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BP 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.
BP 13.40
February, 1996
 
This Bank Procedures statement was revised in April 2007 consequent to the issuance of  OP/BP 12.00, Disbursement.  Previously updated to reflect title change to "finance officer" (formerly disbursement officer) that took effect on July 1, 2002.

Note:  This statement replaces the March 1995 version of BP 13.40.  Questions may be addressed to opmanual@worldbank.org.


Suspension of Disbursements
1


I. Procedures for Suspension Unrelated to Payment
 
Suspension
1.  TM consults with the appropriate SOD/COD chief, lawyer, and finance officer; assesses the situation; recommends action to the CD director. 
2.  CD director decides--for an entire loan,2 part of a loan,3 or several loans, PPF advances, and IDF grants--whether to recommend to (a) threaten suspension, or (b) suspend. 
3.  In a memorandum cleared by the Assistant General Counsel, Operations, the CD director recommends to the RVP whether to threaten suspension or suspend.  The RVP takes the decision and notifies LEGVP, CTRVP, and the managing director (MD), operations, concerned of action to be taken. 
4.  If the RVP decides to threaten suspension: CD director consults RMCVP if any cofinanciers are involved, clears the notice of threatened suspension with the lawyer and the finance officer, and advises the ED concerned, RMCVP, and any cofinanciers.  The notice, signed by the CD director, specifies the loan covenants with which the borrower has failed to comply and outlines the actions necessary to avoid suspension and their timing.  It also states that as of the date of the notice, the Bank will not disburse to designated accounts. 
5.  If the RVP decides, without prior threat, to suspend, or if a threat of suspension is carried out: The CD director clears the draft notice of suspension with the lawyer and finance officer and advises the MD, ED, RMCVP, and cofinanciers of the Bank's decision to suspend.  The notice, signed by the RVP, is sent to the borrower and copied to any executing agencies and guarantor, and also to LEGVP, CTRVP, LOA, OPR, and SEC (see sample notice, Annex A). 
6.  CD director and lawyer clear a notice advising the Board of the suspension. The notice is approved by the RVP and issued by SEC (see sample notice, Annex B). 
 
Cancellation following Suspension4
1.  After at least 30 days of continuous suspension, the TM prepares a memorandum recommending cancellation and obtains RVP and LEGVP approval.  The recommendations include a draft cancellation notice cleared with the lawyer and finance officer (see sample notice, Annex C) and a notice informing the Board of the cancellation (see sample notice, Annex D). 
2.  Subject to RVP and LEGVP approval, the CD director signs the notice of cancellation, which is copied to the loan accounting officer, RMCVP, and SEC. 
3.  RVP informs the MD and ED. SEC issues the notice informing the Board of the cancellation. 
 
Lifting of Suspension
1.  CD director consults the lawyer and finance officer and notifies the RVP, who decides whether to lift suspension. 
2.  CD director clears with the lawyer and finance officer a draft notice lifting suspension.  The notice signed by the RVP, is sent to the borrower and copied to the guarantor, cofinanciers, MD, ED, and RMCVP (see sample notice, Annex E). 
3.  CD director prepares a notice to the Board, which is cleared by the RVP and LEG.  SEC issues the notice (see sample notice, Annex F). 

II. Procedures for Payment-Related Suspension
Time
Action...
  A. ... if the borrower is
not a member country but
the loan is guaranteed by
a member country
 
B. ... if the borrower is
a member country
 
6 weeks before due date 
  • LOALA sends billing statements to the borrower.
  • Same as A
Next business day after due date 
  • LOALA reports overdue payments5 through ALL-IN-1 (updated daily).
  • Same as A
5 business days after due date 
  • LOALA contacts the borrower to obtain payment.
  • Same as A
Next business day after payment becomes 15 days overdue 
  • LOALA sends a reminder to the borrower that if payment reaches 30 days overdue,

    (i) the borrower may lose eligibility for any waiver of interest charges,
    6 and
    (ii) rules regarding Board approval and signing of other agreements (see following box) will apply.
  • Same as A

Next business day after payment becomes 30 days overdue

  • CD director informs the borrower, the guarantor country, and all other borrowers in the country (see sample notice, Annex G) that, until arrears of 30 days or more are cleared,
  • CD director informs the country and all other borrowers in the country (see sample notice, Annex G) that, until arrears of 30 days or more are cleared,
 
(i) no new loans to the borrower will be presented to the Board for approval,7
(i) no new loans to or to be guaranteed by the country will be presented to the Board for approval,7
 
(ii) no Agreements related to approved loans/credits to the borrower will be signed, and
(ii) no Agreements related to approved loans/credits to or to be guaranteed by the country will be signed, and
 
(iii) LOALA will notify the borrower regarding loss of eligibility for interest charge waiver.
(iii) LOALA will notify the borrower regarding loss of eligibility for interest charge waiver.
 
