Update on the Financing of the Fund's Concessional Assistance and Debt Relief to Low-Income Member Countries
Author: International Monetary Fund
Publication Date:
04 Nov 2008
eISBN:
9781498334648
ISBN:
9781498334648
Language:
English
Keywords:
PP; coverage ratio; subsidy Account; ESF lending; SDR equivalent; subsidy resource; PRGF-ESF subsidy account; PRGF-ESF financing; PRGF-HIPC trust; totaling SDR; loan resource
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This paper provides a semi-annual review of the status of financing for PRGFESF lending, HIPC and MDRI debt relief, and an update on the mobilization of resources for the subsidization of emergency assistance to PRGF-eligible countries. The last review was completed by the Executive Board on September 26, 2007.

Abstract

This paper provides a semi-annual review of the status of financing for PRGFESF lending, HIPC and MDRI debt relief, and an update on the mobilization of resources for the subsidization of emergency assistance to PRGF-eligible countries. The last review was completed by the Executive Board on September 26, 2007.

I. Introduction

1. This paper provides a semi-annual review of the status of financing for PRGF-ESF lending, HIPC and MDRI debt relief, and an update on the mobilization of resources for the subsidization of emergency assistance to PRGF-eligible countries.1 The last review was completed by the Executive Board on September 26, 2007.

2. The main points of the paper are as follows:

PRGF-ESF financing

  • Available loan resources provided by bilateral lenders are likely sufficient to meet demand for new PRGF-ESF arrangements through 2010. As of end-2007, loan resources stood at SDR 2.6 billion, a slight reduction from the last update.

  • Available PRGF subsidy resources are projected to be adequate to subsidize almost all of the available loan resources. Projected subsidy needs are now slightly lower as a result of lower SDR interest rates and savings from early repayments of PRGF loans.

  • ESF subsidy contributions remain largely unchanged from the last update. Including a new contribution from Iceland, total commitments from eleven countries amounted to the equivalent of SDR 218 million in cash terms.2 Of this amount, SDR 59 million has been received. No country has yet requested assistance under the ESF.

  • Following the exhaustion of currently available PRGF subsidy resources, the Fund’s PRGF/ESF lending could be subsidized by the Reserve Account of the PRGF-ESF Trust on a “self-sustained” basis. It is expected that such operations could commence in 2011. Updated projections indicate that the Reserve Account could subsidize new PRGF/ESF loan commitments of about SDR 0.8 billion per annum.

Financing of debt relief

  • Available resources are estimated to be sufficient to cover the costs of debt relief under the HIPC Initiative and the MDRI, except for the remaining protracted arrears cases of Somalia, Sudan, and potentially Zimbabwe.3 While the resources available for HIPC debt relief remain broadly unchanged from the last update, the projected surplus in the MDRI Trusts increased by about SDR 0.1 billion, mainly reflecting the Democratic Republic of the Congo’s delay in reaching its HIPC completion point.

  • Bilateral contributions, amounting to SDR 547 million from 102 countries, were secured to finance the cost of the Fund’s debt relief to Liberia. Following Liberia’s clearance of its long-standing arrears to the Fund on March 14, 2008, the Executive Board approved Liberia’s decision point under the enhanced HIPC Initiative and its request for interim assistance. Liberia will receive full debt relief on its outstanding eligible debt when it reaches the HIPC Initiative completion point.

Subsidization of emergency assistance

  • As a result of new requests, which were not anticipated at the time of the last update paper, currently available subsidy resources for emergency assistance now fall short of financing needs. Additional subsidy contributions are, therefore, urgently needed to enable the Fund to continue providing emergency assistance to eligible countries on concessional terms.

  • Management has recently approached member countries, including advanced countries and selected emerging economies and major oil producers, to seek additional contributions. The aim of the fund-raising effort is to mobilize SDR 100 million in additional contributions to cover the estimated financing needs to subsidize emergency assistance through 2014. It is important that member countries provide timely support for this effort.

