Abstract
Financing for Development - Enhancing the Financial Safety Net for Developing Countries
Introduction
1. Against the backdrop of the upcoming July 2015 United Nations Conference on Financing for Development (FfD), this paper makes proposals to strengthen the financial safety net for developing countries by increasing their access to Fund resources when faced with pressing balance of payments needs.1 Developing countries’ efforts to achieve sustainable and inclusive growth remain vulnerable to global volatility in the form of external shocks, unpredictable sudden stops and reversals of capital inflows, and significant commodity price volatility. Enhanced access to Fund financing would provide them with greater flexibility to meet balance of payments needs as they pursue inclusive growth and poverty reduction, and ease the pressure to tie up costly resources in low-yielding reserves. The changes proposed here focus on changes to current parameters in the Fund’s concessional facilities. The paper does not seek to provide a comprehensive review of concessional facilities; it is currently envisaged that such a review would take place in 2018, five years after the last such review.
2. Building on the comprehensive reform of financing facilities to low-income countries (LICs) in 2009, the paper proposes a set of measures that are collectively consistent with maintaining the self-financing nature of the Fund’s concessional lending over the long term:
Expand the norms and limits for access to all concessional facilities, broadly returning them to levels set in the 2009 reforms relative to production, trade, and capital flows.
Target concessional financing to support the poorest and most vulnerable PRGT-eligible members.2 Better-positioned PRGT-eligible countries, which receive blended Fund financial support (a mix of PRGT and GRA resources), would also have significantly higher access to Fund resources, but a higher share of these resources would be provided on General Resources Account (GRA) terms. This rebalancing of the form of support provided takes cognizance of the fact that these countries have increasing access to international capital markets.
Increase access to fast-disbursing support under the RCF (to PRGT-eligible countries) and RFI (to all member countries) to assist countries in fragile situations, hit by conflict, or natural disasters; and increase the level of concessionality of such support to PRGT-eligible countries by setting the interest rate on RCF loans at zero percent.
Finally, the paper considers whether the case can be made for a general allocation of Special Drawing Rights (SDRs) or, pursuant to an amendment of the Articles of Agreement, a special allocation of SDRs to boost development financing. It concludes that the SDR is not the right instrument for this purpose given its role as a reserve asset intended to facilitate international liquidity.
3. The paper is organized as follows: The next section summarizes recent reforms to the Poverty Reduction and Growth Trust (PRGT) facilities. An update on recent experience of usage of these facilities is provided in the next section. The main section of the paper develops the case for the changes being proposed. A final section assesses the impact of these proposed changes on the sustainability of the PRG Trust. The paper concludes with a list of issues for consideration by the Executive Board.
Recent Reforms to Concessional Financing Facilities
4. The architecture of LIC facilities was overhauled in 2009, yielding three facilities (ECF/SCF/RCF), each with distinct purposes tailored to the diverse needs of LICs.3 These changes were accompanied by a financing package that doubled the lending capacity of the PRGT for 2009–14 to meet members’ elevated financing needs in the wake of the global financial crisis.
The Extended Credit Facility (ECF) replaced the Poverty Reduction and Growth Facility (PRGF) as the main tool for providing medium-term support to address protracted balance of payments problems.
The Standby Credit Facility (SCF) provides support to LICs with short-term balance of payments needs, akin to that provided under the Stand-By Arrangement (SBA), with the possibility for countries facing potential balance of payments needs to use it on a precautionary basis.
The Rapid Credit Facility (RCF) provides fast-disbursing financing with limited conditionality to meet urgent balance of payments needs arising from exogenous shocks, natural disasters, and other fragile or emergency situations.
5. A review of experience with the new facilities in 2012–13 concluded that they had achieved their objective of closing gaps in the financing toolkit, creating a streamlined architecture of facilities that is better tailored to the diverse needs of LICs.4 Reforms introduced as a result of this review included: a) enhanced use of blending of concessional and non-concessional financing; b) scope for augmentations of access under ECF and SCF arrangements between scheduled reviews; and c) a higher cumulative access limit under the RCF.
6. A new interest rate mechanism was introduced as part of the 2009 reforms to enhance the concessionality of Fund lending. The mechanism links the interest rates paid on PRGT credit to the SDR interest rate, based on biennial reviews, reducing the fluctuation of the grant element from changes to world interest rates. Additionally, exceptional temporary interest relief—zero percent interest on all outstanding concessional credit—was adopted to assist LICs during the global crisis. As the legacy of the financial crisis lingered, three extensions of the interest waiver have been approved, with the current waiver to expire at end-2016.5
7. A strategy to make the PRGT financially sustainable over the long term was approved in 2012.6 It rests on three pillars: (i) a base envelope of SDR 1¼ billion in annual lending capacity; (ii) contingent measures—including bilateral fundraising efforts and suspension of reimbursement of the GRA for PRGT administrative expenses—which can be activated when average financing needs exceed the base envelope by a substantial margin for an extended period; and (iii) the expectation that all modifications to LIC facilities would be designed in a manner that is consistent with maintaining self-sustainability. This strategy is expected to be robust under a wide range of demand scenarios for the short, medium, and longer term.
Recent Experience with Concessional Financing Facilities
A. Trends in the Use of PRGT Resources
8. Demand for Fund concessional financing has been subject to large swings. In the period 2009–14, annual concessional commitments averaged SDR 1.21 billion, peaking in 2009 at SDR 2.47 billion and hitting a low of SDR 0.15 billion in 2013.7 Commitments in 2015 are expected to increase significantly on 2014, reflecting some sizeable new Fund-supported programs. The number of PRGT-eligible members with a Fund-supported program in place has declined from over 40 (2009–12) to about 30 (2013–15) as members exited from medium-term Fund support initiated in the post-crisis period (Figure 1).
Number of LICs with Facility or Instrument in Place, and Concessional Lending Commitments, 2005–15 1/
Citation: Policy Papers 2015, 070; 10.5089/9781498344463.007.A001
Sources: MONA and FIN.1/ Shows one facility per country, based on the length of use in the year, for the currently PRGT-eligible countries (73). New commitments for all PRGT-eligible LICs at the time.2/ For countries with concurrent PSI and short-term financing, only the latter is counted: (Senegal (2008–10); Mozambique (2009–10); and Tanzania (2009–10 and 2012–13).3/ New concessional commitments (including emergency assistance) cover all LICs that were PRGT-eligible at the time.9. The nature of Fund support to LICs continues to be differentiated according to members’ needs:
The ECF continues to be the workhorse facility for LIC support, accounting for about two-thirds of the country cases in which Fund financial support is provided.
Usage of the SCF has been somewhat more volatile. Nonetheless, total commitments under six precautionary SCF and SCF/SBA blended arrangements amounted to SDR 1.15 billion, with only one request to draw financing under these arrangements.
