OFFICIAL DOCUMENTS CREDIT NUMBER 6338-DJ GRANT NUMBER D390-DJ Financing Agreement (Integrated Slum Upgrading Project) between REPUBLIC OF DJIBOUTI and INTERNATIONAL DEVELOPMENT ASSOCIATION CREDIT NUMBER 6338-DJ GRANT NUMBER D390-DJ FINANCING AGREEMENT AGREEMENT dated as of the Signature Date between REPUBLIC OF DJIBOUTI ("Recipient") and INTERNATIONAL DEVELOPMENT ASSOCIATION ("Association") for the purpose of assisting in financing the project described in Schedule 1 to this Agreement ("Project"). The Association has decided to provide this financing on the basis, among other things, of the existence of an adequate refugee protection framework. 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 the Appendix to this Agreement. ARTICLE II - FINANCING 2.01. The Association agrees to extend to the Recipient a grant and a credit, which are deemed as Concessional Financing for purposes of the General Conditions (collectively, "Financing") in the following amounts to assist in financing the Project: (a) an amount equivalent to three million six hundred thousand Special Drawing Rights (SDR 3,600,000) ("Grant"); and (b) an amount equivalent to ten million eight hundred thousand Special Drawing Rights (SDR 10, 800,000) ("Credit"). 2.02. The Recipient may withdraw the proceeds of the Financing in accordance with Section III of Schedule 2 to this Agreement. 2.03. The Maximum Commitment Charge Rate is one-half of one percent (1/2 of 1%) per annum on the Unwithdrawn Financing Balance. 2.04. The Service Charge is three-fourths of one percent (3/4 of 1%) per annum on the Withdrawn Credit Balance 2.05. The Payment Dates are March 15 and September 15 in each year. -2- 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. ARTICLE III - PROJECT 3.01. The Recipient declares its commitment to the objective of the Project. To this end, the Recipient shall carry out the Project through its ARULOS in accordance with the provisions of Article V of the General Conditions and, Schedule 2 to this Agreement. ARTICLE IV - REMEDIES OF THE ASSOCIATION 4.01. The Additional Event of Suspension consists of the following, namely that the Recipient no longer has an adequate refugee protection framework. 4.02. The Additional Event of Acceleration consists of the following, namely that the event specified in Section 4.01 of this Agreement occurs and is continuing for a period of sixty (60) days after notice of the event has been given by the Association to the Recipient. ARTICLE V - EFFECTIVENESS; TERMINATION 5.01. The Additional Condition of Effectiveness consists of the following, namely that the Association is satisfied that the Recipient has an adequate refugee protection framework. 5.02. The Effectiveness Deadline is the date one hundred and 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 ten (10) years after the Signature Date. ARTICLE VI - REPRESENTATIVE; ADDRESSES 6.01. The Recipient's Representative is its Minister of Economy and Finance in charge of Industry. 6.02. For purposes of Section 11.01 of the General Conditions: -3- (a) the Recipient's address is: Ministry of Economy and Finance in charge of Industry. BP 13 Djibouti City Republic of Djibouti (b) the Recipient's Electronic Address is: Facsimile: (253) 21 35 6501/ (253) 2135 8135 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 -4- AGREED as of the Signature Date. REPUBLIC OF DJIBOUTI By: Authorized Representative Name: C" AO41 Title: Date: INTERNATIONAL DEVELOPMENT ASSOCIATION By: Authorized presentative Name: Title: 10 Y & Jw Date: -5- SCHEDULE 1 Project Description The objectives of the Project are to: (a) improve the living conditions for slum dwellers in selected urban areas; and (b) strengthen the capacity of the Recipient's public institutions in charge of implementing the Zero Slum Program ("ZSP"). The Project consists of the following parts: Part 1: Elaboration of the ZSP Strategic Framework and Investment Plan 1. Carrying out studies and technical assistance activities aimed at implementing the ZSP, including, inter alia: (a) Developing the slum upgrading strategy consisting of the strategic framework and accompanying investment plans, as well as defining administrative procedures and communication plans and designing and implementing a monitoring and evaluation scheme for the ZSP, including the acquisition of computer related- equipment, and (b) Developing the Recipient's slum prevention and restructuring policies, including, inter alia: (i) elaborating a framework for environmental and social safeguards and the resettlement policy specific to the ZSP; (ii) developing a five-year operational and financial plan for slum prevention, including a land and low-income housing market assessment; (iii) detailing restructuring and/or upgrading urban plans for a number of slum neighborhoods selected pursuant to the criteria and procedures established in the Project Implementation Manual ("PIM"); (iv) preparing an urban plan for the first urban area dedicated to prevention and resettlement as part of the ZSP, including a feasibility study for the resettlement zone to be developed under Part 2.1(b) of the Project; and (v) creating a land information system to compile the different tenure security types, and populating it with data regarding Balbala Ancien, and eventually, other selected urban areas. 