II. Financing of PRGF-ESF Operations

A. Loan Resources

3. Available loan resources for PRGF/ESF lending provided by bilateral lenders stood at SDR 2.6 billion at end-2007, a slight reduction from the last update. Over the second half of 2007, the Executive Board approved two new PRGF arrangements totaling SDR 120 million for Guinea and Nicaragua. For 2007 as a whole, four new PRGF arrangements, amounting to SDR 140 million, were approved. This represents the lowest level of annual commitments since the inception of the PRGF (formerly ESAF) in 1987 (Figure 1). Improved external positions of low-income countries, partly as a result of debt relief under the HIPC Initiative and the MDRI, have contributed to low demand for PRGF loans in recent years. To date, no country has requested assistance under the ESF.

Figure 1.
Figure 1.

New PRGF Commitments

(In millions of SDRs; as of end-2007)

Citation: Policy Papers 2008, 067; 10.5089/9781498334648.007.A001

4. Based on current projections, available loan resources are likely sufficient to meet demand for new PRGF/ESF arrangements in 2008–10 (Table 1). Country-specific projections suggest that demand for new PRGF loans could amount to SDR 0.7 billion in 2008, including the recently approved three-year PRGF arrangement with Liberia in an amount of SDR 0.2 billion (185 percent of quota). Demand for PRGF loans in 2009–10 is projected at about SDR 1.2 billion, assuming that requests for PRGF arrangements by several large quota countries are forthcoming. The projected total demand of SDR 1.9 billion for the next three years does not include the remaining protracted arrears cases of Somalia, Sudan, and Zimbabwe.4 Although the projections entail a significant increase in demand for PRGF resources, it is possible that, in light of the ongoing turmoil in global financial markets, weaker growth prospects, and the surge in food and fuel prices, additional requests for PRGF resources, including augmentations of existing arrangements, could be higher than projected.

Table 1.

PRGF-ESF Trust – Loan Resources

(In billions of SDRs; as of end-2007)

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Do not include potential augmentation under existing PRGF arrangements.

Assuming access of 185 percent of quota (exceptional limit) based on quota under the 11th General Review.

France pledged a new loan of US$ 1 billion in the context of the ESF.

B. PRGF Subsidy Resources

5. Available subsidy resources amounted to SDR 1.2 billion at end-2007, broadly unchanged from the last update (Table 2). These resources include subsidies currently held in the PRGF-ESF and PRGF-HIPC Trusts and projected additional inflows to both Trusts. As noted in the previous update, most subsidy contributions provided in the context of the fund-raising effort following the establishment of the ESF (see Section C below) have been made to the PRGF-ESF Subsidy Account and can, therefore, be used both for PRGF and ESF operations. However, for analytical and presentational purposes, the discussion in this section does not include these contributions. The financing structure of the Fund’s concessional operations is shown in Figure 2.

Table 2.

PRGF Subsidy Requirements and Availability

(In billions of SDRs; as of end-2007)

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Excludes subsidy contributions pledged for the ESF.

Excludes the HIPC sub-account balance earmarked for HIPC assistance.

In end-2007 NPV terms; mainly reflects interest income on bilateral deposit agreements.

6. Staff’s current projections indicate that available subsidy resources would be sufficient to subsidize almost all of the available PRGF loan resources.5 Since the last update, projected subsidy needs have been reduced by: (i) lower SDR interest rates assumed for the projection period;6 and (ii) projected subsidy savings from Liberia’s early repayment of PRGF loans when it reaches the HIPC completion point. These estimates, however, do not take into account the pledges made by 10 countries in the to SDR 32 million (Table 3). It is important that these countries make efforts to disburse their pledges as soon as possible to ensure that PRGF-HIPC operations are fully funded.

Table 3.

PRGF-HIPC Trust – Pending Contribution

(In millions of SDRs “as needed”; as of end-2007)

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Remaining balances

Figure 2.
Figure 2.

