## pp110917-2017-handbook-of-imf-facilities-for-low-income-countries ## Source details **Canonical URL:** [pp110917-2017-handbook-of-imf-facilities-for-low-income-countries](https://www.imf.org/-/media/files/publications/pp/2017/pp110917-2017-handbook-of-imf-facilities-for-low-income-countries.pdf) ## Other formats - [Markdown version](/-/media/files/publications/pp/2017/pp110917-2017-handbook-of-imf-facilities-for-low-income-countries.pdf.md) - [Structured JSON version](/-/media/files/publications/pp/2017/pp110917-2017-handbook-of-imf-facilities-for-low-income-countries.pdf.json) --- ### Overview and facilities architecture - Fund’s concessional facilities aim to provide flexible, tailored support to low-income countries (LICs) to achieve, maintain, or restore a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth. - Facilities and nonfinancial instrument: - Extended Credit Facility (ECF) — main tool for medium-term support to LICs with protracted balance of payments (BoP) problems. - Standby Credit Facility (SCF) — for short-term BoP needs. - Rapid Credit Facility (RCF) — rapid low-access financing with limited conditionality for urgent BoP needs. - Policy Support Instrument (PSI) — nonfinancial policy support; can facilitate access under SCF and RCF. ### Choosing the appropriate instrument — rules of thumb - Choice depends on: - (i) expected duration to restore a stable macroeconomic position; - (ii) conditionality standard (UCT-quality or not); - (iii) nature of BoP need (present, prospective, potential, urgent). - Duration definitions: - Protracted BoP problem: resolution normally ≧ 3 years (in any case > 2 years) → ECF appropriate. - Short-term BoP need: resolution normally ≦ 2 years (in any case < 3 years) → SCF appropriate if UCT-quality program feasible; otherwise RCF for urgent needs. - Concurrent and sequencing rules: - ECF cannot be concurrent with SCF or PSI; SCF cannot be concurrent with ECF. - RCF may be used concurrently with an SMP or, under strict conditions, with ECF/SCF when disbursements under ECF/SCF are not possible and urgent exogenous shock exists. - PSI appropriate when country is broadly stable; SCF or RCF can be requested if BoP needs arise during a PSI. ### Blending PRGT and GRA resources — presumptions and rules - General presumption: - Some PRGT-eligible countries are expected to receive blended PRGT and GRA resources rather than fully concessional financing. - Presumed blenders: - PRGT-eligible countries with either: - per capita income above 100 percent of the IDA operational cutoff; or - sustained past and prospective market access and per capita income > 80 percent of the IDA operational cutoff, provided not at high risk of debt distress or in debt distress. - Blending mix and caps: - Blending rules stipulate a 1:2 mix of PRGT:GRA resources; concessional access capped at the applicable norm (all GRA thereafter). - For blended assistance the concessional component is normally one-third of total access; concessional component capped at the norm applicable to unblended arrangements. - IDA operational cutoff reference: - As of July 2017, the IDA operational cutoff cited in the text is US$1,005. ### Access norms, limits, and procedural safeguards (key exact figures) - Cumulative access limits (Current (14th General Quota Review) 1/): - All PRGT facilities-normal 225 - All PRGT facilities-exceptional 300 - RCF 2/ 75 - RCF (exogenous shocks window) 2/ 75 - RCF (large natural disasters window) 2/ 75 - RFI 75 - RFI (large natural disasters window) 75 - Annual access limits: - All PRGT-facilities-normal 75 - All PRGT-facilities-exceptional 100 - SCF (precautionary) – average annual 37.5 - SCF (precautionary), at approval 56.25 - RCF 2/ 18.75 - RCF (exogenous shocks window) 2/ 37.5 - RCF (large natural disasters window) 2/ 60 - RFI 37.5 - RFI (large natural disasters window) 60 - Norms (examples): - 3-year ECF – High access 5/ 90 - 3-year ECF – Low access 56.25 - 18-month SCF – High access 6/ 90 - 18-month SCF – Low access 56.25 - Triggers for procedural safeguards on high access requests: - Total access in any 24-month period—for DSA (update) 8/ 60 - Total access in any 36-month period—for an informal Board Meeting in advance of new PRGT request 9/ 135 - Special caps for exceptional access: - Exceptional access hard caps: 100 percent of quota annually and 300 percent of quota cumulatively across all concessional facilities. ### Extended Credit Facility (ECF) — eligibility, access, and program design - Eligibility and definition: - Protracted BoP problem: resolution expected normally ≧ 3 years. - Minimum ECF length: three years; initial term normally three to four years, extendable subject to an overall five-year limit. - Qualification: - Board finding required that the member is making an effort to strengthen substantially and in a sustainable manner the country’s BoP position. - Program must meet UCT conditionality standards; authorities must have commitment and capacity to implement policies adequate to correct external imbalances and enable repayment. - Countries not yet able to meet qualifications can build a track record via an SMP or, if urgent needs exist, the RCF. - Access norms for unblended ECF: - 90 percent of quota per three-year arrangement if outstanding concessional IMF credit < 75 percent of quota. - 56.25 percent of quota per three-year arrangement if outstanding concessional credit between 75 percent and 150 percent of quota. - If outstanding concessional credit > 150 percent of quota, norms do not apply; access guided by cumulative limit of 225 percent (300 percent exceptional). - Special practice: members with protracted BoP problem but minimal present/prospective needs — access set at standardized level of 10 percent of quota per arrangement. - Phasing and augmentations: - Access normally phased smoothly over three to four years; can be front-loaded/back-loaded if warranted. - Augmentations possible; many historical augmentations were in the range of 15–45 percent of quota (pre-14th Review), though no formal norm. - Trade Integration Mechanism (TIM): augmented access not exceeding 10 percent of quota available to compensate BoP shortfalls from trade liberalization by others. - Repayment and interest: - Repayments in 10 equal semi-annual installments, subject to a 5.5-year grace period and 10-year final maturity. - Interest rate on ECF credit currently set at zero percent; subject to biennial Board reviews within a 0.0–0.5 percent range for ECF. Next review scheduled for December 2018 (text). - Interest on overdue interest/repayments charged at rate equal to SDR interest rate. - Financing assurances and arrears: - ECF arrangements can only be approved/reviews completed when the program is fully financed; staff should confirm no unfilled financing gaps over the 12 months following approval (and completion of each review). - Fund’s non-toleration of sovereign arrears to official multilateral creditors applies; lending into arrears (LIA) policy applies to private external creditor arrears under specified conditions. - Conditionality and program design: - ECF programs aimed at significant progress toward stable, sustainable macro position consistent with poverty reduction and growth. - Conditionality must meet UCT standard; typically includes quantitative periodic and continuous PCs, indicative targets, structural benchmarks, and prior actions as necessary. - Social and priority spending should be safeguarded and monitored (indicative floor where feasible). - Safeguards: - Aim to complete safeguards assessment prior to Board approval but no later than first review; summary of safeguards issues to be reflected in staff reports while Fund credit remains outstanding. - PRS / EDD requirements: - Financing requests or reviews under ECF must be accompanied by statement how program advances poverty reduction/growth objectives. - EDD may be an existing national development plan or a newly prepared document; EDD must satisfy timing rules to allow completion of first review. ### Determination and phasing of access — key operational points - Access determination based on case-by-case standard criteria: - (i) member’s present and prospective BoP need; - (ii) strength of program and capacity to repay; - (iii) amount of outstanding Fund credit and past use. - Annual PRGT access cap: - Total access under PRGT normally not exceed 75 percent of quota per year. - Cumulative PRGT access cap: - Total access under PRGT normally not exceed 225 percent of quota cumulatively, net of scheduled repayments. - Phasing: - Phasing set at approval; should normally be smoothed but can be front- or back-loaded; present and prospective BoP financing should not be exceeded in any period. - Procedural safeguards: - New DSA required for PRGT financing requests if exceptional access, or cumulative disbursements > 60 percent of quota in any 24-month period, or member with high risk of debt distress or in debt distress. - Early informal Board meeting required if exceptional access or cumulative access > 135 percent of quota in any 36-month period. ### Standby Credit Facility (SCF) — objectives and modalities - Purpose: - Concessional financing for LICs with actual or potential short-term BoP needs; appropriate for episodic, short-term financing expected to be resolved within normally two years or less. - Duration: - Minimum 12 months, maximum 24 months; use normally limited to two and a half years out of any five-year rolling period (precautionary SCF not counted towards limit). - Qualification: - Board finding required that member is implementing or committed to policies meeting UCT conditionality standards; qualification presumed for on-track PSI users. - Countries unable to meet qualification may build track record via SMP or, for urgent cases, RCF. - Access norms (unblended SCF): - 90 percent of quota per 18-month arrangement if outstanding concessional IMF credit < 75 percent of quota. - 56.25 percent of quota per arrangement if outstanding concessional credit between 75 percent and 150 percent of quota. - Norms adjusted proportionally for durations ≠ 18 months. - Precautionary SCF: - For SCF treated as precautionary at approval: annual access limited to 56.25 percent of quota; average annual access cannot exceed 37.5 percent of quota. - Financing terms: - Repayments in nine equal semiannual installments, subject to a four-year grace period and eight-year final maturity. - Interest rate currently zero percent; biennial Board reviews within 0.0–0.75 percent range for SCF. Next review scheduled for December 2018 (text). - Small availability fee for precautionary use: 0.15 percent per annum on undrawn portion each six-month period. - Conditionality, safeguards, DSAs: - SCF-supported programs must meet UCT conditionality standard; DSAs required under similar triggers as ECF. - Safeguards assessment to be completed prior to Board approval or no later than first review; fiscal safeguards review required when at least 25 percent of funds expected to finance state budget. ### Rapid Credit Facility (RCF) — objectives, eligibility, and limits - Purpose and scope: - Rapid low-access concessional financing with limited conditionality for urgent BoP needs (exogenous shocks, natural disasters, emergence from conflict, fragility). - Effective January 7, 2010. - Eligibility and qualification: - Available to PRGT-eligible members facing urgent BoP needs unless caused predominantly by donor withdrawal or a UCT-quality program is feasible and