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OP 13.40 - Suspension of Disbursements

These policies were prepared for use by World Bank staff and are not necessarily a complete treatment of the subject.
OP 13.40
February, 1996
This Operational Manual statement was revised in April 2007 consequent to the issuance of  OP/BP 12.00, Disbursement.

Note:  This statement replaces the March 1995 version of OP 13.40.  It differs from the earlier version principally in clarifying the items exempt from suspension (para.5(b) and footnote 12).  Questions may be addressed to


1.  The General Conditions1 authorize the Bank2 to suspend, in whole or in part,3 the right of the borrower to make withdrawals from the loan account when the events set out or referred to in Sections 6.02 and 7.01(f) and (g)4 occur and are continuing.  These events pertain either to the failure of the borrower or other contracting parties to fulfill obligations unrelated to payment under a Loan Agreement or to the borrower's failure to make payments as required.
Suspension Unrelated to Payment

2.  When an event unrelated to payment constitutes a basis for suspension, the Bank determines case by case whether to suspend disbursements on a loan.  The Bank may decide to suspend disbursements as of a specified date, or to warn the borrower that suspension will occur unless the borrower takes certain remedying actions by a specified date.  Most, but not all, suspensions that are unrelated to payment occur because a borrower or other contracting party fails to carry out covenants under a Loan, Project, or other relevant Agreement.
Payment-Related Suspension

3.  When a borrower fails to make payment on any loan due to the Bank,5 the Bank has an option to suspend disbursements immediately on all loans.  The Bank's current policy, however, is to exercise this option through a graduated approach with warning at every step:
(a)  When a payment becomes 30 days overdue,6 no new loans to or to be guaranteed by the borrower in default are presented to the Board for approval, no agreements with the borrower related to previously approved loans are signed, and the borrower loses its eligibility for any waiver of interest charges in effect at the time.7 To avoid the Bank's proceeding further on the notification process leading to suspension, the borrower must pay all payments overdue by 30 days or more; however, nonpayment of amounts that have been due for less than 30 days does not yet cause the Bank to continue proceeding towards suspension.
(b)  When a loan payment becomes 45 days overdue, the provisions cited in (a) above regarding Board presentation, loan signing, and interest waiver eligibility apply to all borrowers in the country.8 In addition, to avoid the Bank's proceeding further on the notification process leading to suspension, the country as borrower or guarantor and all borrowers in the country must pay not only all payments overdue by 30 days or more, but also all payments due as of the date the Bank receives payment, regardless of the number of days since they fell due.
(c) When a loan payment becomes 60 days overdue, the Bank suspends disbursements on all loans to or guaranteed by the country.9 In addition, the restrictions cited in (b) above apply until the suspension is lifted.
Items Exempt from Suspension

4. The Bank exempts from suspension amounts involved in special commitments the Bank enters into under Section 5.02 of the General Conditions.10 In addition, these amounts are not subject to Bank or borrower cancellation.

5. The Bank normally also exempts from suspension payments for eligible expenditures with respect to
(a) technical and consultant services (including payment to seconded Bank and UN agency staff) and training/fellowships whose interruption would disrupt critical technical work or cause personal hardship;11
(b) contracts signed prior to suspension for goods supplied, services provided, and works carried out within 60 days after the suspension date, provided that the Bank receives withdrawal applications within 90 days after the suspension date;12
(c) interest and other charges payable to the Bank out of the loan proceeds; and
(d) other items whose exemption is, in the Bank's judgment, in the interest of the project, including items whose exemption will (i) minimize delays and cost in the event that the suspension is lifted, or (ii) permit an orderly termination of the project.13
Except amounts involved in special commitments, expenditures that are exempt from suspension are paid by the borrower out of the balance outstanding in the designated account applicable to those expenditures until the account is exhausted.  Only then are expenditures submitted for Bank payment out of the loan account.
Other Obligations and Conditions during Suspension

6.  When the Bank suspends disbursements, the borrower and any other entities with which the Bank may have agreements under the project continues to be bound by their other obligations.  Accordingly, the Bank continues to review procurement and other documents submitted by the borrower and approves particular contracts as if no suspension had taken place.
Use of Designated Accounts

7.  When loans for which disbursements are suspended involve designated accounts with available balances, the borrower may continue to use these funds to meet eligible expenditures under the project.  However, the Bank does not disburse to designated accounts after a threat or notice of suspension has been issued or during suspension; rather it records eligible expenditures reported by the borrower against prior advances disbursed into the designated account.  Under a partial suspension, the Bank records eligible expenditures reported by the borrower until the share of the advance attributable to the suspended portion of the loan has been documented.
Cancellation following Suspension

8.  Section 6.03(a) of the General Conditions provides that if a borrower's right to make withdrawals has been suspended for 30 days continuously, the Bank may cancel the part of the loan that was subject to the suspension.
Lifting of Suspension

9.  By notice to the borrower, suspension is lifted

(a)  for a payment-related suspension, when the Bank has received all the overdue payments specified in the suspension notice and those falling due since the suspension date, and

(b)  for all other suspensions, when the events that give rise to the suspension cease to exist. 

