Project Implementation: Loan administrationProject Implementation: Loan administration

April 2012

We would like to acknowledge the contribution of the Programme Management Department in the

preparation of this presentation that will introduce some concepts and guiding principles for Loan

administration

For more information on the topic please refer to the supervision training material of February 2012

Project Implementation: Loan administrationProject Implementation: Loan administrationProject Implementation: Loan administrationProject Implementation: Loan administration

Table of ContentsTable of ContentsTable of ContentsTable of Contents

1. Loan Administration Principles & Framework

2. Letter to the Borrower/ Disbursement Handbook

3. Disbursement Procedures

4. Withdrawal Applications

5. Foreign Exchange Translation

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Loan Administration Principles & Loan Administration Principles & FrameworkFramework

4

Basic Principles of Loan AdministrationBasic Principles of Loan AdministrationBasic Principles of Loan AdministrationBasic Principles of Loan Administration

⇉ Only Eligible expenditure: proceeds of financing shall be used only for purposes for which financing provided

⇉ Due attention & consideration to economy, efficiency & social equity

⇉ Expenditure is eligible as & when incurred: Advance payments made by project other than contractual advances are ineligible

⇉ First withdrawal: First withdrawal from loan/ grant account is made normally only after financing is effective & disbursement conditions met, except for start-up advance if agreed at negotiations and included in the financing agreement (Schedule 2)

⇉ Written application: Borrower can request for withdrawal only by means of written application in specified format along with relevant supporting evidence

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Basic Principles of Loan AdministrationBasic Principles of Loan AdministrationBasic Principles of Loan AdministrationBasic Principles of Loan Administration

⇉ Eligible expenditure: the following conditions should be met: Incurred by project party During project implementation period Reasonable cost of goods & services procured Per procurement procedures as per Schedule 4 of FA/ LTB Per approved AWPB Per percentages stated in Schedule 2/ LTB against eligible

categories Not prohibited by UNSC under Chapter VII of UN Charter Not following any coercive, collusive, fraudulent or corrupt practice Per financing agreement documents

⇉ Retroactive Funding: If Schedule 2 of FA expressly provides for retroactive funding, eligible expenditure incurred for project purposes before financing effectiveness can be reimbursed from loan account after effectiveness

⇉ Letter to the Borrower/ Disbursement Handbook: Sent by IFAD to Authorised Representative of Borrower outlining important financing provisions, disbursement procedures & guidelines 6

Basic Principles of Loan AdministrationBasic Principles of Loan AdministrationBasic Principles of Loan AdministrationBasic Principles of Loan Administration

⇉ Disbursement process in IFAD: On receipt of Withdrawal Application (WA), the following steps are taken:

1. CFS receives original documentation, while PMD receives a signed/scanned copy of the WA package

2. Review and checks are performed simultaneously by PMD and CFS

3. PMD certifies that the expenditures are in line with approved AWPB and that procurement procedures are currently applied

4. CFS performs checks regarding accuracy and completeness of WAs and eligibility of expenditures considering the applicable rules and regulations

5. CFS may conduct independent verification of WA & sends approved Payment order to the Treasury Division to make payment

6. CFS issues debit advice to Borrower & implementing agencies & generates billing statements on fortnightly basis

⇉ Non approval of WA: IFAD informs Borrower about reasons for rejection & suggests corrective action to be taken

⇉ NOTE: Ad hoc procedures for IFAD Country Offices reviewing the WAs

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IFAD Project & Legal DocumentsIFAD Project & Legal DocumentsIFAD Project & Legal DocumentsIFAD Project & Legal Documents

Project DocumentsProject Documents

Design Report

Financing Agreement

General Conditions

Minutes of Loan Negotiations

Amendments to Financing Agreement

Letter to the Borrower (LTB)

Project Implementation Manual (PIM)

IFAD Generic DocumentsIFAD Generic Documents

Loan & Grant Administration Operational Manual

Loan Disbursement Handbook

Procurement Guidelines

Audit Guidelines

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Financing AgreementFinancing AgreementFinancing AgreementFinancing Agreement