2. Implementing institutional reform and capacity building, including, inter alia: -6- (a) Elaborating studies and required regulating documents for the restructuring of the FDH into the newly created ARULOS, and (b) Building capacity of the main institutions involved in the design and implementation of the ZSP including ARULOS, the Land Directorate, the Urban Planning Directorate, the municipalities and the neighborhood committees, including through the provision of Training (including south-south exchanges) and the acquisition of IT equipment. Part 2: Participatory Uparadin! Investments in Selected Urban Areas 1. Supporting inclusive restructuring of the neighborhood and improving access to services, including: (a) upgrading/constructing public infrastructures aimed at improving access to urban services for residents, including, inter alia, roads (including upgrading/widening the access road to Balbala Ancien), bus stations, drainage, water supply, electricity distribution and street lighting, health units, primary schools, community and youth facilities, and public spaces, and (b) developing a resettlement zone and housing construction, including the construction of a number of urban infrastructures, based on the urban plan to be developed under Part 1.1(b)(iv) of the Project, and housing units based on Resettlement Action Plans prepared as part of the Project. 2. Supporting community engagement and youth employability, including: (a) stationing community facilitators to coordinate neighborhood participation at different project stages; (b) provision of training for community representatives and municipal officials on community engagement; and (c) establishing the Community Development Fund ("CDF"). Part 3: Proeect Management Supporting the implementation, coordination, monitoring and evaluation of the Project, though, inter alia: (a) the development of annual work programs and corresponding procurement plan updates; (b) the management of fiduciary and monitoring activities; (c) the coordination of technical work and the provision of support services to the technical units within the Recipient's relevant ministries/entities; (d) the monitoring of and reporting on the implementation of the Project's activities; (e) the acquisition of office equipment and accounting software; (f) the financing of Operating Costs; and (g) the carrying out of the Project audits. -7- SCHEDULE 2 Project Execution Section I. Implementation Arrangements A. Institutional arrangements 1. The Project Steering Committee (a) The Recipient shall, no later than one month after the Effective Date, establish and thereafter maintain, throughout Project implementation, a Project Steering Committee ("PSC"), with composition, mandate and resources satisfactory to the Association ("Project Steering Committee") to be chaired by the Minister of Economy and Finance and shall include the Minister of Housing, Urbanism and the Environment, the Minister of Interior, the Minister of Budget, the Ministry delegated to the Ministry of Housing, Urbanism and the Environment in charge of Housing, and the Secretary of State for Social Affairs. (b) The Project Steering Committee shall be responsible for project monitoring, approval of work programs and annual budgets, review of annual reports, and support for project implementation and shall meet at least twice a year to review the project implementation progress. 2. Project Coordination Unit (a) In order to ensure prompt and efficient implementation of the Project, the Recipient shall maintain, at all times during the implementation of the Project, a Project Coordination Unit ("PCU") within ARULOS with composition and resources acceptable to the Association and defined in the PIM, to be responsible for day-to-day management of the Project, including: (i) managing the Project at the central level; (ii) coordinating overall project implementation; (iii) ensuring the timely availability of funds transfers, maintaining Project accounts and producing financial reports; and (iv) monitoring and evaluation program implementation and impacts, and reporting results to various stakeholders. (b) No later than three (3) months after the Effective Date, or such other date as agreed by the Association, the PCU shall appoint and thereafter maintain a civil engineer, a procurement specialist, a monitoring and evaluation specialist, a financial management specialist and an environmental and social specialist, all with terms of reference acceptable to the Association and described in the PIM. -8- B. Project Implementation Manual 1. The Recipient: (a) shall ensure that the Project is carried out in accordance with the PIM; and (b) shall not assign, amend, abrogate, or waive, or permit to be assigned, amended, abrogated, or waived, any of its provisions without the prior written agreement of the Association. 