necessary. - Urgent BoP need: present need that, if not addressed, would result in immediate and severe economic disruption. - Member normally qualifies if need expected resolved within one year with no major policy adjustments, or UCT-quality program cannot be put in place due to limited capacity or urgency. - LOI required with ex ante policy undertakings; safeguards assessment commitment required. - Repeated use and sub-ceilings: - Member may not receive more than two RCF disbursements in any 12-month period. - RCF-specific sub-ceilings: - 18.75 percent of quota per year and 75 percent of quota cumulatively. - Exogenous shocks window: up to 37.5 percent of quota per year and up to 75 percent cumulatively. - Large natural disasters window: up to 60 percent of quota per year and up to 75 percent cumulatively where damage ≧ 20 percent of GDP. - Purchases under the RFI count toward applicable RCF annual and cumulative sub-ceilings. - Financing terms: - Repayments in 10 equal semiannual installments, subject to a 5.5-year grace period and 10-year final maturity. - Interest rate zero percent. - Financing assurances and arrears: - Unlike ECF/SCF, financing assurances are not required for RCF disbursements; staff reports should provide projected financing gaps. - Fund non-toleration of sovereign arrears to official multilateral creditors applies; LIA and other arrears policies apply with exceptions for emergency situations. - Role in building track records: - RCF can be used to build policy track records (similar to SMP); repeated use conditioned on track record requirements (typically six months) unless qualifying under exogenous shocks or large disaster windows. ### Policy Support Instrument (PSI) — purpose and modalities - Nature and qualification: - Nonfinancial instrument for policy support; Board finding required that member committed to implement policy framework meeting UCT standards and maintain/consolidate stable macroeconomic position. - Available to members meeting PSI policy criteria (good track record, institutional capacity). - Duration and extensions: - Initial PSI duration 1–4 years; three-year PSIs are the norm; total maximum duration five years with possible extensions. - Concurrent use: - PSI cannot be concurrent with ECF; can run concurrently with SCF or RCF without canceling the PSI (SCF qualification presumed for on-track PSI). - Conditionality and ACs: - PSI uses Assessment Criteria (ACs) analogous to PCs: quantitative periodic and continuous ACs, indicative targets, structural benchmarks, prior actions if critical. - PSI-supported programs must meet UCT conditionality standard. - PRS / EDD requirements: - First and subsequent PSI reviews can only be completed if a PRS/EDD exists meeting timing and issuance rules; LOI/MEFP should state how PSI advances poverty reduction/growth objectives. - Misreporting framework: - Misreporting framework tailored to PSI; no waivers under PSI misreporting framework; Board consideration of misreporting normally at next scheduled PSI review. - Publication and financing assurances: - PSIs require the same financing assurances as Fund financial arrangements when provided alongside SCF or RCF financing; safeguards assessments not required but encouraged. ### Poverty Reduction Strategy (PRS) and Economic Development Document (EDD) - EDD role: - PRS-related documentation to be issued as an EDD and subject to staff analysis for ECF or PSI approvals and reviews. - EDD can be existing national development plan or a newly prepared 10–15 page focused EDD. - Minimum standards and timing: - EDD must describe strategy for poverty reduction and growth, specific policies including macroeconomic policies, launch date and timeframe, and participatory process (if any). - For ECF and PSI, an EDD is not required at initial Board consideration but must exist for completion of the first review and subsequent reviews subject to timing rules (normally within previous five years but no more than six years). - PRS Implementation Review (PIR): - PIR expected by the time of the fourth review under an ECF or PSI to report on PRS implementation and linkages to program. ### Documents, mission processes, and program design tools - Policy Note (PN): - Required for policy discussions; includes background diagnostics, outlook, staff and authority positions, program objectives/design, risks, and standard macro tables. - LOI/MEFP and TMU: - LOI/MEFP specify policy commitments; TMU defines PCs/ACs, indicator definitions, adjustors, and data requirements. - SMPs and track records: - SMPs are informal staff-monitored programs to build track records toward UCT-quality arrangements; typical SMP track record minimum six months, normally not beyond 18 months. - Quantitative conditionality design: - PCs typically semiannual; indicative targets quarterly; adjustors specified in TMU; fiscal, monetary, reserves, and debt indicators commonly used. - Continuous PCs: - Always include commitments on non-introduction/intensification of exchange restrictions, multiple currency practices, and non-accumulation of external payments arrears. ### CCR Trust (PCR and CC windows) — catastrophe relief modalities and thresholds - CCR Trust windows: - Post-Catastrophe Relief (PCR) window — for catastrophic natural disasters. - Catastrophe Containment (CC) window — for fast-spreading public health disasters with international spillover potential. - PCR eligibility thresholds (exact source figures): - directly affected normally at least one-third of the population; - destroyed more than one-quarter of the country’s productive capacity; or - caused damage deemed to exceed 100 percent of GDP. - PCR assistance: - Flow relief: relief on IMF debt service falling due from decision date to second anniversary of disaster; relief applies to debt outstanding at disaster plus IMF disbursements made normally within four months following disaster. - Stock (debt cancellation) relief possible in severe cases subject to conditions including concerted creditor effort (assurances from creditors holding at least eighty percent of sovereign external debt outstanding to official creditors, less amounts due to the Fund) and an updated DSA indicating high risk or debt distress; decision could be made six to 24 months after disaster. - CC window numeric terms: - Qualifying public health disaster characterized by at least a cumulative loss of real GDP of 10 percent; or a cumulative loss of revenue and increase of expenditures equivalent to at least 10 percent of GDP. - Immediate up-front grants to pay IMF debt service up to a maximum of 20 percent of quota. - Augmented support cases: - Case 1 (exceptionally burdensome near-term IMF debt service): relief not exceed amount of debt service due in the two-year period since decision. - Case 2 (broad-based international effort): relief up to maximum of two years from decision if bilateral creditors are expected to provide similar relief. - Case 3 (country at high risk or in debt distress): relief to ensure eligible debt incurred to respond has a grant element of 80 percent. - Historical disbursement example: SDR 68 million (equivalent to US$95.5 million) provided in February—March 2015 to Guinea, Liberia, and Sierra Leone via the CC window. *pp110917-2017-handbook-of-imf-facilities-for-low-income-countries* ### INTRODUCTION—FACILITIES ARCHITECTURE OVERVIEW ____________________________________ 6 ### INTRODUCTION—FACILITIES ARCHITECTURE OVERVIEW ### Overview - The Fund’s concessional facilities are aimed at providing flexible and tailored support to low-income countries (LICs) in their efforts to achieve, maintain, or restore a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth. - The architecture of facilities for LICs includes three concessional facilities and one nonfinancial instrument: - The Extended Credit Facility (ECF), which succeeded the Poverty Reduction and Growth Facility (PRGF), is the Fund’s main tool for providing medium-term support to LICs with protracted balance of payments problems. - The Standby Credit Facility (SCF) provides financing to LICs with short-term balance of payments needs. - The Rapid Credit Facility (RCF) provides rapid low-access financing with limited conditionality to meet urgent balance of payments needs. - The Policy Support Instrument (PSI) is the Fund’s nonfinancial policy support tool for LICs, and can facilitate access under the SCF and RCF, if needed. ### A. Background - Key institutional reforms and dates: - In July 2009, the Fund’s Executive Board adopted a comprehensive overhaul of the Fund’s concessional facilities. - The new Poverty Reduction and Growth Trust (PRGT) became effective on January 7, 2010 to finance concessional loans. - On September 28, 2012 the Fund’s Executive Board adopted a three-pillar strategy to make the PRGT financially sustainable, consisting of: - (i) a base envelope of about SDR 1¼ billion in annual lending capacity; - (ii) contingent measures that can be put in place if average financing needs exceed the base envelope by a substantial margin for an extended period; and - (iii) a principle of self-sustainability under which future modifications to LIC facilities would be expected to ensure that demand can be met with the available resources under the first and second pillar under a plausible range of scenarios. - On April 8, 2013, the Fund’s Executive Board concluded the Review of Facilities for Low-Income Countries and approved staff’s proposals to improve tailoring and flexibility. - The Fund’s policy on Poverty Reduction Strategies (PRS) in Fund engagement with LICs was modified by the Board on June 22, 2015. - Further reforms were approved on July 1, 2015 to: (i) enhance access to all concessional facilities; (ii) better target concessional financing to the poorest and most vulnerable members eligible for support from the PRGT, while also boosting access for better-positioned members through greater use of financing from the General Resources Account (GRA); (iii) complement increased access under the Rapid Credit Facility (RCF) for PRGT-eligible countries with a parallel increase of fast-disbursing support under the Rapid Financing Instrument (RFI) to assist all countries with urgent balance of payments (BoP) needs, including those in fragile situations or hit by conflict or natural disasters; and (iv) to set the interest rate on RCF loans at zero percent. - The review of members’ eligibility for PRGT support was concluded on May 15, 2017 (previous reviews took place on January 11, 2010, February 17, 2012, April 8, 2013 and July 17, 2015). - Eligibility and resource considerations: - Under the Articles of Agreement, all Fund members are eligible to access the Fund’s resources in the GRA. No distinctions in GRA eligibility apply according to income. - Only a subsection of the membership (developing countries meeting specified income and market access criteria) is eligible for concessional financial support under the PRGT. These members are eligible, but not obliged, to use such concessional financing. - Staff should continue to advise PRGT-eligible members to seek financing under the PRGT facilities up to the applicable access limits. - If the size of the balance of payments need exceeds the access limits of the PRGT, or if the member prefers to access GRA resources, consideration of a request for support from the GRA would be based on the relevant policies governing access to the GRA, including those that pertain to program strength, capacity to repay the Fund, and