Front Matter Page
INTERNATIONAL MONETARY FUND
Review of the Flexible Credit Line and Precautionary Credit Line
Prepared by the Finance, Legal, and Strategy, Policy and Review Departments
In consultation with other departments Approved by Sean Hagan, Reza Moghadam, and Andrew Tweedie
November 1, 2011
Contents
Executive Summary
I. Introduction
II. Impact of the FCL and PCL: Have They Delivered on Their Objectives?
III. FCL and PCL: Close Reserves Substitutes?
IV. Access and Exit
A. Justification of Access in FCL-PCL Cases
B. Access Limits and Caps: Differences between PCL and FCL
C. Exit and Expectation of Declining Access
V. Review of the Design of the FCL and PCL
A. Qualification
B. Instrument Flexibility
C. Commitment Fees
D. Next Review
VI. Conclusions and Issues for Discussion
Table
Assumptions Underpinning Adverse Shock Scenarios
Figures
1. Reserves: Actual and VAR Projections at Time of First and Second FCL
2. Assumed Access
3. Empirical Adverse Shock Distribution
4. Changes in Reserves
5. Comparison of Some FCL and VEE Assessment Factors
6. VEE Venn Diagrams
Boxes
1. Design of FCL and PCL
2. Summary of Principal Recommendations and Finding
3. Analysis of the Impact of FCL-PCL on Spreads and Exchange Rates
4. A Possible Framework for Comparing Access Assumption
5. FCL and PCL Qualification
6. Treatment of Past Policy Adjustment and Forward-Looking Assessments in FCL and PCL Arrangements Staff Reports
7. FYR Macedonia’s PCL
Annexes
I. Case Studies
II. Survey Responses