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IMF POLICY PAPER
TEMPORARY MODIFICATIONS TO THE FUND’S ANNUAL AND CUMULATIVE ACCESS LIMITS
March 6, 2023
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 [March 6, 2023] consideration of the staff report.
The Staff Report, prepared by IMF staff and completed on February 17, 2023 for the Executive Board’s consideration on [March 6, 2023].
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International Monetary Fund
Washington, D.C.
© 2023 International Monetary Fund
Press Release
PR 23/61
IMF Executive Board Makes Temporary Modifications to the Annual and Cumulative Access Limits for Fund Lending
FOR IMMEDIATE RELEASE
Washington, DC – March 6, 2023: The Executive Board of the International Monetary Fund (IMF) today agreed to temporarily increase the limits on members’ annual and cumulative access to Fund resources in the General Resources Account (GRA). These changes are intended to better support the Fund’s members in a particularly challenging and uncertain economic environment.
IMF lending is subject to both an annual and a cumulative limit on a member’s access to the Fund’s general resources. Access to resources beyond these limits is subject to the requirements of the Fund’s exceptional access framework. The access limits for the GRA were last set in 2016, with an annual limit of 145 percent of quota and a cumulative limit of 435 percent of quota1.
Today’s decision raises the annual limit in the GRA to 200 percent of quota and the cumulative limit to 600 percent of quota for a period of 12 months. These changes will provide member countries—particularly emerging markets and developing economies—that face increased financing pressures and vulnerabilities to access with higher Fund financial support without triggering the exceptional access framework. If circumstances warrant, staff would reengage the Executive Board before the end of the 12-month period on a proposal to maintain for longer the higher GRA access limits.
The Executive Board also discussed possible changes in access limits under the Poverty Reduction and Growth Trust (PRGT), the Fund’s concessional financing arm. PRGT access limits were last raised by 45 percent in 2021, bringing them into alignment with GRA access limits for the first time. Demand for PRGT resources has increased sharply and is expected to grow further given successive shocks. The Fund will undertake a review of PRGT access limits once sufficient additional resources have been pledged to the PRGT, which currently faces a sizable subsidy resource gap. The IMF is working closely with members to fill this gap.
Executive Board Assessment2
Executive Directors welcomed the proposal to raise, on a temporary basis for 12 months, the annual and cumulative limits on overall access to Fund resources in the General Resources Account (GRA). Directors noted the challenging economic environment and uncertain prospects faced by emerging markets and developing economies and recognized that in this context Fund members are likely to have an increased need to access Fund resources to support their pressing financing needs and adjustment efforts.
Against this background, Directors supported a temporary increase in the annual access limit in the GRA from 145 percent of a member’s quota to 200 percent of quota and an increase in the cumulative access limit from 435 percent of quota to 600 percent of quota for the next 12 months. They agreed that an extension of the temporary increase could be appropriate, if circumstances warrant, which should be considered before the expiration of the 12-month period. Many Directors called for staff to engage early with the Executive Board on this issue. Directors noted that the impact of the proposed increases in the access limits on the Fund’s liquidity and on the demand for Fund resources even under extreme scenarios is expected to be limited, though subject to uncertainty.
Directors agreed with the proposed limited grandfathering following the expiration of the period of temporarily higher access limits. They noted and supported the automatic adjustment of thresholds for the combined access to GRA and PRGT resources under the policy on safeguards for high combined GRA and PRGT exposure with any changes to the overall GRA access limits, and also supported the proposed limited grandfathering in the application of this policy.
Directors emphasized the importance of the alignment of PRGT access limits with those of the GRA that was achieved in 2021. While access limits under the PRGT would be part of the expected comprehensive review of concessional facilities in 2024/25, Directors also agreed that, once substantial progress with PRGT fundraising toward the SDR 2.3 billion first stage target for subsidy resources agreed in 2021 has been made—with total pledges of SDR 2 billion or more—access limits under the PRGT would be reviewed at an ad hoc interim review. In this context, it was recognized that efforts to fill the resource gap should be expedited, and most Directors called on members in a strong economic position to accelerate their support for PRGT fundraising efforts. Many Directors also called for an early examination of the possible use of the Fund’s internal resources.
Directors underscored that access limits are key elements of the Fund’s risk management framework, providing an important safeguard to Fund resources, preserving their revolving nature, and supporting the catalytic role of Fund financing. They stressed the importance of diligent application of standard (non-exceptional access) policy criteria for determining access to Fund resources on a case-by-case basis. They also emphasized the importance of enhanced scrutiny and additional safeguards for exceptional access cases. Although the increased access limits heighten risks to the Fund, Directors considered that these risks are expected to be manageable. They agreed that an interim review of the adequacy of the precautionary balances could also serve as risk mitigation.
Directors agreed that a comprehensive review of access limits, tentatively planned for 2024, will assess the GRA access limits in the context of the outcome of the 16th General Review of Quotas.
Title Page
TEMPORARY MODIFICATIONS TO THE FUND’S ANNUAL AND CUMULATIVE ACCESS LIMITS
February 17, 2023
EXECUTIVE SUMMARY
The global economy remains on the back foot. Emerging markets and developing economies face uncertain prospects, while coping with the pandemic’s legacies of higher debt and weaker external conditions. In this context, members are more likely to have an increased need to access Fund resources to support their pressing financing needs and adjustment efforts.
