Chapter

Poverty Reduction and Growth Facility and Exogenous Shocks Facility Trust

Author(s):
International Monetary Fund
Published Date:
October 2008
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Poverty Reduction and Growth Facility and Exogenous Shocks Facility Trust: Combined balance sheets as at April 30, 2008, and 2007

(In thousands of SDRs)

20082007
Assets
Cash and cash equivalents336,963322,061
Investments (Note 4)4,842,3884,890,267
Loans receivable (Note 5)3,873,0373,784,788
Interest and other receivables33,54030,385
Total assets9,085,9289,027,501
Liabilities and resources
Borrowings (Note 6)4,265,5454,384,835
Interest payable42,16646,833
Other liabilities14,01710,916
Total liabilities4,321,7284,442,584
Resources4,764,2004,584,917
Total liabilities and resources9,085,9289,027,501
The accompanying notes are an integral part of these financial statements.These combined financial statements were approved by the Managing Director and the Director of Finance on June 25, 2008.
The accompanying notes are an integral part of these financial statements.These combined financial statements were approved by the Managing Director and the Director of Finance on June 25, 2008.
/s/ Michael G. Kuhn/s/ Dominique Strauss-Kahn
Director, Finance DepartmentManaging Director

Poverty Reduction and Growth Facility and Exogenous Shocks Facility Trust: Combined statements of income and changes in resources for the years ended April 30, 2008, and 2007

(In thousands of SDRs)

20082007
Assets
Balance, beginning of year4,584,9174,448,715
Investment income (Note 8)261,617184,973
Interest on loans18,47418,465
Interest expense(165,155)(158,165)
Other expenses(1,008)(1,414)
Operational income113,92843,859
Contributions (Note 9) from:
Bilateral donors34,64992,148
Special Disbursement Account30,706195
Net income/changes in resources179,283136,202
Balance, end of year4,764,2004,584,917
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.

Poverty Reduction and Growth Facility and Exogenous Shocks Facility Trust: Combined statements of cash flows for the years ended April 30, 2008, and 2007

(In thousands of SDRs)

20082007
Cash flows from operating activities
Net income179,283136,202
Adjustments to reconcile net income to cash generated by operations
Interest income on investments(187,058)(180,626)
Interest income on loans(18,474)(18,465)
Interest expense165,155158,165
138,90695,276
Changes in other assets135(195)
Changes in other liabilities3,1011,790
Loan disbursements(484,080)(477,079)
Loan repayments395,831512,051
Cash provided by operations53,893131,843
Interest received202,242198,234
Interest paid(169,822)(152,839)
Net cash provided by/(used in) operating activities86,313177,238
Cash flows from investment activities
Net acquisition of investments47,879(7,872)
Net cash provided by/(used in) investment activities47,879(7,872)
Cash flows from financing activities
Borrowings497,470525,673
Repayment of borrowings(616,760)(1,120,304)
Net cash used in financing activities(119,290)(594,631)
Net increase/(decrease) in cash and cash equivalents14,902(425,265)
Cash and cash equivalents, beginning of year322,061747,326
Cash and cash equivalents, end of year336,963322,061
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.

Poverty Reduction and Growth Facility and Exogenous Shocks Facility Trust: Notes to the combined financial statements as at April 30, 2008, and 2007

1. Nature of operations

The Poverty Reduction and Growth Facility Trust (the PRGF Trust), for which the IMF is Trustee, was established in December 1987 to provide loans on concessional terms to qualifying low-income country members. Assistance under the Poverty Reduction and Growth Facility (PRGF) is made available under three-year arrangements in support of macroeconomic and adjustment programs. Effective January 5, 2006, the PRGF Trust was renamed the Poverty Reduction and Growth Facility and Exogenous Shocks Facility Trust (the Trust) to also support programs under the Exogenous Shocks Facility (ESF) to facilitate member countries’ adjustment to sudden and exogenous shocks. Programs under the ESF range from one to two years.

The operations of the Trust are conducted through the Loan Account, the Reserve Account, and three Subsidy Accounts—the PRGF-ESF Subsidy Account, the PRGF Subsidy Account, and the ESF Subsidy Account. The resources of the Trust are held separately from the assets of all other accounts of, or administered by, the IMF and may not be used to discharge liabilities or to meet losses incurred in the administration of other accounts. Combining balance sheets and statements of income and changes in resources for the Trust are provided in Note 12 of these financial statements.

Resources of the Trust not immediately needed in operations are invested in fixed-term deposits or fixed-income securities, as allowed by the instrument establishing the Trust. The Trust’s investment objective is to generate returns that exceed the SDR interest rate over time while minimizing the frequency and extent of negative returns and underperformance.

Loan Account

The resources of the Loan Account consist of the proceeds from borrowings, repayments of principal, and interest payments on loans extended by the Trust.

