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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
February, 2012

This Bank Procedures statement was updated in December 2005 to reflect revised disclosure requirements and to clarify financial terms for supplemental financing under development policy lending.  It was again updated in September 2011 to reflect revisions to the policy framework for development policy lending: enhancement of the deferred drawdown option (DDO) and the introduction of a DDO for catastrophic risk, the revision of the special development policy lending option, and the eligibility of political subdivisions for development policy operations. This update also reflects the relevant provisions of the 2010 World Bank Policy on Access to Information.

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.  This OP and BP apply to all operations for which a Concept Review takes place on or after September 1, 2004. This update reflects relevant provisions of Proposal to Enhance the IBRD Deferred Drawdown Option (DDO) and to Introduce a DDO Option for Catastrophic Risk , January 29, 2008, World Bank Response to Financial Crisis: The Special Development Policy Lending Option (July 29, 2009), Development Policy Lending to Political Subdivisions (R2011-0048), March 11, 2011 and The World Bank Policy on Access to Information (2010), which replaced the The World Bank Policy on Disclosure of Information (2002). 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 a results framework with measurable indicators (with quantitative baselines and targets, whenever possible) 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 a Managing Director).5 On conclusion of the review, the Chair of 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), 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 available to the public after the loan or credit has been approved unless the borrower has consented in writing to disclosure before Board consideration.6 It also indicates that the LDP will be made available to the public normally together with the operation’s PD, and that any Tranche Release Document (TRD) will also be made publicly available. 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 that raises issues of confidentiality or sensitivity, or may adversely affect relations between the Bank and the borrower, is removed from the PD but is relevant to the Executive Directors in their decision-making process, the team leader incorporates it in the Memorandum of the President (MOP). The LDP and the Fund Relations Note are normally attached as annexes to the PD.  Whenever the Fund Relations Note is represented by an IMF Assessment Letter it should be treated as confidential and attached to the MOP that accompanies the PD, unless the IMF has informed the Bank that the country authorities have consented to its disclosure.7 

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 Policy and Operations Unit (SECPO), indicating in the Board Submission Form that the PD will be made publicly available after the loan or credit is approved, unless the borrower has consented to the disclosure of the PD before Board consideration.

10. Board Presentation. The Board approves the loan on the basis of the Program Document (which sets out the program content, conditionality, and terms) and the government’s LDP.

(a) For programmatic development policy operations 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 under streamlined procedures.

(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. The process for disclosing the Program Document varies depending on whether the borrower has consented to its early disclosure.8 

(a)  If the borrower has consented to the disclosure of the PD before Board consideration, the country director transmits the PD to SECPO indicating in the Board Submission Form that the PD is to be disclosed upon its distribution to the Board, and that the government has granted its written consent to such early disclosure. SECPO distributes the PDs to the EDs and notifies the Internal Documents Unit (IDU) that the PD should be made available to the public. If the PD is subsequently revised to reflect the Board discussion, the country director transmits the revised final PD to SECPO indicating in the Board Submission Form that the PD may be made available to the public. SECPO distributes the final version of the paper to the EDs and informs IDU that it should now be disclosed.

(b)  If the borrower has not consented to the early disclosure of the PD, disclosure takes place only after the Executive Directors have approved the operation. If after the Board discussion the PD does not need to be revised, SECPO notifies IDU and the InfoShop that the document may be made available to the public. If further revisions to the PD are required, SECPO 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 SECPO, indicating in the Board Submission Form that the PD may be made available to the public. SECPO 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 deferment period of a DPL DDO or a Cat DDO, the Bank maintains a close policy dialogue with the borrower. As part of regular loan supervision and at least every 12 months, the Bank reviews the borrower’s continuing adherence to the overall program laid out in the LDP and, for a DPL DDO, the adequacy of the borrower’s macroeconomic policy framework. If at any time during the deferment period the Bank concludes that the borrower no longer complies with the LDP program (or, for the DPL DDO, no longer has an adequate macroeconomic policy framework), the Bank promptly notifies the borrower, including the reasons for its determination; advises that if the borrower requests a drawdown it will be subject to a full review of program implementation (and, for the DPL DDO, of the macroeconomic policy framework); works with the borrower to help it meet the relevant conditions; and notifies the borrower when those conditions are again met.

14. Drawdown and Renewal. On the borrower’s request to draw on the loan, the Bank responds rapidly with the disbursement (for the Cat DDO, after confirming that the natural disaster trigger has been met). However, if the Bank has previously advised the borrower that it does not meet relevant conditions for the drawdown (set out in OP 8.60, para. 22) and the borrower has not yet returned to compliance with those conditions, the Bank conducts a full review of the overall program implementation (and, for the DPL DDO, of the macroeconomic policy framework) as early as possible on receipt of the borrower’s drawdown request. Once the Bank confirms that the borrower has met the relevant drawdown conditions, the Bank proceeds with disbursement. DPL DDOs and Cat DDOs can be renewed with approval of the RVP provided that the overall program continues to be implemented in a manner satisfactory to the Bank and macroeconomic policies are adequate.

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 and Results 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. For a programmatic series of development policy operations, if priorities or circumstances surrounding the program change during program implementation, it may be desirable to introduce corresponding changes in program objectives and/or design, to be reflected in subsequent operations in the series. 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—for example, revisions to to the number of operations in a series or in the number or substantive content of triggers for subsequent operations—must be vetted by the Regional Operations Committee (ROC) or the Operations Committee (OC), as appropriate. 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 that could adversely affect relations between the borrower and the Bank if disclosed. 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 SECPO, 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. SECPO 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 SECPO for issuance to Executive Directors for approval on an absence-of-objection basis.

Contractual Provisions

22. The following statements set out contractual provisions for Bank loans that are relevant for development policy operations: OP/BP 13.30, Closing Dates; OP/BP 13.40, Suspension of Disbursements; and OP/BP 13.50, Cancellations.


23. The task team prepares an ICR on completion of an operation. 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. 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.

  1. "Bank" includes IBRD and IDA, "loan" includes credit and IDA grant and “borrower” includes borrower, IDA grant recipient, and, except as the context may otherwise require, political subdivision, when a loan is provided to, or for the benefit of, a political subdivision. “Political subdivisions” refers to political entities that have budget authority and legislative competence for the actions supported by the development policy operation; it does not refer to public enterprises. “Country Assistance Strategy (CAS)” includes Country Partnership Strategy (CPS).
  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.  See The World Bank Policy on Access to Information, July 1, 2010, paragraph 23 (b), (ii). See also the Access to Information Policy Staff Handbook, Attachment C, “Communications with Clients and Partners."
  7. For guidelines on the Fund Relations Note and on IMF Assessment Letters, see Guidance Note on Letters and Statements Assessing Members’ Economic Conditions and Policies, available from the OPCS website.
  8.  See paragraph 23 (b) (ii) of the World Bank Access to Information Policy (2010), which governs disclosure of information in the Bank’s possession. See also Attachment A of the Access to Information Handbook (Routinely Available Documents)for an outline of the expected work flow processes in preparing and making information routinely available on the Bank’s external website.

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