Cover Policy Papers
Changes to the Fund’s Financing Assurances Policy in the Context Of Fund Upper Credit Tranche (UCT) Financing Under Exceptionally High Uncertainty
Author:
International Monetary Fund. Strategy, Policy, & Review Department
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International Monetary Fund. Legal Dept.
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International Monetary Fund. Finance Dept.
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Series:
Policy Papers
Volume/Issue:
Volume 2023: Issue 007
Language:
English
Publication Date:
17 Mar 2023
DOI:
https://doi.org/10.5089/9798400237447.007
ISBN:
9798400237447
ISSN:
2663-3493
Pages:
20
Keywords:
Fund supported program; Exceptionally high uncertainty; financing assurances; debt relief; UCT program involvement; fund Upper Credit Tranche; UCT arrangement; UCT context; Fund arrangement; Debt sustainability; Emergency assistance; Global
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The Executive Board of the International Monetary Fund (IMF) approved changes to the Fund’s financing assurances policy. The changes apply in situations of exceptionally high uncertainty, involving exogenous shocks that are beyond the control of country authorities and the reach of their economic policies, and which generate larger than usual tail risks. The changes adopted could enable the design of a Fund Upper Credit Tranche (UCT) program in situations of exceptionally high uncertainty, in particular by modifying the Fund’s financing assurances policies in two ways. The first change allows official bilateral creditors to provide an upfront credible assurance about delivering debt relief and/or financing with the delivery of a contingent second-stage element of debt relief and/or financing once the exceptionally high uncertainty has been resolved. This would help establish that medium-term viability is being restored. The second change extends the use of a capacity-to-repay assurances from official bilateral creditors/donors from emergency financing to a UCT arrangement context. This would help establish adequate safeguards. These changes and their application to any specific country case in a situation of exceptionally high uncertainty would require the Fund to weigh whether it is prepared to accept the enterprise risks that such arrangement would entail.
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Cover Policy Papers
Policy Papers
ISSN:
2663-3493
Publisher:
International Monetary Fund
Volume 2023: Issue 007