On the ratification of the Loan Agreement (Ordinary Operations) (Support for Countercyclical Development) between the Republic of Kazakhstan and the Asian Development Bank

Home / RLA / On the ratification of the Loan Agreement (Ordinary Operations) (Support for Countercyclical Development) between the Republic of Kazakhstan and the Asian Development Bank

The Law of the Republic of Kazakhstan dated December 28, 2015 No. 441-V SAM

 To ratify the Loan Agreement (Ordinary Operations) (Support for Countercyclical Development) between the Republic of Kazakhstan and the Asian Development Bank, signed in Astana on November 18, 2015.

President

Republic of Kazakhstan

N. NAZARBAYEV

LOAN NUMBER 3272-KAZ

LOAN AGREEMENT

(Normal operations)

(Support for countercyclical development)

between

BY THE REPUBLIC OF KAZAKHSTAN

and

BY THE ASIAN DEVELOPMENT BANK

dated November 18, 2015

 KAZ 49083

LOAN AGREEMENT (Normal operations)

Loan Agreement dated November 18, 2015 between the Republic of Kazakhstan (hereinafter referred to as the "Borrower") and the Asian Development Bank (hereinafter referred to as the "ADB")

Taking into account the following:

 (A) ADB received a development policy letter from the Borrower dated July 24, 2015 (hereinafter referred to as the "Development Policy Letter"), which outlines certain objectives, policies, and actions that shape the Borrower's countercyclical development costs, as described in Appendix 1 to this Loan Agreement (hereinafter referred to as "Countercyclical Support development" or "Program");

(B) The Borrower has requested a loan from ADB for the purposes of the Program; and

(C) ADB has agreed to provide the Borrower with a loan from ADB's regular capital resources on the terms and conditions set forth in this Agreement;

Taking into account the above, the parties to this Agreement have agreed on the following:

ARTICLE I Loan rules; Definitions

Section 1.01. All provisions of the Loan Rules for Ordinary Operations applicable to loans at the London Interbank Rate allocated from ADB's Ordinary Capital Resources dated July 1, 2001 (hereinafter referred to as the Loan Rules) are hereby deemed to apply to this Loan Agreement with the same force and effect as if they were fully set out in the text of this Agreement, however, subject to the following amendments:

(a) Section 2.01(49) has been deleted and replaced by the following:

"49. The term "Program" means a program for which ADB has agreed to provide a loan as described in the Loan Agreement, and its description may be changed from time to time by agreement between ADB and the Borrower.";

(b) the term "Project" will be replaced by the term "Program" wherever it is mentioned in the Loan Terms;

"51. The term "Program Executive Agency" means the organization or entities responsible for the implementation of the Program as provided for in the Loan Agreement.";

(d) the term "Project Executive Agency" is replaced by the term "Program Executive Agency" wherever it is mentioned in the Loan Terms and Conditions;

(e) Section 3.03 has been deleted and replaced by the following:

"Reservation fee; Credit.

(a) The Borrower undertakes to pay a reservation fee for the outstanding loan amount at the rate and conditions stipulated in the Loan Agreement.

(b) ADB undertakes to provide the Borrower with a loan at the rate stipulated in this Loan Agreement, and such loan will remain fixed until the end of the loan term. ADB undertakes to apply the loan amount to the interest payable by the Borrower.";

(f) Section 3.06 has been deleted and replaced by the following:

"Compensation.

(a) Upon each notification to ADB that the fixed spread applicable to new loans will be reduced, ADB undertakes to provide refunds to each Borrower with an outstanding loan to which a higher fixed spread applies. The amount of the refund will be determined by multiplying (i) the difference (expressed as an annual percentage value) between the fixed spread applicable to the outstanding loan and the fixed spread applicable to new loans by (ii) the principal amount of the outstanding loan, on which the Borrower ensures interest payments for all interest periods starting from and after the effective date of the reduced fixed spread applicable to new loans.