debt sustainability. - The Fund has noted that for PRGT-eligible members with weak capacity to service non-concessional debt, GRA financing may not be suitable, relative to concessional financing under the PRGT. ### B. Choosing the Appropriate Facility - The choice of the appropriate instrument depends on three main factors: - (i) the expected time needed to establish a stable and sustainable macroeconomic position (duration of adjustment and balance of payments needs); - (ii) the conditionality standard of Fund support; and - (iii) the nature of the balance of payments need. - Duration of adjustment and balance of payments needs: - A country with a protracted balance of payments problem: resolution would be expected to extend over normally three years or more, and in any case more than two years. - A country with a short-term balance of payments need: resolution would be expected to extend over normally two years or less, and in any case less than three years. - Conditionality standard: - Distinguished by whether or not it meets the upper credit tranche (UCT) quality — i.e., whether authorities have the commitment and capacity to implement a set of policies that is adequate to correct external imbalances and enable repayment to the Fund within the specified maturity period. - Nature of the balance of payments need: - A balance of payments need can arise because of a member’s balance of payments deficit, reserve position, and developments in reserves. - The need can be: - present (exists in the current period), - prospective (expected/projected to arise in the future, including during implementation of a Fund-supported program), or - potential (may arise under an alternative, typically downside, macroeconomic scenario, but is not expected to arise based on baseline/program projections). - A present need may also be urgent, specifically when not addressing the external financing gap would result in an immediate and severe economic disruption. - Distinct from the concept of balance of payments need, a protracted balance of payments problem examines the components of the balance of payments need (rather than focusing on the overall balance of payments position), as well as a variety of other indicators; countries with a protracted balance of payments problem may experience a combination of present, prospective, and potential balance of payments needs. ### C. Blending - Note on blending and related instruments: - In some cases it may be appropriate to use Staff-Monitored Programs (SMPs) or blend financial assistance under the PRGT with facilities under the GRA. - The Post-Catastrophe Relief Window and the Catastrophe Containment Window of the Catastrophe Containment and Relief (CCR) Trust are discussed in Appendix VII. *2017 HANDBOOK OF IMF FACILITIES FOR LICS — INTRODUCTION—FACILITIES ARCHITECTURE OVERVIEW* ### 6. To determine the appropriate facility for a particular country case, the following rules of ### pp110917-2017-handbook-of-imf-facilities-for-low-income-countries - 6. To determine the appropriate facility for a particular country case, the following rules of ### Rules of thumb for choosing IMF facilities for LICs - If a country faces a protracted balance of payments (BoP) problem: - ECF appropriate; SCF and PSI not appropriate. - ECF supports a UCT-quality economic program. - If unable to implement a UCT-quality program (institutional/policy capacity constrained or more time needed), the country can: - Build a track record through a Staff-Monitored Program (SMP); and - If urgent financing needs exist concurrently, access the RCF (RCF can be used concurrently with an SMP if a clear and explicit policy framework is needed to build a track record for a UCT-quality arrangement). - If a country has short-term (present) BoP needs but not a protracted BoP problem: - SCF appropriate if a UCT-quality economic program can be implemented; SCF not appropriate if there is a protracted BoP problem. - RCF is an alternative if a UCT-quality program is not necessary or feasible and the need is urgent. - Transitory needs expected to be resolved within one year and requiring no major policy adjustments typically point to RCF (urgent) or SCF (if program feasible). - If not in a position to implement a UCT-quality program, build track record via SMP or access RCF (which could be used concurrently). - If neither protracted nor present BoP needs exist but prospective or potential short-term BoP needs are possible: - SCF may be used on a precautionary basis; disbursements possible if/when a present BoP need arises. - If country is in a broadly stable and sustainable macroeconomic position: - PSI appropriate (non-financial instrument to promote close policy dialogue). - If short-term BoP needs arise during a PSI: country can request SCF financing or RCF if urgent. - Precautionary SCF use possible in conjunction with PSI for periods of increased uncertainty or risk. ### Table 1 — Choice of Program Support for Low-Income Countries — Key Factors (summary of facility features) - Facilities and key attributes (duration of adjustment and BoP needs; UCT conditionality standard; size and nature of BoP need; other aspects): - Extended Credit Facility (ECF) - Protracted BoP problem. - Time needed to achieve stable and sustainable macro position ≧ 3 years (in any case > 2 years). - UCT conditionality: Required. - Present or prospective BoP needs exist (even if minimal) over course of 3-year arrangement, but a present need is not necessary for each disbursement. - Duration: 3 to 4-year duration, extendable to 5 years. 5/ - Economic Development Document (EDD) required by 1st review. - Standby Credit Facility (SCF) - Time needed to achieve stable and sustainable macro position ≦ 2 years (in any case < 3 years). - UCT conditionality: Required. - SCF can be approved based on present, prospective, or potential short-term BoP needs. Precautionary use possible. Disbursements require a present need. - Duration: 1-2-year duration. Episodic use is the norm, i.e., no more than 2.5 out of every 5 years (excl. precautionary use). - Rapid Credit Facility (RCF) - Could be short term or protracted. - UCT conditionality not needed or not feasible. No ex post conditionality or reviews. Can help build track record. - Urgent (present) BoP need must exist. Prospective or potential needs may also exist. - One-off disbursements. Repeated use possible based on sudden exogenous shocks or 6-monthly track records. - Policy Support Instrument (PSI) - Broadly stable and sustainable macroeconomic position. - UCT conditionality: Required. - At approval, BoP needs may exist, but would be expected to be met through financing from non-Fund sources. - Duration: 1-4 year duration, extendable to 5 years. EDD required by 1st review. - Staff-Monitored Program (SMP) - Could be short term or protracted. - UCT conditionality: Not required. Purpose is to build track record toward a UCT-quality program. - Any type or size of BoP need may exist. - Duration normally 6-18 months. No Board endorsement. - Footnotes and operational guidance excerpted in the table: - 1/ For PRGT-eligible countries meeting the blending criteria, any concessional financial support should be blended with GRA financing, normally resulting in ECF-EFF, SCF-SBA, and RCF-RFI blends. Purchases under the RFI count towards the applicable RCF annual and cumulative sub-ceilings. Members not presumed to blend may receive financing exclusively on concessional terms. Provided they meet GRA access policies, they may request access to GRA resources in a blend with concessional resources, typically when financing needs exceed the applicable PRGT access limits, or on a standalone basis. Staff will advise PRGT-eligible members to borrow from the PRGT up to applicable limits before seeking GRA resources. - 2/ Time needed to establish a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth. - 3/ UCT conditionality standard implies authorities have the commitment and capacity to implement policies adequate to correct external imbalances and enable repayment to the Fund. - 4/ BoP (financing) needs can be present, prospective, or potential (definitions preserved). - 5/ For four-year ECF arrangements, access for the fourth year is expected to be set in line with the average annual access corresponding to the norm that would otherwise have applied to a successor three-year ECF arrangement. ### Table 2 — Summary of Norms, Limits, and Procedural Safeguards (selected exact figures) - Cumulative access limits (Current (14th General Quota Review) 1/): - All PRGT facilities-normal 225 - All PRGT facilities-exceptional 300 - RCF 2/ 75 - RCF (exogenous shocks window) 2/ 75 - RCF (large natural disasters window) 2/ 75 - RFI 75 - RFI (large natural disasters window) 75 - Annual access limits: - All PRGT-facilities-normal 75 - All PRGT-facilities-exceptional 100 - SCF (precautionary) – average annual 37.5 - SCF (precautionary), at approval 56.25 - RCF 2/ 18.75 - RCF (exogenous shocks window) 2/ 37.5 - RCF (large natural disasters window) 2/ 60 - RFI 37.5 - RFI (large natural disasters window) 60 - Norms 3/ 4/: - 3-year ECF – High access 5/ 90 - 3-year ECF – Low access 56.25 - 18-month SCF – High access 6/ 90 - 18-month SCF – Low access 56.25 - Blending proportions applicable to members presumed to blend (PRGT:GRA): - 1:2 with concessional access capped at the applicable norm (all GRA thereafter) - Triggers for procedural safeguards on high access requests: - Total access in any 24-month period—for DSA (update) 8/ 60 - Total access in any 36-month period—for an informal Board Meeting in advance of new PRGT request 9/ 135 - Selected explanatory footnotes (verbatim where present): - 1/ The new access limits in effect January 26, 2016 do not affect disbursements under arrangements approved prior to that date and any changes in access levels is to be justified by balance of payments needs in accordance with the standard policies for augmentation of access amounts. Outstanding PRGT credit in existence as of January 26, 2016 counts towards the current annual and cumulative PRGT access limits. - 2/ Any RFI access also counts towards these limits. - 3/ Norms provide guidance on what may constitute an appropriate level of access under PRGT facilities, but they should not be misconstrued as access limits or entitlements. - 4/ High access norms apply if PRGT credit outstanding is less than 75 percent of quota. Norms are not applicable if PRGT credit outstanding >150 percent of quota. In such cases, access is guided by consideration of the cumulative access limit of 225 percent of quota under PRGT facilities (300 percent of quota in exceptional cases), the expectation of future need for Fund support, and the repayment schedule. - 5/ For four-year ECF arrangements, access for the fourth year is expected to be set in line with the average annual access corresponding to the norm that would otherwise have applied to a successor three-year ECF arrangement. For countries whose outstanding PRGT access is above 150 percent of quota, the norms do not apply. - 6/ For SCF arrangements of any other length, the norms will be proportionately adjusted to keep annualized average access unchanged. - 7/ For the RCF, which has no norm, the cap on access to concessional resources is the annual limit, while for the SCF treated as precautionary this cap applies to the average annual access limit. - 8/ A new DSA is also required for any PRGT financing request if it involves exceptional access to concessional