PRODUCT NOTE

Investment Project Financing (IPF) with a Deferred
Drawdown Option (DDO)
Highlights• A contingent credit line that provides
immediate funding for specificexpenditures for a project or a public
institution when an unforeseen shock
occurs• Funds become available for disbursement
when a pre-agreed drawdown trigger ismet• The IPF DDO can cover a period of up to
five years, and can be renewed for three
more years

Key Features
The IPF DDO is governed by World Bank’s IPF policies,and can be a component of a larger IPF contingent
financing, in which case, the IPF DDO financial terms will
only apply to that component of the project financing.
Drawdown trigger: The IPF-DDO has a pre-specified
drawdown trigger as determined by the World Bank andborrower, depending on the nature of the project. For
example, for an IPF-DDO, structured to backstop thereserves of a Bank Deposit Guarantee Fund, the predefined trigger may be a bank failure. Or if IPF-DDO isbackstopping an Energy Fund that covers the increased
cost of hydropower generation, the trigger may be anational declaration of drought conditions.
Drawdown: The five-year drawdown period may berenewed for three more years without a fee.

Increasing resilience to fiscal shocks from crisis andimproving risk management are becoming importantdevelopment objectives for governments around theworld. Shocks could be to the financial sector, such as abanking crisis that negatively impacts the finances of agovernment or state-owned institution, or health crises,
such as pandemics, weather-related shocks, and naturaldisasters.

Repayment schedule: The repayment schedule for theIPF-DDO is defined at the time of withdrawal. A tailored
repayment schedule for each drawdown is possible,
subject to prevailing policy limits. In the case of adrawdown, average repayment maturity (ARM) would
be calculated from effectiveness.

Investment Project Financing (IPF) with a Deferred
Drawdown Option (DDO) is one of the contingent
financing modalities offered by the World Bank thatprovides immediate access to funds in times of crisis. It
can shock-proof specific projects or specific public
institutions’ funds to make sure resources are available
for specific needs in times of crisis, when a pre-defined
trigger is met.

IPF-DDO has the same lending rate as regular IPF loans,and these are set at the time of drawdown.
Disbursements will be priced at the prevailing spreadover the reference rate for IBRD loans – comprising thecontractual spread, funding cost, and maturity premium
at the time of drawdown.

Formalized as a part of World Bank’s Crisis Response
Toolkit, the IPF DDO complements other risk
management tools available to governments, including
their own budget resources and existing national funds,
insurance options, and other World Bank financing
instruments such as DPF DDO, Cat DDO and IPF ProjectBased Guarantee (see page 3 for comparison).

Pricing

In addition to the front-end fee of 0.25%, IPF-DDOs are
subject to a stand-by fee of 0.50% per annum on
undisbursed balances, accruing from the date ofeffectiveness.
For current pricing information, please visit theTreasury website at:
http://treasury.worldbank.org/en/about/unit/treasury/i
brd-financial-products/lending-rates-and-fees

Investment Project Financing (IPF) with a Deferred Drawdown Option (DDO)

Updated as of March 2024

PRODUCT NOTE
Examples

Trigger Event
Certain natural disasters, such as a major
drought or flood
Food security emergency

Institution or Project that the IPF
DDO backstops
National disaster fundSocial protection program

Multiple bank failures

Deposit insurance guarantee fundLocal banks defaulting on payment
obligations on their letters of credit tocommodity importers due to currency risk
National declaration of drought conditions

Local banks

Demand exceeding a pre-agreed amountfor green public transportation

Energy stabilization fund thatcovers the increased electricity
generation costs from Hydropower
Financial intermediary for green
transition

So that…
Can immediately respond in rebuilding
infrastructure after a disaster hits
Can rapidly expand the coverage of cashtransfers to poor households
Can make a payout to insured depositors
in a timely way
Can allow trade financing to continue toallow the importation of strategiccommodities
Can continue providing reasonably priced
electricity to households and industry
Can provide financing to an increased
number of municipalities for transition toelectric transportation.

Major Terms & Conditions – For IBRD Loans
PurposeTo provide immediate liquidity when the borrower needs it. IPF DDO provides borrowers financial
preparedness by committing contingent financing for pre-specified expenditures if a certain trigger event
occurs, in contexts where other public and private sector instruments such as guarantees or tradefinance backstopping are unavailable.

Eligibility

All IBRD-eligible borrowers (upon meeting pre-approval criteria).

Currency

Same as regular IBRD loans.

Tenor

Same as regular IBRD loans

Drawdown

Up to the full loan amount is available for disbursement at any time within five years from loan signing ifthe pre-defined trigger event occurs and as eligible project expenditures are incurred. Drawdown period
may be renewed for an additional three years.

Repayment Terms

Must be determined upon commitment and may be modified upon drawdown within prevailing maturity
policy limits. The ARM is calculated at effectiveness and the repayment schedule will start from the dateof drawdown.