Schedule 2 - Allocation & Withdrawal of Financing Schedule 2 - Allocation & Withdrawal of Financing ProceedsProceedsSchedule 2 - Allocation & Withdrawal of Financing Schedule 2 - Allocation & Withdrawal of Financing ProceedsProceeds

► Category No. & description

► Loan amount allocated to each category

► % of expenditures to be financed

► Definition of terms

► Start-up advance, if envisaged

► Retroactive Financing, if envisaged

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IFAD FinancingIFAD FinancingIFAD FinancingIFAD Financing

► Denominated in Special Drawing Rights (SDR) (only exception supplementary

funds)

► Withdrawal applications made in different currencies

► Disbursement is converted in SDR & deducted from financing amount

Financing Milestone DatesFinancing Milestone DatesFinancing Milestone DatesFinancing Milestone Dates

► Board Approval Date

► Financing Agreement Date

► Effective/ Entry into Force Date

► Project Completion Date

► Loan Closing Date10

Project Financing AgreementProject Financing AgreementProject Financing AgreementProject Financing Agreement

ENTRY INTO FORCEFinancing Agreement Date + Ratification, if required

PROJECT COMPLETION DATE “X” anniversary of Effective Date

WINDING-UP PERIOD Project Completion Date to Loan Closing Date

LOAN CLOSING DATEProject Completion Date + 6 months

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First Disbursement - requirementsFirst Disbursement - requirementsFirst Disbursement - requirementsFirst Disbursement - requirements

► Financing declared effective/ entry into force

► Evidence of opening of Designated Account (DA)

► Letter on WA authorised signatories received

► Signatories of persons authorised to operate DA & specimen signatures

received

► Disbursement condition/s met

► AWPB & Procurement Plan approved

► Withdrawal Application in order

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⇉ Borrower

⇉ IFAD

Country Programme Manager

Controller and Financial Services Division

Treasury

⇉ International Banking Channels

⇉ Local banks

Parties InvolvedParties InvolvedParties InvolvedParties Involved

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Letter to the Borrower/ Disbursement Letter to the Borrower/ Disbursement HandbookHandbook

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Letter to the Borrower/ Disbursement HandbookLetter to the Borrower/ Disbursement HandbookLetter to the Borrower/ Disbursement HandbookLetter to the Borrower/ Disbursement Handbook

⇉ Operational guidelines for withdrawal of loan/ grant funds for project

purchases (procurement) of goods, works & consulting services, details of

financial & audit reporting requirements

⇉ Explained to the Implementing Agency during Start-up mission

⇉ For new projects subject to revised General Conditions, Disbursement

Handbook is an annex to revised Letter to the Borrower

⇉ Includes prescribed forms to be used by Implementing Agency in withdrawing

funds from loan/ grant

Letter to the Borrower/ Disbursement Handbook. . .Letter to the Borrower/ Disbursement Handbook. . .

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. . explains the following topics: . . explains the following topics:

• Disbursement Conditions (Opening of Designated Accounts, appointment of officers authorised to operate DA & sign WAs, etc)

• Disbursement Procedures

• Designated Accounts

• Instructions for Withdrawal

• Annual Work Plan & Budget & Procurement Plan

• Allocation of Financing Proceeds

• Procurement of Goods, Works & Consulting Services, including Methods

• Review of Procurement Decisions by IFAD

• Programme Reviews & Periodic Assessments

• Financial Reporting & Auditing

• Project Completion/ Financing Closure

• Amendments

Letter to the Borrower/Disbursement HandbookLetter to the Borrower/Disbursement HandbookLetter to the Borrower/Disbursement HandbookLetter to the Borrower/Disbursement Handbook

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Disbursement Handbook – TopicsDisbursement Handbook – TopicsDisbursement Handbook – TopicsDisbursement Handbook – Topics

