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June 25, 1986

GRANT AGREEMENT

By this Agreement made and entered into on the 25th day of June, 1986, the Government of the Republic of the Philippines (hereinafter referred to as the "Grantee") and the United States of America, acting through the Agency for International Development (hereinafter referred to as "A. I.D.") hereby agree as follows:

Section 1: The Grant.

Pursuant to the Foreign Assistance Act of 1961, as amended, A.I.D. hereby grants to the Grantee an amount of pesos equivalent, as determined in accordance with this Agreement, to Two Hundred Million United States Dollars (U.S.$200,000,000.00) (the "Grant") for the Budget Support Program ("BSP") as defined in Section 2 and Annex 1 hereto.

Section 2: The Budget Support Program.

BSP will consist of peso budget support to assist the Grantee's financing of peso disbursements in the Grantee's 1986 Budget Year for costs incurred in the Grantee's 1986 budget year on or after March 1, 1986 in selected budget categories, with priority for the agriculture, health and education sectors. Funds made available through the Grant shall be reported exclusively against disbursements in the budget categories agreed upon by the Grantee and A.I.D. in accordance with Section 5.2(B) of this Agreement.

Section 3: Conditions Precedent to Disbursement by A.I.D.

Prior to the disbursement of pesos under Section 4 of this Agreement, or to the issuance of documentation pursuant to which such disbursement will be made, the Grantee shall, except as the Parties may otherwise agree in writing, furnish to A.I.D., in form and substance satisfactory to A. I.D.:

A. An opinion of counsel acceptable to A.I.D. that this Agreement has been duly authorized and/or ratified by and executed on behalf of the Grantee and that it constitutes a valid and legally binding obligation of the Grantee in accordance with all of its terms; and

B. A statement of the name of the person holding or acting in the office of the Grantee specified in Section 7.8 of this Agreement, and of any additional representatives, together with a specimen signature of each person specified in such statement.

Section 4: Peso Disbursement.

Upon satisfaction of the conditions precedent to disbursement described in Section 3 of this Agreement, A.I.D. shall disburse to the Grantee for deposit in a non-interest-bearing Special Account (the "BSP Fund Account") an amount of pesos equivalent to Two Hundred Million United States Dollars (U.S.$200,000,000.00). The amount of pesos to be disbursed under this Section shall be determined on the basis of the rate or rates of exchange obtained by the U.S. Regional Administrative Management Center, Bangkok, Thailand, through its agents from the Central Bank of the Philippines in acquiring the pesos to be transferred.

Section 5: Transfer of Pesos from the BSP Fund Account to the General Fund.

5.1. Restriction on Transfer of Pesos from the BSP Fund Account to the General Fund Account. Except as A.I.D. may otherwise agree in writing, pesos held in the BSP Fund Account may not be transferred except as provided in this Section 5

5.2. Condition Precedent to Initial Transfer of Pesos from the BSP Fund Account. Prior to the initial transfer of pesos from the BSP Fund Account to the Grantee's General Fund Account, the Grantee shall, except as A.I.D. may otherwise agree in writing, furnish to A. I.D., in form and substance satisfactory to A. I.D.:

A. A copy of an implementation plan specifying the responsibilities and interrelationships of the entities involved in the implementation of BSP; and

B. A statement of the budget categories and eligible programs within those budget categories based on the budget then in effect for the Grantee's 1986 Budget Year, against which disbursements in the Grantee's 1986 Budget Year for costs incurred or to be incurred in the Grantee's 1986 Budget Year on or after March l, 1986 will be reported for purposes of BSP and a statement of the total amount of pesos agreed to be disbursed in that period in those budget categories for such costs; and

C. A statement of estimated disbursements through the end of the third quarter of the Grantee's 1986 Budget Year for costs incurred and to be incurred that the Grantee and A.I.D. agree is reasonable or reasonably anticipated for the budget categories specified in Section 5.2(B) for March, 1986 (to the extent disbursements for such costs incurred can be estimated for such period) and for the second and third quarters of the 1986 Budget Year of the Grantee.

5.3 Initial Transfer of Pesos. Upon receipt by the Grantee of notification from A.I.O. that the conditions precedent to initial transfer of pesos from the BSP Fund Account specified in Section 5.2 have been satisfied, pesos in the BSP Fund Account shall be transferred by the Grantee to the Grantee's General Fund Account in the amount specified in the statement provided under Section 5.2(C).

5.4. Subsequent Transfer of Pesos from the BSP Fund Account.

A. The statement furnished to A.I.D. by the Grantee pursuant to Section 5.2(C) may be amended by the Grantee from time to time at any time prior to the date by which the first report under Section 6.2(A) is required to be delivered to A.I.D. Upon receipt by the Grantee of notification from A.I.D. that any such amended statement provided to A.I.D. by the Grantee is in form and substance satisfactory to A.I.D., the amount of pesos by which (i) the amount shown in such amended statement of estimated disbursements through the end of the third quarter of the Grantee's 1986 Budget Year for costs incurred and to be incurred that the Grantee and A.I.D. agree is reasonable or reasonably anticipated for the budget categories specified in Section 5.2(B) for March, 1986 (to the extent disbursements for such costs incurred can be estimated for such period) and for the second and third quarters of the 1986 Budget Year of the Grantee exceeds (ii) the aggregate amount of pesos previously transferred from the BSP Fund Account to the Grantee's General Fund Account, shall be transferred by the Grantee to the Grantee's General Fund Account.