Lending Rate*

Like regular IBRD loans, the lending rate consists of a variable reference rate plus a variable spread, set
at the drawdown.

Front-end Fee**

0.25% of the loan amount is due within 60 days of effectiveness date; may be financed out of the loan
proceeds.

Stand-by Fee**

0.50% of the undisbursed balance accruing from the date of effectiveness.

Cancellation

The IBRD/IDA borrower can always cancel the financing before the closing date with no penalty.

Conversion
Options andPrepayments

Currency Conversions, Interest Rate Conversions, Caps, Collars, Payment Dates, Conversion Fees are thesame as for regular IBRD loans.

Special Considerations for IDA Credits
For IPF DDO operations confirmed to have a specific crisis or emergency preparedness objective, IDA would cover half the costof the IPF DDO for IDA countries, where 50% of the funds would come from a country’s Performance Based Allocation (PBA) and
50% from the IDA General Pool. IDA resources from a country’s national IDA allocations that are committed to an IPF DDO
operation but not disbursed (if a shock does not occur) would revert back to the country’s national IDA allocations.
* Pricing and repayment terms for IDA concessional IPF DDOs would be set at commitment and not at the time of disbursement.
** IDA-financed IPF DDO operations follow standard IDA concessional fee terms. The standby fee for IPF DDO financed from
IDA’s concessional windows is determined on an annual basis from 0% up to a maximum of 0.50% per year (0% for FY24).
Investment Project Financing (IPF) with a Deferred Drawdown Option (DDO)

Updated as of March 2024

PRODUCT NOTE
DDO: Comparison Against Other World Bank Contingent Financing Options

Financing use

Approval
criteria

Trigger

Disbursement
Expectation

Duration

Pricing andfees(1)

Cat-DDO (1)DPF-DDO (2)IPF-DDO (3)Finances all
expenditures throughgeneral budget
support addressing
shocks related tonatural disasters andhealth emergencies.
The borrower musthave an adequate
macroeconomic policy
framework and asatisfactory disasterrisk management
program in place.
The Cat DDO has aprespecified
drawdown trigger,
typically the member
country’s declarationof a state ofemergency or a
specific parametric
trigger.
Unknown at the timeof Board approval anddependent upon thetrigger. Sound macro
framework required atapproval and renewal,
but not for drawdown.
Three years; may berenewed up to fourtimes (IBRD) or once
(IDA).

Finances allexpenditures throughgeneral budget support.

Finances earmarked
investment project
expenditures, withfinancing available to bedrawn down upon theoccurrence of aprespecified trigger event.
Standard IPF approvalconsiderations, following
IPF policy, directives, andguidance.

Pricing and feesconsist of a variablereference rate plus avariable spread, a onetime front-end fee of
0.50% and a renewal
fee of 0.25%

Adequate
macroeconomic
framework andsatisfactory program
implementation.

IPF Project-Based
Guarantee
Backstops governmentobligations to the private
sector.

Standard IPF approvalconsiderations, following IPF
policy, directives, andguidance.

For a DPF DDO, thedrawdown is available
upon the country’s
request. It is animmediate source ofliquidity to respond to
economic shocks orother fiscal needs.

Pre-specified triggers
established for theparticular project; can bea specific parametric
trigger, a defined market
event or contractual
obligation, or anothertrigger.

Call on the Guarantee by thePrivate Sector as defined by
the Legal Agreement.

Drawdown is possible
at any time during thethree-year period.

Unknown at the time ofBoard approval anddependent upon thetrigger/event occurring.

Unknown at the time ofBoard approval and may becalled by the private sector.

Three years; may berenewed once for an
additional three years
as set out in the Letterof Development Policy
and adequate
macroeconomicframework.
Pricing and fees consistof a variable reference
rate plus a variablespread, a
one-time front-end feeof 0.25%, and astand-by fee of 0.50%
per annum.

Expected project length ofup to five years, in linewith standard IPF project
duration. May be
extended for up to threeyears for a maximum
total of eight years

Duration depends on theTerms and Conditions of theGuarantee – e.g., 10-20years.

Pricing and fees consist ofa variable reference rateplus a variable spread, aone-time front-end fee of0.25%, and a stand-by feeof 0.50% per annum.

Pricing of World Bank
Guarantees is set by theWorld Bank Board following
the same principles as those
applied to its lending
instruments. The level of theguarantee fee is set at IBRD,
and the IDA level is adjusted
by the average life of theguarantee and pricing groupof the host country.

Cat-DDO Development Policy Loan (DPL) with a Catastrophe Deferred Drawdown Option (2) DPF-DDO Development Policy Financing (DPF) with aDeferred Drawdown Option (3) IPF-DDO Investment Project Financing (IPF) with a Deferred Drawdown Option

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.
Investment Project Financing (IPF) with a Deferred Drawdown Option (DDO)

Updated as of March 2024