Financial Structure of the Fund’s Concessional Operations

Citation: Policy Papers 2008, 067; 10.5089/9781498334648.007.A001

C. ESF Subsidy Contributions

7. Since the last update, the Fund has received a new pledged contribution to the ESF from Iceland in an amount of SDR 0.1 million. As Table 4 indicates, total pledges from 11 countries have amounted to SDR 218 million in cash terms,7 representing about half of the target initially sought by the Fund.8 Of the pledged amount, SDR 59 million has been received. While no country has yet requested assistance under the ESF, demand for ESF loans could materialize in the event that global economic conditions deteriorate further.

Table 4.

ESF Subsidy Contributions

(In millions of currency units; as of end-February 2008)

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Calculated using the exchange rates of end-February 2008.

Reflecting net investment income (in end-2005 NPV terms) to be generated from investment/deposit agreements.

D. Medium-Term Financing Framework

8. It is envisaged that, once the currently available PRGF-ESF subsidy resources discussed above are exhausted, subsidy resource for the Fund’s PRGF-ESF lending could be financed from the Reserve Account of the Trust on a “self-sustained” basis.9 Under this approach, which would require an amendment of the PRGF-ESF Trust Instrument, bilateral creditors would continue to provide loan resources that would be on-lent to PRGF/ESF borrowers, while income earned on the balances in the Reserve Account would be used to finance interest subsidies on PRGF and ESF loans. As in the case of current framework, the Reserve Account would also continue to provide security to PRGF-ESF Trust lenders in the event of a delay or non-repayment by PRGF-ESF borrowers (Box 1).

The PRGF-ESF Trust Reserve Account—Purpose and Funding

The Reserve Account is designed to: (i) provide security to lenders of the PRGF-ESF Trust in the event of delay or nonpayment by borrowers; and (ii) meet temporary mismatches between repayments from borrowers and payments to lenders.

It is also envisaged that, after currently available PRGF-ESF subsidy resources are exhausted, the balances accumulated in the Reserve Account be used to subsidize the Fund’s future concessional lending. The use of Reserve Account resources for future concessional lending would require an amendment of the PRGF-ESF Trust Instrument adopted by the Executive Board with 85 percent majority of the total voting power and consents from all current Trust lenders.

The Reserve Account was funded by reflows of SAF and Trust Fund loans that had used resources originated from the proceeds of the Fund’s 1977-80 gold sales. At end-2007, the Reserve Account held a balance of SDR 3.6 billion, with a reserve-loan coverage ratio of 97 percent.

PRGF-ESF Trust—Reserve Account Coverage

(In millions of SDRs)

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The decline in total PRGF credit outstanding by about 40 percent from 2005 reflects early repayments arising from the delivery of HIPC and MDRI debt relief.

9. Current projections indicate that “self-sustained” PRGF operations could commence in 2011, with an annual Reserve Account subsidization capacity of about SDR 0.8 billion on a sustained basis. This projection is based on several important assumptions:10 (i) currently available PRGF-ESF resources would be exhausted by 2010, as noted above; (ii) both the rate of investment earned on the Reserve Account balances and interest rate paid to Trust lenders would rise gradually from 4 percent in 2008 to 5 percent in 2013 and beyond; (iii) the Reserve Account would earn a premium of 90 basis points per annum from FY 2010 onwards, stemming from the proposed expansion of investment authority; and (iv) reimbursement of the GRA for PRGF-ESF administrative expenses would resume starting in the financial year in which the Board adopts a decision authorizing sales of gold acquired after the Second Amendment. The estimated Reserve Account subsidization capacity under different assumptions was discussed in the previous papers.

III. Financing of HIPC and MDRI Debt Relief

10. To date, 23 countries have reached the completion point and another 10 have reached the decision point under the enhanced HIPC Initiative. In total, the Fund has committed HIPC Initiative assistance of SDR 2.3 billion. Of this amount, assistance to 23 countries that have reached the completion point amounted to SDR 1.7 billion, while HIPC Initiative interim assistance to the 10 countries that have reached the decision point but not yet the completion point totaled SDR 0.04 billion (Table 5).

