Summing Up by the Acting Chairman—Settlement of Disputes Between Members Relating to External Financial Obligations—Role of the Fund, Executive Board Meeting 84/99, June 22, 1984

I shall begin by outlining four general points that were made in the course of the Board discussion. First, Executive Directors generally endorsed the approach that the Fund has taken in the three major aspects of the subject dealt with in the staff paper.

Second, Directors agreed that the functioning of the international monetary system depended on members’ fulfilling their international financial obligations promptly and according to the terms of those obligations. Therefore, the Fund had a direct interest in the settlement of overdue obligations and a role to play in accordance with the Articles of Agreement.

Third, there was a consensus that the circumstances surrounding overdue financial obligations typically were complex, and that there were often important differences among individual cases. Thus, Directors preferred not to codify the Fund’s approach in each of the three main areas discussed. Instead, most of them supported the idea that the Fund should continue to fulfill its responsibilities under the Articles on a case-by-case basis within the context of the present policies and procedures, which could be expected to continue to evolve as individual cases of overdue financial obligations and related general policy matters were discussed. There was a strong feeling among Directors that the Fund should show caution and restraint in making judgments on issues involving claims on such overdue obligations.

Fourth, Directors stressed the importance of the Fund’s helping member governments to improve their statistical base and to increase the supply of information on their external debt obligations, particularly in cases involving overdue claims. Where necessary, the Fund could provide the technical resources to help sort out the frequently complex circumstances surrounding the debt situation, including individual cases.

Let me turn now to more specific comments on the three major areas dealt with in the staff paper. With respect to the Fund’s jurisdiction under Article VIII and Article XIV, there was strong support for the policies and practices that the Fund had followed to date. Directors generally agreed that, in exercising its functions under Article VIII and Article XIV, the Fund was entitled to examine the context in which nonpayment of a financial obligation had occurred in order to determine whether or not it involved an exchange restriction and, as such, was subject to Fund approval, and that members were obliged to provide the information that the Fund required to make such a determination. The Fund has developed a substantial body of principles and practices for determining which measures were and were not within its jurisdiction and when approval under Article VIII was appropriate. These judgments were inherent in the exercise of the Fund’s jurisdiction.

Executive Directors also generally endorsed the Fund’s existing policies and practices for dealing with disputed financial obligations in members using Fund resources. This concerned primarily the identification and treatment of payments arrears. Directors accepted the general premise that, to restore its financial position, a member country must reduce and eliminate its external payments arrears. In that context, there was broad support for the approach that the Fund had taken to the problems involving countries with large external payments arrears. It was noted that the degree of involvement by the Fund in helping countries to deal with their arrears had varied depending, in part, upon the severity of the case. Some Directors noted that the pivotal role that it had been necessary for the Fund to play in helping some member countries should be the exceptional practice, not the general practice. Nevertheless, the Fund should stand ready to provide technical and analytical expertise to help a member country to negotiate a financing agreement with its external creditors.

Most Directors attached importance to the principle that a member country should give comparable treatment to all its creditors, although there was not broad support for trying to define that principle in detail. There was a strong feeling that responsibility for the enforcement of the principle of comparable treatment was ultimately in the hands of creditors, and that the Fund should take into account the actions of the creditors when assessing the viability of, and progress under, a Fund-supported program. In that connection, Directors felt that the debt relief to help to close the financing gap of a member could best be dealt with through a Paris Club negotiation, which usually involved a large number of a country’s creditors. A Paris Club Agreed Minute could be seen as satisfying a member country’s need for debt relief and could be used for judging whether or not a country’s financing gap has been closed. A Paris Club Agreement also has implications for official creditors not participating in the Paris Club because of the commitment of the debtor to seek and to accord comparable treatment to those creditors. Some Directors stressed that it would be helpful to know about a Paris Club meeting well in advance of its occurrence, although it was also accepted that such notification was ultimately the responsibility of the debtor country in consultation with its creditors. At the same time, it was clearly desirable for as many of a country’s creditors as possible to participate in a Paris Club meeting.

Directors also generally agreed that, if an anticipated bilateral agreement required by the Paris Club, between a debtor and one of its official creditors, were not ratified within the specified period, the amount of arrears involved should be included in the calculation of arrears for purposes of the debtor country’s Fund-supported program. While there was general support for that approach, there was a call for flexibility and the exercise of judgment by the Fund when making such decisions during the course of a Fund-supported program. If a debtor country had made its best efforts to comply with a Paris Club requirement to conclude a bilateral agreement but had been unable to do so, the arrears involved should not be included in the calculation of arrears for purposes of the debtor country’s Fund-supported program. However, such judgments should be made on a case-by-case basis.

Decisions on whether or not a country’s financing gap had been closed, and on whether or not rescheduling and refinancing agreements were being fulfilled, should be made by the Fund itself. The Fund should take into account the particular circumstances of a member, such as the preconditions on the provision of debt relief by other agencies.

There was a strong consensus on three general matters relating to the use of the Fund’s good offices. First, in the light of the Fund’s primary responsibilities concerning the international monetary system and of its specific authority under the Articles to provide financial and technical services, management and staff should stand ready to use their good offices in helping members engaged in a particular dispute over an external financing obligation. Second, such good offices should, however, be limited in scope and frequency, although in that connection there were differences in emphasis among Directors. Some felt that the Fund should be more active, others that the Fund must be quite cautious. In short, the use of good offices should be consistent with available resources and should be substantially technical. Third, all Directors attached great importance to the Fund’s remaining neutral in issues of debt dispute. It should be clearly understood that the Fund’s good offices were meant to bring the parties to a dispute together. Fourth, there was agreement that the Fund should act in such cases only if both parties wished to have the Fund provide its good offices.

BUFF/84/107

August 13, 1984

The Acting Chair’s Summing Up—2021 Financial Sector Assessment Program Review—Towards a More Stable and Sustainable Financial System Executive Board Meeting 21/46, May 12, 2021

Executive Directors welcomed the Financial Sector Assessment Program (FSAP) Review and its background papers. They noted that the FSAP has made an important contribution to Fund surveillance and capacity development. They also noted the potential strains facing financial systems across the Fund membership in the wake of the COVID-19 pandemic which have highlighted the significance of risks from the nonfinancial sector and vulnerabilities in nonbank financial institutions (NBFIs) and financial market infrastructures. In addition, the membership is facing important new opportunities and challenges, including from climate change and digitalization.

Directors emphasized that the three-pillar approach to conducting FSAPs—focusing on risk analysis, oversight, and safety nets—has worked well. The risk-focused approach to scoping Financial Stability Assessments (FSA) has provided flexibility to address relevant risks while helping to prioritize and contain the program’s resource footprint in the face of increasingly complex financial stability challenges since the previous review. Going forward, greater use could be made of the flexibility within the framework when scoping issues for FSAPs, balancing current coverage with emerging risks and issues, with continued tailoring of FSAPs to country specifics, effective prioritization, and in close consultation with the country authorities. The risk-based approach would help decide whether to conduct a full standard assessment versus a focused review and leverage the findings of recent standards assessment to tailor the scope of FSAs. Directors endorsed the Key Attributes of Effective Resolution Regimes as the assessment benchmark for insurance resolution frameworks in FSAPs and standalone assessments.

Directors welcomed ongoing efforts to further enrich the FSAP’s risk analysis toolkit. They stressed the importance of strengthening the development of tools to assess interactions between solvency, liquidity, and contagion risks, vulnerabilities among NBFIs, risks in nonfinancial sectors, interconnectedness, macrofinancial interactions, the macroprudential policy stance and new risks. Directors emphasized the importance of continued efforts to increase the efficiency, dissemination, and ease of use of the FSAP toolkit and to ease data constraints. They also stressed the need for continued efforts to strengthen the toolkit to enhance the assessment of financial vulnerabilities in low and lower-middle income countries.

Directors welcomed the proposals to improve the traction of FSAPs. While most FSAP recommendations were implemented, challenges arose when members faced political economy constraints or where there may have been differences in technical views. In this context, Directors welcomed the introduction of the authorities’ views in FSSAs. Directors also welcomed efforts to leverage the FSAP to develop risk analysis tools for use in bilateral surveillance and looked forward to further progress in this direction. They emphasized the importance of closer integration of the Article IV consultation process with the FSAP.

Directors welcomed the update and expansion of the list of jurisdictions with Systemically Important Financial Sectors (SIFS) that are subject to periodic mandatory FSAs, and a few Directors recalled that Fund policy requires the periodic review of the list and assessment frequency. They recognized that the cost of the FSAP had been broadly stable over time. Going forward, the slight cost increase from expanding the list of mandatory FSAs while maintaining space for voluntary FSAs could be accommodated within the current resource envelope.

Directors clarified the framework for expected periodic FSAs with supra-national authorities. A periodic FSA with a supranational authority would be conducted if at least one member with a SIFS has delegated financial sector policies to the supra-national authority. The individual member country FSAs would be scoped to leverage the planned work on the supra-national FSA to avoid duplication.

SU/21/59

May 17, 2021

2021 Financial Sector Assessment Program Review—Integrating Stability Assessments Under the Financial Sector Assessment Program into Article IV Surveillance

Decision No. 14736-(10/92), adopted September 21, 2010, as amended by Decision No. 15495-(13/111), December 6, 2013, is hereby further amended to reflect the changes set forth in the Annex to this Decision (SM/21/52, 04/16/21).

Decision No. 17041-(21/46), May 12, 2021

ANNEX

Integrating Stability Assessments Under the Financial Sector Assessment Program into Article IV Surveillance: Text of Amended Decision

This Decision sets out the scope and modalities of bilateral surveillance over the financial sector policies of members with systemically important financial sectors and of multilateral surveillance over the spillovers arising from such policies in accordance with Article IV, Sections 3(a) and (b) of the Fund’s Articles and the Fund’s Decision on Bilateral and Multilateral Surveillance - 2012 Integrated Surveillance Decision (Decision No. 15203-(12/72), adopted July 18, 2012 (the “ISD”).

Introduction

1. The obligations of the Fund and its members with regard to bilateral and multilateral surveillance are set forth in Article IV of the Fund’s Articles and further elaborated in the ISD.

a. With respect to bilateral surveillance, Article IV, Section 1 requires each member to “collaborate with the Fund and other members to assure orderly exchange arrangements and to promote a stable system of exchange rates” (“systemic stability”). Recognizing the important impact that a member’s domestic economic and financial policies can have on systemic stability, Article IV, Sections 1(i) and (ii) establish obligations for members respecting the conduct of these policies, including their financial sector policies. In accordance with the framework set out in Article IV, the ISD provides that systemic stability is most effectively achieved by each member adopting policies that promote its own balance of payments stability and domestic stability—that is, policies that are consistent with members’ obligations under Article IV, Section 1 and, in particular, the specific obligations set forth in Article IV, Section 1, (i) through (iv). “Balance of payments stability” refers to a balance of payments position that does not, and is not likely to, give rise to disruptive exchange rate movements. In the conduct of their domestic economic and financial policies, members are considered to be promoting balance of payments stability when they are promoting their own domestic stability that is, when they comply with the obligations of Article IV, Sections 1 (i) and (ii) of the Fund’s Articles. For this purpose, the ISD requires the Fund’s bilateral surveillance to assess, in particular, whether a member’s domestic policies are directed towards domestic stability. It provides that “financial sector policies (both their macroeconomic aspects and macroeconomically relevant structural aspects)” will always be the subject of the Fund’s bilateral surveillance with respect to each member. The ISD also provides that, where relevant, each member is accountable for those policies that are reconducted by union-level institutions on its behalf.

b. With respect to multilateral surveillance, Article IV, Section 3 (a) requires the Fund to oversee the international monetary system in order to ensure its effective operation, and requires members to consult with the Fund on any issue that the Fund considers necessary for this purpose. The ISD recognizes that the international monetary system may only operate effectively in an environment of global economic and financial stability, and provides that the Fund in its multilateral surveillance will focus on issues that may affect global economic and financial stability, including the spillovers arising from policies of individual members that may significantly influence the effective operation of the international monetary system. The policies of members that may be relevant for this purpose include, among others, members’ financial sector policies.

2. While an examination of members’ financial sector policies is important in all cases of bilateral surveillance, the Fund decides that, taking into account the framework described above and the overall purpose of surveillance, heightened scrutiny should be given in bilateral surveillance to the financial sector policies of those members whose financial sectors are systemically important, given the risk that domestic and balance of payments instability in such countries will lead to particularly disruptive exchange rate movements and undermine systemic stability. Heightened scrutiny should also be given in multilateral surveillance to the spillover effects of the financial sector policies of those members, given the risk that they may undermine global economic and financial stability. As financial stability assessments are a key tool for assessing members’ financial vulnerabilities and financial sector policies, it is appropriate that financial stability assessments be conducted with such members as provided for in this Decision.

3. This Decision does not impose new obligations on members or, in particular, modify the scope of their obligations under Article IV. The Fund, in its bilateral surveillance, will continue to assess whether a member’s domestic economic and financial policies are directed toward the promotion of domestic stability. In its multilateral surveillance, the Fund may discuss the impact of members’ policies on the effective operation of the international monetary system and may suggest alternative policies that, while promoting the member’s own stability, better promote the effective operation of the international monetary system.

Scope and modalities of financial stability assessments

4. Determination of systemic importance. The Managing Director, in consultation with the Executive Board, will identify those members that have systemically important financial sectors. This determination will be made in the context of each review that is conducted under paragraph 9 below, and will be based on an assessment taking into account the size and interconnectedness of members’ financial sectors as contemplated in paragraphs 23 to 27 in SM/13/304.¹ and further modified in Appendix V of SM/21/52. Pursuant to paragraph 7 of Appendix V of SM/21/52, two sets of thresholds are relevant for the methodology. Using the lower set of thresholds, the methodology identifies jurisdictions with financial sectors that are considered systemically important. Using the higher set of thresholds, the methodology identifies the subset of those jurisdictions with systemically important financial sectors that are subject to more frequent financial stability assessments.

5. Financial stability assessments. Where the financial sector of a member is determined to be systemically important pursuant to paragraph 4 of this Decision, the member shall engage in a financial stability assessment in the context of bilateral and multilateral surveillance under Article IV of the Fund’s Articles in accordance with the terms of this Decision. For this purpose, the member shall consult with the Fund and the authorities of the member shall make themselves available for discussions with Fund staff of the issues that fall within paragraph 6 of this Decision.

6. Scope of financial stability assessments. The financial stability assessments undertaken under this Decision will consist of the following elements:

a. An evaluation of the source, probability, and potential impact of the main risks to macro-financial stability in the near-term for the relevant financial sector. Such an evaluation will involve: an analysis of the structure and soundness of the financial system; trends in both the financial and nonfinancial sectors; risk transmission channels; and features of the overall policy framework that may attenuate or amplify financial stability risks (such as the exchange rate regime). Both quantitative analysis (such as balance sheet indicators and stress tests) and qualitative assessments will be used to evaluate the risks to macro-financial stability.

b. An assessment of the authorities’ financial stability policy framework. Such an assessment will involve: an evaluation of the effectiveness of financial sector supervision; the quality of financial stability analysis and reports; the role of and coordination between the various institutions involved in financial stability policy; and the effectiveness of monetary policy.

c. An assessment of the authorities’ capacity to manage and resolve a financial crisis should the risks materialize. Such an assessment will involve an overview of the country’s liquidity management framework; financial safety nets (such as deposit insurance and lender-of-last-resort arrangements); crisis preparedness and crisis resolution frameworks; and the possible spillovers from the financial sector onto the sovereign balance sheet.

d. Where relevant, the assessments will also cover the spillovers arising from a member’s financial sector policies that may significantly influence global economic and financial stability.

7. Modalities of assessments. The key findings and recommendations of a financial stability assessment under this Decision will be summarized in a Financial System Stability Assessment Report (FSSA) that will normally be discussed by the Executive Board at the same time as the relevant Article IV consultation report.

8. Frequency. Where the financial sector of a member is determined to be systemically important pursuant to this Decision, it will be expected that a financial stability assessment will be conducted and the FSSA resulting from such an assessment will be discussed by the Executive Board by no later than the deadline for completion of the first Article IV consultation with the member that follows the relevant anniversary of such determination or, in the case of the financial sector of a territory of a member, the date of completion of the Article IV consultation discussion with respect to that territory by the Executive Board that follows the relevant anniversary of such determination. It is expected that subsequent FSSAs for a member with a systemically important financial sector will be discussed by the Executive Board by no later than the deadline for completion of the first Article IV consultation with that member that follows the relevant anniversary of the date of completion of the previous Executive Board discussion of the FSSA respecting that member or, in the case of the financial sector of a territory of a member, the date of completion of the first Article IV consultation discussion with respect to that territory by the Executive Board that follows the relevant anniversary of the date of completion of the previous Executive Board discussion of the FSSA respecting the financial sector of that territory. For purposes of this paragraph, the relevant anniversary shall be the tenth, except that for members with systemically important financial sectors that are identified by the methodology using the higher set of thresholds referenced in paragraph 4, above, the relevant anniversary shall be the fifth.

9. Supranational institutions. This Decision applies to members that have delegated any of the financial sector policies within the scope of paragraph 6 to supranational institutions, subject to the following considerations.

a. Financial stability assessment. Where a member has been identified as having a systemically important financial sector in accordance with paragraph 4 of this decision and the member has delegated any of the financial sector policies within the scope of paragraph 6 to supranational institutions, staff will conduct a financial stability assessment with the relevant supranational institutions.

b. Scope and modalities. The scope of financial stability assessments undertaken under this Decision with supranational institutions will be broadly as outlined in paragraph 6 of this Decision to the extent applicable. The key findings and recommendations of a financial stability assessment will be summarized in a FSSA that will normally be discussed by the Executive Board at the same time as the relevant report on common policies in the context of Article IV consultations with member countries.

c. Frequency. The financial stability assessment with supranational institutions will occur at the frequency applicable to the relevant member subject to mandatory financial stability assessments with the highest frequency. The FSSA will constitute an integral part of the FSSA for each individual member and of the Article IV consultation with each individual member.

Miscellaneous

10. Review. It is expected that the Fund will review this Decision no later than five years following the date of its adoption and subsequently at intervals of no longer than five years. In particular, as “systemic importance” is a dynamic concept, the Fund will, in the context of each such review, examine and revise, as necessary, the criteria and methodology for determining members with systemically important financial sectors. Moreover, the Fund may review this Decision at any time to take into account major advances in the availability of data and in the development of methodologies for assessing the systemic importance of financial sectors. (SM/13/304, 11/18/13).

Attachment¹ Paragraphs 23 to 27 in SM/10/235 (8/31/2010)

23. The point of departure for defining systemic importance for this exercise is the conceptual framework developed by the IMF, BIS, and FSB.² This framework—originally developed for evaluating the systemic importance of financial institutions, markets, and instruments (SIMIs)—approaches systemic importance from both a domestic and a global point of view. It identifies the following three key concepts: (i) size, i.e., the volume of financial services provided by an individual financial institution or market; (ii) interconnectedness, i.e., the extent of linkages with other financial institutions or markets; and (iii) substitutability, i.e., the extent to which other institutions or markets can provide the same services in the event of the failure of part of the system.

24. Systemic importance of a financial sector is defined below with the focus on its size and interconnectedness. The volume of financial services provided by a financial sector is the main component of systemic importance. Size is measured across several dimensions, to capture the importance of a particular financial sector in the specific jurisdiction (expressed in terms of the jurisdiction’s output) and in the global financial system (expressed in absolute terms and scaled by the jurisdiction’s GDP relative to world GDP). Cross-border interconnectedness is an important complementary measure: it captures the systemic risk that can arise through direct and indirect interlinkages among financial sectors in the global financial system, i.e., the risk that individual failure or malfunction may have severe repercussions on other countries or on systemic stability. As regards the notion of substitutability, while it is important at the level of individual institutions and markets, it is not included in the criteria. As acknowledged in IMF/BIS/FSB (2009), the concept of substitutability is difficult to measure, because it is hard to capture the degree of uniqueness of an individual institution or a specific market in the provision of a financial service. More importantly, substitutability may not be a relevant concept for entire financial sectors.

25. It is important to bear in mind the limitations of this definition of systemic importance:

• It is not a proxy for a jurisdiction’s systemic importance writ large. The analytical approach used in this paper is focused on the financial sector. It does not purport to measure all aspects of a country’s relative importance in the world economy, such as the size of the domestic market, growth potential, trade linkages, etc. As a result, some large, systemically important economies may be ranked lower than smaller countries that have relatively big and/or highly interconnected financial sectors.

• It does not capture market perceptions. This approach is entirely data based. Market perception of a financial sector’s systemic importance, though a key component of systemic risk, can be volatile; is influenced by economic and political factors that go beyond the size and interconnectedness of the particular financial sector; and is hard to measure objectively. It is therefore not incorporated into this approach.

• The extent of vulnerabilities is not a factor. The methodology is focused on systemic importance as measured by size and interconnectedness, not vulnerabilities. This is because the benefits of regular financial stability assessments would be maximized—both for the individual members and for the global financial system—if these assessments were focused on the jurisdictions with the most systemically important financial sectors, not on the most vulnerable. To be sure, members faced with macrofinancial vulnerabilities, regardless of their size or interconnections, would also benefit from an in-depth look at their financial sectors and may need additional Fund support. But there are other instruments, including Article IV surveillance, voluntary FSAPs, and technical assistance, which would continue to provide this analysis.

• Like all quantitative analyses, it is limited by the quality of data. In particular, it may not reflect accurately the importance of nonbank and unregulated segments of the financial sector, given the difficulties countries often experience in collecting such data, nor can it fully take into account differences in the quality of data collection and reporting across countries.

26. The methodology for identifying jurisdictions with systemically important financial sectors, explained in greater detail in the accompanying Background Paper, is a three-stage process that uses available financial data for the entire Fund membership. The need to apply the criteria uniformly across the entire membership limits the data that can be used. Data for the analysis are mainly drawn from the BIS, the IMF’s World Economic Outlook, the IMF’s International Financial Statistics, the IMF’s Coordinated Portfolio Investment Survey, and the United Nations Conference on Trade and Development’s datasets on foreign direct investment. The sample covers 191 jurisdictions (187 Fund members plus four territories that are subject to Article IV surveillance) for the year 2008.

• In the first stage, separate ordinal rankings of jurisdictions are developed for size and interconnectedness.

• The size of a jurisdiction’s financial sector is measured by the volume of financial services. The size ranking is a median of four rankings, three of which are measures of the “absolute” size of the sector (currency and deposits as a proxy for the banking-system balance sheet; volume on nonbank financial services; and the jurisdiction’s international investment position, all measured in U.S. dollars), and the fourth is a measure of the “relative” size of the financial sector (financial depth, measured as a share to the jurisdiction’s output). The first three capture the importance of a jurisdiction’s financial sector in the global financial system and the fourth measures the relative weight of the financial sector within a given jurisdiction. At the same time, since distress in an individual financial sector can propagate to the rest of the world both directly through financial connections and indirectly through real economy linkages, these measures of size are weighted by the relative size of each jurisdiction’s total output to global economic output.

• Interconnectedness is determined on the basis of bank-based network analysis. The basic idea (see Background Paper) is to infer from the pattern of cross-border linkages to what extent the banking sector of a particular jurisdiction is an important center in the international banking network.¹ Data availability has limited the measures of interconnectedness to the banking sector only, so the network is defined as a set of bilateral claims of different banking systems on each other. The importance (or “centrality”) of a banking sector in the network is measured in terms of the number and structure of claims on other banking sectors.

• In the second stage, the rankings of size and interconnectedness are combined into a single weighted composite index of systemic importance. To derive the single index, the relative weights for size and interconnectedness are set at 0.7 and 0.3, respectively. As size is a more fundamental measure of systemic importance, it is given a relatively higher weight in the composite index than interconnectedness. As a robustness check, alternative composite rankings are calculated for a range of different weight combinations, and different ways of combining the indices of size and interconnectedness (using averages instead of medians), and different types of bilateral financial assets and liabilities (such as equity, debt, and FDI) are tested.

• In the third stage, cluster analysis is used to identify groups of jurisdictions with financial sectors that have consistently the highest degree of systemic importance. The underlying idea is to “let the data speak for themselves” in identifying groups of financial sectors whose rankings are relatively stable across different weight combinations. To capture this idea, the standard deviation of ordinal rankings across different combinations of weights is calculated for each financial sector as a proxy for the robustness of the ranking. Clusters of jurisdictions are then calculated by iteratively minimizing the with-in-cluster sum of squared standard deviations from cluster means over several possible clusters of jurisdictions. The final list includes the clusters with the jurisdictions that are not just the highest ranked, but also have the most robust rankings across different weighting schemes and represent a substantial share of the global financial system. This methodology eschews as much as possible a priori judgments on the size and makeup of the list (the number of jurisdictions to be included is not predetermined, and it is not possible to “cherry pick” individual jurisdictions), and allows the data to indicate its final composition.

27. The results identify 25 jurisdictions with the most systemically important financial sectors (Table 1). They cover almost 90 percent of the global financial system and represent almost 80 percent of global economic output. The group contains 15 of the G-20 countries and advanced economies are heavily represented. The United Kingdom’s financial sector has the highest composite rank. The United States’ financial sector is ranked third despite being ranked first in size because of its relatively lower level of cross-border connections. Several euro area economies are also highly ranked because of the high degree of interconnectedness of their financial sectors. Although these connections are largely within the euro area, for the purposes of this exercise they have been treated as all other cross-border flows because first, they may give rise to cross-border systemic risk affecting the domestic stability of the individual countries, as well as the external stability of the euro area as a whole; second, the authorities in these countries still have considerable independence in their domestic financial sector policies; and third, comprehensive cross-border resolution mechanisms are yet to be established. Moreover, Article IV consultations (and FSAPs) with these members are still conducted separately. Given the degree of financial integration of the euro area countries and the gradual move toward a more integrated system of regulation and supervision in the European Union, this treatment of cross-border exposures of these countries could be reconsidered in the future.

Poverty Reduction and Growth Trust

1. The Fund adopts the Instrument to Establish the Poverty Reduction and Growth Trust (PRGT) that is annexed to this decision.

2. The Fund is committed, if it appeared that any delay in payment by the Trust to lenders would be protracted, to consider fully and in good faith all such initiatives as might be necessary to assure full and expeditious payment to lenders.

Decision No. 8759-(87/176) ESAF, December 18, 1987,

as amended by Decision Nos. 9115-(89/40) ESAF, March 29, 1989,

9488-(90/106) ESAF, July 2, 1990, 9555-(90/146) ESAF, September 24, 1990, 9585-(90/161) ESAF, November 15, 1990, 10092-(92/94) ESAF, July 23, 1992, 10287-(93/23) ESAF, February 22, 1993, 10515-(93/162) ESAF, November 29, 1993, 10530-(93/170) ESAF, December 15, 1993, 10532-(93/170) ESAF, December 15, 1993, 11114-(95/110) ESAF, November 20, 1995, 11395-(96/110) ESAF, December 9, 1996,

11434-(97/10), February 4, 1997,

11435-(97/10), February 4, 1997, 11533-(97/67) ESAF, July 2, 1997,

11610-(97/113), December 19, 1997, 11832-(98/119) ESAF, November 20, 1998, 12087-(99/118) PRGF, October 21, 1999, effective November 22, 1999, 12206-(00/55) PRGF, May 31, 2000, 12228-(00/66) PRGF, June 30, 2000, 12252-(00/77) PRGF, July 27, 2000, 12279-(00/86), August 25, 2000, 12326-(00/111) PRGF, November 10, 2000, 12344-(00/117) PRGF, November 28, 2000, 12545-(01/84) PRGF, August 22, 2001, 12560-(01/85) PRGF, August 23, 2001, effective September 19, 2001,

13374-(04/105) PRGF, November 9, 2004, 13588-(05/99) MDRI, November 23, 2005, effective January 5, 2006, 13590-(05/99) ESF, November 23, 2005, effective January 5, 2006,

13689-(06/24) ESF, March 10, 2006, 13774-(06/78), August 30, 2006, effective December 8, 2006, 13849-(06/108), December 20, 2006, 14153-(08/82), September 19, 2008, effective November 24, 2008,

14253-(09/08), January 27, 2009,

14287-(09/29), March 24, 2009, effective April 1, 2009, 14354-(09/79), July 23, 2009, effective January 7, 2010, 14593-(10/41), April 28, 2010, effective June 1, 2010, 15035-(11/116), December 1, 2011, 15226-(12/83), August 27, 2012, 15303-(13/1), December 21, 2012, 15352-(13/32), April 8, 2013,

15481-(13/103), November 11, 2013,

15482-(13/103), November 11, 2013, 15576-(14/36), April 24, 2014,

15692-(14/109), December 10, 2014, 15803-(15/62), June 22, 2015,

15818-(15/66), July 1, 2015,

15819-(15/66), July 1, 2015, 16051-(16/86), September 20, 2016,

16059-(16/91), October 3, 2016, 16152-(17/20), March 22, 2017, 16182-(17/35), July 17, 2017, 16448-(18/103), December 4, 2018, 16515-(19/42), May 24, 2019, 16516-(19/42), May 24, 2019, 16521-(19/42), May 24, 2019, 16693-(20/36), Apri 6, 2020, 16846-(20/75), July 13, 2020, 16880-(20-96), September 28, 2020,

16983-(21/29), March 22, 2021,

16984-(21/29), March 22, 2021,

17067-(21/64), June 21, 2021,

17076-(21/68), June 30, 2021,

17077-(21/68), June 30, 2021,

17079-(21/71), July 14, 2021,

17080-(21/71), July 14, 2021, and

17181-(21/121),

December 20, 2021

ANNEX

Instrument to Establish the Poverty Reduction and Growth Trust Introductory Section

To help fulfill its purposes, the International Monetary Fund (hereinafter called the “Fund”) has adopted this Instrument establishing the Poverty Reduction and Growth Trust (hereinafter called the “Trust”), which shall be administered by the Fund as Trustee (hereinafter called the “Trustee”). The Trust shall be governed by and administered in accordance with the provisions of this Instrument.

Section I. General Provisions

Paragraph 1. Purposes

The Trust shall assist in fulfilling the purposes of the Fund by providing:

(a) loans on concessional terms (hereinafter called “Trust loans”) to low-income developing members that qualify for assistance under this Instrument, in order to:

(i) support programs under the Extended Credit Facility (hereinafter called the “ECF”) that enable members with a protracted balance of payments problem to make significant progress toward stable and sustainable macroeconomic positions consistent with strong and durable poverty reduction and growth;

(ii) support programs under the Standby Credit Facility (hereinafter called the “SCF”) that enable members with actual or potential short-term balance of payments needs to achieve, maintain or restore stable and sustainable macroeconomic positions consistent with strong and durable poverty reduction and growth;

(iii) support policies under the Rapid Credit Facility (hereinafter called the “RCF”) of members facing urgent balance of payments needs so as to enable them to make progress towards achieving or restoring stable and sustainable macroeconomic positions consistent with strong and durable poverty reduction and growth; and (iv) for a transitional period, support programs under the Exogenous Shocks Facility that help members to resolve their balance of payments difficulties whose primary source is a sudden and exogenous shock in a manner consistent with strong and durable poverty reduction and growth; and

(b) grants, for a transitional period, to subsidize post-conflict and/ or natural disaster emergency assistance purchases under Decision No. 12341-(00/117) made by low-income developing members as of January 7, 2010, through transfers to the Post-Conflict and Natural Disaster Emergency Assistance Subsidy Account for PRGT Eligible members annexed to Decision No. 12481-(01/45) (“the ENDA/EPCA Subsidy Account”).

