This Operational Policy statement was revised in March 2012 to take into account the provisions of OP/BP 9.00, issued in February 2012.
Note: These OP and BP 12.00 replace OP/BP 12.00, Disbursement, dated February 1997; OP/BP 12.20, Special Accounts, dated May 1994; OP/BP 12.30, Statements of Expenditure, dated September 1993; and the Operational Memoranda Impact of Eligibility Reforms on Disbursement Policies, dated April 19, 2004, and Impact of New Audit Policies and Practices and Eligibility Reforms on Disbursement Policies - Special Accounts, dated April 19, 2004. For investment loans, OP/BP 12.00 should be read in conjunction with OP/BP 6.00, Bank Financing, and OP/BP 10.02, Financial Management. Investment loans in countries without approved country financing parameters to which OP/BP 6.00, Bank Financing, do not apply, are subject to the Operational Memorandum Specific Expenditure Eligibility and Cost Sharing Requirements for Investment Projects in Countries Without Approved Country Financing Parameters; for such loans, OP/BP 12.00 should be read in conjunction with the said Operational Memorandum. For development policy loans, see also OP/BP 8.60, Development Policy Lending. Questions on disbursement should be addressed to the Director, Loan Department or sent by electronic mail to email@example.com.
Revised March 2012
1. The Bank’s1Articles of Agreement require that the Bank "make arrangements to ensure that the proceeds of any loan are used only for the purposes for which the loan was granted” and that the borrower may withdraw the loan proceeds “only to meet expenditures made in connection with the operation as they are actually incurred."2 The Bank’s disbursement policies are part of the Bank’s overall institutional control framework that enables these requirements to be met.3
Disbursement under Investment Loans
2. The Bank establishes disbursement arrangements4 for an operation in consultation with the borrower and taking into consideration, inter alia, an assessment of the borrower’s financial management5 and procurement6 arrangements, the ongoing adequacy of these arrangements, the procurement plan and cash flow needs of the operation, and previous disbursement experience with the borrower.
3. Loan Disbursing Period. After the Loan Agreement is declared effective, the Bank disburses proceeds from the loan account to or on the order of the borrower for expenditures (a) eligible under the operation’s Loan Agreement,7(b) paid for on or after the date of the Loan Agreement (or, for operations that permit retroactive financing,8the earlier date specified in the Loan Agreement), and (c) incurred on or before the closing date9 referred to in the Loan Agreement.10 The Bank may terminate the borrower’s right to withdraw proceeds from the loan account after the closing date.
4. Disbursement Conditions.11 The Bank may require the borrower to fulfill specific conditions before it disburses particular loan amounts.12 Such disbursement conditions apply only to loan amounts that are (a) for parts of the operation that can be clearly separated from the rest of the operation, and (b) separately identified in the Loan Agreement.13
5. Disbursement Methods.14 The Bank disburses proceeds from the loan account using one or more disbursement methods. The Bank may:
(a) reimburse the borrower for expenditures paid from the borrower’s resources;
(b) advance loan proceeds into an account of the borrower that is held in a financial institution acceptable15 to the Bank and operated on terms and conditions acceptable to the Bank (the “designated account”) to finance eligible expenditures as they are incurred and for which supporting documentation will be provided at a later date;
(c) make a direct payment to a third party (e.g., supplier, contractor, consultant); and,
(d) enter into special commitments in writing to pay amounts to a third party in respect of expenditures to be financed out of the loan proceeds, upon the borrower’s request and under terms and conditions agreed between the Bank and the borrower.
The Bank determines the amount that may be advanced into the designated account in accordance with the operation’s periodic financing requirements. The designated account is an account that is maintained exclusively for the project. It may be an account which is segregated for Bank proceeds, or an account which pools Bank proceeds with funds of the borrower, development partners, or both.
6. Supporting Documentation. Before disbursing loan proceeds, the Bank verifies that the application for withdrawal and any required supporting documentation furnished by the borrower are sufficient in form and substance to satisfy the Bank that the borrower is entitled to withdraw the amount applied for pursuant to the provisions of the Loan Agreement. The Bank determines the form, content, and periodicity of required supporting documentation, which may differ depending on the particular disbursement method. The Bank may require records (e.g., receipts, invoices) for certain specific expenditures, and/or accept summary reports of expenditure (i.e., interim financial reports16 or statements of expenditure) from the borrower to support the application for withdrawal.
7. Retention of Original Documentation. The Bank requires that the borrower retain all original records evidencing expenditures for a specified period of time,17and make them available to independent auditors and Bank staff.
8. Loan Account. If the Bank at any time determines that any amount withdrawn from the loan account has been used to finance expenditures that are not eligible for financing pursuant to the provisions of the Loan Agreement, the Bank requires the borrower to refund the amount to the Bank,19 or, at the Bank’s discretion, to provide substitute documentation evidencing other eligible expenditures under the operation.
9. Designated Account. If the Bank at any time determines that amounts in the designated account are not required to meet eligible expenditures as they are incurred, the Bank may require the borrower to refund the excess amount to the Bank unless the borrower submits satisfactory evidence of eligible expenditures financed from the designated account.
