified to read "the Program", the term "the Project Agreement" is modified to read "the Program Agreement", the term "Project Implementing Entity" is modified to read "the Program Implementing Entity", the term "Project Report" is modified to read "Program Report"; and the term "Eligible Expenditures" is modified to read "Program Expenditures". 2. In the Table of Contents, the references to Sections, Section names and Section numbers are modified to reflect the modifications set forth in the paragraphs below. 3. Section 2.02, Special Commitment by the Association, is deleted in its entirety, and the subsequent Sections in Article II are renumbered accordingly. 4. In Section 2.02 (originally numbered as Section 2.03), the heading "Applications for Withdrawal or for Special Commitment" is replaced with "Applications for Withdrawal", and the phrase "or to request the Association to enter into a Special Commitment" is deleted. 5. The section originally numbered as Section 2.04, Designated Accounts is deleted in its entirety, and the subsequent Sections in Article II are renumbered accordingly. 6. Paragraph (a) of Section 2.03 (originally numbered as Section 2.05), Eligible Expenditures (renamed "Program Expenditures" in accordance with paragraph I of this Section II), is modified to read: "(a) the payment is for the financing of the reasonable cost of expenditures required for the Program and to be financed out of the proceeds of the Financing in accordance with the provisions of the Legal Agreements;". 7. The last sentence of Section 2.04 (originally numbered as Section 2.06), Financing Taxes, is modified to read: "To that end, if the Association at any time determines that the amount of any such Tax is excessive, or that such Tax is discriminatory or otherwise unreasonable, the Association may, by notice to the Recipient, exclude such amount or such Tax from the Program Expenditures to be financed out of the proceeds of the Financing, as required to ensure consistency with such policy of the Association." -20- 8. Section 2.06 (originally numbered as Section 2.08), Reallocation, is modified to read: "Notwithstanding any allocation of an amount of the Financing to a withdrawal category under the Financing Agreement, the Association may, by notice to the Recipient, reallocate any other amount of the Financing to such category if the Association reasonably determines at any time that such reallocation is appropriate for the purposes of the Program. 9. Section 6.01, Cancellation by the Recipient, is modified to read: "The Recipient may, by notice to the Association, cancel any amount of the Unwithdrawn Financing Balance." 10. Paragraph (d) of Section 6.03, Cancellation by the Association, entitled "Mis- procurement", is deleted, and subsequent paragraphs are re-lettered accordingly. 11. Section 6.04, Amounts Subject to Special Commitment not Affected by Cancellation or Suspension by the Association, is deleted in its entirety, and subsequent Sections in Article VI and references to such Sections are renumbered accordingly. 12. In the Appendix, Definitions, all references to Section numbers are modified, as necessary, to reflect the modifications set forth above. In addition, the definition of the term "Special Commitment" set forth in paragraph 50 is deleted in its entirety, and all subsequent paragraphs are renumbered accordingly. 13. Paragraph 28 of the Appendix ("Financing Payment") is modified by inserting the words "the Interest Charge" between the words "the Service Charge" and "the Commitment Charge". 14. The Appendix is modified by inserting a new paragraph 32 with the following definition of "Interest Charge", and renumbering the remaining paragraphs accordingly: "32. "Interest Charge" means the interest charge specified in the Financing Agreement for the purpose of Section 3.02(b)." 15. Renumbered paragraph 37 (originally paragraph 36) of the Appendix ("Payment Date") is modified by inserting the words "Interest Charges" between the words "Service Charges" and "Commitment Charges". 16. Renumbered paragraph 50 (originally paragraph 49) of the Appendix ("Service Charge") is modified by replacing the reference to Section 3.02 with Section 3.02 (a).