To better support members in this adverse environment, this paper proposes temporary changes to limits on access under the Fund’s General Resources Account (GRA) from the levels last set in 2016 of 145 percent of quota annually and 435 percent of quota cumulatively. These changes, which would be in place for 12 months, would increase the GRA annual access limit to 200 percent of quota and the cumulative limit to 600 percent of quota. If circumstances warrant, staff would re-engage with the Executive Board on a proposal for an extension before the expiration of the 12-month period.
The paper also discusses possible changes for the Poverty Reduction and Growth Trust (PRGT), for which the access limits were raised by 45 percent in 2021, bringing them into alignment with GRA access limits for the first time. While these changes helped address low-income countries’ (LICs) financing needs, these needs are projected to further increase in the medium term. An increase in the PRGT access limits in line with the proposed increase in the GRA access limits would help address these needs. However, the PRGT faces a sizable subsidy resource gap in fundraising under the first stage of the 2021 funding strategy, and consideration of any increase in access limits should therefore be deferred until more progress has been made in closing this resource gap and the PRGT is more adequately financed. Accordingly, this paper proposes that the Executive Board review PRGT access limits once sufficient subsidy resources have been pledged to the PRGT.
The impact on GRA resources and risks to the Fund from the proposed changes are expected to be manageable. While risks to the Fund’s liquidity and credit would be expected to rise from these changes, such risks would remain well within historical ranges and acceptable risk tolerances.
Approved By
Ceyla Pazarbasioglu (SPR), Bernard Lauwers (FIN), and Rhoda Weeks-Brown LEG)
Prepared by the Strategy, Policy and Review, Finance, and Legal Departments. The team was led by Bikas Joshi (SPR) and Carlo Sdralevich (FIN)—under the supervision of Zuzana Murgasova, Craig Beaumont (both FIN), Guillaume Chabert (SPR), and Bernhard Steinki (LEG)—and comprised Alexander Culiuc, Daehaeng Kim, La-Bhus Fah Jirasavetakul, Alex Grohovsky, Andreja Lenarčič, and Maxwell Tuuli (all SPR); Beata Jajko, Joseph Thornton, Qianying Chen, Alexander Massara, Nicolás Magud, Sandra Saveikyte, and Shan He (all FIN); and Gabriela Rosenberg, Jonathan Swanepoel, and Hoang Pham (all LEG). Further guidance was provided by Andreas Bauer (FIN), Mark Flanagan (SPR), and Yan Liu (LEG). Administrative assistance was provided by Rafael Flores and Atiya Mahdi (FIN).
Contents
Glossary
INTRODUCTION
ECONOMIC CONTEXT
MODIFICATIONS TO THE GRA ACCESS LIMITS
A. Trends in the Use of GRA Resources and Evolution of Access Metrics
B. Staff Proposal for Modifying GRA Access Limits
MODIFICATIONS TO THE PRGT ACCESS LIMITS
A. Trends in the Use of PRGT Resources and Evolution of PRGT Access Metrics
B. Staff Proposal to Defer the Review of PRGT Access Limits
RESOURCE IMPLICATIONS OF STAFF PROPOSAL AND ENTERPRISE RISKS
A. Summary of the Proposal
B. Impact on Fund Resources
C. Enterprise Risk Considerations
IMPLICATIONS FOR AND CHANGES TO OTHER POLICIES
BOXES
1. UCT-Quality Arrangements Since 2020
2. Past Reviews of GRA Access Limits
FIGURES
1. EMDEs. Economic Headwinds and Vulnerability
2. GRA Credit Outstanding Relative to Cumulative Access Limits for GRA Borrowers and Blender with Credit Outstanding, end December, 2022
3. Erosion of GRA Access Limits Against Selected Economic Indicators
4. Evolution of GRA Arrangements, 2016–2022
5. Evolution of GRA Access Limits Against Key Economic Indicators Under the Proposed GRA Access Limits Increase
6. PRGT Credit Outstanding Relative to Cumulative Access Limits, end-December, 2022
7. Evolution of PRGT Access Limit Against Key Economic Indicators
8: GDP Loss and Income Convergence Amid the War in Ukraine and the Pandemic
TABLE
1. Access Limits Before Triggering the Exceptional Access Framework
ANNEXES
I. Fund’s Exceptional Access Framework
II. Redline Version: Proposed Modifications to Existing Decisions
Glossary
| AE | Advanced Economies |
| BoP | Balance of Payments |
| BBAs | Bilateral Borrowing Agreements |
| AAL | Annual Access Limit |
| CAL | Cumulative Access Limit |
| CtR | Capacity to Repay |
| EA | Exceptional Access |
| EFF | Extended Fund Facility |
| EF | Emergency Financing |
| EFN | External Financing Needs |
| EMs | Emerging Markets |
| EMDEs | Emerging Markets and Developing Economies |
| FTP | Financial Transaction Plan |
| FCL | Flexible Credit Line |
| GDP | Gross Domestic Product |
| GFC | Global Financial Crisis |
| GRA | General Resources Account |
| GRQ | General Review of Quotas |
| LICs | Low-income countries |
| PFAs | Post Financing Assessments |
| PLL | Precautionary Liquidity Line |
| PRGT | Poverty Reduction and Growth Trust |
| PS-HCC | Policy Safeguard for High Combined Credit |
| RCF | Rapid Credit Facility |
| RFI | Rapid Financing Instrument |
| SBA | Stand-By Agreement |
| SDR | Special Drawing Rights |
| SDRi | Special Drawing Rights Interest Rate |
| SLL | Short-Term Liquidity Line |
| UCT | Upper-Credit Tranche |
The annual limit was also temporarily increased during mid-2020 until end 2021 to 245 percent of quota, to help Fund members contain the impact of the COVID-19 pandemic.
At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm.
