Public Disclosure Authorized

CONFORMED COPY

LOAN NUMBER 3769 LE

Public Disclosure Authorized

Loan Agreement

(Irrigation Rehabilitation and Modernization Project)

between

LEBANESE REPUBLIC

and
Public Disclosure Authorized

INTERNATIONAL BANK FOR RECONSTRUCTION

AND DEVELOPMENT

Dated August 10, 1994

LOAN NUMBER 3769 LE

LOAN AGREEMENT

AGREEMENT, dated August 10, 1994, between LEBANESE REPUBLIC (the

Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the
Bank).
Public Disclosure Authorized

WHEREAS: (A) the Borrower, having satisfied itself as to the

feasibility and priority of the Project described in Schedule 2 to this
Agreement, has requested the Bank to assist in the financing of the Project;
and

(B) the Project will be carried out by the Council for Development
and Reconstruction (CDR) with the Borrower’s assistance and, as part of such
assistance, the Borrower will make available to CDR the proceeds of the Loan
as provided in this Agreement;

WHEREAS the Bank has agreed, on the basis, inter alia, of the
foregoing, to extend the Loan to the Borrower upon the terms and conditions
set forth in this Agreement and in the Project Agreement of even date
herewith between the Bank and CDR;

NOW THEREFORE the parties hereto hereby agree as follows:

ARTICLE I

General Conditions; Definitions

 Section 1.01. The "General Conditions Applicable to Loan and Guarantee
Agreements" of the Bank, dated January 1, 1985, with the modifications set
forth below (the General Conditions) constitute an integral part of this
Agreement:

(a) The last sentence of Section 3.02 is deleted.

(b) In Section 6.02, sub-paragraph (k) is re-lettered as sub-

paragraph (l) and a new sub-paragraph (k) is added to read:

"(k) An extraordinary situation shall have arisen under which

any further withdrawals under the Loan would be inconsistent with the
provisions of Article III, Section 3 of the Bank’s Articles of
Agreement."

Section 1.02. 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) "CDR" means the Council for Development and Reconstruction, a
public authority established and operating pursuant to Legislative Decree
No. 5 of the Borrower, dated January 31, 1977, as the same may be amended
from time to time;

(b) "CDR’s Basic Legislation" means Legislative Decree No. 5 of the

Borrower, dated January 31, 1977, as the same may be amended from time to
time, Decree No. 433 of the Borrower, dated September 19, 1977, as the same
may be amended from time to time, and Decree No. 2981 of the Borrower, dated
May 9, 1980, as the same may be amended from time to time;

(c) "Project Agreement" means the agreement between the Bank and CDR
of even date herewith, as the same may be amended from time to time, and
such term includes all schedules and agreements supplemental to the Project
Agreement;

(d) "Subsidiary Agreement" means the agreement to be entered into

between the Borrower and CDR pursuant to Section 3.01 (b) of this Agreement,
as the same may be amended from time to time, and such term includes all
schedules to the Subsidiary Agreement;

(e) "Special Account" means the account referred to in Section 2.02

(b) of this Agreement;

(f) "Central Bank" means Banque du Liban, the Borrower’s central

bank, established and operating pursuant to the Money and Credit Law
promulgated by Decree No. 13513 of the Borrower, dated August 1, 1963, as
the same may be amended from time to time;

(g) "MOF" means the Ministry of Finance of the Borrower;

(h) "MOHER" means the Ministry of Hydraulic and Electric Resources

of the Borrower;

(i) "MOA" means the Ministry of Agriculture of the Borrower;

(j) "LRA" means the Litani River Authority, a public authority

established and operating under the administrative supervision of MOHER
pursuant to Law No. 61 of the Borrower, dated August 14, 1954, as the same
may be amended from time to time;

(k) "GP" means the Green Plan, a public authority established and
operating under the administrative supervision of MOA pursuant to Decree No.
13785 of the Borrower, dated September 9, 1963, as the same may be amended
from time to time;

