OFFICIAL DOCUMENTS GRANT NUMBER D454-MG Financing Agreement (Fiscal Sustainability and Energy Development Policy Financing) between REBUBLIC OF MADAGASCAR and INTERNATIONAL DEVELOPMENT ASSOCIATION GRANT NUMBER D454-MG FINANCING AGREEMENT AGREEMENT dated as of the Signature Date between the REPUBLIC OF MADAGASCAR ("Recipient") and the INTERNATIONAL DEVELOPMENT ASSOCIATION ("Association") for the purpose of providing financing in support of the Program, as defined in the Appendix to this Agreement. The Association has decided to provide this financing 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 A of Schedule I to this Agreement; and (ii) the Recipient's maintenance of an adequate macroeconomic policy framework. The Recipient and the Association therefore, 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 the Appendix to this Agreement. ARTICLE II - FINANCING 2.01. The Association agrees to extend to the Recipient a grant, which is deemed as Concessional Financing for purposes of the General Conditions, in an amount equivalent to seventy-one million six hundred thousand Special Drawing Rights (SDR 71,600,000) ("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. 2.03. The Payment Dates are April 15 and October 15 in each year. 2.04. The Payment Currency is Dollar. 2.05. 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. -2- 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 I to this Agreement. ARTICLE IV - EFFECTIVENESS; TERMINATION 4.01. The Additional Condition of Effectiveness consists of the following, namely, that 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. 4.02. The Effectiveness Deadline is the date ninety (90) days after the date of this Agreement. 4.03. 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 date of this Agreement. ARTICLE V - REPRESENTATIVE; ADDRESSES 5.01. The Recipient's Representative is its Minister of Economy and Finance 5.02. For purposes of Section 10.01 of the General Conditions: -3- (a) The Recipient's address is: Ministry of Economy and Finance PO Box 61 Antananarivo 101 Republic of Madagascar (b) The Recipient's Electronic Address is: tresor(gmoov.mg, 5.03. For purposes of Section 10.01 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 -4- AGREED as of the Signature Date. ADAGASCAR Authorized Representative Name: RANDRIAMANDRATO Richard Title[" Ministre de I'Economle et des Finanes Date:Å Y - (1 INTERNATIONAL DEVELOPMENT ASSOCIATION By: horized Rresentative Nane Cort evers Country Manager for Madagascar Title: Date: -5- SCHEDULE 1 Program Actions; Availability of Financing Proceeds Section I. Actions Under the Program A. Actions Taken Under the Program The actions taken by the Recipient under the Program include the following: 1. The Recipient has, through its Ministry of Economy and Finance, issued: (a) Dicret no2018- 589 fixant les modalitis et procidures d'octroi de garantie sur emprunt du Gouvernement Central; and (b) Dicret no2018-590 portant sur les modalitis et conditions d'octrois de prHts directs et de pr&is ritrocidis par le Gouvernement Central, said decrees establishing the institutional basis for assessing and awarding guarantees, and requiring that all requests for government loans, guarantees and on-lending arrangements are objectively analyzed through a credit risk-based assessment. 2. The Recipient has, through its Ministry of Economy and Finance: (a) issued an Arrtj n'1 7975/2018 MFBfixant la description des attributions et /'organisation des Services rattachis aux Dipartements du Ministere des Finances et du Budget, an Arr8t6 that establishes a register to consolidate information on state majority-owned State-Owned Enterprises (SOE) liabilities, including debt, guarantees, and obligations for Public Private Partnership (PPP) projects and; (b) published on the website of the Ministry of Economy and Finance, a debt sustainability analysis for the Fiscal Year (FY) 2018, all to support improved decision-making processes on the management of debt and public sector liabilities. 3. The Recipient has, through its Ministry of Economy and Finance: (a) published on the website of the Ministry of Economy and Finance the audited financial statements for all state majority-owned SOEs; and (b) issued Dicret no2018-689 portant obligation de publicitj des comptes annuels des socijtis commerciales a participation majoritaire publique, requiring all state majority-owned SOEs to publish independently audited financial statements within six (6) months of the end of each FY, commencing in FY 2019, all to increase transparency on the financial statements and performance of all state majority-owned SOEs. 4. The Recipient has, through the supervisory board of Jiro sy Rano Malagasy (JIRAMA): (a) issued Resolution no. 23/2018 portant sur I'approbation des Termes de Refirence concernant la mise en place du Comitj d'Audit de la Socijtj au sein de son Conseil d'administration, said resolution approving the establishment of an audit committee to provide fiduciary oversight and regularly -6- report to the board on the JIRAMA's financial recovery; and (b) institutionalized the semi-annual publication of a detailed breakdown of the JIRAMA 'liabilities. 