  • CD director informs the borrower, the guarantor country, and all other borrowers in the country of Bank actions if payments reach 45, 53, and 60 days overdue.
  • CD director informs the country and all borrowers in the country of Bank actions if payments reach 45, 53, and 60 days overdue.
 
  • Notice to the borrower is cleared with the lawyer and loan accounting officer and copied to the finance officer.
  • Same as A
 
  • LOALA informs the MD and RVP through the semimonthly report on Overdue Service Payments of payments that are overdue 30 days or more. EDs access information (updated daily) on overdue payments through ALL-IN-1.
  • Same as A
5 business days after payment becomes 30 days overdue 
  • LOALA informs the borrower, Region, and ED concerned that the borrower has lost eligibility for waiver of interest charges on all of its loans.8
  • Same as A
Next business day after payment becomes 45 days overdue
  • CD director clears a notice of impending suspension with the lawyer, finance officer, and loan accounting officer, listing due dates and amounts of all overdue payments, as well as payments falling due during the notice period.  The notice, signed by the RVP, is copied to the ED, MD, OPR, RMC, and SEC (see sample notice, Annex H).
  • Same as A
 
  • RVP issues the notice of impending suspension, advising the guarantor country and all borrowers in the country that, until they are current9  on all payments,
  • RVP issues the notice of impending suspension advising the country and all borrowers in the country that, until they are current9  on all payments,
 
(i) no new loans to or to be guaranteed by the country will be presented to the Board for approval and no Agreements related to approved loans to or to be guaranteed by the country will be signed,
(i) [already implemented]
 
(ii) disbursements will not be made into designated accounts under loans to, or guaranteed by, the country,
(ii) same as A
 
(iii) in accordance with Bank arrangements with various cofinanciers and the relevant regional development bank, the Bank is obligated to inform them of the impending suspension of disbursements, and will do so no later than one week before the suspension date, and
(iii) same as A
 
(iv) disbursements on all Bank loans to or guaranteed by the country will be suspended on the 60th day.
(iv) same as A
Delay in sending notice of impending suspension 
  • Should the RVP permit the notice of impending suspension to be delayed, the RVP's authorization is obtained at least three days prior to the day on which the payment becomes overdue by 45 days.  The RVP simultaneously advises the MD, CTRVP, RMCVP, and the Assistant General Counsel, Operations, of the delay and the circumstances that justify it.
  • Same as A

53 days after payment comes due 
  • CD director informs RMCVP, any cofinanciers, and the relevant regional development bank of the impending suspension.
  • Same as A

60 days after payment comes due (if this day is a weekend or Bank holiday, the suspension notice should be sent on the last working day before the 60th day advising that suspension is effective on the 60th day) 
  • RVP sends the guarantor country and all borrowers in the country formal notice of suspension of disbursements on all loans to or guaranteed by the country, and the items to be exempted from suspension (see sample notice, Annex I; para. CCC deals with exemptions).  The notice specifies the Grant Agreements, if any, to which the suspension applies.  The notice is cleared with the lawyer, finance officer, and loan accounting officer.  It is copied to the ED, MD, LEGVP, CTRVP, OPR, RMCVP, SEC, cofinanciers, and relevant regional development bank.
  • Same as A
 
  • CD director prepares a notice, approved by the RVP, informing the Board of the suspension.  The amount of overdue payments is obtained from LOALA. SEC issues the notice (see sample notice, Annex J).
  •  Same as A
Delay in sending notice of suspension 
  • If a delay in the suspension notice seems warranted, at least three days before the 60-day-overdue date, the RVP advises CTRVP, RMCVP, and the Assistant General Counsel, Operations, and brings the matter to the attention of the MD for a final decision.
  • Same as A
Cancellation following suspension10
  • After 30 days of continuous suspension, the TM prepares, for RVP and LEGVP approval, a memorandum recommending cancellation.
  • Same as A
 