B. Upon receipt by the Grantee of notification from A. I.D. that a report or amended report provided in accordance with Section 6.2{A) of this Agreement for any quarter is in form and substance satisfactory to A.I.D., an amount of pesos shall be transferred by the Grantee from the BSP Fund Account to the Grantee's General Fund Account, which when added to (i) the amount by which the cumulative amount of pesos previously transferred from the BSP Fund Account to the Grantee's General Fund Account under this Agreement exceeds the amount that said report shows to have been disbursed as of the end of such quarter for costs incurred in the Grantee's 1986 Budget Year on or after March 1, 1986 in the budget categories agreed upon in accordance with Section 5.2(B), equals (ii) the amount of pesos that the Grantee and A.I.D. agree is reasonably anticipated to be disbursed through the end of the second fiscal quarter following the fiscal quarter through the end of which the report covered for costs incurred and to be incurred for the budget categories specified in Section 5.2(B) during the two fiscal quarters following the fiscal quarter through the end of which the report covered. Transfer of pesos from the BSP Fund Account to the Grantee's General Fund Account shall continue in the foregoing manner until all pesos in the BSP Fund Account have been transferred.

Section 6: Special Covenants of the Grantee.

6.1. Disbursements in Selected Budget Categories. Except as A. I.D. may otherwise agree in writing, the Grantee agrees to disburse in the Grantee's 1986 Budget Year at least the amount of pesos to be agreed upon in accordance with Section 5.2(B) in the agreed upon budget categories for costs incurred in the Grantee's 1986 Budget Year on or after March 1, 1986.

6.2. Reports.

A. Unaudited Quarterly Reports. The Grantee agrees to furnish A.I.D. unaudited quarterly reports, which may be amended, by the end of the following quarter, of cumulative disbursements through the end of the period reported upon for costs incurred in the Grantee's 1986 Budget Year for March, 1986 (to the extent information for such period is reasonably available) and for the period on or after April 1, 1986, in the budget categories agreed upon in accordance with Section 5.2(B).

B. Audited Final Report. The Grantee agrees to furnish A.I.D. a final report by September 30, 1987 audited by the Commission on Audit on disbursements through the end of the Grantee's 1986 Budget Year for costs incurred in the Grantee's 1986 Budget Year for March, 1986 (to the extent information for such period is reasonably available) and for the period on or after April 1, 1986, in the budget categories agreed upon in accordance with Section 5.2(B). The Grantee shall also furnish with this final report a certification, in form and substance satisfactory to A.I.D., that an amount at least equal to the amount of pesos released from the BSP Fund Account to the Grantee's General Fund Account has not been reported against other resources available to the Grantee for disbursements for such costs.

Section 7: General Covenants.

7.1. Taxation. The Grant shall be free from any taxation or fees imposed under laws in effect in the Philippines.

7.2. Reports, Records, Inspections.

A. The Grantee agrees to furnish A.I.D. such information and reports relating to BSP and to this Agreement as A.I.D. may reasonably request.

B. The Grantee shall maintain, or cause to be maintained, in accordance with the Grantee's usual accounting procedures, which shall follow generally accepted accounting procedures, books and records relating to BSP and to this Agreement adequate to evidence compliance with this Agreement. Such books and records shall be audited regularly by the Grantee's Commission on Audit in accordance with generally accepted auditing standards, and shall be maintained for at least three years after the final disbursement of pesos under the Grant. The Grantee agrees to provide authorized representatives of A.I.D. through the Grantee's Commission on Audit the opportunity at any reasonable time to inspect such books and records.

7.3. Refunds.

A. If the Grantee fails to comply with any of its obligations under this Agreement, A.I.D. may require the Grantee to refund to the BSP Fund Account all or any part of the amount of pesos previously transferred to the Grantee's General Fund Account under this Grant. Any such refund shall be paid into the BSP Fund Account within sixty days after receipt of a request therefor and thereafter shall be used for purposes of BSP in accordance with the terms of this Agreement.

B. The right to require such a refund shall continue, notwithstanding any other provision of this Agreement, for three years from the date of the last disbursement of pesos under the Grant.

7.4. Consultation. The Grantee and A.I.D. agree to cooperate to ensure that the purposes of this Grant will be accomplished and at the request of either, shall exchange views on the progress of BSP, the performance of obligations under this Agreement and other matters relating to BSP.

7. 5. Completeness of Information. 