  1. General Conditions Applicable to Loan and Guarantee Agreements (Washington, D.C.: IBRD, 1985); General Conditions Applicable to Development Credit Agreements (Washington, D.C.: IDA, 1985); and General Conditions Applicable to Loan and Guarantee Agreements for Single Currency Loans (Washington, D.C.: IBRD, 1993).  (Text references to "General Conditions" include all three versions of the document.  Otherwise the three versions are referred to as "IBRD General Conditions," "IDA General Conditions," and "SCL General Conditions," respectively.)
  2. As the context may require, "Bank" includes IBRD and IDA; "Loan Agreements" includes Development Credit Agreements; and "loans" includes IDA credits and IDA grants, guarantees, Project Preparation Facility (PPF) advances, and Institutional Development Fund (IDF) grants.  IDA reflows are considered part of normal IDA operations.  OP 13.40 applies to trust fund-financed Grant Agreements that provide for suspension (either by reference to Section 6.02 of the General Conditions or by stand-alone clauses).  Suspension of these Grant Agreements may require notification of the relevant donors in accordance with the Grant Agreement or any applicable framework agreement.
  3. Partial suspension applies to the specific parts of a loan to which the default relates.
  4. These citations refer to Section 6.02 of all three versions of the General Conditions and Section 7.01(f) and (g) of the IBRD and SCL General Conditions.
  5. For guarantees, expanded cofinancing operations (ECOs), and cofinanced loans ("B loans"), such payments include fees and other charges due to the Bank under the relevant Agreements.  Such fees and other charges may be channeled to the Bank through an agent bank, rather than paid directly to the Bank by the borrower.
  6. Payments are considered received when the amounts due are deposited into the Bank's account in the designated depository bank in the currency billed (or, in the case of loans with a currency purchase agreement, in a currency acceptable to the Bank).
  7. For interest charge waivers, including eligibility, see OP/BP  3.10, Loan Charges, Currencies, and Payment Terms of IBRD Loans and IDA Credits.
  8. See the Annex G to BP 13.40 for notifications to be issued to the borrower and the Board when payments are overdue, or when default occurs that is not payment-related.  Notification of impending suspension sent when payment is 45 days overdue appears in Annex H.  Notification of impending suspension may be temporarily delayed when (a) the amount overdue by 45 days or more totals less than $50,000, no single loan or borrower in the country has a cumulative overdue total of $20,000 or more, and the amount overdue is not the entire amount billed; (b) the Bank has received substantial payments on the overdue amount and clear evidence is provided that the balance will be paid shortly; or (c) the borrower has raised billing queries that, in the Vice President and Controller's judgment, require investigation (but such queries must be received before and remain unresolved by the due date).  Only the amount being queried is exempted; the remainder must be paid on time.  Payment delay due to the unavailability of currency on the international financial markets is not a valid reason for delay in sending the notice of impending suspension; borrowers are sent bills more than six weeks before the due date, and before the notice is sent they have an additional 45 days after the due date to purchase the required currencies.  Under the currency purchase agreement, the Bank allows borrowers to make payment in one of six major currencies.  Borrowers are encouraged to use this service.
  9. The telex suspending all loans and credits to a country for payment-related default specifies the Grant Agreements, if any, to which the suspension also applies.
  10. See  OP/BP 12.00, Disbursement.
  11. This exemption is normally subject to specified time limits.  It normally applies only to contracts signed prior to the suspension and to trainees already abroad at the time of the suspension.
  12. However, as an exception, the Director, Loan Department, may authorize payment of such withdrawal applications after this 90-day period but prior to cancellation if (a) the goods, works, or services were not provided by an entity owned or controlled by the borrower (including its agencies and instrumentalities) or a project implementing agency; and (b) the failure to submit the withdrawal applications within the 90-day limit did not, in the Bank's judgment, arise from an act or omission of the concerned contractor, consultant, or supplier.
  13. These exemptions require approval of the managing director, operations, concerned.

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