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BP 8.60 - Development Policy Lending

These policies were prepared for use by World Bank staff and are not necessarily a complete treatment of the subject.
BP 8.60
August, 2004

This Bank Procedures statement was updated in March 2006 to reflect the revised requirements for ICRs for programmatic development policy lending, which take effect on April 1, 2006.  Previously updated in December 2005 to reflect revised disclosure requirements and clarified financial terms for supplemental financing under development policy lending.

Note: OP and BP 8.60 together replace OD 8.60, Adjustment Lending Policy, and update the policy decisions in Issues in Adjustment Lending (R-96-55), April 2, 1996; Adjustment Lending to Subnational Units (SecM98-96[Rev.]), May 14, 1998; Programmatic and Emergency Adjustment Lending: World Bank Guidelines (R-98-249), October 22, 1998; and the following Operational Memoranda: Adjustment Operations – Documentation of Policy Performance in Initiating Memoranda, March 31, 1988; Tranche Release for Adjustment Operations, January 21, 1992; Simplifying Disbursement under Structural and Sectoral Adjustment Loans, February 8, 1996; Guidelines for Special Structural Adjustment Loans, April 19, 1999; Guidelines for Programmatic Adjustment Loans/Credits, February 11, 2000; Clarification of Current Bank Policy on Adjustment Lending, June 5, 2000; and Interim Guidelines for Poverty Reduction Support Credits (PRSCs), May 31, 2001.  They also reflect the relevant provisions in Proposal to Introduce a Deferred Drawdown Option (DDO) for Use with IBRD Adjustment Loans (R2001-0174), September 26, 2001, and The World Bank Policy on Disclosure of Information (2002), as revised in March 2005.  These OP and BP apply to all operations for which a Concept Review takes place on or after September 1, 2004.  Questions on development policy lending should be addressed to

Identification and Preparation

1.  At an early stage of preparation of a development policy operation, the task team consults with the IMF and with relevant units in the Bank,1 IFC, and MIGA.2 As appropriate, to establish a coordinated approach to the development policy program, the task team in coordination with the borrower solicits the views of the concerned regional development bank and other external donors on policy objectives.

2.  After the program concept is clearly defined, but before detailed preparation of the operation begins, the task team prepares a Concept Document3 explaining the rationale for the proposed operation, linking it with the most recent Country Assistance Strategy, and describing its objectives, expected outcomes, and provisions. The task team also prepares an initial Program Information Document (PID) summarizing the main elements of the evolving operation. The Concept Document and PID are reviewed and cleared according to Regional procedures, and the task team sends the PID to the InfoShop. As preparation of the development policy operation proceeds, the task team keeps the PID updated and sends each revision to the InfoShop.

3.  For proposed special development lending,4 the Region consults informally with the Board at an early stage of preparation, and thereafter as necessary.

Appraisal and Review

4.  As the operation is prepared, the task team drafts the Program Document (PD), which includes the policy matrix. The PD clearly sets out the objectives of the proposed operation in terms of the specific outcomes expected from the resource transfer and the government program being supported. It includes measurable indicators for monitoring progress during implementation and evaluating outcomes on completion. In addition, it covers the considerations, design provisions, and fiduciary arrangements discussed in OP 8.60.

5.  Before appraisal, the Region submits the proposed operation for corporate review by the Regional Operations Committee (usually chaired by the Regional vice president) or the Operations Committee (usually chaired by the Managing Director, Operations).5 On conclusion of the review, the Regional Operations Committee or Operations Committee specifies further actions, and, as appropriate, authorizes appraisal and negotiations.

6.  During appraisal, the task team assesses the adequacy of the proposed program to achieve its stated objectives. Before negotiations, the team includes in the documentation the borrower’s draft Letter of Development Policy (LDP), unless the borrower has objected to its disclosure, and the lawyer prepares the draft Loan Agreement.

Negotiations and Board Presentation

7.  Invitation to Negotiate. The country director issues the invitation to negotiate a development policy operation. The invitation includes a statement that it is the Bank’s policy to make the PD and any Tranche Release Document (TRD) available to the public after the loan or credit has been approved by Executive Directors. It also indicates that the LDP will be made available to the public following Board approval, unless the Executive Directors decide otherwise. It requests that the borrower’s negotiating team be prepared to identify, during negotiations, any sections of the PD that are confidential or sensitive, or that may adversely affect relations between the prospective borrower and the Bank, if disclosed.

