The Development Policy Loan (DPL) with a Deferred Drawdown Option (DPL DDO) is a contingent credit line that allows the borrower to rapidly meet its financing requirements following a shortfall in resources due to adverse economic events such as a downturn in economic growth or unfavorable changes in commodity prices or terms of trade. The DPL DDO also provides a formal basis for continuing a policy-based engagement with the World Bank when no immediate need for funding exists. The DPL DDO is part of a broad spectrum of financing and risk management available from the World Bank Group to help clients manage vulnerabilities.
Under the DPL DDO, the borrower may defer disbursement of a DPL for up to three years, renewable for an additional three years. The loan proceeds may be drawn down at any time during the three year drawdown period unless the Bank has notified the borrower that one of the drawdown conditions – adequate macroeconomic framework and satisfactory program implementation – is not being met. In order to provide greater certainty to the borrower that the funds will be available when needed, the Bank will periodically monitor the borrower’s compliance with the drawdown conditions.
Disbursements will be priced at the prevailing spread over the reference rate for IBRD loans –comprised of the contractual spread, funding cost, maturity premium, and market risk premium– at the time of drawdown. The calculation of the average repayment maturity begins at loan effectiveness for the determination of the applicable maturity premium, but at withdrawal for the remaining components of the spread. In addition to the one time front-end fee of 0.25%, DPL DDOs are subject to a stand-by fee of 0.50% per annum on undisbursed balances, accruing from the date of effectiveness.