Paragraph 2. Accounts of the Trust

The operations and transactions of the Trust shall be conducted through a General Loan Account, an ECF Loan Account, a SCF Loan Account, and a RCF Loan Account (the latter four accounts collectively referred to herein as the “Loan Accounts”), a Reserve Account, a General Subsidy Account, an ECF Subsidy Account, a SCF Subsidy Account, a RCF Subsidy Account, an ESF Subsidy Account, and a Subsidy Reserve Account (the latter six accounts collectively referred to herein as the “Subsidy Accounts”), and a Deposit and Investment Account. The resources of the Trust shall be held separately in these Accounts.

Paragraph 3. Unit of Account

The SDR shall be the unit of account for commitments, loans, and all other operations and transactions of the Trust, provided that commitments of resources to the Subsidy Accounts may be made in currency.

Paragraph 4. Media of Payment of Contributions and Exchange of Resources

(a) Resources provided under borrowing agreements or donated to the Trust shall be received in a freely usable currency, subject to the provisions of (c) below, and provided that resources may be received by the Subsidy Accounts in other currencies.

(b) Payments by the Trust to creditors or donors shall be made in U.S. dollars or such other media as may be agreed between the Trustee and such creditors or donors.

(c) Resources provided under borrowing agreements or donated to the Trust may also be made available in or exchanged for SDRs in accordance with such arrangements as may be made by the Trust for the holding and use of SDRs.

(d) The Trustee may exchange any of the resources of the Trust, provided that any balance of a currency held in the Trust may be exchanged only with the consent of the issuers of such currencies.

Section II. Trust Loans

Paragraph 1. Eligibility and Conditions for Assistance

(a) The members on the list annexed to Decision No. 8240-(86/56) SAF, as amended, shall be eligible for assistance from the Trust.

(b) Assistance under the ECF

(1) Assistance under the ECF shall be committed and made available to a qualifying member under a single arrangement of no less than three years and up to five years (hereinafter called an “ECF arrangement”) in support of a macroeconomic and structural adjustment program presented by the member. It would be expected that ECF arrangements would normally be approved for a period of three years, although arrangements for up to five years may also be approved, where appropriate, and if the member so requests. The member shall also present a detailed statement of the policies and measures it intends to pursue for the first twelve months of the arrangement, and indicate how the program advances the member’s poverty reduction and growth objectives, in line with the objectives and policies of the program. The ECF arrangement will prescribe the total amount of resources committed to the member, the amount to be made available during the first year of the arrangement, the phasing of disbursements during that year, and the overall amounts to be made available during the subsequent years of the arrangement. Disbursements shall be phased at regular intervals no more than six months apart (one upon approval and at normally regular intervals thereafter) with performance criteria applicable specifically to each disbursement and appropriate monitoring of key financial variables in the form of quantitative benchmarks and structural benchmarks for critical structural reforms. Structural benchmarks may be targeted for implementation either by a specific date or by the time of a specific review under the ECF arrangement. The ECF arrangement shall also provide for reviews by the Trustee of the member’s program scheduled at intervals that are the same as those applicable to disbursements to evaluate the macroeconomic and structural reform policies of the member and the implementation of its program and reach new understandings if necessary. The determination of the phasing of, and the conditions applying to, disbursements after the first year of the ECF arrangement will be made by the Trustee in the context of reviews of the program with the member. At each review, the member will present a detailed statement describing progress made under the program, the policies it will follow during the next 12 months or up to the remaining period of the arrangement to further the realization of the objectives of the program, and how the program advances the country’s poverty reduction and growth objectives, with such modifications as may be necessary to assist it to achieve its objectives in changing circumstances.

(2) Before approving an ECF arrangement, the Trustee shall be satisfied that the member has a protracted balance of payments problem and is making an effort to strengthen substantially and in a sustainable manner its balance of payments position under a policy program that supports significant progress toward a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth.

(3)(i) Subject to subparagraph (ii) below, the Trustee shall not complete the second or any subsequent review under an ECF Financial Services arrangement unless it finds that: (A) the member concerned has a poverty reduction strategy that has been developed and made publicly available normally within the previous 5 years but no more than 6 years, and covers the period leading up to and covering the date of the completion of the relevant review; and (B) the poverty reduction strategy has been issued to the Executive Board and has been the subject of a staff analysis in the staff report on a request for an ECF arrangement or a review under an ECF arrangement. A Poverty reduction strategy issued to the Executive Board on or after May 24, 2019 shall be named Poverty Reduction and Growth Strategy (PRGS) and a poverty reduction strategy that has been issued to the Executive Board as an Economic Development Document shall be deemed a PRGS. A PRGS shall comprise any of the following: (a) a document developed by a member country on its national development plan or strategy that is already in existence and publicly available, and documents its poverty reduction strategy; or (b) a document newly prepared by a member country documenting its poverty reduction strategy. A PRGS shall be accompanied by a cover letter from the member country concerned to the Managing Director, and shall be issued to the Executive Board with the cover letter. As such, the cover letter shall be deemed to constitute part of the PRGS.

(ii) In cases where a member has limited institutional capacity for meeting the PRGS requirement specified in subparagraph (i) above, the member may request approval by the Executive Board of an extension of the deadline for issuance of the PRGS up until the fourth review under the ECF arrangement. Any request for an extension shall be made no later than the time of the request for completion of the second review. A member may request approval of a further extension of the deadline for issuance of the PRGS up until the sixth review under the ECF arrangement, provided that: (A) the member can provide adequate justifications based on persistent limited institutional capacity for meeting the PRGS requirement and other urgent priorities; and (B) the member’s arrangement has a duration of at least four years, or an extension of the arrangement to at least four years is requested. Any request for such additional extension of the deadline for issuance of the PRGS shall be made no later than the time of the request for completion of the review corresponding to the extended deadline for the PRGS requirement.

(iii) For purposes of this Instrument, subject to the terms of Section II, paragraphs 1(b)(3)(i)-(ii) above, the terms I-PRSP, PRSP, PRSP preparation status report and APR shall have the meaning given to each of them in Section I, paragraph 1 of the PRG-HIPC Trust Instrument (Annex to Decision No. 11436-(97/10), adopted February 4, 1997, as amended).

(4) A member may cancel an ECF arrangement at any time by notifying the Fund of such cancellation. An ECF arrangement for a member approved after the date of adoption of this decision will automatically terminate before its term if no program review under the arrangement has been completed over a period of eighteen months. The Trustee, at the authorities’ request, may decide to delay the termination of the arrangement by up to three months in cases where the reaching of understandings between the authorities and the Trustee on targets and measures to put the ECF-supported program back on track within the term of the arrangement, appears imminent. The ECF arrangement will automatically terminate at the end of the extended period unless a program review under the arrangement is completed within this period. After the expiration of an ECF arrangement for a member, the cancellation of the ECF arrangement by the member, or the automatic termination of the ECF arrangement, the Trustee may approve additional ECF arrangements for an eligible member in accordance with this Instrument.

(c) Assistance under the SCF

(1) Assistance under the SCF shall be committed and made available to a qualifying member under an arrangement (hereinafter called an “SCF arrangement”) in support of a macroeconomic and structural adjustment program presented by the member. The period for an SCF arrangement shall range from one to three years. The member shall present a detailed statement of the policies and measures it intends to pursue during the first year of the arrangement, and how the program advances the member’s poverty reduction and growth objectives. In addition, the member will make an explicit statement, where applicable, about its intention to treat the SCF arrangement as precautionary. The SCF arrangement will prescribe the total amount of resources committed to the member and the phasing of disbursements during the period of the arrangement; provided that in cases where the period of a SCF arrangement exceeds one year, the arrangement may prescribe the amount to be made available during the first year of the arrangement and the phasing of disbursements during that year. Disbursements shall be phased at regular intervals no more than six months apart (one upon approval and at approximately regular intervals thereafter) with performance criteria applicable specifically to each disbursement and appropriate monitoring of key financial variables in the form of quantitative benchmarks and structural benchmarks for critical structural reforms. The SCF arrangement shall also provide for reviews by the Trustee of the member’s program scheduled at intervals that are the same as those applicable to disbursements to evaluate the macroeconomic and structural reform policies of the member and the implementation of its program and reach new understandings if necessary. In cases where the period of a SCF arrangement exceeds one year, the determination of the phasing of, and the conditions applying to, disbursements during the period of the arrangement following the first year may be made by the Trustee in the context of reviews of the program with the member. At the time of each review, the member will present a detailed statement describing progress made under the program, the policies it will follow during the next twelve months or up to the remaining period of the arrangement to further the realization of the objectives of the program, and how the program advances the country’s poverty reduction and growth objectives, with such modifications as may be necessary to assist it to achieve its objectives in changing circumstances. The member may request at any time any previously scheduled and undrawn disbursement under an SCF arrangement, provided that the most recently scheduled review under the arrangement prior to the request has been completed. After the expiration of an SCF arrangement for a member, or the cancellation of the SCF arrangement by the member, or the automatic termination of the SCF arrangement, the Trustee may approve additional SCF arrangements for that member in accordance with the Instrument provided that, normally, no SCF arrangement shall be approved that could result in a member having had SCF arrangements in place for more than three years out of any six-year period, assessed on a rolling basis. In applying this limitation, the Trustee shall not include previously approved SCF arrangements that have expired with no disbursement having taken place or new SCF arrangements whose approval the member has requested and for which the Trustee, at the time of consideration of the request, assesses that the member does not have an actual balance of payments need.

(2) Before approving a SCF arrangement, the Trustee shall be satisfied (a) that the member does not have a protracted balance of payments problem, and has an actual or potential short-term balance of payment need that is expected (or in the case of a potential balance of payments need, would be expected) to be resolved within two years and in any event not later than three years; (b) that the member’s balance of payments difficulties are not predominantly caused by a withdrawal of financial support by donors; and (c) that the member is implementing, or is committed to implement, policies aimed at resolving the balance of payments difficulties it is encountering or could encounter, and at achieving, maintaining or restoring a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction.

(3) Notwithstanding subparagraph 2 above, no SCF arrangement shall be approved before January 1, 2010, based solely on the existence of a potential balance of payments need.

(4) The Trustee shall not complete the second or any subsequent review under an SCF arrangement with an initial duration exceeding two years unless it finds that: (A) the member concerned has a poverty reduction strategy that has been developed and made publicly available normally within the previous 5 years but no more than 6 years, and covers the period leading up to and covering the date of the completion of the relevant review; and (B) the poverty reduction strategy has been issued to the Executive Board and has been the subject of a staff analysis in the staff report on a request for an SCF arrangement or a review under an SCF arrangement. A poverty reduction strategy issued to the Executive Board on or after May 24, 2019 shall be named Poverty Reduction and Growth Strategy Financial Services (PRGS) and shall comprise any of the following: (a) a document developed by a member country on its national development plan or strategy that is already in existence and publicly available, and documents its poverty reduction strategy; or (b) a document newly prepared by a member country documenting its poverty reduction strategy. A PRGS shall be accompanied by a cover letter from the member country concerned to the Managing Director, and shall be issued to the Executive Board with the cover letter. As such, the cover letter shall be deemed to constitute part of the PRGS.

(5) A member may cancel an SCF arrangement at any time by notifying the Fund of such cancellation. An SCF arrangement for a member approved after the date of adoption of this decision, which has an initial duration of more than 24 months or is extended to more than 24 months, will automatically terminate before its term if no program review under the arrangement has been completed over a period of eighteen months. The Trustee, at the authorities’ request, may decide to delay the termination of the arrangement by up to three months in cases where the reaching of understandings between the authorities and the Trustee on targets and measures to put the SCF-supported program back on track within the term of the arrangement, appears imminent. The SCF arrangement will automatically terminate at the end of the extended period unless a program review under the arrangement is completed within this period.

(d) Assistance under the RCF

(1) Assistance under the RCF shall be made available to a qualifying member through outright loan disbursements. A member requesting assistance under the RCF shall describe in a letter the general policies it plans to pursue to address its balance of payment difficulties, how its policies advance its poverty reduction and growth objectives, and its intention not to introduce measures or policies that would compound its balance of payments difficulties. The member shall also commit to undergoing a safeguard assessment, provide staff with access to its central bank’s most recently completed external audit reports and authorize its external auditors to hold discussions with staff. The Trustee will approve support under the RCF only where it is satisfied that the member will cooperate with the Trustee in an effort to find, where appropriate, solutions for its balance of payments difficulties. In exceptional cases, the Managing Director may request that the member implement upfront measures before recommending that the Trustee approve a disbursement under the RCF.

(2) Before approving a disbursement under the RCF, the Trustee shall be satisfied (a) that the member is experiencing an urgent balance of payments need characterized by a financing gap that, if not addressed, would result in an immediate and severe economic disruption; (b) that the member’s balance of payments difficulties are not predominantly caused by a withdrawal of financial support by donors; and (c) normally, that the member either (i) has a balance of payments need that is expected to be resolved within one year with no major policy adjustments being necessary, or (ii) lacks capacity to implement an upper credit tranche-quality economic program owing to its limited policy implementation capacity or the urgent nature of its balance of payments need. If a member has received a disbursement under the RCF within the preceding three years, then any additional disbursements under the RCF may be approved only where the Trustee is satisfied that: (i) the member’s balance of payments need was caused primarily by a sudden and exogenous shock, or (ii) the member has established a track record of adequate macroeconomic policies for a period of normally about six-months prior to the request; provided that (A) effective as of January 1, 2022, a member may not receive more than two disbursements under the RCF during any 12-month period and (B) any disbursements between July 13, 2020 and December 31, 2021 shall not count towards the limit set forth in (A) above.

(e) General Provisions

(1) A member may not obtain assistance from the Trust under the ECF, SCF or ESF at the same time. So long as the requirements under the Instrument for approval of such assistance have been met, a member may obtain assistance under the RCF when it has an ECF, ESF, or SCF arrangement in place, if (a) disbursements under the relevant arrangement are delayed due to delays in program implementation, the nonobservance of conditions attached to such disbursements or delays in reaching new understandings when necessary, and (b) the member’s balance of payments need giving rise to the request for assistance under the RCF is caused primarily by a sudden and exogenous shock.

(2) Commitments under arrangements under this Instrument may be made for the period through December 31, 2024.

(3) The Managing Director shall not recommend for approval, and the Trustee shall not approve, a request for a disbursement under the RCF or an arrangement under this Instrument whenever the member has an overdue financial obligation to the Fund in the General Resources Account, the Special Disbursement Account, or the SDR Department, or to the Fund as Trustee, or while the member is failing to meet a repurchase expectation to the Fund pursuant to Decision No. 7842-(84/165) on the Guidelines on Corrective Action, or is failing to meet a repayment expectation pursuant to Section II, paragraph 3(c) or the provisions of Appendix I to this Instrument.

(4) The Trustee shall not complete a review under an arrangement under this Instrument unless and until all other conditions for the disbursement of the corresponding loan have been met or waived.

Paragraph 2. Amount of Assistance

(a)(A) Except as specified in sub-paragraph (B) below, the overall access of each eligible member to the resources of the Trust under all facilities of the Trust as specified in Section I, Paragraph 1(a) shall be subject to (i) an annual limit of 145 percent of quota; and (ii) a cumulative limit of 435 percent of quota, net of scheduled repayments. The Trustee may approve access in excess of these limits if all of the following criteria are satisfied:

(1) The member is experiencing or has the potential to experience exceptional balance of payments pressures on the current account or capital account, resulting in a need for resources under the Trust that cannot be met within the normal limits.

(2) Risks to the sustainability of public debt are adequately contained, which shall be evidenced by, and subject to, the standards set forth below:

I. A rigorous and systematic analysis indicates that there is a high probability that the member’s public debt is sustainable in the medium term. This is generally considered to be met for countries that are assessed under the Bank-Fund Debt Sustainability Framework for Low-Income Countries (the “LIC-DSF”) to be at low or moderate overall risk of public debt distress; or

II. Where the member’s public debt is assessed to be sustainable but not with high probability (which includes cases where the member’s overall risk of public debt distress is assessed to be high or in debt distress), or where the member’s debt is assessed to be unsustainable ex ante, access to resources in excess of the normal limits will only be made available if the combination of the member’s policies and financing from sources other than the Fund, which may include debt restructuring, restores public debt sustainability with high probability (generally considered to be met for countries that are assessed under the LIC-DSF to be at low or moderate overall risk of public debt distress) (i) within 36 months from Board approval in the case of a new arrangement under this Trust or a loan under the RCF, or within the period of the new arrangement, whichever is longer, or (ii) within the remaining period of an arrangement, in cases where the Board approves a request for an augmentation or a rephasing of access under the arrangement;

(3) The member does not meet the income criterion for presumed blending, as set forth in paragraph 1(a) of Decision No. 17082-(21/71), adopted July 14, 2021, at the time of making a request for resources under this Trust in excess of the access limits set forth in paragraph 2(a)(A) above; and

(4) The policy program of the member provides a reasonably strong prospect of success, including not only the member’s adjustment plans but also its institutional and political capacity to deliver that adjustment.

(a)(B)(i) During the period from March 22, 2021 to December 31, 2021 (the “Applicable Period”), the annual access limit shall be 245 percent of quota for financing approved through December 31, 2021 (the “Eligible Financing”). For the computation of the annual access under the above specified “Eligible Financing”, the annual access limit of 245 percent of quota shall apply for any 12-month period that includes any part of the “Applicable Period”.

(a)(B)(ii) Notwithstanding the increase in access limits set forth in Paragraphs 2(a)(A) and 2(a)(B)(i) above, a member’s access to PRGT resources approved under an arrangement in place prior to September 9, 2020 that was exempted from the application of Policy Safeguards for High Combined GRA and PRGT Credit set forth in Decision No. 16873-(20/91) will remain subject to observance of the access limits and criteria for exceptional access to the PRGT that were in effect at the time of approval of such arrangement; if access under such an arrangement is augmented, the provisions in paragraphs 2(a)(A) and 2 (a)(B)(i) shall apply to such an arrangement.

(b) Subject to the provisions in subparagraphs (i) to (iv) below, the access of each eligible member under the RCF shall be subject to an annual limit of 50 percent of quota, and a cumulative limit of 100 percent of quota, net of scheduled repayments, including where the assistance is requested to address an urgent balance of payments need resulting primarily from a sudden and exogenous shock and the member’s existing and prospective policies are sufficiently strong to address the exogenous shock:

(i) each disbursement shall not exceed 25 percent of quota except where the member requests assistance under the RCF to address an urgent balance of payments need resulting primarily from a sudden and exogenous shock (including a large natural disaster under (ii) below);

(ii) the annual and cumulative access limits under the RCF shall be 80 percent of quota and 133.33 percent of quota, net of scheduled repayments, respectively, where (a) the member requests assistance under the RCF to address an urgent balance of payments need resulting from a natural disaster that occasions damage assessed to be equivalent to or to exceed 20 percent of the member’s gross domestic product (GDP) and (b) the member’s existing and prospective policies are sufficiently strong to address the natural disaster shock. For the period from June 21, 2021 to December 31, 2021, the above annual access limit shall be 130 percent of quota and for the period from June 21, 2021 to June 30, 2023, the above cumulative access limit shall be183.33 percent of quota, net of scheduled repayments;

(iii) a member’s request for assistance under the RCF to address an urgent balance of payments need resulting primarily from a sudden and exogenous shock shall be subject to an annual access limit of 100 percent of quota for the period from April 6, 2020 to December 31, 2021, and to a cumulative access limit of 150 percent of quota, net of scheduled repayments for the period from April 6, 2020 to June 30, 2023; and

(iv) outstanding credit by a member under the rapid-access component of the ESF or outstanding purchases from the General Resources Account under emergency post conflict/natural disaster assistance covered by Decision No. 12341-(00/117), shall count towards the annual and cumulative limits applicable to access under the RCF. With effect from July 1, 2015, any purchases from the General Resources Account under the Rapid Financing Instrument shall count towards the annual and cumulative limits applicable to access under the RCF.

(c) [Ed. Note: The sub-limit on precautionary use of the SCF was repealed by Decision No. 16516-(19/42), May 24, 2019.]

(d) These access limits shall be subject to review from time to time by the Trustee.

(e) To the extent that a member has notified the Trustee that it does not intend to make use of the resources available from the Trust, the member shall not be included in the calculations of the access limits on Trust loans.

(f) The access for each member that qualifies for assistance from the Trust under the ECF, SCF, RCF or ESF shall be determined on the basis of an assessment by the Trustee of the actual or potential balance of payments need of the member, the strength of its adjustment program and capacity to repay the Fund, the amount of the member’s outstanding use of credit extended by the Fund, and its record in using Fund credit in the past. The access for each member that qualifies for assistance under the RCF and ESF shall also take into account the size and likely persistence of the shock (where applicable, in the case of the RCF).

(g) The amount of resources committed to a qualifying member under an ECF, SCF or ESF arrangement may be increased at the time of any review contemplated under the arrangement, to help meet a larger balance of payments need or in the case of an ECF or SCF arrangement, to support a strengthening of the program. The amount committed to a member under an ECF arrangement shall not be reduced because of developments in its balance of payments, unless such developments are substantially more favorable than envisaged at the time of approval of the arrangement and the improvement for the member derives in particular from improvements in the external environment.

(h) The amount of resources committed to a qualifying member under an ECF or SCF arrangement may also be increased by the Trustee in an ad-hoc review between scheduled reviews under the arrangement to address an increase in the underlying balance of payments problems of the qualifying member where the problem is so acute that the augmentation cannot await the next scheduled review under the arrangement. The Trustee, however, shall not approve requests for augmentation at an ad hoc review if the scheduled review associated with the most recent availability date preceding the augmentation request has not been completed. In support of a request for augmentation between scheduled reviews under an ECF or SCF arrangement, the member will describe in a letter of intent the nature and size of its balance of payment difficulties, and any information relevant to program implementation, including exogenous developments. Before approving such augmentation, the Trustee shall be satisfied that the program remains on track to achieve its objectives at the time of the augmentation, based on the information provided by the member, and, in particular, that the member is in compliance with any continuous performance criteria or that a waiver of nonobservance is justified and that all prior actions have been met. Requests for augmentation of access that do not exceed 15 percent of quota would be considered for approval on a lapse-of-time basis as provided for in Decision/A/13207, as amended. Following its approval by the Trustee, the augmentation of access under the arrangement will not exceed the amount immediately needed by the member in light of its balance of payments difficulties and will become available to the member in a single disbursement, which the member may request at any time until the availability date of the next scheduled disbursement under the ECF or SCF arrangement. A program review following an augmentation of access under the arrangement between scheduled reviews would be expected to include a comprehensive review of policies under the program. In order to allow the Trustee to undertake such a comprehensive assessment of the member’s policies, this review may not be completed on a lapse of time basis.

(i) Any commitment shall be subject to the availability of resources to the Trust.

Paragraph 3. Disbursements

(a) Any disbursement shall be subject to the availability of the resources to the Trust.

(b) Disbursements under an arrangement under this Instrument must precede the expiration of the arrangement period. If phased amounts under an arrangement do not become available as scheduled due to delays in program implementation, nonobservance of conditions attached to such disbursements or delays in reaching new understandings when necessary, the Trustee may rephase those amounts over the remaining period of the arrangement. The Trustee may also extend the original period of (i) an ECF arrangement to allow for the disbursement of rephased amounts or to provide additional resources in light of projected developments in the member’s balance of payments position, subject to appropriate conditions consistent with the terms of assistance under the ECF, provided that the total period of the arrangement shall not exceed five years overall, and (ii) an SCF or ESF arrangement for up to the overall maximum two-year period referred to in Section II, paragraph 1 (c)(1) and Appendix III, respectively, to allow for the disbursement of rephased amounts or to provide additional resources subject to appropriate conditions consistent with the terms of assistance under the ESF or SCF.

(c) When requesting a disbursement under the SCF, RCF or ESF, the member shall represent that it has a need because of its balance of payments or its reserve position or developments in its reserves. The Trustee shall not challenge this representation of need prior to providing the member with the requested disbursement. If, after a disbursement is made, the Trustee determines that the disbursement took place in the absence of a need, the Trustee may decide that the member shall be expected to repay an amount equivalent to the disbursement, together with any interest accrued thereon, normally within a period of 30 days from the date of the Executive Board decision establishing that the member is expected to make an early repayment. If the member fails to meet a repayment expectation within the period established by the Trustee, (i) the Managing Director shall promptly submit a report to the Executive Board together with a proposal on how to deal with the matter, and (ii) interest shall be charged on the amount subject to the repayment expectation at the rate applicable to overdue amounts under paragraph 4 of this Section.

(d) Following a member’s qualification for a disbursement, the disbursement shall be made on the soonest value date for which the necessary notifications and payment instructions can be issued by the Trustee.

(e) No disbursement to a member shall be made after the expiration of the period referred to in Section III, paragraph 3.

(f) In cases of misreporting and noncomplying disbursements of Trust loans, the provisions of Appendix I, which is incorporated at the end of this Instrument, shall apply.

(g) Disbursements under an arrangement to a qualifying member shall be suspended in all the cases specified in Paragraph 1(e)(3) of this Section.

(h) The Trustee’s approval of a loan disbursement under the RCF after March 22, 2021 shall automatically expire after 60 days following the date of such approval (the “automatic expiration date”) if the Trustee has not received the member’s authenticated instructions to request the disbursement of the approved RCF loan. The Trustee, at the member’s request made prior to the automatic expiration date, may decide to delay such expiration date for an additional period not exceeding 60 days from the automatic expiration date.

Paragraph 4. Terms of Loans

(a) Effective August 1, 2021, and subject to the provisions of Section IV.A, paragraph 5, interest on the outstanding balance of Trust loans shall be charged at the rate of zero percent per annum on loans under the ECF, the SCF, the ESF, and the RCF.

(b) The interest rates for loans outstanding under the ECF and the SCF as specified under paragraph (a) shall be subject to periodic reviews to take account of developments in world interest rates, with such first review to be completed by July 31, 2023, and subsequent reviews every two years thereafter. In the context of such reviews, and subject to the provisions of Section IV.A, paragraph 5, the interest rate on the outstanding balances of loans under the ECF and SCF shall normally be determined by the Trustee as follows:

(i) If the SDR interest rate (average rate over the most recently observed 12-month period) is less than 2 percent, the interest rate shall be established or maintained, as the case may be, at zero percent per annum for ECF and SCF loans;

(ii) If the SDR interest rate (average rate over the most recently observed 12-month period) is between 2 percent and 5 percent, the interest rate shall be established or maintained, as the case may be, at 0.25 percent per annum for ECF and SCF loans;

(iii) If the SDR interest rate (average rate over the most recently observed 12-month period) is greater than 5 percent, the interest rate shall be established or maintained, as the case may be, at 0.5 percent per annum for ECF and SCF loans. (c) Notwithstanding the provisions of paragraph (a) or any interest rate determined in terms of the provisions of paragraph (b), interest at a rate equal to the SDR interest rate shall be charged on the amounts of any overdue interest on or overdue repayments of Trust loans.

(c) Notwithstanding the provisions of paragraph (a) or any interest rate determined in terms of the provisions of paragraph (b), interest at a rate equal to the SDR interest rate shall be charged on the amounts of any overdue interest on or overdue repayments of Trust loans.

(d) Trust loans shall be disbursed in a freely usable currency as decided by the Trustee. They shall be repaid, and interest paid, in U.S. dollars or other freely usable currency as decided by the Trustee. The Managing Director is authorized to make arrangements under which, at the request of a member, SDRs may be used for disbursements to the member or for payment of interest or repayments of loans by the member to the Trust.

(e) The Trustee may not reschedule the repayment of loans from the Trust.

(f) Trust loans under the ECF, RCF and ESF shall be repaid in ten equal semi-annual installments beginning not later than five and a half years from the date of each disbursement and completed at the end of the tenth year after that date. Trust loans under the SCF shall be repaid in nine equal semi-annual installments beginning not later than four years from the date of each disbursement and completed at the end of the eighth year after that date.

Paragraph 5. Availability Fee

A charge in the amount of 0.15 percent per annum shall be payable on the full amount of disbursements available during each six-month period under an SCF arrangement, or any shorter period that is remaining under an SCF arrangement, to the extent that such available disbursements were not drawn by the member. The charge shall be paid to the SCF Subsidy Account five days after the end of each relevant period. Payment of the availability fee shall normally be made in SDRs but can also be made in a freely usable currency as decided by the Trustee. The Managing Director shall make the necessary arrangements for the use of SDRs for payment of the availability fee.

Paragraph 6. Modifications

Any modification of these provisions will affect only loans made after the effective date of the modification, provided that modification of the interest rate shall apply to interest accruing after the effective date of the modification.

Section III. Borrowing for the Loan Account

Paragraph 1. Resources

(a) For purposes of this Section III, the term “borrowing agreements” shall comprise loan and note purchase agreements, and the term “Trust borrowing” shall comprise loans made to the Trust and notes issued by the Trust, including loans made and notes issued for the purposes set forth in Section III, paragraph 4(b) of this Instrument.

(b) The resources held in the General Loan Account shall consist of:

(i) the proceeds of Trust borrowing for the General Loan Account; and

(ii) payments of principal and interest on Trust loans funded with drawings under borrowing agreements to the General Loan Account, subject to the provisions of Section IV.A, paragraph 4(g) and Section V, paragraph 3 of this Instrument.

(c) The resources held in the ECF Loan Account shall consist of:

(i) the proceeds of loans made to the Trust for the Loan Account of the Trust as of January 7, 2010, unless a lender notifies the Trustee by January 22, 2010, that it wishes to transfer the proceeds of its share in the amounts not yet committed under PRGF and ESF arrangements to another Loan Account.

(ii) the proceeds of Trust borrowing for the ECF Loan Account; and

(iii) payments of principal and interest on Trust loans funded with drawings under borrowing agreements to the ECF Loan Account, subject to the provisions of Section IV.A, paragraph 4(g) and Section V, paragraph 3 of this Instrument.

(d) The resources held in the SCF Loan Account shall consist of:

(i) the proceeds of Trust borrowing for the SCF Loan Account; and

(ii) payments of principal and interest on Trust loans funded with drawings under borrowing agreements to the SCF Loan Account, subject to the provisions of Section IV.A, paragraph 4(g) and Section V, paragraph 3 of this Instrument.

