1. This supplement provides additional information to the Staff paper on the Adequacy of the Global Financial Safety Net—Review of the Flexible Credit Line and Precautionary and Liquidity Line, and Proposals for Toolkit Reform—Revised Proposals, which was circulated to the Executive Board on November 8, 2017. The information relates to Poland’s exit from its Flexible Credit Line (FCL) arrangement and does not alter the thrust of the Staff paper.
2. Poland has exited from its FCL arrangement. The Polish authorities notified the IMF of their decision to cancel, effective November 3, 2017, their arrangement under the FCL. This follows three access reductions since early 2015 and thereby marks the final step in the process of gradually exiting from its FCL arrangements. Poland treated all of its FCL arrangements as precautionary and did not draw on any of these arrangements.
3. Poland’s exit from the FCL arrangement was communicated to markets prior to the official cancellation. A few weeks before the cancellation of the FCL arrangement, the Polish Deputy Prime Minister and Finance Minister Morawiecki publicly noted the Polish authorities’ intention to exit from the facility, citing the strength of Poland’s economy, a reduction in external risks, and the prospects for continued favorable global growth, especially in the euro area. The advance communication of their intention was in line with the Polish authorities’ previous practice of communicating to investors and the general public their plans for gradual exit prior to reductions in access. On the day of the cancellation, both the Polish authorities and the IMF (PR No. 17/418) issued press releases to communicate the exit.
4. Market reaction to the cancellation has been muted. Both the exchange rate and EMBI spreads remained broadly stable around the announcement of the exit from the FCL. This is consistent with the findings in the Staff paper “Adequacy of the Global Financial Safety Net—Review of the Flexible Credit Line and Precautionary and Liquidity Line, and Proposals for Toolkit Reform,” circulated to the Executive Board on June 2, 2017, which noted that high-frequency data have generally pointed to muted market reaction to access reductions across FCL and PLL arrangements.