(b) Upon each notification from ADB that its calculations of the financing margin in respect of any loan currency (or approved currency) in any half-year have resulted in savings for ADB, ADB undertakes to reimburse the Borrower. The amount of the refund will be determined by multiplying (i) the margin of the financing cost (expressed as an annual percentage) by (ii) the principal amount of the loan, for which the Borrower undertakes to pay interest during the interest period beginning immediately after the half-year for which the financing margin was calculated. ADB undertakes to apply the refund amount to the interest payable by the Borrower during the interest period beginning immediately after the half-year for which the financing margin was calculated";

(g) Section 3.07 has been deleted and replaced by the following:

"An additional amount.

(a) After each notification to ADB that the fixed spread applicable to new loans will be increased, each Borrower with an outstanding loan to which a lower fixed spread applies undertakes to pay an additional amount to ADB. The amount of this additional amount will be determined by multiplying (i) the difference (expressed as an annual percentage value) between the fixed spread applicable to new loans and the fixed spread applicable to the outstanding loan by (ii) the principal amount of the outstanding loan, on which the Borrower undertakes to pay interest for all interest periods starting from from and after the effective date of the increased fixed spread applicable to new loans.

(b) After each notification to ADB that its calculations of the financing margin in respect of any loan currency (or approved currency) in any half-year have resulted in additional costs incurred by ADB, the Borrower shall ensure that the additional amount is paid to ADB. The amount of this additional amount will be determined by multiplying (i) the margin of the financing cost (in the form of an annual percentage value) by (ii) the principal amount of the loan, for which the Borrower undertakes to pay interest during the interest period beginning immediately after the half-year for which the financing margin was calculated. ADB undertakes to add the additional amount to the interest payable by the Borrower during the interest period beginning immediately after the half-year for which the financing margin was calculated.

Section 1.02. In each case of use in this Loan Agreement, unless otherwise required by the context, the following terms, defined in the Loan Terms, have the corresponding meanings set forth in them. The additional terms used in this Loan Agreement have the following meanings:

 (a) "Partnership Financing" means funds in local currency received from the Program loan funds specified in paragraph 4 of Annex 4 to this Loan Agreement;

 (b) "Deposit Account" means the account specified in paragraph 3 of Annex 3 to this Loan Agreement;

(c) "Eligible imports" means all of the Borrower's imports during the relevant period, minus the following imports during the same period:

(i) Imports from non-ADB member countries;

 (ii) the import of ineligible items specified in the appendix to Annex 3 to this Loan Agreement; and

(iii) imports financed by official international or bilateral aid agencies or through any other loans or grants granted by ADB;

(d) "Eligible items" means Eligible Items of imports and services in connection with the delivery and installation of such imports;

 (e) "First tranche" means a portion of the loan funds in the amount of five hundred million US dollars (500 million US dollars) to be withdrawn in accordance with and under the terms of the provisions of paragraph 4 of Annex 3 to this Loan Agreement;

(f) "Loan Disbursement Handbook" means the ADB Loan Disbursement Handbook (dated 2015, as amended periodically);

(g) "MF" means the Borrower's Ministry of Finance;

(h) "National Bank" means the National Bank of the Borrower or any of its successors;

(i) "Program Executing Agency", for the purposes and in accordance with the meaning of the Loan Rules, means the Ministry of Finance or any of its successors acceptable to ADB, which is responsible for the implementation of the Program; and

 (j) "Second tranche" means the balance of the loan funds remaining in the loan account after the use of the First Tranche, subject to withdrawal in accordance with and in accordance with the provisions of paragraph 5 of Annex 3 to this Loan Agreement.

ARTICLE II Loan

 Section 2.01. (a) ADB agrees to provide the Borrower with a loan from ADB's ordinary capital resources in the amount of one billion US dollars (US$ 1000000000), and this amount may be converted periodically as part of the conversion in accordance with the provisions of Section 2.06 of this Loan Agreement.

(b) The loan assumes a principal repayment period of two (2) years and a grace period as defined in paragraph (c) of this section.