Reserve Account

The resources of the Reserve Account consist of amounts transferred by the IMF from the Special Disbursement Account and net earnings from investment of resources held in the Reserve Account, net earnings from investment of any resources held in the Loan Account pending their use in operations, and payment of interest on Trust loans to the extent that payment has been made to a lender from the Reserve Account.

The resources held in the Reserve Account are to be used by the Trustee in the event that borrowers’ principal repayments and interest payments, together with the authorized interest subsidy, are insufficient to repay loan principal and interest on borrowings of the Loan Account. The Trustee reviews the adequacy of the Reserve Account regularly to determine whether sufficient resources are available to meet all obligations to the lenders to the Loan Account.

Subsidy Accounts

The resources held in the Subsidy Accounts consist of bilateral contributions to the Trust, including transfers of net earnings from the PRGF Administered Accounts, resources transferred from the Special Disbursement Account, and net earnings from investment of Subsidy Accounts resources.

The resources available in the Subsidy Accounts are drawn by the Trustee to pay the difference, with respect to each interest period, between the interest due from the borrowers under the Trust and the interest due on Loan Account borrowings.

The resources in the PRGF Subsidy Account are earmarked for PRGF loans only, and the resources in the ESF Subsidy Account are earmarked for ESF loans only. The PRGF-ESF Subsidy Account can be used for both PRGF and ESF loans.

To the extent that resources in the PRGF-ESF Subsidy Account and the PRGF Subsidy Account are insufficient for PRGF subsidy operations, the Trustee will transfer to the PRGF Subsidy Account resources in the PRGF-HIPC Trust Account not earmarked for debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative.

2. Summary of significant accounting policies

Basis of preparation and measurement

The combined financial statements include the Loan Account, the Reserve Account, and the Subsidy Accounts. All receivables, payables, and transfers between these accounts have been eliminated during the combination. The combined financial statements of the PRGF-ESF Trust are prepared in accordance with International Financial Reporting Standards (IFRS). The financial statements have been prepared under the historical cost convention, except for the revaluation of financial assets at fair value through profit and loss. Specific accounting principles and disclosure practices, as set out below, are in accordance with and comply with IFRS and have been applied consistently for all periods presented.

Use of estimates

The preparation of financial statements requires IMF management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The determination of estimates requires the exercise of judgment based on various assumptions and other factors, such as historical experience and current and expected economic conditions. Actual results could differ from those estimates.

Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Unit of account

The functional and presentation currency of the Trust is the SDR. The value of the SDR is determined by the IMF each day by summing the values in U.S. dollars, based on market exchange rates, of the currencies in the SDR valuation basket. The IMF reviews the SDR valuation basket every five years. The latest review was completed in November 2005, and the new composition of the SDR valuation basket became effective on January 1, 2006. The currencies in the basket as at April 30, 2008, and 2007 and their amounts were as follows:

CurrencyAmount
Euro0.4100
Japanese yen18.4000
Pound sterling0.0903
U.S. dollar0.6320

As at April 30, 2008, one SDR was equal to US$1.62378 (US$1.52418 as at April 30, 2007).

Foreign currency translation

Foreign currency transactions are recorded at the rate of exchange on the date of the transaction. At the balance sheet date, monetary assets and liabilities denominated in foreign currencies are reported using the closing exchange rates. Exchange differences arising from the settlement of transactions at rates different from those on the originating date of the transaction and unrealized foreign exchange differences on unsettled foreign currency monetary assets and liabilities are included in the determination of net income.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits and other highly liquid short-term investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Investments

Investments are managed primarily by external investment managers. Investments and the related assets and liabilities in accounts managed solely for the Trust and the net asset value of the Trust’s share of pooled investment accounts are reported in the Trust’s balance sheet.

Financial assets at fair value through profit or loss

The Trust has designated its investments in fixed-income securities, other than fixed-term deposits, as financial assets held at fair value through profit or loss since performance is measured on a fair value basis. Such designation may be made only upon initial recognition and cannot subsequently be changed. The designated assets are carried at fair value on the balance sheet with the change in fair value included in the income statement in the period in which they arise.

Recognition

Investments are recognized on the trade date at which the Trust becomes a party to the contractual provisions of the instrument.

Derecognition

Investments are derecognized when the contractual rights to the cash flows from the asset expire, or in transactions in which substantially all the risks and rewards of ownership of the investment are transferred.

Fair value measurement

The determination of the fair value of investments, other than fixed-term deposits, is based on quoted market prices for financial instruments traded in active markets. The carrying amount of fixed-term deposits, which typically have maturities of 12 months or less, approximates the fair value.

Investment income

Investment income comprises interest income, realized gains and losses, and unrealized gains and losses, including currency valuation differences arising from exchange rate movements against the SDR.

Loans

Loans in the Trust are initially recorded at the amount disbursed provided that the present value of the cash flows from stated interest due and the Subsidy Accounts is equal to or exceeds the disbursed amount. Thereafter, the carrying value of the loans is amortized cost.