(e) The resources held in the RCF Loan Account shall consist of:

(i) the proceeds of Trust borrowing for the RCF Loan Account; and

(ii) payments of principal and interest on Trust loans funded with drawings under borrowing agreements to the RCF Loan Account, subject to the provisions of Section IV.A, paragraph 4(g) and Section V, paragraph 3 of this Instrument.

Paragraph 2. Borrowing Authority

The Trustee may borrow resources for the Loan Accounts on such terms and conditions as may be agreed between the Trustee and the respective creditors, subject to the provisions of this Instrument. For this purpose, the Managing Director of the Trustee is authorized to enter into borrowing agreements and agree to their terms and conditions with creditors to the Loan Accounts of the Trust.

Paragraph 3. Commitments

Commitments for drawings under borrowing agreements to the Loan Accounts of the Trust that were entered into before November 30, 1993, shall extend through December 31, 1997, and under borrowing agreements that are entered into after November 30, 1993, shall extend through December 31, 1999. The drawdown period under borrowing agreements to the Loan Accounts of the Trust entered into or amended after September 19, 2001, shall normally extend through December 31, 2018. The drawdown period under borrowing agreements to the Loan Accounts of the Trust entered into or amended after May 31, 2014, shall normally extend through December 31, 2029. The drawdown period may be extended by mutual agreement between the Trustee and the creditor. The Managing Director is authorized to conclude such agreements on behalf of the Trustee.

Paragraph 4. Drawings under Borrowing Agreements

(a) The Trustee may draw under borrowing agreements to the General Loan Account for purposes of loan disbursements under any of the facilities of the Trust, provided that it shall draw first (i) under borrowing agreements to the ECF Loan Account for purposes of ECF and ESF loan disbursements, (ii) under borrowing agreements to the SCF Loan Account for purposes of SCF loan disbursements, and (iii) under borrowing agreements to the RCF Loan Account for purposes of RCF loan disbursements, and provided further that before calling on commitments made under new borrowing agreements entered into, or augmented under existing borrowing agreements amended, after May 31, 2014, for disbursements under a facility of the Trust, the Trustee shall aim to first draw resources available for that facility under borrowing agreements entered into before that date, including from the General Loan Account if, and to the extent that, commitments of loan resources for all facilities are considered adequate by the Managing Director. Drawings on the commitments of individual creditors over time shall be made so as to maintain broad proportionality of these drawings relative to commitments to each Loan Account, provided that commitments under borrowing agreements entered into or augmented after May 31, 2014, shall only be taken into account after borrowing agreements entered into before that date have been fully drawn. Drawings under paragraph 4(b) below will not be taken into account for purposes of the proportionality requirement set forth in this paragraph 4(a).

(b) Notwithstanding subparagraph (a) above, the Trustee may draw under one or more borrowing agreements to any Loan Account of the Trust to fund the early repayment of outstanding Trust borrowing under another borrowing agreement to any Loan Account of the Trust (“encashment”), where (i) the terms of all such borrowing agreements permit the Trustee to make drawings to fund such early repayments, and (ii) the creditor requesting early repayment represents that its balance of payments and reserve position (the balance of payments and reserve position of the relevant member if the creditor is the central bank or other official institution of a member) justify the early repayment, and the Trustee, having given this representation the overwhelming benefit of any doubt, agrees. As from the effective date of such early repayment, the creditor or creditors whose borrowing agreements have been drawn to fund the early repayment shall have the same rights to repayment as the creditor receiving the early repayment had with respect to the encashed claim, including all rights to payments of principal and interest pursuant to paragraph 5 of this Section III. For purposes of Section IV.A of this Instrument, drawings under this paragraph 4(b) shall be considered resources borrowed for the Trust loans for which the disbursements related to the encashed claims were made. Borrowing agreements allowing for encashment shall provide for the same effective maturity dates for drawings under this paragraph 4(b) as apply to encashed claims. Drawings on the commitments of individual creditors under this paragraph 4(b) shall be made with the aim of maintaining broad proportionality of these drawings relative to the commitments of these creditors.

(c) Calls on commitments under borrowing agreements shall be suspended temporarily if, at any time prior to June 30, 1997, in case of a commitment under a borrowing agreement entered into before November 30, 1993, or prior to June 30, 1999, in case of a commitment under a borrowing agreement entered into after November 30, 1993, or prior to June 30, 2018, in case of a commitment under a borrowing agreement entered into after August 31, 2001, or prior to June 30, 2029, in case of a commitment under a loan agreement entered into after May 31, 2014, the creditor represents to the Trustee that it has a liquidity need for such suspension and the Trustee, having given this representation the overwhelming benefit of any doubt, agrees. The suspension shall not exceed three months, provided that it may be extended for further periods of three months by agreement between the creditor and the Trustee. No extension shall be agreed which, in the judgment of the Trustee, would prevent drawing of the full amount of the commitment.

(d) Following any suspension of calls with respect to the commitment of a creditor, calls will be made on that commitment thereafter so as to restore as soon as practicable the proportionality of drawings contemplated pursuant to this paragraph 4.

Paragraph 5. Payments of Principal and Interest

(a) The Trust shall make payments of principal and interest on its borrowing for the Loan Accounts from the payments into these accounts of principal and interest made by borrowers under Trust loans. Payments of the authorized subsidy shall be made from the Subsidy Accounts in accordance with Section IV.A of this Instrument, and, as required, payments shall be made from the Subsidy Reserve Account and reserve Account in accordance with Section IV.A and Section V of this Instrument.

(b) The Trust shall pay interest on outstanding borrowing for Trust loans promptly after June 30 and December 31 of each year, unless the particular modalities of a borrowing agreement make it necessary for the Trustee to agree with the creditor on interest payments at other times; provided however that interest on outstanding drawings under borrowing agreements that provide for disbursements in SDRs will normally be paid promptly after April 30, July 31, October 31, and January 31 of each year.

Section IV.A. Subsidy Accounts

Paragraph 1. Resources

(a) The resources held in the General Subsidy Account shall consist of:

(i) the proceeds of donations made to the Trust for the General Subsidy Account;

(ii) the proceeds of loans made to the Trust for the General Subsidy Account;

(iii) transfers from the Special Disbursement Account in accordance with Section F of Decision No. 14354-(09/79);

(iv) transfers from the Reserve Account in accordance with Section V, Paragraph 5(b)(ii) of this Instrument.

(v) net earnings from investment of resources held in that Account.

(b) The resources held in the ECF Subsidy Account shall consist of:

(i) the proceeds of donations made to the Trust for the PRGF-ESF Subsidy Account and the PRGF Subsidy Account as of January 7, 2010, unless a donor notifies the Trustee that it wishes to transfer the proceeds of its outstanding donation to another Subsidy Account by January 22, 2010;

(ii) the proceeds of loans made to the Trust for the PRGF-ESF Subsidy Account and the PRGF Subsidy Account as of January 7, 2010, unless a lender notifies the Trustee that it wishes to transfer the proceeds of its outstanding loan to another Subsidy Account by January 22, 2010;

(iii) the proceeds of donations made to the Trust for the ECF Subsidy Account;

(iv) the proceeds of loans made to the Trust for the ECF Subsidy Account;

(v) transfers from the Special Disbursement Account in accordance with Decision No. 10531-(93/170);

(vi) transfers from the Special Disbursement Account in accordance with paragraph 5(c) of Decision No. 13588-(05/99) MDRI;

(vii) transfers from the Trust for Special Poverty Reduction and Growth Operations for the Heavily Indebted Poor Countries and Interim ECF Subsidy Operations (PRG-HIPC Trust), in accordance with Section III bis of the Instrument establishing that Trust; and

(viii) net earnings from investment of resources held in that Account.

(c) The resources held in the SCF Subsidy Account shall consist of:

(i) the proceeds of donations made to the Trust for the SCF Subsidy Account;

(ii) the proceeds of loans made to the Trust for the SCF Subsidy Account;

(iii) proceeds from availability fees in accordance with Section II, paragraph 5 of this Instrument; and

(iv) net earnings from investment of resources held in that Account.

(d) The resources held in the RCF Subsidy Account shall consist of:

(i) the proceeds of donations made to the Trust for the RCF Subsidy Account;

(ii) the proceeds of loans made to the Trust for the RCF Subsidy Account; and

(iii) net earnings from investment of resources held in that Account.

(e) The resources held in the ESF Subsidy Account shall consist of:

(i) the proceeds of donations made to the Trust for the ESF Subsidy Account as of January 7, 2010, unless a donor notifies the Trustee that it wishes to transfer the proceeds of its outstanding donation to another Subsidy Account by January 22, 2010;

(ii) the proceeds of loans made to the Trust for the ESF Subsidy Account as of January 7, 2010, unless a lender notifies the Trustee that it wishes to transfer the proceeds of its outstanding loan to another Subsidy Account by January 22, 2010; and

(iii) net earnings from investment of resources held in that Account.

(f) The resources held in the Subsidy Reserve Account shall consist of:

(i) the proceeds of donations made to the Trust for the Subsidy Reserve Account;

(ii) the proceeds of loans made to the Trust for the Subsidy Reserve Account;

(iii) transfers from the Deposit and Investment Account in accordance with Section IV.B, paragraph 3 of this Instrument;

(iv) net earnings from investment of resources held in that Account;

(v) payments of overdue principal or interest or interest thereon under Trust loans, and payments of interest under Trust loans to the extent that payment has been made to a creditor from the Subsidy Reserve Account; and

(vi) repayments of the principal under Trust loans, to the extent that resources in the Subsidy Reserve Account have been used to make payments to a creditor due to a difference in timing between scheduled principal repayments to the creditor and principal repayments under Trust loans.

Paragraph 2. Donations

The Trustee may accept donations of resources for any of the Subsidy Accounts on such terms and conditions as may be agreed between the Trustee and the respective donors, subject to the provisions of this Instrument. To the extent possible, annual contributions should be made before April 30 of each year. For this purpose, the Managing Director of the Trustee is authorized to accept donations of resources and agree to their terms and conditions with donors to the Subsidy Accounts of the Trust.

Paragraph 3. Borrowing

The Trustee may, in exceptional circumstances, borrow resources for any of the Subsidy Accounts from official lenders on such terms and conditions as may be agreed between the Trustee and the lenders, in order:

(a) to prefinance an amount that is firmly committed to be donated to the Trust for the relevant Subsidy Account; repayment of principal and any payments of interest on such borrowing shall be contingent upon the receipt by the relevant Subsidy Account of the donation that has been prefinanced; and

(b) that the relevant Subsidy Account may benefit from net investment earnings on the proceeds of a loan extended at a concessional interest rate; repayment of principal and any payment of interest on such borrowing shall be made exclusively from the proceeds of liquidation of the investment and the earnings thereon. For this purpose, the Managing Director of the Trustee is authorized to enter into borrowing agreements and agree to their terms and conditions with lenders to the Subsidy Accounts of the Trust.

Paragraph 4. Authorized Use of Subsidy Accounts

(a) The Trustee shall draw upon the resources available in the General Subsidy Account to pay the difference, with respect to each interest period, between the interest due by the borrowers and the interest due on resources borrowed for loans under the facilities of the Trust specified in Section I, Paragraph 1 of the Instrument, provided that resources available in the General Subsidy Account shall be drawn upon for these purposes only if there are no other resources immediately available in the ECF Subsidy Account, SCF Subsidy Account, RCF Subsidy Account or ESF Subsidy Account, as the case may be, for these purposes. For purposes of the preceding sentence, resources in the PRG-HIPC Trust that are transferable to the ECF Subsidy Account shall not be considered resources immediately available in the ECF Subsidy Account. The Trustee may also draw upon resources available in the General Subsidy Account for transfer to the ENDA/EPCA Subsidy Account, if there are no other resources immediately available in the ENDA/EPCA Subsidy Account for purposes of the subsidies of post-conflict and/or natural disaster emergency assistance purchases provided by that Account. Any such transfers shall be limited to the amounts needed for subsidy payments.

(b) The Trustee shall draw upon the resources available in the ECF Subsidy Account to pay the difference, with respect to each interest period, between the interest due by the borrowers and the interest due on resources borrowed for loans under the ECF and ESF, provided that resources in the ESF Subsidy Account shall be drawn first, with respect to the interest on ESF loans, before resources in the ECF Subsidy Account are drawn to subsidize ESF loans.

(c) The Trustee shall draw upon the resources available in the SCF Subsidy Account to pay the difference, with respect to each interest period, between the interest due by the borrowers and the interest due on resources borrowed for loans under the SCF.

(d) The Trustee shall draw upon the resources available in the RCF Subsidy Account to pay the difference, with respect to each interest period, between the interest due by the borrowers and the interest due on resources borrowed for loans under the RCF.

(e) The Trustee shall draw upon the resources available in the ESF Subsidy Account to pay the difference, with respect to each interest period, between the interest due by the borrowers and the interest due on resources borrowed for loans under the ESF.

(f) The Trustee shall draw upon the resources available in the Subsidy Reserve Account to:

(i) pay the difference, with respect to each interest period, between the interest due by the borrowers and the interest due on resources borrowed for loans under the facilities of the Trust specified in Section I, Paragraph 1 of the Instrument, provided that resources available in the Subsidy Reserve Account shall be drawn only if there are no other resources available in the relevant Subsidy Accounts for these purposes; or

(ii) to make payments of principal and interest on its borrowing for Trust loans, to the extent that the amounts available from receipts of repayments and interest from borrowers under Trust loans, together with the authorized subsidy under Section IV.A, paragraph 4, are insufficient to cover the payments to creditors as they become due and payable, provided that resources available in the Subsidy Reserve Account shall be drawn upon for these purposes only if there are no other resources immediately available in the Reserve Account.

(g) Any repayment of principal under Trust loans, to the extent that repayment to a creditor has been made from the Subsidy Reserve Account due to differences in timing between scheduled principal repayments to the creditor and principal repayments under Trust loans, any payments of overdue principal or interest or interest thereon under Trust loans, and any payments of interest under Trust loans to the extent that payment has been made to a creditor from the Subsidy Reserve Account, shall be made to the Subsidy Reserve Account.

Paragraph 5. Calculation of Subsidy

(a) The amount of the subsidy shall be determined by the Trustee in the light of (i) the objective of ensuring that the facilities of the Trust are highly concessional facilities and, to the extent possible, of reducing the rate of interest charged on Trust loans in accordance with Section II, paragraphs 4(a), (b), and (c), as well as the objective of subsidizing, as needed, the rate of charge on purchases from the General Resources Account (“GRA”) in accordance with the terms of the ENDA/EPCA Subsidy Account; (ii) the rate of interest on resources available to the Loan Accounts and the rate of charge on GRA purchases covered by the ENDA/EPCA Subsidy Account; and (iii) the availability and prospective availability of resources to the Subsidy Accounts of the Trust and the ENDA/EPCA Subsidy Account.

(b) The Trustee shall keep the operation of the Subsidy Accounts under review. If at any time it determines that resources available or committed are likely to be insufficient to reduce the rate of interest on Trust loans in accordance with Section II, paragraphs 4(a), (b), and (c) throughout the operation of the Trust, and to fund needed transfers to the ENDA/EPCA Subsidy Account to subsidize the rate of charge on GRA purchases in accordance with the terms of that Account, then the Trustee shall seek such additional resources as may be necessary to achieve this objective.

(c) Should adequate additional resources not be forthcoming to reduce the rate of interest on Trust loans in accordance with Section II, paragraphs 4(a), (b), and (c), or to fund needed transfers to the ENDA/EPCA Subsidy Account to subsidize the rate of charge on GRA purchases in accordance with the terms of that Account, then the Trustee shall recalculate the subsidy with a view to reducing those interest rates to the lowest feasible rates and funding those transfers to the maximum extent that could be applied throughout the remaining life of the Trust. The rate of interest charged on all outstanding loans by the Trust under the relevant facility shall be adjusted accordingly in the succeeding interest periods, and the level of transfers to the ENDA/EPCA Subsidy Account shall be calculated to achieve the new level of subsidization. Borrowers shall be notified promptly of such adjustments. Further recalculations and adjustments shall be made in subsequent interest periods, as necessary in light of relevant developments, including the rate of interest on resources available to the Loan Accounts, the rate of charge on purchases covered by the ENDA/EPCA Subsidy Account and the availability of resources to the Subsidy Accounts and the ENDA/EPCA Subsidy Account.

(d) If the interest due to creditors for an interest period has exceeded the interest due by borrowers under the relevant facility, together with the authorized subsidy under paragraph 4 of this Section for that period, and payment to creditors of that difference has been made from the Reserve Account in accordance with Section V, paragraph 2, then an amount equivalent to that difference shall be added to the interest due by the relevant borrowers for the succeeding interest period. Payment of that amount shall be made to the Reserve Account in accordance with Section V, paragraph 3. The additional interest due shall not be taken into account in the calculation of the authorized subsidy for that same interest period.

Paragraph 6. Termination arrangements

(a) The ESF Subsidy Account shall be terminated after its resources as of January 7, 2010 have been used for subsidy operations in accordance with paragraphs 4(b) and 4(e) of this Section or transferred to other Subsidy Account in accordance with paragraph 1(e) of this Section.

(b) Upon completion of the subsidy operations authorized by this Instrument, the Fund shall wind up the affairs of the Subsidy Accounts. The Fund may also wind up the affairs of any Subsidy Account other than the General Subsidy Account prior to the completion of the overall subsidy operations authorized by this Instrument, if the Fund deems this to be appropriate. In case of termination of a Subsidy Account in accordance with this subparagraph, the remaining resources shall be used as follows:

(i) Any resources remaining in the General Subsidy Account shall be used in a manner consistent with paragraph 4(a) of this Section (i) to reduce to the fullest extent possible the interest rate paid by borrowers in accordance with Section II, paragraphs 4(a), (b), and (c) on loans from the PRGT, by means of payments to such borrowers, and (ii) to fund transfers to the ENDA/EPCA Subsidy Account needed to subsidize the rate of charge on any remaining outstanding GRA purchases in accordance with the terms of the ENDA/EPCA Subsidy Account. Any resources remaining after that subsidization and transfer shall be distributed to the Fund, donors, and creditors that have contributed to the General Subsidy Account, in proportion to their contributions, including donors and creditors of resources transferred from other Subsidy Accounts upon their termination. The resources representing the Fund’s share in such distribution shall be transferred to the Special Disbursement Account. Any resources attributable to transfers from the Deposit and Investment Account shall be transferred to that account.

(ii) Any resources remaining in the ECF Subsidy Account shall be used to reduce to the fullest extent possible the interest rate paid by borrowers on ECF and ESF loans in accordance with Section II, paragraphs 4(a), (b), and (c), by means of payments to such borrowers. Any resources remaining after that subsidization shall be transferred to the General Subsidy Account, provided that a contributor may request that its share in any remaining resources be returned to it.

(iii) Any resources remaining in the SCF Subsidy Account shall be used to reduce to the fullest extent possible the interest rate paid by borrowers on SCF loans in accordance with Section II, paragraphs 4(a), (b), and (c), by means of payments to such borrowers. Any resources remaining after that subsidization shall be transferred to the General Subsidy Account, provided that a contributor may request that its share in any remaining resources be returned to it.

(iv) Any resources remaining in the RCF Subsidy Account shall be used to reduce to the fullest extent possible the interest rate paid by borrowers on RCF loans in accordance with Section II, paragraphs 4(a), (b), and (c), by means of payments to such borrowers. Any resources remaining after that subsidization shall be transferred to the General Subsidy Account, provided that a contributor may request that its share in any remaining resources be returned to it.

(v) Any resources remaining in the ESF Subsidy Account shall be used to reduce to the fullest extent possible, in accordance with Section II, paragraphs 4(a), (b), and (c), the interest rate paid by borrowers on ESF loans, by means of payments to such borrowers. Any resources remaining after that subsidization shall be transferred to the General Subsidy Account, provided that a contributor may request that its share in any remaining resources be returned to it.

(vi) Any resources remaining in the Subsidy Reserve Account shall be used in a manner consistent with paragraph 4(f) of this Section to reduce to the fullest extent possible the interest rate paid by borrowers in accordance with Section II, paragraphs 4(a), (b), and (c) on loans from the PRGT, by means of payments to such borrowers. Any resources remaining after that subsidization and not attributable to the Deposit and Investment Account shall be transferred to the General Subsidy Account, provided that a contributor may request that its share in any remaining resources be returned to it. Any resources attributable to transfers from the Deposit and Investment Account shall be transferred to that Account.

(vii) For the purposes of the distributions provided for in this paragraph 6, account will be taken of donations, the net earnings from investment of the proceeds of concessional loans extended to the Subsidy Accounts under paragraph 3(b) above, and the subsidy element of concessional loans extended to the Trust under Section III; the subsidy element associated with such loans shall be calculated as the difference, if positive, between the SDR rate of interest and the interest on such loans, applied to the amount of the loans during the period they were outstanding.

Section IV.B. Deposit and Investment Account

Paragraph 1. Purpose and Resources

The purpose of the Deposit and Investment Account is to provide a separate vehicle under which the Trust can borrow resources to generate net investment earnings for the benefit of the Subsidy Reserve Account or, at the request of a contributor, the General Subsidy Account. The resources held in the Deposit and Investment Account shall consist of the proceeds from deposit and other investment agreements with contributors and the net earnings on the investment proceeds.

Paragraph 2. Borrowing for the Deposit and Investment Account

(a) The Trustee may enter into deposit and other investment agreements for the benefit of the Deposit and Investment Account with the aim of generating net investment earnings from the investment of the resources borrowed. For this purpose, the Managing Director of the Trustee is authorized to enter into deposit and other investment agreements and agree to their terms and conditions with contributors to the Deposit and Investment Account. The borrowed resources shall be invested in accordance with guidelines adopted by the Trustee.

(b) The agreements may provide for the right of a contributor to request the early repayment of the principal amount under its deposit or investment agreement upon representation of a balance of payments need. The contributor shall reconstitute any withdrawn amount as its balance of payments and reserve position improves.

Paragraph 3. Use of Resources

(a) Resources in the Deposit and Investment Account derived from net investment earnings shall be transferred to the Subsidy Reserve Account at the final maturity of the deposit and investment agreement such resources are attributable to; provided that, with the consent of the contributor, the Managing Director is authorized to transfer to the Subsidy Reserve Account at an earlier time resources attributable to that contributor’s deposit or investment agreement, to meet the subsidization needs of the Trust.

(b) A contributor may prescribe that investment earnings in the Deposit and Investment Agreement attributable to that contributor’s investment be directed to the General Subsidy Account instead of the Subsidy Reserve Account.

Paragraph 4. Termination Arrangements

Upon completion of the subsidy operations authorized by this Instrument, the Trustee shall wind down the affairs of the Deposit and Investment Account. Contributors shall be repaid the principal of their deposits or investments and any remaining investment earnings or losses attributed to it.

Paragraph 5. Repayment of the principal amount and payment of interest to a contributor

Repayment of the principal amount and any payment of interest to a contributor on any borrowing for the Deposit and Investment Account, including repayment upon maturity, early repayment in accordance with Section IV.B, paragraph 2(b), or repayment in accordance Section IV.B, paragraph 4, shall be made exclusively from resources attributed to the deposit or other investment of this principal amount and the net investment earnings thereon, net of the cumulative interest previously paid to the contributor.

Section V. Reserve Account

Paragraph 1. Resources

The resources held in the Reserve Account shall consist of:

(a) transfers by the Fund from the Special Disbursement Account in accordance with Decision No. 8760-(87/176), adopted December 18, 1987, as amended by Decision No. 10531-(93/170), adopted December 15, 1993;

(b) net earnings from investment of resources held in the Reserve Account;

(c) net earnings from investment of any resources held in the Loan Accounts pending the use of these resources in operations;

(d) payments of overdue principal or interest or interest thereon under Trust loans, and payments of interest under Trust loans to the extent that payment has been made to a creditor from the Reserve Account;

(e) transfers by the Fund from the Special Disbursement Account in accordance with Decision No. 10286-(93/23) ESAF, adopted February 22, 1993; and

(f) repayments of the principal under Trust loans, to the extent that resources in the Reserve Account have been used to make payments to a creditor due to a difference in timing between scheduled principal repayments to the creditor and principal repayments under Trust loans.

Paragraph 2. Use of resources

(a) The resources held in the Reserve Account shall be used by the Trustee to make payments of principal and interest on its borrowing for Trust loans, to the extent that the amounts available from receipts of repayments and interest from borrowers under Trust loans, together with the authorized subsidy under Section IV.A, paragraph 4, are insufficient to cover the payments to creditors as they become due and payable.

(b) The Trustee may decide to use income from the investment of the resources in the Reserve Account for subsidy purposes by transferring such income to the General Subsidy Account if the Trustee determines that additional subsidy resources are required for the subsidization of outstanding PRGT lending or new lending commitments. The amount of any transfers shall be decided by the Trustee following consultations with all creditors to the Loan Accounts on the adequacy of the Reserve Account to protect claims of the creditors to the PRGT Loan Accounts.

Paragraph 3. Payments to the Reserve Account

Any repayment of principal under Trust loans, to the extent that repayment to a creditor has been made from the Reserve Account due to differences in timing between scheduled principal repayments to the creditor and principal repayments under Trust loans, any payments of overdue principal or interest or interest thereon under Trust loans, and any payments of interest under Trust loans to the extent that payment has been made to a creditor from the Reserve Account, shall be made to the Reserve Account.

Paragraph 4. Review of resources

If resources in the Reserve Account are, or are determined by the Trustee likely to become, insufficient to meet the obligations of the Trust that may be discharged from the Reserve Account as they become due and payable, the Trustee shall review the situation in a timely manner.

Paragraph 5. Reduction of resources and liquidation

(a) Whenever the Trustee determines that amounts in the Reserve Account of the Trust exceed the amount that may be needed to cover the total liabilities of the Trust to creditors that are authorized to be discharged by the Reserve Account, the Trustee shall retransfer such excess amount to the Fund’s Special Disbursement Account.

(b) Notwithstanding (a) above, the equivalent of up to SDR 250 million may be transferred from the Reserve Account to the Special Disbursement Account to be used to provide Trust Grants or Trust loans, as defined in the Instrument to Establish a Trust for Special PRG Operations for the Heavily Indebted Poor Countries and Interim ECF Subsidy Operations. These transfers will be made only when and to the extent that the Trustee of the Trust established by that Instrument determines that there are no other resources immediately available for this purpose.

(c) Upon liquidation of the Trust, all amounts in the Reserve Account remaining after discharge of liabilities authorized to be discharged by the Reserve Account shall be transferred to the Special Disbursement Account.

Section VI. Transfer of Claims

Paragraph 1. Transfers by creditors

(a) Any creditor shall have the right to transfer at any time all or part of any claim to any member of the Fund, to the central bank or other fiscal agency designated by any member for purposes of Article V, Section 1 (“other fiscal agency”), or to any official entity that has been prescribed as a holder of SDRs pursuant to Article XVII, Section 3 of the Fund’s Articles of Agreement.

(b) The transferee shall, as a condition of the transfer, notify the Trustee prior to the transfer that it accepts all the obligations of the transferor relating to the transferred claim with respect to renewal and new drawings, and shall acquire all the rights of the transferor with respect to repayment of and interest on the transferred claim, except that any right to encashment pursuant to Section III, paragraph 4(b) of this Instrument shall be acquired only if the transferee is a member or the central bank or other fiscal agency of a member and, at the time of transfer, the balance of payments and reserve position of the member is considered sufficiently strong in the opinion of the Fund for its currency to be usable in transfers under the Fund’s Financial Transactions Plan.

Paragraph 2. Transfers among electing creditors

(a) Any creditor to one of the Loan Accounts (“electing creditors”) may inform the Trustee that it stands ready, upon request by the Trustee, to purchase claims on the Trust from any other electing creditor, provided that the holdings of claims so acquired shall at no time exceed the amount communicated to the Trustee and subject to the other provisions of this section. A list of electing creditors and the amounts communicated by them shall be established separately by the Trustee. This list may be extended and the amounts therein increased in accordance with communications received subsequently.

(b) An electing creditor shall have the right to transfer temporarily to other electing creditors part or all of any claim arising from its loans to the Trust or note purchases under Section III, if the electing creditor represents to the Trustee that it has a liquidity need to make such transfer and the Trustee, having given this representation the overwhelming benefit of any doubt, agrees.

(c) The Trustee shall allocate each transfer by an electing creditor under this provision to all other electing creditors in proportion to the amounts by which the respective maximum holdings listed in the attachment exceed actual holdings of claims acquired under this provision; provided, however, that no allocation shall be made to an electing creditor if it represents to the Trustee that it has a liquidity need for exclusion from an allocation and the Trustee agrees, in which case allocations to the remaining electing creditors shall be adjusted accordingly.

(d) The purchaser of any claim transferred under this provision shall assume, as a condition of the transfer, any obligation of the transferor, relating to the transferred claim, with respect to the renewal of drawing on Trust borrowing and to new drawings in the event a renewal, having been requested, is not agreed by the transferor.

(e) Transfers of claims under this provision shall be made in exchange for freely usable currency and shall be reversed in the same media within three months, provided that such transfers may be renewed, by agreement between the transferor and the Trustee, for further periods of three months up to a total of one year. Notwithstanding the above, the transferor shall reverse a transfer under this provision not later than the date on which the transferred claim is due to be repaid by the Trust.

(f) Interest on claims transferred under this Section shall be paid by the Trust to the transferor in accordance with the provisions of the transferor’s borrowing agreement with the Trust. The transferor shall pay interest to the transferee(s) on the amount transferred, so long as the transfer remains outstanding, at a daily rate equal to that set out in Rule T-1 of the Fund’s Rules and Regulations; such interest shall be payable three months after the date of a transfer or of its renewal, or on the date the transfer is reversed, whichever is earlier.

Section VII. Administration of the Trust

Paragraph 1. Trustee

(a) The Trust shall be administered by the Fund as Trustee. Decisions and other actions taken by the Fund as Trustee shall be identified as taken in that capacity.

(b) Subject to the provisions of this Instrument, the Fund in administering the Trust shall apply the same rules as apply to the operation of the General Resources Account of the Fund.

(c) The Trustee, acting through its Managing Director, is authorized:

(i) to make all arrangements, including establishment of accounts in the name of the International Monetary Fund, which shall be accounts of the Fund as Trustee, with such depositories of the Fund as the Trustee deems necessary; and

(ii) to take all other administrative measures that the Trustee deems necessary to implement the provisions of this Instrument.

Paragraph 2. Separation of assets and accounts, audit and reports

(a) The Resources of the Trust shall be kept separate from the property and assets of all other accounts of the Fund, including other administered accounts, and shall be used only for the purposes of the Trust in accordance with this Instrument.

(b) The property and assets held in the other accounts of the Fund shall not be used to discharge liabilities or to meet losses arising out of the administration of the Trust. The resources of the Trust shall not be used to discharge liabilities or to meet losses arising out of the administration of the other accounts of the Fund.

(c) The Fund shall maintain separate financial records and prepare separate financial statements for the Trust.

(d) The external audit firm selected under Section 20 of the Fund’s By-Laws shall audit the financial transactions and records of the Trust. The audit shall relate to the financial year of the Fund.

