This Operational Policy statement was updated on September 29, 2009, to clarify that the policy applies to Project Preparation Advances that were signed after July 10, 2008. Note: OP and BP 8.10 replace the version dated February 2002 (revised in April and August 2004) and apply to all PPA Agreements that were signed after July 10, 2008. For guidance on, and answers to, specific questions about, the Project Preparation Facility, staff should contact opmanual@worldbank.org. |
1. The Bank[1] may make a Project/Program Preparation Advance (PPA) from the Project Preparation Facility (PPF) to a borrowing country to finance: (a) preparatory activities for investment operations, including preliminary and detailed designs and limited initial implementation activities; and (b) preparation of programs to be supported by development policy lending operations.
2. A PPA is made only to a borrowing country. The PPA complements other Bank methods of assisting project or program preparation, such as trust fund grants for project/program preparation and retroactive financing. [2] 3. A PPA is made only when there is a strong probability that a Bank loan will be made for the operation under preparation. However, granting the PPA does not commit the Bank to finance any portion of the operation. The PPA is designed to be refinanced out of the proceeds of the loan for whose preparation the PPA is granted or, if the loan does not materialize, to be refinanced or repaid as provided in paragraph 8. The PPA is made in US dollars and carries interest on IBRD fixed spread terms or charges on IDA credit or IDA grant terms, depending on the borrowing status of the country.[3] Payment of interest or service charges, where applicable,[4] is deferred until the PPA is refinanced out of the proceeds of the loan or other repayment terms take effect. 4. The Bank determines the PPF's total commitment authority and the ceiling on individual advances. One or more PPAs may be made for the operation at any stage before the Bank approves the loan, up to an aggregate maximum amount of: (a) US$5 million for operations made under OP 8.00, Rapid Response to Crises and Emergencies; or (b) US$3 million for all other operations. Refinancing/Repayment 5. The PPA agreement between the country and the Bank spells out the purposes, terms, and conditions of the PPA and specifies a date by which the advance is to be refinanced or the repayment process initiated. The refinancing date is the expected date of effectiveness of the loan agreement to be made for the operation under preparation. After this date, no withdrawals of the advance are made, and any unwithdrawn amount of the advance is canceled. If the loan agreement has not become effective within two years following the date of PPA approval,[5] a later refinancing date may be agreed between the country and the Bank. Extension of the refinancing date beyond four years following PPA approval requires RVP approval. If the loan for which the PPA was made is unlikely to materialize by the refinancing date, the PPA may be refinanced out of the proceeds of any other loan to or guaranteed by the country whose loan agreement becomes effective by the refinancing date. 6. To refinance the PPA, an amount sufficient to cover the principal amount of the advance plus estimated accrued interest or service charges, where applicable, is allocated in a separate disbursement category in the loan agreement providing for the Bank loan. Any excess amount remaining in this category after refinancing the PPA may be reallocated to other disbursement categories in the disbursement schedule of the loan agreement. 7. Further disbursements for continuing PPA activities that have been included as eligible for financing under the loan are made against the appropriate disbursement categories in the loan agreement. 8. If no loan agreement providing for the refinancing of the PPA has become effective by the refinancing date (including any extensions), the following apply: (a) If the country was an IBRD-country or an IDA-country eligible to receive IDA credits[6] on the PPA approval date, it is required to repay the PPA (together with the accrued interest or service charges, as applicable) upon notice by the Bank in 10 approximately equal semiannual installments over a five year period after the refinancing date. However, if the disbursed amount of the PPA is US$50,000 or less, the country is required to repay it within a period of 60 days after the Bank's notice to repay.[7] (b) If the country was an IDA-country eligible only to receive IDA grants on the PPA approval date, the advance becomes a grant and is not repaid by the country.
Suspension of Disbursements and Cancellation 9. The Bank may suspend disbursements[8] of the PPA upon occurrence of any of the events of suspension specified or referred to in the PPA agreement.[9] The Bank may also request a refund of any amount of the advance that has not been used in accordance with the provisions of the PPA agreement. 10. At any time after disbursements of the PPA have been suspended, or an amount of the advance has been refunded, the Bank may cancel any remaining unwithdrawn amount of the PPA.
“Bank” includes IBRD and IDA, and “loans” includes IDA credits and IDA grants, borrower includes recipient of an IDA credit or grant. For grants, see OP/BP 8.45, Grants; and for retroactive financing, see BP 6.00, Bank Financing. When the operation is likely to be financed with a blend of IBRD and IDA funds, the PPA is normally granted on IDA terms and refinanced out of the proceeds of the IDA credit or grant, in accordance with the policy that IDA funds are normally disbursed first. See OP 3.10, Annex D, IBRD/IDA and Blend Countries: Per Capita Incomes, Lending Eligibility and Repayment Terms. If, on the date of approval of the PPA, the country is eligible only to receive IDA Grants, the PPA does not carry service charges. See OP 3.10, Annex D, IBRD/IDA and Blend Countries: Per Capita Incomes, Lending Eligibility and Repayment Terms. Approval is determined as the date of signature by the Country Director of the PPA agreement. The notice of how the PPA will be repaid is sent by ACTCF. See OP 3.10, Annex D, IBRD/IDA and Blend Countries: Per Capita Incomes, Lending Eligibility, and Repayment Terms. See OP/BP 13.40, Suspension of Disbursements. See the Standard Conditions for Project Preparation Facility Advances, incorporated by reference in the PPA agreement.
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