Development Policy Financing (DPF) aims to help the borrower achieve sustainable poverty reduction through a program of policy and institutional actions, for example, strengthening public financial management, improving the investment climate, addressing bottlenecks to improve service delivery, and diversifying the economy. This represents a shift away from short-term macroeconomic stabilization and trade liberalization reforms of the 1980s-90s towards more medium-term institutional reforms.
DPF is governed by the operational policy, OP/ BP8.60 , approved by the World Bank’s Executive Directors in August 2004. The policy emphasizes country ownership and alignment, government consultation with stakeholders in the design of the reform program, donor coordination, results and requires a systematic treatment of fiduciary risks and of the potential environmental – forests, and other natural resource aspects - poverty and social consequences of supported actions.
The Bank's use of DPF in a country is determined in the context of the Country Assistance Strategy (CAS) and DPF can be extended as loans, credits, or grants.
The Bank makes the funds available to the client upon (a) maintenance of an adequate macroeconomic policy framework, as determined by the Bank with inputs from IMF assessments; (b) satisfactory implementation of the overall reform program; and (c) completion of a set of critical mutually agreed prior policy and institutional actions (prior actions) between the Bank and the client. (source)