(l) "ARIL" means the Agricultural Research Institute of Lebanon, a

public authority established and operating under the administrative
supervision of MOA pursuant to Legislative Decree No. 155 of the Borrower,
dated June 12, 1959, as the same may be amended from time to time;

(m) "WA" means any one of the water authorities presently existing
in the Borrower’s territory, all of which are established and operating
under the administrative supervision of MOHER, and this term shall include
any and all successor water authorities thereto;

(n) "Irrigation Scheme" means, in respect of each WA, an irrigation

scheme which is under the jurisdiction of such WA, and this term shall
include all distribution canals, pipes, drains, feeder roads, pumping
stations and miscellaneous structures located within such Irrigation Scheme,
as the same may be extended and improved from time to time;

(o) "Water Charges" means charges owed to the WAs for water
distributed through the WAs’ Irrigation Schemes for irrigation purposes;

(p) "ERRP" means the Emergency Reconstruction and Rehabilitation

Project (Loan No. 3562 LE); and

(q) "Fiscal Year" means the fiscal year of the Borrower commencing
on January 1 and ending on December 31.

ARTICLE II

The Loan

Section 2.01. The Bank agrees to lend to the Borrower, on the terms
and conditions set forth or referred to in the Loan Agreement, various
currencies that shall have an aggregate value equivalent to the amount of
fifty-seven million two hundred thirty thousand dollars ($57,230,000), being
the sum of withdrawals of the proceeds of the Loan, with each withdrawal
valued by the Bank as of the date of such withdrawal.
Section 2.02. (a) The amount of the Loan may be withdrawn from the
Loan Account in accordance with the provisions of Schedule 1 to this
Agreement for expenditures made (or, if the Bank shall so agree, to be made)
in respect of the reasonable cost of goods, works and services required for
the Project described in Schedule 2 to this Agreement and to be financed out
of the proceeds of the Loan.

(b) The Borrower shall, for the purposes of the Project, open and
maintain in dollars a special deposit account in the Central Bank on terms
and conditions satisfactory to the Bank. Deposits into, and payments out of,
the Special Account shall be made in accordance with the provisions of
Schedule 4 to this Agreement.

Section 2.03. The Closing Date shall be June 30, 2001 or such later
date as the Bank shall establish. The Bank shall promptly notify the
Borrower of such later date.

Section 2.04. The Borrower shall pay to the Bank a commitment charge
at the rate of three-fourths of one percent (3/4 of 1%) per annum on the
principal amount of the Loan not withdrawn from time to time.

Section 2.05. (a) The Borrower shall pay interest on the principal
amount of the Loan withdrawn and outstanding from time to time, at a rate
for each Interest Period equal to the Cost of Qualified Borrowings
determined in respect of the preceding Semester, plus one-half of one
percent (1/2 of 1%). On each of the dates specified in Section 2.06 of this
Agreement, the Borrower shall pay interest accrued on the principal amount
outstanding during the preceding Interest Period, calculated at the rate
applicable during such Interest Period.

(b) As soon as practicable after the end of each Semester, the Bank
shall notify the Borrower of the Cost of Qualified Borrowings determined in
respect of such Semester.

(c) For the purposes of this Section:

(i) "Interest Period" means a six-month period ending on the
date immediately preceding each date specified in Section
2.06 of this Agreement, beginning with the Interest
Period in which this Agreement is signed.
(ii) "Cost of Qualified Borrowings" means the cost, as
reasonably determined by the Bank and expressed as a
percentage per annum, of the outstanding borrowings of
 the Bank drawn down after June 30, 1982, excluding such
borrowings or portions thereof as the Bank has allocated
to fund: (A) the Bank’s investments; and (B) loans which
may be made by the Bank after July 1, 1989 bearing
interest rates determined otherwise than as provided in
paragraph (a) of this Section.