The Fund’s program engagement since the 2008–09 global financial crisis has remained elevated in LICs in fragile situations (Figure 2). Fund financial support has been provided to at least half of the countries in this group in each of the past five years, either through the RCF or the ECF, playing a catalytic role in mobilizing additional resources.8 Staff work on the Fund’s engagement with countries in fragile situations (2011–12) concluded that repeated use of the RCF in such engagement would be desirable in situations where pressing balance of payments needs warranted financial support but the capacity to design or implement an ECF arrangement was not yet in place.9
Figure 2. Use of LIC Facilities by Country Group, 2010–15
(In percent of years with facilities in place) 1/
Citation: Policy Papers 2015, 070; 10.5089/9781498344463.007.A001
Source: Fund staff estimates.1/ Sum of country years with facility in place as a share of total country years for each country group. Number of countries in each group shown in parentheses.Fund financial support to the poorest and most vulnerable PRGT-eligible members have accounted for 60 percent of PRGT commitments since 2010. These members typically have limited access to domestic and external market financing sources, rely significantly on foreign aid, and face longer-term structural external payments imbalances.
B. Evolution of Access Norms and Limits
10. Most PRGT-eligible countries have experienced robust growth since the global crisis, supported by generally sound policies, buoyant external demand from emerging markets, and greater risk appetite by global investors. GDP and trade expanded at an annual average rate of 10 percent (nominal US$ terms) while gross financing needs (current account balance excluding grants, amortization, arrears clearance, and gross reserve accumulation) expanded at 15 percent annually as countries borrowed more to support economic expansion (Figure 3).
PRGT-Eligible Members GDP, Trade, Gross Financing Need, 2004–15
Citation: Policy Papers 2015, 070; 10.5089/9781498344463.007.A001
Source: World Economic Outlook.1/ Gross financing needs are defined as the current account deficit excluding grants, amortization payments, arrears clearance, and change in reserves.11. PRGT access norms and limits have steadily eroded relative to economic indicators of need since access increases in 2009–10, and have now broadly returned to the historically low levels prevalent in the run-up to the crisis in 2008. Norms on access to resources have declined by 40–50 percent on average in relation to the metrics of GDP, trade, and gross financing needs through 2015 (Figures 4 and 5). The cumulative erosion of annual access limits for the RCF has been more significant than for the ECF because the 2009 doubling of access limits did not apply to the precursor emergency financing instrument to the RCF (subsidized assistance for Emergency Post-Conflict Assistance (EPCA), Emergency Natural Disasters Assistance (ENDA), and the Rapid Access Component of the Exogenous Shocks Facility (ESF-RAC)).10 Hence, the cumulative RCF access erosion since 2004 vis-à-vis the standard economic metrics is on the order of two-thirds (Figure 6).11
Index of Quota Based ECF Access Norm Relative to Economic Indicators, 2004–15 1/
Citation: Policy Papers 2015, 070; 10.5089/9781498344463.007.A001
Sources: WEO and Fund staff estimates.1/ Gross financing needs are defined as the current account deficit excluding grants, amortization payments, arrears clearance, and change in reserves. Average is the simple average of GDP, exports plus imports, and gross financing needs.Access Limits, Norms, and GDP
(In percent of current quota)
Citation: Policy Papers 2015, 070; 10.5089/9781498344463.007.A001
Sources: WEO and Fund staff estimates.1/ Unweighted mean of the relevant ECF access norm available to each PRGT-eligible country based on the existing policies.Index of Quota Based RCF Annual Access Limits Relative to Economic Indicators, 2004–15 1/
Citation: Policy Papers 2015, 070; 10.5089/9781498344463.007.A001
Sources: WEO and Fund staff estimates.1/ GDP-weighted index of EPCA/RCF-normal usage annual limit (25 percent of quota) and ENDA/RCF-shock window usage annual limit (50 percent of quota) in relation to demand indicators.2/Gross financing needs are defined as the current account deficit excluding grants, amortization payments, arrears clearance, and change in reserves.12. Reflecting continued use of concessional financing, some members’ PRGT credit outstanding is expected to rise towards the cumulative PRGT access limit of 300 percent of quota (Figure 7). At end-2009, only one member had credit outstanding greater than 150 percent of quota and none above 200 percent of quota. Based on the current lending framework, expected repayments, and disbursements in 2015–16, by end-2016 some 13 members’ PRGT credit outstanding will be above 150 percent of quota and five above 200 percent of quota. This situation would significantly constrain access under new arrangements, as was flagged in the 2012–13 review of facilities for LICs (p. 23).
PRGT Credit Outstanding, 2009–16
Citation: Policy Papers 2015, 070; 10.5089/9781498344463.007.A001
Source: FINReform Proposals
A. Boosting and Rebalancing Access to Fund Resources for PRGT-eligible Countries
The following changes to access norms and limits and the blending mix are proposed:
Boost access by raising norms, annual and cumulative normal access limits by one-half across all concessional facilities for all PRGT-eligible countries (details, including on the proposed increases in the quota-based thresholds that trigger procedural safeguards for high access PRGT financing requests, are shown in Annex 2). This would largely reverse the erosion of access levels relative to trade, capital flows and GDP since 2010.12
Rebalance the funding mix of concessional to non-concessional resources provided to blended arrangements from 1:1 to 1:2. This is in line with recent developments in “blender” countries, which typically have had significantly greater access to market funding than was envisaged in 2009.
13. The impact of boosting access levels available under PRGT facilities and rebalancing blending would provide a sharp increase in total Fund resources available to PRGT-eligible countries (Figure 8). The favorable impact on the poorest and most vulnerable is strongest since this expanded access comes entirely in the form of concessional resources. Those that blend will also benefit significantly through greater access to Fund resources, even if access under blended arrangements comes at a higher average cost (that is still modest relative to market terms). The proposals are also consistent with the self sustainability of the PRGT financing model, which envisaged an increase of access levels in SDR terms in line with future income and quota growth, resources permitting.13 The impact of the increases in norms and limits on demand and PRGT sustainability as a package with other proposals are discussed in the following section.
Projected Total Commitments (midpoint PRGT + GRA), 2016–36
(In billions of SDRs, three-year centered moving average) 1/
Citation: Policy Papers 2015, 070; 10.5089/9781498344463.007.A001
Source: Fund staff estimates.1/ The commitment represents the total commitment of both GRA and PRGT resources. The midpoint is estimated as an average of commitments under low case and high case scenarios.14. The increase in access to PRGT resources towards poorer/more vulnerable countries would be offset in large part by a rebalancing of access toward GRA resources for blenders. This change would reduce the call on PRGT resources, particularly over the medium to long term as the share of PRGT-eligible members subject to blending is expected to increase (Figure 9). As a result, these proposals increase the Fund’s ability to meet members’ financing needs while preserving its scarce concessional resources. At the same time, more lending would come from the Fund’s balance sheet, i.e., the GRA.