8.  Finalizing the PD. When finalizing the PD, the team leader makes appropriate adjustments to it to deal with any matters raised by the borrower. If any information raises issues of confidentiality or sensitivity, or may adversely affect relations between the Bank and the borrower, and is relevant to the Executive Directors in their decisionmaking process, the team leader incorporates it in the Memorandum of the President (MOP). The LDP is normally attached as an annex to the PD; but if the borrower has objected to the disclosure of the LDP, it is included as an annex to the MOP. The cover of the PD indicates to which document the LDP is annexed.

9.  Distribution of the PD to Executive Directors. After the PD has been cleared for distribution to Executive Directors following the corporate review process, the Regional vice president transmits the PD to the Corporate Secretariat’s Board Operations Unit (SECBO), indicating in the Board Submission Form that the PD will be made publicly available after the loan or credit is approved.

10.  Board Presentation. The Board approves the loan on the basis of the Program Document—setting out the program content, conditionality, and terms—and the government’s Letter of Development Policy.

(a)  For programmatic development policy operations, including poverty reduction support credits, the Board approves each individual operation in the series. If there are no substantive changes in the policy program and performance is adequate, subsequent operations are presented to the Board on a streamlined procedure basis.

(b)  For special development policy operations, the Region may propose fast-track consideration by Executive Directors (that is, consideration within not less than one calendar week following distribution of the documents).

11.  Disclosure. After the Executive Directors approve the operation, if their discussion does not necessitate revisions to the PD, SECBO notifies the Internal Document Unit (IDU) and the InfoShop that the document may be made available to the public. If further revisions to the PD are required, SECBO notifies IDU and the InfoShop about the need for revisions. Once the document has been revised and cleared according to Regional procedures, the country director transmits the revised final document to SECBO, indicating in the Board Submission Form that the PD may be made available to the public. SECBO notifies IDU and the InfoShop that the PD may be made available to the public.

12.  Signing and Effectiveness. Once the Bank approves a development policy operation, authorized representatives of the borrower and the Bank sign the legal agreements for the loan. After signing, the legal agreements become effective only after the borrower furnishes to the Bank satisfactory evidence that the borrower has met standard and special conditions of effectiveness. OP/BP 13.00, Signing of Legal Documents and Effectiveness of Loans and Credits, sets out the relevant requirements and procedures.

Development Policy Operations with Deferred Drawdown Option

13.  Throughout the drawdown period, the borrower and the Bank maintain a close policy dialogue. As part of regular loan supervision, Bank staff periodically consult with the IMF on the adequacy of the borrower’s macroeconomic framework and monitor the borrower’s continuing adherence to the overall program. If at any time during the drawdown period Bank staff conclude that the borrower does not meet one or both of these two drawdown conditions, they promptly advise the borrower and conduct more frequent follow-up monitoring until the borrower again meets both drawdown conditions.

14.  Drawdown. The Bank responds rapidly to the borrower’s request to draw on the loan. If the Bank has not previously had to advise the borrower of the need for a subsequent review to confirm that both conditions are met as a prerequisite for a drawdown, the Bank would quickly reconfirm whether the two conditions remain satisfied. If the Bank had previously advised the borrower of the need for such a subsequent review, the Bank conducts a full review of the macroeconomic policy framework and overall program implementation as early as possible on receipt of the borrower’s drawdown request. When the borrower asks to draw on the loan, Bank staff reconfirm whether the two conditions remain satisfied;6 and if they are, the Bank grants the borrower’s request to draw on the loan. If Bank staff determine that the borrower does not meet one or both drawdown conditions, they advise the borrower promptly of the reasons for this determination. The general policies and procedures on waivers of conditions apply.

Supervision, Monitoring, and Evaluation


15.  Supervision of a development policy operation covers monitoring, evaluative review, reporting, and technical assistance activities to:

(a)  ascertain whether the borrower is carrying out the program with due diligence to achieve its development objectives in conformity with the legal agreements;

(b)  identify problems promptly as they arise during implementation and recommend to the borrower ways to resolve them;

(c)  recommend changes in program concept or design, as appropriate, as the program evolves or circumstances change;

(d)  identify the key risks to program sustainability and recommend appropriate risk management strategies and actions to the borrower; and

(e)  prepare the Bank’s Implementation Completion Report (ICR), and draw lessons to improve the design of future operations, sector and country strategies, and policies.

16.  In supervising a development policy operation, the task team monitors the country’s overall economic performance and the timely adoption and effective implementation of the agreed program conditions. For multiple-tranche operations, the task team assesses the borrower’s progress toward meeting the conditions for release of the next tranche. For programmatic operations, the task team assesses the borrower’s progress in implementing the expected actions for the subsequent operation in the series. The task team also validates the borrower’s monitoring and evaluation findings on the progress and results of program implementation. The task team consults and coordinates with the IMF and any cofinanciers in carrying out its supervision work.