(iii) "Semester" means the first six months or the second six
months of a calendar year.

(d) On such date as the Bank may specify by no less than six months’
notice to the Borrower, paragraphs (a), (b) and (c) (iii) of this Section
shall be amended to read as follows:

"(a) The Borrower shall pay interest on the principal

amount of the Loan withdrawn and outstanding from time to time,
at a rate for each Quarter equal to the Cost of Qualified
Borrowings determined in respect of the preceding Quarter, plus
one-half of one percent (1/2 of 1%). On each of the dates
specified in Section 2.06 of this Agreement, the Borrower shall
pay interest accrued on the principal amount outstanding during
the preceding Interest Period, calculated at the rates
applicable during such Interest Period."

"(b) As soon as practicable after the end of each

Quarter, the Bank shall notify the Borrower of the Cost of
Qualified Borrowings determined in respect of such Quarter."

"(c) (iii) ‘Quarter’ means a three-month period

commencing on January 1, April 1, July 1 or October 1 in a
calendar year."

Section 2.06. Interest and other charges shall be payable semi-

annually on March 1 and September 1 in each year.

Section 2.07. The Borrower shall repay the principal amount of the
Loan in accordance with the amortization schedule set forth in Schedule 3
to this Agreement.
Section 2.08. CDR 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) The Borrower declares its commitment to the

objectives of the Project as set forth in Schedule 2 to this Agreement, and,
to this end, without any limitation or restriction upon any of its other
obligations under the Loan Agreement, shall cause CDR to perform in
accordance with the provisions of the Project Agreement all the obligations
of CDR therein set forth, shall take or cause to be taken all action,
including the provision of funds, facilities, services and other resources,
necessary or appropriate to enable CDR to perform such obligations, and
shall not take or permit to be taken any action which would prevent or
interfere with such performance.

(b) The Borrower shall make available as a grant the proceeds of the
Loan to CDR under a subsidiary agreement to be entered into between the
Borrower and CDR, under terms and conditions which shall have been approved
by the Bank.

(c) The Borrower shall exercise its rights under the Subsidiary
Agreement in such manner as to protect the interests of the Borrower and the
Bank and to accomplish the purposes of the Loan, and, except as the Bank
shall otherwise agree, the Borrower shall not assign, amend, abrogate or
waive the Subsidiary Agreement or any provision thereof.

Section 3.02. Except as the Bank 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 Loan shall be governed by the
provisions of Schedule 1 to the Project Agreement.

Section 3.03. The Bank and the Borrower hereby agree that the
obligations set forth in Sections 9.04, 9.05, 9.06, 9.07, 9.08 and 9.09 of
the General Conditions (relating to insurance, use of goods and services,
plans and schedules, records and reports, maintenance and land acquisition,
respectively) shall be carried out by CDR pursuant to Section 2.03 of the
Project Agreement.
Section 3.04. The Borrower shall select, from its investment program
for the agriculture sector, sub-projects, to be financed out of the proceeds
of the Loan, for the rehabilitation, operation and maintenance of the
Irrigation Schemes referred to under Part A.1 (b) of the Project on the
basis of criteria acceptable to the Bank, including those set forth in
Schedule 5 to this Agreement.

ARTICLE IV

Financial Covenants

Section 4.01. (a) For all expenditures with respect to which

withdrawals from the Loan Account were made on the basis of statements of
expenditure, the Borrower shall:

(i) maintain or cause to be maintained in accordance with

sound accounting practices, records and accounts
reflecting such expenditures;

(ii) ensure that all records (contracts, orders, invoices,

bills, receipts and other documents) evidencing such
expenditures are retained until at least one year after
the Bank has received the audit report for the Fiscal
Year in which the last withdrawal from the Loan Account
was made; and

(iii) enable the Bank’s representatives to examine such

records.

