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IMF POLICY PAPER

ROLLBACK OF CREDIT ARRANGEMENTS IN THE NEW ARRANGEMENTS TO BORROW

March, 2024

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• The Staff Report, prepared by IMF staff and completed on January 12, 2024 for the Executive Board’s consideration on January 30, 2024.

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Title page

ROLLBACK OF CREDIT ARRANGEMENTS IN THE NEW ARRANGEMENTS TO BORROW

January 12, 2024

EXECUTIVE SUMMARY

On December 15, 2023, the Board of Governors (BoG) approved Resolution No. 79–1, which provides for an increase of 50 percent in Fund quotas under the Sixteenth General Review of Quotas, conditional on a reduction (“rollback”) in credit arrangements under the New Arrangements to Borrow (NAB). The quota increase, together with the pending expiration of the bilateral borrowing arrangements (BBAs) and the rollback of the NAB, would strengthen the quota-based nature of the Fund by reducing reliance on borrowing and thus ensuring the primary role of quotas in Fund resources, while maintaining the Fund’s lending capacity.

This paper presents a proposal for the implementation of the rollback through a reduction in NAB credit arrangements as follows:

• A reduction of the aggregate size of the NAB by SDR 61.3 billion, which represents a reduction of 16.8 percent, is proposed that would maintain the Fund’s lending capacity around its November 7, 2023 level of SDR 696 billion.

• The reduction of individual credit arrangements would be proportionate, on the basis of participants’ current NAB shares, except that: (i) no change is proposed to the credit arrangement for Kuwait, which did not participate in the 2020 NAB doubling; and (ii) the credit arrangement for Russia would be reduced by 39.3 percent, i.e., adjusted one-for-one for its quota increase, minus its BBA amount, to keep unchanged its total maximum exposure to the Fund from quota and borrowed resources after the quota increase and NAB rollback become effective.

• According to the NAB decision, the rollback would require the consent of NAB participants representing 85 percent of total credit arrangements, as well as each participant whose credit arrangement is changed. The NAB rollback proposal also includes a safeguard mechanism to address potential delays in the effectiveness due to one or a few participants’ inability to provide consent, allowing the rollback to become effective provided that participants representing at least 90 percent of credit arrangements have consented to this proposal.

• The rollback of NAB credit arrangements would become effective for each participant on the same day that it pays its quota increase under the Sixteenth General Review of Quotas.

Approved By

Bernard Lauwers (FIN) and Rhoda Weeks-Brown (LEG)

Contents

• INTRODUCTION

• CHANGE IN SIZE OF NAB CREDIT ARRANGEMENTS

• A. Aggregate Size of the NAB Rollback

• B. Changes to Individual Credit Arrangements

• EFFECTIVENESS OF THE ROLLBACK

• A. General Considerations

• B. NAB Safeguard Mechanism in Case of Delayed Consents

• IMPLICATIONS FOR ENTERPRISE RISKS

• NEXT STEPS

• TABLES

• 1. IMF Resources and Lending Capacity

• 2. IMF Resources and Lending Capacity Under the Proposed 50 Percent Quota Increase, Expiration of the BBAs, and Proposed NAB Rollback

• 3. NAB Participants and Their Current and Proposed Credit Arrangements

• ATTACHMENTS

• I. Participants and Amounts of Credit Arrangements

• II. Model Consent Letter