Common use of Historical Background Clause in Contracts

Historical Background. After decades of civil unrest that caused significant damages to its economic and financial infrastructure, the Republic of Congo has since the beginning of the millennium undertaken a significant effort to restructure and boost its economy. It has also undertaken to normalize its financial relations with the international community. The first objective of the Government has been to rebuild the economic and social infrastructure, which underwent severe damage or destruction during the years of civil turmoil. This situation had led to the deterioration of all of the economic and social indicators of the country and, in particular, to the destruction of the school and health apparatus as well as to the interruption of the provision of essential services such as drinkable water and electricity. It had also resulted in widespread displacements of populations and, as a result, in an important disorganization of the economic system. As a consequence, GDP contracted by approximately 3 points between 1990 and 2001; real income per capita dropped by almost one half from its level eleven years earlier, and more than 70% of the population had fallen below the poverty line. In the area of the public finances, the budget deficit reached 8.4% of GDP in 2000 and was accompanied by a large accumulation of domestic payment arrears by the government; the banking system was totally ruined; external debt increased from 175% to almost 240% of GDP, and the country had virtually ceased payments on its foreign obligations. The economy survived only thanks to the maintenance of a certain level of activity in the oil sector. Faced with this situation, the authorities have attempted progressively to restore a proper and democratic functioning of the State and of the political institutions. At the economic level, they have implemented an emergency program that benefited from various contributions from external partners, including the World Bank through post-conflict assistance. Undertaken within the framework of a series of reference programs defined with the IMF, these efforts have led to a relative recovery of the economy. GDP has grown by an average of 4 ½% per annum since the beginning of the decade (6 ¼% in the non-oil sector) and the country’s economic and social infrastructure has been progressively rehabilitated. Meanwhile, the budget situation has been gradually stabilized, and an important train of structural reforms launched. These encouraging results made it possible in December 2004 to enter into a multi-year economic and financial program supported by the IMF under the Poverty Reduction and Growth Facility (PRGF). The normalization of payments was carried out in several steps. First, the Government adopted and implemented a program of reduction of domestic payment arrears so as to restore confidence among private operators and accompany the restructuring efforts of the banking system. Second, outstanding arrears to multilateral creditors, in particular the African Development Bank (AfDB), were cleared. Finally, in December 2004, the Republic of Congo signed an agreement with the Paris Club under the so-called “Naples Terms” (involving a minimum 67% cancellation of eligible debt service) to restructure its bilateral official debt — a significant step toward the final resolution of the debt problem under the HIPC Initiative. Given the level of indebtedness of the Republic of Congo, and its performance under the program supported by the PRGF, the Boards of Directors of the World Bank and the IMF formally decided in March 2006 that the Republic was eligible for the HIPC Initiative (“decision point”). This decision enabled the Congo to benefit, shortly thereafter, from an additional reduction of its external debt service obligations to Paris Club member countries (increasing to a minimum of 90% of the cancellation of eligible debt service). Reaching this stage provided the country with the appropriate framework to engage in negotiations with its private and official bilateral non-Paris Club creditors to secure a comparable debt reduction, in accordance with the requirements of the Paris Club. The signature of various agreements with the official non-Paris Club creditors of the Congo is being finalized on this basis. Likewise, the formal negotiations with the London Club Committee led to the conclusion in June 2007 of an agreement in principle, the terms of which are deemed to be broadly consistent with the Paris Club requirement of comparability of treatment between creditors. Once adopted, these terms will serve as a basis for the negotiations with the Congo’s non-insured supplier creditors in order to guarantee the comparability of treatment of all creditors of the Republic.

Historical Background. After decades of civil unrest that caused significant damages damage to its economic and financial infrastructure, the Republic of Congo has since the beginning of the millennium undertaken a significant effort to restructure and boost its economy. It has also undertaken to normalize its financial relations with the international community. The first objective of the Government has been to rebuild the economic and social infrastructure, which underwent severe damage or destruction during the years of civil turmoil. This situation had led to the deterioration of all of the economic and social indicators of the country and, in particular, to the destruction of the school and health apparatus as well as to the interruption of the provision of essential services such as drinkable water and electricity. It had also resulted in widespread displacements of populations and, as a result, in an important disorganization of the economic system. As a consequence, GDP contracted by approximately 3 points between 1990 and 2001; real income per capita dropped by almost one half from its level eleven years earlier, and more than 70% of the population had fallen below the poverty line. In the area of the public finances, the budget deficit reached 8.4% of GDP in 2000 and was accompanied by a large accumulation of domestic payment arrears by the government; the banking system was totally ruined; external debt increased from 175% to almost 240% of GDP, and the country had virtually ceased payments on its foreign obligations. The economy survived only thanks to the maintenance of a certain level of activity in the oil sector. Faced with this situation, the authorities have attempted progressively to restore a proper and democratic functioning of the State and of the political institutions. At the economic level, they have implemented an emergency program that benefited from various contributions from external partners, including the World Bank through post-conflict assistance. Undertaken within the framework of a series of reference programs defined with the IMF, these efforts have led to a relative recovery of the economy. GDP has grown by an average of 4 ½% 4½% per annum since the beginning of the decade (6 ¼% in the non-oil sector) and the country’s economic and social infrastructure has been progressively rehabilitated. Meanwhile, the budget situation has been gradually stabilized, and an important train of structural reforms launched. These encouraging results made it possible in December 2004 to enter into a multi-year economic and financial program supported by the IMF under the Poverty Reduction and Growth Facility (PRGF). The normalization of payments was carried out in several steps. First, the Government adopted and implemented a program of reduction of domestic payment arrears so as to restore confidence among private operators and accompany the restructuring efforts of the banking system. Second, outstanding arrears to multilateral creditors, in particular the African Development Bank (AfDB)Bank, were cleared. Finally, in December 2004, the Republic of Congo signed an agreement with the Paris Club under the so-called “Naples Terms” (involving a minimum 67% cancellation of eligible debt service) to restructure its bilateral official debt — - a significant step toward the final resolution of the debt problem under the HIPC Initiative. Given the level of indebtedness of the Republic of Congo, and its performance under the program supported by the PRGF, the Boards of Directors of the World Bank and the IMF formally decided in March 2006 that the Republic was eligible for the HIPC Initiative (“decision point”). This decision enabled the Congo Republic to benefit, shortly thereafter, from an additional reduction of its external debt service obligations to Paris Club member countries (increasing to a minimum of 90% of the cancellation of eligible debt service). Reaching this stage provided the country with the appropriate framework to engage in negotiations with its private and official bilateral non-Paris Club creditors to secure a comparable debt reduction, in accordance with the requirements of the Paris Club. The signature of various agreements with the official non-Paris Club creditors of the Congo Republic is being finalized on this basis. Likewise, the formal negotiations with the London Club Committee led to the conclusion in June 2007 of an agreement in principle, the terms of which are deemed to be broadly consistent with the Paris Club requirement of comparability of treatment between creditors. Once adopted, these terms will serve as a basis for the negotiations with the CongoRepublic’s non-insured supplier creditors in order to guarantee the comparability of treatment of all creditors of the Republic.