(e) The Fund shall report on the resources and operations of the Trust in the Annual Report of the Executive Board to the Board of Governors and shall include in that Annual Report the report of the external audit firm on the Trust.

Paragraph 3. Investment of resources

(a) Any balances held by the Trust and not immediately needed in operations shall be invested. Investments shall be made as determined by the Trustee in accordance with guidelines adopted by the Trustee from time to time.

Section VIII. Period of Operation and Liquidation

Paragraph 1. Period of operation

The Trust established by this Instrument shall remain in effect for as long as is necessary, in the judgment of the Fund, to conduct and to wind up the business of the Trust.

Paragraph 2. Liquidation of the Trust

(a) Termination and liquidation of the Subsidy Accounts shall be made in accordance with the provisions of Section IV.A, paragraph 6. Termination and liquidation of the Deposit and Investment Account shall be made in accordance with the provisions of Section IV.B, paragraph 4.

(b) All other resources, if any, shall be used to discharge any liabilities of the Trust, other than those incurred under Section IV.A, and any remainder shall be transferred to the Special Disbursement Account of the Fund.

Section IX. Amendment of the Instrument

The Fund may amend the provisions of the Instrument, except this Section and Section I, paragraphs 1 and 2; Section III, paragraphs 4 and 5; Section IV.A, paragraphs 4 and 6; Section IV.B; Section V; Section VI; Section VII, paragraph 2(a) and (b); and Section VIII, paragraph 2(b).

APPENDIX I

Misreporting and Noncomplying Disbursements Under Poverty Reduction and Growth Facility and Poverty Reduction and Growth Trust Facilities—Provisions on Corrective Action

a. A noncomplying disbursement occurs when (i) the Trustee makes a disbursement to a member in accordance with the Instrument on the basis of a finding by the Trustee or the Managing Director that all applicable conditions established for that disbursement under the terms of the decisions on the disbursement have been observed, and (ii) that finding later proves to be incorrect. For the purposes of these provisions, a condition established under the terms of a decision on a disbursement means a condition specified in the arrangement for the relevant disbursement; in a decision approving the arrangement or approving an outright disbursement; in a decision approving an augmentation of access under an ECF or SCF arrangement during an ad-hoc review, or in a decision completing a scheduled review, or granting a waiver of applicability or for the nonobservance of a performance criterion under the arrangement.

b. Whenever evidence comes to the attention of the staff of the Trustee indicating that a member may have received a noncomplying disbursement, the Managing Director shall promptly inform the member concerned.

c. If, after consultation with the member, the Managing Director determines that the member did receive a noncomplying disbursement, the Managing Director shall promptly notify the member and submit a report to the Executive Board together with recommendations.

d. In any case where the noncomplying disbursement was made no more than four years prior to the date on which the Managing Director informed the member, as provided for in paragraph (b), the Executive Board may decide either (i) that the member will be called upon to make an early repayment, or (ii) that the nonobservance will be waived.

e. If the decision of the Executive Board is to call upon the member to make an early repayment as provided for in paragraph (d) (i), the member will be expected to repay an amount equivalent to the noncomplying disbursement, together with any interest accrued thereon, normally within a period of 30 days from the date of the Executive Board decision.

f. A waiver under paragraph (d)(ii) will normally be granted only if the deviation from the relevant performance criterion or other condition was minor or temporary, or if, subsequent to the disbursement, the member had adopted additional measures appropriate to achieve the objectives supported by the relevant decision on the disbursement.

g. If a member fails to meet a repayment expectation under these guidelines within the period established by the Executive Board, (i) the Managing Director shall promptly submit a report to the Executive Board together with a proposal on how to deal with the matter, and (ii) interest shall be charged on the amount subject to the repayment expectation at the rate applicable to overdue amounts under Section II, Paragraph 4 of the Instrument.

h. For the purposes of this decision:

(i) whenever the Managing Director considers there is evidence indicating that a member may have received a noncomplying disbursement, but the nonobservance of the relevant performance criterion or other specified condition was de minimis in nature, as defined in paragraph 1 of Decision No. 13849, the communication referred to in paragraph (b) may be made by a representative of the relevant Area Department;

(ii) if the Managing Director determines that a member has received a noncomplying disbursement and considers that the non-observance of the relevant performance criterion or other specified condition was de minimis in nature, as defined in paragraph 1 of Decision No. 13849, the notification referred to in paragraph (c) may be made by a representative of the relevant Area Department, and the report of the Managing Director contemplated in paragraph (c) shall, wherever possible, be included in a staff report on the relevant member that deals with issues other than the noncomplying disbursement and shall include a recommendation that the related nonobservance be considered to be de minimis in nature, and that a waiver for nonobservance be granted. In those rare cases when such a staff report cannot be issued to the Board promptly after the Managing Director concludes that a noncomplying disbursement has been made, the Managing Director shall consult Executive Directors and, if deemed appropriate by the Managing Director, a standalone report on the noncomplying disbursement will be prepared for consideration by the Executive Board, normally on a lapse-of-time basis; and

(iii) whenever the Executive Board finds that a noncomplying disbursement has been made but that the nonobservance of the relevant performance criterion or other specified condition was de minimis in nature as defined in paragraph 1 of Decision No. 13849, a waiver for nonobservance shall be granted by the Executive Board.

APPENDIX II

Procedures for Addressing Overdue Financial Obligations to the Poverty Reduction and Growth Trust

The following procedures aim at preventing the emergence or accumulation of overdue financial obligations to the Poverty Reduction and Growth Trust (the “Trust”) and at eliminating existing overdue obligations. These procedures will be implemented whenever a member has failed to make a repayment of principal or payment of interest to the Trust (“financial obligation”).

1. Whenever a member fails to settle a financial obligation on time, the staff will immediately send a cable urging the member to make the payment promptly; this communication will be followed up through the office of the Executive Director concerned. At this stage, the member’s access to the Fund’s resources, including Poverty Reduction and Growth Trust and HIPC resources, will have been suspended.

2. When a financial obligation has been outstanding for two weeks, management will send a communication to the Governor for that member stressing the seriousness of the failure to meet obligations to the Trust and urging full and prompt settlement.

3. The Managing Director will notify the Executive Board normally one month after a financial obligation has become overdue, and will inform the Executive Board of the nature and level of the arrears and the steps being taken to secure payment.

4. When a member’s longest overdue financial obligation has been outstanding for six weeks, the Managing Director will inform the member concerned that, unless all overdue obligations are settled, a report concerning the arrears to the Trust will be issued to the Executive Board within two weeks. The Managing Director will in each case recommend to the Executive Board whether a written communication should be sent to a selected set of Fund Governors, or to all Fund Governors. If it were considered that it should be sent to a selected set of Fund Governors, an informal meeting of Executive Directors will be held to consider the thrust of the communication. Alternatively, if it were considered that the communication should be sent to all Fund Governors, a formal Board meeting will be held to consider a draft text and preferred timing.

5. A report by the Managing Director to the Executive Board will be issued two months after a financial obligation has become overdue, and will be given substantive consideration by the Executive Board one month later. The report will request that the Executive Board limit the member’s use of Trust resources. A brief factual statement noting the existence and amount of arrears outstanding for more than three months will be posted on the member’s country-specific page on the Fund’s external website. This statement will also indicate that the member’s access to the Fund’s resources, including Poverty Reduction and Growth Trust and HIPC resources, has been and will remain suspended for as long as such arrears remain outstanding. A press release will be issued following the Executive Board decision to limit the member’s use of the Trust resources. A similar press release will be issued following a decision to lift such limitation. Periods between subsequent reviews of reports on the member’s arrears by the Executive Board will normally not exceed six months. The Managing Director may recommend advancing the Executive Board’s consideration of the reports regarding overdue obligations. The Managing Director may also recommend postponing for up to one-year periods the Executive Board’s consideration of a report regarding a member’s overdue obligations in exceptional circumstances where the Managing Director judges that there is no basis for an earlier evaluation of the member’s cooperation with the Fund.

6. The Annual Report and the financial statements will identify those members with overdue obligations to the Trust outstanding for more than six months.

Removal from the list of PRGT-eligible countries

7. When a member’s longest overdue financial obligation has been outstanding for six months, the Executive Board will review the situation of the member and may remove the member from the list of PRGT eligible countries. Any reinstatement of the member on the list of PRGT eligible countries will require a new decision of the Executive Board. The Fund shall issue a press release upon the decision to remove a member from the list of PRGT eligible countries. A similar press release shall be issued upon reinstatement of the member on the list. The information contained in such press releases, where pertinent, shall be included in the Annual Report for the year concerned.

Declaration of noncooperation with the Trust

8. A declaration of noncooperation with the Trust may be issued by the Executive Board whenever a member’s longest overdue financial obligation has been outstanding for twelve months. The decision as to whether to issue such a declaration would be based on an assessment of the member’s performance in the settlement of its arrears to the Trust and of its efforts, in consultation with the Fund, to follow appropriate policies for the settlement of its arrears. Three related tests would be germane to this decision regarding (i) the member’s performance in meeting its financial obligations to the Trust, taking account of exogenous factors that may have affected the member’s performance; (ii) whether the member had made payments to creditors other than the Fund while continuing to be in arrears to the Trust; and (iii) the preparedness of the member to adopt comprehensive adjustment policies. The Executive Board may at any time terminate the declaration of noncooperation in view of the member’s progress in the implementation of adjustment policies and its cooperation with the Fund in the discharge of its financial obligations. Upon a declaration of noncooperation, the Fund could also decide to suspend the provision of technical assistance. The Managing Director may also limit technical assistance provided to a member, if in his judgment that assistance was not contributing adequately to the resolution of the problems associated with overdues to the Trust. The Fund shall issue a press release upon the declaration of noncooperation and upon the termination of the declaration. The information contained in such press releases shall be included in the Annual Report(s) for the year(s) concerned.

Fund Concessional Financial Support for Low-Income Countries—Responding to the Pandemic—Blended Access to Financing Under the PRGT and the GRA

1. A member that is included in the list of members annexed to Decision No. 8240-(85/56) SAF, as amended (i.e., a member eligible for financing under the Poverty Reduction and Growth Trust (PRGT), hereinafter “member”) is a “Presumed Blender” in accordance with the criteria set forth below:

a. Income: A member meets the income thresholds for presumed blending if its annual per capita gross national income (GNI) has exceeded the prevailing operational cutoff for assistance from the International Development Association (IDA) by at least 5 percent for two consecutive years (the “income threshold”). Once a member has met the income threshold, it shall be deemed to continue to meet the threshold unless its annual per capita GNI falls below 95 percent of the IDA operational cut-off.

b. Absence of debt vulnerabilities that limit market access: A member that meets the income threshold as defined in Paragraph 1.a shall be presumed to blend unless it faces debt vulnerabilities that limit its access to international financial markets. A member will be considered to face debt vulnerabilities that limit its access to international financial markets if it is (i) in debt distress or (ii) at high risk of debt distress and either (a) does not meet the criterion of capacity to access international financial markets on a durable and substantial basis for the purpose of graduation from the PRGT eligibility as set forth in Paragraph 1(C)(1)(ii) of Decision No. 14521-(10/3), adopted January 11, 2010, as amended (the “PRGT Eligibility Decision”) or (b) is a “small country” or a “microstate”, as such terms are defined in paragraph 1 (D) of the PRGT Eligibility Decision.

2. A request by a Presumed Blender for access to PRGT resources shall be approved only in a blend with access to resources in the General Resources Account (GRA). The mix of PRGT and GRA resources shall be provided in a ratio of one to two of PRGT resources to GRA resources, subject to a cap on access to PRGT resources of 145 percent of quota per arrangement and subject to the overall limits on access to the PRGT set out in Section II, Paragraph 2 of this Instrument. (SM/21/120, Sup. 2, 07/08/21)

Decision No. 17082-(21/71), July 14, 2021

The Acting Chair’s Summing Up—Eligibility to Use the Fund’s Facilities for Concessional Financing, 2019, Executive Board Meeting 20/18, February 19, 2020

Executive Directors welcomed the opportunity to review the PRGT eligibility framework and the associated list of PRGT-eligible countries, and to consider staff’s proposals for refining the framework. They emphasized that PRGT eligibility should continue to be guided by a framework that is transparent and rules-based, ensures uniformity of treatment among members, and preserves the Fund’s scarce concessional resources for the use of low-income members that are in most need, while maintaining the self-sustainability of PRGT lending. Directors reiterated that the eligibility framework should remain broadly aligned with International Development Association (IDA) practice, while allowing scope for some differences given the different mandates of the two institutions.

Directors concurred that the existing framework remains broadly appropriate while generally supporting the proposed refinements to improve the assessment of market access, and the extension of the transition period before graduation decisions become effective. They underscored the importance of a robust communication strategy and early engagement with countries that may be graduation candidates in upcoming reviews, to ensure a smooth transition process.

Directors agreed that for the purpose of assessing past market access borrowing from international financial markets below 2 percent of quota in any given year should not count as market access in evaluating the durability requirement for both graduation from and entry into PRGT eligibility. They also supported the proposed clarifications to the definition of commercial borrowing, which would generally exclude borrowing by public corporations on the basis of their own balance sheets and without sovereign guarantees, and would also exclude borrowing that is guaranteed or subsidized by an official external entity and loans from foreign state-owned banks. In this context, some Directors stressed the importance of debt transparency.

Directors broadly supported the proposed modifications related to database use, confirming that the IDS database will be the primary data source used to assess past market access. They agreed that use of this data source will simplify data sourcing, improve data accuracy, and enhance evenhandedness by ensuring that the same five-year period is used to assess market access in all member countries. Directors welcomed the clarifications with respect to the assessment of whether a country “could have tapped” international markets on a durable and substantial basis, even though the scale or duration of actual borrowing fell short of the specified thresholds for past market access. They emphasized the need to follow the “could have tapped” principle in an evenhanded manner across the membership, taking into account-country specificities.

Directors concurred that the proposed modifications for assessing market access in the PRGT eligibility framework should also apply to assessments of past market access under the PRGT’s blending and exceptional access frameworks. These modifications consist of (i) the use of one primary data source to assess past market access, (ii) the exclusion of de minimis borrowing below 2 percent of quota from indicating market access in that year, and (iii) the clarifications to the definition of commercial borrowing.

Directors welcomed the proposed clarifications with respect to how serious short-term vulnerabilities are assessed. They noted the importance of paying attention to risks stemming from climate change, natural disasters, structural weaknesses, and social unrest in making such assessments, giving due consideration to both historical and forward-looking indicators of risk. Directors also considered it important to ensure that the assessment of vulnerabilities yields consistent outcomes to avoid premature graduation.

Directors generally agreed with the extension of the transition period for the deferred effectiveness of graduation decisions from three to five months to allow adequate time to conclude any ongoing discussions on and obtain Board approval for PRGT financing or support under the Policy Support Instrument (PSI). Directors supported the proposed graduation of Guyana from PRGT eligibility, noting that its graduation is a positive and welcome step signaling Guyana’s sustained progress in achieving higher levels of income.

Directors agreed that other members that currently meet the income and/or market access criteria face serious short-term vulnerabilities that preclude graduation from PRGT eligibility during this review.

Directors concurred that no non-eligible members are currently eligible for entry onto the list of PRGT-eligible countries. Directors agreed that the next review of PRGT eligibility would be held on the standard two-year cycle.

SU/20/26, February 21, 2020

The Acting Chair’s Summing Up—Eligibility to Use the Fund’s Facilities for Concessional Financing, 2017, Executive Board Meeting 17/38, May 15, 2017

Executive Directors welcomed the opportunity to review the PRGT-eligibility framework and the associated list of PRGT-eligible countries. They emphasized that PRGT eligibility should continue to be guided by a framework that is transparent and rules-based, ensures uniformity of treatment among members in similar circumstances, and preserves the Fund’s scarce concessional resources for the use of low-income members that are most in need, while maintaining the self-sustainability of PRGT lending. Directors reiterated that the eligibility framework should remain broadly aligned with International Development Association (IDA) practices, while allowing scope for some differences given the different mandates of the two institutions.

Directors generally concurred that the existing framework remains broadly appropriate, and did not see a need to introduce changes at this time. In this context, they noted that none of the countries that graduated recently from the PRGT-eligibility list are currently at risk of re-entering it.

Directors agreed that no members are currently eligible for entry onto, or graduation from, the list of PRGT-eligible countries. They encouraged staff to continue monitoring closely the potential demand for PRGT resources, underscoring the importance of maintaining the self-sustained capacity of the PRGT. In this regard, Directors welcomed that the decision to keep the list of PRGT-eligible countries unchanged at this review is consistent with the principle of self-sustainability of the PRGT. Noting that 13 countries meet the income and/or market access criteria but are assessed to face serious short-term vulnerabilities,

Directors emphasized the importance of continuing to help these countries address these vulnerabilities and move towards graduation.

Directors agreed that the next review of PRGT eligibility would be held on the standard two-year cycle.

BUFF/17/27,

May 17, 2017

The Acting Chair’s Summing Up—Eligibility to Use the Fund’s Facilities for Concessional Financing, Executive Board Meeting 15/73, July 17, 2015

Executive Directors welcomed the opportunity to review the eligibility framework and the associated list of PRGT-eligible countries, and to consider staff’s proposals for enhancing the framework. Directors concurred that PRGT-eligibility should continue to be guided by a framework that is transparent and rules-based to reserve access to Fund’s concessional financing for members with low income per capita levels and without durable and substantial access to financing in international markets. Directors agreed that the eligibility framework should ensure uniformity of treatment among members, while taking account of country-specific circumstances. Additionally, the framework should remain consistent with the self-sustainability of PRGT lending capacity over time and broadly aligned with International Development Association practices, allowing scope for some differences in graduation criteria between the Fund and the World Bank given the different mandates of the two institutions.

Directors broadly agreed with staff’s proposals to enhance the existing framework by: (i) making use of additional data sources in assessing that a country has durable and substantial market access; and (ii) limiting the application of the serious short-term vulnerabilities criterion so that it would not preclude the graduation of a country with income per capita exceeding the applicable graduation threshold by 50 percent or more. In this context, Directors generally agreed that including domestic and/or private external debt in the assessment of overall debt vulnerabilities would help align the PRGT framework with the latest debt sustainability framework.

Directors supported the graduation of Bolivia, Mongolia, Nigeria, and Vietnam from PRGT eligibility. They generally supported staff’s proposals regarding the non-graduation of other members that meet one or both of the graduation criteria but which are prevented from graduation by the presence of serious short-term vulnerabilities. Directors highlighted the need for continued monitoring of the remaining PRGT countries facing serious short-term vulnerabilities and for the Fund to stand ready to provide concessional finance should balance-of-payments needs emerge. They underscored the need for early engagement and communication on the graduation process with the countries concerned. Directors agreed that there were no new countries that met the entry criteria. More generally, they recommended careful monitoring of graduating economies to minimize the risk of reverse graduation especially in light of the current global financial environment. A number of Directors highlighted that they would have preferred a framework that would allow for flexibility in the graduation process, including continued concessional financing in the immediate period after graduation.

Directors agreed that the next review of PRGT eligibility would be held on the standard two-year cycle.

BUFF/15/68

July 23, 2015

Amendment to the Poverty Reduction and Growth Trust Instrument and Floor for the Six-Month Derived SDR Interest Rate

1. …

2. …

3. The Executive Board endorses staff’s understanding set out in SM/16/259 regarding the implications of a negative six month derived SDR interest rate on outstanding claims under PRGT borrowing agreements subject to this rate. (SM/16/259, 09/13/16)

Decision No. 16051-(16/86), September 20, 2016

ATTACHMENT

Zero Percent Floor on Six-Month Derived SDR Interest Rate on Borrowed Resources for the PRGT¹

10. The six-months derived SDR interest rate formula, which is used in currency borrowing agreements for the PRGT, could result in a negative rate. Outstanding claims under loan and note purchase agreements to the PRGT are either remunerated at the official SDR rate in the case of agreements that, as a rule, provide for drawings in SDR, or at the six-month derived SDR rate, in the case of agreements that, as a rule, provide for drawings in currency (currency agreements). The six-month derived SDR interest rate is currently based on: (1) the U.S. treasury bill rate, (2) the Japanese treasury bill rate, (3) the Euribor, and (4) the Libor (all at six months maturity).¹ The percentage weight of each interest rate instrument in the calculation of the six-month derived SDR interest rate is based on the corresponding weight of each relevant currency in the valuation of the SDR. While the Executive Board adopted a floor of 0.05 percent or five basis points for the official SDR interest rate on October 24, 2014,² there is no explicit floor on the six-month derived SDR interest rate. During the current mobilization round, staff has received questions from lenders using currency agreements on what would happen if the interest formula resulted in a negative rate during the low-interest rate environment.

11. In the view of staff, the current PRGT borrowing agreements and the PRGT Instrument provide no basis for charging PRGT lenders a negative rate and a zero percent interest rate floor would automatically be applied in the event the six-month derived SDR rate turned negative. While the interest rate formula for the six-month derived SDR rate could result in a negative rate, neither the PRGT borrowing agreements nor the PRGT Instrument contemplate that charges as a result of a negative interest rate be paid by creditors. In particular, the PRGT Instrument does not include any mechanism for interest payments by PRGT lenders. Furthermore, neither the PRGT Instrument nor the individual agreements require a minimum interest payment by the PRGT. Rather, the PRGT Instrument permits a zero percent interest rate on PRGT loans and has no requirement that remuneration be paid on PRGT borrowing. In light of the foregoing, staff is of the view that a zero percent interest rate floor should be applied to outstanding claims under PRGT loan and note purchase agreements in the event that the six-month derived SDR interest rate formula resulted in a negative rate. The Executive Board is asked to endorse this understanding in the proposed decision to this paper. Upon such endorsement, staff would inform all PRGT creditors using currency agreements of this approach, and new PRGT currency agreements would include a clause clarifying the zero percent floor in case the six-month derived SDR interest rate formula produces a negative rate.

Financing for Development—Enhancing the Financial Safety Net for Developing Countries—Review of Poverty Reduction and Growth Trust Access Limits

1. The Fund as Trustee of the Poverty Reduction and Growth Trust (“PRG Trust”) has reviewed the limits of overall access by eligible members to the resources of the Trust under all facilities pursuant to Section II, paragraph 2(d) of the PRG Trust, and decides as follows:

a. The percentages of quota referred to in Section II, paragraph 2(a) with regard to the annual and cumulative limits of overall access under all facilities shall be changed from 150 percent to 75 percent and from 450 percent to 225 percent respectively.

b. The percentages of quota referred to in Section II, paragraph 2(a) with regard to the maximum annual and cumulative limits of overall access under all facilities applicable when a member is experiencing an exceptionally large balance of payments need shall be changed from 200 percent to 100 percent and from 600 percent to 300 percent respectively.

c. The percentages of quota referred to in Section II, paragraph 2(b) with regard to the annual and cumulative limits of access under the RCF shall be changed from 37.5 percent to 18.75 percent and from 150 percent to 75 percent respectively.

d. The percentages of quota referred to in Section II, paragraph 2(b) with regard to the annual and cumulative limits of access under the RCF to address an urgent balance of payments need resulting primarily from a sudden and exogenous shock shall be changed from 75 percent to 37.5 percent and from 150 percent to 75 percent respectively.

e. The percentages of quota referred to in Section II, paragraph 2(c) with regard to the limits of access at approval of an SCF arrangement that is approved in the absence of an actual balance of payments need shall be changed from 75 percent to 37.5 percent with regard to the average annual access and from 112.5 percent to 56.25 percent with regard to annual access.

2. This decision will become effective when the conditions specified in paragraph 3 of the Board of Governors Resolution No. 66-2 (December 15, 2010) are met and will apply to assistance under the PRGT committed after its date of effectiveness. (SM/15/134, Sup. 1, 06/25/15)

Decision No. 15819-(15/66),

July 1, 2015

The Acting Chair’s Summing Up—Poverty Reduction and Growth Trust—Review of Interest Rate Structure, Executive Board Meeting 19/42, May 24, 2019

Executive Directors welcomed the opportunity to review the interest rates charged on credits extended from the Poverty Reduction and Growth Trust (PRGT). They agreed to align the mechanism for determining interest rates to be charged on credit provided under the Stand-by Credit Facility (SCF) with the interest rate mechanism applicable to credit provided under the Extended Credit Facility (ECF), while keeping the latter unchanged. They noted that this change is consistent with the package of reforms adopted in the parallel Review of Facilities for Low-Income Countries.

Directors noted that the change in the interest rate mechanism applicable to SCF credit would simplify the structure of interest rates on concessional lending, making it more like the structure of interest rates charged on non-concessional loans, financed through the General Resources Account (GRA). Directors agreed that the proposed changes are consistent with preserving the fundamental logic of the PRGT interest rate mechanism, while modestly increasing the overall degree of concessionality of PRGT financing. They noted that the additional subsidy costs can be financed within the PRGT’s self-sustaining financing envelope in the context of the full reform package, as discussed in the Review of the Financing of the Fund’s Concessional Assistance and Debt Relief to Low Income Countries.

Based on the revised interest rate mechanism and the most recent 12-month average SDR rate, Directors supported staff’s proposal to set interest rates on all ECF and SCF credit at zero until June 2021 in the context of a persistently low global interest rate environment. The interest rate on credit provided under the

Rapid Credit Facility (RCF) was set at zero on a permanent basis in 2015. Directors also supported the staff’s proposal to waive interest rate charges on the outstanding legacy credit under the Exogenous Shocks Facility (ESF) until November 2020, by which time all the credit previously extended under the ESF is scheduled to be fully repaid, or until the time of the next review. The next review of the PRGT interest rate mechanism is scheduled to take place no later than June 2021.

SU/19/74

May 30, 2019

The Chairman’s Summing Up—Building Resilience in Developing Countries Vulnerable to Large Natural Disasters, Executive Board Meeting 19/33, May 1, 2019

Executive Directors welcomed the opportunity to take stock of ongoing staff work on building resilience to natural disasters in vulnerable countries, including the efforts being made to incorporate disaster risks into macroeconomic frameworks and into Fund surveillance more generally.

Directors agreed that natural disasters can have significant and long-lasting effects on economic well-being in many developing countries, particularly small, fragile, and low-income states, and that the frequency and intensity of weather-related shocks are expected to further increase as climate change evolves. They underscored that the social and economic impact of natural disasters can be mitigated through policies to build resilience, including targeted investments in infrastructure and the effective use of available financial instruments.

Directors agreed that incorporating disaster risk is an important component of sound macroeconomic management in countries where risks of large-scale natural disasters are significant. They agreed that the Fund, in collaboration with the World Bank and other development partners, can help vulnerable countries assess the trade-offs between development needs, rising debt vulnerabilities, and the benefits of ex ante resilience building. Most Directors agreed that the Fund’s approach to resilience building should extend to slower-onset disasters, which can also have a detrimental impact on countries.

Directors welcomed the suggested three-pillar approach to resilience-building as a useful framework for analyzing policy options in a systematic fashion and for identifying key priorities. They noted that the approach was informed by the Sendai Framework for Disaster Risk Reduction and the work of the World Bank on disaster risk management and insurance strategies. They agreed that many small, fragile, and low-income countries face significant capacity constraints in developing a full strategy for building resilience, which can severely impair the ability of governments to make effective use of external support, and noted that the Fund and the World Bank are well placed to assist countries in overcoming these capacity gaps. While noting the important role of development partners in supporting national efforts, Directors emphasized that government ownership is crucial in building resilience to natural disasters.

Directors saw merit in governments in vulnerable countries developing a national disaster resilience strategy (DRS), drawing on support from the international financial institutions. The Fund could take a lead role in helping countries develop a macroeconomic policy framework that adequately reflects both disaster costs and returns from resilient investment and that identifies the fiscal actions to support the policy framework. The World Bank and other development banks could take a lead role in helping countries identify and assess disaster vulnerabilities and in prioritizing investment needs. Directors highlighted the need for Fund staff to collaborate closely with the World Bank in supporting country efforts, with a few Directors underscoring the core expertise of the Bank in key areas where support would be needed.

Overall, a DRS would provide a roadmap for policy design and sequencing, and facilitate coordination of donor support for national plans. Directors remarked that the DRS would focus national attention on active preparation for disasters while providing an anchor for support from development partners. Directors noted scope for further clarifying the details of coordination, sequencing, and responsibilities of different stakeholders in developing an effective country-owned DRS. They also highlighted that the development of a DRS would benefit from peer learning and experience-sharing among countries and agencies. Directors agreed that a credible DRS could help catalyze higher levels of financial support from bilateral donors, climate funds, and other sources, and welcomed the interest expressed by some Caribbean authorities in developing such strategies.

Directors emphasized that the use of risk-transfer instruments should figure more prominently in government measures to improve financial resilience to disasters, while recognizing the challenges involved in developing insurance markets that provide reasonable premium levels relative to expected annual payouts. They welcomed the efforts of donor countries to support insurance market development and strengthen risk pooling. Directors broadly supported additional work by the Fund, in collaboration with the World Bank, to analyze the role and potential contribution of state contingent debt instruments in helping countries build resilience to natural disasters.

Directors noted that the Fund has a valuable role to play in supporting country efforts to build resilience to natural disasters, as part of its surveillance and capacity building activities. A coherent resilience strategy should fit within a medium-term macroeconomic policy framework that is consistent with maintaining debt sustainability, including under adverse shocks—an area of core Fund expertise. Staff could also contribute through analysis of the economic impact of disasters and of trade-offs between public investment and debt accumulation. Directors agreed that the Fund’s lending toolkit was sufficiently flexible to provide support for disaster-vulnerable countries that face a BoP need, but most saw scope to increase access limits as well as to use the toolkit in non-traditional ways to support resilience-building. Directors encouraged giving special attention to countries prone to natural disasters in the upcoming FSAP Review and Comprehensive Surveillance Review.

Directors agreed that disaster resilience strategies need to be based on a robust diagnostic of risks and vulnerabilities and encouraged a pragmatic approach, in coordination with the World Bank. They asked for a full assessment of the Climate Change Policy Assessments being piloted in a handful of small countries, in collaboration with the World Bank, which could provide a valuable diagnostic for national authorities.

Directors noted that building resilience to natural disasters extends to areas in which the Fund does not have relevant in-house expertise. They underscored that providing effective support to governments would require close collaboration and coordination with other institutions that have the relevant expertise, including in developing disaster resilience strategies, and called for a clear division of labor, based on respective mandates, between the Fund, the multilateral development banks, and other gencie

SU/19/60

May 14, 2019

The Acting Chair’s Summing Up—Large Natural Disasters—Enhancing the Financial Safety Net for Developing Countries, Executive Board Meeting 17/35, May 5, 2017

Executive Directors welcomed the proposals for enhancing the financial safety net for countries hit by natural disasters. They recognized that, while these countries can avail themselves of the Rapid Credit Facility (RCF) and Rapid Financing Instrument (RFI), annual access limits under these instruments may be low relative to the size of balance of payment needs caused by large disasters, to which small states are most vulnerable. They noted that, when access limits under the RCF and RFI were halved with the doubling of Fund quotas under the 14th General Review of Quotas, members that received the lowest quota increases were at a disadvantage and have not benefitted fully from the previous reforms that were intended to address an erosion of access limits.