5. The Recipient has, through its Ministry of Energy, Water and Hydrocarbons, issued Decret no2018-692 Portant modalits de passation de contrats pour les investissements dans la production d'dnergie dlectrique supirieure ai 5MW, a decree to restrict the award of concessions and power purchase agreements for private power generation with a capacity over 5 MW to projects that are ready for contract award and that are part of the Recipient's "Master Plan for the Least- Cost Development of the Power Sector". 6. The Recipient has, through the supervisory board and the Chief Executive Officer of JIRAMA respectively, issued two letters no002/PCA/18 and no23/DG/2019 to institutionalize regular targeted metering audits of key customers, and has mandated JIRAMA to include targets for commercial loss reduction in performance contracts for its regional director, in order to reduce commercial losses and incentivize energy efficiency. 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: Amount of the Financing Allocated Allocations (expressed in SDR) (1) Single Withdrawal Tranche 71,600,000 TOTAL AMOUNT 71,600,000 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. Notwithstanding the provisions of Section 2.03 of the General Conditions: -7- (a) the Recipient shall open, prior to furnishing to the Association the first request for withdrawal from the Financing Account, and thereafter maintain the following two dedicated accounts on terms and conditions satisfactory to the Association: (i) a deposit account in US Dollars ("Foreign Currency Deposit Account"); and (ii) a deposit account in Madagascar Ariary ("Local Currency Deposit Account"); and (b) all withdrawals from the Financing Account shall be deposited by the Association into the Foreign Currency Dedicated Account. Upon each deposit of an amount of the Financing into the Foreign Currency Dedicated Account, the Recipient shall deposit an equivalent amount into the Local Currency Dedicated Account. 2. 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 Foreign Currency Dedicated Account; (b) the details of the account to which the Ariary 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 Foreign Currency Dedicated Account. E. Audit. Upon the Association's request, the Recipient shall: 1. have the Dedicated Accounts audited by independent auditors acceptable to the Association, in accordance with consistently applied auditing standards acceptable to the Association; 2. furnish to the Association as soon as available, but in any case, not later than four months after the date of the Association's request for such audit a certified copy of the report of such audit, of such scope and in such detail as the Association shall reasonably request, and make such report publicly available in a timely fashion and in a manner acceptable to the Association and 3. furnish to the Association such other information concerning the Dedicated Accounts and their audit as the Association shall reasonably request. F. Closing Date. The Closing Date is December 31,2020. -8- APPENDIX Definitions 1. "Ariary" means the currency of the Recipient. 2. "Dedicated Accounts" means both the Foreign Currency Dedicated Account and the Local Currency Dedicated Account". 3. "Foreign Currency Dedicated Account" means the account referred to in Section II.D.1(b) of Schedule I to this Agreement. 4. "Fiscal Year" or "FY" means the fiscal year of the Recipient which commences on January 1 and ends on December 31 of each year. 5. "Jiro sy Rano Malagasy" or "JIRAM4 means the Recipient's state-owned electric utility and water services company established by ordonnance N. 075- 027 October, 17 1975, establishing the company Jiro sy Rano Madagascar (JIRAMA) and setting the status of the company. 6. "General Conditions" means the "International Development Association General Conditions for IDA Financing, Development Policy Financing", dated December 14, 2018. 7. "Local Currency Dedicated Account" means the account referred to in Section II.D.1(b) of Schedule I to this Agreement. 8. "Master Plan for the Least-Cost Development of the Power Sector" means the report of the Recipient titled "Elaboration du plan de Diveloppement de /'Electricitd au Moindre Coit (PDMC)" dated November 2018. 9. "Ministry of Economy and Finance" means the Recipient's ministry responsible for finance, or any successor thereto. 10. "Ministry of Energy, Water and Hydrocarbons" means the Recipient's ministry responsible for energy, or any successor thereto. 11. "MW" means Megawatt. 12. "Program" means the program of objectives, policies, and actions set forth or referred to in the letter dated March 25, 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 I to this Agreement, and actions to be taken consistent with the program's objectives. -9- 13. "Single Withdrawal Tranche" means the amount of the Financing allocated to the category entitled "Single Withdrawal Tranche" in the table set forth in Section II.B of Schedule 1 to this Agreement. 14. "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. 15. "State Owned Enterprises" or "SOEs" means wholly or partially government- owned companies or enterprises established and operating pursuant to the laws of the Recipient.