Concessional Lending Timeline

1975: The IMF establishes oil facilities to provide temporary balance of payments financing to those members adversely affected by higher oil prices, with a rate of charge of 2 percent. The loan resources are provided by several oil-producing countries and subsidy contributions made by close to 25 member countries.

1976: A Trust Fund is set up for concessional lending, financed through the sale of 25 million ounces of the IMF’s gold during 1976-80. Trust Fund loans include a 5½-year grace period and are repayable in 10 years, at an interest rate of ½ percent a year.¹

1986: The Structural Adjustment Facility is created to provide concessional financing to help low-income countries address balance of payments financing needs arising from structural weaknesses. The SAF Trust is financed by reflows of Trust Fund repayments, and its loans are extended on the same terms.

1987: The Enhanced Structural Adjustment Facility (ESAF) Trust offers higher access under 3-year arrangements.

1994: The ESAF Trust is enlarged with new bilateral loans and subsidy contributions.

1999: The ESAF is renamed the Poverty Reduction and Growth Facility (PRGF) and refocused toward reducing poverty and strengthening growth on the basis of country-owned poverty-reduction strategies.

2001: An Administered Account is set up at the IMF for donors to subsidize Emergency Post-Conflict Assistance purchases from the GRA (EPCA) to eligible countries (Box 3.2).

2005: Subsidized assistance is extended to eligible members receiving Emergency Natural Disaster Assistance (ENDA) purchases from the GRA.

2006: The Exogenous Shocks Facility (ESF) is set up within the PRGF Trust to assist low-income countries facing sudden and exogenous shocks (Box 3.3). To implement the ESF, the PRGF Trust is renamed the Poverty Reduction and Growth Facility and Exogenous Shocks Facility (PRGF-ESF) Trust.

2008: The Executive Board modifies the ESF to provide shocks assistance more rapidly and with streamlined conditionality. In particular, a rapid-access component (ESF–RAC) allows a member access via an outright disbursement of up to 25 percent of its quota with no upper-credit-tranche (UCT) conditionality (which involves a set of policies sufficient to correct balance of payments imbalances and enable repayment to the Fund). The high-access component (ESF-HAC) provides financing under an IMF program.

2010: The PRGF–ESF Trust is converted into the PRGT in the wake of the sweeping reform of concessional assistance by the Executive Board. Three new facilities are created: the Extended Credit Facility (ECF), which succeeds the PRGF to provide financial assistance to countries with protracted balance of payments problems; the Standby Credit Facility (SCF) to address short-term balance of payments needs, allowing also for precautionary use; and the Rapid Credit Facility (RCF) to provide rapid, low-access financing with limited conditionality to meet urgent balance of payments needs. The SCF replaces the ESF-HAC, and the RCF replaces both the ESF-RAC and subsidized ENDA and EPCA to eligible countries.

2012: In September, the Executive Board approves a strategy to make the PRGT self-sustaining for the longer term. The IMF’s concessional lending is normally to be subsidized by returns on existing resources rather than new bilateral contributions. However, loan resources continue to be provided by bilateral lenders.

2013: In October, resources needed to sustain concessional lending to low-income countries at an average annual capacity of around SDR 1.25 billion, which is broadly in line with estimated demand for IMF support to the world’s poorest countries, was secured. A critical mass of 151 member countries committed to provide to the Poverty Reduction and Growth Trust (PRGT) their share in the partial distribution of the general reserve of SDR 1.75 billion which was attributed to windfall profits remaining from the partial sale of IMF gold. This amounted to more than 90 percent of the distribution that was approved in September 2012. This distribution followed a similar partial distribution of SDR 0.7 billion of general reserves attributable to windfall profits from gold sales which took place in October 2012.

Subsidization of Emergency Assistance and Its Financing

Since 1962, the IMF has provided emergency assistance to member countries afflicted by natural disasters. In 1995, the IMF’s emergency assistance was broadened to include countries in the aftermath of conflict. This assistance was provided under the Emergency Natural Disaster Assistance and Emergency Post-Conflict Assistance (ENDA/EPCA) Facility, which were financed by GRA resources. Financial support through EPCA was subsidized for low-income countries from May 2001 onward and that for ENDA support from January 2005 onward. The Rapid Credit Facility (RCF) replaced subsidized use of ENDA/EPCA for low-income countries in January 2010.

The RCF provides rapid concessional financial assistance with limited conditionality to low-income countries facing urgent balance of payments needs (see Table 3.1).

Terms: Access to RCF financing is determined on a case-by-case basis and is generally limited to 18.75 percent of quota a year and 75 percent of quota cumulatively. However, under the RCF’s shocks window, access is available up to 37.5 percent of quota a year and 75 percent on a cumulative basis. Financing under the RCF has a grace period of 5½ years and a final maturity of 10 years.