2. Notwithstanding the foregoing, in the event of any inconsistency between the provisions of the PIM and those of this Agreement, the provisions of this Agreement shall prevail. C. Annual Work Plans and Budgets 1. No later than November 30 before the end of each calendar year of Project implementation (or one month after the Effective Date for the first year of Project implementation), the Recipient shall prepare or cause to be prepared for the purpose of forwarding to the Association, a draft annual work plan and budget for the Project (including Training and Operating Costs) for the subsequent calendar year of Project implementation, of such scope and detail as the Association shall have reasonably requested. 2. The Recipient shall afford the Association a reasonable opportunity to review such draft annual work plan and budget, and thereafter shall carry out (or cause to be carried out) such annual work plan and budget during such subsequent calendar year as shall have been approved by the Association ("Annual Work Plan and Budget"). Only those activities that are included in an Annual Work Plan and Budget shall be eligible for financing out of the proceeds of the Financing. 3. Any Training proposed to be included in an Annual Work Plan and Budget, shall include, inter alia: (a) particulars of the Training envisaged; (b) the criteria for selection of the personnel to be trained, and such personnel if known; (c) the selection method of the institution or individuals conducting such Training; (d) the institution conducting such Training if identified; (e) the purpose and justification for such Training; (f) the location and duration of the proposed training; and (g) the estimate of the cost of such Training. 4. Annual Work Plans and Budgets may be revised as needed during Project implementation subject to the Association's prior written approval. D. Safeguards 1. The Recipient shall: (i) carry out the Project in accordance with the provisions of the Safeguards Instruments; and (ii) ensure that any contracts for civil works under the Project include codes of conduct for employees, in form and substance -9- acceptable to the Association, detailing measures on the environment, health and safety and measures designed to prevent and respond to HIV/AIDS, gender- based violence, and violence against children. 2. The Recipient shall not amend, abrogate or waive, or permit to be amended, abrogated or waived, any of the Safeguards Instruments or any provision thereof without prior approval in writing by the Association, subject to the same approval requirements as applicable to the adoption of the said instruments. 3. If any supplemental social and environmental safeguards instrument is required under any of the Safeguards Instruments, the Recipient shall: (a) (i) prepare such supplemental social and environmental safeguards instrument in accordance with the applicable Safeguards Instrument; (ii) carry out consultations upon such supplemental social and environmental safeguards instrument; (iii) furnish such supplemental social and environmental safeguards instrument to the Association for review and approval; and (iv) thereafter adopt such supplemental social and environmental safeguards instrument prior to implementation of the activities, and (b) thereafter take such measures as shall be necessary or appropriate to ensure full compliance with the requirements of such supplemental social and environmental safeguards instrument. 4. The Recipient shall ensure that all technical assistance activities under the Project, application of whose results would have environmental or social implications, shall only be undertaken pursuant to terms of reference reviewed and found satisfactory by the Association, such terms of reference to ensure that the technical assistance takes into account, and calls for application of the applicable Association's environmental and social safeguards policies. 