(b) The Borrower shall:

(i) have the records and accounts referred to in

paragraph (a) (i) of this Section including those for the
Special Account for each Fiscal Year audited, in
accordance with appropriate auditing principles
consistently applied, by independent auditors acceptable
to the Bank;

(ii) furnish to the Bank as soon as available, but in any case

not later than six (6) months after the end of each such
Year the report of such audit by said auditors, of such
scope and in such detail as the Bank shall have
reasonably requested, including a separate opinion by
said auditors as to whether the statements of expenditure
submitted during such Fiscal Year, together with the
procedures and internal controls involved in their
preparation, can be relied upon to support the related
withdrawals; and

(iii) furnish to the Bank such other information concerning

said records and accounts and the audit thereof as the
Bank shall from time to time reasonably request.

Section 4.02. The Borrower shall ensure that, upon completion of the
rehabilitation works under Part A.1 (a) of the Project, Water Charges shall
be set at levels sufficient to recover one hundred percent (100%) of the
recurrent costs of operating and maintaining the Irrigation Schemes referred
to under said Part A.1 (a) of the Project.

Section 4.03. Pending attainment of the operation and maintenance cost

recovery targets referred to under Section 4.02 of this Agreement, and
without limitation or restriction upon the provisions of Section 3.01 of
this Agreement, the Borrower shall take all action necessary on its part to
ensure that (a) budgetary allocations shall be made for each Fiscal Year,
in the relevant budget or budgets of its public agencies, in amounts
sufficient to cover, in respect of Irrigation Schemes under Part A.1 of the
Project, the shortfall, if any, in recovery by the WAs of the operation and
maintenance costs of such schemes; and (b) funds shall be released in a
timely manner to cover said shortfall.

ARTICLE V

Remedies of the Bank

Section 5.01. Pursuant to Section 6.02 (l) of the General Conditions,

the following additional events are specified:

(a) CDR shall have failed to perform any of its obligations under
the Project Agreement;

(b) as a result of events which have occurred after the date of the
Loan Agreement, an extraordinary situation shall have arisen which shall
make it improbable that CDR will be able to perform its obligations under
the Project Agreement;
(c) CDR’s Basic Legislation shall have been amended, suspended,
abrogated, repealed or waived so as to affect materially and adversely the
ability of CDR to perform any of its obligations under the Project
Agreement; and

(d) the Borrower or any other authority having jurisdiction shall

have taken any action for the dissolution or disestablishment of CDR or for
the suspension of its operations.

Section 5.02. Pursuant to Section 7.01 (h) of the General Conditions,

the following additional events are specified:

(a) the event specified in paragraph (a) of Section 5.01 of this

Agreement shall occur and shall continue for a period of sixty (60) days
after notice thereof shall have been given by the Bank to the Borrower; and

(b) any event specified in paragraph (c) or (d) of Section 5.01 of

this Agreement shall occur.

ARTICLE VI

Effectiveness; Termination

Section 6.01. The following are specified as additional matters,

within the meaning of Section 12.02 (c) of the General Conditions, to be
included in the opinion or opinions to be furnished to the Bank:

(a) that the Project Agreement has been duly authorized or ratified
by CDR, and is legally binding upon CDR in accordance with its terms; and

(b) that the Subsidiary Agreement has been duly authorized or

ratified by the Borrower and CDR and is legally binding upon the Borrower
and CDR in accordance with its terms.

Section 6.02. The date ninety (90) days after the date of this
Agreement is hereby specified for the purposes of Section 12.04 of the
General Conditions.
ARTICLE VII

Representatives of the Borrower; Addresses

Section 7.01. Except as provided in Section 2.08 of this Agreement,

the Minister of Finance of the Borrower is designated as representative of
the Borrower for the purposes of Section 11.03 of the General Conditions.