Subsidized Financing: In May 2001, the interest rate on ENDA/EPCA loans was lowered to 0.5 percent a year through subsidies from bilateral donors for postconflict cases eligible for IMF concessional facilities. After January 2005, subsidized rates were also available for emergency assistance for natural disasters at a member’s request—again, financed by donor contributions. As of April 30, 2013, contributions to subsidize ENDA/EPCA emergency assistance totaled SDR 41 million from 19 donors. The 2009 reform of the IMF’s concessional facilities set the interest rate on financing under the RCF on an exceptional basis at zero from 2010 through 2016. In July 2015, the Executive Board set the interest rate on the RCF to zero percent. The ENDA/EPCA Subsidy Account remained open temporarily to subsidize emergency purchases outstanding on the effective date of the PRGT reform (that is, as of January 7, 2010). All of these purchases were fully repaid by April 4, 2013. Accordingly, the account was terminated on February 1, 2014, with most of the remaining subsidy resources transferred to the PRGT subsidy account. Between 2001 and 2013, the account had enabled subsidization of SDR 406 million in purchases under EPCA/ENDA.

Exogenous Shocks Facility

On November 23, 2005, the IMF Executive Board approved the establishment of the Exogenous Shocks Facility (ESF) within the Poverty Reduction and Growth Facility (PRGF). The ESF was designed to provide concessional financing to low-income countries that had no PRGF arrangement and were experiencing exogenous shocks. For purposes of the ESF, the Executive Board defined an exogenous shock as an event beyond the control of the authorities of the member country that had a significant negative impact on the economy. The ESF was modified several times and was superseded in 2009 by the Rapid Credit Facility (RCF) and Standby Credit Facility (SCF).

Because the ESF was established as a new facility under the PRGF Trust, it was necessary to mobilize additional loan and subsidy resources to make it operational. Resources were sought from bilateral creditors and secured by the PRGF Reserve Account. There were pledges of SDR 211.3 million in subsidy resources from 11 contributing members and about SDR 0.7 billion in loan resources for ESF-specific lending from one lender.

The ESF was modified in 2008 with the establishment of two separate modalities, the High-Access Component (ESF-HAC) and the Rapid-Access Component (ESF-RAC). The ESF-RAC made loan disbursements outright, rather than under an arrangement as required for the ESF-HAC.

As part of the 2009 LIC facility reforms, the RCF replaced the ESF-RAC, and the SCF replaced the ESF-HAC. Existing ESF-HAC arrangements remained in effect until their expiration or cancellation.

Policy Support Instrument

The Executive Board established the Policy Support Instrument (PSI) in 2005. The PSI is a nonfinancial instrument that supports countries in a broadly stable and sustainable macroeconomic position—that is, low-income countries that may not need or want IMF financial assistance but seek to consolidate their economic performance with IMF monitoring and support and seek explicit Executive Board endorsement of their program and policies.

Purpose: The PSI is designed to promote a close policy dialogue between the IMF and a member country. It provides more frequent IMF assessments of the member’s economic and financial policies than is available through the regular annual surveillance. This support from the IMF also delivers clear signals to donors, creditors, and the general public about the strength of the country’s policies.

Eligibility: The PSI is available to all Poverty Reduction and Growth Trust (PRGT)-eligible countries with a poverty-reduction strategy in place and that have a policy framework focused on consolidating macroeconomic stability, while deepening structural reforms in key areas in which growth and poverty reduction are constrained. Countries should have established a good track record of macroeconomic management and institutions that are able to support continued good performance, including in response to shocks.

Duration and repeated use: A PSI is approved for 1 to 4 years and may be extended for a maximum of 5 years. After the expiration or cancellation of the PSI, a successor PSI may be requested as long as the qualification criteria are met. There is no limit on the number of successor PSIs.

The PSI is a valuable complement to the lending facilities under the PRGT. If short-term financing needs arise, PSI users can request concurrent support under the Standby Credit Facility, or under the Rapid Credit Facility

As of April 30, 2016, the IMF’s Executive Board had approved PSIs for seven members: Cabo Verde (formerly Cape Verde), Mozambique, Nigeria, Rwanda, Senegal, Tanzania, and Uganda.