⇉ Basic Principles & Financing Administration

⇉ Instructions for Withdrawal

⇉ Disbursement Procedures

⇉ Statement of Expenditure

⇉ Register of Contracts/ Contract Monitoring

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1. Sample letter of evidence of authority to sign WA

2. Instruction for completing forms

3. The various forms for use with 4 Disbursement Procedures

• Initial Deposit Advance/Replenishment to Special/ Designated Account

• Direct payment procedure

• Special commitment procedure

• Reimbursement procedure

4. SOE provision & eligibility

5. Project Checklist – Form & Instructions in completing form

6. Register of Contracts

7. Status of Financial Statements & Audit Report

Disbursement Handbook – AttachmentsDisbursement Handbook – AttachmentsDisbursement Handbook – AttachmentsDisbursement Handbook – Attachments

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Disbursement ProceduresDisbursement Procedures

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Disbursement ProceduresDisbursement ProceduresDisbursement ProceduresDisbursement Procedures

Direct Payment

Procedure 2

Withdrawal of Loan Funds(Explained in the Letter to the Borrower)

Special Account Procedure 1

Special Commitment Procedure 3

Reimbursement

Procedure 4

Disbursement Procedures

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A facility provided in Letter to the Borrower for advance funding from IFAD

Initial Deposit/Advance – paid in USD or other freely convertible currency

Replenishment applications should be submitted regularly using specified

forms – usually on quarterly basis (see checklist)

Special/ Designated Account (Procedure I)Special/ Designated Account (Procedure I)Special/ Designated Account (Procedure I)Special/ Designated Account (Procedure I)

FORM 105

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Special/ Designated AccountSpecial/ Designated AccountSpecial/ Designated AccountSpecial/ Designated Account

Special Account/Designated provisions are found in in Section 4.04(d) of General Conditions

Article IV deals with Loan Account & Withdrawals - Withdrawals from loan & grant accounts, special commitments, WAs, transfers, allocation & reallocation of financing proceeds, value dates of withdrawals, eligible expenditures & refund of withdrawals

There are 3 stages in operation of the Designated Account during project life:

1. Payment of Authorized Allocation or Initial Deposit

2. Replenishment to Designated Account

3. Recovery of Authorized Allocation

GeneralGeneral

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Special AccountSpecial AccountSpecial AccountSpecial Account

• Review wording of disbursement conditions in Financing Agreement

• Ensure receipt of evidence of opening of SPA/ DA & Letter on authorized persons to operate account

• Check if opening of SPA is condition for effectiveness

• After IFAD payment, issue SPA letter

• The financing agreement may provide that authorised allocation/advance is paid in 1, 2 or more tranches

• During project implementation, authorised allocation may be increased through amendment to financing agreement

Payment of Payment of AuthorisedAuthorised Allocation (Initial Deposit)/Advance Allocation (Initial Deposit)/Advance

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Special AccountSpecial AccountSpecial AccountSpecial Account

Exchange rate used

Frequency of submission of WAs

Adequacy of supporting documentation

Correct use of summary sheets

Replenishment during recovery period – should equal the balance of the agreed percentage of expenditures duly justified

Exercise care in reviewing WA to determine which expenditures are eligible under SOE & which are subject to supporting documentation

Usually minimum 20% of Authorised Allocation

Replenishment to Special/ Designated AccountReplenishment to Special/ Designated Account

Check following items

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Special AccountSpecial AccountSpecial AccountSpecial Account

Timing of recovery: monitor 3 trigger points (see paragraph 230 of the loans & grants administration manual) , whichever comes first

Percentage of recovery: to be confirmed by CPM

Exchange rate to be used is historic rate at value date of payment of initial deposit

Maintenance of SPA/ DA Initial Deposit/ Advance Recovery Control & reconciliation of unjustified balance with LGS

At start of recovery – issue SPA/ DA Recovery Letter

Amount for refund to IFAD Unjustified balance per IFAD records; not balance in bank Unjustified balance should be reconciled with LGS When the initial deposit is fully justified, any balance in bank

should remain with Borrower & should not be refunded to IFAD; all future replenishments are processed as reimbursements to Government