Table 5.

Implementation of the HIPC Initiative

(In millions of SDRs; as of end-March 2008)

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Includes interest on amounts committed under the enhanced HIPC Initiative.

Includes commitment under the original HIPC Initiative.

Including SDR 17 million committed to Côte d’Ivoire under the original HIPC Initiative.

11. Since the last update, one additional country has reached the completion point and two others have reached the decision point. On December 19, 2007, The Gambia reached its completion point and received HIPC and MDRI debt relief from the Fund, totaling SDR 9.4 million. On September 28, 2007, the Executive Board approved the Central African Republic’s decision point and committed HIPC Initiative assistance of SDR 17.3 million. The Board approved Liberia’s decision point on March 18, 2008, and committed HIPC assistance of SDR 428.1 million.11

12. Since the inception of the MDRI in January 2006, 25 countries have received debt relief under the Initiative, totaling SDR 2.3 billion (Table 6).12 At the time of the establishment of the MDRI, the cost to the Fund of providing MDRI debt relief was estimated at about SDR 2.6 billion.13 Under the established financing framework, qualifying members would receive 100 percent debt relief on the full stock of debt owed to the Fund at end-December 2004 that remains outstanding at the time the member qualifies for such debt relief and is not covered by assistance under the HIPC Initiative. The estimated cost would be covered by the resources in the MDRI-I Trust (SDR 1.5 billion) and MDRI-II Trust (SDR 1.12 billion).14

Table 6.

Debt Relief Following Implementation of the MDRI

(In millions of SDRs; as of end-March 2008)

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Balances outstanding at the time of MDRI debt relief.

Non-HIPCs but qualified for MDRI debt relief with a per capita income below the US$380 threshold.

A. Decision and Pre-Decision Point HIPCs

13. The costs to the Fund of providing debt relief under both the HIPC Initiative and the MDRI to the remaining decision and pre-decision point HIPCs (excluding the protracted arrears cases) is estimated at SDR 0.6 billion (end-2007 NPV terms), or SDR 0.1 billion lower than estimated in the previous update. While the estimated cost of debt relief under the HIPC Initiative remains broadly unchanged from the last update, the cost of MDRI debt relief is now estimated to be lower by about SDR 0.1 billion (Table 7). This reduction mainly reflects an expected delay in the Democratic Republic of the Congo’s (DRC) attainment of the HIPC completion point. The DRC is now expected to reach the completion point in early 2009 as compared to mid-2008 assumed in the last update. As a result, the DRC would need to make payments of principal on debt outstanding at end-2004 before reaching its completion point. This will reduce the stock of DRC’s debt to the Fund that would be MDRI-eligible and thus the cost of MDRI debt relief for the Fund. The estimated cost of providing HIPC and MDRI debt relief to the HIPCs identified during the ring-fenced exercise would amount to SDR 12 million, little changed from the last update.15

Table 7.

Financing of Debt Relief to the Remaining HIPCs

(In billions of SDRs; end-2007 NPV terms)

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Including resources in the HIPC Umbrella account.

14. Resources currently available in the PRGF-HIPC and MDRI-I and II Trusts for debt relief stood at SDR 0.8 billion at end-2007, sufficient to cover the estimated costs to the remaining HIPCs. Specifically, available PRGF-HIPC Trust resources are projected to exceed the financing needs by SDR 0.05 billion, unchanged from the last update, while the MDRI Trusts are projected to incur a surplus of over SDR 0.1 billion for the reason described above. It should be noted that the estimated cost of HIPC debt relief does not include potential needs for topping-up assistance, which are inherently difficult to predict.16 Moreover, these projections are based on assumptions regarding the timing of HIPC decision and completion points and the future path of interest rates, which are subject to change.