Interest Rate Regime for Concessional Facilities

Prior to the 2009 reform of IMF concessional lending facilities, the interest rate on the IMF’s concessional loans, including Exogenous Shock Facility (ESF) loans, was fixed at 0.5 percent over a 10-year maturity, with a 5%-year grace period. The reform reduced the interest rates on all concessional loans while tailoring repayment terms under the different facilities of the Poverty Reduction and Growth Trust (PRGT) according to the type of balance of payments need. The interest rate was initially zero for the Extended Credit Facility (ECF) and Rapid Credit Facility (RCF) and 0.25 percent for the Standby Credit Facility (SCF) and ESF. However, in the wake of the global financial crisis, effective January 7, 2010, the Executive Board waived all interest payments for 2010 and 2011 on all outstanding concessional credit through the end of January 2012, including subsidized emergency assistance through the Emergency Natural Disaster Assistance (ENDA) and Emergency Post-Conflict Assistance (EPCA) under the General Resources Account (GRA).

The interest rate structure is reviewed every 2 years for all concessional loans (except balances outstanding under the old ESF which will continue to carry a rate of 0.25 percent once the temporary interest waiver expires). At each review, the interest rate levels would normally be adjusted in line with developments in SDR interest rates, within the ranges shown in the table below. The new interest rates following reviews will apply to all existing and subsequent credit disbursed.

The first review of the interest rate structure was concluded in December 2011. Given the severe downside risks to the global economy, the Executive Board endorsed a 1-year extension of the temporary interest waiver on all PRGT loans through the end of 2012, and a zero interest rate on outstanding ECF and RCF loans, and 0.25 percent on outstanding SCF loans from January 1, 2013, through December 31, 2013. The waiver was extended for a further two years in December 2012, and in December 2014 the Executive Board approved the extension of the temporary interest waiver on concessional loans through end-December 2016 in view of the global economic crisis.¹ In July 2015, the Executive Board agreed to set the interest rate on the RCF at zero percent.

Interest Rate Mechanism for Concessional Facilities

(Percent per year)¹

Source: Finance Department, International Monetary Fund.Note: SDR = Special Drawing Right.

¹The average SDR rate is based on the most recent 12 months.

Interest Rate Mechanism for Concessional Facilities

(Percent per year)¹

	Extended Credit Facility	Rapid Credit Facility	Standby Credit Facility
SDR Rate Less Than 2 Percent	0.00	0.00	0.25
SDR Rate 2-5 Percent	0.25	0.00	0.50
SDR Rate Greater Than 5 Percent	0.50	0.00	0.75

Source: Finance Department, International Monetary Fund.Note: SDR = Special Drawing Right.

¹The average SDR rate is based on the most recent 12 months.

View Table

Interest Rate Mechanism for Concessional Facilities

(Percent per year)¹

	Extended Credit Facility	Rapid Credit Facility	Standby Credit Facility
SDR Rate Less Than 2 Percent	0.00	0.00	0.25
SDR Rate 2-5 Percent	0.25	0.00	0.50
SDR Rate Greater Than 5 Percent	0.50	0.00	0.75

Source: Finance Department, International Monetary Fund.Note: SDR = Special Drawing Right.

¹The average SDR rate is based on the most recent 12 months.

Poverty Reduction Strategies

The Poverty Reduction Strategy (PRS) approach was initiated by the IMF and the World Bank in 1999 in the context of the HIPC Initiative. Countries were required to adopt and implement a PRS, set out in a Poverty Reduction Strategy Paper (PRSP), to qualify for the decision and completion points under the HIPC Initiative. Country-owned PRSPs were the basis of sustained program relationships with the IMF under the Extended Credit Facility and Policy Support Instrument (the nonfinancing instrument available to the IMF’s low-income members). PRSPs aimed to provide the crucial link between national public actions, donor support, and development outcomes.

The core principles underlying the PRS approach are that such strategies should be:

• country driven

• based on broad participation of civil society to promote national ownership of strategies

• results oriented and focused on outcomes that will benefit the poor

• comprehensive in recognizing the multidimensional nature of poverty

• partnership oriented, involving coordinated participation of development partners (government, domestic stakeholders, external donors)

• based on a long-term perspective for poverty reduction.

The 2009 reform of concessional facilities and the 2013 Review of Facilities for Low-Income Countries eased the procedural requirements related to the PRS while underscoring the importance of maintaining a strong focus on poverty reduction in low-income countries. Programs supported by the IMF’s concessional lending facilities will, when possible, include specific quantitative targets to safeguard social and other priority spending, consistent with the priorities in national poverty-reduction strategies.