Loan account cannot be closed by IFAD if Authorised Allocation/ Advance is not fully justified or unjustified portion is not refunded to IFAD

Recovery of Recovery of AuthorisedAuthorised Allocation (Initial Deposit)/Advance Allocation (Initial Deposit)/Advance

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Special Account/ Statement of ExpendituresSpecial Account/ Statement of ExpendituresSpecial Account/ Statement of ExpendituresSpecial Account/ Statement of Expenditures

Special/ DesignatedSpecial/ Designated AccountAccount

Statement of Statement of ExpendituresExpenditures

• Relates to funding

• Eligibility applies to all categories

• Relates to the submission of prescribed form in lieu of required supporting documentation

• Eligibility is limited to coverage provided in Financing Agreement or prescribed by IFAD

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Special /Designated Account ReconciliationSpecial /Designated Account ReconciliationSpecial /Designated Account ReconciliationSpecial /Designated Account Reconciliation

To be provided with every WA for Replenishment

Reflects position of end of period covered by WA

Should reflect all bank balances supported by bank statements as per Special/ Designated Account

Reconciliation Format

Each line of SPA/ DA Reconciliation should be completed per Notes & Instructions enclosed

IFAD SPA Reconciliation

Notes to SPA Reconciliation

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Project instructs IFAD to make payment directly to a supplier, contractor, consultant, or any other third party

Minimum of approximately $20,000 equivalent for each Direct Payment

For payments below approximately $20,000, Project should use Designated / special Account funds

Documentation should show evidence of:

Amounts due (invoice, statement or demand note)

Initial or advance payments, progress payments on contract (as recorded on the contract monitoring form), progress certificate & invoice/ purchase order

Note: Payment instructions in WA must be clear & complete

Direct Payment (Procedure II)Direct Payment (Procedure II)Direct Payment (Procedure II)Direct Payment (Procedure II)

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Project opens LC & sends WA to IFAD, with copy of LC & contract (Form 301)

IFAD sends SC Letter to bank of supplier as guarantee of payment (Form 302)

Bank sends request for payment to IFAD when LC conditions are met (Form 303)

Stages / ProcessesStages / Processes

Special Commitment (Procedure III)Special Commitment (Procedure III)Special Commitment (Procedure III)Special Commitment (Procedure III)

Disbursement procedure for payment of goods covered under a Letter of Credit

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Special Commitment ProcedureSpecial Commitment ProcedureSpecial Commitment ProcedureSpecial Commitment Procedure

A special withdrawal application (Form 301) is submitted by Project

when agreed modality of payment for procurement of goods is through a

Letter of Credit (LC)

This WA is processed & reviewed using Checklist 3 for Special

Commitment

After processing by CPM, certified Checklist is forwarded to regional

office (where applicable)

GeneralGeneral

WA Checklist-Special Commitment

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• Based on the certified Checklist, regional office prepares a draft Special Commitment Letter (SCL), using Form 302 & sends it to finance division in Rome together with checklist for signature. LC details are duly reflected in the SCL. Completed SCL signed by Controller is mailed to negotiating bank (addressee of the SCL) with Form 303 as an attachment

• The value of the Special Commitment (the amount requested in WA Form 301) is converted into SDR using prevailing IMF rate as of preparation date & small percentage added to cater for exchange rate fluctuations

• SCLs that are issued for each loan/ grant are numbered sequentially

• Checklist is used to verify the steps in preparation & issuance of SCL

Issuance of Special Commitment LetterIssuance of Special Commitment Letter

Special Commitment ProcedureSpecial Commitment ProcedureSpecial Commitment ProcedureSpecial Commitment Procedure

FORM 302

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Once the terms of LC are complied with, negotiating bank sends request for reimbursement via SWIFT to IFAD Treasury or through written request for payment (Form 303)

Treasury sends SWIFT message of negotiating bank to regional Office

After completion of checking process, Payment Order (PO) to pay the negotiating bank is prepared using prescribed format for Special Commitment payment