 (c) The term "grace period" used in paragraph (b) of this section means the period preceding the first payment date for repayment of the principal amount of the loan in accordance with the repayment schedule set out in annex 2 to this Loan Agreement.

Section 2.02. The borrower will pay interest to ADB on the principal amount of the loan, withdrawn and outstanding, periodically at the rate of each interest period equal to the amount of:

(a) LIBOR; and

 (b) 2.00% according to section 3.02 of the Loan Rules.

Section 2.03. The borrower will pay a reservation fee of 0.75% per year for the outstanding loan amount. This fee will be charged for the full loan amount (minus amounts that have been withdrawn periodically), starting from the date sixty (60) days after the date of signing this Loan Agreement.

Section 2.04. Interest and other loan payments are payable once a half-year on February 15 and August 15 of each year.

 Section 2.05. The Borrower will pay the principal amount of the loan withdrawn from the loan account in accordance with the provisions of Appendix 2 to this Loan Agreement.

Section 2.06. (a) The Borrower may at any time request any of the following loan terms conversions in order to ensure sound debt management:

(i) changing the currency of the entire principal amount of the loan or any part of it, both withdrawn and outstanding, as well as not withdrawn, to the approved currency;

 (ii) a change in the base interest rate applicable to the entire principal amount of the loan, as well as any portion of it withdrawn and outstanding, from a floating to a fixed interest rate, or vice versa; and

(iii) setting limits on the floating interest rate applicable to the entire principal amount of the loan, as well as any part of it withdrawn and outstanding, by setting a maximum or minimum of the specified floating interest rate.

(b) Any conversion requested in accordance with paragraph (a) of this section, approved by ADB, will be considered a "Conversion" as defined in section 2.01(6) of the Loan Rules, and must take effect in accordance with the provisions of article V of the Loan Rules and the Conversion Guidelines.

ARTICLE III Use of loan funds

Section 3.01. The Borrower ensures that the loan funds are used to finance Program costs in accordance with the provisions of this Loan Agreement.

 Section 3.02. Loan funds must be withdrawn in accordance with the provisions of Annex 3 to this Loan Agreement, and this annex may be amended from time to time by agreement between ADB and the Borrower.

Section 3.03. The closing date for withdrawal of funds from the loan account for the purposes of Section 9.02 of the Loan Terms is December 31, 2016, or another date that may be agreed from time to time between the Borrower and ADB.

ARTICLE IV Special conditions

Section 4.01. (a) The Borrower ensures that the Program is implemented with due responsibility and efficiency and in accordance with sound applicable technical, financial, business and development practices.

 (b) During the implementation of the Program, the Borrower fulfills or assigns the fulfillment of all obligations set out in Appendix 4 to this Loan Agreement.

Section 4.02. In addition to the loan funds, the borrower will provide timely funds, facilities, services and other resources necessary for the implementation of the Program.

Section 4.03. The Borrower ensures that all actions of its departments and organizations in relation to the implementation of the Program are carried out and coordinated in accordance with sound administrative methods and procedures.

Section 4.04. (a) The Borrower will maintain or ensure that appropriate records and documents are maintained to identify Eligible Loan-funded Items and determine the progress of the Program.

(b) The Borrower will provide an opportunity for ADB representatives to verify any relevant records and documents specified in paragraph (a) of this section.

Section 4.05. (a) As part of the reporting and information specified in Section 7.04 of the Loan Terms, the Borrower will provide or ensure that ADB provides all such reports and information reasonably requested by ADB related to (i) Partner Financing and its use; and (ii) Program implementation, including the achievement of objectives and the implementation of actions provided for in the Program.

 (b) Without limiting the general meaning of Section 7.04 of the Loan Rules, the Borrower provides or ensures that ADB provides annual reports on the implementation of the Program, as well as on the achievement of the goals and actions outlined in the Development Policy Letter.

ARTICLE V Entry into force

Section 5.01. The date after the expiration of thirty (30) days after the date of signing this Loan Agreement is considered to be the effective date of the Loan Agreement for the purposes of Section 10.04 of the Loan Rules.