resources or involves a member with high risk of debt distress or in debt distress. - 9/ An early informal meeting is also required if the financial request would involve exceptional access to concessional financing. ### Blending of PRGT and GRA resources — rules and presumptions - General presumption: - Some PRGT-eligible countries are expected to receive blended PRGT and GRA resources rather than fully concessional financing.17 - When financing is blended, total access is determined based on standard criteria so total access should be comparable across country cases with similar BoP needs, program strengths, and outstanding Fund credit.18 - Blending can signal movement toward middle-income or emerging market status. - PRGT-eligible countries should typically use either fully concessional or blended resources, rather than GRA-only financing, although they remain eligible for GRA resources if they meet GRA policies. - Specific presumptions and limitations: - Blending is presumed for PRGT-eligible countries with either: - (i) per capita income above 100 percent of the International Development Association (IDA) operational cutoff; or - (ii) sustained past and prospective market access and a per capita income that exceeds 80 percent of the IDA operational cutoff provided that (iii) they are not deemed to be at a high risk of debt distress or in debt distress (as assessed by the most recent joint Bank-Fund LIC Debt Sustainability Analysis (DSA)). These members (“presumed blenders”) are expected to receive concessional financing only in a blend with GRA resources. - Non-presumed blenders: - Can access PRGT resources exclusively up to applicable PRGT access limits. - If they meet applicable GRA policies (program strength, capacity to repay, debt sustainability), they may access GRA resources either standalone or with PRGT resources, but should typically resort first to PRGT up to applicable access limits under ECF, SCF, or RCF. - If a non-presumed blender requests PRGT resources exclusively but financing needs exceed PRGT access limits: - The member will be expected to blend PRGT resources with GRA resources, subject to meeting applicable GRA policies. The member will be expected to access GRA resources for the amount in excess of PRGT limits.19 - Blending mix and caps: - Blending rules stipulate a 1:2 mix of PRGT and GRA resources, with access to concessional resources capped at the norm (or equivalent) applicable to unblended arrangements.20 - All access above the norm needs to be met from the GRA.21 - For RCFs (no norm), the cap on access to concessional resources is the annual limit; for SCF treated as precautionary, the cap applies to the average annual access limit. - Operational mix depends on type and length of arrangement and outstanding PRGT access, which determine norms and sub-ceilings. ### Extended Credit Facility (ECF) — purpose and objectives (excerpt) - The ECF is the Fund’s main tool for providing medium-term support to LICs with protracted balance of payments problems.22 - Purpose and objective: - ECF provides medium- and longer-term concessional financing to LICs with protracted BoP problems. - Purpose: assist PRGT-eligible member countries with a protracted BoP problem in implementing economic programs aimed at making significant progress toward a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth. - A stable and sustainable macroeconomic position is characterized by: - Absence of a present or prospective BoP need; - Domestic and external stability necessary to support strong and durable poverty reduction and growth; - Typically associated with sustainable fiscal and current account balances, limited debt vulnerabilities, adequate international reserves, and sufficient policy and institutional capacity to implement appropriate macroeconomic policies. - Such a position might still involve significant donor assistance, though aid dependence expected to decline over time. - Use of the ECF is appropriate where resolution of entrenched macroeconomic imbalances is expected to extend over the medium or longer term, and repeated use (of the ECF and its predecessors) has been common. - Additional ECF functions: - ECF arrangements assist countries by providing temporary concessional financial support to smooth economic adjustment and avoid excess volatility. - ECF resources can be used to strengthen international reserve positions and loosen financing constraints for public and private sectors within a policy framework aimed at moving toward a stable and sustainable macroeconomic position. - ECF is also expected to catalyze additional financing from donors. *Italic source attribution: pp110917-2017-handbook-of-imf-facilities-for-low-income-countries - 6. To determine the appropriate facility for a particular country case, the following rules of* ### 12. Assistance under the ECF is available to all PRGT-eligible member countries ### 12. Assistance under the ECF is available to all PRGT-eligible member countries ### Eligibility and definition of a protracted balance of payments problem - A protracted balance of payments problem exists when the resolution of macroeconomic imbalances needed to establish a stable and sustainable macroeconomic position is expected to extend over normally three years or more. - If a stable and sustainable macroeconomic position is expected to be established within two years or less and the member has a short-term balance of payments need, the SCF is the appropriate instrument to support UCT-quality programs. - When resolution is expected in more than two but less than three years, the choice between ECF and SCF is case-by-case; note: - Minimum length for an ECF arrangement is three years. - Use of the SCF is normally limited to two and a half years out of any five-year period assessed on a rolling basis (except for precautionary SCF). - Indicators that point to a protracted problem (and thus favor ECF) include substantial structural reform or capacity building needs, or frequently recurring financing needs. - Indicators that favor SCF include needs for a relatively front-loaded adjustment process aimed at a speedy restoration of macroeconomic stability. ### Balance of payments needs, precautionary use, and appropriateness of ECF - A protracted balance of payments problem implies balance of payments needs are expected to arise over the course of the arrangement, but these needs may not be present at approval or at individual disbursements. - Approval of an ECF arrangement is possible in the absence of present balance of payments needs, but precautionary use of the ECF is not envisaged (in contrast to the SCF). - Members are not legally required to draw under an ECF arrangement, but the ECF is not intended to provide contingent financial support; members have routinely drawn available amounts irrespective of present needs. - For members with minimal present/prospective needs but medium- or longer-term adjustment needs (e.g., high debt burden or unsustainable current account deficit), a low-access ECF arrangement would be appropriate. - For members with immediate balance of payments needs and medium- or longer-term adjustment needs, an ECF (rather than SCF) should be used. ### Qualification requirements for ECF - Board finding required that the member is making an effort to strengthen substantially and in a sustainable manner the country’s balance of payments position. - Program must meet UCT conditionality standards and support significant progress toward a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth. - Authorities must have commitment and capacity to implement policies adequate to correct external imbalances and enable repayment within the specified maturity period. - Qualification requires elaboration of a UCT-quality program in the LOI, MEFP, and TMU and assurances of capacity and commitment evidenced by recent policy performance, institutional capacity, and other relevant circumstances. - Countries not yet able to meet qualification requirements (notably capacity for a three-year UCT-quality program) can build a track record through an SMP or, if urgent financing needs exist, the RCF (or concurrent SMP and RCF). ### Duration, extensions, cancellations, and repeated use - Initial term of an ECF arrangement: three to four years from the date of Board decision; normally three years. - An initial duration of up to four years may be considered to align with the member’s Economic Development Document (EDD) cycle or when blending with EFF arrangements. - An ECF arrangement may be extended (including multiple times) subject to an overall five-year limit on total duration of any ECF arrangement. - After expiration or cancellation, additional ECF arrangements may be approved if qualification criteria are met; no limit on number of successor ECF arrangements. - Extensions may be requested to allow disbursement of rephased amounts or to provide augmentations based on projected balance of payments developments. - Typical circumstances warranting rephasing of access include: - (i) more time needed to implement envisaged policies or reforms; - (ii) a shock has led to additional financing and adjustment needs (augmentation); - (iii) more time needed to design a successor ECF-supported program; - (iv) the protracted balance of payments problem is expected to be resolved within the remaining maximum period of the ECF arrangement. - Extensions must be requested by the member and approved by the Board before expiration; extensions only possible if needed to allow disbursement of amounts under the arrangement (cannot extend when all scheduled amounts have already been disbursed). - Extensions are not automatic and are subject to appropriate conditions consistent with ECF terms. - Extensions involving rephasing/augmentations normally require a request in an LOI and be in the context of a program review demonstrating program is on track; exceptional approval outside review context may be possible with documented policy understandings and a staff report. - Short-term “technical” extensions (a few weeks or months) can be granted outside a review where additional time is needed to complete final review(s) and make final disbursement available; Board approval typically via a short staff paper and lapse-of-time (LOT) decision. - Authorities may cancel ECF arrangements at any time (e.g., imbalances resolved, lack of capacity/commitment, or substantial policy changes). - ECF arrangements approved after November 11, 2013 will automatically terminate before their terms if no program review has been completed over an 18-month period. - The Board may, at authorities’ request, delay termination for up to three additional months—provided this extension does not fall outside the existing period of the arrangement—if an understanding on targets and measures appears imminent. - The arrangement automatically expires at the end of that extended period unless a program review is completed within this period. ### Concurrent use and blending - Concurrent use: - The ECF cannot be used concurrently with the SCF or PSI; any pre-existing SCF arrangement or PSI must be cancelled before an ECF arrangement can be approved, and vice versa. - A member cannot obtain RCF financing (or start an SMP) if an ECF arrangement is in place and on track. - If additional balance of payments needs arise during an ECF, an augmentation of access under the ECF would typically be the appropriate response. - RCF financing during an ECF can be provided