Access under the facilities for LICs is subject to access limits and access norms. Under both the PRGF and the Exogenous Shocks Facility’s (ESF) high-access component (HAC), there are limits on access that can, however, be exceeded in exceptional circumstances. Access under the PRGF is also subject to an “exceptional” limit that can never be exceeded. The rapid access component (RAC) of the ESF also includes a hard cap that cannot be exceeded. Under the PRGF, actual access is generally expected to be in line with access norms—that represent neither an entitlement nor a maximum. These norms are tapered depending on the number of prior arrangements. For countries with limited balance of payments needs, a standardized low access level has been set.
The maximum and exceptional limits on access were originally set at 250 and 350 percent of quota, respectively, when the Enhanced Structural Adjustment Facility (ESAF) Trust was established in 1987. The determination of the maximum limit was based on projections of members’ financing needs and the amount of resources available. The limits have been reduced twice in the context of the 9th and 11th quota reviews in 1992 and 1999, respectively.
Review of Access to Financing in the Credit Tranches and Under the Extended Fund Facility, and Overall Access Limits Under the General Resources Account.
PRGF access was set at the maximum limit for Haiti and at the exceptional limit for Liberia (in the context of arrears clearance). Access under the ESF-HAC is at the limit for the Kyrgyz Republic and Malawi. Stand-By Arrangements (SBAs) for Pakistan, Mongolia, Armenia, and Georgia have access well above the PRGF limit.
This projection is based on the estimated share of the Fund’s concessional financing in LICs’ projected gross financing requirements (GFR) for 2009–2013. The Fund’s contribution to meeting LICs’ GFR has averaged about 3 percent in the past, but has fallen to around 1¼ percent in recent years, reflecting favorable global conditions and availability of financing from other sources. Looking ahead, the Fund’s contribution is expected to rise from the exceptionally low levels of the recent past, but remain below its long-run average, which was elevated by the high levels of Fund lending associated with macro-stabilization efforts in the 1990s.
The one-time allocation proposed by the G20 would be equivalent to 77 percent of quota for all members. This would amount to about US$19 billion for all LICs. Excluding India and the protracted arrears cases, the allocation would provide SDR 9 billion, compared to projected gross financing requirements of approximately SDR 500 billion through 2015 (see The Fund’s Facilities and Financing Framework for Low-Income Countries, Table 6).
Under this proposal, norms would increase by between 25 and 60 percent of quota, depending on the number of prior ESAF/PRGF arrangements; if, instead, all norms were doubled, the range of increases would be 25– 90 percent.
The relatively moderate increase in the upper bound reflects the fact that the original upper bound already allowed for a substantial deviation of access from previous norms.
Access norms were designed to provide general guidance for access decisions, primarily in cases of repeated PRGF use, not ceilings (or floors) on access for specific arrangements. Accordingly, they have been applied flexibly.
Financing under the PRGF requires that a member has a “protracted balance of payments problem” at the time of approval of the arrangement; financing under the ESF requires that a member experiences a balance of payments need whose primary source is a sudden and exogenous shock. Augmentations can be provided in response to increased balance of payments needs or, in case of the PRGF, to support a strengthening of the program.
Capacity to repay was also included as an express criterion (rather than being subsumed under the strength of the adjustment program) when the RAC was added to the ESF. This criterion was meant to apply specifically to the RAC, to reflect the fact that RAC support could be provided outside of a traditional adjustment program. See Proposed Reforms to the Exogenous Shocks Facility, Supplement 1.
This analysis may take the form of either a joint Bank-Fund DSA, if one is scheduled, or a DSA update prepared by Fund staff that draws on a prior full joint DSA. For pre-completion point HIPC-eligible countries, the analysis of the implications of additional Fund financing should take into account the prospects for debt relief.
As an additional transitional measure, in the first four weeks during which the new safeguards are fully effective, DSAs and other material can be submitted as a supplement to the staff report up to one week before the proposed Board date. Thereafter, the DSA should be subject to normal circulation procedures.