ARTICLE VI Other provisions

Section 6.01. The Borrower's Minister of Finance acts as the Borrower's representative for the purposes of Section 12.02 of the Loan Rules.

Section 6.02. The following details are provided for the purposes of Section 12.01 of the Loan Terms:

For the Borrower

Ministry of Finance

11 Pobedy Avenue

Astana, 010000,

Republic of Kazakhstan

Fax: +7 (7172) 717785

For the ADB

Asian Development Bank

6 ADB Avenue

 Mandaluyong City

 1550 Metro Manila

Philippines

Fax: (632) 636-2444

(632) 636-2424

In support of the above, the parties to this Agreement, represented by their authorized representatives, have ensured that this Loan Agreement is signed with appropriate signatures on the date and year indicated above and delivered to ADB headquarters.

 Republic of Kazakhstan

______________________________

[Authorized representative]

 Asian Development Bank

______________________________

[Authorized representative]

APPENDIX 1 Program Description

1. The main goal of the Program is to maintain the financial stability of the Borrower. The Program includes the implementation of measures aimed at (a) supporting the development of the non-oil and private sectors, (b) increasing employment, and (c) maintaining priority spending on job preservation and social spending. A more detailed description of the Program is provided in the Development Policy Letter.

2. It is expected that the funds of this loan will be allocated in two equal tranches and used until December 31, 2016.

APPENDIX 2 Loan repayment schedule (Countercyclical Development Support Program)

 1. The following table shows the repayment dates of the loan principal and the percentage of the total loan principal payable on each repayment date of the loan principal (regular installment). If the loan funds are fully disbursed on the first payment date for repayment of the principal amount of the loan, the principal amount of the loan payable by the Borrower on each payment date for repayment of the principal amount of the loan will be determined by ADB by multiplying: (a) the total principal amount of the loan withdrawn and outstanding at the time of the first payment date for repayment of the principal amount loan amounts; (b) a regular installment for each payment date in repayment of the principal amount of the loan, and such repayment amount will be changed, if necessary, to deduct any amounts specified in paragraph 4 of this annex to which currency conversion applies.

Payment date The next installment

(expressed in %)

February 15, 2019 25000000

August 15, 2019 25000000

February 15, 2020 25000000

August 15, 2020 25000000

Total 100000000

2. If the loan funds have not been fully disbursed before the first payment date for repayment of the loan principal, the loan principal amount payable by the Borrower on each payment date for repayment of the loan principal will be determined as follows:

 (a) to the extent that any loan funds that should have been disbursed on the first payment date will repay the principal amount of the loan, the Borrower will repay the amount withdrawn and outstanding on that date in accordance with paragraph 1 of this annex.;

 (b) any withdrawal made after the first date of repayment of the principal amount of the loan shall be repaid on each date of repayment of the principal amount of the loan falling after the date of the withdrawal, in amounts determined by ADB by multiplying the amount of each withdrawal by a fraction, the numerator of which will be the initial installment specified in the table in paragraph 1 of this annex, for the above-mentioned payment date for repayment of the principal amount of the loan (initial installment), and the denominator will be the sum of all remaining initial regular contributions for the dates of payments to repay the principal amount of the loan that fall on or after this date, while these amounts of payments will be changed, if necessary, to deduct any amounts specified in paragraph 4 of this annex, to which currency conversion applies.

3. Funds withdrawn within two calendar months prior to any of the payment dates for repayment of the principal amount of the loan, solely for the purpose of calculating the principal amounts payable on any day of repayment of the principal amount of the loan, should be considered withdrawn and outstanding at the time of the second payment date for repayment of the principal amount of the loan after the withdrawal date, and this amount is due due on each payment date for repayment of the principal amount of the loan, starting from the second payment date for repayment of the principal amount of the loan after the withdrawal date.