17.  During program implementation, if priorities or circumstances surrounding the program change, it may be desirable to introduce corresponding changes in the development operation, its design, or the implementation arrangements. On receipt of a written request from the borrower for the change, the country director, in consultation with the team leader and the lawyer, determines whether the change is significant or minor. Significant changes in the operation are submitted for approval to Executive Directors. Minor changes are submitted to the country director for approval.

Supplemental Financing

18.  Before considering supplemental financing, Bank staff work with the borrower to explore other solutions, including identifying alternative sources of funds.  Staff develop a concise program document, known as the Supplemental Financing Document (SFD), that explains why supplemental financing is needed and what measures have already been taken to deal with the situation.  The SFD sketches the recent developments relevant to the program and shows that the criteria for supplemental Bank financing have been met. It also describes any changes required in the loan documents. Supplemental financing is provided as a separate loan and constitutes a new loan commitment.  The financial terms and conditions for the supplemental loan are set in accordance with the provisions of OP 3.10, Financial Terms and Conditions of IBRD Loans, IBRD Hedging Products, and IDA Credits.  The legal documentation for a supplemental loan usually consists of an amendment to the Loan Agreement.  The supplemental loan is normally considered at a Board meeting under standard procedures. However, Board approval may be sought under streamlined procedures when (a) the supplemental financing raises no complex or controversial issues; (b) the proposed loan is small relative to the original operation; (c) the loan does not involve a major change in the Bank’s share of financing; and (d) no substantial changes are proposed in the program objectives or design.  The SFD is disclosed following the same procedures as for the PD (para. 11.)

Tranche Release

19.  During the preparation of a TRD the team leader consults with the borrower to identify any sections of the TRD that are confidential or sensitive, or likely to adversely affect relations between the borrower and the Bank. As appropriate, the team leader makes adjustments to the TRD to deal with any matters raised by the borrower.

20.  When the borrower has in all material respects satisfactorily met the conditions for tranche release specified in the Loan Agreement, the Regional vice president approves the tranche release and sends the announcement to SECBO, indicating in the Board Submission Form that the TRD will be made publicly available. The MOP that accompanies the TRD may incorporate any information raising issues of confidentiality, sensitivity, or adverse relations between the borrower and the Bank that the Regional vice president wishes to convey to Executive Directors. SECBO distributes the TRD to Executive Directors for information and notifies IDU and the InfoShop that the TRD may be made available to the public.

21.  Board approval is required for a waiver or amendment of loan agreement requirements. If the borrower has not met the tranche release conditions and the Region proposes to waive or amend the loan agreement requirements, the Regional vice president consults with the Managing Director concerned before recommending approval of the tranche release and sending the announcement to SECBO for issuance to Executive Directors for approval on a non-objection basis.

Contractual Provisions

22.  The following contractual provisions for Bank loans are relevant for development policy operations: Closing Dates (OP/BP 13.30), Suspension of Disbursements (OP/BP 13.40), Cancellations (OP/BP 13.50).


23.  The task team prepares an ICR on completion of an operation. For programmatic development policy lending, an ICR is prepared on completion of the program and includes a separate assessment of the contribution of each individual operation to the program. The ICR assesses (a) the degree to which the program achieved its development objectives and outputs as set out in the program documents; (b) other significant outcomes and impacts; (c) prospects for the program’s sustainability; and (d) Bank and borrower performance, including compliance with relevant Bank policies. It draws on the data and analysis to substantiate these assessments, and it identifies the lessons learned from implementation.

  1. "Bank" includes IBRD and IDA, and "loan" includes credit and IDA grant. "Borrower" includes borrower and IDA grant recipient.
  2. See Bank-Fund Collaboration in Assisting Member Countries (R89-45), March 31, 1989.
  3. Examples of the Concept Document and other development policy lending documents are available at the World Bank OPCS website.
  4. See OP 8.60, Development Policy Lending, paras. 24-26.
  5. For internal guidelines to assist in the application of OP and BP 8.60 on the corporate review process and the Operations Committee, staff may refer to the OPCS website.
  6. If the Bank needs to conduct a full review of the macroeconomic framework and overall program implementation, Bank staff examine and Bank management makes a judgment on the adequacy of the macroeconomic policy framework, taking into account the Fund's assessment, and on the continued consistency of government actions and policies with the objectives of the program agreed at negotiations and set out in the LDP. Depending on country and external developments, government actions may remain consistent with the objectives of the program even if one or more prior actions might have been partly or fully reversed.  In such a case, Management would consider the drawdown condition on adherence to the program fulfilled.

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