PRGF and ESF loans are repayable in 10 equal semiannual installments beginning 5½ years after disbursement. Interest on loans accrues at the stated interest rate of ½ of 1 percent per annum. It is the Trust’s policy to exclude from income interest on loans that are six months or more overdue. At each balance sheet date, the loans are reviewed to determine whether there is objective evidence of loan impairment. If any such evidence exists, an impairment loss is recognized to the extent that the present value of estimated future cash flows falls below the carrying amount.

Borrowings

The Trust borrows on such terms and conditions as agreed between the Trustee and the lenders. The principal amounts of the borrowings are repayable in 10 equal semiannual installments 5½ years after drawing. Borrowings are recorded and subsequently stated at amortized cost.

Contributions

Contributions are reflected as increases in resources after the achievement of specified conditions and are subject to bilateral agreements stipulating how the resources are to be used.

Transfers

Internal transfers of resources within the Trust are accounted for under the accrual method of accounting.

Adoption of new International Financial Reporting Standards

During the financial year ended April 30, 2008, the Trust adopted IFRS 7, “Financial Investments: Disclosures” (issued by the IASB in August 2005), which requires disclosures in the financial statements as to the significance of financial instruments for the Trust’s financial position and performance, the nature and extent of risks arising from such instruments, and how those risks are managed (see Note 3).

In September 2007, the International Accounting Standards Board (IASB) issued an amended standard, IAS 1, “Presentation of Financial Statements.” The amended IAS 1 requires presentation of nonowner changes in equity (comprehensive income) either in one statement of comprehensive income or in two statements (a separate income statement and a statement of comprehensive income). The revised IAS 1 will become effective for the financial year ending April 30, 2010, and its implementation is not expected to have a significant impact on the financial position, results of operations, or cash flows of the Trust.

3. Financial risk management

In providing financial assistance to member countries, conducting its operations, and investing its resources, the Trust is exposed to various types of operational and financial risks, including credit, market, and liquidity risks.

Credit risk

Lending

Credit risk refers to potential losses on loans receivable owing to the inability, or unwillingness, of member countries to repay loans. Measures to help mitigate the Trust’s credit risk include policies on access limits, program design, monitoring, and conditionality attached to its financing.

The Trust has established limits on overall access to its resources. The limits for PRGF and ESF arrangements are currently set at 140 percent (in exceptional cases up to 185 percent) and 50 percent (higher in exceptional circumstances), respectively, of members’ IMF quotas. In each case, the amount will depend on the country’s balance of payments need, the strength of its adjustment program, and its previous and outstanding use of IMF credit. Access in excess of these limits can be granted in exceptional circumstances subject to certain procedural requirements and substantive criteria that have been adopted by the Executive Board.

Disbursements under PRGF and ESF arrangements are made in tranches and subject to conditionality in the form of performance criteria and periodic reviews. Safeguards assessments of member central banks are undertaken to provide the Trustee with reasonable assurance that the banks’ legal structure, controls, accounting, reporting, and auditing systems are adequate to ensure the integrity of their operation and ensure that Trust loan resources are used for intended purposes. Misreporting by member countries on performance criteria and other conditions may entail early repayment for noncomplying borrowers.

To protect the lenders to the Trust, resources are accumulated in the Reserve Account and are available to repay the lenders in the event of delays in repayment or nonpayment by borrowers. As at April 30, 2008, available resources in the Reserve Account amounted to SDR 3.6 billion (SDR 3.4 billion as at April 30, 2007).

The maximum credit risk exposure is the carrying value of the Trust’s outstanding loans and the undrawn commitments (see Notes 5 and 10, respectively).

Investments

Credit risk on investment activities represents the potential loss that the Trust may incur if obligors and counterparties default on their contractual obligations. Credit risk is managed through the conservative range of eligible investments, including (i) domestic government bonds of countries in the euro area, Japan, the United Kingdom, and the United States—that is, members whose currencies are included in the SDR basket; (ii) obligations of international financial organizations; (iii) claims on the Bank for International Settlements (BIS); and (iv) deposits with a commercial bank, a national official financial institution, or an international financial institution. Credit risk is further minimized by restricting eligible investments to financial instruments rated AA or higher by a major credit rating agency, and for deposits, the Trust may invest in obligations issued by institutions with a credit rating of A or higher. Compliance controls are enforced to ensure that the portfolio does not include a security whose rating is below the minimum rating required.

