PRODUCT NOTE

Deferred Drawdown Option:
Major Terms and Conditions
Highlights••••An immediate source of liquidity to respondto economic shocks
Deferred disbursement of a Development
Policy Loan up to three years
Periodic monitoring of borrower’s
compliance with drawdown conditions
provides greater certainty of availability offunds when needed
Similar pricing as regular IBRD Loans

The Development Policy Loan (DPL) with a Deferred
Drawdown Option (DPL DDO) 1 is a contingent credit line thatallows 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 forfunding 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.

Key Features
Under the DPL DDO, the borrower may defer disbursement ofa DPL for up to three years, renewable for an additional threeyears.
The loan proceeds may be drawn down at any time during thethree year drawdown period unless the Bank has notified theborrower that one of the drawdown conditions–

adequate
macroeconomic
frameworkandsatisfactory program implementation– is not beingmet.

In order to provide greater certainty to the borrower that thefunds will be available when needed, the Bank will periodicallymonitor the borrower’s compliance with the drawdown
conditions.

Pricing
Disbursements will be priced at the prevailing spread over thereference rate for IBRD loans –comprising the contractual
spread, funding cost, and maturity premium– at the time ofdrawdown. The calculation of the average repayment maturity
begins at loan effectiveness for the determination of theapplicable maturity premium, but at withdrawal for theremaining 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.
For current pricing information, please visit the Treasury
website at:
http://treasury.worldbank.org/en/about/unit/treasury/ibrdfinancial-products/lending-rates-and-feesCountry Example: Indonesia
In the midst of the 2008-2009 financial crisis Indonesia usedthe DPL DDO to support ongoing access to international
capital markets. The loan was the largest component in a USD
5.5 billion contingent financing facility that helped Indonesia
mobilize funding from the capital markets by sending a strong
positive signal to international and domestic markets about its
available economic strength.
The facility contributed towards improving market sentiment:Indonesia was one of the first countries to issue a bond in theinternational capital markets during the crisis and got better
terms than it would have achieved without the facility.
Between September 2008 and March 2009, Indonesia raised
more than USD 6.3 billion through five bond issuances in thecapital markets. The DPL DDO, which was never disbursed,
also acted as a back-up financing facility, helping to ensure that
the Indonesian government had access to resources if markets
failed to provide the required financing at a reasonable cost.

A Deferred Drawdown Option allows a borrower to postponedrawing down a Development Policy Loan for a defined drawdown
period after the Loan Agreement has been declared effective.

1

Deferred Drawdown Option: Major Terms & Conditions

Updated as of July 2024

PRODUCT NOTE

Major Terms & Conditions
PurposeTo provide immediate liquidity when the borrower needs it.

Eligibility

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

Pre-approval
Criteria

Appropriate macroeconomic policy framework. Satisfactory implementation of the overall program.

Currency

Same as regular IBRD loans.

MaturityMaximum final maturity is 35 years including grace period (during which only interest is paid), while
maximum weighted average maturity is 20 years. For some projects addressing Global Challenges withCross Border Externalities, the maximum loan maturity is extended to up to 50 years and the ARM up to 25years.

Drawdown

Up to the full loan amount is available for disbursement at any time within three years from loan signing.
Drawdown period may be renewed.

Repayment
Terms

Must be determined upon commitment and may be modified upon drawdown within prevailing maturity
policy limits. The repayment schedule will start from the date of drawdown.

Lending Rate

Like regular IBRD loans, the lending rate consists of a variable reference rate plus a variable spread. Thelending rate is reset semi-annually, on each interest payment date, and applies to interest periods beginningon those dates. The reference rate is the value of the applicable market rate for a six-month interest rate period(SOFR for USD, TONA for JPY, SONIA for GBP, and EURIBOR for EUR).
The variable spread consists of IBRD's average cost margin on related funding relative to the applicablereference rate plus IBRD’s contractual spread of 0.50% and a maturity premium for loans with average
maturities greater than eight years. The spread is recalculated on a quarterly basis.
The calculation of the average maturity of DDOs begins at loan effectiveness for the determination of theapplicable maturity premium, but at withdrawal for the remaining components of the spread.

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.

Conversion
Options andPrepayments

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

Download the term sheet for regular IBRD loans: IBRD Flexible Loan: Major Terms and Conditions

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.

Deferred Drawdown Option: Major Terms & Conditions

Updated as of July 2024