15. It should also be noted that the cost of debt relief to the HIPCs newly identified in the “ring-fencing” exercise was not included in the original HIPC/MDRI financing framework. While resources in the HIPC and MDRI Trusts are available to qualifying members on a “first-come, first-served” basis and are likely sufficient to cover the projected financing needs of non-arrears cases, additional financing would need to be mobilized in the event of a shortfall in available resources. In this context, the G-8 committed in the lead up to the MDRI at the 2005 Summit in Gleneagles to cover, on a fair burden-sharing basis, the cost of debt relief for countries that may become eligible for the HIPC Initiative under the extended sunset clause. The G-8 also committed that donors would provide the extra resources necessary for full debt relief at completion point for the protracted arrears cases.

16. On March 14, 2008, Liberia cleared its long-standing arrears to the Fund in an amount of SDR 543 million. Following the normalization of Liberia’s financial relations with the Fund, the Executive Board approved new PRGF and EFF arrangements (SDR 239 million and SDR 343 million, respectively) in support of Liberia’s medium-term economic reform program. The Board also determined that Liberia reached the decision point under the HIPC Initiative and qualified for interim assistance.17 18

17. The cost to the Fund of providing HIPC Initiative and beyond-HIPC debt relief to Liberia was estimated at about SDR 530 million (in NPV terms).19 On March 11, the Managing Director notified the Executive Board that satisfactory financing assurances had been secured regarding the availability of the resources needed to finance the Fund’s debt relief to Liberia.20 The decision on the financing modalities for arrears clearance and debt relief became effective on March 14, 2008 upon Liberia’s clearance of its arrears to the Fund. In total, 102 member countries pledged contributions in an amount of SDR 547 million, sufficient to cover the estimated cost. Consistent with contributors’ wishes, these contributions have been, or will be, placed in the Liberia Administered Account or the PRGF-HIPC Trust.

B. Remaining Protracted Arrears Cases

18. Providing debt relief, similar to that extended to Liberia, to Somalia and Sudan would require substantial additional resources. As of end-February 2008, the total stock of arrears of these countries to the Fund amounted to SDR 1.3 billion. As the costs for providing debt relief to these countries were not included in the original financing framework of the HIPC Initiative and the MDRI, additional financing would need to be identified and secured when these countries are ready to clear their arrears to the Fund and embark on the HIPC Initiative. The approach developed for Liberia’s arrears clearance and debt relief, including the necessary financing modalities, could provide a useful framework for Sudan and Somalia at an appropriate time.

19. Similarly, additional resources could also potentially be needed to provide debt relief to Zimbabwe. Currently, Zimbabwe is not PRGF-eligible and is not on the list of “ring-fenced” countries that could benefit from the HIPC Initiative. However, when Zimbabwe is ready to clear its protracted arrears to the PRGF-ESF Trust (SDR 87 million at end-March 2008), an assessment would need to be made of Zimbabwe’s eligibility for the HIPC Initiative based on relevant criteria, including whether the NPV of debt at end-2004 exceeded the HIPC thresholds. On that basis, it would be determined whether and, if so, to what extent, additional resources would need to be identified and secured to cover debt relief for Zimbabwe.

IV. Subsidization of Emergency Assistance

20. The Fund provides emergency assistance to help member countries in the wake of natural disasters or as they emerge from conflict (ENDA and EPCA). Since 2001, bilateral contributions have allowed the Fund to provide such assistance to low-income countries at a reduced rate of charge of 0.5 percent per annum. A number of countries have benefited from subsidization of emergency assistance since then. The continued strong demand for such assistance underscores its critical importance in providing timely balance of payments support to the Fund’s most vulnerable members.

21. Providing the subsidized emergency assistance requires substantial resources. As discussed below, the available resources will not be sufficient to fully cover the costs of subsidizing existing emergency assistance, including the new requests by Bangladesh and Côte d’Ivoire approved by the Board on April 2 and 4, 2008, respectively.21 In the absence of additional contributions, the available resources are expected to be exhausted by the second half of 2009, or sooner should new requests for subsidized emergency assistance be forthcoming. It is, therefore, urgent that additional subsidy contributions be secured to allow the Fund to continue providing emergency assistance on concessional terms in a timely manner.