The credit risk exposure in the Trust portfolio as at April 30 was as follows:

20082007
RatingPercentageRatingPercentage
Government bonds
FranceAAA0.69%AAA
GermanyAAA14.39%AAA11.81%
ItalyAA0.22%AA0.20%
JapanAA4.15%AA3.51%
United KingdomAAA2.87%AAA2.90%
United StatesAAA10.23%AAA9.19%
Nongovernment bonds
Bank for International
SettlementsNot rated46.61%Not rated43.55%
Other financial institutionsAAA6.33%AAA5.97%
Fixed-term deposits and other
Bank for International
SettlementsNot rated13.61%Not rated18.32%
Other financial institutionsAAAAAA0.33%
AA0.90%AA4.22%,
100.00%100.00%

The Trustee also engages in a securities lending program with its custodian, as lending agent, to enhance the return on its investments. Under this program, marketable securities are lent temporarily to other institutions in exchange for a fee and collateral equal to at least 100 percent of the market value of the lent securities. The Trustee maintains effective control over securities lent and therefore continues to report such securities as invested assets. The Trust participates in the lending agent’s collateral fund but does not recognize the receipt of the collateral held by the lending agent or the obligation to return the collateral as there exists no right to sell or repledge the collateral. As at April 30, 2008, the market value of securities lent to other institutions under the securities lending program and the collateral amounted to SDR 1,108 million and SDR 1,132 million, respectively (SDR 1,000 million and SDR 1,023 million as at April 30, 2007, respectively).

Market risk

Interest rate risk

Lending

Interest rate risk is the risk that future cash flows will fluctuate because of changes in market interest rates. The Trust accumulates resources to cover any interest shortfall arising from the difference between the market-based interest rate paid on borrowings and the concessional rate applicable to outstanding loans. Should such resources be deemed inadequate for this purpose, the Trust instrument allows an increase in the interest rate levied on outstanding loans.

Investments

The investment portfolio is exposed to interest rate movements. The interest rate risk is mitigated by limiting the duration of the portfolio to a weighted average of 1–3 years.

A 50 basis point increase in the average effective yields of the Trust portfolio as at April 30, 2008, would result in a loss of SDR 40.2 million, or approximately 0.77% of the portfolio (SDR 36.9 million, or 0.63% as at April 30, 2007), whereas a 50 basis point decrease would result in a gain of SDR 40.8 million, or approximately 0.78% of the portfolio (SDR 37.5 million, or 0.63%, as at April 30, 2007).

Exchange rate risk

Lending

Exchange rate risk is the exposure to the effects of fluctuations in foreign currency exchange rates on an entity’s financial position and cash flows. The Trust has minimal exchange rate risk on its loans and borrowings, as disbursements, repayments, and interest payments are denominated in SDRs.

Investments

In accordance with current guidelines, exchange rate risk on investments is managed by investing in financial instruments denominated in SDRs or in constituent currencies of the SDR with the relative amount of each currency matching its weight in the SDR basket. In addition, the portfolio is regularly rebalanced to reflect currency weights in the SDR basket.

The value of the SDR is the sum of the market values, in U.S. dollar equivalents, of the predetermined amounts of the four currencies in the SDR valuation basket. The effective share of each currency in the valuation of the SDR fluctuates daily and depends on the prevailing exchange rate in the London market at noon against the U.S. dollar on that day. Since the share of a currency in the SDR valuation basket is determined by reference to the market value against the U.S. dollar, the exchange risk can be measured indirectly by the exchange rate movements between a basket currency and the U.S. dollar. The net effect on the investment portfolio of a 10 percent increase in the market exchange rates of the basket currencies against the U.S. dollar, as at April 30, would be as follows:

20082007
Net gain/lossNet gain/loss
Percentage

change of

currency unit

against SDR
In

millions

of SDRs
As a percentage

of investments

not denominated

in SDRs
Percentage

change of

currency unit

against SDR
In

millions

of SDRs
As a percentage

of investments

not denominated

in SDRs
Euro5.91%−0.24−0.01%6.18%2.730.06%
Japanese yen9.71%1.140.03%9.92%1.950.05%
Pound sterling8.81%0.770.02%8.71%0.470.01%

The net effect of a 10 percent decrease in the market exchange rate of the basket currencies against the U.S. dollar as at April 30, would be as follows:

20082007
Net gain/lossNet gain/loss
Percentage

change of

currency unit

against SDR
In

millions

of SDRs
As a percentage

of investments

not denominated

in SDRs
Percentage change

of currency

unit against

SDR
In

millions

of SDRs
As a percentage

of investments

not denominated

in SDRs
Euro−6.27%1.670.04%−6.52%−0.47−0.01%
Japanese yen−8.24%0.290.01%−8.22%0.550.01%
Pound sterling−9.00%0.580.01%−8.92%1.920.04%

The Trust has other assets and liabilities denominated in currencies other than SDRs, but the exchange rate risk exposure from these assets and liabilities is very limited.

Liquidity risk

Lending

Liquidity risk is the risk of nonavailability of resources to meet the Trust’s financing needs and obligations. The Trust must have usable resources available to meet members’ demand for credit, and uncertainties in the timing and amount of credit extended to members expose the Trust to liquidity risk.

The Trust conducts semiannual reviews to determine the adequacy of the resources accumulated in the Subsidy and Reserve Accounts. Resources in the Subsidy Accounts are expected to exceed estimated needs based on the present level of loans outstanding, and the balance in the Reserve Account is projected to increase until it reaches a level sufficient to cover all outstanding Trust obligations to lenders.

