Report on Access to Fund Resources During 2005

In the context of a relatively benign international environment with limited balance of payments needs, recourse to Fund resources has declined across several dimensions: fewer GRA arrangements; lower outstanding Fund resources; and a smaller average access under new PRGF arrangements.

Abstract

In the context of a relatively benign international environment with limited balance of payments needs, recourse to Fund resources has declined across several dimensions: fewer GRA arrangements; lower outstanding Fund resources; and a smaller average access under new PRGF arrangements.

Key Points

Access to Fund resources under the General Resources Account (GRA) and the Poverty Reduction and Growth Facility (PRGF) during 2005 illuminates several key features and emerging patterns:

  • In the context of a relatively benign international environment with limited balance of payments needs, recourse to Fund resources has declined across several dimensions: fewer GRA arrangements; lower outstanding Fund resources; and a smaller average access under new PRGF arrangements.

  • Over the past decade, signaling has become an increasingly important purpose of Fund arrangements. The share of precautionary arrangements in the credit tranches and of low-access PRGF arrangements has increased. More recently, the Policy Support Instrument was established.

  • Concerning the duration and distribution of access to Fund resources:

    • - There are early signs of an upward shift in the average duration of stand-by arrangements.

    • - The bimodal character of access in the credit tranches and under the Extended Fund Facility continued, but may be moderating as the number of exceptional access cases declined in 2003-05.

    • - While the concentration of outstanding use of GRA resources remains high, the Fund’s nominal exposure to the largest users during 2005 and early 2006 decreased. Accordingly, PRGF borrowing as a proportion of total outstanding use of Fund financing has risen significantly.

I. Background

1. This report summarizes developments in access to Fund resources—both under the General Resources Account (GRA) and the Poverty Reduction and Growth Facility (PRGF)—during the calendar year 2005. It also discusses briefly the extent to which recent developments have been in line with trends established over the past decade and identifies key patterns in access to Fund resources.

2. The last review of the Fund’s access policy was concluded in April 2005, and was the first to cover access under both the GRA and PRGF. At that time, the Board also agreed to improve program documents under the exceptional access framework, by including a discussion of exit strategies and a critical analysis of alternative forecast scenarios. The Fund’s access policies in the credit tranches and under the Extended Fund Facility (EFF)— including exceptional access—as well as under the PRGF are summarized in the Appendix. The next biennial review of access policy is currently scheduled to be undertaken based on data through end-2006; however, the Managing Director’s medium-term strategy proposes moving to a five-year cycle for all policy reviews except the review of surveillance.1 This report is an example of the factual report to be prepared in intervening years.2

II. Recent Developments

A. Number and Type of Arrangements

3. The number of GRA arrangements approved during 2005—six stand-by arrangements (SBAs) and no extended arrangements—was approximately half of the average number approved in each of the preceding ten years, continuing the pattern that emerged in 2004 (Tables 1 and 2, Figure 1). Two of these arrangements involved exceptional access under the credit tranches: Turkey’s SBA exceeded both the annual and cumulative access limits; and Uruguay’s SBA exceeded the cumulative access limit (Table 3). There were two SBAs—Colombia and Iraq—that the authorities treated as precautionary from approval, whereas the authorities of the FYR Macedonia, only decided to treat the arrangement as precautionary after making the initial purchase under the SBA (Figure 2). The average duration of SBAs has increased to 28 months, relative to the average of 18 months for 1995-2004 (Figure 3).

Table 1.

Access Under Fund Arrangements Approved in 2005 1/

(In percent of quota, unless otherwise indicated)

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Sources: Executive Board documents, and information provided by the Finance Department.

Reflects amounts and duration agreed at the time the arrangements were initially approved; excludes potential access under external contingency mechanisms and other augmentations.

Total access divided by length of arrangement (in years), except where otherwise specified.

Numbers may not sum due to rounding.

PRGF Trust includes remaining credit outstanding under ESAF and SAF facilities; end positions assume full disbursement of committed amounts; in the case of phased drawing under the CFF, the entire eligible amount estimated.

Gross Fund Financing/Gross Financing Requirement; GFF includes all use of Fund resources during the period under the arrangement and associated purchases that were anticipated at the time of approval. GFR is defined as the sum of the current account deficit (excluding grants), amortization of maturities in excess of one year including Fund repurchases, the targeted reduction in arrears (in cash as well as through rescheduling) and the targeted buildup in gross reserves. Figures may be estimated based on information available for the period most closely corresponding to the program period.

Simple arithmetic average; excludes Supplemental Reserve Facility (SRF) cases.

Simple arithmetic average.

Table 2.