4. Regardless of the provisions of paragraphs 1 and 2 of this annex, when converting the currency of the entire principal withdrawn loan amount or any part thereof into an approved currency, the amount of funds converted into the aforementioned approved currency, which is due to be repaid on any of the repayment dates of the principal amount during the conversion period, will be determined by ADB by multiplying this amount in the currency its denomination immediately before the aforementioned conversion, or (i) to a currency exchange rate reflecting the amounts in the specified approved currency, payable to ADB as part of a currency hedging transaction related to the aforementioned conversion; or (ii) as decided by ADB in accordance with the guidelines for conversion to the exchange rate component of the established rate.

 5. If the principal amount of the loan, withdrawn and outstanding, is periodically denominated in more than one loan currency, the provisions of this annex should be applied separately to the amounts denominated in each loan currency in order to develop a separate repayment schedule for each of these amounts.

APPENDIX 3 Withdrawal of loan funds

1. Unless otherwise agreed by ADB, the following provisions of this annex will apply to the withdrawal of loan funds from the loan account.

2. (a) The request for withdrawal of funds from the loan account must be submitted to ADB by the Borrower and must be executed in a form that meets the requirements of ADB.

(b) Such withdrawal request must be accompanied by a Borrower's certificate confirming that for each year during which the loan funds are expected to be paid, the expected value of eligible imports will be greater than the loan amount expected to be paid during that year.

(c) The Borrower authorizes experts appointed by ADB to verify the value of Eligible Imports during any period for which the Borrower has submitted a certificate of the value of Eligible Imports in its withdrawal application.

3. (a) Prior to submitting the first application to ADB for withdrawal of funds from the loan account, the Borrower shall designate an account with the National Bank of the Republic of Kazakhstan as an escrow account in which all funds withdrawn from the loan account will be deposited. The deposit account is created, managed and closed in accordance with the terms and conditions that meet the requirements of the ADB.

(b) Separate statements and documentation of the escrow account should be maintained in accordance with financial reporting principles acceptable to ADB. Upon receiving an ADB request, the Borrower organizes an audit of the financial statements of the escrow account with respect only to the funds of this loan by independent auditors, whose qualifications, experience and terms of reference are acceptable to ADB, in accordance with international Standards on Auditing or their national equivalent acceptable to ADB. Certified copies of such financial statements in English, which have been audited, must be submitted to ADB immediately after preparation, but in any case no later than 6 months after the date of the ADB request.

(c) Throughout the duration of the Program, the Borrower provides trade statistics and any other information that ADB may periodically request to assess the Borrower's compliance with the formula for determining Eligible imports.

4. The borrower may disburse the first tranche after the entry into force of this Loan Agreement.

5. Regardless of any other provisions of this Loan Agreement and unless otherwise agreed with ADB, no funds for the second tranche should be withdrawn from the loan account until ADB, after consulting with the Borrower, is satisfied that the Borrower has fulfilled the following conditions for disbursement of funds:

(a) the creation of a unified database for tax and customs administration was approved by the order of the Ministry of Finance;

(b) the creation of the "E-declaration" information system for customs clearance of goods was approved by the order of the Ministry of Finance;

(c) A bill has been submitted to Parliament aimed at increasing the investment attractiveness of the electric power industry and introducing a new tariff policy. The new tariff policy establishes the introduction of a special tariff structure based on a fixed component to cover capital expenditures and a variable component to cover electricity generation costs.;

(d) A bill has been submitted to Parliament providing for the optimization of social assistance by strengthening its targeted nature. In particular, the new law will provide for (i) monetary assistance to low-income citizens who actively participate in employment promotion and social adjustment programs; (ii) increased access to employment opportunities, vocational training and retraining within the framework of the Employment Roadmap 2020; and (iii) the conclusion of a social contract between the state and an individual beneficiary.