Section 7.02. The following addresses are specified for the purposes
of Section 11.01 of the General Conditions:

For the Borrower:

Minister of Finance
Ministry of Finance
 Beirut, Lebanese Republic

Telex:

923.235.13

For the Bank:

International Bank for

Reconstruction and Development
1818 H Street, N.W.
Washington, D.C. 20433
United States of America

Cable address: Telex:

INTBAFRAD 248423 (RCA)

Washington, D.C. 82987 (FTCC)
64145 (WUI) or
197688 (TRT)
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.

LEBANESE REPUBLIC

By /s/ Riad Tabbarah

Authorized Representative

INTERNATIONAL BANK FOR

RECONSTRUCTION AND DEVELOPMENT

By /s/ Tariq Husain

Acting Regional Vice President
Middle East and North Africa

SCHEDULE 1

Withdrawal of the Proceeds of the Loan

1. The table below sets forth the Categories of items to be financed out
of the proceeds of the Loan, the allocation of the amounts of the Loan to
each Category and the percentage of expenditures for items so to be financed
in each Category:

Amount of the
Loan Allocated % of
(Expressed in Expenditures
Category Dollar Equivalent) to be Financed
(1) Civil works 34,270,000 80%

(2) Goods 10,490,000 100% of foreign

expenditures,
100% of local
expenditures
(ex-factory
cost) and 80%
 of local expen-
ditures for
other items
procured locally
(3) Consultants’ 8,180,000 100%
services,
studies and
training
(4) Unallocated 4,290,000
__________

TOTAL 57,230,000
==========
2. For the purposes of this Schedule:

(a) the term "foreign expenditures" means expenditures in the currency

of any country other than that of the Borrower for goods or services
supplied from the territory of any country other than that of the Borrower;
and
(b) the term "local expenditures" means expenditures in the currency
of the Borrower or for goods or services supplied from the territory of the
Borrower.

3. 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.
4. The Bank may require withdrawals from the Loan Account to be made on the
basis of statements of expenditure for such expenditures for goods and
services under contracts not exceeding $50,000 equivalent, under such terms
and conditions as the Bank shall specify by notice to the Borrower.
SCHEDULE 2

Description of the Project

The objectives of the Project are to increase agriculture-based income

and employment in previously neglected rural areas, and achieve sustainable
and improved management of water resources through (a) the rehabilitation
and modernization of surface irrigation infrastructure; and (b) the
provision of basic public support services.

The Project consists of the following parts, subject to such

modifications thereof as the Borrower and the Bank may agree upon from time
to time to achieve such objectives:

Part A: Irrigation Infrastructure Rehabilitation and

Modernization
1. Rehabilitation, operation and maintenance of:

(a) the Yammouneh, Qasmieh-Ras El Ain, Danniyeh, Akkar El-Bared and

South Bekaa Irrigation Schemes; and

(b) other Irrigation Schemes.

2. Carrying out of feasibility studies for the rehabilitation of Irrigation
Schemes referred to under Part A.1 (b) of the Project.

Part B: Irrigation Services

Strengthening the institutional capabilities of (i) MOHER and LRA to

prepare designs for, and supervise the execution of, the rehabilitation
works under Part A.1 of the Project, and to prepare feasibility studies
under Part A.2 of the Project; (ii) GP to participate in the execution of
rehabilitation works for small Irrigation Schemes under Part A.1 (b) of the
Project; and (iii) the WAs to carry out operation and maintenance activities
in respect of the Irrigation Schemes to be rehabilitated under Part A.1 of
the Project.
Part C: Environmental Monitoring

Strengthening the institutional capabilities of MOHER and LRA to monitor

the quality of groundwater aquifers and gather and interpret hydrological
data.
Part D: Applied Research

Reinforcing the applied research capabilities of ARIL in the fields of

(i) verification trials for new cereals, pulses, vegetables, and tree crops
varieties and species; (ii) irrigation techniques; (iii) plant disease
control; (iv) integrated pest management; and (v) soil investigation,
mapping and classification.