Number of PRGT-Eligible Countries: Blenders and Non-Blenders, 2015–37 1/
Citation: Policy Papers 2015, 070; 10.5089/9781498344463.007.A001
Source: FIN1. The number of countries presumed to blend in any year is increased by entry of non-blenders and reduced by the graduation from the PRGT eligibility.15. The combination of higher access levels at higher average interest rates for countries with blended financing is in line with moves underway at other international financial institutions. The African Development Bank (AfDB) has decided to augment its lending on non-concessional terms to members eligible for concessional financing, subject to conditions such as creditworthiness. The World Bank already lends on hardened terms to better-off IDA eligible countries as they approach graduation (see Annex 3).
16. While it is proposed to increase access norms and limits, the amount of access in individual cases would remain guided by the current policy on determination of access. Access is determined on a case-by-case basis and guided by the following standards: (i) the member’s (present, prospective, and potential) balance of payment needs (taking into account all projected balance of payments flows, including reserve accumulation and financing from other sources); (ii) the strength of its program and capacity to repay the Fund (taking into account the member’s policy commitments, adjustment effort, institutional capacity, track record of policy implementation, debt sustainability, vulnerabilities, and other country circumstances); and (iii) the amount of outstanding Fund credit and the member’s record of past use of Fund credit.14
17. The current policy provides significant scope for flexibility around the “norms” to support strong programs by countries undertaking growth-oriented reforms and a scaling-up of investment spending. The access guidelines are expected to yield access below the norms in some instances and above the norms in others; norms are neither a ceiling nor a floor nor an entitlement.15 The sizeable gaps between norms and limits provide space for expanded balance of payments support for countries undertaking growth-oriented reforms, if justified by a staff assessment of likely growth impact, adequacy of measures to execute investment projects, and balance of payment needs. In exercising flexibility to scale up Fund support, due regard would need to be given to avoid imposing excessive strains on the financing capacity of the PRGT, which will continue to be reviewed annually by the Board in the context of the Update paper on the Fund’s concessional financing assistance. In addition, the three-pillar strategy (paragraph 7) has safeguards aimed at ensuring that the Fund has the resources to meet the projected demand for concessional lending, including contingent measures that can be put in place when financing needs exceed lending capacity by a substantial margin for an extended period.
18. The proposed increase in access levels in SDR terms would be implemented immediately. To preserve the higher access in SDR terms going forward, it is proposed that the decision increasing the RCF, SCF, and ECF access limits also provides that these new limits (as a share of quota) would be reduced by one-half at the time when the general effectiveness conditions for quota increases under the 14th General Review of Quotas become effective (see Annex 2).
B. Enhanced Support Under the RFI and RCF
It is proposed that: a) access to the Rapid Financing Instrument (RFI) be increased by 50 percent, with a view to facilitating the provision of assistance to countries in fragile situations and/or affected by natural disasters; and b) that RCF terms be made more concessional through changes to the interest rate mechanism.
19. The Fund’s rapid financing facilities have in recent years been used by members with urgent balance of payments needs arising from natural disasters, and by countries with such needs that are in fragile situations and are not in a position to meet Upper Credit Tranche (UCT) standard conditionality. FS constitute more than half of the usage of financing under the RCF, while small states hit by natural disasters account for another third. Typically, states in fragile situations have weaker institutions, considerably lower per capita income and growth rates, less diversified economic structures with large informal sectors, weaker governance and political stability, higher risk of internal violence, and are more susceptible to spillovers from neighboring countries’ instabilities. These conditions have affected the modalities of Fund engagement, limiting their ability to effectively implement UCT programs.16 Outstanding RCF credit currently accounts for about 11 percent of total PRGT loans outstanding (SDR 6.2 billion).17 Future loan demand projections assume a share of about 15 percent. Meanwhile, the RFI has only been used twice, in both case as part of blended support for PRGT-eligible small states, but has recently elicited some interest from FS that are not PRGT-eligible.
RFI access limits
20. The proposals to boost and rebalance PRGT access would increase access limits for the RCF above those for the RFI. Specifically, the RCF cumulative access limit would rise to 150 percent of quota (compared to 100 percent for the RFI) and the annual limit under the exogenous shocks window would rise to 75 percent of quota (compared to 50 percent for the RFI).
21. Accordingly, staff proposes to raise RFI annual and cumulative limits by one half. This would ensure alignment with the RCF limits, while also broadly correcting for the erosion of access limits (Figure 10).18 Accordingly, the resulting new annual and cumulative access limits for the RFI would be 75 percent of quota annually and 150 percent of quota cumulatively, net of scheduled repurchases, pending the effectiveness of the quota increase under the 14th General Review.
Index of Quota Based GRA Access Limits Relative to Economic Indicators for Emerging Market and Developing Economies, 2004–15
Citation: Policy Papers 2015, 070; 10.5089/9781498344463.007.A001
Sources: WEO and Fund staff estimates.1/ Gross financing needs are defined as the current account deficit excluding grants, amortization payments, arrears clearance, and change in reserves.22. Raising access limits for the RCF and RFI—non-UCT standard conditionality instruments— could raise questions of potential moral hazard and diversion of demand away from UCT to non-UCT instruments. An increase in access under the RFI might lower demand for the SBA, but the scale of any such move is likely to be modest, given that the SBA would typically continue to provide much higher access levels; annual access under the latter has averaged around 150 percent of quota (300 percent cumulative) since 2012. Moreover, the opportunity for “facilities shopping” needs to be balanced against the strong incentives for a UCT program: additional potential access level and considerably stronger signaling and catalytic effect of a UCT-quality program. Additionally, the size of Fund financing relative to the size of the shock in recent PRGT programs has been generally small enough not to warrant significant moral hazard concerns (Table 1).19
RCF/RFI Access and GDP Impact of Shocks
Source: Fund staff estimates. Note: Only shocks occurring in the period 2012–15 have been included. The estimated output impact refers to a yearly average, for main years of crisis impact.Impact of shock expressed as residual financing need.
RCF/RFI Access and GDP Impact of Shocks
| Amount approved | Impact of Shock | ||
|---|---|---|---|
| Type of Shock | In percent of quota | In percent of GDP | In percent of GDP |
| Ebola | 25 | 1.4 | 7.3 |
| Commodity price drop 1/ Natural disaster | 25 50 | 0.5 0.7 | 0.7 22.5 |
| Political crisis | 11 | 0.1 | 1.9 |
Impact of shock expressed as residual financing need.
RCF/RFI Access and GDP Impact of Shocks
| Amount approved | Impact of Shock | ||
|---|---|---|---|
| Type of Shock | In percent of quota | In percent of GDP | In percent of GDP |
| Ebola | 25 | 1.4 | 7.3 |
| Commodity price drop 1/ Natural disaster | 25 50 | 0.5 0.7 | 0.7 22.5 |
| Political crisis | 11 | 0.1 | 1.9 |
Impact of shock expressed as residual financing need.
23. The proposed increase in RFI access levels in SDR terms would be implemented immediately; the increase in access levels, expressed as a share of quota would be partially unwound once the 14th review of quotas comes into effect, i.e., these new limits would be reduced by half at the time the general effectiveness conditions for quota increases under the 14th General Review of Quotas become effective.