Access Under Fund Arrangements by Year of Approval, 1995-2005 1/

(In percent of quota, unless otherwise indicated) 2/

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Sources: Executive Board documents and information provided by the Finance Department.

Reflects amounts and duration at the time arrangements were approved; excludes potential access under augmentations.

Access expressed in terms of quotas of the Ninth General Review of Quotas through January 1999, Eleventh General Review of Quotas

through January 2003, and twelfth Review of Quotas thereafter.

3/ Above access of 100 percent of quota annually and 300 percent of quota cumulatively per member.

Including first credit tranche arrangements.

Assumes all purchases and repurchases are made as scheduled at the time of the new arrangement approval.

Figure 1.
Figure 1.

Total Number of GRA Arrangements Approved

Citation: Policy Papers 2006, 025; 10.5089/9781498332651.007.A001

Source: Fund staff.
Table 3.

Exceptional Access Under Fund Arrangements, October 1994-Present 1/

(As of December 31, 2005)

(In percent of quota at approval, unless otherwise indicated)

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Sources: Executive Board documents, and information provided by the Finance Department.

Reflects amounts and duration agreed for an arrangement at the time SRF resources was approved or the exceptional circumstances clause was invoked. Data regarding future augmentations that included SRF resources or exceptional circumstances are reported on separate rows.

In the case of augmentations, the date and duration remaining at the time of approval of the augmentation, not initial approval of the arrangement.

In the case of augmentations, includes previously undrawn amounts from the arrangement, as well as the new augmentation. Amounts drawn prior to augmentation are not included.

Total access divided by length of arrangement (in years), except where otherwise specified.

Special facilities include Emergency Assistance, CCL, CCFF/CFF, PRGF, SAF, and STF. End positions assume full disbursement of committed amounts and, in the case of phased drawing under the CCFF, the entire eligible amount is estimated.

Actual Fund credit outstanding when the arrangement expired or was cancelled. This may reflect augmentations, extensions, reductions, or quota changes which occurred after approval.

Gross Fund Financing includes all use of Fund resources during the period under arrangement and associated purchases anticipated at the time of approval. The Gross Financing Requirement is defined as the sum of the current account deficit (excluding grants), amortization of maturities in excess of one year, including Fund repurchases, the targeted reduction in arrears (in cash and through rescheduling) and the targeted buildup in gross reserves. Figures estimated based on information available for the period most closely corresponding to the program period. Calculated on approval of new arrangement; does not include augmentations.

Arrangement was approved for an amount of up to SDR 12,070.2 million, of which the initial commitment was SDR 5,259.9 million. Figures here reflect phasing and size of the arrangement as determined at the second (June) review.

With two exceptions, all exceptional circumstances cases required a waiver of the annual and cumulative limits. Russia’s 1996 EFF required only a waiver of the annual limit and Indonesia’s 2000 EFF required only a waiver of the cumulative limit.

Total amount approved on December 4, 1997 as an SBA. A portion was then converted to an SRF on December 18, 1997 after creation of the SRF.

EFF amount includes 50 percent of quota approved under the CCFF along with the augmentation.

Brazil’s previous SBA was cancelled and replaced with this arrangement, which the authorities did not expect to draw upon; however, they drew on the arrangement two weeks after approval.

The SRF approved at the previous augmentation was cancelled and the SBA augmentation was increased equivalent to the undrawn funds.

Argentina announced on December 15, 2005, its intention to repuchase all outstanding Fund credit and cancel their current SBA. They did not complete this until January 3, 2006.

Arrangement turned precautionary from this point forward.

Figure 2.
Figure 2.

Precautionary and Non-Precautionary GRA Arrangements Approved

Citation: Policy Papers 2006, 025; 10.5089/9781498332651.007.A001

Source: Fund staff.
Figure 3.
Figure 3.

Average duration of Stand-By Arrangements (Number of months)

Citation: Policy Papers 2006, 025; 10.5089/9781498332651.007.A001

Source: Fund staff.

4. Eight arrangements were approved under the PRGF during 2005, which represented a slight increase relative to 2004, but remained somewhat below the annual average of ten for the period 1995-2004 (Figure 4). With the exception of Sao Tomé and Príncipe (second PRGF arrangement), all arrangements were for members accessing PRGF resources for the third or fourth time (Table 4). In October 2005, the Board approved for Nigeria the first use of a Policy Support Instrument (for a two-year period), which did not involve any access to PRGF (or GRA) resources.

Figure 4.
Figure 4.

Total Number of PRGF Arrangements Approved

Citation: Policy Papers 2006, 025; 10.5089/9781498332651.007.A001

Source: Fund staff.
Table 4.