Accordingly, Directors supported the proposed establishment of new windows under the RCF and RFI to provide annual access of up to 60 percent of quota for countries experiencing urgent balance of payments needs arising from large natural disasters. They noted that this will better help meet the immediate needs of these members and enhance the Fund’s catalytic role in mobilizing other external financing. Directors agreed that, pending next year’s comprehensive review of the Fund’s facilities for low-income countries, the current cumulative access limits for both the RCF and the RFI should remain unchanged at 75 percent of quota. A few Directors saw a case for considering how to further enhance the financial safety net for fragile states.

Directors agreed that qualification for higher access under the large natural disaster windows within the RCF and RFI should be conditional, inter alia, on meeting a disaster damage threshold of 20 percent of the member’s GDP. They considered that this threshold strikes the appropriate balance between providing emergency financing to disaster-hit countries on the one hand, and safeguarding Fund resources and discouraging facility shopping on the other hand. Directors also supported the staff’s approach to estimating disaster damage, drawing on a range of third-party information and collaborating closely with other organizations, while ensuring that the Fund’s response is timely and consistent with its mandate.

Directors welcomed the staff’s assessment that the reform proposals would be consistent with the self-sustainability of the Poverty Reduction and Growth Trust (PRGT), and that demand for PRGT resources associated with the proposed damage threshold would not pose significant risks to the robustness of the Trust under a broad range of scenarios.

Directors underscored the importance of closely monitoring the experience with the use of the RCF and RFI, future financing demand, and the PRGT lending capacity as part of the regular reviews of Fund facilities. They also stressed the need for vulnerable countries to continue to enhance economic and financial resilience to shocks and strengthen policy frameworks, including risk reduction planning, noting in this regard that the Fund’s surveillance and technical assistance can play an important role in helping these countries improve disaster preparedness.

BUFF/17/24

May 10, 2017

The Acting Chair’s Summing Up—Social Safeguards and Program Design in PRGT and PSI-Supported Programs, Executive Board Meeting 17/43, May 26, 2017

Executive Directors welcomed the opportunity to review the experience with the use of social safeguards measures in PRGT and PSI-supported programs, while recognizing that a more comprehensive assessment of the effectiveness of social safeguards would require further analysis, including from outside the Fund. They generally welcomed the findings in the staff paper that Fund-supported programs with low-income countries had helped to safeguard social spending in most programs, as reflected in indicative targets generally being met. At the same time, Directors saw scope to strengthen the effectiveness of these safeguards in protecting the poor and most vulnerable. In this regard, they generally supported staff’s proposals to improve the design of social safeguards measures in PRGT and PSI-supported programs. Directors looked forward to the upcoming IEO evaluation on the “IMF and Social Protection,” and encouraged the staff to draw on Board-endorsed policies based on its findings when preparing the staff guidance note that would help clarify how to treat social safeguards measures in Fund-supported programs and surveillance. They indicated that the lessons learned from these experiences, as well as broad consultations with external stakeholders, could usefully feed into the holistic review of low-income facilities scheduled for early-2018. Directors also stressed the importance of pro-active outreach and clear communications on the work of the Fund in this area and on collaboration with other development partners and stakeholders.

Directors welcomed the use of program floors for social and other priority spending as an important safeguard for outlays favoring vulnerable groups. They called for careful definition of the types of expenditures included in program floors to prioritize safeguarding resources for vulnerable groups, especially in cases where fiscal space is limited and the short-term needs of the poor are significant. At the same time, Directors indicated that country authorities should retain flexibility in setting spending targets, to better reflect national priorities. They encouraged staff to support the adoption of spending targets by advising on questions of coverage, on how to strengthen the quality of spending, and on strategies for creating the fiscal space necessary to support such spending.

Directors welcomed the adoption in Fund-supported programs of concrete measures to strengthen social safety nets, noting that such reforms may require time to design and implement. In general, staff should consider national capacity to operate social safety nets, and should seek to strengthen such capacity, where appropriate, with technical assistance and training provided by the Fund and other development partners.

Directors underscored the merits of early and consistent engagement with country authorities, development partners, and other external stakeholders, including civil society organizations, on social safeguards issues. Where social safeguards have the potential to affect domestic or balance-of-payments stability, staff should provide analysis and advice as part of Fund surveillance, with input from development partners where possible. This would provide a strong foundation where there is subsequent engagement under a Fund-supported program, including by taking stock of existing social safety nets; identifying safeguards gaps; exploring technical assistance and training needs; identifying and addressing data gaps; and developing strategies for increasing fiscal space, where necessary.

Directors called for closer and more effective collaboration with the World Bank and other development partners, drawing on the specialist expertise of these agencies and catalyzing their support. Collaboration can also help in identifying possible adverse distributional effects of policy measures and the need to mitigate these through social safeguards.

Directors supported the recommendation to strengthen the documentation of social safeguards measures in country documents for PRGT and PSI-supported programs. They indicated that documentation should cover policy goals for social safeguards; the design of safeguards measures; the factors explaining realized outcomes regarding spending targets and social safety net reform measures; and the corrective policy measures taken, or to be taken, in response to missed program goals. In addition, collaboration with the World Bank, other development partners, and external stakeholders could also be reflected in documents. Where Fund-supported programs include policy measures with a potentially adverse distributional impact, Directors called on staff to document the steps taken to protect vulnerable groups, with input from other development partners and external stakeholders, where possible.

BUFF/17/32

June 1, 2012

The Acting Chair’s Summing Up—Review of the Debt Sustainability Framework for Low Income Countries—Proposed Reforms Executive Board Meeting 17/79, September 27, 2017

Executive Directors welcomed the comprehensive review of the Debt Sustainability Framework for Low-income Countries (LIC DSF) and appreciated the extensive consultations with country authorities, the Executive Board, and external stakeholders. They noted that the LIC-DSF is a vital tool for country authorities to help strengthen fiscal policy and debt management and this review has highlighted areas where the framework can be reformed. Directors agreed that the proposed reforms would make the framework more comprehensive and transparent and that the revised LIC-DSF would continue to play a critical role in informing borrowing and lending decisions by more accurately flagging potential debt distress with the aim of avoiding unnecessarily constraining LICS’ ability to finance their development. They agreed that the new Guidance Note, templates, and training of officials will be necessary to ensure that the framework is fully accessible to users. Directors also underscored the importance of facilitating the use of the LIC DSF by as many actors as possible, including non-traditional bilateral and commercial creditors.

Directors welcomed that the review maintains the main features of the existing framework. They considered it appropriate that the framework continues to classify countries based on their assessed debt-carrying capacity, estimates threshold levels for a set of key debt burden indicators, evaluates baseline projections and stress test scenarios relative to these thresholds, and combines rules and staff judgment to determine ratings of the risk of entering into external debt distress.

Directors welcomed the proposed composite measure to assess a country’s debt-carrying capacity, based on both the CPIA and a set of macroeconomic variables. They observed that the inclusion of macroeconomic variables takes better account of country-specific features, and enables a fuller understanding of, and policy discussions on, how economic policies affect debt carrying capacity. This, in turn, will enhance the contribution of the DSF to policy formulation.

Directors endorsed the proposed new thresholds for debt stock and debt service indicators. They noted that, for countries whose assessment of debt-carrying capacity remains unchanged, the revised framework may imply additional borrowing space, provided countries manage debt service well. Directors observed that the quality of the framework’s outputs depend heavily on the quality of the inputs. Against this background and given deep concerns that debt levels in a number of LICS are on the rise again, Directors highlighted the need for borrowers to implement prudent debt management practices, and encouraged countries to further strengthen their Medium-Term Debt Management Strategies, including the capacity to compile needed data. They also expressed concern about “uncaptured debt” in the Fund’s work. In this light, they strongly encouraged staff, Management and country authorities to strengthen efforts to ensure full and transparent disclosure and reporting of all debt—including private, quasi-public, and official—noting that the responsibility for doing so was shared between borrowers and lenders. Promoting the Fund’s statistical and reporting standards and rules could help in this regard.

Directors agreed that the proposed new tools to assess the plausibility of macroeconomic projections will facilitate a more thorough scrutiny of baseline assumptions. They welcomed the tools’ focus on the sources of debt accumulation, the realism of fiscal adjustment, as well as the projected impact of public investment and fiscal adjustment on growth.

Directors supported the proposed streamlining of debt thresholds and standardized stress tests. They welcomed the recalibration of shocks and the introduction of interactions between key macroeconomic variables in these tests, which should enhance the insights generated by the stress-testing.

Directors agreed that adding tailored scenario stress tests will help evaluate risks of particular importance for some member countries – including those emanating from natural disasters, volatile export prices, market-financing shocks, and contingent liability exposures. They called for clear disclosure in debt sustainability analyses of the key assumptions made in calibrating these tests.

Directors welcomed the re-estimation of benchmarks for assessing total public debt levels, which should improve the quality of the analysis of risks linked to elevated levels of overall public debt. They appreciated the attention given to evaluating rollover risks related to external commercial borrowing. Directors also welcomed the additional information on debt vulnerabilities generated by the more granular assessment of the debt position of countries assessed to be at moderate risk of debt distress.

Directors considered that the prudent application of judgment as a complement to model-based mechanical results, while avoiding excess discretion, remains essential for the final determination of a country’s risk rating. They underscored the importance of even-handedness in applying judgment, and called for careful attention to providing guidance to staff in exercising this judgment in a new Guidance Note. Directors underscored that a Board discussion prior to the finalization of the Guidance Note will be helpful. Directors also agreed with the shortening of the projection horizon from 20 to 10 years, with consideration being given to identifiable and material factors that have an effect in the later years.

Directors generally saw merit in maintaining a unified discount rate of five percent for the LIC DSF, the DLP, NCBP, and the calculation of grant elements. Directors called for revisiting the determination of discount rates in future DSF reviews, or sooner if needed.

Directors welcomed staff assurances that the new framework is expected to become operational in the second half of 2018, six months after the completion of the associated Guidance Note and template. They noted that the proposed July 1, 2018 timeline for the implementation of the revised LIC DSF could be challenging. Directors called on the staff, in collaboration with the World Bank, to update guidance materials and conduct outreach and provide training opportunities to all relevant parties, including staff and LIC authorities, especially those with weak capacity, with enough lead time to ensure that the timeframe would prove feasible. Going forward, staff should continue to monitor the implementation of the framework and bring forward the next review, if warranted.

BUFF/17/72

September 29, 2017

The Acting Chair’s Summing Up—Revisiting the Debt Sustainability Framework for Low-Income Countries, Executive Board Meeting 12/16, February 15, 2012

Executive Directors welcomed the timely review of the debt sustainability framework (DSF) for low-income countries (LICs). They welcomed the use of the framework by country authorities in their borrowing decisions, and by a growing community of donors and lenders to help inform financing decisions. Directors noted that experience with the DSF to date suggests that it has performed relatively well and fulfilled its main objectives. They agreed nevertheless that some modest improvements are necessary in light of changing circumstances in LICs, to ensure that the framework remains robust and relevant. In doing so, Directors underscored the importance of maintaining cross-country comparability while also assessing country-specific circumstances adequately and evenhandedly. They also considered the framework as a critical tool for ensuring that LICs have access to the resources necessary to meet their development goals while preserving long-term debt sustainability.

Most Directors agreed that the indicative policy-dependent thresholds used in the framework remain broadly valid. While most supported lowering thresholds for debt service to revenue, a number of Directors cautioned that the more conservative thresholds could unduly constrain LICs’ borrowing decisions. Many Directors endorsed a downward revision to the current export-based thresholds for countries with large remittance flows, to adjust for the inclusion of such flows in calculating a country’s repayment capacity. However, some viewed such a downward revision as representing an unnecessary tightening of the framework, while some others were skeptical about including remittances explicitly in the DSF, pointing to the limited availability and volatility of data. Directors emphasized the need to exercise judgment when considering cases where remittances should be included, and when interpreting breaches of external debt thresholds more broadly. They endorsed the proposal to maintain all other thresholds at their current values, and recommended that revisions to the framework be explained to country authorities and communicated carefully to the public.

Noting the growing role of domestic debt in some LICs, Directors generally saw scope for strengthening the analysis of total public debt and fiscal vulnerabilities, including from contingent liabilities, along the lines of the recommendations made in the staff paper on Modernizing the Framework for Fiscal Policy and Public Debt Sustainability Analysis. Most Directors supported the proposed benchmarks for total public debt to help determine when to conduct deeper analysis, including in the discussions with country authorities, while cautioning that such benchmarks should not be used mechanically. A few Directors noted that the lack of comprehensive and reliable data on domestic debt makes it difficult to derive benchmarks that could be used across LICs.

Most Directors considered that introducing an additional risk rating would usefully complement the assessment of external public debt, in cases where there are significant vulnerabilities related to domestic public debt or private external debt. The additional risk rating would inform the macroeconomic and structural policy dialogue with country authorities, while the assessment of the risk of external debt distress would continue to inform the financing decisions of the International Development Association. Some other Directors were not convinced of the need for the additional risk rating, on grounds of data limitations and the risk of weakening LICs’ ability to attract foreign capital.

Directors agreed that country-specific information should be taken into account more systematically when assessing the risk of debt distress. They broadly supported more consistent use of judgment in this regard, although a few saw merit in calibrating country-specific thresholds. Directors welcomed the plan to develop clearer guidance for staff, and supported analytical work on alternative approaches to complement the current methodology.

Directors recognized the benefits of public investment for growth and development, which could extend beyond national boundaries. They stressed therefore that understanding the linkages between debt-financed investment and growth, including the positive externalities of regional projects, is critical to the quality of debt sustainability analyses (DSAs). Directors generally welcomed ongoing efforts by staff to develop models and analytical tools to strengthen the treatment of investment-growth linkages in DSAs. A number of Directors urged a cautious approach to this issue, including by using conservative assumptions, accounting for all the costs associated with the investments, and paying due regard to countries’ absorptive capacity.

Directors saw merit in improving the assessment of dynamic linkages among macroeconomic variables. They endorsed the proposed methodological refinements of stress tests, on an experimental basis, to enrich the analysis while not having a formal role in determining the risk rating.

Directors generally welcomed efforts to simplify the DSA template, which would allow country authorities to produce their own DSAs more easily, gradually building up their capacity and enhancing the policy dialogue on debt issues. They also supported the proposal to produce full joint DSAs every three years, with lighter updates in the interim years, while maintaining the flexibility to prepare full DSAs if warranted by circumstances, including those prompting a request for use of Fund resources. Directors underscored the importance of ensuring that these changes do not undermine the quality of DSAs.

BUFF/12/18,

February 17, 2012

The Acting Chair’s Summing Up—Reform of the Fund’s Policy on Poverty Reduction Strategies in Fund Engagement with Low-Income Countries—Proposals, Executive Board Meeting, 15/62, June 22, 2015

Executive Directors welcomed the opportunity to consider the proposed reform of the Fund’s policy on poverty reduction strategies (PRS) in Fund engagement with low-income countries. They concurred that the near-completion of the IMF-World Bank HIPC Initiative, the recent trends in PRS documentation by member countries, and the World Bank’s delinking of its IDA concessional lending from the PRS process warrant a reform of the Fund’s PRS requirements. These requirements have currently been centered around the Poverty Reduction Strategy Paper (PRSP) used in the context of the HIPC Initiative, as well as the Fund’s concessional financing and the Policy Support Instrument (PSI). In this regard,

Directors supported the proposed reforms to the Fund’s PRS policy in the context of ECF arrangements and PSIs. Directors noted that the proposed reform does not entail any modification to the HIPC Initiative Instrument.

Directors reiterated the importance of anchoring Fund-supported programs for low-income countries in strategies to achieve sustained poverty reduction and growth, and emphasized the need to adhere to the objectives underlying the PRGT Instrument. Directors welcomed the key objectives of the reform approach that would: (i) maintain a clear link between a member’s PRS and its policies under a Fund-supported program with streamlined PRS documentation; (ii) preserve national ownership of the PRS process; and (iii) allow flexibility in PRS procedures to reflect country circumstances. In considering these reforms, some Directors felt that it would be useful to assess the impact of the PRS process and the PRGT on poverty reduction in member countries in the past. A few Directors also suggested incorporating guidance in defining and setting social spending. For ECF arrangements and PSIs, Directors supported the transmittal to the Fund of an Economic Development Document (EDD) that could comprise an existing national development plan or strategy document or a newly-prepared document on a member’s PRS elaborated for Fund-supported program purposes. The latter could take the form of an entirely new PRS document or a streamlined document based on an existing national PRS document, along the lines proposed by staff.

Directors endorsed the proposed minimum standards and good practice guidelines for EDD content, noting that they provide enough flexibility and scope to member countries in documenting their PRS based on specific country circumstances. Some Directors considered it important to incorporate elements of the guidelines into the minimum standards, and some others saw a need to provide an incentive for countries to observe the guidelines in addition to the minimum standards. Directors concurred that existing PRSPs at the time of adoption of the new policy would be deemed to satisfy the new policy for EDDs subject to the requirements proposed by staff with respect to the coverage and expiration of the PRS set out in the EDD.

Directors emphasized the value of participatory processes in elaborating national poverty reduction strategies. Many Directors agreed that countries should be strongly encouraged to pursue participatory processes in line with the good practice guidelines for EDDs, but without making participatory processes mandatory under the new PRS policy. Many other Directors, however, expressed concern that making participation by stakeholders non-mandatory could weaken ownership of the PRS. Some of these Directors suggested that participatory processes should be a minimum standard and that the minimum standards should incorporate some other good practices.

Most Directors concurred that an EDD should be required for completion of the first and every subsequent review under an ECF arrangement or a PSI along the lines proposed by staff. This requirement would help ensure close alignment, in terms of timing and substance, between Fund-supported programs and the member’s poverty reduction strategy. Some Directors expressed concern, nevertheless, regarding the scope for countries with limited capacity to prepare PRS documentation by the first review. They stressed the need for effective outreach and early engagement by staff to avoid potential delays in Fund support and ensure good-quality documentation.

Most Directors agreed that the PRS set out in an EDD should not normally be older than five years (exceptionally six years) to qualify for the completion of a review. A few Directors did not support the use of PRS that are more than five years old as basis for an EDD, especially if the requirement for the PRS to be forward-looking is also eliminated.

Most Directors concurred that Joint Staff Advisory Notes outside the HIPC Initiative context should be eliminated. In this regard, Directors welcomed the proposed approach under which Fund staff’s assessment of the member country’s poverty reduction strategy would be provided in program documentation. Directors further welcomed staff’s intention to conduct a PRS implementation review around the mid-point of an ECF arrangement or PSI, with findings reported in program documentation. Most Directors also agreed that member countries would inform the Board of PRS implementation through program documentation and discontinue the preparation of Annual Progress Reports.

Directors stressed the importance of close Fund-World Bank collaboration on poverty reduction and growth issues, including in evaluating the quality of the member country’s poverty reduction strategy. Most Directors welcomed the proposed approach under which World Bank staff’s views would be communicated to the Board through an assessment letter. A few Directors, however, continued to see merit in a consensus-based assessment of a country’s PRS by Fund and Bank staff. Directors agreed that concerns raised by Bank staff on the quality of the PRS would need to be reflected in Fund staff’s analysis.

Directors supported the transitional arrangement through end-December 2015 along the lines proposed by staff.

Directors looked forward to a review of the new PRS policy as part of the next Review of the Fund’s Facilities for Low-Income Countries expected in 2018.

BUFF/15/53

June 25, 2015

Poverty Reduction and Growth Facility Trust—Other Provisions

…

2. All the provisions applying to assistance under the Poverty Reduction and Growth Facility Trust Instrument, other than those amended or deleted pursuant to Part I¹¹ of this Decision, shall continue to apply to assistance committed after November 20, 1998 under such Instrument, including the maturity of loans, which will continue to be repaid in ten equal semiannual installments beginning not later than five and a half years from the date of each disbursement and completed at the end of the tenth year after that date with regard to the ECF and the RCF and beginning not later than four years from the date of each disbursement and completed at the end of the eight year after that date with regard to the SCF.

3. The Managing Director shall not recommend, and the Fund shall not approve, a request by a member for the use of the Fund’s general resources, Special Disbursement Account resources, or resources administered by the Fund as Trustee, whenever the member is in arrears, or is failing to meet a repayment expectation, to the Poverty Reduction and Growth Facility Trust.

4. …

Decision No. 11832-(98/119) ESAF,

November 20, 1998,

as amended by Decision. No. 13592-(05/99) ESF,

November 23, 2005,

effective January 5, 2006, and

14354-(09/79), July 23, 2009,

effective January 7, 2010

Transformation of the Enhanced Structural Adjustment Facility

1. The name of the Enhanced Structural Adjustment Facility established by Decision No. 8757 (87/176) SAF/ESAF, adopted December 18, 1987, shall be changed to the “Poverty Reduction and Growth Facility.”

2. The following changes shall be made to the Enhanced Structural Adjustment Facility Trust established by Decision No. 8759-(87/176) ESAF, adopted December 18, 1987:

(a) The name of the Trust shall be changed to the “Poverty Reduction and Growth Facility Trust”; accordingly, Paragraph 1 of Decision No. 8759 and the Title and Introductory Section of the ANNEX to that Decision, containing the Trust Instrument, shall be amended by substituting “Poverty Reduction and Growth Facility Trust” for “Enhanced Structural Adjustment Facility Trust;”

(b) Section I, Paragraph 1 of the Trust Instrument shall be amended to read as follows:

The Trust shall assist in fulfilling the purposes of the Fund by providing loans on concessional terms (hereinafter called “Trust loans”) to low-income developing members that qualify for assistance under this Instrument, in order to support programs to strengthen substantially and in a sustainable manner their balance of payments position and to foster durable growth, leading to higher living standards and a reduction in poverty.

3. The name of the “Trust for Special ESAF Operations for the Heavily Indebted Poor Countries and Interim ESAF Subsidy Operations” shall be changed to the “Trust for Special PRGF Operations for the Heavily Indebted Poor Countries and Interim PRGF Subsidy Operations.” Accordingly,

(a) Paragraphs 1 and 2 of Decision No. 11436-(97/10), adopted February 4, 1997, and the title and Introductory Section of the ANNEX to that Decision containing the Trust Instrument, shall be amended by substituting “Trust for Special PRGF Operations for the Heavily Indebted Poor Countries and Interim PRGF Subsidy Operations” for “Trust for Special ESAF Operations for the Heavily Indebted Poor Countries and Interim ESAF Subsidy Operations.”

(b) All references to “ESAF” in Section I, paragraphs 1(viii) and 1(ix), Section I, paragraph 2(b), Section III, Paragraphs 1(a) and 1(b), and Section III, Paragraph 2(c) of the Trust Instrument shall be changed to references to “PRGF.”

4. References in other Fund decisions, instruments, agreements or documents related to the Enhanced Structural Adjustment Facility, the Enhanced Structural Adjustment Facility Trust, or any of its Accounts, the ESAF, the ESAF Trust, the Trust for Special ESAF Operations for the Heavily Indebted Poor Countries and Interim ESAF Subsidy Operations, or the ESAF-HIPC Trust shall be understood to be to the Poverty Reduction and Growth Facility, the Poverty Reduction and Growth Facility Trust, or any of its Accounts, the PRGF, the PRGF Trust, the Trust for Special PRGF Operations for the Heavily Indebted Poor Countries and Interim PRGF Subsidy Operations, or the PRGF-HIPC Trust, respectively.

5. This Decision shall become effective when all contributors to the ESAF Trust have consented to the changes.

Decision No. 12087-(99/118) PRGF,

October 21, 1999,

effective November 22, 1999

Establishment of General Policy to Condition Waiver Decisions Under the Poverty Reduction and Growth Trust on Accuracy of Information Regarding Performance Criteria

Any decision granting a waiver for the nonobservance of a performance criterion under an arrangement under a facility of the Poverty Reduction and Growth Trust will be made conditional upon the accuracy of data or other information provided by the member to assess observance of the performance criterion in question.

Any decision waiving the applicability of a performance criterion under an arrangement under a facility of the Poverty Reduction and Growth Trust will be made conditional upon (i) the accuracy of the member’s representation that the information necessary to assess observance of the relevant performance criterion is unavailable, and (ii) the accuracy of data provided by the member to assess observance of the same performance criterion for a preceding period (if applicable for that period).

Decision No. 12254-(00/77),

July 27, 2000,

as amended by Decision No. 14354-(09/79),

July 23, 2009,

effective January 7, 2010

Decision No. 12559-(01/85) PRGF, August 23, 2001,

effective September 23, 2001

Partial Distribution of the General Reserve Attributed to Windfall Gold Sale Profits

1. Pursuant to Article V, Section 2(b), the Fund adopts the Instrument to Establish the Interim Administered Account for Windfall Gold Sales Profits (the “Administered Account”) that is attached to this decision.

2. In accordance with Article XVII, Section 3, the Fund prescribes that:

(a) an SDR Department participant or prescribed holder, by agreement with an SDR Department participant or prescribed holder and at the instruction of the Fund, may transfer SDRs to that participant or prescribed holder in effecting a transfer to or from the Administered Account or in effecting a payment due to or by the Fund in connection with financial operations under the Administered Account.

(b) Operations pursuant to these prescriptions shall be recorded in accordance with Rule P-9.

3. Pursuant to Article XII, Section 6(d), an amount equivalent to SDR 0.7 billion of the general reserve shall be distributed to all members in proportion to their quotas. The payment of the distribution shall be made in SDRs or, if the Fund or a member so decides, in the member’s own currency, provided that payment to a member with overdue repurchase obligations in the General Resources Account shall be made in the member’s own currency.

4. In accordance with Article XII, Section 6(f)(vi) and Article XII, Section 6(f)(ix), the Fund decides to reduce the amount of investment in the Investment Account by an amount equivalent to SDR 0.7 billion and to transfer the proceeds from this reduction to the General Resources Account for immediate use in the Fund’s operations and transactions.

5. Paragraphs 1 through 4 above shall become effective when the Managing Director has notified the Executive Board that, in her assessment, satisfactory financing assurances exist regarding the availability of at least SDR 630 million for new subsidy contributions to the Poverty Reduction and Growth Trust based upon: (a) the amount that members have requested in writing be transferred as subsidy contributions to the PRGT from their share in the partial distribution of the general reserve provided for in paragraph 3 of this decision; (b) the amount of other new contributions that members have provided as subsidy contributions to the PRGT in light of this decision; and (c) the amount of other subsidy contributions that members have given written assurances that they will provide to the PRGT in light of this decision.

6. Paragraph 1(b) of the decision on Attribution of Reductions in Fund’s Holdings of Currencies, Decision No. 6831-(81/65), adopted April 22, 1981 and effective May 1, 1981, as amended, shall be amended to read as follows: “(b) For a member with overdue repurchase obligations, the reduction shall be attributed to any obligation to repurchase.” (SM/12/23, 02/03/12)

Decision No. 15092-(12/19),

February 24, 2012,

as amended by Decision No. 15840-(15/77),

July 24, 2015, and 16575-(19/68),

July 23, 2019

ATTACHMENT

Instrument to Establish the “Interim Administered Account for Windfall Gold Sales Profits”

To help fulfill its purposes, the International Monetary Fund (the “Fund”) has adopted this Instrument to establish the Interim Administered Account for Windfall Gold Sales Profits in accordance with Article V, Section 2(b) (the “Account”), which shall be governed and administered by the Fund in accordance with the terms and conditions of this Instrument.

1. The purpose of the Account is to serve as an interim vehicle for the holding and administration of contributions representing all or a portion of members’ shares of the partial distribution the general reserve provided for in Decision No. 15092, pending instruction from each such contributing member as to the subsequent disposition of its share of such resources.

2. The SDR shall be the unit of account. Resources provided to the Account shall be in SDRs or currencies as paid to the relevant contributing member by the Fund in the context of the distribution of the general reserve provided for in Decision No. 15092.

3. Upon the instruction of a contributing member, the Fund shall transfer all or part of the resources in the Account that are attributable to that member, including the member’s pro rata share of any investment returns, to one or more of the Subsidy Accounts of the Poverty Reduction and Growth Trust (PRGT), or as otherwise specified by the member.

4. The resources held in the Account and not immediately needed for operations of the Account shall be invested at the discretion of the Managing Director. Investments pursuant to this paragraph may be made in any of the following: (i) marketable obligations issued by international financial organizations and denominated in SDRs or in the currency of a member of the Fund, (ii) marketable obligations issued by a member or by a national official financial institution of a member and denominated in SDRs or in the currency of that member, and (iii) deposits with a commercial bank, a national official financial institution of a member, or an international financial institution that are denominated in SDRs or in the currency of a member.

5. The assets held in the Account shall be kept separate from the assets and property of all other accounts of, or administered by, the Fund. The assets and property held in such other accounts shall not be used to discharge or meet any liabilities, obligations or losses incurred in the administration of the Account; nor shall the assets of the Account be used to discharge or meet any liabilities, obligations or losses incurred in connection with any such other accounts of, or administered by, the Fund.

6. The Fund shall maintain separate financial records and prepare financial statements for the Account. The financial statements for the Account shall be expressed in SDRs and prepared in accordance with International Financial Reporting Standards.

7. The external audit firm selected under Section 20 of the Fund’s By-Laws shall audit the operations and transactions of the Account. The audit shall relate to the financial year of the Fund.

8. The Fund shall report on the assets and property and on the operations and transactions of the Account in the Annual Report of the Executive Board to the Board of Governors and shall include in that Annual Report the audit report of the external audit firm on the Account.

9. Subject to the provisions of this Instrument, the Fund, in administering the Account, shall apply, mutatis mutandis, the same rules and procedures as apply to operations of the General Resources Account of the Fund.

10. The Managing Director is authorized (a) to make all arrangements, including the establishment of accounts in the name of the Fund, with such depositories as she deems necessary to carry out the operations of the Account, and (b) to take all other measures she deems necessary to implement the provisions of this Instrument.

11. No charge shall be levied in respect of the services rendered by the Fund in the administration, operation, and termination of this Account. All investment costs, including but not limited to costs associated with the exchange of currencies, purchase of securities, and hiring of external asset managers and custodian banks, shall be borne by, and deducted from, the Account.

12. The Account shall be terminated (a) on October 11, 2021 or (b) as promptly as practicable following the receipt of instructions from every contributing member regarding the distribution of its resources in the Account, whichever is earlier.¹ In the event of termination pursuant to (a) above, each Participant with resources remaining in the Account at the time of termination shall have paid in full to it the amount of such resources.

13. The provisions of this Instrument may be amended by a decision of the Fund and with the concurrence of each contributing member with resources remaining in the Account at the time of such decision.

14. Any questions arising under this Instrument between a contributing member and the Fund shall be settled by mutual agreement between the contributing member and the Fund.

