Like the PRGF, loans under the ESF carry an interest rate of 0.5 percent and semiannual repayments, beginning 5½ years and ending 10 years after the disbursement. Purchases under emergency assistance for natural disasters (ENDA) and post-conflict situations (EPCA) as well as under the CFF are subject to the GRA rate of charge and repurchase obligations, beginning 3¼ years and ending 5 years after the purchase. For PRGF-eligible member countries an interest subsidy (subject to availability) brings the rate of charge for ENDA and EPCA down to 0.5 percent.
This note was prepared by Mumtaz Hussain and Carlos Leite (PDR), and draws on related Board papers and discussions, including Strengthening the Fund's Ability to Assist Low-Income Countries Meet Balance of Payments Needs Arising from Sudden and Exogenous Shock and Establishment of an Exogenous Shocks Facility Under the Poverty Reduction and Growth Facility Trust, 10/04/05.
Unless specifically noted herein, the ESF is subject to the same modalities and rules applicable to the PRGF.
Guidelines on PRGF augmentation are discussed in Operational Guidance Note on Access Under the Poverty Reduction and Growth Facility, 11/10/2004.
The reliance on a specified set of qualifying shocks, a strictly mechanical formula for the assessment of financing need, and a clawback requirement for disbursements subsequently deemed to be in excess of actual financing need contributed to a drop in the usage of the CFF.
A member may not simultaneously have one arrangement under the ESF and another arrangement under the PRGF.
Shocks due to known erosions in trade preferences, such as those envisaged by the Trade Integration Mechanism (TIM), might qualify for the ESF but would require a case-by-case consideration. In general, a PRGF arrangement may be more appropriate due to the type of structural reforms normally needed and the likelihood that the shock would be foreseen well in advance.
A need is considered temporary if the need indicators can reasonably be expected to be reversed over a relatively short period, given the country’s external prospects and its ability to implement timely and effective adjustment policies. The determination of a protracted balance of payments problem for the PRGF involves an examination of past, present, and prospective balance of payments developments, and is based on a broader set of indicators, including stagnant exports, rising cost of debt service, depressed imports, and need for structural adjustment efforts over a number of years. Moreover, in many cases, protracted balance of payments problems may not manifest themselves in an actual need until further financing is available, because a lack of financing requires policies that constrain actual need.
Establishment of an Exogenous Shocks Facility Under the Poverty Reduction and Growth Facility Trust, 10/04/05, paragraph 5.
For this purpose and consistent with the approach used under stand-by arrangements, the definition of balance of payments need would be the one specified in Article V, Section 3(b)(ii) (i.e., a member’s balance of payments, its reserve position or development in its reserves).
Establishment of an Exogenous Shocks Facility Under the Poverty Reduction and Growth Facility Trust, 10/04/05.
For a discussion on policy conditionality, including in the case of purchases in the upper credit tranches, please see Guidance on the Design and Implementation of IMF Conditionality—Preliminary Considerations, 05/31/2002.
Guidelines on Conditionality, 8/23/02 and Decision No. 12864-(02/102), adopted September 25, 2002.
In cases where the period of an ESF arrangement exceeds one year, the member needs to present a detailed statement of the policies and measures it intends to pursue for at least the first 12 months of the arrangement.
As ESF and PRGF arrangements cannot be in place simultaneously, an off-track PRGF arrangement would need to be cancelled if it had not yet expired before a request for an ESF arrangment was possible. Conversely, an ESF arrangement would need to be cancelled prior to the (delayed) request for a PRGF arrangement.
Eligibility for EPCA requires that a member is currently unable to develop and implement a comprehensive economic program that could be supported under a Fund arrangement.
For a detailed discussion of the PSI, see The Policy Support Instrument – A Factsheet.
No JSAN will be required in connection with a PRSP preparation status report, in which case the analysis of the PRSP preparation status report will be included in the staff report on a new ESF arrangement or a review under an ESF arrangement.
Some 53 of 78 PRGF-eligible members currently have either an I-PRSP or a full PRSP, and the majority of the remaining countries have a PRS process underway or a draft I-PRSP under preparation. Some countries who have not initiated the PRS process have available an alternative development strategy document—such as the Transitional Results Matrix supported by the World Bank in several low-income countries under stress (LICUS)—that can help to identify priorities and that can be made consistent, relatively quickly, with the guidelines set out in Annex VI of Poverty Reduction Strategy Paper-Progress in Implementation, 8/14/00. These guidelines envision an I-PRSP prepared primarily from existing documents and analyses—such as a macroeconomic framework, previous poverty assessments, and current development strategies. The proposed PSI guidelines also require that a PRS process be underway.
For PRGF arrangements, the financing assurances policy implies the elimination of any financing gaps for at least the next six months of an arrangement following its activation or completion of a review.