The Payment that is authorised in PO is recorded in Special Commitment Payment Summary, quoting WA number & LC Reference Number

Payment Instructions on Special Payment Instructions on Special CommitmentsCommitments

Special Commitment ProcedureSpecial Commitment ProcedureSpecial Commitment ProcedureSpecial Commitment Procedure

Form 303

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An expenditure pre-financed by Government or other sources

Reimbursed by IFAD in currency of expenditure

Reimbursement applications should be submitted normally within 3

months from date of payment

Reimbursement (Procedure IV)Reimbursement (Procedure IV)Reimbursement (Procedure IV)Reimbursement (Procedure IV)

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Withdrawal ApplicationsWithdrawal Applications

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Withdrawal Application Forms

Application Summary Sheets

Statement of Expenditure Forms

Register of Contracts

Special/ Designated Account Reconciliation Statement

Project WA Checklist

IFAD WA Checklist

FormsFormsFormsForms

WA Checklist-Special Commitment

WA Checklistt-First Disbursement

WA Checklistt-Special Account

FORM 100

FORM 100A

FORM 101

FORM 102 A

FORM 102 B

FORM 104 A - 104 B

FORM 105FORM 301

FORM 302FORM C-10

FORM C- 11

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WA FormsWA FormsWA FormsWA Forms

⇉ Sequential numbering irrespective of disbursement procedure used

⇉ All sections should be completed

⇉ Payment instructions must reflect complete name & address of bank &

beneficiary’s account number, including correspondent bank, if required

Withdrawal Application – Form 100Withdrawal Application – Form 100

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Application Summary SheetApplication Summary SheetApplication Summary SheetApplication Summary Sheet

Form 101-A (SA) & 101-B (Direct Payment/ Reimbursement to Government)

For direct payment and for reimbursement of expenditures not eligible under SOE

Supporting documents must be attached

Form 102-A (SA) and 102-B (to Government)

Prescribed form for expenditures eligible under SOE

Supporting documents not required to be submitted; SOE form must be signed by designated Project staff

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Supporting DocumentationSupporting DocumentationSupporting DocumentationSupporting Documentation

Prescribed SOE Form 102A or 102B, with certification text, duly certified by 3 designated signatories: Project Accountant, Project Coordinator & WA signatory

For expenditures that are eligible under SOE

Summary Sheet Form 101B, together with the following, as applicable:

⇉Copy of invoice (or Demand Letter, Statement), certified for payment by Project Coordinator

⇉Copy of contract (for 1st progress payment) or contract monitoring form

⇉Copy of purchase order

⇉Copy of bank guarantee, for advance payment &/ or performance

⇉Copy of delivery receipt for goods

⇉Copy of certification for works completed on civil works

⇉Copy of consultant’s report, if required, for final payment to be made

For direct payment to a contractor, supplier or consultant

Note: Since original copies of above documents are retained by PCU for audit purposes, a photocopy is accepted as supporting documentation

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Supporting DocumentationSupporting DocumentationSupporting DocumentationSupporting Documentation

⇉ The certified SOE form 102A, for eligible expenditures

⇉ Summary Sheet Form 101A with copy of above documents (as applicable) plus evidence of payment (receipt or bank statement), for expenditures not eligible under SOE

⇉ Special/ Designated Account Reconciliation Statement, together with Bank Statement by SPA/ DA holding bank

For replenishment to the Special/ Designated Account

For Special Commitment ⇉ Copy of Letter of Credit opened by Project

⇉ Copy of contract

For all WAs, irrespective of disbursement procedure

⇉ Project Checklist certified by Project Accountant & Project Coordinator

⇉ Summary Breakdown by Category that adds up to WA amount

⇉ Copy of CPM’s No Objection to procurement of goods, works or consultancy services

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SOE ProcedureSOE ProcedureSOE ProcedureSOE Procedure