only when: - (i) ECF disbursements are not possible (e.g., policy slippages or delays in program discussions), - (ii) qualification requirements for the RCF are met, including the existence of an urgent balance of payments need and relevant policy commitments, - (iii) the balance of payments need is primarily caused by a sudden exogenous shock. - When RCF access exceeds 18.75 percent of quota by using the “exogenous shocks” window or the “large natural disasters” window, policies should be appropriate to address the shock. - RCF-supported policies could serve as a track record to bring the ECF-supported program back on track; absent an urgent financing need, a track record could be built through an SMP. - The ECF can be used concurrently with GRA financing under certain circumstances. - Blending: - Certain PRGT-eligible countries are expected to receive financial assistance through blended PRGT and GRA resources rather than relying on fully concessional Fund financing. - When financing is blended under a PRGT arrangement and an arrangement under the GRA, total access is determined based on the standard criteria, implying total access should be comparable across country cases with similar needs and program strength irrespective of financing modality. - PRGT-eligible countries, including those qualifying for ECF, would typically use either fully concessional or blended resources rather than GRA-only financing, although they are always eligible for access to the Fund’s general resources. - Presumptions and limitations on blending: - Blending is presumed for PRGT-eligible countries with either: - (i) per capita income above the prevailing operational cutoff used by IDA (as of July 2017, this cut-off is US$1,005), or - (ii) sustained past and prospective market access and a per capita income that exceeds 80 percent of the IDA operational cutoff provided that they are not deemed to be at a high risk of debt distress or in debt distress (as assessed by the most recent joint Bank-Fund LIC DSA). These members (“presumed blenders”) are expected to receive concessional financing only in a blend with GRA resources. - Non-presumed blenders can access PRGT resources exclusively up to applicable PRGT access limits; they may access GRA resources if they meet applicable GRA policies, but should typically resort first to PRGT up to applicable access limits under an ECF. - If a non-presumed blender requests PRGT resources exclusively but financing needs exceed PRGT access limits under an ECF, the member is expected to blend ECF resources with GRA resources for the amount in excess of PRGT access limits, subject to meeting applicable GRA policies. - When blended, ECF resources will normally be provided together with GRA resources under the EFF. - Concurrent financial assistance under an ECF and a Stand-By Arrangement (SBA) would be expected only where pre-existing ECF support is supplemented by SBA financing later (e.g., when an ECF arrangement initially blended with EFF financing is extended beyond four years, as EFF arrangements are limited to a four-year period). - Financing through the RFI under the GRA during an ECF would be expected only if the ECF-supported program is off track, in which case RFI purchases would typically be combined with RCF disbursements. - Modalities of blended financial assistance under ECF and EFF: - Support a three- to four-year economic program for countries with protracted balance of payments problems, based on a single set of program conditions, schedule of disbursements and reviews, and other requirements mirroring stand-alone ECF arrangements. - Differences when blending: - Disbursements involve both ECF and EFF resources, implying lower average concessionality of Fund support than under stand-alone ECF. - EFF qualification requirements must be met; EFF requires a clearly articulated structural reform agenda and meeting Exceptional Access criteria if EFF access is above GRA normal limits. - Reviews under the Extended arrangement of blended assistance may require waivers of applicability under certain circumstances. - Each disbursement under an ECF arrangement is linked to a specific test date, whereas for extended arrangements purchases are conditioned upon observance of the Performance Criteria related to the most recent test date; this can create situations where ECF-component resources can be disbursed while EFF-component resources cannot unless waivers are granted. *Source: pp110917-2017-handbook-of-imf-facilities-for-low-income-countries - Chapter 12* ### 27. When considering access for a new arrangement, or possible augmentation under an ### 27. When considering access for a new arrangement, or possible augmentation under an existing arrangement ### Determination of Access—Main Criteria - Access is determined on a case-by-case basis based on the following standard criteria: - (i) the member’s (present and prospective) balance of payments need (taking into account all projected balance of payments flows, including reserve accumulation and financing from other sources); - (ii) the strength of its program and capacity to repay the Fund (taking into account the member’s policy plans, adjustment effort, commitment to implement the program, institutional capacity, track record of policy implementation, and country circumstances such as vulnerabilities, imbalances, and debt sustainability); - (iii) the amount of outstanding Fund credit and the member’s record of past use. - All else being equal, higher access would generally be associated with a stronger program, stronger track record, and stronger capacity to repay. - Access may generally not exceed the member’s present and prospective balance of payments needs during the program period, and would typically be less than total financing needs, keeping in mind that ECF-supported programs are expected to catalyze financing from donors. - An ECF arrangement can be approved and individual disbursements can be made even in the absence of a present balance of payment need, provided that the IMF’s Executive Board has made a finding that the member is experiencing a protracted balance of payment problem at the time of approval of the ECF arrangement. ### Access Norms - Access norms apply to access to financing under unblended ECF arrangements (in blended arrangements the norms only apply as caps to the concessional resources). - The access norm is: - 90 percent of quota per three-year ECF arrangement for countries with total outstanding concessional IMF credit under all facilities of less than 75 percent of quota; and - 56.25 percent of quota per three-year arrangement for countries with outstanding concessional credit of between 75 percent of quota and 150 percent of quota. - For four-year ECF arrangements, access for the fourth year is expected to be set in line with the average annual access corresponding to the norm that would otherwise have applied to a successor three-year ECF arrangement. - For countries whose outstanding concessional credit is above 150 percent of quota, the norms do not apply, and access is guided by consideration of the cumulative access limit of 225 percent of quota (300 percent of quota in exceptional cases), the expectation of future need for Fund support, and the repayment schedule. - Access norms provide general guidance and represent neither ceilings nor floors (nor entitlements). Access can deviate from the norms if warranted by standard criteria. - Special case: members with a protracted balance of payments problem but minimal present or prospective balance of payments needs over the course of the ECF arrangement: - Practice has been to set access at a standardized level of 10 percent of quota per arrangement. ### Access Limits - A member’s total access under all concessional facilities is subject to “global” annual and cumulative limits. This includes credit outstanding and disbursements under the ECF, SCF, RCF, and Exogenous Shocks Facility (ESF). - Total access to financing under the PRGT should normally not exceed 75 percent of quota per year across all concessional facilities. - This annual access limit refers to past and future scheduled disbursements in any 12-month period, specifically: - (i) any actual disbursements under the RCF and past ECF and SCF arrangements at the time they became available (i.e., the date of the Board decision that makes the disbursement available), - (ii) any disbursements to date that became available under the current ECF arrangement, irrespective of whether they have been drawn or not, and - (iii) any future disbursements under the ECF at the scheduled availability dates. - Total access to financing under the PRGT should normally not exceed 225 percent of quota cumulatively, net of scheduled repayments. - The cumulative access limit requires that total outstanding Fund concessional credit (including disbursements that were made available but not drawn in the context of the current arrangement) cannot normally exceed 225 percent of quota at any point in time based on projected disbursements and repayments. - In exceptional circumstances, access above the normal limits can be made available if: - (i) the country experiences an exceptionally large balance of payments need that cannot be met within the normal limits; - (ii) the country has a comparatively strong adjustment program and ability to repay the Fund—this criterion would generally not be met for countries with a high risk of debt distress or those that are in debt distress as defined under the joint Bank-Fund DSA, unless expected debt relief or restructuring is projected to reduce the risk of debt distress to a moderate level or low level; and - (iii) the country does not have sustained past and prospective access to capital markets, and has income at or below the prevailing operational cutoff for assistance from IDA. - Exceptional access is subject to hard caps of: - 100 percent of quota annually and - 300 percent of quota on a cumulative basis, net of scheduled repayments, across all concessional facilities. ### The Phasing of Access - Phasing of ECF access, determined at the time of approval of the arrangement, must take into account the applicable annual access limits, but does not have to mirror the projected evolution of balance of payments needs over the course of the arrangement. - Access should normally be phased smoothly over the three- to four-year period, but could be front-loaded (or back-loaded) if warranted based on the strength of the program and/or the time profile of balance of payments needs. - Significant front-loading has been applied in exceptional cases involving repayment of emergency assistance to the Fund or arrangements approved following clearance of overdue obligations as part of a broader arrears clearance strategy. - Standard practice for staff reports: present the balance of payments so scheduled IMF disbursements, together with other exceptional financing items, do not exceed the overall balance of payments deficit and the programmed level of reserve accumulation in any given period. ### Access Under Blended Financial Assistance - When financing is blended under an ECF arrangement and an arrangement under the GRA, the standard PRGT access norms do not apply, and access under blended financial assistance is subject to specific rules. - Total access is determined based on the standard criteria, implying total access should be comparable across country cases irrespective of whether assistance comes as blended or PRGT-only