A. The Grantee confirms that the facts and circumstances of which it has informed A. I.D., or caused A. I.D. to be informed, in the course of reaching agreement with A.I.D. on this Agreement, are accurate and complete to the best of the Grantee's knowledge after due inquiry and include all facts and circumstances to the Grantee's knowledge after due inquiry that might materially affect the BSP and the discharge of responsibilities under this Agreement.

B. The Parties agree to inform each other in a timely fashion of any subsequent facts and circumstances that might materially affect, or that it is reasonable to believe might so affect, BSP or the discharge of responsibilities under this Agreement.

7.6. Implementation Letters. To facilitate the implementation of the program, the Parties may issue jointly agreed-upon Implementation Letters to confirm and record their mutual understanding on aspects of the implementation of this Agreement. Implementation Letters will not be used to amend the text of the Agreement, but can be used to record revisions that are permitted by the Agreement, including the revision of the description of BSP in Annex 1.

7.7. Communications. Any notice, request, document, or other communication submitted by either Party to the other under this Agreement will be in writing or by telegram or cable, and will be deemed duly given or sent when delivered to such Party at the following address:

                                                                                

To the Grantee
	Mail Address:	National Economic and Development Authority Amber Avenue, Pasig, Metro Manila
	with a copy to:	Economic Support Fund Secretariat 17th Floor Strata 100 Building Emerald Avenue, Pasig, Metro Manila
	and a copy to:	Office of Budget and Management Malacañang, Manila
To A.I.D. :
	Mail Address:	United States Agency for   International Development   c/o The Embassy of the United States   Manila, Philippines

 

Alternate address for cables:USAID/AMEMB Manila

All such communications will be in English, unless the Parties otherwise agree in writing. Other addresses may be substituted for the above upon the giving of notice.

7.8. Representatives. For all purposes relating to this Agreement, the Grantee shall be represented by the person holding or acting in the office of the Director-General of the National Economic and Development Authority and A.I.D. will be represented by the person holding or acting in the office of the Director, United States A. I.D. Mission to the Philippines, each of whom, by written notice, may designate additional representatives for all purposes other than exercising the power to revise the description of BSP in Annex 1. The names of the representatives of the Grantee, with specimen signatures, will be provided to A.I.D., which may accept as duly authorized any instrument signed by such representatives in the implementation of this Agreement, until receipt of written notice of revocation of their authority.

7.9. Nonwaiver of Remedies. No delay in exercising any right or remedy accruing to a Party in connection with this Agreement will be construed as a waiver of such right or remedy.

7.10. Termination. Prior to any disbursement of pesos under Section 4 of this Agreement, either Party may terminate this Agreement by giving the other Party thirty (30) days' written notice. Thereafter, this Agreement may be terminated only by mutual agreement of the Parties. 

ANNEX 1

Budget Support Program
  Description

The objective of the Budget Support Program (BSP) is to provide peso budget support to the Government of the Philippines (the "Grantee") to assist it in ameliorating its current budget crisis and, thereby, contribute to the Grantee's financial and political stability. BSP will assist the Grantee finance peso expenditures in selected priority budget categories at the levels provided in the budget in effect for the Grantee's 1986 Budget Year. Priority will be given to the education, agriculture and health sectors. However, other budget categories will be given consideration based upon mutual agreement between A. I.D. and the Grantee. BSP will not, however, finance national defense, equity to government corporations, and consumer subsidy budget expenditures. These program restrictions are intended to ensure that the budget categories to be financed are consistent with the Grantee's and A.I.D.’s economic reform objectives.

BSP is being funded under the Economic Support Fund (ESF) Program as part of the United States Government's commitment, in connection with the 1983 review of operations under the 1947 Military Bases Agreement, as amended, to obtain appropriations of $475 million in Economic Support Fund assistance over the FY 1985-1989 period. Any disbursements in the Grantee's 1986 Budget Year for costs incurred in the 1986 Budget Year on or after March 1, 1986 in the priority budget categories agreed upon by the Grantee and A.I.D. may be reported as disbursements for purposes of BSP, provided such disbursements are not reported against any other resources available to the Grantee for disbursements for such costs. A.I.D. and the Grantee will agree on the minimum peso amount to be disbursed in the Grantee's 1986 Budget Year in total by the Grantee for the budget categories eligible for assistance.

The Grantee will monitor the implementation of BSP and report quarterly on its progress. These quarterly reports will provide a summary of cumulative disbursements in the agreed upon budget categories for the stated time period. A final close out report will be provided in the same format and contain a Commission on Audit (COA) certified financial statement on the status of BSP.

IN WITNESS WHEREOF, the Grantee and the United States of America, each acting through its duly authorized representatives, have caused this Agreement to be signed in their names and delivered as of the day and year first above written.

                                                  

REPUBLIC OF THE PHILIPPINES		UNITED STATES OF AMERICA
By: (Sgd.)		By: (Sgd.)
	SALVADOR H. LAUREL		GEORGE P. SHULTZ
Title: Vice-President		Title: Secretary of State
	Minister for Foreign   Affairs

(Sgd.)
  Title: Vice-President
  Minister for Foreign Affairs Title: Secretary of State