PRODUCT NOTEIDA Development Policy Loan with Catastrophe
Deferred Drawdown (Cat DDO)
Highlights•••

A contingent financing line that provides
immediate liquidity following a natural
catastrophe including natural disasters andpublic health emergencies caused by abiological event.
Funds become available for disbursement
after the drawdown trigger – typically thecountry’s declaration of a state of emergency– is met.
At approval, a country must have anadequate macroeconomic policy framework
and a satisfactory program in place tomanage risks of natural disasters and publichealth emergencies, which the Bank will
monitor periodically.

The Development Policy Loan with a Catastrophe Deferred
Drawdown Option (DPF Cat DDO) is a contingent financing linethat provides immediate liquidity to countries to address
shocks related to natural disasters and public healthemergencies caused by a biological event. It enhances
countries’ crisis preparedness and prevention through policy
and institutional actions as well as the requirement for asatisfactory program for managing related risks, which theBank monitors during implementation.
Approved prior to the disaster, the DPF Cat DDO disburses
quickly once the event occurs, the drawdown trigger is met - if
the program implementation remains satisfactory. It serves as
early budget support while funds from other sources, such as
bilateral aid or reconstruction loans, are being mobilized.
The DPF Cat DDO is most effective as part of a broader risk
management strategy in countries highly exposed to natural
disasters and public health emergencies. The DPF Cat DDO
may also be complemented by other risk retention and risk
transfer instruments that provide post-disaster liquidity, coverlosses, or support reconstruction. Governments determine themix of disaster risk financing instruments based on anassessment of risks, desired coverage, available budget, andcost efficiency.

Key Features

Access criteria: To access the DPF Cat DDO, the recipients
must (i) have an adequate macroeconomic policy framework;
IDA resources for DPF Cat DDOs will continue to be capped at US$3billion (cumulative).
IDA Catastrophe Deferred Drawdown Option (Cat DDO)

and (ii) have a satisfactory program in place to manage risks ofnatural disasters and public health emergencies. The WorldBank will monitor this program periodically. Both criteria must
be met at approval and any potential renewals. Additionally,
the effectiveness of the program for managing risks of natural
disasters and public health emergencies will be continuously
assessed throughout the implementation phase. Progress will
be measured against established results indicators and theimplementation of the reform program. Failure to maintain asatisfactory implementation of the program may result in thesuspension of drawdowns.
Country limit: The country limit for IDA countries is set at amaximum of US$500 million or 1 percent of GDP, whichever islower. IDA clients with limits below US$40 million may request
a Cat DDO up to a maximum of US$40 million. 1
Drawdown trigger: The DPF Cat DDO has a pre-specified
drawdown trigger linked to a natural catastrophe, typically themember country’s declaration of a state of emergency.
Drawdown period: The drawdown period is three years,
which may be renewed once for a maximum of six years intotal.
Disbursement criteria: Once the drawdown trigger is met,
the satisfactory implementation of the reform programsupported by the DPF Cat DDO is required. The assessment ofthe macroeconomic policy framework is not needed at thetime of disbursement.
Scale-up Options: An existing (parent) DPF Cat DDO can bescaled up with new financing (the Scalable DPF) to allow anincrease in disbursements of up to 100 percent of the parent
DPF Cat DDO financing amount. A request for a Scalable DPF
is subject to: (i) compliance with the disbursement conditions
for the parent DPF Cat DDO; (ii) due consideration of theavailability of IDA resources; and (iii) an assessment that
additional funds needed are for disaster response. Thisadditional funding is intended to bridge the gap in situations
where the amount available for drawdown in the parent Cat
DDO may be small relative to the expected costs associatedwith the disaster response. An existing DPF Cat DDO may betopped up with up to 10 percent of undisbursed balancesacross the country’s Bank portfolio of Investment Project
Financing and Program for Results operations, under theRapid Response Option (RRO). When the RRO is linked to a DPF
Cat DDO, its disbursement conditions are the same as those ofthe existing DPF Cat DDO.

Sources of Funding and Pricing

IDA Concessional Country Allocation: A country can fund the
DPF Cat DDO through its IDA concessional country allocation(25 percent), the crisis response window (25 percent) andgeneral IDA resources (50 percent). The Scalable DPF is funded1

Updated as of June 2024

PRODUCT NOTE
by the IDA concessional country allocation. Lending rates andrepayment terms follow the standard IDA financing terms.
Regular Scale-up Window (SUW): Eligible countries may fundthe DPF Cat DDO through the regular SUW, which is a nonconcessional credit, following IBRD loan pricing for IBRD
Group-A countries.
For current pricing here:
https://treasury.worldbank.org/en/about/unit/treasury/idafinancial-products/lending-rates-and-fees

There is a front-end fee of 0.50% on the loan amount and arenewal fee of 0.25% on the undisbursed amount when using
the regular SUW.
Repayment terms would follow that of IDA Non-concessional
credits.

Other Disaster Risk Financing Products

The Cat DDO is part of a broader crisis management toolkit
available from the World Bank, including the Crisis Response
Window (CRW), Pandemic Emergency Facility, andintermediation of disaster risk management products such as
bonds, derivatives, and insurance.

Major Terms & Conditions
Eligibility

All IDA-eligible clients — including blend countries — upon meeting approval criteria

Approval Criteria

The existence of an adequate macroeconomic policy framework and a satisfactory disaster risk
management program, including results indicators defined for implementation of the Program that
addresses natural disasters, which may include health-related events, are required for approval.

Currency• IDA Concessional Country Allocation option and Undisbursed Balances option: SDR, USD, EUR, JPY,and GBP• Regular SUW option: USD, EUR, JPY, and GBP

Drawdown• Up to the full loan amount is available for disbursement when a natural catastrophe, including anatural disaster and a public health emergency due to a biological event, occurs and when thepre-defined trigger condition is met at any time prior to the loan closing date. Eligibility fordrawdown also requires satisfactory implementation of the reform program.
• Up to the full commitment amount is available for disbursement at any time within three years
from the signing of the financing agreement

RenewalDrawdown period may be renewed once, for a maximum of six years in total

Repayment Terms• IDA Concessional Country Allocation option and Undisbursed Balances option: Repayment terms
would follow that of standard IDA concessional credits applicable to the country at time ofcommitment.
• Regular SUW option: Repayment terms would follow that of regular SUW credits. They must bedetermined upon commitment and may be modified upon drawdown within prevailing regular
SUW maturity policy limits.

Lending Rate• Same as the standard IDA financing terms.
• For regular SUW, the lending rate consists of a variable market-based reference rate plus a variablespread.

Front-end Fee• IDA Concessional Country Allocation option and Undisbursed Balances option: zero percent• Regular SUW option: 0.50% of the credit amount is due within 60 days of the effectiveness date;
may be financed out of loan proceeds

Renewal Fee• IDA Concessional Country Allocation option and Undisbursed Balances option: zero percent• Regular SUW option: 0.25% of the undisbursed balanceCommitment Fee

No commitment charge

Recommitment ofUndisbursed Balances

The country’s IDA Concessional Country Allocation portion of undisbursed Cat-DDO balances may
be recommitted upon expiry.

Contact: Miguel Navarro-Martin, Manager, Financial Products & Client Solutions, The World Bank Treasury
 mnavarromartin@worldbank.org  +1 (202) 458 4722
1225 Connecticut Avenue NW, Washington, D.C., 20433, U.S.A.

IDA Catastrophe Deferred Drawdown Option (Cat DDO)

Updated as of June 2024