In June 2015 the Executive Board of the IMF reviewed the policy on the PRS in the context of engagement with its low-income members. The Board reiterated the importance of anchoring Fund-supported programs for low-income countries in strategies to achieve sustained poverty reduction and growth. It was also recognized that a majority of countries eligible for concessional financing under the PRGT had completed the HIPC process and were no longer required to produce PRS documentation for the purpose of debt relief. In parallel, countries had been increasingly producing PRS documentation for their own domestic purposes on timelines determined by national needs. Reflecting these developments, the World Bank had decided to delink its concessional financial support from the PRS process. In that context, the Executive Board agreed to reforms to the Fund’s PRS policy in the context of ECF arrangements and PSIs. The key objectives of the reform include: (1) maintain a clear link between a member’s PRS and its policies under a Fund-supported program with streamlined PRS documentation; (2) preserve national ownership of the PRS process; and (3) allow flexibility in PRS procedures to reflect country circumstances. For ECF arrangements and PSIs, documentation requirements would be satisfied by 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.¹

Debt Relief Timeline

1996: The IMF and World Bank jointly launch the Heavily Indebted Poor Countries (HIPC) Initiative to provide assistance through grants that lower recipient countries’ debt service repayments to the IMF.

1999: The HIPC Initiative is further enhanced to provide faster, deeper, and broader debt relief.

2006: The IMF implements the Multilateral Debt Relief Initiative (MDRI) to provide full relief of eligible (pre-2004) IMF debt to eligible HIPCs and other low-income countries. The HIPC Initiative and the MDRI are financed through bilateral contributions and IMF resources.

2010: In June, following the devastating earthquake in Haiti, the IMF introduces the Post-Catastrophe Debt Relief (PCDR) Trust, which allows the IMF to join international debt relief efforts when eligible low-income countries are hit by catastrophic natural disasters. The PCDR Trust is initially financed with the IMF’s own resources, with the expectation of replenishment through donor contributions, as necessary.

2015: In February, the IMF transforms the Post-Catastrophe Debt Relief (PCDR) Trust to create the Catastrophe Containment and Relief (CCR) Trust. This broadens the range of situations covered by IMF disaster assistance to include epidemics with international spillover potential. The CCR Trust has two windows, each with different purposes, qualification criteria, and assistance terms. The CCR Trust was initially financed with the remaining balance of resources in the PCDR Trust, the residual balances of the MDRI-I and MDRI-II Trusts, and bilateral contributions. Additional bilateral resources, are being sought to support the capacity of the Trust to finance future debt relief for countries experiencing catastrophes.

The HIPC Sunset Clause

Under the sunset clause, the HIPC Initiative was initially set to expire at the end of 1998. This was meant to prevent the initiative from becoming permanent, to minimize moral hazard, and to encourage early adoption of reforms by HIPCs. The expiration date was subsequently extended four times to allow more time for eligible countries to undertake qualifying programs.

With the last extension, until the end of 2006, the IMF and World Bank Boards decided to close the initiative to new entrants by ring-fencing its application to those countries that met the income and indebtedness criteria based on debt data at the end of 2004. In April 2006, the IMF endorsed and closed a list of 14 countries that were assessed to have met these criteria, and these countries were grandfathered into the initiative: seven countries that were previously assessed eligible for HIPC Initiative debt relief (Central African Republic, Comoros, Côte d’Ivoire, Liberia, Somalia, Sudan, and Togo), four additional countries (Eritrea, Haiti, the Kyrgyz Republic, and Nepal), and three countries that chose not to participate (Bhutan, Lao P.D.R., and Sri Lanka). Sri Lanka later graduated from PRGT eligibility and therefore from eligibility for the HIPC Initiative. In 2007, Afghanistan was assessed to be HIPC-eligible after its debt-reconciliation process was completed (based on end-2004 debt data) and included in the ring-fenced list of countries. In 2009, Nepal chose not to participate in the initiative.

In December 2011, the IMF and the World Bank Executive Boards agreed to add end-2010 indebtedness as a criterion for eligibility for assistance under the HIPC Initiative, as well as to ring-fence further the list of eligible or potentially eligible countries based on that criterion. The expanded criteria eliminated from eligibility three countries: Bhutan and Lao P.D.R., both of which had previously indicated that they chose not to participate, and the Kyrgyz Republic because its external debt was assessed as well below the initiative’s thresholds.

The cost to the IMF for providing debt relief to the protracted arrears countries was not included in the original cost estimates for the HIPC Initiative, and so additional financing will need to be secured when these members are ready to clear their arrears and embark on the HIPC Initiative.

Topping Up HIPC Assistance

Under the Enhanced HIPC Initiative, additional debt relief beyond that committed at the decision point can be committed at the time of the completion point on a case-by-case basis to bring the ratio of the net present value (NPV) of debt-to-exports to 150 percent (or NPV of debt-to-fiscal-revenue to 250 percent). The burden-sharing approach is based on a creditor’s exposure after both enhanced HIPC relief and additional bilateral debt reduction. Topping-up assistance for eligible HIPCs is calculated on the basis of the debt stock before the delivery of Multilateral Debt Relief Initiative (MDRI) relief.