Addendum to Appendix 3

List of exceptions (unauthorized expenses)

No withdrawal of loan funds will be made in respect of the following:

(i) expenses related to goods included in the following groups or subgroups of the United Nations Standard Classification of International Trade, vol. 3 (CMT, ed. 3), or any group or subgroup provided for by further amendments to the CMT, as indicated in the ADB's notification to the Borrower.:

Table: Ineligible articles

Chapter

Heading

Description of articles

112

Alcoholic beverages

121

Tobacco, unprocessed; tobacco production waste

122

Processed tobacco (containing or not containing tobacco substitutes)

525

Radioactive and related materials

667

Pearls, precious and semi-precious stones, whether or not worked

718

718.7

Nuclear reactors and their components; non-radiating fuel cells (cartridges) for nuclear reactors

728

728.43

Tobacco preparation or processing equipment

897

897.3

Jewelry made of metals of the gold, silver or platinum group (excluding wristwatches and watch cases) and gold or silver products (including precious stones)

971

Gold, non-monetary (excluding gold ore and concentrates)

Source: The United Nations.

(ii) expenses in the Borrower's currency, or for goods shipped from the Borrower's territory;

(iii) expenses related to goods delivered on the basis of contracts for which financing has been made or agreed by any national or international financial institution or agency, including any contracts financed under loans or grants from ADB;

(iv) expenses related to goods intended for military or paramilitary purposes, or luxury goods;

(v) Drug costs;

(vi) expenses for environmentally hazardous goods, the production, use or import of which is prohibited under the Borrower's legislation or international agreements to which the Borrower has acceded, and

(vii) expenses related to payments prohibited by the Borrower in accordance with a decision of the United Nations Security Council adopted in accordance with Chapter VII of the Charter of the United Nations.

APPENDIX 4 Program implementation and other issues

Implementation mechanisms

1. The Borrower will appoint the MF as the Executive Agency of the Program, and the Ministry of National Economy, the Ministry of Health and Social Development, and the Ministry of Energy of the Borrower in each case, including any successor, and the National Bank, as the implementation agencies that will be jointly responsible for monitoring the implementation of the Program, countercyclical development measures, and determining their impact on key macroeconomic and the Borrower's financial performance.

Political events and dialogue

2. The Borrower will immediately discuss with ADB the problems and limitations encountered during the implementation of the Program, as well as appropriate measures to eliminate and mitigate them.

3. The Borrower will inform ADB regarding policy discussions with other multilateral and bilateral aid agencies that may have implications for the implementation of the Program, and will provide ADB with an opportunity to comment on all policy proposals arising from them. The borrower will take into account the ADB's point of view before finalizing and implementing any such proposal.

Using Partner Financing

4. The Borrower ensures the use of Partner Financing to finance the implementation of certain programs and activities that correspond to the objectives of the Program.

Anti-corruption policy and management methods

5. The borrower provides:

 (a) compliance with ADB's Anti-Corruption Policy (dated 1998, as amended) and recognizes that ADB reserves the right, directly or through its agents, to investigate any alleged cases of corruption, fraud, collusion or coercion related to the Program; and

(b) cooperate in any such investigation and provide all necessary assistance for the satisfactory conclusion of such investigation.

Monitoring and review

6. The borrower ensures that reports are submitted to ADB on an annual basis on: (a) the conditions of the macroeconomic and financial sector; (b) expenditures made from the national budget to support countercyclical development measures, as well as budget execution; and (c) the implementation of countercyclical development measures, including the implementation of the Nurly Zhol Program. the Borrower's new economic policy, the Borrower's Employment Roadmap 2020 Program and the achievement of the goals set in them.

7. The borrower ensures that the ADB submits a report on the completion of the program within 8 months after the closing date of the loan.

I hereby certify that this translation corresponds to the text of the Loan Agreement (Ordinary Operations) (Support for Countercyclical Development) between the Republic of Kazakhstan and the Asian Development Bank in English, signed on November 18, 2015 in Astana.

Head of the Department

editing and linguistic

examination of documents

Department of Document Management

Ministry of Finance

Republic of Kazakhstan

B. Akhmetzhanova

 RCPI's note!  The following is the text of the Agreement in English.

President

Republic of Kazakhstan

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