24. Staff proposes to eliminate an anomaly in the current rules and guidelines that allows some PRGT-eligible countries to “double dip” in PRGT and GRA resources. In cases where use of the RCF or RFI is justified, PRGT-eligible countries may, in some circumstances, obtain support up to the maximum levels under both the RCF and the RFI, in effect obtaining double the access available to GRA-only countries. To address this anomaly, it is proposed that access to RFI assistance in blended RCF/RFI requests count towards the applicable RCF annual and cumulative limits; this will also help to address moral hazard concerns.
Amending the interest rate mechanism
25. To further enhance support for PRGT-eligible countries in fragile situations and those hit by natural disasters, it is proposed to modify the interest rate mechanism introduced in 2009 by setting the interest rate levied on RCF financing at zero (Table 2).
Current Interest Rate Mechanism for the Fund’s Concessional Facilities 1/
(In percent)
Source: FIN.Average SDR rate for the latest 12 months.
Current Interest Rate Mechanism for the Fund’s Concessional Facilities 1/
(In percent)
| ECF | RCF | SCF | |
|---|---|---|---|
| SDR rate < 2 | 0.00 | 0.00 | 0.25 |
| 2 ≤ SDR rate ≤ 5 | 0.25 | 0.25 | 0.50 |
| SDR rate > 5 | 0.50 | 0.50 | 0.75 |
Average SDR rate for the latest 12 months.
Current Interest Rate Mechanism for the Fund’s Concessional Facilities 1/
(In percent)
| ECF | RCF | SCF | |
|---|---|---|---|
| SDR rate < 2 | 0.00 | 0.00 | 0.25 |
| 2 ≤ SDR rate ≤ 5 | 0.25 | 0.25 | 0.50 |
| SDR rate > 5 | 0.50 | 0.50 | 0.75 |
Average SDR rate for the latest 12 months.
26. Interest relief on RCF financing would provide additional support to those countries with the most uncertain economic prospects. The estimated loss of interest income related to such relief, even when combined with the proposed increase in access, is on the order of SDR 40–60 million through 2030 (the target date for the SDGs), yielding a cumulative decline in self sustained annual PRGT lending capacity of some SDR 12–18 million, depending in part on the assumed further path for SDR rates. In view of the modest additional cost to the PRGT, the proposed change to the rate setting mechanism would leave the self-sustained onward lending capacity target of SDR 1¼ billion intact and, therefore, be consistent with the three-pillar strategy of the self-sustaining PRGT.
27. A proposal to extend interest relief to all concessional facilities to 2030 would be costly and substantially erode the annual lending capacity of the PRGT. Depending on the evolution of SDR rates over the long term, the loss of interest income would be in the range of SDR 310–430 million as the interest subsidy element rises with the assumed increase in the SDR interest rate leading to a significant reduction of the self-sustained annual capacity by about SDR 100–140 million (equivalent to about 10 percent of the current lending capacity).
C. SDR Allocation
An SDR allocation targeted at supporting the financing needs of developing countries would first require a change in the IMF’s Articles of Agreement: staff does not see sufficient support among the membership for a change in the Articles for such a purpose, which would require the support of three-fifths of the membership with 85 percent of the voting power.
28. General SDR Allocation: Under its Articles of Agreement, the Fund can decide to make a general allocation of SDRs, distributed to all members in proportion to their quotas.20
Such a decision has to be based on assessment that there is long-term global need to supplement existing reserve assets that will promote the attainment of the Fund’s purposes and achieve specified global macroeconomic objectives.21
There have been only three general SDR allocations in the Fund’s history. The last allocation was made in 2009, 30 years after the previous allocation; this allocation, made during the global financial crisis, filled an immediate expression of a long-term global need for reserves and had broad-based support.
Proposals to link SDR allocations to the provision of development finance have been considered on several occasions: these proposals did not command the level of support needed to make the requisite changes to the Articles of Agreement.
29. Special SDR Allocation: The Fund can make a special allocation of SDRs, but only via a specific amendment to its Articles of Agreement.
There has been only one special SDR allocation in the Fund’s history, undertaken via the Fourth Amendment of the IMF’s Articles of Agreement; the Executive Board approved the proposal in 1997 and the amendment came into effect in 2009 upon its approval by the membership. This one-time allocation allowed members to participate equitably in the SDR system even if they had joined the Fund after previous allocations had been made.22
Staff does not see a compelling basis for pursuing an amendment to the Articles of Agreement to generate a special SDR allocation targeted at developing countries. Fund support for members is likely to be used more effectively in circumstances where resources are provided in the context of Fund facilities rather than through unconditional use of SDRs—hence the focus in this paper on expanding access to Fund resources. Experience indicates that even if there were to be sufficient political support among the membership for such an Amendment, the time needed to achieve the required approvals of governments and legislatures would be very long indeed.
Impact of Proposals on Prgt Finances
30. The combination of boosting and rebalancing access is consistent with the principle of the self-sustained PRGT. Annual PRGT loan demand would remain broadly unchanged relative to baseline projections before the policy change and, on average remain within the target for the PRGT’s self-sustained average annual lending capacity of SDR 1¼ billion under a broad range of demand scenarios (Table 3).23 Somewhat higher loan demand initially would be offset by lower loan demand in outer years, as the proposed 50 percent increase in access levels would be compensated by a delay in built-in future access increases by about one year, and by a shift in the loan mix for blenders between PRGT and GRA resources from 1:1 to 1:2.
Projected Average Annual Demand for PRGT Resources: Current and Proposed
Source: FIN. Note: Bolivia, Mongolia, Nigeria, and Vietnam are assumed to graduate in 2015 if the Executive Board approves the staff proposals in the forthcoming staff paper Eligibility to use the Fund’s Facilities For Concessional Financing, 2015. For access base grows by 24.2 percent every three years starting in 2016 in the current and in 2020 in the proposed (after the 50 percent increase in 2016).With minor revision from April 2015 Update paper to incorporate revisions to blender status for some members.
Projected Average Annual Demand for PRGT Resources: Current and Proposed
| 2016-25 | 2016-37 | |||||
|---|---|---|---|---|---|---|
| Low-case | Mid-point | High-case | Low-case | Mid-point | High-case | |
| (In billions of SDRs) | ||||||
| Current 1/ | 0.86 | 1.14 | 1.43 | 1.12 | 1.49 | 1.87 |
| Proposed | 0.87 | 1.15 | 1.44 | 1.11 | 1.47 | 1.84 |
With minor revision from April 2015 Update paper to incorporate revisions to blender status for some members.
Projected Average Annual Demand for PRGT Resources: Current and Proposed
| 2016-25 | 2016-37 | |||||
|---|---|---|---|---|---|---|
| Low-case | Mid-point | High-case | Low-case | Mid-point | High-case | |
| (In billions of SDRs) | ||||||
| Current 1/ | 0.86 | 1.14 | 1.43 | 1.12 | 1.49 | 1.87 |
| Proposed | 0.87 | 1.15 | 1.44 | 1.11 | 1.47 | 1.84 |
With minor revision from April 2015 Update paper to incorporate revisions to blender status for some members.