Part E: Quality Control of Agricultural Inputs

Enhancing the capabilities of ARIL to control the quality of farm inputs

with a view to rationalizing the use of pesticides and enforcing quality
standards on agricultural produce.

Part F: On-Farm Technology Testing and Extension Services

Carrying out of (i) on-farm demonstrations and field tests of

agricultural technologies relevant to farmers’ needs; (ii) field seminars
on topics of immediate concern to farmers; and (iii) studies to enhance
marketing capacities.

* * *

The Project is expected to be completed by December 31, 2000.

SCHEDULE 3
Amortization Schedule

Payment of Principal
Date Payment Due (expressed in dollars)*

March 1, 1999 1,360,000

September 1, 1999 1,410,000
March 1, 2000 1,460,000
September 1, 2000 1,515,000
March 1, 2001 1,570,000
September 1, 2001 1,625,000
March 1, 2002 1,685,000
September 1, 2002 1,745,000
March 1, 2003 1,810,000
September 1, 2003 1,875,000
March 1, 2004 1,945,000
September 1, 2004 2,015,000
March 1, 2005 2,085,000
September 1, 2005 2,160,000
March 1, 2006 2,240,000
September 1, 2006 2,320,000
March 1, 2007 2,405,000
September 1, 2007 2,495,000
March 1, 2008 2,585,000
September 1, 2008 2,680,000
March 1, 2009 2,775,000
September 1, 2009 2,875,000
March 1, 2010 2,980,000
September 1, 2010 3,090,000
March 1, 2011 3,205,000
September 1, 2011 3,320,000

_____________________________

* The figures in this column represent dollar equivalents determined as

of the respective dates of withdrawal. See General Conditions, Sections
3.04 and 4.03.

Premiums on Prepayment
 Pursuant to Section 3.04 (b) of the General Conditions, the premium
payable on the principal amount of any maturity of the Loan to be prepaid
shall be the percentage specified for the applicable time of prepayment
below:

Time of Prepayment Premium

The interest rate (expressed as a

percentage per annum) applicable to the
Loan on the day of prepayment multiplied
by:
Not more than three years 0.18
before maturity
More than three years but 0.35
not more than six years
before maturity
More than six years but 0.65
not more than 11 years
before maturity
More than 11 years but not 0.88
more than 15 years
before maturity
More than 15 years before 1.00
maturity

SCHEDULE 4

Special Account
1. For the purposes of this Schedule:

(a) the term "eligible Categories" means Categories (1), (2) and (3)
set forth in the table in paragraph 1 of Schedule 1 to this Agreement;

(b) the term "eligible expenditures" means expenditures in respect of

the reasonable cost of goods and services required for the Project and to
be financed out of the proceeds of the Loan allocated from time to time to
the eligible Categories in accordance with the provisions of Schedule 1 to
this Agreement; and

(c) the term "Authorized Allocation" means an amount equivalent to

$1,500,000 to be withdrawn from the Loan Account and deposited in the
Special Account pursuant to paragraph 3 (a) of this Schedule.

2. Payments out of the Special Account shall be made exclusively for

eligible expenditures in accordance with the provisions of this Schedule.

3. After the Bank has received evidence satisfactory to it that the Special
Account has been duly opened, withdrawals of the Authorized Allocation and
subsequent withdrawals to replenish the Special Account shall be made as follows
:

(a) For withdrawals of the Authorized Allocation, the Borrower shall

furnish to the Bank a request or requests for a deposit or deposits which
do not exceed the aggregate amount of the Authorized Allocation. On the
basis of such request or requests, the Bank shall, on behalf of the
Borrower, withdraw from the Loan Account and deposit in the Special Account
such amount or amounts as the Borrower shall have requested.

(b) (i) For replenishment of the Special Account, the Borrower

shall furnish to the Bank requests for deposits into the
Special Account at such intervals as the Bank shall
specify.