The additional topping-up assistance is committed only if the member’s declining debt sustainability stems primarily from a fundamental change in its economic circumstances as a result of exogenous factors. Moreover, the IMF will only deliver topping-up assistance once satisfactory financing assurances have been received from other creditors indicating they will also provide their share of debt relief under the HIPC Initiative. These indications of satisfactory financing assurances are similar to assurances required for the provision of HIPC debt relief at the completion point. This approach also ensured that the IMF’s MDRI debt relief was additional to assistance under the HIPC Initiative. As of April 30, 2015, the IMF has provided additional topping-up assistance to six countries for a total of SDR 62.7 million in NPV terms.

IMF Topping-Up of HIPC Assistance

(Millions of SDRs, in NPV terms; as of April 30, 2016)

Source: Finance Department, International Monetary Fund.Note: NPV = net present value.

IMF Topping-Up of HIPC Assistance

(Millions of SDRs, in NPV terms; as of April 30, 2016)

			Percent of	Dates of		Time until Satisfactory Financing
			Original			Assurances Were in Place
	Country	Amount	Commitment	Commitment	Disbursement	(months)
1	Burkina Faso	10.9	65	April 2002	October 2004	30.8
2	Ethiopia	18.2	68	April 2004	March 2005	11.1
3	Malawi	10.1	43	August 2006	December 2006	3.7
4	Niger	9.7	45	April 2004	March 2005	11.4
5	Rwanda	13.0	38	April 2005	August 2005	4.6
6	Säo Tomé and Príncipe	0.8	…	March 2003	December 2008	9.5
	Total	62.7
	Average	10.4	51.9			11.8

Source: Finance Department, International Monetary Fund.Note: NPV = net present value.

View Table

IMF Topping-Up of HIPC Assistance

(Millions of SDRs, in NPV terms; as of April 30, 2016)

			Percent of	Dates of		Time until Satisfactory Financing
			Original			Assurances Were in Place
	Country	Amount	Commitment	Commitment	Disbursement	(months)
1	Burkina Faso	10.9	65	April 2002	October 2004	30.8
2	Ethiopia	18.2	68	April 2004	March 2005	11.1
3	Malawi	10.1	43	August 2006	December 2006	3.7
4	Niger	9.7	45	April 2004	March 2005	11.4
5	Rwanda	13.0	38	April 2005	August 2005	4.6
6	Säo Tomé and Príncipe	0.8	…	March 2003	December 2008	9.5
	Total	62.7
	Average	10.4	51.9			11.8

Source: Finance Department, International Monetary Fund.Note: NPV = net present value.

Liberia’s Debt Relief

Liberia was in arrears to the IMF from 1984 until March 14, 2008, when it regularized its relations with the IMF through the clearance of SDR 543 million in arrears. This paved the way for Liberia to receive new financing and debt relief.

New financing: On March 14, 2008, with financing from a bridge loan provided by the United States, Liberia cleared its long-standing overdue obligations to the IMF. On the same day, the IMF’s Executive Board approved an Extended Credit Facility (ECF; formerly the PRGF) and Extended Fund Facility (EFF) arrangements amounting to SDR 239.02 million and SDR 342.77 million, respectively. Disbursements under the ECF and EFF arrangements were front-loaded in order to repay the bridge loan.

Debt relief: On March 18, 2008, the IMF and the World Bank committed to provide Liberia debt relief under the HIPC Initiative. The IMF Executive Board also agreed that upon reaching the completion point, Liberia would receive MDRI-type (beyond-HIPC) debt relief to cover any remaining debt originating under the successor ECF and EFF arrangements that corresponded to the stock of arrears at the time of arrears clearance.

Fundraising: A large number of IMF member countries contributed to the financing package of debt relief for Liberia. Bilateral contributions from 102 countries, including low-income countries, were facilitated by a partial distribution from the balances of the First Special Contingent Account (SCA-1) and the proceeds of deferred charges adjustments used to offset the impact on IMF income from Liberia’s arrears.

In June 2010, Liberia received SDR 549 million in debt relief from the IMF. The IMF debt relief was associated with the stock of arrears at arrears clearance, subject to HIPC and beyond-HIPC assistance (SDR 427 million and SDR 116 million, respectively), and remaining HIPC assistance associated with the first disbursement of new credit under the ECF (SDR 5.5 million).

The Multilateral Debt Relief Initiative (MDRI)

In June 2005, the Group of 8 (G8) major industrial countries proposed that three multilateral institutions—the IMF, the International Development Association (IDA) of the World Bank, and the African Development Fund (AfDF)—provide resources beyond the enhanced HIPC initiative to help a group of low-income countries advance toward the United Nations Millennium Development Goals, by canceling 100 percent of their debt claims on those countries. The decision to grant debt relief was a separate responsibility of each institution, with varying approaches to coverage and implementation. In early 2007 the Inter-American Development Bank decided to join this initiative and provided similar debt relief to the five HIPCs in the Western Hemisphere.