5. If any activity under the Project would involve Affected Persons, the Recipient shall: (a) ensure that no physical or economic displacement or limitation of access to natural resources shall occur before resettlement measures under a supplemental social and environmental safeguards instrument prepared in accordance with the RPF, including, in the case of either physical or economic displacement, full payment to Affected Persons of fair compensation at replacement value and of other assistance required for relocation and livelihoods restoration, have been implemented; and (b) provide from its own resources, any financing required for any measures under sub-paragraph (a) above, including but not limited to any costs associated with land acquisition required for the Project. - 10 - 6. Without limitation upon its other reporting obligations under Section II. of this Schedule 2, the Recipient shall take all measures necessary to regularly collect and compile, and submit to the Association, as part of the project reports, and promptly in a separate report whenever the circumstances warrant, information on the status of compliance with the Safeguards Instruments, providing details of: (a) measures taken in furtherance of the Safeguards Instruments including, as the case may be, any supplemental social and environmental safeguards instrument; (b) conditions, if any, which interfere or threaten to interfere with the smooth implementation of the Safeguards Instruments including, as the case may be, any supplemental social and environmental safeguards instrument; and (c) remedial measures taken or required to be taken to address such conditions including but not limited to the implementation of a grievance redress mechanism. E. Provisions of Sub-grants 1 . For purposes of implementing Part 2.2(c) of the Project, the Recipient, through ARULOS, shall, upon selection of a proposed community activity pursuant to the criteria and procedures established in the PIM, enter into a standard agreement with the Eligible Local Association ("Sub-grant Agreement") under terms and conditions acceptable to the Association, including: (a) the amount to be provided in the form of a Sub-grant to the Eligible Local Association, its terms and conditions and a disbursement schedule; (b) the obligation of the Eligible Local Association to: (i) procure the goods or services to be financed under the Sub-grant Agreement in accordance with the procedures set forth in the PIM; (ii) carry out its activities in compliance with the Anti-Corruption Guidelines, and, when applicable, prepare an environmental and social management plan in accordance with the ESMF, in form and substance satisfactory to the Association, and to implement said activities in accordance with the relevant environmental and social management plan; (iii) report to ARULOS on the progress of the implementation of the activity financed with the Sub-grant and to enable ARULOS, the Recipient and the Association, if the Association shall so - 11 - request, to visit the facilities where the financed activities are implemented and administered; (iv) maintain records and accounts for expenditures incurred and financed with the Sub-grant, and make available such documentation to ARULOS, the Recipient and the Association, if the Association shall so request; and (c) the right of ARULOS to suspend, cancel or request a refund of the Sub- grant or a portion thereof in case of the failure by the Eligible Local Association to perform any of its obligations under the Sub-grant Agreement. Section II. Project Monitoring, Reporting and Evaluation The Recipient shall furnish to the Association each Project Report not later than forty-five (45) days after the end of each calendar quarter, covering the calendar quarter. Section III. Withdrawal of the Proceeds of the Financing A. General Without limitation upon the provisions of Article II of the General Conditions and in accordance with the Disbursement and Financial Information Letter, the Recipient may withdraw the proceeds of the Financing to: (a) finance Eligible Expenditures; and (b) repay the Preparation Advance; in the amount allocated and, if applicable, up to the percentage set forth against each Category of the following table: Percentage of Amount of the Amount of the Expenditures to Credit Allocated Grant be Financed (expressed in (expressed in (inclusive of Category SDR) SDR) Taxes) (1) Works, goods, 10,670,000 2,600,000 100% non-consulting services (including Training), and consulting services under Parts 1, 2.1, 2.2(a), 2.2(b), and 3 of the Project and Operating -12- Costs (2) Sub-grants under 130,000 100% Part 2.2(c) of the Project (3) Refund of 1,000,000 Amount payable Preparation pursuant to Section Advance 2.07(a) of the General Conditions TOTAL AMOUNT 10,800,000 3,600,000 B. Withdrawal Conditions; Withdrawal Period 1. Notwithstanding the provisions of Part. A of this Section, no withdrawal shall be made for payments made prior to the Signature Date, except that withdrawals up to an aggregate amount not to exceed $100,000 may be made for payments made prior to the Signature date but on or after the date twelve (12) months prior to the Signature Date, for Eligible Expenditures under Category 1. 