31. PRGT lending to the poorest and most vulnerable (non-blenders) would increase, and decrease to blenders, relative to baseline projections (Figure 11). The number of non-blenders is expected to decrease from 46 in 2015 to 13 at the end of the projection period as many graduate to middle-income status, thus capping overall PRGT loan growth stemming from this group of countries. However, lending as a share of GDP would remain steady or increase and be allowed to exceed the baseline for this group of countries. By contrast, the number of blenders fluctuates between 23 and 34 throughout the projection period as some blenders graduate from the PRGT while others transit to blender status. Owing to the shift in funding, PRGT lending to the group of blenders remains below baseline demand throughout the projection period, both in nominal terms and relative to countries’ GDP.
PRGT Demand Projections, 2016–36
(Three-year centered moving average)
Citation: Policy Papers 2015, 070; 10.5089/9781498344463.007.A001
Source: FIN32. Beyond the proposed 50 percent access increase, staff also considered a proposal for a more aggressive upfront increase in access, such as a doubling of norms and limits, and concluded that, absent a sizeable injection of more subsidy resources, the proposal would not be consistent with the three-pillar strategy of the PRGT. The robustness of the PRGT framework would be at risk as a stronger initial boost to loan demand under such proposals would likely surpass the PRGT self-sustained lending capacity under a wider range of demand scenarios, particularly in the short to medium term.24
33. Risks to this assessment, mainly related to uncertainty surrounding drivers of PRGT loan demand, are broadly balanced. PRGT usage will continue to be reviewed annually in the context of the Update Paper of the Fund’s concessional financing assistance with a view to assure self-sustainability of the Trust.
Blending and graduation projections: The current model to forecast PRGT loan demand relies on a continued decline in the number of non-blenders and a steady graduation of members from eligibility for PRGT financing, based on projections of GNI per capita. This keeps growth in nominal loan demand in check while the resource envelope for remaining PRGT-eligible countries can rise, broadly in line with future income and quotas. While growth projections are based on WEO forecasts, actual graduation or transition to blender status could occur at a faster or slower pace, resulting in lower or higher loan demand relative to projections.
Debt distress and market access: The forecast model may somewhat understate PRGT loan demand because it makes no assumption in the longer term that any countries’ ability to use a blend of PRGT and GRA resources is constrained by a high risk of debt distress. However, the framework also does not assume any blending or graduation based on countries meeting the market access criterion, thereby introducing an offsetting upward bias in demand. Periodic updates to projections will incorporate the impact of changes to debt distress ratings and market access.
Greater interest in facilities: Overall demand for Fund resources might increase from members that were disinterested in borrowing from the Fund at existing access levels. However, the proposed increases in access limits are not out of line with historical precedents while spikes in revealed program interest, measured by the proportion of program countries to eligible countries, over the past three decades have occurred primarily during major structural shifts and/or crises in the global economy, suggesting that need plays a relatively more important role than access per se.25
Default risk: There is some risk that higher lending by the Fund to the poorest and most vulnerable members, with unchanged lending from other sources, could lead to debt servicing difficulties later on. Similarly, the blending proposals transfer some demand from the PRGT to the GRA at the cost of a higher effective debt service burden for the recipient countries. To address this risk, Fund-supported programs should continue to pay close attention to debt risks in the assessment of capacity to repay and debt sustainability analysis (DSA). In cases where external debt issued on market terms is an important component of external debt, staff would be expected to make use of relevant elements of the market access countries DSA as a tool for exploring market-related risks, reporting on these risks, if significant, in program documentation.
34. While robust, the proposal marginally reduces the scope for future access increases. In particular, increase in quotas in the context of the 14th review of quotas might generate an expectation of further increases in PRGT access. However, increased access in 2016 would not leave room for further step increases, in the order 20–25 percent, until 2019–20. Therefore, any proposed 2016 increase would need to be understood as frontloading future increases of norms and limits in the PRGT, and that access norms and limits would need to be commensurately reduced at the time of the effectiveness of the 14th review of quotas.
Other Considerations
35. Required Board majorities. The proposed changes to the access limits and norms, to the blending rules and the proposed zero interest rate on RCF loans, with corresponding modifications of the interest rate mechanism in the PRGT can be adopted with a majority of the votes cast. The proposed decisions to implement the staff’s proposals are contained in a forthcoming supplement to this paper.
36. Impact on existing arrangements upon the adoption of the proposed decisions. The proposed new access limits will not affect any disbursements under arrangements that were approved prior to the date of the decision establishing these limits, and any changes in access levels going forward would need to be justified by balance of payments need in accordance with the standard policies for augmentation of access amounts. Outstanding PRGT credit in existence at the time of adoption of the proposed decisions would count towards the new annual and cumulative PRGT access limits. In addition, access to RFI assistance approved after adoption of the decisions proposed in this paper would count towards the applicable RCF annual and cumulative limits.
Issues for Discussion
37. Do Directors agree with proposals to enhance the financial safety net to developing countries? Specifically by:
Raising access norms, annual access limits, and cumulative access limits by 50 percent across the concessional facilities for all PRGT-eligible countries, increasing existing quota-based thresholds for the procedural safeguards for high access PRGT financing requests, and rebalancing the funding mix of concessional to non-concessional resources provided in blended financing from 1:1 to 1:2 up to the applicable PRGT norm;
Amending the PRGT interest rate on RCF loans to set it at zero percent, and make corresponding changes in the PRGT instrument so as to increase the level of concessionality of support to PRGT-eligible countries facing urgent balance of payments needs, notably states in fragile situations;
Increasing RFI annual and cumulative access limits by one half in line with the increase in RCF limits to enhance support for all members with urgent balance of payments needs, including in fragile states. Access to RFI assistance would count towards the applicable RCF annual and cumulative limits; and
Reducing access norms and limits commensurately at the time of the effectiveness of the 14th review of quotas.
Annex I. Country Groupings
PRGT-Eligible Developing Countries
Blending is presumed for PRGT-eligible countries with either (i) per capita income above 100 percent of the prevailing operational cutoff used by IDA or (ii) sustained past and prospective market access and a per capita income that exceeds 80 percent of the IDA operational cutoff. Blending should normally not be used for countries at a high risk of debt distress or in debt distress (as assessed by the most recent joint Bank-Fund LIC Debt Sustainability Analysis (DSA)), even if per capita income or market access creates a presumption for blending.
Zimbabwe is not PRGT-eligible due to its removal from the PRGT-eligibility list by a Board decision in connection with its overdue obligations to the PRGT. It would be expected to become PRGT-eligible if the remedial measure were lifted.