Framework Interim Account—Establishment of the Interim Windfall Gold Sales Profits Subaccount, and Termination of the Interim Administered Account for Windfall Gold Sales Profits

I. Pursuant to Article V, Section 2(b), the Fund approves the establishment of the Interim Windfall Gold Sales Profits Subaccount (the “Interim WGSP Subaccount”) under the Framework Interim Account, which was established pursuant to Decision No. 16626-(19/103), December 18, 2019.

II. Consistent with paragraph 2 of the Instrument to Establish the Framework Interim Account (the “Instrument”), the Interim WGSP Subaccount shall be managed in accordance with the Instrument and the following terms and conditions:

1. The purpose of the Interim WGSP Subaccount is to serve as an interim vehicle for the holding and administration of resources transferred from the Interim Administered Account for Windfall Gold Sales Profits (which was established pursuant to Decision No. 15092-(12/19), February 24, 2012, as amended), pending instruction from each such Fund member (“Member”) which owns part of these resources as to the disposition of its share of such resources.

2. Upon the instruction of a Member, the Fund shall transfer all or part of the resources in the Interim WGSP Subaccount that are attributable to the Member, including the Member’s pro rata share of any investment returns, to one or more of the Subsidy Accounts of the Poverty Reduction and Growth Trust (PRGT), or as otherwise specified by the Member.

3. The Interim WGSP Subaccount shall be terminated by the Fund: (a) as determined by the Fund upon the request of the Managing Director; (b) upon the request of a Member and with the concurrence of all other Members contributing to the subaccount at the time of termination; or (c) as promptly as practicable following the receipt of instructions from every Member regarding the disposition of its resources in the Interim WGSP Subaccount; whichever is earlier. In the event of termination pursuant to (a) or (b) above, each Member with resources remaining in the Interim WGSP Subaccount at the time of termination shall have paid in full to it the amount of such resources, together with its net pro rata share of any investment returns.

4. Any amendment to the terms and conditions of the Interim WGSP Subaccount requires approval of the Executive Board as well as the concurrence of each Member with resources held in the Interim WGSP Subaccount at the time at which such amendment is proposed. Such concurrence for any proposed amendment of this Instrument may be presumed if Members do not object within thirty days after the issuance of the proposed amendment to Members.

III. A Member’s shares in the Interim Administered Account for Windfall Gold Sales Profits shall be transferred to the Interim WGSP Subaccount, subject to the Member’s consent; provided that a Member shall be deemed to have consented to such transfer if no response from the Member is received by April 3, 2020; and provided further that a Member that is not in a position to consent to the transfer shall so notify the Fund by April 3, 2020 and shall receive their shares in the Interim Administered Account for Windfall Gold Sales Profits no later than April 30, 2020.

IV. The Interim Administered Account for Windfall Gold Sales Profits shall be terminated as promptly as practicable following the completion of the transfers pursuant to paragraph II.1 of this decision. (EBS/20/14, 03/06/20)

Decision No. 16666-(20/27), March 12, 2020

Instrument to Establish the Interim Administered Account for Remaining Windfall Gold Sales Profits

1. Pursuant to Article V, Section 2(b), the Fund adopts the Instrument to Establish the Interim Administered Account for Remaining Windfall Gold Sales Profits (the “Administered Account”) that is attached to this decision.

2. In accordance with Article XVII, Section 3, the Fund prescribes that:

(a) an SDR Department participant or prescribed holder, by agreement with an SDR Department participant or prescribed holder and at the instruction of the Fund, may transfer SDRs to that participant or prescribed holder in effecting a transfer to or from the Administered Account or in effecting a payment due to or by the Fund in connection with financial operations under the Administered Account.

(b) Operations pursuant to these prescriptions shall be recorded in accordance with Rule P-9.

3. Pursuant to Article XII, Section 6(d), an amount equivalent to SDR 1.75 billion of the general reserve shall be distributed to all members in proportion to their quotas. The payment of the distribution shall be made in SDRs or, if the Fund or a member so decides, in the member’s own currency, provided that payment to a member with overdue repurchase obligations in the General Resources Account shall be made in the member’s own currency.

4. In accordance with Article XII, Section 6(f)(vi) and Article XII, Section 6(f)(ix), the Fund decides to reduce the amount of investment in the Investment Account by an amount equivalent to SDR 1.75 billion and to transfer the proceeds from this reduction to the General Resources Account for immediate use in the Fund’s operations and transactions.

5. Paragraphs 1 through 4 above shall become effective when the Managing Director has notified the Executive Board that, in her assessment, satisfactory financing assurances exist regarding the availability of at least SDR 1.575 billion for new subsidy contributions to the Poverty Reduction and Growth Trust based upon: (a) the amount that members have requested in writing be transferred as subsidy contributions to the PRGT from their share in the partial distribution of the general reserve provided for in paragraph 3 of this decision; (b) the amount of other new contributions that members have provided as subsidy contributions to the PRGT in light of this decision; and (c) the amount of other subsidy contributions that members have given written assurances that they will provide to the PRGT in light of this decision. (SM/12/244, 09/17/12)

Decision No. 15228-(12/95),

September 28, 2012,

as amended by Decision No. 16039-(16/75), August 17, 2016,

16246-(17/69), July 26, 2017, and 16422-(18/73),

July 27, 2018

ATTACHMENT

Instrument to Establish the “Interim Administered Account for Remaining Windfall Gold Sales Profits”

To help fulfill its purposes, the International Monetary Fund (the “Fund”) has adopted this Instrument to establish the Interim Administered Account for Remaining Windfall Gold Sales Profits in accordance with Article V, Section 2(b) (the “Account”), which shall be governed and administered by the Fund in accordance with the terms and conditions of this Instrument.

1. The purpose of the Account is to serve as an interim vehicle for the holding and administration of contributions representing all or a portion of members’ shares of the partial distribution the general reserve provided for in Decision No. 15228-(12/95), pending instruction from each such contributing member as to the subsequent disposition of its share of such resources.

2. The SDR shall be the unit of account. Resources provided to the Account shall be in SDRs or currencies as paid to the relevant contributing member by the Fund in the context of the distribution of the general reserve provided for in Decision No. 15228-(12/95).

3. Upon the instruction of a contributing member, the Fund shall transfer all or part of the resources in the Account that are attributable to that member, including the member’s pro rata share of any investment returns, to one or more of the Subsidy Accounts of the Poverty Reduction and Growth Trust (PRGT), or as otherwise specified by the member.

4. The resources held in the Account and not immediately needed for operations of the Account shall be invested at the discretion of the Managing Director. Investments pursuant to this paragraph may be made in any of the following: (i) marketable obligations issued by international financial organizations and denominated in SDRs or in the currency of a member of the Fund, (ii) marketable obligations issued by a member or by a national official financial institution of a member and denominated in SDRs or in the currency of that member, and (iii) deposits with a commercial bank, a national official financial institution of a member, or an international financial institution that are denominated in SDRs or in the currency of a member.

5. The assets held in the Account shall be kept separate from the assets and property of all other accounts of, or administered by, the Fund. The assets and property held in such other accounts shall not be used to discharge or meet any liabilities, obligations or losses incurred in the administration of the Account; nor shall the assets of the Account be used to discharge or meet any liabilities, obligations or losses incurred in connection with any such other accounts of, or administered by, the Fund.

6. The Fund shall maintain separate financial records and prepare financial statements for the Account. The financial statements for the Account shall be expressed in SDRs and prepared in accordance with International Financial Reporting Standards.

7. The external audit firm selected under Section 20 of the Fund’s By-Laws shall audit the operations and transactions of the Account. The audit shall relate to the financial year of the Fund.

8. The Fund shall report on the assets and property and on the operations and transactions of the Account in the Annual Report of the Executive Board to the Board of Governors and shall include in that Annual Report the audit report of the external audit firm on the Account.

9. Subject to the provisions of this Instrument, the Fund, in administering the Account, shall apply, mutatis mutandis, the same rules and procedures as apply to operations of the General Resources Account of the Fund.

10. The Managing Director is authorized (a) to make all arrangements, including the establishment of accounts in the name of the Fund, with such depositories as she deems necessary to carry out the operations of the Account, and (b) to take all other measures she deems necessary to implement the provisions of this Instrument.

11. No charge shall be levied in respect of the services rendered by the Fund in the administration, operation, and termination of this Account. All investment costs, including but not limited to costs associated with the exchange of currencies, purchase of securities, and hiring of external asset managers and custodian banks, shall be borne by, and deducted from, the Account.

12. The Account shall be terminated (a) on October 9, 2020, or (b) as promptly as practicable following the receipt of instructions from every contributing member regarding the distribution of its resources in the Account, whichever is earlier.

13. The provisions of this Instrument may be amended by a decision of the Fund and with the concurrence of each contributing member with resources remaining in the Account at the time of such decision.

14. Any questions arising under this Instrument between a contributing member and the Fund shall be settled by mutual agreement between the contributing member and the Fund.

Framework Interim Account — Establishment of the Interim Remaining Windfall Gold Sales Profits Subaccount, and Termination of the Interim Administered Account for Remaining Windfall Gold Sales Profits

I. Pursuant to Article V, Section 2(b), the Fund approves the establishment of the Interim Remaining Windfall Gold Sales Profits Subaccount (the “Interim Remaining WGSP Subaccount”) under the Framework Interim Account, which was established pursuant to Decision No. 16626-(19/103), December 18, 2019.

II. Consistent with paragraph 2 of the Instrument to Establish the Framework Interim Account (the “Instrument”), the Interim Remaining WGSP Subaccount shall be managed in accordance with the Instrument and the following terms and conditions:

1. The purpose of the Interim Remaining WGSP Subaccount is to serve as an interim vehicle for the holding and administration of resources transferred from the Interim Administered Account for Remaining Windfall Gold Sales Profits (which was established pursuant to Decision No. 15228-(12/95), September 28, 2012, as amended), pending instruction from each Fund member (“Member”) which owns part of these resources as to the disposition of its share of such resources.

2. Upon the instruction of a Member, the Fund shall transfer all or part of the resources in the Interim Remaining WGSP Subaccount that are attributable to the Member, including the Member’s pro rata share of any investment returns, to one or more of the Subsidy Accounts of the Poverty Reduction and Growth Trust (PRGT), or as otherwise specified by the Member.

3. The Interim Remaining WGSP Subaccount shall be terminated by the Fund: (a) as determined by the Fund upon the request of the Managing Director; (b) upon the request of a Member and with the concurrence of all other Members contributing to the subaccount at the time of termination; or (c) as promptly as practicable following the receipt of instructions from every Member regarding the disposition of its resources in the Interim Remaining WGSP Subaccount; whichever is earlier. In the event of termination pursuant to (a) or (b) above, each Member with resources remaining in the Interim Remaining WGSP Subaccount at the time of termination shall have paid in full to it the amount of such resources, together with its net pro rata share of any investment returns.

4. Any amendment to the terms and conditions of the Interim Remaining WGSP Subaccount requires approval of the Executive Board as well as the concurrence of each Member with resources held in the Interim Remaining WGSP Subaccount at the time at which such amendment is proposed. Such concurrence for any proposed amendment of this Instrument may be presumed if Members do not object within thirty days after the issuance of the proposed amendment to Members.

III. A Member’s shares in the Interim Administered Account for Remaining Windfall Gold Sales Profits shall be transferred to the Interim Remaining WGSP Subaccount, subject to the Member’s consent; provided that a Member shall be deemed to have consented to such transfer if no response from the Member is received by April 3, 2020; and provided further that a Member that is not in a position to consent to the transfer shall so notify the Fund by April 3, 2020 and shall receive their shares in the Interim Administered Account for Remaining Windfall Gold Sales Profits no later than April 30, 2020.

IV. The Interim Administered Account for Remaining Windfall Gold Sales Profits shall be terminated as promptly as practicable following the completion of the transfers pursuant to paragraph II.1 of this decision. (EBS/20/14, 03/06/20)

Decision No. 16667-(20/27), March 12, 2020

Establishment of a Trust for Special Poverty Reduction and Growth Operations for the Heavily Indebted Poor Countries and Interim ECF Subsidy Operations (PRG-HIPC Trust)

1. The Fund adopts the Instrument to Establish a Trust for Special Poverty Reduction and Growth Operations for the Heavily Indebted Poor Countries and Interim ECF Subsidy Operations, which is annexed to this decision.

2. The Fund shall conduct semi-annual reviews of the financing of the Trust for Special Poverty Reduction and Growth Operations for the Heavily Indebted Poor Countries and Interim ECF Subsidy Operations.

Decision No. 11436-(97/10), February 4, 1997,

as amended by Decision Nos.11492-(97/45), April 24, 1997, 11861-(98/131) ESAF, December 18, 1998, 12087-(99/118) PRGF, October 21, 1999, effective November 2, 1999, 12132-(00/9) PRGF, January 27, 2000, 12349-(00/118), December 1, 2000, 12561-(01/85) PRGF, August 23, 2001, effective September 19, 2001, 12680-(02/17) PRGF, February 20, 2002,

12696-(02/27) PRGF, March 15, 2002, 12777-(02/65), June 20, 2002, 12874-(02/110), October 25, 2002, 13224-(04/33), April 1, 2004, 13367-(04/98) PRGF, October 18, 2004, 13373-(04/105) PRGF, November 9, 2004, 13588-(05/99) MDRI and 13590-(05/99) ESF, November 23, 2005,

effective January 5, 2006, 13775-(06/78), August 30, 2006, 13797-(06/88), October 13, 2006, 13849-(06/108), December 20, 2006, 14039-(08/3), January 14, 2008, 14354-(09/79), July 23, 2009, effective January 7, 2010, 15018-(11/112), November 21, 2011, and

15031-(11/115),

November 30, 2011

ANNEX

Instrument to Establish a Trust for Special Poverty and Growth Operations for the Heavily Indebted Poor Countries and Interim ECF Subsidy Operations

Introductory Section

To help fulfill its purposes, and in furtherance of the purposes of the Poverty Reduction and Growth Trust (“PRGT”) as described in the Instrument to Establish the Poverty Reduction and Growth Trust adopted by Decision No. 8759-(87/176) ESAF, December 18, 1987, as amended (“the PRGT Instrument”), the International Monetary Fund (“the Fund”) has adopted this Instrument to Establish a Trust for Special Poverty Reduction and Growth Operations for the Heavily Indebted Poor Countries and for Interim ECF Subsidy Operations (“the Trust”), which shall be administered by the Fund as Trustee (“the Trustee”). The Trust shall be governed by and administered in accordance with the provisions of this Instrument.

Section I. General Provisions

Paragraph 1. Definitions 1¹

Wherever used in this Instrument, unless the context otherwise requires:

(i) “Initiative” means the program of action endorsed by the Fund, the International Bank for Reconstruction and Development and the International Development Association (hereinafter jointly referred to as “the Bank”) in September 1996 and the enhancement of this program agreed in September 1999 for reducing the external debt burden of heavily indebted poor countries to a sustainable level;

(ii) “DSA” means a debt sustainability analysis jointly prepared by the staffs of the Fund and the Bank and the concerned member to provide the basis for determining the member’s qualification for assistance under the Initiative;

(iii) “decision point” means the time when the Trustee decides whether a member qualifies for assistance under the Initiative, that is, normally at the end of the initial three-year performance period and decides on the amount of assistance to be provided under the Initiative;

(iv) “completion point” means the time when a decision will be taken by the Trustee to disburse remaining undisbursed assistance committed for a qualifying member, excluding any additional amount committed for a member pursuant to the second sentence of Section III, paragraph 3(e);

(v) “debt sustainability” means the achievement of a sustainable level of external debt which shall be 150 percent for the present value of debt-to-exports ratio calculated on the basis of data available at the decision point. In the special case of a country that has, at the decision point, (i) an exports-to-GDP ratio of at least 30 percent, and (ii) a fiscal revenues-to-GDP ratio of at least 15 percent, a “debt sustainability” target of below 150 percent for the present value of debt-to-exports ratio at the decision point may be set with the specific target determined so as to reduce the present value of debt-to-revenue ratio to 250 percent at the decision point. For the purposes of these calculations, amounts that are subject to an early repurchase or repayment expectation established under the Misreporting Guidelines shall not constitute external debt.

(vi) “traditional debt relief mechanisms” means the application of Naples terms by Paris Club creditors, including the assumption of a stock-of-debt operation, involving a 67 percent present value reduction of the eligible debt of a member at the decision point, and at least comparable treatment by other official bilateral and commercial creditors;

(vii) “interim PRGF subsidy operations” means operations to subsidize the interest rate on interim PRGF financing to be made following full commitment under PRGF arrangements of resources available under borrowing agreements for the current phase of PRGF operations which is expected by about December 31, 2001; interim PRGF operations are expected to take place during the period 2001/02–2014/15;

(viii) “self-sustained PRGF operations means PRGF-type operations financed on a revolving basis from Special Disbursement Account (SDA) resources through the retransfer of resources from the PRGF Trust Reserve Account, when they are no longer needed to cover the total liabilities of the 1987 PRGF Trust to lenders;

(ix) “PRSP” means a Poverty Reduction Strategy Paper prepared by the member concerned in a participatory process involving a broad range of stakeholders and setting out a comprehensive three-year poverty reduction strategy; and

(x) “I-PRSP” means an Interim Poverty Reduction Strategy Paper prepared by the member concerned setting out a preliminary reduction strategy as a precursor to a full PRSP; and

(xi) “PRSP preparation status report” means a report prepared by the member concerning updating the preliminary poverty reduction strategy set out in an I-PRSP in anticipation of a full PRSP; and

(xii) “APR” means an Annual Progress Report prepared by the member concerned reporting on the implementation of a PRSP and updating it as appropriate; and

(xiii) “Joint Staff Advisory Note” means a document prepared by the staff of the Bank and the Fund containing an analysis of the strengths and weaknesses of the poverty reduction strategy of the member concerned and identifying priority action areas for strengthening the poverty reduction strategy during implementation; and

(xiv) “Misreporting Guidelines” means the Guidelines on Corrective Action for Misreporting and Noncomplying Purchases in the General Resources Account (Decision No. 12249-(00/77), adopted July 27, 2000), and the Provisions on Corrective Action for Misreporting and Noncomplying Disbursements in Arrangements under the Poverty Reduction and Growth Facility and the Exogenous Shocks Facility (Appendix I of the Instrument to Establish the Poverty Reduction and Growth Facility and Exogenous Shocks Facility Trust annexed to Decision No. 8759-(87/176) ESAF, adopted December 18, 1987).

Paragraph 2. Purposes

The Trust shall assist in fulfilling the purposes of the Fund by providing balance of payments assistance to low-income developing members by:

(a) making grants (“Trust grants”) and/or loans (“Trust loans”) to eligible members that qualify for assistance under the terms of this Instrument for purposes of the Initiative; and

(b) subsidizing the interest rate on interim PRGF operations to PRGF-eligible members.

Paragraph 3. Trust Account and resources

The operations and transactions of the Trust shall be conducted through an account (“the Account”). Within the Account, the Trustee may establish such sub-accounts as it deems necessary for the administration of the resources in the Account.

The resources held in the Account shall consist of:

(a) grant contributions made to the Trust for the purposes of paragraph 2;

(b) loans, deposits and other types of investments made by contributors with the Trust to generate income to be used for the purposes of paragraph 2;

(c) transfers from the Special Disbursement Account for the purposes of paragraph 2; and

(d) net earnings from investment of resources held in the Account.

Paragraph 4. Unit of account

The SDR shall be the unit of account for commitments and all other operations and transactions of the Trust, provided that commitments for contributions may also be made in currency.

Paragraph 5. Media of payment of contributions and exchange of resources

(a) Resources provided to the Trust may be received in any currency.

(b) Payments by the Trust shall be made in U.S. dollars or such other media as may be agreed between the Trustee and the payee.

(c) Contributions to the Trust may also be made in or exchanged for SDRs in accordance with such arrangements as may be made by the Trust for the holding and use of SDRs.

(d) The Trustee may exchange any of the resources of the Trust, provided that any balance of a currency held in the Trust may be exchanged only with the consent of the issuer of such currency.

Section II. Contributions to the Trust

The Trustee may accept contributions of resources for the Account on such terms and conditions as may be agreed between the Trustee and the respective contributors, subject to the provisions of this Instrument. For this purpose, the Managing Director of the Trustee is authorized to accept grants and enter into loan, deposit or other types of investment agreements with the contributors to the Trust.

Section III. Trust Grants and Loans

Paragraph 1. Eligibility for assistance

In order to be eligible for assistance from the Trust under Section I, paragraph 2(a) of this Instrument, a member shall meet the following requirements:

(a) the member is PRGF-ESF eligible, i.e., it is included in the list of members annexed to Decision No. 8240-(86/56) SAF, as amended;

(b) the member was pursuing a program of adjustment and reform by October 1, 1996, or the member shall have adopted such a program in the period beginning October 1, 1996 and ending December 31, 2006, that is either (i) supported by the Fund through ECF, SCF, PRGF, ESF or Extended Arrangements, or, on a case-by-case basis as determined by the Trustee, a Stand-By Arrangement, a decision on rights accumulation, or financial support under the Fund’s emergency assistance policy in post conflict countries or under the Rapid Credit Facility or under the Rapid Financing Instrument; or (ii) monitored by the staff, in the circumstances specified in paragraph 2(c) below; and

(c) in support of the member’s adjustment and reform program, the member shall have received or is eligible to receive assistance to the full extent available under traditional debt relief mechanisms.

(d) after the assumed full application of traditional debt relief mechanisms, the member’s external debt situation, based on both end-2004 and end-2010 data, is unsustainable, as determined by the debt sustainability thresholds in Section I, Paragraph 1(v) of this Instrument.

Paragraph 2. Qualification for assistance

The Trustee shall determine whether an eligible member qualifies for assistance under the Initiative in accordance with the criteria set out below:

(a) At the decision point, the DSA shall indicate that the member’s external debt situation, even after the assumed full application of traditional debt relief mechanisms, would not be sustainable. Moreover, the member shall have in place a satisfactory poverty reduction strategy set out in an I-PRSP, PRSP preparation status report, PRSP, or APR, that has been issued to the Executive Board normally within the previous 12 months but in any case within the previous 18 months, and has been the subject of an analysis in a Joint Staff Advisory Note also issued to the Executive Board.

(b) The member has not agreed on an exit operation with Paris Club creditors on Naples terms after September 1999.

(c) The member has established a track record of strong policy performance under programs covering macroeconomic policies and structural and social policy reforms. This requirement shall normally be satisfied by an initial three-year performance period leading up to the decision point, followed by a second performance period leading up to the completion point, which shall be satisfied when a member has satisfactorily implemented a set of predefined key policy reforms, has a stable macroeconomic position, and has kept on track with its Fund-supported program. In addition, the member country concerned shall have prepared a PRSP and implemented satisfactorily the strategy therein described for at least one year by the completion point as evidenced by an APR that has been issued to the Executive Board normally within the previous 12 months but in any case within the previous 18 months, and has been the subject of an analysis in a Joint Staff Advisory Note also issued to the Executive Board. In the case of the first three-year period, such programs shall be programs supported by ECF, SCF, PRGF, ESF, or Extended arrangements, or, on a case-by-case basis as determined by the Trustee, Structural Adjustment Facility (SAF) arrangements, Stand-By Arrangements, decisions on rights accumulations (RAPs), programs, programs supported by the Fund under the policy on emergency assistance for post-conflict countries, programs supported by the Fund under the Rapid Credit Facility or under the Rapid Financing Instrument, or programs monitored by the staff (SMPs) in cases where the Executive Board agrees with the staff’s assessment that the macroeconomic and structural policies under the SMP meet the policy standards associated with programs supported by arrangements in the upper credit tranches or under the PRGT. For these purposes, an SMP will qualify as of the time of the Executive Board determination referenced in the preceding sentence (including determinations that precede the adoption of this provision), but will qualify only if (i) the member, if not eligible for a RAP, remains current with respect to all obligations to the Fund during the period of the SMP, and (ii) the member, if eligible for a RAP, remains current at least with respect to new obligations falling due to the Fund during the period of the SMP, except that a post-conflict RAP-eligible member that has severely limited payments capacity may, to the extent its payments capacity requires it, be allowed to accumulate new arrears to the Fund during the period of the SMP. In the case of the second performance period, such programs shall be programs supported by ECF, SCF, PRGF, ESF or Extended Arrangements. It is expected that the member shall have a track record of strong and sustainable policy performance when the completion point is reached. The required period shall be evaluated flexibly by the Trustee. Members could receive credit toward the decision point for programs that were underway prior to the adoption of the Initiative. (EBS/07/152, 12/21/07)

(d) Notwithstanding the provisions of subparagraph (c) above and paragraph 6 below, for a member that has reached a decision point or a completion point prior to January 27, 2000, a commitment of assistance under the revised provisions of this instrument, and delivery of that assistance, may be made by the Trustee on the basis of assessments by the Trustee regarding satisfactory adjustment and reform efforts and overall progress in poverty reduction that is broadly acceptable.

(e) All other creditors (holding debt claims above a de minimis amount) of the member shall have agreed to take action under the initiative.

Paragraph 3. Amount of assistance

(a) At the decision point, and in consultation with the Bank, the eligible member and its other creditors, the Trustee shall make a determination of the amount of resources that could be made available from the Trust to achieve a reduction in the present value of debt owed to the Fund by the member. The amount to be committed shall be confirmed by the Trustee in the context of satisfactory assurances regarding the exceptional assistance to be provided under the initiative by the member’s other creditors.

(b) At the decision point, based on the external debt sustainability targets established for the member, the Trustee shall commit the amount to be provided from the Trust to a member to permit a reduction in the present value of debt owed by it to the Fund. The specific amount of assistance to be committed by the Trustee will be based on (i) the Fund’s share in the present value of the multilateral debt of the member at the decision point; and (ii) the assistance to be provided by multilateral creditors, in terms of a reduction in the present value of the debt owed to them by the member sufficient to achieve the debt sustainability targets, taking into account the exceptional assistance to be provided by Paris Club creditors and at least comparable action by other official bilateral and commercial creditors under te Initiative. The Trustee shall, subject to the conditions specified below, adjust the amount of assistance committed to a member under this provision, whether or not disbursed to the account established under paragraph 5 below, if the Trustee, on the basis of revised information, recalculates the member’s debt sustainability position used for the purposes of reaching the decision point and determines that the recalculated amount of relief to be provided under the Initiative exceeds or falls short of the amount originally committed by more than one percentage point of the targeted net present value of debt as defined in section I paragraph 1(v) above. In such circumstances, the amount of the commitment shall be increased or reduced as necessary to reach the amount to which the member, on the basis of such recalculation, would be entitled under the terms of this Instrument. No such adjustment shall be made: (i) after the completion point; or (ii) in the case of an excess of more than one percentage point, if such excess is attributable to incorrect information on exports, gross domestic product, or fiscal revenues that was not provided by or at the behest of the member. If the amount already disbursed by the Trustee to the account established under paragraph 5 below for the benefit of the member exceeds the adjusted amount of assistance, the Trustee shall retransfer to the Trust any amount remaining in the account equivalent to such excess.

(c) In case of protracted delays by a member in reaching the completion point because of problems in policy implementation, the Trustee may reassess that member’s eligibility and qualification for assistance, including the amount of assistance committed at the decision point.

(d) Following commitment of the assistance at the decision point, the Trustee may advance to the member as interim assistance a portion of such committed assistance not to exceed (i) 20 percent of the total assistance committed for each 12-month period following the decision point, and (ii) a maximum of 60 percent of the total assistance committed prior to the member reaching the completion point, provided that the amount of such assistance in any 12-month period does not exceed the amount of debt service falling due to the Fund during that period. In exceptional circumstances, interim assistance could be raised to 25 percent and 75 percent, respectively. Where the Trustee has made a disbursement of resources under this paragraph to the account established under paragraph 5 below for the benefit of the member on the understanding that all performance-related conditions specified for such disbursement have been met and subsequently determines that any such condition was not met, the Trustee shall retransfer to the Trust any amount remaining in such account from such disbursement up to the total amount of such disbursement as well as all net investment income accrued on the amounts disbursed on the basis of incorrect information provided, however, that no retransfer shall be made if (i) the member’s completion point has been reached, (ii) the Trustee decides that such disbursement remains appropriate in view of the member’s record of policy implementation and its poverty reduction efforts, or (iii) in cases where the Executive Board finds the nonobservance of the relevant performance-related condition to be de minimis in nature as defined in paragraph 1 of Decision No. 13849 (hereinafter “de minimis”). The retransfer of these amounts will not affect the amount of commitment in NPV terms to the member as established at the decision point. Where the Managing Director or the Trustee, as the case may be, believes the nonobservance of a performance-related condition to be de minimis in nature, (i) any communications with the member respecting such nonobservance may be made by a representative of the relevant Area Department, and (ii) the Executive Board shall be informed of the misreporting in a staff report which deals with issues other than the misreporting; in those rare cases where such a staff report cannot be issued to the Executive Board promptly after the Managing Director concludes that misreporting has taken place, the Managing Director shall consult Executive Directors and, if deemed appropriate by the Managing Director, a stand-alone report on the misreporting will be prepared for consideration by the Executive Board normally on a lapse-of-time basis. The Fund shall issue press releases on its decisions regarding the circumstances of a misreporting and the applicable remedies. except with respect to instances of misreporting involving the nonobservance of performance-related conditions which the Fund considers to be de minimis in nature.

(e) At the completion point, the Trustee shall disburse the amount committed to the member at the decision point, as such amount may have been subsequently adjusted on the basis of revised information on the member’s debt sustainability position, less any disbursements made after the decision point. To the extent that the Trustee, in determining the amount committed to the member under paragraph 3(b) above, included in the member’s external debt amounts that, after the decision point, were found to be subject to an early repurchase or repayment expectation under the Misreporting Guidelines, the Trustee shall recalculate and adjust the amount of its commitment, excluding from the member’s external debt the amount that was subject to the repurchase or repayment expectation. The Trustee retains the right to commit additional assistance at the completion point, beyond that already committed, but only so as to bring the ratio of the net present value of debt-to-exports to 150 percent (or debt-to-fiscal revenue to 250 percent), if the deterioration in the member’s debt sustain-ability is primarily attributable to a fundamental change in the member’s economic circumstances due to exogenous factors. The disbursement of any such additional assistance shall be approved at the completion point or thereafter, whenever the assurances specified in subparagraph (f) below with respect to such assistance have been obtained.

(f) Approval of the disbursements shall be given in the context of satisfactory assurances regarding the exceptional assistance to be provided under the Initiative by the member’s other creditors.

Paragraph 4. Terms of assistance

(a) The assistance to be provided by the Trust to a qualifying member shall be either through a Trust grant or a Trust loan, or both. The choice of a Trust grant, a Trust loan, or a combination thereof, shall be made by the Trustee on a case-by-case basis, taking into account the objective of bringing the debt-service-to-exports ratio (after assistance under the Initiative from the Fund and other creditors) to the debt sustainability target agreed for the member at the decision point. The maturity of a Trust loan shall be determined by the Trustee on a case-by-case basis, subject to paragraph 4(c) below, taking into account the need to smooth the time profile of the member’s total external debt service and its debt service to the Fund (after assistance under the Initiative from the Fund and other creditors). The schedule for using the proceeds of the Trust grant or the Trust loan by the member shall be agreed by the Trustee and the member taking into account the same criteria for deciding among a Trust grant, a Trust loan, or a combination thereof and the maturity of such loan.