  • TM prepares a cancellation notice to the borrower and clears it with the lawyer and finance officer.  The CD director signs the notice, which is copied to the loan accounting officer, RMCVP, and SEC (see sample notice, Annex C).
  • Same as A
 
  • RVP informs the MD, ED, and OPR.  SEC issues a notice informing the Board of the cancellation (see sample notice, Annex D).
  • Same as A

Lifting of suspension
  • CD director consults the lawyer, finance officer, and loan accounting officer, and advises the RVP.
  • Same as A
 
  • The lawyer, finance officer, and loan accounting officer clear a draft notice formally lifting suspension; the notice, signed by the RVP, is sent to the borrower and copied to the guarantor, all other borrowers in the country, cofinanciers, the relevant regional development bank, the MD, ED, OPR, and RMCVP (see sample notice, Annex E).
  • Same as A
 
  • CD director prepares a notice to the Board, cleared by the RVP and LEG and issued by SEC (see sample notice, Annex K).
  • Same as A


III. Procedures for Items Exempt from Suspension
1.  TM consults with the appropriate SOD/COD chief, lawyer, and finance officer; assesses the situation; recommends action to the CD director. For exemptions under OP 13.40, para. 5(a), the CD director takes the necessary decision.
2.  For exemptions requested under OP 13.40, para. 5(b), the CD director sends the request to the Director, LOA, and copies the RVP and OPR.
3.  For exemptions requested under OP 13.40 para. 5(d), the CD director sends the request to the MD and copies the RVP and OPR.
4.  After CD director, LOA Director, or MD takes decision, the CD director notifies OPR of action taken.


Acronyms:

CD = country department SEC = Vice President and Secretary 
CTRVP = Vice President and Controller MD = managing director 
IDF = Institutional Development Fund OPR = Operations Policy Department 
ED = executive director PPF = Project Preparation Facility 
LEG = Legal Vice Presidency RMCVP = Vice President, Resource Mobilization and Cofinancing 
LEGVP = Senior Vice President and General Counsel RVP = Regional vice president 
LOA = Loan Department SOD/COD = sector/country operations division 
LOALA = Loan Accounting and Borrower Services Division TM = task manager 

____________
  1. For the purpose of this procedural statement, defaults have been divided into two categories: (a) defaults unrelated to payment, and (b) payment-related defaults.  However, the General Conditions do not make this categorization.
  2. "Bank" includes IBRD and IDA, and "loans" includes IDA credits and IDA grants, and, as the context may require, PPF advances and IDF grants. BP 13.40 applies to trust fund-financed Grant Agreements that provide for suspension (either through reference to Section 6.02 of the General Conditions or by stand-alone clauses).  Suspension under 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. For procedures required after cancellation, see BP 13.50, Cancellations.
  5. Some donors have established debt-service trust funds to help certain countries service Bank loans.  Payment to the Bank is considered made only when the funds are received by the Bank. See OP/BP 14.40, Trust Funds.
  6. For borrowers who have serviced all their loans within 30 days of the due date, a partial waiver may be granted for interest charges on IBRD loans; the waiver is decided by the EDs annually after a review of the Bank's financial position.  Six months of continuous timely servicing of all its loans is required for the borrower to maintain eligibility for the partial waiver.  See OP/BP 3.10, Loan Charges, Currencies, and Payment Terms of IBRD Loans and IDA Credits, and their annexes.
  7. However, subject to the approval of the MD concerned, loans may be placed on the agenda for Board consideration when there is reasonable evidence that the Bank will receive the overdue payments before the Board presentation date.
  8. When the Bank receives the overdue payment, eligibility is restored in six months if payments on all amounts falling due during that period have been received within 30 days of their due dates.
  9. Being current on all payments includes, for the purposes of OP/BP 13.40, not only the payments 30 days or more overdue, but also all other payments due as of the date the Bank receives payment, regardless of the number of days since they fell due.
  10. For procedures required after cancellation, see BP 13.50, Cancellations.



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