PRGT-Eligible Developing Countries
| Country | DSA( March,2015) | ||
|---|---|---|---|
| Poorest and most vulnerable (47) | |||
| Below IDA cutoff ($1,215) | |||
| Afghanistan, I.S. of | High | ||
| Bangladesh | Low | ||
| Benin | Low | ||
| Burkina Faso | Moderate | ||
| Burundi | High | ||
| Cambodia | Low | ||
| Central African Republic | High | ||
| Chad | High | ||
| Comoros | Moderate | ||
| Congo, Dem. Rep. of | Moderate | ||
| Eritrea | In debt distress | ||
| Ethiopia | Low | ||
| Gambia, The | Moderate | ||
| Guinea | Moderate | ||
| Guinea-Bissau | Moderate | ||
| Haiti | High | ||
| Kyrgyz Republic | Moderate | ||
| Liberia | Low | ||
| Madagascar | Low | ||
| Malawi | Moderate | ||
| Mali | Moderate | ||
| Mauritania | High | ||
| Mozambique | Moderate | ||
| Myanmar | Low | ||
| Nepal | Low | ||
| Niger | Moderate | ||
| Rwanda | Low | ||
| Sierra Leone | Moderate | ||
| Somalia | n.a. | ||
| South Sudan | n.a. | ||
| Sudan | In debt distress | ||
| Tajikistan | Moderate | ||
| Tanzania | Low | ||
| Togo | Moderate | ||
| Uganda | Low | ||
| Zimbabwe 2/ | In debt distress | ||
| Above IDA cutoff with debt vulnerability | |||
| Djibouti | High | ||
| Dominica | High | ||
| Ghana | High | ||
| Grenada | In debt distress | ||
| Kiribati | High | ||
| Marshall Islands | High | ||
| Micronesia, Fed. States of | n.a. | ||
| Samoa | High | ||
| São Tomé and Príncipe | High | ||
| St. Lucia | High | ||
| Tuvalu | High | ||
| Presumed Blenders (27) 1/ | |||
| Above IDA cutoff($1,215) | |||
| Bhutan | Moderate | ||
| Bolivia | Low | ||
| Cameroon | Moderate | ||
| Cabo Verde | Moderate | ||
| Congo, Republic of | Low | ||
| Côte d'Ivoire | Moderate | ||
| Guyana | Moderate | ||
| Honduras | Moderate | ||
| Lao PDR | Moderate | ||
| Lesotho | Moderate | ||
| Maldives | Moderate | ||
| Moldova | Low | ||
| Mongolia | Moderate | ||
| Nicaragua | Moderate | ||
| Nigeria | Low | ||
| Papua New Guinea | Low | ||
| Solomon Islands | Moderate | ||
| St. Vincent and the Grenadines | Moderate | ||
| Timor-Leste | Low | ||
| Tonga | Moderate | ||
| Uzbekistan | n.a. | ||
| Vanuatu | Low | ||
| Vietnam | Low | ||
| Yemen, Republic of | Moderate | ||
| Zambia | Low | ||
| Above 80 percent IDA cutoff with market access | |||
| Kenya | Low | ||
| Senegal | Low | ||
Blending is presumed for PRGT-eligible countries with either (i) per capita income above 100 percent of the prevailing operational cutoff used by IDA or (ii) sustained past and prospective market access and a per capita income that exceeds 80 percent of the IDA operational cutoff. Blending should normally not be used for countries at a high risk of debt distress or in debt distress (as assessed by the most recent joint Bank-Fund LIC Debt Sustainability Analysis (DSA)), even if per capita income or market access creates a presumption for blending.
Zimbabwe is not PRGT-eligible due to its removal from the PRGT-eligibility list by a Board decision in connection with its overdue obligations to the PRGT. It would be expected to become PRGT-eligible if the remedial measure were lifted.
PRGT-Eligible Developing Countries
| Country | DSA( March,2015) | ||
|---|---|---|---|
| Poorest and most vulnerable (47) | |||
| Below IDA cutoff ($1,215) | |||
| Afghanistan, I.S. of | High | ||
| Bangladesh | Low | ||
| Benin | Low | ||
| Burkina Faso | Moderate | ||
| Burundi | High | ||
| Cambodia | Low | ||
| Central African Republic | High | ||
| Chad | High | ||
| Comoros | Moderate | ||
| Congo, Dem. Rep. of | Moderate | ||
| Eritrea | In debt distress | ||
| Ethiopia | Low | ||
| Gambia, The | Moderate | ||
| Guinea | Moderate | ||
| Guinea-Bissau | Moderate | ||
| Haiti | High | ||
| Kyrgyz Republic | Moderate | ||
| Liberia | Low | ||
| Madagascar | Low | ||
| Malawi | Moderate | ||
| Mali | Moderate | ||
| Mauritania | High | ||
| Mozambique | Moderate | ||
| Myanmar | Low | ||
| Nepal | Low | ||
| Niger | Moderate | ||
| Rwanda | Low | ||
| Sierra Leone | Moderate | ||
| Somalia | n.a. | ||
| South Sudan | n.a. | ||
| Sudan | In debt distress | ||
| Tajikistan | Moderate | ||
| Tanzania | Low | ||
| Togo | Moderate | ||
| Uganda | Low | ||
| Zimbabwe 2/ | In debt distress | ||
| Above IDA cutoff with debt vulnerability | |||
| Djibouti | High | ||
| Dominica | High | ||
| Ghana | High | ||
| Grenada | In debt distress | ||
| Kiribati | High | ||
| Marshall Islands | High | ||
| Micronesia, Fed. States of | n.a. | ||
| Samoa | High | ||
| São Tomé and Príncipe | High | ||
| St. Lucia | High | ||
| Tuvalu | High | ||
| Presumed Blenders (27) 1/ | |||
| Above IDA cutoff($1,215) | |||
| Bhutan | Moderate | ||
| Bolivia | Low | ||
| Cameroon | Moderate | ||
| Cabo Verde | Moderate | ||
| Congo, Republic of | Low | ||
| Côte d'Ivoire | Moderate | ||
| Guyana | Moderate | ||
| Honduras | Moderate | ||
| Lao PDR | Moderate | ||
| Lesotho | Moderate | ||
| Maldives | Moderate | ||
| Moldova | Low | ||
| Mongolia | Moderate | ||
| Nicaragua | Moderate | ||
| Nigeria | Low | ||
| Papua New Guinea | Low | ||
| Solomon Islands | Moderate | ||
| St. Vincent and the Grenadines | Moderate | ||
| Timor-Leste | Low | ||
| Tonga | Moderate | ||
| Uzbekistan | n.a. | ||
| Vanuatu | Low | ||
| Vietnam | Low | ||
| Yemen, Republic of | Moderate | ||
| Zambia | Low | ||
| Above 80 percent IDA cutoff with market access | |||
| Kenya | Low | ||
| Senegal | Low | ||
Blending is presumed for PRGT-eligible countries with either (i) per capita income above 100 percent of the prevailing operational cutoff used by IDA or (ii) sustained past and prospective market access and a per capita income that exceeds 80 percent of the IDA operational cutoff. Blending should normally not be used for countries at a high risk of debt distress or in debt distress (as assessed by the most recent joint Bank-Fund LIC Debt Sustainability Analysis (DSA)), even if per capita income or market access creates a presumption for blending.