⇉ CPM sends official notification on SOE coverage to Borrower

⇉ SOE arrangements specified in LTB

⇉ Amendment to Financing Agreement not required for changes

in SOE coverage/ threshold unless SOE threshold is specified

in Financing Agreement

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Statement of ExpenditureStatement of ExpenditureStatement of ExpenditureStatement of Expenditure

The Financing Agreement provision for SOE is always found in Schedule 2

Provision in Financing AgreementProvision in Financing Agreement

⇉ SOE cases, taking into account whether threshold is applicable on contracts or expenditure

⇉ The interpretation of the SOE coverage as provided in: (i) Financing agreement; (ii) Minutes of Loan Negotiation; or (iii) Agreement reached during Start-up Mission – giving particular attention to financial ceiling (usually $20,000)

⇉ The types of expenditures normally fully eligible under SOE. Examples: Credit, Local training, Local salaries & allowances, Operating Costs & Civil Works on Force Account

Items that should be taken into Items that should be taken into considerationconsideration

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Statement of ExpenditureStatement of ExpenditureStatement of ExpenditureStatement of Expenditure

SOE Form 102A for replenishment to Special/ Designated Account

SOE Form 102B for reimbursement of pre-financed expenditures

Certification text is required for each SOE form

3 signatures are always required: Project Accountant, Project Coordinator & WA Signatory

Prescribed SOE formsPrescribed SOE forms

Other items to take note Other items to take note ofof Relationship between SOE financial ceiling & procurement prior review

threshold

Proper filing system in PCU to enable audit trail during supervision missions

Audit of SOE & separate opinion by independent auditor

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For Prompt DisbursementsFor Prompt DisbursementsFor Prompt DisbursementsFor Prompt Disbursements

• Authorised Signatories for WAs

• Banking Instructions, including correspondent bank

• Complete Supporting documentation

• Statement of Expenditure eligibility

• Procurement Procedures

• Terms of payment (contract payment terms)

• Currency of expenditure

• Correct % of financing

Ensure (1)Ensure (1)

Ensure (2)Ensure (2)

• Disbursement conditions are met (Sch 2 of Financing Agreement)

• Withdrawal Application Size: Direct Payment: usually minimum approximately $20,000 Repl. to SPA/ DA: 20% of Authorised Allocation/ Advance (or more)

• Exchange Rate correctly calculated

• Accuracy of computations43

Withdrawal Application SubmissionWithdrawal Application SubmissionWithdrawal Application SubmissionWithdrawal Application Submission

Each WA submission should consist of the following

WA ContentsWA Contents

• Required supporting documentation

• Withdrawal Application Amount

If final WA amount approved is lower than WA submission, PO can be released & Project is advised on reductions made

If the final WA amount approved is higher than WA submission, Project should be advised on findings & corrections made (in practice WAs may be processed in reduced (not increased) amounts from what is indicated in Form 100. If amount payable is more than what is in Form 100, project is advised to claim in subsequent WA)

A WA can be authorised for partial payment & balance paid in separate PO

• WA Checklist (Form 105)

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Withdrawal Application SubmissionWithdrawal Application SubmissionWithdrawal Application SubmissionWithdrawal Application Submission

Withdrawal Application Form Withdrawal Application Form 100100

• The preparation & approval of WA at project level is a long process

involving project staff & concerned officers in relevant Ministry

• The Project is required to submit prescribed Form 100 signed by designated

WA signatory

• WA without authorized signatures will not be processed

• When a WA is not signed at all or only 1 of 2 required signatories signed,

project is required to send new WA with required signature or signatures

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Withdrawal Application SubmissionWithdrawal Application SubmissionWithdrawal Application SubmissionWithdrawal Application Submission

Written CommunicationWritten Communication

• Change of WA authorized signatories – Original signed letter from representative of Borrower

• When PO already issued & payment was made on WA, Project’s request for adjustment in WA submitted – Original signed letter from Project Coordinator

• Confirmation on increase in WA amount as result of review

• Change in bank where Special Account is maintained

• Change of account number, in same bank, due to changes in bank’s system

• Confirmation of last WA submitted before closing of Loan Account

Written Communication from Project authority is required for the following:

