Note: This BP was revised on April 2013 to take into account the recommendations in “Investment Lending Reform: Modernizing and Consolidating Operational Policies and Procedures” (R2012-0204 [IDA/R2012-0248]), which were approved by the Executive Directors on October 25, 2012. As a result of these recommendations, a number of OP/BPs have been consolidated and are now reflected in OP/BP 8.60 Development Policy Lending, OP/BP 9.00 Program-for-Results Financing, and OP/BP 10.00, Investment Project Financing, have been updated, while other OP/BPs, including OP/BP 13.40, Suspension of Disbursements, have been retired. This OP has consequently been updated to reflect these changes.
Questions may be addressed to the Chief Counsel, Operations Policy.
Revised April 2013
1. When a de facto government takes power in a Bank1 member country, the concerned country director (CD): (a) gathers all relevant information about the status, policies, and public acceptance of the new government; and (b) initiates the internal process to determine whether to continue or suspend disbursements under existing loans2 and whether to process new loans or guarantee operations.
2. Immediately upon the change of government, and even if no final decision has been taken on the Bank's future relations with the de facto government, the CD contacts the Legal Vice Presidency (LEG) and Loan Department (LOA) to (a) ascertain the status of processing of withdrawal requests under loans to or guaranteed by the member country, and (b) ensure that no further withdrawal requests are authorized for payment under such loans (pending consultation with the de facto government). However, the Bank makes payments under such loans claimed against special commitments (in accordance with their terms) and may continue to make direct payments under such loans to suppliers, contractors, or consultants, if these applications were received at headquarters or a country office prior to the change in government.
3. The CD consults the sector manager concerned to determine (a) the status of projects under implementation (e.g., whether they are experiencing supervision problems or adverse physical conditions); and (b) whether the objectives of the ongoing projects and those under preparation are consistent with the de facto government's stated policies. Before making a recommendation on suspending or continuing disbursements under existing loans and/or processing new loans or guarantee operations, the CD ascertains the nature and extent of the de facto government's commitment to existing and proposed projects.
4. The Bank may reach an informal agreement with the new authorities in the country to withhold disbursements under loans (other than disbursements required to be made under special commitments)until a decision has been made on dealings with the de facto government. However, once the Bank is satisfied that the government meets the criteria set forth in OP 7.30, paras. 3 and 4
, the Bank decides in a matter of days whether to suspend or continue disbursements under each loan.
5. The Bank makes disbursements under loans (beyond those outlined in para. 2) only when it receives from the de facto government (a) confirmation that representatives previously appointed to sign withdrawal applications remain in authority: or (b) satisfactory evidence of authorized signatures of newly appointed representatives. The CD, in close collaboration with LEG, verifies the authority of the borrower's representatives to sign withdrawal applications before further disbursements beyond those outlined in para. 2 are authorized.
6. Responsibility for a final decision concerning the Bank's relationship with a de facto government rests with the Regional vice president (RVP). The RVP bases this decision on a recommendation made by the CD in consultation with the office of the Director, Credit Risk Group in the office of the Vice President and Chief Financial Officer and cleared by LEG. In case of doubt, the RVP consults the managing director (MD), operations, concerned and the Vice President and General Counsel (LEGVP). Before advising the member country of the decision, the RVP in any event informs the MD, the LEGVP, the Vice President, Resource Mobilization and Cofinancing, and the Vice President, External Affairs.
"Bank" includes IBRD and IDA; "loans" includes IDA credits and IDA grants; and "project" includes a development policy lending program supported under a Bank loan or guarantee, and a program supported under Program-for-Results financing. Depending on the instrument involved, suspension of disbursements under a loan is processed in accordance with OP/BP 8.60, Development Policy Lending, OP/BP 9.00, Program-for-Results Financing, or OP/BP 10.00, Investment Project Financing.