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IMF POLICY PAPER
ELIGIBILITY TO USE THE FUND’S FACILITIES FOR CONCESSIONAL FINANCING, 2020
March 2020
IMF staff regularly produces papers proposing new IMF policies, exploring options for reform, or reviewing existing IMF policies and operations. The following documents have been released and are included in this package:
A Press Release summarizing the views of the Executive Board as expressed during its February 19, 2020 consideration of the staff report.
The Staff Report, prepared by IMF staff and completed on January 22, 2020 for the Executive Board’s consideration on February 19, 2020.
The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
Electronic copies of IMF Policy Papers are available to the public from http://www.imf.org/external/pp/ppindex.aspx
International Monetary Fund
Washington, D.C.
© 2020 International Monetary Fund
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ELIGIBILITY TO USE THE FUND’S FACILITIES FOR CONCESSIONAL FINANCING, 2019
January 22, 2020
Executive Summary
The review of Poverty Reduction and Growth Trust (PRGT) eligibility, conducted biennially, is guided by a transparent, rules-based and parsimonious framework.
The framework determines which IMF members can access concessional resources based on an assessment of their level of income per capita, market access, and the severity of short-term vulnerabilities. Application of the framework should be consistent with the self-sustainability of the PRGT’s lending capacity over time. The framework, introduced in 2010, has generally achieved its objective of targeting the Fund’s scarce concessional resources to poorer and more vulnerable member countries, but work on the 2019 review revealed a number of methodological issues that warranted further analysis.
This paper concludes that the existing framework remains broadly appropriate, but proposes methodological refinements to improve the assessment of market access, clarifies how serious short-term vulnerabilities are assessed, and proposes a modest extension of the transition period before graduation decisions become effective. These include changes with respect to the treatment of de minimis market borrowing, data sourcing, and the appropriate five-year period over which to assess past market access. The paper also discusses the requirement of market borrowing in three of the past five years as an indicator of durable market access, the treatment of externally guaranteed or subsidized borrowing, and borrowing from state-owned banks and by state-owned enterprises. Finally, it provides clarification on the assessment of serious short-term vulnerabilities and proposes a short extension in the deferred effectiveness of graduation decisions.
Guyana is proposed for graduation from the PRGT eligibility list while no countries meet the criteria for entry. Guyana is proposed for graduation because it meets the income criterion from graduation and does not have serious short-term vulnerabilities.
The impact of the proposed refinements and the graduation of Guyana on demand for PRGT resources is expected to be small and is in line with maintaining the self-sustaining capacity of the PRGT.
Approved By
Seán Nolan, Christian Mumssen, and Yan Liu
Prepared by the Strategy, Policy and Review Department, Finance Department, and Legal Department, in consultation with other departments. The staff team was led by Atticus Weller and comprised Kyungsuk Lee, Anne-Charlotte Paret Onorato, and Kiichi Tokuoka (all SPR), Kyung Kwak, Gomiluk Otokwala, and Jonathan Swanepoel (all LEG), and Gilda Cabauatan Fernandez, Randa Sab, Huy Quoc Nguyen, Marta Spinella, and Niklas Westelius (all FIN), under the guidance of Vitaliy Kramarenko and Wes McGrew (both SPR), Gabriela Rosenberg (LEG), and Charleen Gust (FIN). Yunhui Lin and Yudong Rao provided research assistance, while Phyo Zin and Merceditas San Pedro-Pribram provided administrative support.
Contents
Acronyms and Abbreviations
INTRODUCTION
CURRENT FRAMEWORK
ALIGNMENT WITH IDA PRACTICES
RISK OF REVERSE GRADUATION
PROPOSED CHANGES AND CLARIFICATIONS
A. Assessing Market Access
B. Serious Short-Term Vulnerabilities (SSTVs)
C. Transitional Provisions
ASSESSMENT OF THE LIST OF COUNTRIES ELIGIBLE FOR PRGT GRADUATION AND ENTRY
FINANCING IMPLICATIONS
ISSUES FOR DISCUSSION
BOXES
1. Criteria for Entry and Graduation from PRGT Eligibility
2. Summary of Past Reviews of Eligibility to Use the Fund’s Facilities for Concessional Financing
3. Comparison of International Debt Statistics and Dealogic Database
FIGURE
1. PRGT-vs. IDA-Eligible Countries by Type
TABLES
1. Previous Graduates
2. Members That Meet at Least One of the Graduation Criteria
3. Projected Demand and Capacity for PRGT Resources
ANNEXES
I. PRGT Graduation Criteria
II. Tables on GNI Per Capita and Debt
III. Assessment of Countries that Meet the Income or Market Access Criteria for Graduation and are not Assessed to be at High Risk of Debt Distress or in Debt Distress
References
Acronyms and Abbreviations
| BEL |
Bonds, Equities, and Loans |
| DSA |
Debt Sustainability Analysis |
| ECF-EFF |
Extended Credit Facility-Extended Fund Facility |
| FCL/PLL |
Flexible Credit Line/Precautionary and Liquidity Line |
| GNI |
Gross National Income |
| GRA |
General Resources Account |
| IBRD |
International Bank for Reconstruction and Development |
| IDA |
International Development Association |
| IDS |
International Debt Statistics |
| LICs |
Low-Income Countries |
| LIC DSF |
LIC Debt Sustainability Framework |
| PPG |
Public and Publicly Guaranteed |
| PRGT |
Poverty Reduction and Growth Trust |
| PSI |
Policy Support Instrument |
| SBA/SCF |
Stand-by Arrangement/Stand-by Credit Facility |
| WAEMU |
West African Economic and Monetary Union |
| WB |
World Bank |
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