A. Current Status and Projected Subsidy Needs

22. Since the inception of subsidization of EPCA in 2001, 18 member countries have provided commitments of SDR 40 million to subsidize the rate of charge on emergency assistance (Table 8). Of this amount, SDR 11 million was received before the Board decided, in early 2005, to extend subsidization to also cover emergency assistance for natural disasters. At that time, the Board set an initial goal of raising additional contributions of SDR 45–65 million to cover the estimated needs for the five-year period through 2009. Since 2005, 17 countries have committed to provide contributions equivalent to SDR 29 million, with the remaining SDR 15–35 million yet to be mobilized.22

Table 8.

Subsidy Contributions for Emergency Assistance

((In millions; as of end-February 2008)

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For contributions which have been fully received, the SDR equivalent is the actual SDR amount received using the exchange rate on the value date. For contributions that are not yet disbursed, the SDR equivalent is calculated using the exchange rate at end-February 2008.

Reflecting investment income to be generated on a deposit agreement, effective May 2006.

To subsidize the rate of charge on purchases by Sri Lanka and Maldives under ENDA following the 2004 Tsunami.

Existing contribution, previously earmarked for EPCA.

23. The Executive Board has approved 28 requests from 16 PRGF-eligible countries for emergency assistance since 2001 (Table 9). Of these requests, 21 were for EPCA and 7 for ENDA, with total credit amounting close to SDR 500 million.23 As of end- February 2008, resources used for subsidizing the rate of charge on emergency assistance had amounted to about SDR 20 million. As a result, the remaining available subsidy resources, including undisbursed commitments and interest earnings on the balances held in the accounts, are now estimated at SDR 23 million in NPV terms (Table 10).

Table 9.

List of Countries that Have Benefited from Subsidization of Emergency Assistance 1/

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Subsidization for EPCA and ENDA started in 2001 and 2005, respectively. Countries with requests approved prior to the beginning of subsidization also received interest subsidies on their outstanding credit.

Table 10.

Subsidy Resources and Projected Needs for Existing Emergency Assistance

(In millions of SDRs)

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Including scheduled disbursements.

24. Based on current estimates, subsidy resources of about SDR 46 million would be required to fully cover existing credit (including the new requests by Bangladesh and Côte d'Ivoire).24 Against the currently available resources, this would leave a financing gap of about SDR 23 million for the existing cases. In the absence of additional contributions, the available subsidy resources would be expected to be fully used to subsidize charges falling due through the second half of 2009. Thereafter, countries with outstanding emergency assistance would need to pay unsubsidized charges, including burden sharing adjustments on their ENDA/EPCA credit.25

25. Projections of additional subsidies that could be required to cover new requests for emergency assistance through end-2009 and beyond are subject to considerable uncertainty. For illustrative purposes, assuming that possible new requests for emergency assistance through end-2009 amount to SDR 50–100 million, in line with the annual average level of requests made in the previous three years, additional subsidy resources of about SDR 10–20 million would be required. This would bring total subsidy needs for the five-year period 2005–09 to the top end of the range of SDR 45–65 million that was initially sought. For the next five-year period (2010–14), it is assumed that additional subsidy resources of SDR 65 million would need to be secured. Thus, taking into account the estimated financing gap for the existing cases and assumed additional needs through 2014, total new subsidy resources of not less than SDR 100 million would be required to cover existing and projected subsidy needs over the medium term.

B. Resource Mobilization Efforts

26. In light of the above, it is urgent that additional subsidy contributions be secured from member countries. Timely contributions are needed to allow the Fund to continue providing subsidies to reduce the rate of charge on emergency assistance to low- income countries. To this end, the Managing Director has recently written to Fund Governors of a number of member countries, including advanced countries and selected emerging economies and major oil producers, to seek additional contributions. The aim of the fund- raising effort is to mobilize SDR 100 million in additional contributions. Management and staff will follow up with member countries on possible contributions during the Spring Meetings.