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Withdrawal Application SubmissionWithdrawal Application SubmissionWithdrawal Application SubmissionWithdrawal Application Submission

Email CommunicationEmail Communication

• Change in the category to charge

• Information on correspondent bank or change in correspondent bank

• Any other relevant information provided by project relating to claim

in WA

Email Communication from Project authority is acceptable for the following:

Project should complete all sections in WA

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Foreign Exchange TranslationForeign Exchange Translation

48

Foreign Exchange TranslationForeign Exchange TranslationForeign Exchange TranslationForeign Exchange Translation

1. Conversion of IFAD financing in US Dollars (USD) to Special Drawing

Rights (SDR)

2. Conversion of withdrawals from loan account based on approved WAs

submitted in various currencies into SDR

3. For replenishment to Special Account, conversion of local currency

expenditures funded from Special Account into currency denomination of

Special Account, e.g. USD, Euro

4. Conversion of amounts submitted through WAs as justification of

authorised allocation (initial deposit) to Special Account

Usage of Exchange ratesUsage of Exchange rates

The usage of exchange rates in IFAD loans applies to one of the following areas:

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The IFAD loan is reflected in Design Report in US Dollars

During financing negotiations between representatives of Borrower & IFAD, US Dollar loan amount is converted into SDR using prevailing USD/ SDR rate at the end of month preceding loan negotiation

Likewise, amounts allocated to each category are converted into SDR using same exchange rate

Financing amount is fixed & is reflected in relevant sections of financing agreement

If the project is partially financed from a grant, known as project-component grant, grant amount is also denominated in SDR

SDR rate are listed on a daily basis by the International Monitory Fund & available through its website – www.imf.org

Conversion of IFAD Loan into SDRConversion of IFAD Loan into SDR

Foreign Exchange TranslationForeign Exchange TranslationForeign Exchange TranslationForeign Exchange Translation

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• Loans & project-component grants are denominated in SDR

• Disbursements from loan/ grant account are made in currencies in which expenditures to be financed from loan/ grant proceeds have been paid or are payable

• Each withdrawal application that is submitted by Borrower is paid in currency requested in WA & approved by IFAD

• The payment made is converted into SDR using prevailing rate as of value date of payment, i.e., date of debit of IFAD’s bank account for equivalent amount of disbursement

• For withdrawal requests denominated in currencies other than USD, requests are converted first into USD using prevailing UN rate during month of payment thereafter converted & SDR as above

Conversion of withdrawals made from Loan/ Grant AccountConversion of withdrawals made from Loan/ Grant Account

Foreign Exchange TranslationForeign Exchange Translation

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When preparing WA for replenishment to Special/ Designated Account, local

currency expenditures are converted into denomination of Special Account,

using prevailing rate at time of transfer of funds from Special Account to

Project Operating Account in order to recoup actual value of transfer made

One of the tools to be used by Project in monitoring special accounts

movements & operation is Special/ Designated Account Reconciliation

Statement. This statement is submitted with each WA for replenishment to

Special/ Designated Account

Conversion of local currency expenditures funded from Conversion of local currency expenditures funded from Special Account Special Account

Foreign Exchange TranslationForeign Exchange Translation

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3 trigger points for start of justification of initial deposit/ advance to

Special/ Designated Account; whichever comes first shall be applied:

a) 6 months before Project completion Date,

b) When undisbursed balance of financing, less outstanding Special Commitments, is equal to twice the amount of Authorised Allocation, or

c) When the undisbursed balance of the loan is less than 10% of the total loan balance

When either of the trigger points is reached, each request for

replenishment to Special/ Designated Account will be used

partially or in full, as justification of Authorised Allocation/ Advance

Exchange rate used for partial/ full justification is historic rate – rate

at which authorised allocation/ advance was paid

Conversion of WAs used as Justification (or Recovery) of Initial Deposit/ Advance to Special/ Designated Account

Foreign Exchange TranslationForeign Exchange TranslationForeign Exchange TranslationForeign Exchange Translation

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