2. The Closing Date is December 31, 2023. - 13 - SCHEDULE 3 Repayment Schedule Date Payment Due Principal Amount of the Credit repayable (expressed as a percentage) * On each March 15 and September 15: commencing March 15, 2029 to and including 1% September 15, 2038 commencing March 15, 2039 to and including 2% September 15, 2058 * 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. - 14 - APPENDIX Definitions 1. "Affected Persons" means persons who on account of the execution of the Project, have experienced or would experience direct economic and social impacts caused by: (a) the involuntary taking of land, resulting in: (i) relocation or loss of shelter; (ii) loss of assets or access to assets; or (iii) loss of income sources or means of livelihood, whether or not such persons must move to another location; or (b) the involuntary restriction of access to legally designated parks and protected areas, resulting in adverse impacts on the livelihood of such persons. 2. "Annual Work Plans and Budgets" means each annual work plan, together with the related budget, for the Project prepared by the Recipient and approved by the Association in accordance with the provisions of Section I.C of Schedule 2 to this Agreement. 3. "Anti-Corruption Guidelines" means, for purposes of paragraph 5 of the Appendix to the General Conditions, the "Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants", dated October 15, 2006 and revised as of July 1, 2016. 4. "ARULOS" means Agence de Rihabilitation Urbaine et du Logement Social, the Agency for Urban Renovation and Social Housing, placed under the responsibility of the Recipient's Ministry delegated to the Ministry of Housing, Urbanism and the Environment in charge of Housing established pursuant to the Recipient's Law No. 9/AN/18/8me, published in the Recipient's Official Gazette on June 28, 2018. 5. "Balbala Ancien" means the area of Balbala located on the Eastern part of Balbala North, just North of the National Road 1, as which spatial limit is provided in the strategy document of the ZSP. 6. "Balbala North" means the area of Balbala located in the northern of Balbala. 7. "Balbala South" means the area of Balbala located in the southern of Balbala. 8. "Category" means a category set forth in the table in Section III.A of Schedule 2 to this Agreement. 9. "Community Development Fund" means a fund established as part of the Project for small grants for community-type activities executed within the neighborhood covered under Part 2, which will be eligible to local associations. - 15- 10. "DATUH" means Territorial Development, Urban Planning, and Housing Department within the Recipient's Ministry of Housing, Urbanism and the Environment. 11. "Eligible Local Association" means a legally established local association which operates in the Recipient's territory and meets the eligibility criteria set forth in the PIM for implementing a community activity under Part 2.2(c) of the Project. 12. "ESIA" means the Environmental and Social Impact Assessment, including an Environmental and Social Management Plan, prepared and adopted by the Recipient, disclosed in-country on July 10, 2018, and on the Association's website on June 26, 2018, and approved by the Association, setting out, inter alia: (a) the mitigation measures to monitor, reduce, offset or compensate any environmental and/or negative impact that may arise from the construction works of the upgrading/widening of the access road to Balbala Ancien under Part 2.1(a) of the Project; and (b) the institutional arrangements, budget and monitoring and evaluation systems to implement, monitor and evaluate said mitigation measures; as the ESIA/ESMP may be amended from time to time with the prior written consent of the Association. 13. "ESMF" means the Environmental and Social Management Framework prepared and adopted by the Recipient disclosed in-country on July 10, 2018, and on the Association's website on June 26, 2018, approved by the Association, setting out the modalities to be followed in assessing the potential adverse environmental and social impacts of activities under Part 2 of the Project (including impacts on natural habitat, forests, and physical cultural resources and risks of gender-based violence and sexual exploitation and abuse) and the measures to be taken to offset, reduce or mitigate such adverse impacts (including measures that endeavor to prevent and respond to gender-based violence and sexual exploitation and abuse), as well as for the preparation of environmental and social management plans, when applicable, and a grievance redress mechanism, as such framework may be amended by the Recipient from time to time, with the prior written agreement of the Association. 14. "FDH" means "Fonds de l'Habitat" the Recipient's public housing operator, established within the Recipient's Ministry delegated to the Ministry of Housing, Urbanism and the Environment in charge of Housing. 