BP 6.00 - Bank Financing

Country Financing Parameters

1.       The country director, supported by the country economist and country team, consults with the borrower and proposes the overall parameters for Bank financing in each country in accordance with OP 6.00, Bank Financing:  

(a)     Cost sharing.  In determining the limit on the proportion of individual project costs that the Bank may finance, Bank staff take into account available information³on (i) the level and quality of the borrower's public expenditure program and its financing; (ii) the quality of the borrower’s mechanisms for budget preparation, execution,⁴and monitoring; and (iii) the degree to which the projects to be financed by the Bank are integrated into the borrower’s budget.

(b)     Recurrent cost financing.  In determining any limits that would apply to the overall amount of recurrent expenditures that the Bank may finance, Bank staff take into account available information³Â on (i) the borrower’s actual and expected economic and public finance performance; (ii) the share of Bank and other official development assistance financing in the borrower’s development expenditures; (iii) the adequacy of the borrower’s budget preparation and execution⁴; and (iv) the borrower's commitment and ability to provide continued financing for recurrent expenditures after Bank financing is completed.

(c)     Local cost financing. In forming a judgment on whether the requirements for Bank financing of local expenditures are met, Bank staff take into account available information³on (i) whether financing requirements for the country’s development program would exceed the public sector’s own resources (e.g., from taxation and other revenues) and expected domestic borrowing; and (ii) whether the financing of foreign costs alone would not enable the Bank to assist in the financing of individual projects.

(d)     Taxes and duties.  In forming a judgment on whether the Bank would not finance any taxes and duties, Bank staff review available information on whether the country’s fiscal regime includes taxes or duties that are at levels that the Bank considers excessive and material.

2.       Bank staff determine the country financing parameters, which take effect upon approval by the Regional vice president. These parameters may be reviewed and (with the Regional vice president’s approval) amended as appropriate in the light of changing country circumstances, and they are always reviewed during preparation of the Country Assistance Strategy (CAS) and reflected in the CAS.⁵  Regional staff send the parameters to Operations Policy and Country Services (OPCS), which maintains on the Bank’s internal website a list of the parameters for all borrowing countries.⁶

Financing Individual Projects

3.       The borrower prepares a cost estimate and financing plan for each project.  Bank staff review the estimate and judge whether all costs are necessary to meet the objectives of the operation.  Bank staff ensure that the costs to be financed by the Bank comply with the provisions of OP 6.00, Bank Financing, and are consistent with the approved country financing parameters.  Specific considerations at the project level are as follows:

(a)     Cost sharing. In determining the cost sharing for an individual project, Bank staff take into account available information on the borrower’s use of its own resources to fund its development program for the sector concerned.

(b)     Recurrent cost financing.  In determining the level of financing of recurrent costs in a specific project, Bank staff take into account sustainability issues at the sector and project levels.  In particular, Bank staff review the financial statements and projections of the project entity (or entities), focusing on (i) the entity's revenue-raising performance and plans, (ii) actual and planned financial contributions from government and other public entities, and (iii) current and projected debt and debt service levels.

(c)     Taxes and duties. In determining whether the Bank should not finance any taxes and duties, Bank staff consider whether, and to what extent, taxes and duties (i) constitute an excessively high share of project costs, or (ii) are specifically directed at Bank-financed projects or activities or expenditures and are material. If the country's tax regime changes significantly during project implementation, Bank staff take necessary actions to modify the percentage of Bank financing for the project, within the limits allowed by the country financing parameters.

4.       Any proposal that a project exceed the country financing parameters (e.g., that the Bank finance a higher proportion of a specific project than the limit determined for individual projects in that country) is submitted to the Regional vice president for approval and justified and disclosed in the Project Appraisal Document (PAD).

Special Review and Authorization Arrangements for Selected Types of Expenditures

5.  In determining whether and to what extent to finance various types of expenditures, Bank staff are guided by the three principles outlined in para. 1 of OP 6.00, Bank Financing. Bank financing under a project of particular types of expenditures—those considered to pose particular risks or those that would likely benefit from inputs from a broader group—are subject to authorization additional to that for normal project processing (see Annex A).⁷ Staff set out in the PAD a justification for financing any such expenditures, any risks these expenditures might pose, and the steps proposed to manage these risks.  

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