The IMF Executive Board adopted the MDRI in November 2005, and it became effective on January 5, 2006. The countries eligible for MDRI debt relief included countries that reached the completion point under the HIPC Initiative and those, with income per capita below $380 a year, with outstanding debt to the IMF on December 31, 2004. Under the IMF’s MDRI, qualifying members received 100 percent debt relief on the full stock of debt owed to the IMF as of December 31, 2004, that remained outstanding at the time of the provision of debt relief and was not covered by HIPC Initiative assistance. To qualify for the relief, the IMF Executive Board also required that these countries were current on their obligations to the IMF and demonstrated satisfactory performance in macroeconomic policies, implementation of a poverty-reduction strategy, and public expenditure management.

Immediately following the effective date of the MDRI decision in January 2006, the IMF delivered MDRI debt relief totaling SDR 2.0 billion to 19 qualifying countries. These countries included 17 HIPCs that had reached their completion points¹ and two non–HIPCs. Total IMF MDRI debt relief granted to 30 qualifying countries reached SDR 2.3 billion.²

Funding for MDRI did not involve any new resource mobilization. The MDRI-I and MDRI-II Trusts were composed of one account each which received and provided resources for debt relief under the MDRI to two groups of countries differentiated by their levels of income per capita. The MDRI-I Trust was financed with IMF resources of SDR 1.5 billion that were transferred from the SDA, representing the IMF’s resources from past gold sales. The MDRI-II Trust was financed by a direct, one-time transfer of SDR 1.12 billion from the PRGF-ESF Subsidy Account of the PRGT, representing bilateral resources from 37 contributors. There is no longer any outstanding MDRI-eligible debt to the Fund. In February 2015 the balance of the MDRI-I Trust (SDR 13.2 million) was transferred to the CCR Trust; and in August 2015, the MDRI-II Trust was liquidated and its residual balance (SDR 38.9 million) was transferred to the CCR Trust.

Country Coverage of the MDRI

Country Coverage of the MDRI

		Eligible under the “MDRI-I Trust” (per capita income at or below $380)	Eligible under the “MDRI-II Trust” (per capita income above $380)
Countries that have benefited from MDRI
	“Completion point” HIPCs: 35 countries have reached the completion point under the Enhanced HIPC Initiative	Afghanistan, Burkina Faso, Burundi, Central African Republic, Democratic Republic of the Congo, Ethiopia, The Gambia, Ghana, Guinea-Bissau, Liberia, Madagascar, Malawi, Mali, Mozambique, Niger, Rwanda, Säo Tomé and Príncipe, Sierra Leone, Tanzania, Togo, Uganda	Benin, Bolivia, Cameroon, Comoros, Republic of Congo, Côte d’Ivoire, Guinea, Guyana, Haiti, Honduras, Mauritania, Nicaragua, Senegal, Zambia
	Non-HIPC countries (2) with per capita income below $380 and outstanding debt to the IMF	Cambodia, Tajikistan

View Table

Country Coverage of the MDRI

		Eligible under the “MDRI-I Trust” (per capita income at or below $380)	Eligible under the “MDRI-II Trust” (per capita income above $380)
Countries that have benefited from MDRI
	“Completion point” HIPCs: 35 countries have reached the completion point under the Enhanced HIPC Initiative	Afghanistan, Burkina Faso, Burundi, Central African Republic, Democratic Republic of the Congo, Ethiopia, The Gambia, Ghana, Guinea-Bissau, Liberia, Madagascar, Malawi, Mali, Mozambique, Niger, Rwanda, Säo Tomé and Príncipe, Sierra Leone, Tanzania, Togo, Uganda	Benin, Bolivia, Cameroon, Comoros, Republic of Congo, Côte d’Ivoire, Guinea, Guyana, Haiti, Honduras, Mauritania, Nicaragua, Senegal, Zambia
	Non-HIPC countries (2) with per capita income below $380 and outstanding debt to the IMF	Cambodia, Tajikistan

Trust Assets: Investments in Support of Concessional Financing

The IMF manages several trusts, funded and invested to provide positive returns to augment its lending capacity to low-income countries. The IMF acts as trustee, and these trusts are separate from general quota resources. The trusts have been established to meet specific needs.

The trusts include contributions from the IMF, from its members, and from other sources. The IMF’s contributions have included funds from the special disbursement account. Other funding sources include multilateral institutions and bilateral creditors and donors, who have provided grants, deposits, and loans at zero or below-market interest rates. As of April 2016, the trust resources available for investment totaled about SDR 8.2 billion. Most of these assets (93 percent) were in the Poverty Reduction and Growth Trust (PGRT). The trust to support the Heavily Indebted Poor Countries (HIPC) Initiative held 5 percent of total trust assets, and the Catastrophe Containment and Relief (CCR) Trust had 2 percent.