15. "General Conditions" means the "International Development Association General Conditions for IDA Financing, Investment Project Financing", dated July 14, 2017. 16. "Ministry delegated to the Ministry of Housing, Urbanism and the Environment in charge of Housing" means the Recipient's Ministry delegated to the Ministry - 16- of Housing, Urbanism and the Environment in charge of Housing, or any successor thereto. 17. "Operating Costs" means the necessary and reasonable incremental expenses based on annual budgets approved by the Association, incurred by the Recipient on account of Project implementation, management, and monitoring, including office supplies and consumables; communication costs; operation and maintenance of office, vehicles and equipment; per diem and national and international travel costs and accommodations for Project staff; reasonable bank charges; and allowances and salaries of the Project's contractual staff (but excluding the salaries of the Recipient's civil/public servants). 18. "Preparation Advance" means the advance referred to in Section 2.07(a) of the General Conditions, granted by the Association to the Recipient pursuant to the letter agreement signed on behalf of the Association on July 16, 2017, and on behalf of the Recipient on July 17, 2017. 19. "Procurement Regulations" means, for purposes of paragraph 87 of the Appendix to the General Conditions, the "World Bank Procurement Regulations for IPF Borrowers", dated July 2016, revised November 2017. 20. "Project Implementation Manual" or "PIM" means the project implementation manual referred to in Section I.B of Schedule 2 to this Agreement, as the same may be amended from time to time with the prior written agreement of the Association. 21. "Project Coordination Unit" or "PCU" means a project coordination team to be maintained within ARULOS under the Project in accordance with Section I.A.2 of Schedule 2 to this Agreement. 22. "Project Steering Committee" means "PSC" each means the steering committee for the Project referred to in Section I.A. 1 of Schedule 2 to this Agreement. 23. "RAP" means the Resettlement Action Plan in form and substance acceptable to the Association prepared and adopted by the Recipient and approved by the Association, disclosed in-country on July 10, 2018, and on the Association's website on July 10, 2018, which outlines the policies and procedures to be implemented for the upgrading/widening of the access road under Part 2.1(b) of the Project to mitigate the potentially negative impacts on the livelihoods, assets and land of the Affected Persons, as the said plan may be amended and/or supplemented from time to time with the prior written consent of the Association. 24. "Resettlement Policy Framework" or "RPF" means the document in form and substance acceptable to the Association prepared and adopted by the Recipient dated and disclosed in-country on July 10, 2018, and on the Association's -17- website on July 10, 2018, which outlines the policies and procedures to be implemented in the event that specific activities implemented under Part 2 of the Project have potentially negative impacts on the livelihoods, assets and land of the affected population, including the procedures for preparation and implementation of resettlement action plans, when applicable, as the said framework may be amended and/or supplemented from time to time with the prior written consent of the Association. 25. "Safeguards Instruments" means the ESIA/ESMP, the ESMF, the RPF, the RAP, and any supplemental social and environmental safeguards instruments. 26. "Sub-grant" means non-reimbursable contribution in an amount to be defined by a resource allocation procedure set forth in the Project Implementation Manual, made out of the Financing to any given Eligible Local Association to assist in the implementation of a community activity under Part 2.2(c) of the Project. 27. "Sub-grant Agreement" means the agreement referred to in Section I.E. of Schedule 2 to this Agreement. 28. "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. 29. "Training" means the reasonable costs of training under the Project, based on the Annual Work Plans and Budget referred to in Section I.C of Schedule 2 to this Agreement as approved by the Association, and attributable to national and international seminars, workshops, and study tours, along with national and international travel and subsistence allowances for training participants, services of trainers, rental of training facilities, preparation and reproduction of training materials, and other activities directly related to course preparation and implementation. 30. "Zero Slum Program" or "ZSP" means the Recipient's proposed program to implement its slum upgrading policy.