IMF Reviews Eligibility for Using Concessional Financing ResourcesPublic Information Notice (PIN) No. 12/22
March 5, 2012
Public Information Notices (PINs) form part of the IMF's efforts to promote transparency of the IMF's views and analysis of economic developments and policies. With the consent of the country (or countries) concerned, PINs are issued after Executive Board discussions of Article IV consultations with member countries, of its surveillance of developments at the regional level, of post-program monitoring, and of ex post assessments of member countries with longer-term program engagements. PINs are also issued after Executive Board discussions of general policy matters, unless otherwise decided by the Executive Board in a particular case.
On February 17, 2012, the Executive Board of the International Monetary Fund (IMF) reviewed the framework that determines which member countries are eligible to use its concessional financial resources under the Poverty Reduction and Growth Trust (PRGT). The framework, which was established in 2010 and will be reviewed every two years, is intended to preserve access to the IMF’s concessional financing for members with a low level of income and related economic and financial vulnerabilities. The Board also reviewed the list of PRGT-eligible countries.
The PRGT-eligibility framework provides transparent criteria for IMF Executive Board decisions regarding entry onto and graduation from the list of countries that are eligible to use the IMF’s concessional resources. It is designed to ensure the uniformity of treatment across all members with similar vulnerabilities and aligns access to concessional resources with the objectives of the PRGT.
The framework comprises differentiated criteria for entry and for graduation. In broad terms, countries enter the list if their annual per-capita income is below a certain threshold and they do not have capacity to access international financial markets on a durable and substantial basis. The IMF uses the same per-capita income threshold as used by the World Bank Group to determine eligibility for International Development Association (IDA) resources, which is revised on an annual basis.
Countries that are on the PRGT-eligibility list are expected to graduate from the list if they have either a persistently high level of income, exceeding twice the IDA per capita income threshold, or capacity to access international financial markets on a durable and substantial basis, and they do not face serious short-term risks of a sharp decline in per-capita income, loss of market access, and/or debt vulnerabilities.
The framework also comprises special entry and graduation criteria to small countries. For these countries, the PRGT-eligibility entry and graduation criteria largely mirror the general rules but they are less stringent as regards per-capita income, to account for these countries’ higher vulnerabilities.
Executive Board Assessment
Executive Directors welcomed today’s discussion on eligibility to use the Fund’s facilities for concessional financing, reviewing the eligibility framework that was established in 2010 as well as the list of countries eligible for concessional financing under the Poverty Reduction and Growth Trust (the PRGT-eligibility list). Directors agreed that, based on the application of the framework, no members are currently eligible for entry or graduation, and decided to keep the list of PRGT-eligible countries unchanged in this review, noting that the framework allows for interim updates where warranted by the existing criteria and requirements. Directors also agreed to increase the population threshold used to define small states to 1.5 million, aligning it with the definition adopted by the World Bank.
Directors emphasized the need to maintain a transparent and rules-based framework for PRGT eligibility that ensures uniformity of treatment among members. They generally recalled the importance of preserving the Fund’s scarce concessional resources for members with a low income level and related vulnerabilities, and continuing to closely align eligibility with the objectives of the PRGT and with IDA practices. A few Directors stressed that eligibility should not be constrained by the availability of concessional resources. A few other Directors were of the view that highly vulnerable small states that marginally exceed the relevant income threshold should be PRGT-eligible.
Directors agreed to advance the more comprehensive review of PRGT eligibility to early-2013. On the basis of extensive consultations and analytical work, the review could assess, among other things, the suitability of the various criteria and whether the balance between the criteria used in the framework remains appropriate. In particular, a number of Directors pointed out the shortcomings of the gross national income per capita criterion in the case of small states, while some other Directors called for a careful assessment of the application of the short-term vulnerabilities criterion for graduation. The review would also consider whether additional or alternative variables could be used to better capture members’ circumstances, particularly those of small states. Many Directors called for the next review to assess further options to enhance the flexibility of the PRGT-eligibility framework to cover small and very small countries.