Investment Strategy: Between 1987 and 2000, the trust assets were invested in either SDR-denominated deposits at the Bank for International Settlements (BIS) or short-term debt instruments issued by government or official institutions. In March 2000, to supplement the resources available for concessional lending, the Executive Board endorsed a strategy focused on longer-term investments with the aim of enhancing returns. Short-term deposits are kept to a minimum, and the bulk of the funds are invested over longer horizons in line with a 1- to 3-year SDR-weighted government bond benchmark. Since 2000, about 5 to 10 percent of the trust resources have been held in short-term deposits with the BIS to ensure adequate liquidity to meet the operational requirements of managing inflows from donations and repayments and outflows for loans. In 2016, the Executive Board started a review of the investment strategy for Trust Accounts taking into account developments in the concessional financing framework, changes in market conditions and the recent reviews of the investment strategy for the Subaccounts of the Investment Account (see Chapter 5).

Investment Provisions of Trusts: The investment provisions of the trusts define the eligible investments, which generally consist of domestic government bonds of member countries, bonds and other marketable obligations of eligible national and international financial organizations, deposits with the BIS, and deposits with commercial banks.

As with the Fixed-Income Subaccount of the Investment Account, the investments are carried out by external managers (except for BIS investments which are managed by staff), and assets are held in safekeeping by custodian banks. Although the resources and records of the Investment Account and the trusts are separate, the investment activities for both portfolios are carried out in a consistent way in order to realize the cost benefits of economies of scale.

All trust operations and transactions are denominated in SDRs, but this is not necessarily the case for all trust investments. Aside from SDR deposits with the BIS, investments in the currencies that comprise the SDR are weighted in alignment with the SDR basket to mitigate currency risk. When the relative prices of assets in the various currencies diverge, the portfolio is rebalanced periodically to further reduce risk.

The 2009 Fundraising Exercise

As part of the 2009 reform of the IMF concessional lending facilities, a major fundraising drive was launched to secure an additional SDR 10.8 billion in loan resources and SDR 1.5 billion in subsidy resources to support projected demand for concessional loans of SDR 11.3 billion during 2009-14.

Loan resources: In 2009, the IMF staff initially projected that loan resources of about SDR 9 billion would be needed to ensure a projected lending capacity of SDR 11.3 billion during 2009-11. However, the target was subsequently raised to SDR 10.8 billion to allow for a 20 percent buffer for encashment purposes. By the end of 2011, 14 lenders had pledged SDR 9.8 billion in loan resources, including seven lenders that participate in the encashment regime.

Subsidy resources: In 2009, the IMF staff projected resources needed to fully subsidize lending during 2009-14 at SDR 2.5 billion in end-2008 net present value (NPV) terms. With SDR 1.0 billion available at the time, additional subsidy resources of SDR 1.5 billion were needed. The IMF Executive Board agreed to a financing package composed of mostly internal sources that broadly covered the SDR 1.5 billion NPV target:

• a transfer of SDR 0.62 billion from the Poverty Reduction and Growth Trust (PRGT) Reserve Account to the General Subsidy Account (GSA) and new bilateral contributions of SDR 0.2-0.4 billion

• delayed reimbursement to the GRA for PRGT administrative costs for three financial years, FY2010-12, of SDR 0.15-0.20 billion

• use of SDR 0.5-0.6 billion linked to gold sales profits from a distribution to members of reserves attributed to gold sales profits.

The Executive Board endorsed the transfer of resources from the Reserve Account to the GSA.¹ As of March 31, 2016, 26 members had committed SDR 214.1 million in new bilateral subsidy resources, near the lower bound of the target range. The equivalent of the estimated costs of administering the PRGT was transferred from the Reserve Account to the GSA—SDR 38.4 million in FY2010, SDR 46.4 million in FY2011, and SDR 63.1 million in FY2012.

Reimbursement of Administrative Expenses Associated with Concessional Lending Operations

The Office of Budget and Planning (OBP) provides the Finance Department (within the IMF) with an estimate of the cost of administering the IMF’s concessional lending operations at the end of each financial year. Since the inception of the Trust Fund in 1976, all such administrative expenses have been accounted for and the general rule is that costs are reimbursed to the General Resources Account (GRA). In 1987, the IMF Executive Board adopted a decision providing for annual reimbursement to the GRA of the expenses incurred in conducting the business of the Enhanced Structural Adjustment Facility, now the Poverty Reduction and Growth Trust (PRGT).

