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IMF Concludes Discussions on Review of Access Policy in the Credit Tranches and Under the Extended Fund Facility
On August 30, 2001 the Executive Board of the International Monetary Fund completed its Review of Access Policy in the Credit Tranches and Under the Extended Fund Facility (EFF).
The IMF reviews its access policy at regular intervals. Access policy—those policies of the Fund that affect the amount of Fund support granted to members—is applied in individual cases based on certain agreed criteria, described below, and on a system of access limits. The limits, which are on the annual and cumulative use of Fund resources by members, are expressed as a percentage of a member's quota, are generally reviewed annually, and were last reviewed in December 1999. The limit on annual access to Fund resources under the credit tranches (typically in the form of stand-by arrangements) and the EFF is currently 100 percent of quota, and the limit on the cumulative use of Fund resources is 300 percent of quota. The Executive Board can decide that they should be exceeded in exceptional circumstances.
The current review covered both the limits on access and the criteria which are used to determine access within the limits in individual cases. The discussion was based on two papers.
1. Review of Access Policy in the Credit Tranches and under the Extended Fund Facility discusses the criteria for access in individual cases which were agreed by the Board in 1983: the member's need for Fund resources, the member's capacity to service its indebtedness to the Fund, its outstanding use of Fund resources and its record of using Fund resources in the past. It also examines the system of annual and cumulative access limits and proposes limits for the remainder of 2001 and 2002. The paper discusses briefly emergency assistance and the Compensatory Financing Facility, which are subject to their own access policies outside the access limits for the credit tranches and EFF. The paper also discusses whether there should be an access norm to supplement the limits in the credit tranches and for the EFF, the methodology for considering future changes in access limits, and what should be the frequency of reviews of access policy. Considerations relating to access beyond or outside the access limits, including for the recent capital-account crisis cases, are not covered in this paper, although a chapter of the accompanying background paper describes the access decisions in these cases and some of the considerations that motivated them.
2. Review of Access Policy in the Credit Tranches and under the Extended Fund Facility—Background Paper provides additional material and analysis. After a brief introduction, Chapter II of this paper describes the history of and rationale for access limits. Chapter III describes the application of access policy in 2000 (since the last Board review of the access limits) and during the period since 1994 (when the current access limits were set), and uses simple econometric analysis to assess how the criteria for access have been followed in practice in recent years. Chapter IV addresses the question of whether the financing from the Fund and other creditors projected in Fund arrangements has materialized and if it has been sufficient to finance adjustment programs. Chapter V sets out the latest WEO projections of gross financing need for borrowing members and describes the current and prospective liquidity position of the Fund. Chapter VI gives an account of access in the recent capital account cases. Annex 1 assesses the impact of higher oil prices on potential financing needs under different scenarios.
Executive Board Assessment
The Board has now completed its review of access policy in the credit tranches and under the Extended Fund Facility (EFF). Directors decided that the current annual and cumulative access limits should be maintained through the end of 2002, and agreed that the criteria for access to Fund resources agreed by the Board in 1983 remain appropriate. Directors further agreed that emergency assistance and the Compensatory Financing Facility should remain subject to their own access policies outside the access limits for the credit tranches and EFF.
The Board will soon turn to a review of policy involving high access to the Fund resources. Most Directors requested that this review consider financing under all facilities—including the Supplemental Reserve Facility (SRF)—and that it be pursued in tandem with the continuing discussions by the Board on a framework for private sector involvement in the prevention and resolution of balance of payments crises. A few Directors noted that last year's decisions on the SRF and Contingent Credit Lines (CCL) involved a number of balanced considerations that should not be reopened. Several Directors also noted that access policy for countries requiring lower levels of access may need to be reconsidered in light of policy for high access cases. Furthermore, some Directors considered that the distribution of quotas, on which the access limits are based, did not adequately reflect changes in the world economy.
Directors discussed a proposal to supplement access limits with an annual access norm, which would serve as an operational benchmark against which access criteria would be applied. They agreed that this proposal should not be pursued, maintaining that such a norm could lead to unintended bunching of access levels or be considered as an entitlement.
Directors emphasized that proposals for access to Fund resources should be based on careful and explicit justification in staff papers. They encouraged the staff to base access proposals on the agreed access criteria, and to be prepared to propose substantial variation in access within the agreed access limits based on the criteria.
Directors noted that the access criteria should also be applied in precautionary arrangements.
IMF EXTERNAL RELATIONS DEPARTMENT