resources. - Rules for blended financial assistance: - Access to the concessional (ECF) component of blended financial assistance is normally one-third of total access, with access to concessional resources capped at the norm applicable to unblended arrangements. - At the time of approval of a new ECF arrangement that involves blended financial assistance from a GRA arrangement, each scheduled disbursement should generally involve both ECF and GRA resources. For GRA resources phasing and PCs would only apply to purchases above the first credit tranche. The shares of ECF and GRA financing at each disbursement can be determined individually and do not have to remain constant across disbursements. - In cases of very large balance of payments needs, access to the concessional resources under blended financial assistance could reach the annual access limit of 75 percent of quota or possibly the exceptional annual access limit of 100 percent of quota if the criteria for exceptional concessional access are met. ### Augmentations and Reductions of Access - Access under an ECF arrangement can be augmented to help meet a larger balance of payments need or to support a strengthening of the program. - Augmentation would often be appropriate in response to increased balance of payments needs in the context of shocks, unless the ECF-supported program is off track (in which case RCF financing may be appropriate). - When an ECF arrangement period is extended, extension periods that involve needs not originally included can justify augmentation. - Under the Trade Integration Mechanism (TIM), augmented access not exceeding 10 percent of quota will be available to compensate balance of payments shortfalls arising from trade liberalization measures implemented by other countries. - Determination of access for an augmentation is based on the standard access criteria. - No norms apply to the size of an augmentation, although many augmentations have been in the range of 15–45 percent of quota (pre-14th Review of Quotas), with a few cases well above this range. - Staff reports supporting augmentation requests should explicitly discuss the basis for the augmentation and its size with reference to main criteria and applicable norms and limits. - Augmentations would normally be approved at the time of a scheduled review; however, augmentations can be requested between scheduled reviews when the increase in underlying balance of payments problems is so acute that it cannot await the next scheduled review. - Approval at an ad hoc review requires an assessment by the Board that the program is on track to achieve its objectives at the time of the augmentation. - Modalities for augmentations at ad hoc reviews: - Requests expected to be supported by a short staff report and an LOI describing the nature and size of the problem, the policies being undertaken, and any information relevant to program implementation, including exogenous developments. - Augmentations approved in ad hoc reviews are available to the member in a single disbursement following Board approval. There is no limit on the amount of such a disbursement subject to overall access limits and norms. - The augmentation is subject to rules on blending and may be supplemented by corresponding augmentation of the GRA arrangement. - The amount of the disbursement is limited to what is immediately needed by the member in light of its balance of payments difficulties. - The new disbursement approved at the ad hoc review is subject to observance of the continuous PCs under the arrangement and accuracy of information on implementation and any prior actions; it is not subject to periodic PCs and other conditions linked to remaining disbursements. - If the scheduled review associated with the most recent availability date preceding the augmentation request has not been completed, an augmentation request cannot be approved at an ad hoc review. - A member may request an undrawn disbursement made available upon the Executive Board’s approval of the requested augmentation at an ad hoc review until the availability date of the next scheduled disbursement under the arrangement. - Augmentation requests at ad hoc reviews that do not exceed 12.5 percent of quota are eligible for approval on a LOT basis. A scheduled review following an ad hoc review to consider an augmentation request is expected to undertake a comprehensive review of policies and cannot be completed on a LOT basis. - For augmentations of arrangements presumed to involve blended PRGT and GRA resources, access should be set so the total financing mix over the full course of the arrangement is guided by the specific rules on access under blended arrangements, including that total access (post augmentation) to concessional financing would normally be one-third of total overall access, subject to a cap on the concessional component at the norm applicable to unblended arrangements. - Access could in principle be reduced rather than augmented. The Fund will not unilaterally reduce access because of developments in the member’s balance of payments, unless such developments are substantially more favorable than envisaged at the time of approval and the improvement derives in particular from improvements in the external environment. ### Procedural Safeguards on High Access Requests—DSAs and Informal Board Meetings - Financing requests are subject to procedural safeguards aimed at protecting PRGT-eligible members’ debt sustainability and the Fund’s concessional resources. - The staff report for any arrangement request or augmentation should provide an up-to-date assessment of debt vulnerabilities, with explicit reference to the impact of new borrowing from all sources, including prospective IMF disbursements. - Requirements: - A new DSA is required for any financing request under the PRGT (augmentation or new arrangement) if it: - (i) involves exceptional access to concessional resources; - (ii) brings total access, i.e., cumulative disbursements, under all concessional facilities to more than 60 percent of quota, based on cumulative past and future scheduled disbursements in any 24-month period, specifically: - (a) any actual disbursements under the RCF, SCF, ESF, and past ECF arrangements at the time they became available (the date of the Board decision), - (b) any disbursements to date that became available under the current ECF arrangement, irrespective of whether they have been drawn or not, and - (c) any future scheduled disbursements under the ECF; or - (iii) involves a member country with a high risk of debt distress or in debt distress. - All DSAs (Full DSAs and updates) should be prepared jointly by Fund and Bank staff and must be submitted to both the IMF and IDA’s Executive Boards. - An early informal Board meeting is required if a financing request would: - (i) involve exceptional access to concessional financing; or - (ii) bring total access under all concessional facilities to more than 135 percent of quota, based on cumulative past and future scheduled disbursements in any 36-month period, specifically: - (a) any actual disbursements under the RCF, SCF, ESF, and past ECF arrangements at the time they became available (the date of the Board decision), - (b) any disbursements to date that became available under the current ECF arrangement, irrespective of whether they have been drawn or not, and - (c) any future scheduled disbursements under the ECF. - Information to the Board would typically be in a 2–3 page note including factors underlying the large balance of payments need, summary of main policy measures and macro framework, expected program strength and capacity to repay, analysis of debt vulnerabilities, reference to impact on Fund’s concessional resources, likely timetable for discussion with the authorities, and a selected indicators table and, if possible, the standard DSA charts. - The meeting should take place before staff reaches understandings, ad referendum, with the authorities. - Staff would provide early notice to the Board of upcoming arrangement requests or augmentations where the envisaged financing commitment, in absolute terms, would have a large impact on the Fund’s overall concessional resources. - Exception: the requirement for a new DSA or a Board brief in high access cases does not apply for new financing requests of 5 percent or less of quota. *EXTENDED CREDIT FACILITY — INTERNATIONAL MONETARY FUND* ### 44. Repayments of ECF credit are made in 10 equal semi-annual installments, subject to a 5.5- ### pp110917-2017-handbook-of-imf-facilities-for-low-income-countries - 44. Repayments of ECF credit are made in 10 equal semi-annual installments, subject to a 5.5- ### Repayment terms and interest - Repayments of ECF credit are made in 10 equal semi-annual installments. - Subject to a 5.5-year grace period from the date of the first disbursement and 10-year final maturity. - The authorities may decide to make early repayments at any time, but would not be expected to do so. - Interest is paid semi-annually. - The interest rate on ECF credit is currently set at zero percent, but subject to biennial Board reviews that take account of developments in world interest rates. - At each review, interest rates would normally be adjusted if warranted by the prevailing SDR rate, within a 0.0–0.5 percent range for the ECF. - The new interest rate would apply to all outstanding ECF credit. - The next such review is scheduled for December 2018. - Note: interest on any overdue interest or overdue repayments of PRGT loans is charged at a rate equal to the SDR interest rate. ### Financing assurances and program financing - ECF arrangements can only be approved (and reviews can only be completed) when the program is fully financed. - Staff should confirm there are no unfilled financing gaps over the 12 months immediately following the approval of the arrangement (and the completion of each review). - There should be a clear expectation that the program will be fully financed through the remainder of the arrangement period. - Assurances should be given that the member country has the capacity to repay the Fund based on medium-term projections of the balance of payments and, in the case of new arrangements or augmentations, the standardized table on indicators of the capacity to repay the Fund. ### Arrears treatment and lending policies - Fund’s policy of non-toleration of sovereign arrears to official multilateral creditors: calls for resolution of existing arrears and non-accumulation of new arrears during the program. - Existing arrears need not be settled immediately; can be addressed in a number of ways depending on creditor type. - Assumptions under the ECF arrangement should be consistent with the expected resolution of existing arrears to official multilateral creditors. - Treatment of arrears to official bilateral creditors: - If arrears arise where economic parameters do not require restructuring of the underlying claim, the Fund maintains a policy of non-toleration; tacit approval of an official bilateral creditor’s Executive Director (non-objection at the Board meeting) has been deemed sufficient. - If arrears arise where restructuring of such claims is required by program parameters, the Fund may provide financing notwithstanding those arrears only under carefully circumscribed circumstances; each Fund disbursement is subject to a financing assurances review. - Arrears to private external creditors are covered by the Lending into Arrears (LIA) policy: - The Fund can lend, on a case-by-case basis, in a situation of sovereign arrears to private external creditors only where: - (i) prompt Fund support is considered essential for the successful implementation of the member’s adjustment program; and - (ii) the member is pursuing appropriate policies and is making a good faith effort to reach a collaborative agreement with its private creditors (or to facilitate a collaborative agreement) and good prospects exist for the removal of exchange controls. - Whenever the LIA policy applies, each Fund disbursement under an arrangement is subject to a financing assurances review. ### Domestic arrears and overdue obligations to the Fund - ECF-supported programs should address domestic arrears as part of overall program design; specification of policies related to domestic arrears depends on country context, particularly the fiscal framework. - Where a member is in arrears to the Fund in the GRA, the Special Disbursement Account, or the SDR Department, or to the Fund as Trustee (including the PRGT), a request for IMF financing, including under the ECF, will not be approved and disbursements under an existing arrangement will be suspended until the arrears are cleared. - After one month the Managing Director will notify the Executive Board that an obligation is overdue. - In the case of protracted arrears (arrears of more than six months’ duration), annual reports are to be issued to the Executive Board, except for status changes. - While a member is in arrears to the Fund, policy support can only be provided through surveillance, technical assistance, and, under certain circumstances, SMPs. - Remedial measures for dealing with PRGT arrears include removal from the list of PRGT-eligible countries, declaration of noncooperation, and suspension of technical assistance. ### Safeguards assessments - Staff should aim to complete a safeguards assessment prior to Executive Board approval of a new ECF arrangement but no later than the first review under the arrangement. - Exceptions where an update assessment would not be required: - (i) successor arrangements where an assessment was completed no more than 18 months prior to approval of the successor arrangement; or - (ii) central banks with a strong track record, if previous assessment was completed within four years and no substantial issues were identified in the prior assessment or subsequent monitoring. - A summary of safeguards issues should be reflected in the main body of staff reports for as long as Fund credit remains outstanding. - Safeguards assessments relate to the borrowing members’ central banks; a separate fiscal safeguards review may be required in some cases involving direct budget financing. - Staff reports should discuss status of assessments, significant recommendations on legislative amendments, problems in obtaining access to data, and deviations from commitments relating to safeguards recommendations. - Safeguards assessment recommendations may be incorporated into conditionality or structural measures under the member’s program. ### Program objectives and design - All ECF-supported programs are aimed at making significant progress toward a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth. - ECF-supported programs should aim to maintain or move toward: - (i) strong and durable poverty reduction and growth, - (ii) low or moderate inflation, - (iii) sustainable fiscal and current account balances, - (iv) limited debt vulnerabilities, - (v) adequate international reserves, and - (vi) sufficient policy and institutional capacity to implement appropriate macroeconomic policies. - Program design should be aligned with the country’s own poverty reduction and growth objectives. - Typical policy areas to be articulated in the LOI/MEFP and staff report include: - Fiscal policies: fiscal stance anchored for macro stability and fiscal/debt sustainability; revenue and spending policies that account for growth and social objectives; budgets guided by medium-term fiscal frameworks to the extent possible. - Monetary policies: consistent with inflation, exchange rate, and reserve objectives, taking account of cyclical considerations. - Exchange rate policies: ensure a unified exchange rate and a real exchange rate level broadly in line with fundamentals. - Financial sector policies: geared toward financial stability and deepening to foster investment and forestall financial crises. - Public financial management reforms: tracking, reporting, and targeting resources appropriately; public debt management to support debt sustainability; revenue reforms to broaden the revenue base and enhance tax efficiencies. - Other structural reforms critical for achieving the program’s macroeconomic objectives. ### Role of ECF financial support and use of domestic counterpart - Balance of payments support under ECF arrangements assists countries in smoothing adjustment toward a more stable and sustainable macroeconomic position. - Fund financial support can be used to strengthen international reserve positions and provide liquidity for making external payments. - By relaxing external financing constraints, Fund balance of payments support loosens domestic liquidity constraints of public and private sectors, reducing the need for retrenchment in public and private savings-investment balances. - The appropriate mix of financing and public/private adjustment is determined case-by-case. - A member may use the domestic counterpart of resources received under an ECF arrangement to finance, directly or indirectly, the budget deficit of the government, consistent with the Fund’s legal framework if the member has balance of payments problems and is implementing an appropriate program. - Direct budget support may be appropriate when: - (i) the program envisages that the entire amount of the Fund’s financial support is used to meet a present or prospective balance of payments need, - (ii) loosening fiscal financing constraints is an important macroeconomic objective under the program, and - (iii) the central bank cannot or should not lend to the government (for legal or institutional reasons) while the domestic financial sector is too shallow (or not stable enough) to provide necessary budget financing. - Under safeguards policy, a fiscal safeguards review of the state treasury should be conducted for all arrangements before the first program review where a member requests exceptional access to Fund resources, and at program approval if the member expects that at least 25 percent of the funds will be directed to financing the state budget. - The fiscal safeguards review requirement also applies when a member requests exceptional access during an arrangement, unless a fiscal safeguards review was completed within the previous 18 months. *pp110917-2017-handbook-of-imf-facilities-for-low-income-countries - 44. Repayments of ECF credit are made in 10 equal semi-annual installments, subject to a 5.5-* ### 58. ECF-supported programs should be aligned with the country’s own poverty reduction and ### 58. ECF-supported programs should be aligned with the country’s own poverty reduction and ### PRS linkages and EDD requirements - Any financing request or program review under the ECF must be accompanied by a statement, normally in the LOI or MEFP, of how the program advances the country’s poverty reduction and growth objectives. - Where a relevant PRS document exists, the LOI/MEFP description may cross-reference the PRS, and the ECF-supported program should be consistent with PRS objectives in the context of making significant progress toward a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth. - The EDD is a PRS document that meets requirements defined below and in Appendix V. - The EDD may take two forms: - (i) an existing national development plan or strategy document on the country’s PRS; or - (ii) a newly prepared document on the country’s PRS. - PRSPs already issued to the Board at the time of approval of the current PRS policy (June 22, 2015) and subject to staff analysis in a staff report of an ECF request or review would be deemed to satisfy EDD requirements, subject to coverage and expiration rules. - Staff should inform authorities at an early stage about Definitions and Timelines for EDD requirements (Appendix V) to ensure adequate time for the PRS process. - Timing and Board review rules: - An EDD is not required at initial Board consideration of an ECF arrangement. - The first (and every subsequent) review can only be completed if: - (i) a member has a PRS developed and made publicly available normally within the previous five years, but no more than six years, and covering the period up to the review completion date; and - (ii) the PRS has been issued to the Executive Board as an EDD that has been the subject of staff analysis in the staff report on a request for an ECF arrangement or a review under an ECF arrangement. - Staff views on the PRS must be provided in program documentation; staff reports should discuss how ECF policies contribute to the member’s PRS. - A letter of assessment of the authorities’ PRS should be requested from the World Bank and circulated to the Board at the same time as the EDD. - Staff will report to the Board on PRS implementation, including a PRS Implementation Review (PIR) by the time of the fourth review; PRS implementation will also be tracked in the member’s LOI/MEFP. ### Social and priority spending - Social and other priority spending should be safeguarded and, whenever appropriate, increased under ECF-supported programs. - Monitoring: - Should be through explicit program targets, typically an indicative floor on social and other priority spending, whenever possible. - The member establishes the definition of social or other priority spending in line with its poverty reduction and growth strategy. - Where tracking of such expenditures is not feasible, program documentation should report measures envisaged to develop an adequate tracking system. - Staff should monitor progress in establishing tracking systems; programs may include relevant structural benchmarks if appropriate. ### Debt Sustainability Analysis (DSA) - ECF-supported programs should be underpinned by a thorough DSA to inform medium-term debt strategies and fiscal frameworks. - Country teams should engage authorities in preparing DSAs, discuss results, and share final files with relevant officials. - DSAs for all LICs should be prepared jointly with the World Bank; other MDBs should be involved. - Joint DSAs are required for all PRGT-eligible countries that also have access to IDA resources. - For PRGT-eligible countries with durable and substantial market financing access, Fund staff may produce a DSA using the market-access template, with close consultation with the Bank recommended. - Frequency and scope: - As a general rule, a full DSA should be produced at least once every calendar year. - A fully elaborated DSA is required at least once every three years, or whenever circumstances have changed significantly since the previous DSA. - Shorter annual updates are possible in interim years absent significant changes. - Full DSAs should be prepared in periods of heightened domestic, external, or global risk. - Program linkage: - Design of debt limits under an ECF arrangement is systematically related to the assessment of debt vulnerabilities (see Appendix II). - Determination of access to concessional resources must take account of the country’s debt vulnerabilities