10. If the Bank at any time determines that ineligible expenditures have been financed from the designated account, the Bank requires the borrower to refund to the Bank an amount equal to the amount withdrawn from the designated account to pay for the ineligible expenditures. Alternatively, the Bank may, at its discretion, allow the borrower to (a) deposit into the designated account an amount equal to the amount so withdrawn from the designated account, or (b) provide substitute documentation evidencing other eligible expenditures under the operation. The Bank may also withhold disbursement of additional deposits into the designated account. If the borrower does not comply with any of the requirements of this paragraph, as specified by the Bank, within 12 months following notice by the Bank to the borrower of the requirement, the Bank may (a) decline to allow the use of designated accounts under new loans made to or guaranteed by the borrower, (b) establish compliance as a condition for Board presentation of new loans, (c) suspend disbursements under the loan; or (d) in extreme cases, suspend disbursements under all ongoing loans to or guaranteed by the borrower.20
11. The Bank makes no disbursement into the designated account after a warning or notice of suspension21 or, normally, after the closing date.22
12. Before the Bank closes the loan account, the borrower must provide supporting documentation satisfactory to the Bank that shows the expenditures paid out of the designated account, or refund any undocumented balance. If the borrower fails to provide the documentation or refund required by the Bank, the Bank does not permit the use of designated accounts under new loans made to or guaranteed by the borrower.
Disbursement under Development Policy Loans23
13. After the Loan Agreement is declared effective, the Bank disburses proceeds of development policy loans (DPL) upon compliance with any disbursement conditions set out in the Loan Agreement, to or on the order of the borrower.
14. If the Bank at any time determines that any amount withdrawn under the DPL has been used for ineligible expenditures24 the Bank requires the borrower to refund the amount to the Bank.25
Disbursement under Program-for-Results Financing
15. Disbursement policies related to Program-for-Results financing are set out in OP 9.00.
“Bank” includes IBRD and IDA; “loan” includes IBRD loans, IDA credits, IDA grants, Project Preparation Facility (PPF) advances, grants made under the Institutional Development Fund (IDF), and Global Environment Facility (GEF) grants unless otherwise provided in OP 10.20; “borrower” includes the recipient of a grant. The policy also applies to recipient-executed grants financed from trust funds, unless, exceptionally, the terms of the agreement with the donor make provision for different requirements. When the Bank acts as an agent of another financier for the purpose of administering the disbursement of the financier’s funds (see OP/BP 14.20, Cofinancing), OP/BP 12.00 normally applies; exceptions should be determined in consultation with the Director, Loan Department. “Loan Agreement” includes agreements for loans, credits, grants or PPF advances.
IBRD Articles of Agreement, Article III, Section 5 (b) and (c); see also IDA Articles of Agreement, Article V, Section 1 (g) and (h).
For internal guidance to assist in the application of OP/BP 12.00, staff may refer to the Guidance for Loan Department Staff issued by the Loan Department.
The disbursement arrangements for an operation comprise the specific disbursement methods and supporting documentation requirements agreed for the operation.
See OP/BP 10.02, Financial Management. See OP/BP 11.00, Procurement. See OP/BP 6.00, Bank Financing. See OP/BP 6.00, Bank Financing, for the conditions under which retroactive financing may be approved. See OP/BP 13.30, Closing Dates. The Bank may finance the reasonable costs of audits required by the Bank under an operation, the costs of which may be incurred after the closing date. See OP/BP 13.30, Closing Dates.
Such conditions are referred to as “withdrawal conditions” in the Loan Agreement.
Implementation of investment projects involves ongoing disbursement of loan proceeds, usually against contracts that are performed over an extended period of time, until project completion. For this reason, disbursement conditions for investment projects should be limited to actions required before the commencement of these activities, and should not relate to events that are not directly necessary for the particular activities being financed.
If a borrower of an IBRD loan finances the front-end fee out of its own resources instead of the loan, receipt of payment of the front-end fee becomes a condition of disbursement of any proceeds under the loan.
Disbursement methods, terms and conditions related to designated accounts and acceptable to the Bank, and supporting documentation requirements are further elaborated in the World Bank Disbursement Guidelines for Projects, which may be updated from time to time. The Guidelines apply to all loans, credits and grants that are using the simplified legal agreements which incorporate the IBRD General Conditions for Loans or the IDA General Conditions for Credits and Grants dated July 1, 2005 or later, or which incorporate the Standard Conditions for Grants Made by the World Bank Out of Various Trust Funds. To be acceptable to the Bank, the financial institution would be financially sound and able to meet the needs of the operation. The normal requirements are set out in the World Bank Disbursement Guidelines for Projects, which may be updated from time to time. See OP/BP 10.02, Financial Management.
See the record retention provisions of the Loan Agreement for the specific operation concerned.
In addition to the actions described in paragraphs 8-12 of this statement, the General Conditions include other remedies that may apply, e.g., suspension (see OP/BP 13.40, Suspension of Disbursements).
The refunded amount normally is cancelled.
See OP/BP 13.40, Suspension of Disbursements. See OP/BP 13.30, Closing Dates. Refer also to OP/BP 8.60, Development Policy Lending, for disbursement policies related to DPL loans.
“Ineligible expenditures” include, inter alia, goods or services from the negative list, including luxury and military items and payments prohibited by a decision of the United Nations Security Council taken under Chapter VII of the Charter of the United Nations. If the DPL is used to finance a positive list, “ineligible expenditures” would be items not included on the list or that were procured in a manner inconsistent with the requirements of the Loan Agreement or that were prohibited by a decision of the United Nations Security Council taken under Chapter VII of the Charter of the United Nations.
In this case, the refunded amount would be credited to the loan account and cancelled.