Zimbabwe is not PRGT-eligible due to its removal from the PRGT-eligibility list by a Board decision in connection with its overdue obligations to the PRGT. It would be expected to become PRGT-eligible if the remedial measure were lifted.
Annex II. Proposed Changes to Access Norms, Limits, Blending Proportions, and Procedural Safeguards
Any RFI access also counts towards these limits.
RCF cumulative limit is raised 50 percent relative to limit in 2010. A 25 percent increase of this limit was approved in the 2013 Concessional Facilities Review.
High access norms apply if PRGT credit outstanding is less than 100 percent of quota in the baseline, 150 percent of quota in the proposed change. Norms are not applicable if PRGT credit outstanding >200 percent of quota under the baseline, >300 percent of quota under the proposed changes.
| Access Limits | Current | Proposed | Upon Effectiveness of 14th Review of Quotas | |
|---|---|---|---|---|
| Cumulative access limits | ||||
| All PRGT facilities-normal | 300 | 450 | 225 | |
| All PRGT facilities-exceptional | 450 | 600 | 300 | |
| RCF 1/ | 100 | 150 | 75 | |
| RCF (exogenous shocks window) 1/2/ | 125 | 150 | 75 | |
| RFI | 100 | 150 | 75 | |
| Annual access limits | ||||
| All PRGT-facilities-normal | 100 | 150 | 75 | |
| All PRGT-facilities-exceptional | 150 | 200 | 100 | |
| SCF precautionary, average | 50 | 75 | 37.5 | |
| SCF precautionary, at approval | 75 | 112.5 | 56.25 | |
| RCF 1/ | 25 | 37.5 | 18.75 | |
| RCF (exogenous shocks window) 1/ | 50 | 75 | 37.5 | |
| RFI | 50 | 75 | 37.5 | |
| Norms 3/ | ||||
| ECF (annual) – High access | 40 | 60 | 30 | |
| – Low access | 25 | 37.5 | 18.75 | |
| SCF (annual avg) – High access | 80 | 120 | 60 | |
| – Low access | 50 | 75 | 37.5 | |
| Blending proportions | ||||
| (PRGT:GRA) | 1:1 up to the applicable norm, GRA thereafter | 1:2 up to the applicable norm, GRA thereafter | 1:2 up to the applicable norm, GRA thereafter | |
| Triggers for procedural safeguards on high access requests | ||||
| Total access in any 24-month period‐for DSA/DSA update | 80 | 120 | 60 | |
| Total access in any 36-month period‐for an informal Board Meeting in advance of new PRGT request | 180 | 270 | 135 | |
Any RFI access also counts towards these limits.
RCF cumulative limit is raised 50 percent relative to limit in 2010. A 25 percent increase of this limit was approved in the 2013 Concessional Facilities Review.
High access norms apply if PRGT credit outstanding is less than 100 percent of quota in the baseline, 150 percent of quota in the proposed change. Norms are not applicable if PRGT credit outstanding >200 percent of quota under the baseline, >300 percent of quota under the proposed changes.
| Access Limits | Current | Proposed | Upon Effectiveness of 14th Review of Quotas | |
|---|---|---|---|---|
| Cumulative access limits | ||||
| All PRGT facilities-normal | 300 | 450 | 225 | |
| All PRGT facilities-exceptional | 450 | 600 | 300 | |
| RCF 1/ | 100 | 150 | 75 | |
| RCF (exogenous shocks window) 1/2/ | 125 | 150 | 75 | |
| RFI | 100 | 150 | 75 | |
| Annual access limits | ||||
| All PRGT-facilities-normal | 100 | 150 | 75 | |
| All PRGT-facilities-exceptional | 150 | 200 | 100 | |
| SCF precautionary, average | 50 | 75 | 37.5 | |
| SCF precautionary, at approval | 75 | 112.5 | 56.25 | |
| RCF 1/ | 25 | 37.5 | 18.75 | |
| RCF (exogenous shocks window) 1/ | 50 | 75 | 37.5 | |
| RFI | 50 | 75 | 37.5 | |
| Norms 3/ | ||||
| ECF (annual) – High access | 40 | 60 | 30 | |
| – Low access | 25 | 37.5 | 18.75 | |
| SCF (annual avg) – High access | 80 | 120 | 60 | |
| – Low access | 50 | 75 | 37.5 | |
| Blending proportions | ||||
| (PRGT:GRA) | 1:1 up to the applicable norm, GRA thereafter | 1:2 up to the applicable norm, GRA thereafter | 1:2 up to the applicable norm, GRA thereafter | |
| Triggers for procedural safeguards on high access requests | ||||
| Total access in any 24-month period‐for DSA/DSA update | 80 | 120 | 60 | |
| Total access in any 36-month period‐for an informal Board Meeting in advance of new PRGT request | 180 | 270 | 135 | |
Any RFI access also counts towards these limits.
RCF cumulative limit is raised 50 percent relative to limit in 2010. A 25 percent increase of this limit was approved in the 2013 Concessional Facilities Review.
High access norms apply if PRGT credit outstanding is less than 100 percent of quota in the baseline, 150 percent of quota in the proposed change. Norms are not applicable if PRGT credit outstanding >200 percent of quota under the baseline, >300 percent of quota under the proposed changes.
Annex III. MDBs Measures to Increase Their Lending Capacity to Developing Countries
In a recent joint statement on FfD,1 MDBs committed to helping raise an important part of the required flows needed to achieve the SDGs, either through direct financing, by leveraging their capital or catalyzing other resources. In this connection, a number of proposals have already been approved by the African Development Bank (AfDB), the Asian Development Bank (ADB), and the World Bank with the aim of increasing their lending capacity for developing countries. These include:
AfDB lending: extend access to the sovereign (non-concessional) window: This measure aims to facilitate access of eligible ADF-only countries to the sovereign window for the purpose of financing profitable projects. Various criteria are set to ensure that such a move will not raise the risks of debt distress faced by borrowing countries.
Enhancing ADB’s Financial Capacity for Reducing Poverty in Asia and the Pacific: This outcome is to be achieved by combining the Asian Development Fund’s (ADF) lending operations with the ordinary capital resources (OCR) balance sheet, retaining the ADF as a grant-only operation, effective from January 2017.2 As a result, the ADB is expected to expand its lending capacity by up to 50 percent, strengthening the ability of the institution to meet demand from its developing member countries, including those expected to graduate in the near term.