Exceptions to the general rule have been agreed by the Executive Board in the context of funding initiatives since 1998 to increase concessional lending capacity or provide debt relief. During FY1998-2004, the Executive Board agreed to redirect SDR 366.2 million of such payments from the GRA to the PRGF-HIPC Trust to help finance both subsidy needs and debt relief. Similarly, during FY2005–09, SDR 237.3 million was redirected to benefit the subsidy account of the PRGF-ESF Trust.

Reimbursements were resumed as part of the new income model endorsed by the Executive Board in 2009. However, the new income model provides for an exception, which allowed temporary suspension of the annual reimbursements to the GRA for PRGT expenses if a determination is made that the resources of the trust are likely to be insufficient to support anticipated demand for PRGT assistance, and the IMF has been unable to obtain additional subsidy resources to cover the anticipated demand.

As part of the 2009 concessional financing reforms, the Executive Board decided that, for a period of 3 years, starting in FY2010, an amount equivalent to the expenses of operating the PRGT would be transferred from the PRGT Reserve Account to the General Subsidy Account of the PRGT instead of to the GRA. This generated additional PRGT subsidy resources of SDR 147.9 million.

In September 2012, the Executive Board approved a financing strategy for the PRGT aimed at placing concessional lending on a self-sustaining basis over the longer term. This strategy involves establishing an annual base lending envelope of SDR 1¼ billion by using available resources and contributions from members linked to the windfall profits from the recent gold sales. Part of the financing strategy called for reimbursement of the GRA for PRGT administrative expenses to recommence in FY2013 and continue thereafter. If, however, demand for PRGT borrowing substantially exceeds the base envelope for an extended period, the strategy for the self-sustained PRGT allows the Executive Board to consider further temporary suspension of reimbursement.

Administrative Expenses Associated with SAF/PRGF/PRGT Operations, 1987–2016

(Millions of SDRs)

Source: Finance Department, International Monetary Fund.Note: SAF = Structural Adjustment Facility; PRGF = Poverty Reduction and Growth Facility; PRGT = Poverty Reduction and Growth Trust.

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Administrative Expenses Associated with SAF/PRGF/PRGT Operations, 1987–2016

(Millions of SDRs)

Source: Finance Department, International Monetary Fund.Note: SAF = Structural Adjustment Facility; PRGF = Poverty Reduction and Growth Facility; PRGT = Poverty Reduction and Growth Trust.

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Administrative Expenses Associated with SAF/PRGF/PRGT Operations, 1987–2016

(Millions of SDRs)

Source: Finance Department, International Monetary Fund.Note: SAF = Structural Adjustment Facility; PRGF = Poverty Reduction and Growth Facility; PRGT = Poverty Reduction and Growth Trust.

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Making the Poverty Reduction and Growth Trust Sustainable

A three-pillar strategy to ensure that the PRGT has sufficient resources to meet projected demand for IMF concessional lending over the long-term was set out in Proposal to Distribute Remaining Windfall Gold Sales Profits and Strategy to Make the Poverty Reduction and Growth Trust Sustainable (September 17, 2012). It consists of:

1. A base envelope of about SDR 1¼ billion in annual lending capacity, which is expected to cover concessional lending needs over normal periods. While financing commitments can vary substantially from year to year, the self-sustaining PRGT can build up capacity in years with low levels of new lending commitments and draw down capacity in years when demand is high. This implies that the base envelope could cover periods where demand in individual years could be much higher, as long as fluctuations average out over a number of years.

2. Contingent measures that can be put in place when average financing needs exceed the base envelope by a substantial margin for an extended period. If the Executive Board considers that the self-sustaining capacity will decline substantially below SDR 1¼ billion, it could decide to activate a range of contingent measures, including (1) reaching additional understanding on bilateral fundraising efforts among a broad range of the membership; (2) suspending for a limited period the reimbursement of the GRA for PRGT administrative expenses; and (3) modifying access, blending, interest rate, and eligibility policies to reduce the need for subsidy resources.

3. A principle of self-sustainability under which future modifications to facilities for low-income countries would be expected to ensure that the demand for IMF concessional lending can reasonably be met with the resources available under the first and second pillars under a plausible range of scenarios.¹

The estimate of a self-sustained capacity of SDR 1¼ billion is based on the projected annual returns on the balances in the four PRGT subsidy accounts—including all existing subsidy resources and those facilitated by two partial distributions of amounts in the IMF general reserve attributed to the windfall gold sales profits—and investment income from the Reserve Account in the steady state.

Poverty Reduction and Growth Trust Self-Sustainability

Source: Finance Department, International Monetary Fund.

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Poverty Reduction and Growth Trust Self-Sustainability

Source: Finance Department, International Monetary Fund.

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Poverty Reduction and Growth Trust Self-Sustainability

Source: Finance Department, International Monetary Fund.

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