Investments

To minimize the risk of loss from liquidating long-term investments, the Trust holds resources in readily marketable short-term financial instruments to meet anticipated liquidity needs.

4. Investments

Investments consisted of the following at April 30:

20082007
(In thousands of SDRs)
Fixed-term deposits404,000834,641
Fixed-income securities4,438,3884,055,626
Total4,842,3884,890,267

The maturities of the investments are as follows:

Investments maturing in

financial year

ending April 30
(In thousands of SDRs)
2009576,282
20102,437,679
20111,739,651
201225,580
201363,196
Total4,842,388

5. Loans receivable

Resources of the Loan Account of the PRGF-ESF Trust are committed to qualifying members for a three-year period, upon approval by the Trustee of three-year PRGF arrangements or ESF arrangements with durations of one to two years in support of members’ macroeconomic and structural adjustment programs. Interest on the outstanding loans is set at the rate of ½ of 1 percent per annum.

At April 30, 2008, and 2007, the resources of the Loan Account included cumulative advances from the Reserve Account of SDR 74 million and SDR 75 million, respectively, resulting from the nonpayment of principal by Zimbabwe.

Scheduled repayments of loans by borrowers, including Zimbabwe’s overdue obligations, are summarized below:

Period of repayment,

financial year

ending April 30
(In thousands of SDRs)
2009436,876
2010468,231
2011529,769
2012559,804
2013508,516
2014 and beyond1,295,971
Overdue73,870
Total3,873,037

As at April 30, 2008, scheduled repayments of loans included loans totaling SDR 658 million due from members that are potentially eligible for debt relief under the Multilateral Debt Relief Initiative (MDRI).

As at April 30, use of credit in the Trust by the largest users was as follows:

20082007
(In millions of SDRs and percent of

total PRGF-ESF credit)
Largest user of credit825.921.3%922.124.4%
Three largest users of credit1,654.142.7%1,792.347.4%
Five largest users of credit2,028.252.4%2,085.955.1%

The five largest users of Trust credit as at April 30, 2008, in descending order, were Pakistan, Democratic Republic of the Congo, Bangladesh, Liberia, and Kenya. Outstanding credit by member is provided in Schedule 1.

The concentration of outstanding credit by region was as follows as at April 30:

20082007
(In millions of SDRs and percent of

total PRGF-ESF credit outstanding)
Africa1,64542.5%1,42737.7%
Asia and Pacific1,35635.0%1,45838.5%
Europe44511.5%46212.2%
Latin America and Caribbean1644.2%1373.6%
Middle East and Turkey2636.8%3018.0%
Total3,873100%3,785100%

6. Borrowings

Outstanding borrowings by member are provided in Schedule 3. The weighted average interest rate on borrowings was 3.87 percent per annum for the financial year ended April 30, 2008 (3.42 percent per annum for the financial year ended April 30, 2007).

During the financial year ended April 30, 2008, the PRGF-ESF Trust made early repayments of SDR 16 million (SDR 368 million for the financial year ended April 30, 2007) to lenders following the repayment of Trust loans by members that received HIPC Initiative and MDRI grant assistance.

Scheduled repayments of borrowings are summarized below:

Period of repayment,

financial year

ending April 30
(In thousands of SDRs)
2009608,729
2010592,727
2011624,519
2012610,386
2013514,928
2014 and beyond1,314,256
Total4,265,545

The following summarizes the borrowing agreements in effect as at April 30:

Amount undrawn
Amount undrawn20082007
(In thousands of SDRs)
Loan Account2,732,5763,216,657
Subsidy Accounts126,36538,754

7. HIPC Initiative, Multilateral Debt Relief Initiative, and other debt relief

Under the MDRI, effective January 5, 2006, the IMF administers resources to provide debt relief to HIPCs and non-HIPCs with annual per capita incomes of US$380 or less and to HIPCs with annual per capita income of more than US$380.

Qualifying members at or below the per capita income threshold receive grant assistance from the MDRI-I Trust, which was funded initially by resources transferred from the Special Disbursement Account (SDR 1.5 billion). Grant assistance to HIPCs with per capita income above the threshold is provided from the MDRI-II Trust through resources contributed by individual members (SDR 1.12 billion). Grant assistance from the MDRI Trusts provides debt relief to cover the full stock of debt owed to the IMF (including loans under the PRGF-ESF Trust) as at December 31, 2004, that is not covered by the HIPC Initiative assistance and remains outstanding at the time the member qualifies for such relief.

For the financial year ended April 30, 2008, one HIPC member reached the completion point under the HIPC Initiative and combined HIPC and MDRI grant assistance of SDR 10 million was disbursed to settle PRGF-ESF Trust obligations. Since the IMF adopted the MDRI, 23 HIPC members and 2 non-HIPC members have received grant assistance totaling SDR 2,702 million under the HIPC Initiative and MDRI combined. The eligible debt covered by the grant assistance has included GRA and PRGF-ESF Trust obligations of SDR 101 million and SDR 2,601 million, respectively. Disbursed MDRI assistance by member is provided in Schedule 5. No impairment loss has been recognized in the Loan Account.

