Page 1 CONFORMED COPY CREDIT NUMBER 2058 KE (Financial Sector Technical Assistance Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and CENTRAL BANK OF KENYA Dated July 12, 1989 CREDIT NUMBER 2058 KE PROJECT AGREEMENT AGREEMENT, dated July 12, 1989, between INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) and CENTRAL BANK OF KENYA (CBK). WHEREAS (A) by the Development Credit Agreement of even date herewith between Republic of Kenya (the Borrower) and the Associa- tion, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to three million eight hundred seventy-one thousand Special Drawing Rights (SDR 3,871,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that CBK agree to undertake such obligations toward the Association as are set forth in this Agreement; and (B) WHEREAS CBK, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, has agreed to undertake the obligations set forth in this Agreement; Page 2 NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Unless the context otherwise requires, the several terms defined in the Development Credit Agreement, the Preamble to this Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. CBK declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Development Credit Agreement and, to this end, shall carry out the Project with due diligence and efficiency and in conformity with appro- priate administrative, financial, banking and engineering practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the Project. Section 2.02. Except as the Association shall otherwise agree, procurement of the goods, works and consultants' services required for the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of Schedule 1 to this Agreement. Section 2.03. CBK shall carry out the obligations set forth in Sections 9.03 through 9.08 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) in respect of the Project Agreement. Section 2.04. (a) CBK shall, at the request of the Associa- tion, exchange views with the Association with regard to the progress of the Project, the performance of its obligations under this Agreement and other matters relating to the purposes of the Credit. (b) CBK shall promptly inform the Association of any condi- tion which interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of the Credit, or the performance by CBK of its obligations under this Agreement. ARTICLE III Management and Operations of CBK Section 3.01. CBK shall carry on its operations and conduct its affairs in accordance with sound administrative, financial and banking practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 3.02. CBK shall at all times operate and maintain its plant, machinery, equipment and other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound banking, financial and engineering practices. Section 3.03. CBK shall take out and maintain with respon- sible insurers, or make other provision satisfactory to the Asso- ciation for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. ARTICLE IV Financial Covenants Page 3 Section 4.01. (a) CBK shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition. (b) CBK shall: (i) have its records, accounts and financial statements (balance sheets, statements of income and expenses and related statements) including the Special Account for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Association as soon as available, but in any case not later than six months after the end of each such year (A) certified copies of its financial statements for such year as so audited, and (B) the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iii) furnish to the Association such other information concerning said records, accounts and financial statements as well as the audit thereof, as the Association shall from time to time reasonably request. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 5.02. (a) This Agreement and all obligations of the Association and of CBK thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement shall terminate in accordance with its terms; or (ii) the date 20 years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in para- graph (a) (ii) of this Section, the Association shall promptly notify CBK of this event. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the General Conditions. ARTICLE VI Miscellaneous Provisions Section 6.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: For the Association: Page 4 International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For CBK: P.O. Box 60000 Nairobi Kenya Cable address: Telex: 22324 Section 6.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of CBK, or by CBK on behalf of the Borrower under the Development Credit Agreement, may be taken or executed by the Governor of CBK or such other person or persons as the Governor of CBK shall designate in writing, and CBK shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 6.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, 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 written. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Edward V.K. Jaycox Regional Vice President Africa CENTRAL BANK OF KENYA By /s/ D. D. Afande Authorized Representative SCHEDULE 1 Procurement and Consultants' Services Section I: Procurement of Goods and Works Part A: International Competitive Bidding 1. Except as provided in Part C hereof, goods and works shall be procured under contracts awarded in accordance with procedures consistent with those set forth in Sections I and II of the Page 5 "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in May 1985 (the Guidelines). 2. (a) To the extent practicable, contracts for equipment shall be grouped in bid packages estimated to cost the equivalent of $50,000 or more each. (b) Bidding packages for vehicles and equipment shall be prepared on an annual basis. Part B: Preference for Domestic Contractors In the procurement of works in accordance with the procedures described in Part A.1 hereof, CBK may grant a margin of preference to domestic contractors in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraph 5 of Appendix 2 thereto. Part C: Other Procurement Procedures Contracts for vehicles and equipment may be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures satisfactory to the Asso- ciation. Part D: Review by the Association of Procurement Decisions 1. (a) With respect to each contract for vehicles and equipment estimated to cost the equivalent of $50,000 or more, the proce- dures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract required to be furnished to the Association pursuant to said paragraph 2 (d) shall be furnished to the Association prior to the making of the first payment out of the Special Account in respect of such contract. (b) With respect to each contract not governed by the preceding paragraph, the procedures set forth in paragraphs 3 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract together with the other information required to be furnished to the Association pursuant to said para- graph 3 shall be furnished to the Association as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 3 to the Development Credit Agreement. (c) The provisions of the preceding subparagraphs (a) and (b) shall not apply to contracts on account of which the Associa- tion has authorized withdrawals from the Credit Account on the basis of statements of expenditure. Such contracts shall be retained in accordance with Section 4.01 (a) (ii) of the Develop- ment Credit Agreement. 2. The figure of 15% is hereby specified for purposes of para- graph 4 of Appendix 1 to the Guidelines. Section II: Employment of Consultants In order to assist CBK in carrying out the Project, CBK shall employ banking and financial consultants whose qualifications, experience and terms and conditions of employment shall be satis- factory to the Association. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Association on the basis of the "Guidelines for the Use of Consul- tants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981. Page 6