(b) Trust grants and Trust loans (including any income from investment of their proceeds) advanced to a member as interim assistance shall be used to meet the member’s debt service payments on its existing debt to the Fund as they fall due, in accordance with the schedule for using the proceeds of such grants and loans as determined under the provisions of (a) above. Trust grants and Trust loans (including any income from investment of their proceeds) disbursed to a member at the completion point, along with any amounts previously advanced to the member as interim assistance that remain unused at the completion point, shall be used to effect the early repayment of the member’s qualifying debt to the Fund, in accordance with the schedule for using the proceeds of such grants and loans as determined under the provisions of (a) above. Notwithstanding paragraph 6 below, the preceding sentence shall also apply to Trust grants and Trust loans (including any income from investment of their proceeds) that, prior to January 5, 2006, had been disbursed to a member at the completion point or had been advanced to the member as interim assistance and remained unused at the completion point, once agreement is reached between the Trustee and the member on a modified schedule for using the proceeds of the Trust grant or Trust loan as provided for in (a) above.

(c) Trust loans shall be provided to members interest-free and shall have a maturity of no less than ten (10) years and up to twenty (20) years, including a grace period of no less than five-and-a-half (5½) years and up to ten-and-a-half (10½) years. The Trustee may not reschedule the repayment of Trust loans.

Paragraph 5. Disbursements

(a) Any disbursement of Trust grants and Trust loans shall be subject to the availability of resources to the Trust.

(b) The proceeds of a Trust grant or Trust loan (or both) shall be paid into a separate account for the benefit of the member and administered by the Trustee. The Trustee shall use these proceeds (including any income from investments of such proceeds) in accordance with paragraph 4(b) above. The terms and conditions for the operation of such account shall be determined by the Trustee.

Paragraph 6. Modifications

Any modification of these provisions will affect only Trust grants or Trust loans made after the effective date of the modification, provided that any modification of the interest rate shall apply to interest accruing after the effective date of the modification.

Section III bis. Subsidies for Interim PRGF Operations

For purposes of Section I, paragraph 2(b) of this Instrument, and to the extent that resources in the ECF Subsidy Account and General Subsidy Account of the PRGT are insufficient for interim ECF subsidy operations, the Trustee shall transfer to the ECF Subsidy Account of the PRGT, as needed, resources in the Trust Account not earmarked for assistance under Section III of this Instrument. Any such transfers shall be limited to the amounts needed for subsidy payments.

Section IV. Administration of the Trust

Paragraph 1. Trustee

(a) The Trust shall be administered by the Fund as Trustee. Decisions and other actions taken by the Fund as Trustee shall be identified as taken in that capacity.

(b) Subject to the provisions of this Instrument, the Fund in administering the Trust shall apply the same rules as apply to the operation of the General Resources Account of the Fund.

(c) The Trustee, acting through its Managing Director, is authorized:

(i) to make all arrangements, including establishment of accounts in the name of the International Monetary Fund, which shall be accounts of the Fund as Trustee, with such depositories of the Fund as the Trustee deems necessary; and

(ii) to take all other administrative measures that the Trustee deems necessary to implement the provisions of this Instrument.

Paragraph 2. Separation of assets and accounts, audits and reports

(a) The resources of the Trust shall be kept separate from the property and assets of all other accounts of the Fund, including other administered accounts, and shall be used only for the purposes of the Trust in accordance with this Instrument.

(b) The property and assets held in the other accounts of the Fund shall not be used to discharge liabilities or to meet losses arising out of the administration of the Trust. The resources of the Trust shall not be used to discharge liabilities or to meet losses arising out of the administration of the other accounts of the Fund.

(c) The Fund shall maintain separate financial records and prepare separate financial statements for the Trust.

(d) The audit committee selected under Section 20 of the Fund’s By-Laws shall audit the financial transactions and records of the Trust. The audit shall relate to the financial year of the Fund.

(e) The Fund shall report on the resources and operations of the Trust in the Annual Report of the Executive Board to the Board of Governors and shall include in the Annual Report the report of the audit committee on the Trust.

Paragraph 3. Investment of resources

(a) Any balance held by the Trust and not immediately needed in operations shall be invested.

(b) Investments may be made in any of the following: (i) marketable obligations issued by international financial organizations and denominated in SDRs or in the currency of a member of the Fund; (ii) marketable obligations issued by a member or by a national official financial institution of a member and denominated in SDRs or in the currency of that member; and (iii) deposits with a commercial bank, a national official financial institution of a member, or an international financial institution that are denominated in SDRs or in the currency of a member. Investment which does not involve an exchange of currency shall be made only after consultation with the member whose currency is to be used, or, when an exchange of currency is involved, with the consent of the issuers of such currencies.

Section V. Period of Operation and Liquidation

Paragraph 1. Period of operation

The Trust established by this Instrument shall remain in effect for as long as is necessary, in the judgment of the Fund, to conduct and to wind up the business of the Trust.

Paragraph 2. Liquidation of the Trust

If the Trustee decides to wind up the operations of the Trust, the resources in the Account shall be used first to discharge all the liabilities of the Trust. Any amount remaining in the Account after the discharge of all the liabilities of the Trust shall be used first to reimburse the SDA for transfers made in accordance with Decision No. 11434-(97/10), adopted February 4, 1997, and any remaining amount shall then be made available for self-sustained PRGF operations, except that at the request of the contributor, its pro rata share in any unused resources contributed to finance the operations referred to in Section I, Paragraph 2(a) of this Instrument, after the completion of such operations, shall be distributed to the contributor.

Section VI. Amendment of the Instrument

The Fund may amend the provisions of the Instrument, except that any amendment of Section I, paragraph 2, Section IV, Section V and this Section shall require the consent of all contributors to the Trust.

PRGF-HIPC Trust Instrument—Sunset Clause on Eligibility

1. The Fund decides not to extend further the sunset clause on eligibility set forth in Section 111, paragraph I (b) of the Instrument to Establish a Trust for Special PRGF Operations for the Heavily Indebted Poor Countries and Interim PRGF Subsidy Operations (“PRGF-HIPC Trust Instrument”), annexed to Decision No. 11436-(9711 O), adopted February 4, 1997. Accordingly, the sunset clause on eligibility shall take effect on December 31, 2006, as scheduled.

2. Notwithstanding paragraph 1 of this decision, the Fund decides to grandfather members that have been, or in the future are, included on the list of members assessed by the Executive Board to have met the end-2004 indebtedness criterion set forth in Section III, paragraph l(d) of the PRGF-HIPC Trust Instrument, and who have not yet met the policy performance criterion set forth in Section III, paragraph 1 (b) of the PRGF-HIPC Trust Instrument. Accordingly, such members could become eligible for assistance under the HIPC Initiative if they adopt, at any time, a program of adjustment and reform of the kind specified in Section III, paragraph 1 (b) of the PRGF-HIPC Trust Instrument. (SM/06/288, Sup. 2, 10/5/06)

Decision No. 13797-(06/88),

October 13, 2006

Trust for Special ESAF Operations for Heavily Indebted Poor Countries and Interim ESAF Subsidy Operations—Terms and Conditions for Administration of Account Provided Under Section III, Paragraph 5(b) of Trust

Pursuant to Section III, Paragraph 5(b) of the Instrument to Establish a Trust for Special ESAF Operations for the Heavily Indebted Poor Countries and Interim ESAF Subsidy (ESAF-HIPC Trust), the Fund, as Trustee of the ESAF-HIPC Trust, establishes the following terms and conditions for the administration of the Account provided for under that provision:

1. The resources of the Account shall consist of (i) the proceeds of grants and/or loans paid into the Account for the benefit of a member by the ESAF-HIPC Trust, and (ii) contributions by other donors to the reduction of a member’s debt service payments on its existing debt to the Fund, and (iii) net earnings from the investment of resources held in the Account.

2. Within the Account, the Trustee shall establish a separate sub-account for the administration of the resources paid into the Account for the benefit of each member for which the resources have been paid. The Trustee shall establish a sub-account within the Account whenever the Fund as Trustee of the ESAF-HIPC Trust grants final approval of a Trust grant and/or Trust loan under the ESAF-HIPC Trust.

3. Following the establishment of a sub-account, the Fund, as Trustee, shall be authorized to use the resources of the sub-account (including any net income from the investment of such resources) to repay the member’s existing debt to the Fund, in accordance with the Schedule for using the proceeds of grants and loans as determined under the provisions of Section III, Paragraphs 4(a) and 4(b) of the Instrument to Establish th PRGF-HIPC Trust. The Trustee shall also be authorized to retransfer back to the Trust an amount equivalent to (i) resources disbursed from the Trust into a sub-account in excess of the amount needed to meet the Fund’s share of debt reduction in accordance with Section III, paragraph 3(b) of the Instrument to Establish the PRGF-HIPC Trust, or (ii) resources disbursed as interim assistance from the Trust into a sub-account on the incorrect understanding that all performance-related conditions specified for such disbursement were met, in accordance with Section III, paragraph 3(d) of the Instrument to Establish the PRGF-HIPC Trust.

4. (a) Resources held in a sub-account of the Account and not immediately needed for operations shall be invested.

(b) Investments may be made in any of the following: (i) marketable obligations issued by international financial organizations and denominated in SDRs or in the currency of a member of the Fund; (ii) marketable obligations issued by a member or by a national official financial institution of a member and denominated in SDRs or in the currency of that member; and (iii) deposits with a commercial bank, a national official financial institution of a member, or an international financial institution that are denominated in SDRs or in the currency of a member. Investment which does not involve an exchange of currency shall be made only after consultation with the member whose currency is to be used, or, when an exchange of currency is involved, with the consent of the issuers of such currencies. Earnings, net of any transactions costs, shall accrue to the sub-account and shall be available for the purposes of the sub-account.

(c) The Managing Director of the Trustee is authorized (i) to make all arrangements, including establishment of accounts in the name of the Trustee, with such depositories as may be necessary to carry out the operations of the Account, and (ii) to take all measures necessary to implement the provisions of this decision.

5. The SDR shall be the unit of account.

6. (a) Resources received into a sub-account may be in U.S. dollars or such other media as may be determined by the Trustee.

(b) Resources held in a sub-account may be currencies or currencies exchanged for SDRs in accordance with such arrangements as may be made by the Trustee for the holding and use of SDRs.

(c) The Trustee may exchange any of the resources held in a sub-account provided that any balance of a currency held in the sub-account may be exchanged only with the consent of the issuer of such currency.

(d) Payments made from a sub-account shall be made in U.S. dollars or such other media as may be determined by the Trustee.

7. Assets held in the Account shall be kept separate from the assets and property of all other accounts of, or administered by, the Trustee. The assets of the Account shall not be used to discharge or meet any liabilities, obligations, or losses incurred by the Trustee in the administration of such other accounts. The assets and property held in a sub-account of the Account shall not be used to discharge or meet any liabilities, obligations, or losses of the Trustee in the administration of any other sub-account of the Account.

8. Subject to the provisions of this decision, the Trustee, in administering the Account, shall apply, mutatis mutandis, the same rules and procedures as apply to the operations of the General Resources Account of the Fund.

9. No charge shall be levied for the services rendered by the Trustee in the administration, operation, and termination of the Account.

10. (a) The Trustee shall maintain separate financial records and prepare separate financial statements for the Account. Such records and statements will be maintained in accordance with generally accepted accounting principles. The financial statements for the Account shall be expressed in SDRs.

(b) The External Audit Committee selected under Section 20 of the Trustee’s By-Laws shall audit the operations and transactions conducted through the Account. The audit shall relate to the financial year of the Trustee.

(c) The Trustee shall report on the resources and operations of the Account in the Annual Report of the Executive Board to the Board of Governors and shall include in that Annual Report the report of the External Audit Committee on the Account.

11. (a) The Account shall remain in effect for as long as is necessary, in the judgment of the Trustee, to conduct and to wind up the business of the Account. A sub-account for a particular member would be wound up when the resources of that sub-account have been exhausted in servicing the member’s obligations to the Fund.

(b) Any balance remaining in a sub-account upon termination and after the discharge of all obligations of that sub-account shall be transferred promptly to the member for which the sub-account had been established.

Decision No. 11698-(98/38) ESAF, April 1, 1998,

as amended by Decision Nos. 12697-(02/27) ESAF, March 15, 2002 and 13589-(05/99) MDRI, November 23, 2005, effective January 5, 2006

The Chairman’s Summing Up at the Conclusion of the Discussion on the Modalities for Special ESAF Operations in the Context of the HIPC Initiative and Other ESAF Issues, Executive Board Meeting 97/10, February 4, 1997

We have now established the structure and modalities for special ESAF operations under the HIPC Initiative, based on the agreement reached in the September Board meetings and the endorsement of the Interim and Development Committee meetings. The decisions to establish the ESAF-HIPC Trust will allow us to place to that account the resources that have already been accumulating for these purposes. The additional decision to allow an early transfer of Reserve Account resources to the Special Disbursement Account (SDA) for the financing of special ESAF operations—to the extent that sufficient resources for this purpose are not immediately available from other sources—responds to the Interim Committee’s request to proceed quickly with the implementation of the HIPC Initiative. Together with consents to an early transfer from all ESAF Trust Loan Account creditors, which will be sought during the coming weeks, these decisions will permit the Fund to commit its resources as a participant in the Initiative, as the first countries reach their decision points and are judged to require assistance under the Initiative.

This exercise has been technically complex and has surfaced very genuine and legitimate differences of view regarding how best to provide the assistance needed by our poorest and most heavily indebted members. All of you want to assure that the resources used for this purpose produce the best results—and views can differ on how to accomplish that. I appreciate the spirit all of you brought to this and your willingness to compromise.

In agreeing to the authorization for an early transfer of Reserve Account resources, some Directors stressed the need for maintaining a maximum effort by all to secure bilateral contributions and, if necessary, to consider the optimization of the management of the Fund’s reserves for the financing of interim ESAF subsidies and special ESAF operations. We will certainly maintain this effort and the financing of the Trust will be kept under regular review.

****

While some of the operational details will need to be developed on a case-by-case basis as specific country cases are presented to the Boards of the Fund and the Bank, a number of issues have been raised by Directors that will need to be taken into account when implementing the HIPC Initiative and the Fund’s participation therein.

First, Directors considered that there should be a presumption that ESAF arrangements with HIPC-eligible countries, and especially arrangements during the second stage, would be among the stronger ESAF arrangements. This is appropriate in light of the seriousness of the problems confronting these countries, the need to progress as rapidly as possible with structural reform, and the need to protect Fund resources. We can thus expect to see more front-loading of policy reform and forceful action on critical structural measures in these arrangements.

Second, Directors emphasized that under the agreed framework endorsed by the Interim and Development Committees any shortening of the second stage would be on an exceptional basis for countries which have already sustained records of strong performance and for which the adjustment and reform effort has become firmly rooted. This matter would be decided on a case-by-case basis by the Boards of the Fund and the Bank.

Third, some Directors expressed the view that approval of more than two three-year ESAF arrangements, including for HIPCs having reached their completion points, should be on an exceptional basis. However, most Directors were of the view that the continued ESAF should in principle be open to all ESAF-eligible members, given the protracted nature of the problems faced by many of them, their vulnerability to external shocks, and the risk of a recurrence of problems even after a sustained period of successful adjustment. Directors stressed that the continuation of ESAF is intended to maintain the Fund’s ability to respond to eligible members’ needs as they arise, and not to provide a source of continuous financing for individual countries. Directors also agreed that countries having benefited from exceptional assistance under the HIPC Initiative at the completion point would in most cases be expected to have made major progress toward a viable balance of payments position or achieved it, although they were likely to remain dependent on development aid flows. I have also noted the interest expressed by some Directors in exploring the scope for precautionary ESAF arrangements and we will return to that matter.

Fourth, Directors agreed that any reduction at the completion point of the assistance committed to a member at the decision point, would be taken only in concert with all other creditors and only where a major windfall transforms the economic circumstances of the member concerned and not when the improvement in its circumstances is the result of more ambitious adjustment and reform efforts undertaken by the member.

Fifth, Directors discussed the vulnerability factors that should be taken into account at the decision point in determining the debt sustainability targets. These might include a range of factors in addition to those mentioned in the decision, including, as suggested by some Directors, the present value of external debt-to-GDP ratio.

Sixth, the reference to extended arrangements as satisfying the requirement of a track record of strong policy performance in the case of the second three-year period is intended only to cover the possibility that interim ESAF operations could take the form of extended arrangements in the General Resources Account.

Finally, regarding the amounts of Fund assistance under the HIPC Initiative, Directors reiterated the importance of one of the guiding principles of the Initiative, i.e., that the assistance provided by the Fund and other multilateral creditors should preserve the financial integrity of the institutions and their preferred creditor status. Directors emphasized that before deciding on commitments or disbursements, the Fund would need to have satisfactory assurances concerning the actions and decisions to be taken—on their own responsibilities and in accordance with their own procedures—by other involved creditors. It would not be productive to try to formulate these considerations in mechanical terms in the abstract, but we will have them clearly in mind in considering individual cases.

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Several Directors asked for an early report to the Board on progress on financing the ESAF/HIPC initiatives, including through bilateral contributions. The staff will discuss this issue in the context of a paper on the use of SCA-2 resources, to be presented to the Board in the coming weeks.

BUFF/97/12

February 5, 1997

The Acting Chair’s Summing Up—HIPC Initiative—Status of Implementation; Background Papers on the Achievement of Long-Term External Debt Sustainability and External Debt Management in HIPCs; and Update on Financing of PRGF and HIPC Operations and Subsidization of Post-Conflict Emergency Assistance, Executive Board Meeting 02/40, April 9, 2002

1. Directors considered the HIPC Initiative to be an important part of a comprehensive strategy to eradicate poverty. They therefore welcomed the steady progress that has been made to date under the enhanced HIPC Initiative, especially in bringing new countries to the decision point. They noted that 26 countries have reached their decision points, of which 4 countries have reached their completion points, by end-March 2002. The committed debt relief under the enhanced HIPC Initiative would lower the outstanding stock of external debt of these countries by two thirds. This relief would also lower, on average, debt-service payments during 2001–05, compared to 1998–99, by about one third relative to exports and by almost one half relative to government revenue thus allowing for significant increases in social and poverty-related spending. However, Directors emphasized that HIPC debt relief should not displace other forms of development aid, either to HIPCs or to non-HIPCs.

2. Directors urged the staff to continue to work with the remaining HIPCs, most of which are conflict-affected, to bring them to decision points as soon as conditions permit. Directors noted that progress has been slow in bringing countries that have reached their decision points to the completion point, when the remaining debt relief could be provided on an irrevocable basis. Directors underscored the need for these countries to remain on track with their economic reform and poverty reduction programs in order to reach their floating completion points, while acknowledging that this will require additional effort in the context of the current global economic slowdown and the decline in primary commodity prices.

3. Directors regretted that the participation so far in the delivery of HIPC Initiative assistance by non-Paris Club official and commercial creditors has been poor, and expressed concern about repeated attempts by some official bilateral creditors to sell their claims on HIPCs to the secondary market with attendant risk of litigation. They stressed that participation by all creditors is necessary for the successful implementation of the HIPC Initiative and urged the creditors that have not yet agreed to participate in the Initiative to do so as soon as possible. Directors called on the staff to take all possible measures, within the existing institutional constraints, to help secure a more effective participation of all creditors. In this regard, most Directors welcomed the new supplementary measures proposed by the staff. Some Directors expressed concern about the proposal that non-Paris Club creditors with Fund-supported programs be allowed to include the amount of their debt relief to HIPCs in their financing gaps.

4. Directors stressed that a track record of strong policy performance under Fund- and Bank-supported programs is central to the success of the HIPC Initiative. It was agreed, therefore, that the Bank and the Fund should retain the requirement of at least one-year of satisfactory PRSP implementation before the completion point under the HIPC Initiative (except as provided for in retroactive cases). Many Directors were of the view, however, that some flexibility in timing could be allowed in cases where there has been satisfactory progress in implementing the PRSP, the other completion point triggers have been met, and the financial cost of delaying the completion point is significant. In such cases, they considered that countries’ completion point requests could be submitted for Board consideration without waiting for a full year of PRSP implementation; this would require an amendment of the HIPC Instrument. In interpreting the practical modalities of ascertaining the observance of the standard completion point condition on track record performance under a PRGF-supported program, most Directors agreed that, in the case of extended interruptions of policy performance (more than six months), a satisfactory track record in the form of the completion of one review of a PRGF-supported program covering a period of policy implementation of at least six months would be required immediately before the completion point. While agreeing that a satisfactory macroeconomic performance prior to the completion point is essential, many Directors felt that some flexibility should be applied in judging performance to take into account factors beyond the control of the authorities.

5. Directors expressed concern that the recent global slowdown, coupled with a significant decline in primary commodity prices, has weakened HIPCs’ growth and export performance over the past two years and led to a deterioration of external debt indicators for many of them. Continued export volume growth in most HIPCs has moderated the slowdown in real GDP growth, and the overall impact of recent changes in the international economic environment has varied considerably across HIPCs. Of the four countries that have reached their completion points, two seem to be in a good position to maintain long-term debt sustainability, but the situation of the other two is more mixed. For the 20 countries that reached their decision points by end-2001, 8 to 10 are likely to have NPV of debt-to-exports ratios at the completion point above the 150 percent threshold; for 6 of these countries, such deviations were anticipated at the time of their decision points, but to a lesser degree. Directors recognized that these projections would necessarily be modified in the light of the actual developments in these countries before their completion points are attained.

6. Directors recalled that the enhanced HIPC Initiative provided for the consideration on a case-by-case basis of additional debt relief at the completion point in cases where exceptional exogenous shocks have caused fundamental changes in a country’s economic circumstances. They stressed that the potential additional HIPC relief is not meant to compensate for slippages in policy reform and/or imprudent new external borrowing, nor could it be provided on an ongoing basis to deal with future economic shocks. In this context, they also noted the need for greater recognition of downside risks in debt sustainability analyses and in projections for growth and exports at the decision point. Directors recognized that any additional debt relief at the completion point would increase the overall costs of the HIPC Initiative. The financing implications of this would need to be explored in due course.

7. Overall, Directors noted that virtually all HIPCs are heavily dependent on primary commodities for their export earnings and government revenue, and, as a result, they would remain vulnerable to adverse developments in the external environment. Directors agreed that the objective of the enhanced HIPC Initiative is to achieve a lasting exit from unsustainable debt for eligible countries. But many emphasized that HIPC debt relief was not the only factor in ensuring debt sustainability. They emphasized that the achievement of long-term debt sustainability would require, on the one hand, a combination of continued policy reforms aimed at accelerating growth and diversifying the export base, as well as a strengthened external debt management capacity by the HIPCs themselves, and on the other hand, improved access for their exports to world markets and external financing on appropriate terms.

8. Directors underscored that given HIPCs’ limited repayment capacity, almost all new financing should be in the form of highly concessional loans and grants. Directors encouraged HIPCs to significantly strengthen their debt management capacities during the HIPC process, especially in increasing transparency and accountability on new borrowing and on the use of borrowed resources. Directors stressed the importance for HIPCs, as well as the Fund and the Bank, to closely monitor HIPC country debt indicators in order to detect potential debt-servicing problems at an early stage.

9. Directors welcomed the progress made in securing financing for the interim ECF and the Fund’s participation in the HIPC Initiative. They were pleased to note that new PRGF loan resources of SDR 4.4 billion had been pledged, of which SDR 4.1 billion are now available, and that nearly all the pledged bilateral subsidy contributions to the PRGF-HIPC Trust have become effective. Directors urged that the remaining bilateral contributions to the PRGF-HIPC Trust be made effective soon to ensure full funding of PRGF-HIPC operations.

10. Directors welcomed contributions by several countries to subsidize post-conflict emergency assistance and encouraged further pledges by other members to ensure that resources remain sufficient to subsidize charges by the poorest members beyond 2002.

11. Directors were in broad agreement with staff analysis that available and pledged loan and subsidy resources appeared sufficient to finance PRGF operations and the Fund’s share of HIPC Initiative assistance. They also agreed that accumulated balances in the Reserve Account adequately protected providers of both current and new loans to the PRGF Trust. They noted, however, that consideration might need to be given to mobilizing additional loan and subsidy resources should the recent high demand for PRGF resources continue. Over the long term, the adequacy of the level of self-sustained PRGF operations would also need to be assessed. Directors also noted that any expansion of the list of eligible countries under the HIPC Initiative, or significant topping up at the completion points, if warranted, would increase the cost of the Fund’s HIPC Initiative assistance, necessitating the mobilization of additional resources. Some Directors also called for a fuller assessment of the potential costs of topping up going forward. Directors looked forward to a further discussion later this year of the Fund’s concessional assistance to low-income countries.

BUFF/02/62

April 15, 2002

Summing Up by the Chairman—Enhanced Initiative for Heavily Indebted Poor Countries (HIPCs) and Poverty Reduction Strategy Papers (PRSPs)—Progress Reports and Review of Implementation, Executive Board Meeting 00/90, September 5, 2000

…

Directors agreed that an overall track record of three years of Bank- and Fund-supported programs prior to the decision point should in general be maintained, but that this should be interpreted flexibly on a case-by-case basis. Most Directors also agreed that the track record requirements immediately preceding a decision point may need to be applied flexibly, especially for countries that have experienced significant program interruptions. They emphasized, however, that countries need to demonstrate strong commitment to reform programs, particularly in the areas of governance and accountability, and that the link between debt relief and poverty reduction should be clearly maintained. In this regard, Directors stressed the importance of establishing a clear framework for the tracking of public expenditure on poverty reduction. A few Directors favored the maintenance of a track record requirement under Fund-supported programs immediately prior to the decision point, particularly for the most difficult cases, to ensure a prospect for a durable resolution of countries’ debt problems.

….

BUFF/00/147

September 11, 2000

Summing Up by the Acting Chairman—Initiative for Heavily Indebted Poor Countries—Proposal for Streamlining Preliminary Documents, Executive Board Meeting 00/108, November 3, 2000

Directors considered the proposals for streamlining preliminary HIPC documents in EBS/00/207. They agreed that preliminary documents should be streamlined as proposed in paragraph 7 of the paper to focus on a few key issues, notably: eligibility; track record; summary debt sustainability analysis; timing of possible decision points; possible triggers for the floating completion point; and likely assistance under the Initiative. A number of Directors emphasized that streamlining should not be allowed to compromise the quality and coverage of the information presented to the Board. Some Directors considered that reaching a decision point before the end of the year may be premature for some of the country cases currently envisaged for consideration within that time frame. Accordingly, requests were made that the preliminary documents also include the rationale for the choice of completion point triggers, details on the debt service profiles before and after HIPC Initiative assistance, more information on expenditure tracking and monitoring of debt relief, plans for interim relief, and policies on transparency. Directors also stressed that adequate information on a country’s performance under the PRGF, and the justifications for any shortening of the required track record—where appropriate—should be included. The staff will take these factors into account when preparing these papers.

Directors also supported the proposal that, for the remainder of this year, the streamlined preliminary documents be discussed by the Board on a case-by-case basis, after a review period of five working days.

Directors generally supported a review of the experience with these arrangements early in 2001.

BUFF/00/165

November 7, 2000

Liquidation of the MDRI-II Trust—Establishment of a Post-MDRI-II Trust Interim Administered Account

1. Pursuant to Article V, Section 2(b) of the Articles, the Fund adopts the Instrument to Establish the Post-MDRI-II Interim Administered Account (the “Account”) that is annexed to this decision.

2. In accordance with Article XVII, Section 3 of the Articles, the Fund prescribes that an SDR Department participant or a prescribed holder, by agreement with an SDR Department participant or a prescribed holder and at the instruction of the Fund, may transfer SDRs to that participant or prescribed holder in effecting a transfer to or from the Account or in effecting a payment due to or by the Fund in connection with financial operations under this Account; and operations pursuant to this prescription shall be recorded in accordance with Rule P-9. (SM/15/141, 06/16/15)

Decision No. 15811-(15/63),

June 23, 2015

Annex

Instrument to Establish the Post-MDRI-II Interim Administered Account

To help fulfill its purposes, the International Monetary Fund (the “Fund”), at the request of two contributors, has adopted this Instrument to establish the Post-MDRI-II Interim Administered Account (the “Account”) in accordance with Article V, Section 2(b) of the Fund’s Articles of Agreement, which shall be governed and administered by the Fund in accordance with the terms and conditions of this Instrument.

1. The purpose of the Account is to serve as an interim vehicle for the temporary holding and administration of resources transferred to the Account by a member in the context of the liquidation of the Multilateral Debt Relief Initiative-II Trust (the “MDRI-II Trust”), set forth in Attachment II to Decision No. 13588-(05/99), adopted November 23, 2005, as amended by Decision No. 15708-(15/12), adopted February 4, 2015, pending any decision by such member (“Contributor”) as to the final disposition of those resources.

2. The SDR shall be the unit of account. Resources provided to the Account shall be in SDRs or any currency. Transfers may be made in or exchanged for SDRs in accordance with such arrangements as may be made by the Fund for holding and use of SDRs.

3. Upon the instruction of a contributing member, the Fund shall transfer all or part of the resources received from a member, together with the member’s pro rata share of the investment returns, to the Catastrophe Containment and Relief Trust established pursuant to Decision No. 15708-(15/12), adopted February 4, 2015, the Poverty Reduction and Growth Trust for use in any current or future subsidy operations authorized for that Trust, or to the account of the contributing member.

4. The resources held in the Account and not immediately needed for operations of the Account shall be invested at the discretion of the Managing Director. Investments pursuant to this paragraph may be made in any of the following: (i) marketable obligations issued by international financial organizations and denominated in SDRs or in the currency of a member of the Fund; (ii) marketable obligations issued by a member or by a national official financial institution of a member and denominated in SDRs or in the currency of that member; or (iii) deposits with a commercial bank, a national official financial institution of a member, or an international financial institution, that are denominated in SDRs or in the currency of a member.

5. The assets held in the Account shall be kept separate from the assets and property of all other accounts of, or administered by, the Fund. The assets and property held in such other accounts shall not be used to discharge or meet any liabilities, obligations or losses incurred in the administration of the Account; nor shall the assets of the Account be used to discharge or meet any liabilities, obligations or losses incurred in connection with any such other accounts of, or administered by, the Fund.

6. The Fund shall maintain separate financial records and prepare financial statements for the Account. The financial statements for the Account shall be expressed in SDRs and prepared in accordance with International Financial Reporting Standards.

7. The external audit firm selected under Section 20 of the Fund’s By-Laws shall audit the operations and transactions of the Account. The audit shall relate to the financial year of the Fund.