V. Proposed Decision

The following decision, which may be adopted by a majority of the votes cast, is proposed for adoption by the Executive Board:

The Executive Board notes the report entitled “Update on the Financing of the Fund’s Concessional Assistance and Debt Relief to Low-Income Member Countries”, and decides that (i) the semi-annual reviews of the financing of the MDRI-I and MDRI-II Trusts, contemplated in paragraphs 1 and 2, respectively, of Decision No.13588-(05/99) MDRI, adopted November 23, 2005, effective January 5, 2006, and (ii) the semi-annual review of the financing of the Trust for Special PRGF Operations for the Heavily Indebted Poor Countries and Interim PRGF Subsidy Operations, contemplated in paragraph 2 of Decision No. 11436-(97/10) adopted February 4, 1997, as amended, are completed.

Table 11.

Summary of Bilateral Contributions to the PRGF-ESF and PRGF-HIPC Trusts

(In millions of SDRs; as of end-2007)

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Less than SDR 5,000.

Subsidy contributions of Bangladesh, Belgium, Czech Republic, India, Luxembourg, Netherlands, Saudi Arabia, Sweden, and Thailand are held in the PRGF Subsidy Account. Tunisia’s contribution is held in both PRGF Subsidy Account and ESF Subsidy Account. All other countries’ contributions are held in the PRGF-ESF Subsidy Account.

Excludes the G-8 commitment of SDR 100 million in end-2005 NPV terms and new ESF subsidy contributions.

Estimated values of total contributions include forthcoming contributions that are not yet received. The term “as needed” refers to the nominal sum of concessional assistance taking into account the profile of subsidy needs associated with PRGF lending and the provision of HIPC assistance, respectively.

Table 14.

Commitments to Finance the Cost of IMF’s Debt Relief to Liberia

(In millions of SDRs)

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Amounts less than SDR 50,000.

Table 15.

Information on Pending Bilateral Contributions to the PRGF-HIPC Trust 1/

(Status as of end-2007)

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Reflects pledged contributions which are not yet effective. Post-SCA-2 amounts shown include refunds of SCA-2 resources and accumulated interest income.

Table 12.

PRGF-ESF Trust—Subsidy Agreements 1/

In millions of SDRs; as of end-December 2007)

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Source: Staff estimates.

Subsidy contributions to the PRGF-ESF Trust result from the difference between the investment income on contributions and the below market rate of interest paid to contributors.

In January 2006, the original PRGF Subsidy Account was renamed as the PRGF-ESF Subsidy Account, and two new subsidy accounts, the ESF Subsidy Account and the PRGF Subsidy Account, were established. For deposits/investments that have not yet expired, the current name of the account is presented. For deposits/investments that have been repaid, the old name of Subsidy Account is kept.

Equivalent of US$10 million (at the exchange rate of June 29, 1994).

The Fund made early repayments to Botswana, Malaysia, and Singapore on March 1, 2004.

Interest rate paid is equivalent to the return on investment by the Fund on this deposit (net of any costs), less 2.0 percent per annum. If the interest rate obtained is less than 2.0 per annum, the deposit shall bear zero interest.

All the deposits will be repaid together at the end of sixteen years after the date of the first deposit.

Including (i) a new investment of SDR 38.2 million; and (ii) a rollover of two investments of SDR 49.8 million and SDR 27.9 million and of the deposit of SDR 16.7 million from the PRGF-HIPC Trust upon their maturities in 2011, 2011-14, and 2018, respectively.

The investment coincides with the repayment of each of the first nine (out of ten) semiannual installments of a drawing of the PRGF-ESF Trust loan of SDR 67 million from the Government of Spain (the Instituto de Credito Oficial).

Equivalent of US$5 million (at the exchange rate of May 11, 1994).

Interest rate paid is equivalent to the return on this investment by the Fund (net of any costs), less 2.6 percent per annum. If the interest rate obtained by the Fund is 2.6 percent per annum or less, the investment shall bear zero interest.