ARCHIVED: Operational Manual

BP 8.10 - Project Preparation Facility

 

1.  Project/Program Preparation Advances (PPAs) are made by Bank^1 management from the Project Preparation Facility (PPF) under a special authority granted by the Executive Directors, who determine, from time to time, the ceiling on the commitment authority of the PPF and on the size of individual PPAs.  The Managing Directors responsible for Operations, make indicative allocations to the Regions within the limits of the commitment authority and adjust them periodically, as necessary.  The Regions monitor their commitments against the indicative allocations to ensure that the limits are observed.  Since PPAs are normally refinanced out of loans, they are carried on the books of the Bank as receivables on account of project preparation, rather than as loans, until they are refinanced or repaid.

2.  The processing of a PPA begins when the Bank receives a letter from the country requesting the advance and containing the following information:

(a)  brief statement of the purposes of the PPA, and the expenditures it would finance;

(b)  the expected period of project preparation; and

(c)  a table showing local currency and U.S. dollar estimates for the items to be financed under the PPA.

3.  The country unit and the task team leader (TL) review the country's proposal for a PPA to determine²:

(a)  whether the proposal is sound;

(b)  whether the proposed activities are appropriate;

(c)  what amount of advance would be needed, given the estimated cost of the activities;

(d)  how the activities would be carried out (including procedures for procurement of goods and services);

(e)  whether the PPA should be made by IBRD or IDA (including country debt-risk classification – green; yellow; red); and

(f)  a suitable deadline for refinancing/repaying the PPA.

4. If the proposal meets the criteria set out in OP 8.10, paras. 1-3, the TL prepares a brief memorandum to the Country Director requesting approval of the PPA.  The memorandum covers the following points:

(a)  a brief description of the project, its objectives, and its economic justification, and whether it is likely to be financed by IBRD or IDA (including country debt-risk classification – green; yellow; red);

 

(b)  the recipient's commitment and readiness to undertake project preparation;

 

(c)  the activities to be financed by the PPA, and their appropriateness;

 

(d)  the refinancing date; and

 

(e)  the procurement methods and disbursement arrangements, including the terms and conditions of any designated account.³

5. The draft memorandum, together with a copy of the country’s letter of request, is sent to the finance officer, the procurement specialist, and the lawyer for review. The lawyer prepares the PPA agreement, which is cleared by the TL, the finance officer and the procurement specialist. The finance officer and the Accounting Officer/Portfolio Officer in the Loan Services Group ensure that the proposed advance falls within the Regional commitment level and assigns the PPF number that is shown in the PPA agreement.

6. The TL sends the memorandum and two originals of the cleared PPA agreement, together with a copy of the country’s letter of request to the Country Director for approval. The originals of the PPA agreement are signed by the Country Director or any other designated person,^ 4 and are sent to the country for countersignature by an authorized representative of the country. One original fully signed version of the PPA agreement is returned to the Bank. Upon receipt by the Bank of the countersigned original, the PPA agreement becomes effective in accordance with the terms of the PPA agreement.⁵ This original is sent to the lawyer, and a copy is sent to LOA, the Loan Services Group, and OPCS.

Extension of Refinancing Date

7. Requests for approval of an extension of the refinancing date are made in a memorandum that explains the rationale for the extension. The memorandum is prepared by the TL, cleared by the finance officer, and the lawyer, and sent to the Country Director for approval. Extensions of the refinancing date beyond four years following PPA approval requires RVP approval.

Reporting Arrangements

8. After signing, the Region reports the agreement for a PPA in the Report to the Executive Directors on Bank and IDA Operations and in the Monthly Operational Summary of Bank and IDA Proposed Projects.

1. "Bank" includes IBRD and IDA, "loans" includes IDA credits and IDA grants, "borrower" includes recipient of an IDA credit or grant.
2. For PPAs made under  OP 8.00, Rapid Response to Crises and Emergencies, staff should follow  BP 8.00.
3. When relatively few payments are anticipated, the establishment of a designated account may not be warranted.
4.  Staff should see  Administrative Manual Statement 1.30, Annex C, Designation of Authorized Signatories for Instruments Relating to Lending, Technical Assistance, and Cofinancing Operations.
5. Usually, the Letter Agreement becomes effective as of the date of countersignature.