8. The Fund shall report on the assets and property and on the operations and transactions of the Account in the Annual Report of the Executive Board to the Board of Governors and shall include in that Annual Report the audit report of the external audit firm on the Account.

9. Subject to the provisions of this Instrument, the Fund, in administering the Account, shall apply, mutatis mutandis, the same rules and procedures as apply to operations of the General Resources Account of the Fund.

10. The Managing Director is authorized (a) to make all arrangements, including the establishment of accounts in the name of the Fund, with such depositories as he or she deems necessary to carry out the operations of the Account; and (b) to take all other measures he or she deems necessary to implement the provisions of this Instrument.

11. No charge shall be levied in respect of the services rendered by the Fund in the administration, operation, and termination of the Account. All investment costs, including but not limited to costs associated with the exchange of currencies, purchase of securities, and hiring of external asset managers and custodian banks, shall be borne by, and deducted from, the Account.

12. The Account shall be terminated (a) three years from the effective date of the decision adopting this Instrument, unless the Fund decides to maintain the Account for a longer period of time; or (b) as promptly as practicable following the receipt of instructions from every Contributor regarding the distribution of its resources in the Account, whichever is earlier. In the event of termination under (a) above, the Fund shall distribute to each Contributor with resources remaining in the Account at the time of termination the full amount of such resources, including its share in any retained investment earnings.

13. The provisions of this Instrument may be amended by a decision of the Fund and with the concurrence of each Contributor with resources in the Account at the time of such decision, provided that the extension of the Account period in accordance with paragraph 12 shall not be considered an amendment to this Instrument.

14. Any questions arising under this Instrument between a Contributor and the Fund shall be settled by mutual agreement between the Contributor and the Fund.

Proposal to Enhance Fund Support for Low-Income Countries Hit by Public Health Disasters—Transformation of the Post-Catastrophe Debt Relief (PCDR) Trust into the Catastrophe Containment and Relief (CCR) Trust and Liquidation of the MDRI-I Trust

Part I - Transformation of the PCDR Trust

1. The name of the Trust established pursuant to Decision No. 14649-(10/64), adopted June 25, 2010, shall be changed to the Catastrophe Containment and Relief (CCR) Trust. Accordingly, Decision No. 14649-(10/64) and the title of the Attachment to that Decision shall be amended by replacing references to the “Post-Catastrophe Debt Relief Trust” (“PCDR Trust”) with “Catastrophe Containment and Relief Trust” (“CCR Trust”).

2. The Instrument to Establish the CCR Trust (“CCR Trust Instrument”), annexed to Decision No. 14649-(10/64), shall be amended to read as set forth in Attachment A to this decision.

3. The terms and conditions for the administration of the PCDR Trust Umbrella Account set forth in Attachment A to Decision No. 14650-(10/64) PCDR Umbrella Account, adopted June 25, 2010 shall be amended to read as set forth in Attachment B to this decision.

4. Except as otherwise specifically provided or where the context otherwise requires, references in other Fund decisions, instruments, agreements or documents to the Post-Catastrophe Debt Relief Trust and Post-Catastrophe Debt Relief Trust Instrument shall be understood to be, respectively, references to the “Catastrophe Containment and Relief Trust” (“CCR Trust”) and “Catastrophe Containment and Relief Trust Instrument.”

5. The review of the PCDR Trust set forth in paragraph 1 of Decision No. 14649-(10/64), adopted June 25, 2010 is no longer required. It is expected that the Fund will review the financing and operations of the CCR Trust every five years or earlier if needed.

Part II - Liquidation of the MDRI-I Trust and Transfer of the Remaining Balances to the CCR Trust

…

Decision No. 15708-(15/12), February 4, 2015

Catastrophe Containment and Relief Trust Fund—Establishment and Related Matters

1. Pursuant to Article V, Section 2(b), the Fund adopts the Instrument to Establish the Catastrophe Containment and Relief Trust (“CCR Trust” or “Trust”) that is annexed as Attachment I to this decision. It is expected that the Fund shall review the financing and operations of the CCR Trust at least every five years.

2. …

3. In accordance with Article V, Section 12(i), the General Resources Account of the Fund shall be reimbursed annually by the CCR Trust, from resources transferred to the CCR Trust from the SDA, in respect of the expenses of administering SDA resources in the CCR Trust, other than expenses already attributed to other accounts or trusts administered by the Fund, or to the General Resources Account.

4. In accordance with Article XVII, section 3, the Fund prescribes that:

(a) an SDR Department participant or prescribed holder, by agreement with an SDR Department participant or prescribed holder and at the instruction of the Fund, may transfer SDRs to that participant or prescribed holder in effecting a transfer to or from (i) the CCR Trust, or (ii) the Account and subaccounts established pursuant to Section III, paragraph 4(b) of the CCR Trust Instrument; or in effecting a payment due to or by the Fund in connection with financial operations under the CCR Trust or the referred accounts; and

(b) Operations pursuant to these prescriptions shall be recorded in accordance with Rule P-9. (SM/10/97, Sup. 1, 6/23/10) (SM/10/97, Sup. 1, 06/23/10)

Decision No. 14649-(10/64),

June 25, 2010,

as amended by Decision No. 15708-(15/12),

February 4, 2015, 16684-(20/32), March 26, 2020, and 16709-(20/41), April 13, 2020

Attachment A

Instrument to Establish the Catastrophe Containment and Relief Trust

To help fulfill its purposes, the International Monetary Fund (the “Fund”), pursuant to Article V, Section 2(b) of the Fund’s Articles of Agreement, has adopted this Instrument to Establish the Catastrophe Containment and Relief Trust (the “CCR Trust” or “Trust”), which shall be administered by the Fund as Trustee (the “Trustee”). The Trust shall be governed by, and administered in accordance with, the following provisions:

Section I. General Provisions

Paragraph 1. Purposes

The Trust shall assist in fulfilling the purposes of the Fund by providing balance of payments assistance in the form of grants (“Trust grants”) to eligible low-income members that qualify for assistance as set forth in Section III of this Instrument. Such members may request balance of payments assistance in accordance with the terms of this Instrument under either:

(a) the Post-Catastrophe Relief Window (PCR window), in the form of grants that shall be used to deliver temporary relief of debt service payments (interest and principal) on such members’ eligible debt (“debt flow relief”) and, in appropriate cases, permanent debt relief on such debt (“debt stock relief”), where the member experienced a Qualifying Catastrophic Disaster, subject to the terms of this Instrument; or

(b) the Catastrophe Containment Window (CC window), in the form of grants that shall be used to provide immediate debt relief on eligible debt (“immediate debt relief”), where the member experienced a Qualifying Public Health Disaster subject to the terms of this Instrument.

Paragraph 2. Trust Accounts and Resources

(a) For its operations and transactions the Trust shall have a General Account, a PCR Window Account and a CC Window Account, collectively referred to as “the Accounts.” Within each Account, the Trustee may establish such sub-accounts as it deems necessary for the administration of the resources of the Trust.

(b) The resources held in the General Account shall consist of:

(i) transfers from the Special Disbursement Account in accordance with Section V, paragraph 2 of the Multilateral Debt Relief Initiative-I Trust established pursuant to Decision No. 13588-(05/99) MDRI, as amended by Decision No. 14649-(10/64);

(ii) transfers from the Special Disbursement Account in accordance with paragraph 8 of Decision No. 15708-(15/12);

(iii) grant contributions made to the Trust for the General Account;

(iv) the proceeds of loans, deposits and other types of investments made by contributors with the Trust to generate income for the General Account; and

(v) net earnings from investment of resources held in the General Account.

(c) The resources held in the PCR Window Account shall consist of:

(i) grant contributions made to the Trust for the purposes of the PCR Window Account;

(ii) the proceeds of loans, deposits and other types of investments made by contributors with the Trust to generate income for the PCR Window Account; and

(iii) net earnings from investment of resources held in that Account.

(d) The resources held in the CC Window Account shall consist of:

(i) grant contributions made to the Trust for the CC Window Account;

(ii) the proceeds of loans, deposits and other types of investments made by contributors with the Trust to generate income for the CC Window Account; and

(iii) net earnings from investment of resources held in that Account.

(e) For the purpose of grant disbursements as set forth in Section III, paragraph 4 of this Instrument, the Trustee may draw upon resources in the General Account for purposes of providing relief under the PCR window and the CC window, provided that it shall draw first (i) under the PCR Window Account for purposes of PCR window grant assistance, and (ii) under the CC Window Account for purposes of CC window grant assistance.

Paragraph 3. Unit of Account

The SDR shall be the unit of account for commitments and all other operations and transactions of the Trust, provided that commitments for contributions may also be made in currency.

Paragraph 4. Media of Payment of Contributions and Exchange of Resources

(a) Resources provided to the Accounts shall be in any currency.

(b) Payments by the Trust shall be made in U.S. dollars or such other media as may be agreed between the Trustee and the payee.

(c) Contributions to the Trust may also be made in or exchanged for SDRs in accordance with such arrangements as may be made by the Trust for the holding and use of SDRs.

(d) The Trustee may exchange any of the resources of the Trust for other resources.

Section II. Contributions to the Trust

The Trustee may accept contributions of resources for the Accounts of the Trust on such terms and conditions as may be agreed between the Trustee and the respective contributors, subject to the provisions of this Instrument. For this purpose, the Managing Director of the Trustee is authorized to accept grants and enter into loan, deposit, or other types of investment agreements with the contributors to the Trust.

Section III. Trust Grants

Paragraph 1. Eligibility for Assistance

In order to be eligible for relief under the PCR window or the CC window of the Trust, a member shall meet the following requirements:

(a) the member is PRGT-eligible (i.e., is included in the list of members annexed to Decision No. 8240-(86/56) SAF, as amended); and

(b) the member has an annual per capita gross national income, as assessed by the Trustee in accordance with paragraph 1(E) of Decision No. 14521-(10/3), that is below the International Development Association operational cut-off or, for a member qualifying as a “small country” under the definition set forth in paragraph 1(D) of that decision, is less than twice the International Development Association operational cut-off.

Paragraph 2. Post-Catastrophe Relief Window (PCR Window)

(a) Qualification for Assistance

The Trustee shall determine whether an eligible member requesting assistance under the PCR Window qualifies under this Instrument for debt flow relief and, in appropriate cases, for debt stock relief, in accordance with the respective criteria set forth below:

(i) Debt Flow Relief

An eligible member shall qualify for debt flow relief under this window when the Trustee determines that the member is experiencing a balance of payments need that arises from a Qualifying Catastrophic Disaster. For purposes of this Instrument, a Qualifying Catastrophic Disaster shall mean an exceptional natural disaster occurring any time after January 1, 2010 that the Trustee determines, based on available information, including preliminary estimates, has had the following effects on the member: (I) a large portion of the member’s population has been directly affected (i.e., deceased, injured, and/or displaced), such portion normally being at least one third of the population; and (II) a large portion of the member’s economy has been directly affected, as evidenced by either (a) the destruction of more than a quarter of the member’s productive capacity measured by destroyed structures, impact on key economic sectors and public institutions, and other relevant early indicators, or (b) damage in an amount exceeding 100 percent of the member’s GDP prior to the Qualifying Catastrophic Disaster.

(ii) Debt Stock Relief

An eligible member that qualifies for debt flow relief under this window shall also qualify for debt stock relief when the Trustee determines, based on available information, that: (I) the member has substantial balance of payments needs that have been created or exacerbated by the Qualifying Catastrophic Disaster and the subsequent economic recovery efforts and are expected to persist beyond the period covered by debt flow relief; and (II) the resources that would be freed up by the debt stock relief would be critical for meeting these needs. For purposes of (II), resources would normally be considered critical for meeting the member’s needs only if, based on an updated debt sustainability analysis conducted after the Qualifying Catastrophic Disaster, the member has a high level of debt in relation to GDP or exports prior to the delivery of any debt relief after the Qualifying Catastrophic Disaster, typically resulting in an assessment that the member is in debt distress or has a high risk of debt distress. Decisions on a member’s qualification for debt stock relief will normally be adopted by the Trustee in the period beginning six months after the occurrence of the Qualifying Catastrophic Disaster and ending in all cases no later than twenty-four months after such disaster.

(b) Amount and Delivery of Assistance

The Trustee shall deliver assistance to eligible members that it has determined qualify for debt flow or debt stock relief in accordance with the following terms:

(i) Debt Flow Relief

Upon a determination that a member qualifies for debt flow relief pursuant to paragraph 2(a)(i) of this Section, the Trustee shall disburse to the subaccount established for the benefit of the member pursuant to paragraph 4(b) below, a Trust grant in an amount equivalent to all payments on the member’s eligible debt falling due within the period beginning on the date of the debt flow relief decision and ending two years after the occurrence of the Qualifying Catastrophic Disaster. For the purposes of this paragraph, eligible debt shall be defined as all of the member’s debt to the Fund (including to the Fund as Trustee) that was outstanding as of the date of the Qualifying Catastrophic Disaster and in respect of which the member had made regular scheduled debt service payments (interest and principal) before the Qualifying Catastrophic Disaster, plus any disbursements by the Fund (including by the Fund as Trustee) to the member made normally within four months following such disaster, but shall exclude any debt to the Fund that is scheduled to be repaid with assistance under other debt relief trusts administered by the Fund or under paragraph 3 of this Section.

(ii) Debt Stock Relief

I. Upon a determination that a member qualifies for debt stock relief pursuant to paragraph 2(a)(ii) of this Section, the Trustee shall commit an amount up to which the Trust will disburse a Trust grant for debt stock relief to the member pursuant to subparagraph 2(b) (ii)(II) below. The amount committed shall be the amount needed to effect the early repayment of the member’s eligible debt that is outstanding as of the second anniversary of the occurrence of the Qualifying Catastrophic Disaster. The amount actually disbursed pursuant to subparagraph 2(b)(ii)(II) below shall be the amount needed to effect the early repayment of the member’s eligible debt that is outstanding as of the second anniversary of the occurrence of the Qualifying Catastrophic Disaster or on the date of the Trustee’s decision to disburse debt stock relief, whichever is later.

II. The Trustee shall disburse debt stock relief in the amount specified in subparagraph 2(b)(ii)(I) above to the subaccount established for the benefit of the member pursuant to paragraph 4(b) below as of the date the Trustee determines that: (a) a concerted effort exists within the international community to provide similar debt relief to the member, which shall be evidenced by satisfactory assurances regarding the debt relief to be provided by the member’s other official sector creditors whose debts together account for at least eighty percent of the member’s total sovereign external debt outstanding to official creditors (less amounts due to the Fund) at the time of the Qualifying Catastrophic Disaster, (b) the member has provided assurances that it will cooperate with the Trustee in an effort to find solutions to its balance of payments problems and will refrain from any inappropriate policies that could compound these problems, and (c) taking into account the member’s implementation capacity after the Qualifying Catastrophic Disaster, the member has established a track record of adequate macroeconomic policies, normally for a period of at least six months immediately preceding the Trustee’s decision to disburse debt stock relief.

Paragraph 3. Catastrophe Containment Window (CC Window)

(a) Qualification for Assistance

(i) An eligible member shall qualify for immediate debt relief under the CC window when the Trustee determines, that (I) the member is experiencing a balance of payments need arising from a Qualifying Public Health Disaster specified in subparagraph (ii) (I) below, or an exceptional balance of payments need arising from a Qualifying Public Health Disaster specified in subparagraph (ii) (II) below; and (II) the macroeconomic policy framework put in place by the member to address the balance of payments need created by the public health disaster and the ensuing policy response is appropriate.

(ii) For purposes of this Instrument, a Qualifying Public Health Disaster arises either where:¹

(I) a life-threatening epidemic has a sustained presence and has spread across several areas of the member’s territory, causing significant economic disruption and creating a balance of payments need; and the epidemic has the capacity to spread, or is already spreading, rapidly both within and across countries, producing or threatening, significant economic disruption and loss of life. Based on available information (which may take the form of preliminary estimates) and for the purposes of this subparagraph (I), the magnitude of economic disruption that has occurred and is projected to occur in the future would normally be characterized by at least: (a) a cumulative loss of real GDP of 10 percent; or (b) a cumulative loss of revenue and increase of expenditures equivalent to at least 10 percent of GDP. Such economic disruption will be measured relative to staff estimates made prior to the onset of the public health disaster and would reflect, inter alia, sharp curtailments, for disease containment purposes, on the movement of people and products within the country and related declines in production, exports, tax revenues, and international visitors, and also surges in government outlays on relief and containment efforts; OR

(II) a life-threatening global pandemic is inflicting severe economic disruption across the Fund’s membership and is creating balance of payments needs on such a scale as to warrant a concerted international effort to support the poorest and most vulnerable countries through substantial additional grant support and debt service relief. Where the Executive Board determines that a member suffers a Qualifying Public Health Disaster under this test, it is expected that the Fund would be calling for a broad international response to provide support to the CCRT-eligible countries.

(iii) In making a determination of the occurrence of a Qualifying Public Health Disaster pursuant to subparagraph (ii)(I) above, the Fund may be guided by assessments of the health situation and outlook made by national authorities, the World Health Organization, the World Bank, and other relevant agencies. For the purpose of paragraph 3(a)(i) above, the Fund shall make a determination of the occurrence of a Qualifying Public Health Disaster specified in subparagraph (ii)(II) above, guided by assessments of the World Health Organization.

(b) Request for CC Window Assistance

A member requesting assistance under the CC window shall describe in a letter the nature of the public health disaster and the balance of payments needs arising from it, the measures being taken to contain the disaster, including budgetary reallocations, and the macroeconomic policies it is pursuing or plans to pursue to address its balance of payment difficulties.

(c) Amount and Delivery of Assistance

(i) Upon a determination that a member qualifies for assistance pursuant to paragraph 3(a) of this Section, the Trustee will approve grant assistance for debt service relief for an initial tranche covering the member’s eligible debt falling due within a period not exceeding six months from the date of the qualification decision, with respect to paragraph 3(a)(ii)(I), or from the date of the Board determination that a global pandemic exists, with respect to paragraph 3(a)(ii)(II). Subject to the availability of resources in the Trust, the Trustee will approve additional tranches for further periods, provided that the total amount shall not exceed the cumulative debt service falling due to the Fund within two years from the date of the qualification decision, with respect to paragraph 3(a)(ii)(I), or from the date of the Board determination that a global pandemic exists, with respect to paragraph 3(a)(ii)(II).

(ii) The amount of the grant assistance approved by the Trustee in any of the tranches pursuant to (i) above will be equivalent to the total amount of the member’s eligible debt falling due within the period covered under the respective tranche. In approving each tranche, the Trustee shall take into account the availability of resources in the Trust and the likely need of other potentially qualifying members under the Trust.

(iii) The Managing Director will report to the Executive Board periodically on the availability of resources for CC window relief to inform the Trustee’s decision on the commitment of Amount and Delivery of Assistance

(iv) Upon approval of a member’s request for grant assistance under the CC window, the Trustee shall disburse to a subaccount established for the benefit of the member pursuant to paragraph 4(b) below, a Trust grant in the amount that is necessary to repay the member’s eligible debt to the Fund falling due within the period specified in (i) above. For the purposes of this paragraph, eligible debt shall be defined as all of the member’s debt to the Fund (including to the Fund as Trustee) that was outstanding as of the date of the determination by the Fund that the member is qualified to receive grant assistance under this window and related charges and interest falling due over the period specified in (i) above, and in respect of which the member had made regular scheduled debt service payments (principal, charges and interest) before such determination. Eligible debt shall exclude any debt to the Fund that is scheduled to be repaid with assistance under other debt relief trusts administered by the Fund or u under paragraph 2 of this Section.

Paragraph 4. Disbursements

(a) All disbursements of Trust grants shall be subject to the availability of resources to the Trust.

(b) The proceeds of Trust grants approved under the CCR Trust shall be paid into a subaccount for the benefit of the relevant member that is maintained within a separate account (the “Umbrella Account”) established and administered by the Trustee pursuant to this subparagraph, as follows:

(i) The Trustee shall use the proceeds disbursed as debt flow relief under the PCR window (including any income from investments of such proceeds) to make payments on the member’s eligible debt as they fall due within the period specified in paragraph 2(b)(i) above. The Trustee shall use the proceeds disbursed as debt stock relief under the PCR window as set forth in paragraph 2(b)(ii) promptly after such disbursement to effect the early repayment of the member’s eligible debt as of the date specified in the last sentence of paragraph 2(b)(ii)(I) above. If the amounts disbursed by the Trustee to the subaccount exceed the amounts needed to effect payments falling due on, and early repayment of, the member’s eligible debt pursuant to the terms of this Instrument, then the Trustee shall be authorized to retransfer to the Trust an amount equivalent to such excess. Such retransfers will be made to the specific CCR Trust account from which the resources were drawn.

(ii) The Trustee shall use the proceeds disbursed for CC Window grant assistance under paragraph 3(c) promptly after such disbursement to effect the early repayment of an equivalent amount of the member’s eligible debt, with the repayments being attributed to the obligations in the order in which they fall due. However, the proceeds of Trust grants covering charges and interest specified in paragraph 3(c)(iv) above under the CC window shall be paid into the subaccount upon their due date and promptly used to repay the obligation due. If the amounts disbursed by the Trustee to the sub-account exceed the amounts needed to effect early repayment of the member’s eligible debt pursuant to the terms of the CC Window, then the Trustee shall be authorized to retransfer to the Trust an amount equivalent to such excess. Such retransfers will be made to the specific CCR Trust account from which the resources were drawn.

(iii) The terms and conditions for the operation of the Umbrella Account shall be determined by the Trustee.

Paragraph 5. Modifications

Any modification of the provisions of this Section will affect only Trust grants made after the effective date of the modification.

Section IV. Administration of the Trust

Paragraph 1. Trustee

(a) The Trust shall be administered by the Fund as Trustee. Decisions and other actions taken by the Fund as Trustee shall be identified as taken in that capacity.

(b) Subject to the provisions of this Instrument, the Fund in administering the Trust shall apply the same rules as apply to the operation of the General Resources Account of the Fund.

(c) The Trustee, acting through its Managing Director, is authorized:

(i) to make all arrangements, including establishment of accounts in the name of the International Monetary Fund, which shall be accounts of the Fund as Trustee, with such depositories of the Fund as the Trustee deems necessary; and

(ii) to take all other administrative measures that the Trustee deems necessary to implement the provisions of this Instrument.

Paragraph 2. Separation of Assets and Accounts, Audits and Reports

(a) The resources of the Trust shall be kept separate from the property and assets of all other accounts of the Fund, including other administered accounts, and shall be used only for the purposes of the Trust in accordance with this Instrument.

(b) The property and assets held in the other accounts of the Fund shall not be used to discharge liabilities or to meet losses arising out of the administration of the Trust. The resources of the Trust shall not be used to discharge liabilities or to meet losses arising out of the administration of the other accounts of the Fund.

(c) The Fund shall maintain separate financial records and prepare separate financial statements for the Trust in accordance with International Financial Reporting Standards.

(d) The external audit firm selected under Section 20 of the Fund’s By-Laws shall audit the financial transactions and records of the Trust. The audit shall relate to the financial year of the Fund.

(e) The Fund shall report on the resources and operations of the Trust in the Annual Report of the Executive Board to the Board of Governors and shall include in the Annual Report the report of the external audit firm on the Trust.

Paragraph 3. Investment of Resources

(a) Any balance held by the Trust and not immediately needed in operations shall be invested.

(b) Investments may be made in any of the following: (i) marketable obligations issued by international financial organizations and denominated in SDRs or in the currency of a member of the Fund; (ii) marketable obligations issued by a member or by a national official financial institution of a member and denominated in SDRs or in the currency of that member; and (iii) deposits with a commercial bank, a national official financial institution of a member, or an international financial institution that are denominated in SDRs or in the currency of a member.

Section V. Period of Operation and Liquidation

Paragraph 1. Period of Operation

The Trust established by this Instrument shall remain in effect for as long as is necessary, in the judgment of the Fund, to conduct and to wind up the business of the Trust.

Paragraph 2. Liquidation of the Trust

If the Trustee decides to wind up the operations of the Trust, the resources in the Accounts shall be used first to discharge all the liabilities of the Trust. Any amount remaining in the Accounts after the discharge of all the liabilities of the Trust shall be transferred to the General Subsidy Account of the Poverty Reduction and Growth Trust established pursuant to Decision No. 8759-(87/176) ESAF, as amended (“PRGT”), for use in accordance with the provisions of the PRGT Instrument; provided that, at the request of a contributor that has provided resources to the Trust, its pro rata share of any such remaining resources in the Trust, or any portion of such share, shall be distributed to the contributor.

Section VI. Amendment of the Instrument

The Fund may amend the provisions of the Instrument, except that any amendment of Section I, paragraph 1, Section IV, Section V, and this Section shall require the consent of all contributors to the Trust.

Attachment B

Catastrophe Containment and Relief Trust—Terms and Conditions for Administration of Umbrella Account

Pursuant to Section III, paragraph 4 (b) of the Instrument to Establish the Catastrophe Containment and Relief Trust (CCR Trust), the Fund, as Trustee of the CCR Trust, establishes the following terms and conditions for the administration of the Umbrella Account provided for under that provision:

1. The resources of the Umbrella Account shall consist of (i) the proceeds of grants paid into the Umbrella Account for the benefit of a member by the CCR Trust, (ii) contributions by other donors to finance debt relief on a member’s eligible debt to the Fund, and (iii) net earnings from the investment of resources held in the Umbrella Account.

2. Within the Umbrella Account, the Trustee shall establish a separate subaccount for the administration of the resources paid into the Umbrella Account for the benefit of each member for which the resources have been paid. The Trustee shall establish a subaccount within the Umbrella Account, at the latest, whenever the Fund as Trustee of the CCR Trust grants final approval of the disbursement of a Trust grant under the CCR Trust.

3. Following the establishment of a subaccount, the Fund, as Trustee, shall be authorized to use the resources of the subaccount (including any net income from the investment of such resources) to make payments for the benefit of the member as specified in Section III, paragraph 4(b) of the Instrument to Establish the CCR Trust.

4. (a) Resources held in a subaccount of the Umbrella Account and not immediately needed for operations shall be invested.

(b) Investments may be made in any of the following: (i) marketable obligations issued by international financial organizations and denominated in SDRs or in the currency of a member of the Fund; (ii) marketable obligations issued by a member or by a national official financial institution of a member and denominated in SDRs or in the currency of that member; and (iii) deposits with a commercial bank, a national official financial institution of a member, or an international financial institution that are denominated in SDRs or in the currency of a member. Earnings, net of any transactions costs, shall accrue to the subaccount and shall be available for the purposes of the subaccount.

(c) The Managing Director of the Trustee is authorized (i) to make all arrangements, including the establishment of accounts in the name of the Trustee, with such depositories as may be necessary to carry out the operations of the Umbrella Account, and (ii) to take all measures necessary to implement the provisions of this decision.

5. The SDR shall be the unit of account.

(a) Resources received into a subaccount may be in U.S. dollars or such other media as may be determined by the Trustee.

(b) Resources held in a subaccount may be currencies or currencies exchanged for SDRs in accordance with such arrangements as may be made by the Trustee for the holding and use of SDRs.

(c) The Trustee may exchange any of the resources held in a subaccount for other resources.

(d) Payments made from a subaccount shall be made in U.S. dollars or such other media as may be determined by the Trustee.

6. Assets held in the Umbrella Account shall be kept separate from the assets and property of all other accounts of, or administered by, the Trustee. The assets of the Umbrella Account shall not be used to discharge or meet any liabilities, obligations, or losses incurred by the Trustee in the administration of such other accounts. Except as expressly authorized in the CCR Trust Instrument and this decision, the assets and property held in a subaccount of the Umbrella Account shall not be used to discharge or meet any liabilities, obligations, or losses of the Trustee in the administration of any other subaccount of the Umbrella Account.

7. Subject to the provisions of this decision, the Trustee, in administering the Umbrella Account, shall apply, mutatis mutandis, the same rules and procedures as apply to the operations of the General Resources Account of the Fund.

8. No charge shall be levied for the services rendered by the Trustee in the administration, operation, and termination of the Umbrella Account.

(a) The Trustee shall maintain separate financial records and prepare separate financial statements for the Umbrella Account in accordance with International Financial Reporting Standards. The financial statements for the Umbrella Account shall be expressed in SDRs.

(b) The external audit firm selected under Section 20 of the Trustee’s By-Laws shall audit the operations and transactions conducted through the Umbrella Account. The audit shall relate to the financial year of the Trustee.

(c) The Trustee shall report on the resources and operations of the Umbrella Account in the Annual Report of the Executive Board to the Board of Governors and shall include in that Annual Report the report of the external audit firm on the Umbrella Account.

9. (a) The Umbrella Account shall remain in effect for as long as is necessary, in the judgment of the Trustee, to conduct and to wind up the business of the Umbrella Account. A subaccount for a particular member would be wound up when the resources of that subaccount have been exhausted in providing debt relief to the member according to the terms of the CCR Trust Instrument.

(b) Any balance remaining in a subaccount upon termination and after the discharge of all obligations of that subaccount shall be transferred promptly to the specific CCR Trust account from which the resources were drawn; provided that, at the request of a donor that has contributed directly to a subaccount pursuant to paragraph 1(ii) above, its pro rata share of any such resources remaining in the subaccount, shall be distributed to the donor.

The Chair’s Summing Up— Catastrophe Containment and Relief Trust—Approval of Grant Assistance for Debt Service Relief, Executive Board Meeting 20/41, April 13, 2020

Executive Directors determined, effective April 14, 2020, that the COVID-19 pandemic is a Qualifying Public Health Disaster under the Catastrophe Containment and Relief Trust (CCRT) that is inflicting severe economic disruption across the Fund’s membership. The crisis is creating balance of payments needs on scale that warrant concerted international efforts to support the poorest and most vulnerable countries through substantial additional grant support for debt service relief. Directors also approved the technical modifications to the CCRT Instrument, which would facilitate operational implementation of the provision of assistance for debt relief under the Catastrophe Containment (CC) window.

Directors agreed that the CCRT has sufficient financial resources to deliver a first tranche of grants for debt service relief to all 29 countries with outstanding credit to the Fund that are potentially eligible for CCRT assistance over the next six months. They agreed that 25 of these countries that have requested such assistance meet the specific criteria for qualification for debt service relief, and looked forward to considering the requests for assistance of the remaining four eligible members. Directors would consider committing additional tranches, up to a cap of two years through April 13, 2022, in light of the availability of CCRT resources at the end of each tranche period. To this end, Directors stressed the urgency of the ongoing fundraising effort to ensure timely delivery of assistance to the eligible countries.

Directors underscored the importance of monitoring the macroeconomic situations of the recipient countries, including their policy responses to pandemic, and looked forward to an update from staff toward the end of the initial six-month period of debt service relief. In this context, a number of Directors highlighted the need for careful analysis of debt sustainability, safeguards, and accountability, and called for staff assessment on the effectiveness of country policies and use of debt service relief resources prior to the commitment of future tranches.

SU/20/59,

April 15, 2020