(ii) Prior to or at the time of each such request, the Borrower

shall furnish to the Bank the documents and other evidence
 required pursuant to paragraph 4 of this Schedule for the
payment or payments in respect of which replenishment is
requested. On the basis of each such request, the Bank
shall, on behalf of the Borrower, withdraw from the Loan
Account and deposit into the Special Account such amount as
the Borrower shall have requested and as shall have been
shown by said documents and other evidence to have been
paid out of the Special Account for eligible expenditures.
All such deposits shall be withdrawn by the Bank from the Loan Account under
the respective eligible Categories, and in the respective equivalent
amounts, as shall have been justified by said documents and other evidence.

4. For each payment made by the Borrower out of the Special Account, the
Borrower shall, at such time as the Bank shall reasonably request, furnish
to the Bank such documents and other evidence showing that such payment was
made exclusively for eligible expenditures.

5. Notwithstanding the provisions of paragraph 3 of this Schedule, the Bank

shall not be required to make further deposits into the Special Account:

(a) if, at any time, the Bank shall have determined that all further
withdrawals should be made by the Borrower directly from the Loan Account
in accordance with the provisions of Article V of the General Conditions and
paragraph (a) of Section 2.02 of this Agreement; or

(b) once the total unwithdrawn amount of the Loan allocated to the
eligible Categories, less the amount of any outstanding special commitment
entered into by the Bank pursuant to Section 5.02 of the General Conditions
with respect to the Project, shall equal the equivalent of twice the amount
of the Authorized Allocation.

Thereafter, withdrawal from the Loan Account of the remaining unwithdrawn

amount of the Loan allocated to the eligible Categories shall follow such
procedures as the Bank shall specify by notice to the Borrower. Such further
withdrawals shall be made only after and to the extent that the Bank shall
have been satisfied that all such amounts remaining on deposit in the
Special Account as of the date of such notice will be utilized in making
payments for eligible expenditures.

6. (a) If the Bank shall have determined at any time that any payment out
of the Special Account: (i) was made for an expenditure or in an amount not
eligible pursuant to paragraph 2 of this Schedule; or (ii) was not justified
by the evidence furnished to the Bank, the Borrower shall, promptly upon
notice from the Bank: (A) provide such additional evidence as the Bank may
request; or (B) deposit into the Special Account (or, if the Bank shall so
request, refund to the Bank) an amount equal to the amount of such payment
or the portion thereof not so eligible or justified. Unless the Bank shall
otherwise agree, no further deposit by the Bank into the Special Account
shall be made until the Borrower has provided such evidence or made such
deposit or refund, as the case may be.

(b) If the Bank shall have determined at any time that any amount
outstanding in the Special Account will not be required to cover further
payments for eligible expenditures, the Borrower shall, promptly upon notice
from the Bank, refund to the Bank such outstanding amount.

(c) The Borrower may, upon notice to the Bank, refund to the Bank all
or any portion of the funds on deposit in the Special Account.

(d) Refunds to the Bank made pursuant to sub-paragraphs 6 (a), (b) and
(c) of this Schedule shall be credited to the Loan Account for subsequent
withdrawal or for cancellation in accordance with the relevant provisions
of this Agreement, including the General Conditions.

SCHEDULE 5

Irrigation Schemes under Part A.1 (b) of the Project

Selection Criteria and Procedures

The Borrower shall, in connection with each sub-project for the

rehabilitation of an Irrigation Scheme referred to under Part A.1 (b) of the
Project, furnish to the Bank a feasibility study of the proposed sub-
project. Sub-projects to be financed out of the proceeds of the Loan shall,
inter alia:

(a) have an internal economic rate of return equivalent to at least

twelve percent (12%);

(b) promote community participation in the rehabilitation, operation

and maintenance of the Irrigation Scheme;

(c) increase rural income;

(d) not have an adverse impact on the environment; and

(e) not involve involuntary relocation of local population.