Access to PRGF by Three-Year Arrangements 1/

(In percent of 12th Review Quota; as of December 31, 2005) 2/

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Sources: Executive Board documents.

Excludes augmentations.

Access is presented as a share of the twelfth Review Quota to ensure comparability across time and with the access norms. Access limits and norms were lowered proportionately in 1999 to offset the effect of the quota increase on absolute lending levels.

B. Average Access Under Fund Arrangements

5. The bimodal pattern of access observed in recent years continued, but this pattern was less pronounced, reflecting a moderation in exceptional access (Figure 5). The two exceptional access SBAs averaged annual access of 157 percent of quota (below the 1995-2004 average of 302 percent), whereas annual access for nonexceptional arrangements averaged 44 percent of quota, close to the historical average (Figure 6). The Supplemental Reserve Facility has not been used since 2002.

Figure 5.
Figure 5.

Distribution of Annual Access Under GRA Arrangements, 1995-2005

Citation: Policy Papers 2006, 025; 10.5089/9781498332651.007.A001

Source: Fund staff.
Figure 6.
Figure 6.

Non-Exceptional GRA Average Annual Access

Citation: Policy Papers 2006, 025; 10.5089/9781498332651.007.A001

Source: Fund staff.

6. Average access under the PRGF continued the sharp downward trend witnessed in recent years.3 For PRGF arrangements approved in 2005, average three-year access fell to 26 percent of quota (or 9 percent of quota on an annual basis) from 49 percent in 2004 and an average of 80 percent for the period 1995-2004 (Figures 7 and 8). Excluding four low-access PRGF arrangements (Benin, Cameroon, Kyrgyz Republic, and Niger), access among the remaining PRGF arrangements ranged between 25 percent and 55 percent of quota, averaging 41 percent of quota.

Figure 7.
Figure 7.

Average Annual PRGF Access

Citation: Policy Papers 2006, 025; 10.5089/9781498332651.007.A001

Source: Fund staff.
Figure 8.
Figure 8.

Distribution of Annual Access Under PRGF Arrangements, 1995-2005

Citation: Policy Papers 2006, 025; 10.5089/9781498332651.007.A001

Source: Fund staff.
Figure 9.
Figure 9.

Distribution of Annual Access for first-time PRGF Users

Citation: Policy Papers 2006, 025; 10.5089/9781498332651.007.A001

Source: Fund staff.

C. Resources Committed Under Fund Arrangements

7. Total GRA resources committed during 2005 amounted to SDR 8.8 billion, including access granted on approval of the six SBAs and a relatively small augmentation of Bolivia’s existing SBA (Table 5). Consistent with the sizable decline in the number of arrangements approved and the moderation in average annual access, these new commitments were around half of average annual new commitments during 1995-2004 (Figure 10).

Table 5.

Status of Fund Commitments of IMF HIPC Assistance as of December 31, 2005

(In millions of SDRs)

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Source: Finance Department.

Includes interest on amounts committed under the Enhanced HIPC Initiative

Equivalent to the committed amount of US $22.5 million at decision point exchange rates (3/17/98)

Amount committed is equivalent to the remaining balance of the total IMF HIPC assistance of SDR 337.9 million, after deducting SDR 109.6 million representing the concessional element associated with the disbursement of a PRGF loan following the DRC’s clearance of arrears to the IMF on June 12, 2002.

Figure 10.
Figure 10.

Commitments of GRA Resources

Citation: Policy Papers 2006, 025; 10.5089/9781498332651.007.A001

Source: Fund staff.

8. Similarly, total PRGF resources committed in 2005 fell sharply below the 2001 peak and the historical annual average of about SDR 1 billion (Figure 11). New commitments of PRGF resources totaled around SDR 150 million, more than 85 percent of which reflected new arrangements, with the remainder accounted for by the augmentation of Niger’s arrangement. This drop largely reflects delays in the approval of new PRGF arrangements for several large-quota members.

Figure 11.
Figure 11.

Commitments of PRGF Resources

Citation: Policy Papers 2006, 025; 10.5089/9781498332651.007.A001

Source: Fund staff.

D. Access Under Emergency Assistance and the Compensatory Financing Facility

9. In 2005, the Fund provided emergency assistance to three members—natural disaster assistance to the Maldives and Sri Lanka following the tsunami and post-conflict assistance to Haiti. Access remained at the normal limit of 25 percent of quota except in the Maldives where the exceptional limit of up to 50 percent of quota was applied (Table 6). The Compensatory Financing Facility has not been used since 1999.

Table 6.

Access Under Emergency Assistance, 1995-2005

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Sources: Executive Board documents and information provided by the Finance Department.