Boosting IBRD’s Margins for Maneuver (World Bank Group): The World Bank has decided to increase the International Bank for Reconstruction and Development’s (IBRD)3 Single Borrower Limit by $2.5 billion for Brazil, China, Indonesia, India, and Mexico, while lowering the IBRD minimum equity-to-loan ratio and changing the IBRD’s loans terms. These measures are expected to increase the IBRD’s annual lending commitment capacity from the current $15 billion in annual lending to more than $25 billion per year and to help address additional demand from developing countries for infrastructure financing. The World Bank Group is exploring other ways to increase WBG’s financial capacity, including by leveraging IDA’s capital to finance additional non-concessional loans, while maintaining IDA’s focus on the poorest and fragile and conflict-affected states and allowing for enhanced targeting of scarce concessional resources.
A paper that summarizes a set of proposals by the MDBs to better leverage their financial resources and catalyze private financing is currently being prepared and is set to be issued prior to the July 2015 Financing for Developments United Nations Conference.
References
International Monetary Fund, 2009a, “Modification of Access Policies for the Poverty Reduction and Growth Facility and the Exogenous Shocks Facility” (Washington).
International Monetary Fund, 2009b, “Proposal for a General Allocation of SDRs” (Washington).
International Monetary Fund, 2009c, “A New Architecture of Facilities for Low-Income Countries” (Washington).
International Monetary Fund, 2009d, “A New Architecture of Facilities for Low-Income Countries and Reform of the Fund’s Concessional Financing Framework—Supplementary Information” (Washington).
International Monetary Fund, 2011a, “Macroeconomic and Operational Challenges in Countries in Fragile Situations” (Washington).
International Monetary Fund, 2011b, “Poverty Reduction and Growth Trust—Review of Interest Rate Structure” (Washington).
International Monetary Fund, 2012a, “Staff Guidance Note on the Fund’s Engagement with Countries in Fragile Situations” (Washington).
International Monetary Fund, 2012b, “Review of Facilities for Low-Income Countries” (Washington).
International Monetary Fund, 2012c, “Chairman’s Summing Up on Review of Facilities for Low-Income Countries” (Washington).
International Monetary Fund, 2012d, “Proposal to Distribute Remaining Windfall Gold Sales Profits and Strategy to Make the Poverty Reduction and Growth Trust Sustainable” (Washington).
International Monetary Fund, 2012e, “Chairman’s Summing Up on Proposal to Distribute Remaining Windfall Gold Sales Profits and Strategy to Make the Poverty Reduction and Growth Trust Sustainable” (Washington).
International Monetary Fund, 2012f, “Poverty Reduction and Growth Trust interest Rate Mechanism—Extension of Temporary Interest Rate Waiver” (Washington).
International Monetary Fund, 2013a, “Review of Facilities for Low-Income countries—Proposals for Implementation” (Washington).
International Monetary Fund, 2013b, “Review of the Facilities for Low-Income Countries—Proposed Decisions” (Washington).
International Monetary Fund, 2014a, “Review of the Flexible Credit Line, the Precautionary and Liquidity Line, and the Rapid Financing Instrument” (Washington).
International Monetary Fund, 2014b, “Poverty Reduction and Growth Trust—Review of Interest Rate Structure” (Washington).
International Monetary Fund, 2015a, “Update on the Financing of the Fund’s Concessional Assistance and Debt Relief to Low-Income Member Countries” (Washington).
International Monetary Fund, 2015b, “IMF Engagement with Countries in Post-Conflict and Fragile Situations— Stocktaking” (Washington).
Developing countries are all countries not classified as advanced economies in the IMF World Economic Outlook.
The poorest and most vulnerable are defined as countries with a gross national income (GNI) below the International Development Association GNI threshold of US$1,215 and without market access as well as other PRGT-eligible countries at a high risk of debt distress or in debt distress (see Annex I Table 1 for a country listing).
See IMF (2009c) and (2009d)
See IMF (2012b), (2012c), and (2013b).
See IMF (2011b), (2012f), and (2014b).
See IMF (2012d) and (2012e).
For details, see IMF (2015a).
See IMF (2015b), for further discussion of FS engagement.
See IMF (2011a) and IMF (2012a).
See IMF (2009a). From September 2008, the Exogenous Shocks Facility-Rapid Access Component (ESF-RAC) allowed for two drawings of up to 25 percent of quota in any five year period, allowing potentially two drawings totaling 50 percent in a 12-month period. This is broadly equivalent to the provisions of the RCF, which permits 50 percent of quota in any 12-month period under the exogenous shocks window.
In 2013, the cumulative access limit for the RCF was increased from 75 to 100 percent of quota, reflecting the intent to expand use of the RCF, where warranted, as a tool to support states in fragile situations; in the case of “shocks window” of the RCF, the cumulative access limit was increased from 100 to 125 percent of quota. Comparisons of similar longitude for the SCF are not possible, as its precursor, the Exogenous Shocks Facility-High Access Component (ESF-HAC), came into existence only in 2008.
The difference in percent of quota between the normal and exceptional access limits will remain unchanged, i.e., annual and cumulative exceptional access limits are raised by the same amount as the corresponding normal access limits.
The self sustained PRGT strategy envisaged access norms periodically increasing in line with nominal GDP, with increases offset through a periodic graduation of PRGT-eligible members through reviews of PRGT eligibility. See IMF (2013a).
See Section II, Paragraph 2 (f) of Instrument to Establish the Poverty Reduction and Growth Trust (PRGT Instrument), Annex to Decision No. 8759-(87/176) ESAF, December 18, 1987, as amended.
With the notable exception that norms are a ceiling in the case of PRGT resources in a blended arrangement.
See IMF (2015b).
Including assistance provided under the RCF predecessor, the ESF-RAC.
In 2014, the Board had a preliminary discussion of GRA limits and surcharges, and how limits should adjust when the effectiveness conditions for the 14th review of quotas are met.
RCF and RFI have equivalent safeguards on repeated use (see IMF, 2009d and 2014a). Under the RFI, if a member has made a purchase under the RFI within the preceding three years, any additional purchases under the RFI may be approved only if the Fund is satisfied that (a) the member’s urgent balance of payments need was caused primarily by an exogenous shock; or (b) the member has established a track record of adequate macroeconomic policies over a period of at least six months immediately prior to the request.
For details on the conditions for a general SDR allocation, see IMF (2009b).
The next such assessment is expected to take place in 2016.
Specifically, the reform raised the ratios of members’ cumulative SDR allocations relative to quota to a common benchmark ratio.
The underlying assumptions for loan demand projections including those for blending and graduation are unchanged relative to previous staff projections. For a detailed description of assumptions underlying medium- to long-term loan demand projections and demand scenarios (see IMF, 2015a).
Staff calculations indicate that, it would take only one out of five programs (or even fewer large cases) with access at twice the current norm (instead of 1.5 times the current norm) for demand to be boosted beyond capacity.
See Box 2 of the April 2015 Update paper IMF (2015a).
ADF is the concessional financing window of the ADB and OCR provide loans to middle-income countries at market-based rates. The ADB Board approved the proposal in March 2015: http://www.adb.org/documents/chairs-summary-30-march-2015.
IBRD provides financing, risk management products, and other financial services to middle-income countries.