Since the debt owed to the IMF as at December 31, 2004, decreases over time, the actual debt eligible for MDRI assistance for the remaining potentially eligible members depends on the timing of their completion points under the HIPC Initiative. The qualification of members for HIPC and MDRI debt relief is reviewed periodically as progress by these members toward reaching the completion point is being made.

8. Investment income

Investment income comprised the following for the financial years ended April 30:

20082007
(In thousands of SDRs)
Interest income187,058180,626
Realized gains/(losses), net19,089(3,128)
Unrealized gains, net55,4297,406
Exchange rate gains, net4169
Total261,617184,973

9. Contributions

The Trustee accepts contributions for the Subsidy Accounts of the PRGF-ESF Trust on such terms and conditions as agreed between the Trustee and the contributors. At April 30, 2008, cumulative contributions amounted to SDR 3,110 million (SDR 3,075 million as at April 30, 2007). Contributions by member are provided in Schedule 2.

10. Commitments under loan arrangements

An arrangement under the PRGF or ESF is a decision that gives a member the assurance that the IMF as Trustee stands ready to provide foreign exchange or SDRs during a specified period and up to a specified amount in accordance with the terms of the decision. At April 30, 2008, undrawn balances under 25 loan arrangements amounted to SDR 458 million (SDR 592 million under 29 arrangements at April 30, 2007). Undrawn balances by member are provided in Schedule 4.

11. Related party transactions

For the financial years ended April 30, 2008, and 2007, the Executive Board of the IMF decided to forgo the reimbursement by the Trust to the General Resources Account for the cost of administering the Trust. Such reimbursement would have amounted to SDR 43 million and SDR 48 million, respectively.

The cumulative contributions to the Trust from the IMF, through the Special Disbursement Account, as at April 30, 2008, and 2007 were as follows:

20082007
(In thousands of SDRs)
Reserve Account2,8932,862
Subsidy Accounts870870
Total3,7633,732

The PRGF-ESF Subsidy Account also receives contributions from member countries that had placed deposits in the Poverty Reduction and Growth Facility Administered Accounts at low interest rates. Net investment income transferred from the Poverty Reduction and Growth Facility Administered Accounts to the PRGF-ESF Subsidy Account amounted to SDR 0.05 million for the financial years ended April 30, 2008, and 2007.

12. Combining balance sheets and statements of income and changes in resources

The balance sheets and statements of income and changes in resources of the PRGF-ESF Trust are presented below:

Note 12

Poverty Reduction and Growth Facility and Exogenous Shocks Facility Trust: Combining balance sheets as at April 30, 2008, and 2007

(In thousands of SDRs)

Loan AccountReserve AccountSubsidy AccountsCombined
20082007200820072008200720082007
Assets
Cash and cash equivalents156,42334,12384,66157,08895,879230,850336,963322,061
Investments270,000594,3413,500,7933,316,5981,071,595979,3284,842,3884,890,267
Loans receivable3,873,0373,784,7883,873,0373,784,788
Accrued account transfers(7,548)(904)60,93358,572(53,385)(57,668)
Interest and other receivables28,56227,2281433064,8352,85133,54030,385
Total assets4,320,4744,439,5763,646,5303,432,5641,118,9241,155,3619,085,9289,027,501
Liabilities and resources
Borrowings4,190,3304,307,02475,21577,8114,265,5454,384,835
Interest payable42,04446,69212214142,16646,833
Other liabilities14,01710,909714,01710,916
Total liabilities4,246,3914,364,62575,33777,9594,321,7284,442,584
Resources74,08374,9513,646,5303,432,5641,043,5871,077,4024,764,2004,584,917
Total liabilities and resources4,320,4744,439,5763,646,5303,432,5641,118,9241,155,3619,085,9289,027,501

Note 12

Poverty Reduction and Growth Facility and Exogenous Shocks Facility Trust: Combining statements of income and changes in resources for the years ended April 30, 2008, and 2007

(In thousands of SDRs)

Loan AccountReserve AccountSubsidy AccountsCombined
20082007200820072008200720082007
Balance, beginning of year74,95175,4693,432,5643,319,0721,077,4021,054,1744,584,9174,448,715
Investment income22,50227,418180,622113,89158,49343,664261,617184,973
Interest on loans18,47418,46518,47418,465
Interest expense(164,751)(157,822)(404)(343)(165,155)(158,165)
Other expenses(803)(972)(205)(442)(1,008)(1,414)
Operational (loss)/income(123,775)(111,939)179,819112,91957,88442,879113,92843,859
Contributions from:
Bilateral donors34,64992,14834,64992,148
Special Disbursement Account30,70619530,706195
Transfers between
Loan and Reserve Accounts(3,441)(378)3,441378
Loan and Subsidy Accounts126,348111,799(126,348)(111,799)
Net income (loss)/changes in resources(868)(518)213,966113,492(33,815)23,228179,283136,202
Balance, end of year74,08374,9513,646,5303,432,5641,043,5871,077,4024,764,2004,584,917

