Policy-based Lending Category
Policy-based loans or PBLs provide the Bank’s borrowing member countries with flexible, liquid (fungible) funding to support policy reforms and/or institutional changes in a particular sector or subsector. Policy-based lending is limited to 30 percent of all Bank lending.
Eligibility: To be eligible for a policy-based loan or PBL, the borrowing country needs to have a sound macroeconomic policy framework, as determined by an independent assessment of macroeconomic conditions elaborated by the IDB.
Size of the loan: The size of a PBL depends on the country’s financing needs. It is not necessarily related to the cost of implementing the reforms supported by the program. PBLs provide general financing to the borrower and disburse upon evidence that the borrower or its agents has complied with the policy conditions.
Examples of eligible activities include programs to modernize the fiscal (tax and spending) apparatus of a country, air transport reform programs, transparency and financial integrity programs, or programs to improve technical vocational education.
At the request of the borrower, a policy-based loan may include an investment component, in which case it becomes a Hybrid Loan.
There are two types of PBL instruments: Multi-Tranche PBLs and Programmatic PBLs.