BASIC CONTRACTS REQUIRED FOR WORLD BANK GUARANTEES

The implementation of a World Bank Guarantee requires the establishment of contractual

relationships amongst the government as obligor, the private investors as beneficiaries, and the
World Bank as Guarantor. It also requires a direct contractual relationship between the World Bank
and the member country.

The following are the basic contracts that are required for a World Bank Guarantee.
Exceptionally, depending on the specific structure of a project, other contracts may be required.

Guarantee Agreement
This is a contract between the World Bank (IDA/IBRD) and the beneficiaries of the Guarantee. This
contract incorporates the terms and conditions of the Guarantee, such as tenor, covered events,
conditions, termination and suspension events, etc. In the case of Loan Guarantees it is customary
to have the Guarantee Agreement incorporated into the guaranteed loan agreement.

Project Agreement
These are agreements to be entered between the World Bank (IDA/IBRD) and the project company
and/or the sovereign/sub-sovereign, depending on the specific structure. These contracts
incorporate standard undertakings to IDA/IBRD such as use of proceeds from the underlying
financing, proper operation of the project, compliance with World Bank environmental standards, etc.

Guarantee Support Agreement

This is a contract amongst the government, the project company and the World Bank, whereby the
government undertakes to pay the project company the amounts that are past due, in the event that
the government-owned entity or the sub-sovereign which is the direct obligor fails to make the
payments as due. This contract allows governments to address the default situation without
triggering the World Bank Guarantee unnecessarily.

Indemnity Agreement
This is a contract between a member country (the sovereign government) and the World Bank,
whereby the government will indemnify IDA/IBRD in the event that IDA/IBRD make payments to the
beneficiaries under the Guarantee.