Schedule 1

Poverty Reduction and Growth Facility and Exogenous Shocks Facility Trust: Schedule of outstanding PRGF loans as at April 30, 2008

(In thousands of SDRs)

MemberBalancePercent
Afghanistan, Islamic Republic of47,1001.22
Albania50,6261.31
Armenia94,1432.43
Azerbaijan55,0721.42
Bangladesh316,7308.18
Benin3,5200.09
Burkina Faso27,2300.70
Burundi69,3001.79
Cameroon13,2500.34
Cape Verde8,3940.22
Central African Republic28,7960.74
Chad32,3380.83
Congo, Democratic Republic of the511,46713.20
Congo, Republic of23,5800.61
Cóte d’Ivoire54,9311.42
Djibouti9,6320.25
Dominica7,6880.20
Gambia, The6,0000.15
Georgia149,0153.85
Ghana105,4502.72
Grenada1,5600.04
Guinea37,6780.97
Guinea-Bissau3,0480.08
Guyana37,0600.96
Haiti43,3001.12
Honduras20,3420.53
Kenya166,8004.31
Kyrgyz Republic89,1732.30
Lao People’s Democratic Republic14,9490.39
Lesotho21,0000.54
Liberia207,2605.35
Madagascar42,7721.10
Malawi31,0670.80
Mali8,0000.21
Mauritania8,3800.22
Moldova95,9642.48
Mongolia15,1440.39
Mozambique9,7400.25
Nepal49,9001.29
Nicaragua53,6801.39
Niger25,3800.66
Pakistan825,92821.32
Rwanda6,2730.16
São Tomé and Príncipe2,0460.05
Senegal17,3300.45
Sierra Leone23,1130.60
Sri Lanka38,3900.99
Tajikistan29,4000.76
Tanzania11,2000.29
Togo13,2600.34
Uganda6,0000.15
Vietnam95,2202.46
Yemen, Republic of79,5252.05
Zambia55,0231.42
Zimbabwe73,8701.91
Total PRGF loans outstanding3,873,037100.00

Schedule 2

Poverty Reduction and Growth Facility and Exogenous Shocks Facility Trust: Cumulative contributions to and resources of the Subsidy Accounts as at April 30, 2008

(In thousands of SDRs)

Subsidy Accounts
PRGF-ESFPRGFESFTotal
Direct contributions to the Subsidy Accounts1
Argentina27,06827,068
Australia11,89611,896
Bangladesh57889667
Canada199,86814,976214,844
China11,30011,300
Czech Republic10,00410,004
Denmark38,29938,299
Egypt10,00210,002
Finland22,68422,684
France17,42317,423
Germany153,443153,443
Iceland3,2963,296
India8,5801,3279,907
Ireland6,9116,911
Italy174,497174,497
Japan527,185527,185
Korea, Republic of34,82434,824
Luxembourg9,64268010,322
Morocco7,2847,284
Netherlands99,27899,278
Norway28,0745,37433,448
Oman2,2432,243
Russian Federation14,70614,706
Spain5,2575,257
Sweden110,887110,887
Switzerland41,20541,205
Turkey10,00010,000
United Kingdom345,280345,280
United States126,079126,079
Total direct contributions to the Subsidy Accounts2,057,7932,09620,3502,080,239
Net income transferred to the Subsidy Accounts
Austria40,45140,451
Belgium77,95377,953
Botswana1,3521,352
Chile2,9102,910
Greece25,94125,941
Indonesia5,0035,003
Iran, Islamic Republic of1,3461,346
Portugal3,4963,496
Spain—Government of Spain (ICO)907907
Total net income transferred to the Subsidy Accounts159,359159,359
2,217,1522,09620,3502,239,598
Contributions from Special Disbursement Account870,320870,320
Total contributions received3,087,4722,09620,3503,109,918
Cumulative net income of the Subsidy Accounts1,037,3721,7551,3561,040,483
Contributions to MDRI-II Trust(1,120,000)(1,120,000)
Transfers to PRGF Subsidy Account(95,042)95,042
Transfers to ESF Subsidy Account(35)35
Resources disbursed to subsidize Trust lending(1,887,921)(98,893)(1,986,814)
Total resources of the Subsidy Accounts1,021,84621,7411,043,587

In addition to direct contributions, a number of members also make loans available to the Loan Account on concessional terms.

In addition to direct contributions, a number of members also make loans available to the Loan Account on concessional terms.

