See Strengthening the International Monetary System, IMF Policy Paper, February 2016 and Adequacy of the Global Financial Safety Net, IMF Policy Paper, March 2016.
The PSI is the Fund’s nonfinancial policy support instrument for a subset of PRGT-eligible countries. See Decision No. 13561-(05/85), October 5, 2005, as amended.
A balance of payments need can be present (i.e., a need that exists in the current period), prospective (i.e., a need that is expected/projected to arise in the future, including during the implementation of a Fund-supported program), or potential (i.e., a need that may arise under an alternative, typically downside, macroeconomic scenario, but is not expected to arise based on baseline/program projections).
As with the PSI, the legal basis for the PCI would be Article V, Section 2(b) of the Fund’s Articles, which provides that “if requested, the Fund may decide to perform financial and technical services […] that are consistent with the purposes of the Fund.” This activity would therefore be voluntary for both the relevant member and the Fund.
The term upper credit tranche refers to the use of IMF credit beyond the first 25 percent of a member’s quota, against which conditionality is then applied.
Since the PCI does not involve Fund financing, the arrears policies apply by analogy, i.e., it applies in full unless there is a policy justification for a deviation, taking into account consistency and uniformity of treatment. For example, the requirement under the policy on arrears to official bilateral creditors or under the Lending into Arrears policy for private creditors that there is a need for prompt Fund financial assistance is not applicable.
For the policy on arrears to official bilateral creditors, see BUFF/15/107. The LIA policy (BUFF/02/42) applies to both sovereign arrears to external private creditors and non-sovereign arrears arising from the imposition of exchange controls. The Fund can lend only where: (i) prompt Fund support is essential for the successful implementation of the member’s adjustment program; and (ii) the member is pursuing appropriate policies and is making a good faith effort to reach a collaborative agreement with its private creditors (or to facilitate such an agreement between private debtors and their creditors, and good prospects exist for the removal of exchange controls).
The new terms “quantitative targets” and “reform targets” would help signal the shift to a review-based approach to monitoring of conditionality.
As in Fund financial arrangements, members with a PCI are expected not to: (i) impose or intensify restrictions on the making of payments and transfers for current international transactions; (ii) introduce or modify multiple currency practices; (iii) conclude bilateral payments agreements which are inconsistent with Article VIII; (iv) impose or intensify import restrictions for balance of payments reasons; and (v) accumulate external payments arrears.
The goals would be program-specific, but could include, inter alia, building up of external buffers, ensuring debt sustainability, and maintaining monetary and financial stability.
See the Guidelines on Conditionality, Decision No. 12864-(02/102), as amended and Revised Operational Guidance to IMF Staff on the 2002 Conditionality Guidelines, July 23, 2014.
If the report is published, the press release could also summarize staff views set out in the update.
This clause was revised to clarify circumstances that would trigger the automatic termination of the PCI as follows: “Non-completion of a review for a twelve-month period would signify lack of Board endorsement on the member’s policies and result in an automatic termination of the PCI.” This change was reflected in the revised decision.
Under UFR arrangements, a waiver of non-observance for a PC is granted if the Fund is satisfied that the program will nevertheless be successfully implemented—i.e., that it will achieve its goals—either because of the minor or temporary nature of the nonobservance, or because of remedial actions taken by the authorities to preserve program objectives. Under the PSI, a formal request from the member is not required, instead the waiver is “granted” if the conditions noted above are met.
There are no waivers for misreporting in the context of the PSI misreporting framework. If the nonobservance was de minimis in nature, the Executive Board is informed of the misreporting in a staff report on a review.
In addition, while the misreporting framework under Article VIII, Section 5 does not apply to information provided to the Fund solely for the purposes of a PCI, these procedures would apply in the context of a PCI when such information is otherwise subject to Article VIII, Section 5.
The main factor influencing the precise marginal cost is the decision to open/maintain a Resident Representative posting, which would be at the discretion of the corresponding Area Department. Other factors include cost of travel and additional TA required to achieve program objectives.
As reflected in the revised decision, this recommendation was amended to allow for an earlier review, if warranted.
According to current TA policy, self-financing is expected only in the case of use by an advanced economy.