Schedule 3

Poverty Reduction and Growth Facility and Exogenous Shocks Facility Trust: Schedule of borrowing agreements as at April 30, 2008

(In thousands of SDRs)

Interest rateAmount ofAmountOutstanding
Member(In percent)agreementdrawnbalance
Loan Account
BelgiumVariable1350,000266,53181,000
CanadaVariable1400,000400,000188,075
ChinaVariable1200,000189,02285,022
EgyptVariable1155,600105,35825,611
FranceVariable12,100,0001,418,950572,539
GermanyVariable12,050,0001,077,256332,863
ItalyVariable1800,000572,944485,470
JapanVariable12,934,8002,720,1851,835,611
NetherlandsVariable1450,000283,738223,559
Spain—Bank of SpainVariable1425,000221,047179,637
Spain—Government of Spain (ICO)0.5067,00067,00028,365
SwitzerlandVariable1401,700279,493152,578
Total—Loan Account10,334,1007,601,5244,190,330
PRGF-ESF Subsidy Account
Pakistan0.5010,00010,00010,000
Saudi Arabia0.50136,20038,20038,200
Spain—Government of Spain (ICO)0.5067,00038,63524,015
Trinidad and Tobago0.503,0003,0003,000
Total—Subsidy Accounts216,20089,83575,215
Total borrowing agreements10,550,3007,691,3594,265,545

The loans under these agreements are made at variable, market-related rates of interest.

The loans under these agreements are made at variable, market-related rates of interest.

Schedule 4

Poverty Reduction and Growth Facility and Exogenous Shocks Facility Trust: Status of loan arrangements as at April 30, 2008

(In thousands of SDRs)

Date ofExpirationAmountUndrawn
Memberarrangementdateagreedbalance
Afghanistan, Islamic Republic ofJun. 26, 2006Jun. 25, 200981,00033,900
AlbaniaFeb. 1, 2006Jan. 31, 20098,5232,435
ArmeniaMay 25, 2005May 24, 200823,0003,320
BeninAug. 5, 2005Aug. 4, 20086,1902,670
Burkina FasoApr. 23, 2007Apr. 22, 201015,05011,040
CameroonOct. 24, 2005Oct. 23, 200818,5705,320
Central African RepublicDec. 22, 2006Dec. 21, 200936,20015,500
ChadFeb. 16, 2005May 31, 200825,20021,000
Congo, Republic ofDec. 6, 2004Jun. 5, 200854,99031,410
Gambia, TheFeb. 21, 2007Feb. 20, 201014,0008,000
GrenadaApr. 17, 2006Apr. 16, 200910,5308,970
GuineaDec. 21, 2007Dec. 20, 201048,19541,310
HaitiNov. 20, 2006Nov. 19, 200973,71030,410
Kyrgyz RepublicMar. 15, 2005May 31, 20088,8801,270
LiberiaMar. 14, 2008Mar. 13, 2011239,02031,760
MadagascarJul. 21, 2006Jul. 20, 200954,99023,566
MalawiAug. 5, 2005Aug. 4, 200838,1704,771
MauritaniaDec. 18, 2006Dec. 17, 200916,1007,720
MoldovaMay 5, 2006May 4, 2009110,88034,320
NicaraguaOct. 5, 2007Oct. 4, 201071,50059,600
NigerJan. 31, 2005May 31, 200826,320940
RwandaJun. 12, 2006Jun. 11, 20098,0103,450
São Tomé and PríncipeAug. 1, 2005Jul. 31, 20082,960423
Sierra LeoneMay 10, 2006May 9, 200931,11022,000
TogoApr. 21, 2008Apr. 20, 201166,06052,800
1,089,158457,905

Schedule 5

Poverty Reduction and Growth Facility and Exogenous Shocks Facility Trust: Disbursed Multilateral Debt Relief Initiative assistance as of April 30, 2008

(In thousands of SDRs)

Eligible debtSources of grant assistance
MemberPRGF-ESFGRATotalMDRI-I TrustMDRI-II TrustPRGF-HIPC Trust
Benin36,06036,06034,1111,949
Burkina Faso62,12062,12057,0535,067
Bolivia71,15489,780160,934154,8196,115
Cambodia56,82956,82956,829
Cameroon173,260173,260149,16924,091
Ethiopia112,073112,07379,64532,428
Gambia9,4169,4167,4351,981
Ghana265,389265,389220,02045,369
Guyana45,05845,05831,57213,486
Honduras107,457107,45798,2409,217
Madagascar137,286137,286128,4928,794
Malawi27,02710,84437,87114,52723,344
Mali75,06675,06662,43412,632
Mauritania32,90932,90930,2282,681
Mozambique106,560106,56083,03923,521
Niger77,55477,55459,81517,739
Nicaragua140,481140,48191,76248,719
Rwanda52,74352,74320,17432,569
São Tomé and Príncipe1,4261,4261,049377
Senegal100,323100,32394,7625,561
Sierra Leone117,343117,34376,75540,588
Tajikistan69,30869,30869,308
Tanzania234,031234,031206,99027,041
Uganda87,72887,72875,84511,883
Zambia402,592402,592398,4714,121
Total2,601,193100,6242,701,8171,219,4101,083,134399,273

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