based on the most recent DSA; a DSA may be needed for higher access financing requests. - DSA format and components: - DSAs for LICs should be presented as self-contained documents (see Appendix I) and normally use the LIC Debt Sustainability Framework (DSF), except for countries with durable and substantial market access that may use the market-access template. - LIC DSF analysis includes three components: - A forward-looking analysis (20-year projection) of debt and debt-service dynamics under a baseline scenario, alternative scenarios, and standardized stress tests; - An explicit rating of the risk of external debt distress (low, moderate, high, or in debt distress) based on indicative country-specific debt-burden thresholds that depend on the quality of policies and institutions; and an assessment of the overall risk of debt distress; - Recommendations on a borrowing (and lending) strategy and other crucial macro policies to limit the risk of debt distress while maximizing the resource envelope to achieve development objectives. ### Collaboration with the World Bank and other development partners - Fund staff should consult closely with all major development partners active in the country when designing and monitoring an ECF-supported program. - The Joint Management Action Plan (JMAP) calls on Bank and Fund country teams to consult at least once a year to identify key macroeconomic and structural reform challenges and coordinate work plans. ### Conditionality — Principles - Purpose: Ensure Fund resources assist members in resolving balance of payments problems consistent with the Fund’s Articles and establish safeguards to the Fund’s resources. - Conditions will normally: - Consist of macroeconomic variables and structural measures reasonably within the member’s direct or indirect control; and - Be either (i) of critical importance for achieving program goals (or monitoring implementation); or (ii) necessary for implementing specific IMF Articles provisions or policies under them. - Where conditions are outside the Fund’s core expertise, a detailed explanation of critical importance is required. - ECF-supported programs must meet the UCT conditionality standard—requiring the authorities’ commitment and capacity to implement policies adequate to correct external imbalances and enable repayment to the Fund. - The appropriate adjustment path is determined by country circumstances, objectives, policy constraints, and severity of balance of payments needs; adjustment may extend beyond the ECF duration and conditionality would focus on policies critical to the portion covered by the arrangement. - The ECF generally permits more flexibility than the SCF in timing of measures given its medium- to longer-term focus. ### Specification of program conditions - Conditionality typically includes quantitative periodic and continuous PCs, quantitative and structural benchmarks, and prior actions if necessary. - Conditionality is set at arrangement approval and updated at program reviews; conditionality should normally be set (or modified) by the Board before the test date. - Post-dated PCs: Program documents must be signed and circulated to the Board before the test date; no implementation information is available at the Board meeting. - Prior actions: - Are measures required prior to Fund approval, completion of a review, or granting of a waiver when critical for successful implementation. - Are to be applied parsimoniously, justified by criticality, and specified in clear, objective, and unambiguous terms. - Should in principle be implemented at least five working days before the Board discussion and defined in the LOI/MEFP and cross-referenced in the Board Decision. - Timing and frequency: - Quantitative PCs normally set on a semi-annual basis and tied to semi-annual program reviews. - Quantitative benchmarks (indicative targets) normally specified on a quarterly basis. - Where closer monitoring or flexibility is needed, PCs and reviews may be scheduled no more than six months apart; each scheduled review must be associated with a set of performance criteria and a disbursement. - Conditionality should cover the 12 months following the Board meeting (initial approval or review). Under semi-annual monitoring, PCs are normally established for two future test dates at approval and at each review (except penultimate and final reviews). - Typical quantitative periodic PCs include measures of net international reserves, central bank domestic assets, domestic and fiscal balances or financing, and other macro-critical indicators. - Public debt conditionality is normally required when a member faces significant debt vulnerabilities, or when debt limits are preferable to, or complement, "above-the-line" fiscal conditionality. - PCs are usually subject to program adjustors reflecting deviations from projected external flows. - Indicative targets should include a floor on social and other priority spending where possible and may include indicators such as reserve money. - Continuous PCs always include commitments related to non-introduction or intensification of exchange restrictions and on non-introduction or modification of multiple currency practices; other continuous PCs typically include non-accumulation of external payments arrears. - Structural agenda: - ECF arrangements should include macro-critical structural reforms with flexibility on timing. - Structural benchmarks are critical markers of progress; they should be used parsimoniously and their macro-criticality explicitly justified. - Specific objectives should be defined for each review period, with related structural benchmarks critical for program objectives. - The appropriate number of structural benchmarks depends on country-specific factors and capacity. - Structural PCs were discontinued in 2009; under the ECF structural benchmarks may be targeted for implementation by a specific test date or by a specific program review. - Delays and modification: - Structural benchmarks significantly delayed can be re-dated and re-linked to the next review if they remain macro-critical. - If implementation as originally defined is no longer possible, a new benchmark or modified version may be appropriate if critical to program goals. ### Waivers and modifications - A waiver for nonobservance of a PC may be granted if the Fund is satisfied the program will nevertheless be successfully implemented because of the minor/temporary nature of nonobservance or remedial actions taken by authorities to preserve program objectives. - Upon verification that a PC was not met, a member may request a waiver in the LOI. - If staff supports waiving, justification is provided in the staff report along with a proposed decision on the waiver. - Waivers are required only for quantitative PCs tied to the specific disbursement and to the review being completed (and for any standard continuous PC missed). - Waivers for PCs tied to subsequent disbursements and reviews are not required even if information on nonobservance exists; in those cases staff report and LOI/MEFP must provide assurances that understandings on appropriate policies have been reached to complete the subsequent review, although PCs will need to be waived when that review is concluded. *Source: EXTENDED CREDIT FACILITY chapter text provided.* ### 74. Waivers of applicability could in principle be granted if the Fund is satisfied that, ### 74. Waivers of applicability could in principle be granted if the Fund is satisfied that, ### Waivers of applicability (ECF and GRA differences) - Waivers of applicability could be granted if the Fund is satisfied that, notwithstanding the unavailability of the information necessary to assess observance of a PC, the program will be successfully implemented and there is no clear evidence that the PC has not been met. - For the ECF, waivers of applicability would be highly unusual because: - Each ECF disbursement is linked to specific PC test dates and to a specific review, so a disbursement is not blocked when a new test date passes and information on performance under it is unavailable. - A waiver of applicability for a PC at a test date linked to the current review would raise serious questions about the country’s capacity to provide timely data. - Reviews under the ECF should generally be scheduled with sufficient time to monitor the data relevant for the applicable test dates. - In arrangements with blended financing: - Waivers of applicability would be required for the GRA-financed arrangement if the review is being conducted after the most recent test date has passed and data are not yet available. - With respect to the GRA financial arrangement: - The member may purchase any amount available based on earlier completed reviews if the purchase is requested within 45 days of the most recent test date and all the conditions specified in paragraph 2 of the Reduction of Blackout Periods in GRA arrangements decision (Decision No. 14407-(09/105)) are met. ### Modifications to program conditionality - Modifications to Board-set conditionality may be appropriate when departures from PCs are expected (e.g., when basic program assumptions have not been realized or significant unanticipated developments occur), provided the targets remain macro-critical. - Requests for such modifications must be: - Submitted to the Board before the relevant test date has been passed, and - Approved by the Board before information on the observance of the PC is available, normally in the context of a program review. - Exceptional cases: - Modifications can be approved by the Board outside a program review if authorities and staff have common understandings on appropriate policies through the next review, documented in a revised or new LOI with an updated PC table and, where relevant, an updated TMU. - Board approval requires a staff report discussing reasons for the modification, why it is proposed outside review context, status of the program, and relevant policy understandings. ### Misreporting and noncomplying disbursements under the ECF - Definition of a noncomplying disbursement under an ECF arrangement: - (i) The Fund makes a disbursement based on a finding that applicable conditions established for that disbursement have been observed (including accuracy of information on PCs for which waivers have been requested); and - (ii) That finding later proves to be incorrect. - Procedure upon evidence of a possible noncomplying disbursement: - The MD shall inform the member promptly. - After consultation, if the MD determines a noncomplying disbursement occurred, the MD shall promptly notify the member and submit a report to the Executive Board with recommendations. - Executive Board options: - (a) The member shall be expected to repay the disbursed amount, or - (b) The nonobservance will be waived. - Waiver norms: - Waivers will normally be granted only when the deviation from the relevant PC or other condition was minor or temporary, or if the member had adopted additional measures appropriate to achieve the objectives supported by the decision on the disbursement. - Whenever the Executive Board finds the noncomplying disbursement has been made but the nonobservance was de minimis (trivial with no impact on performance assessment), a waiver for nonobservance shall be granted by the Executive Board. - De minimis misreporting will not be published in a staff report. ### Reviews and disbursements — purpose and requirements - Purpose of program reviews: - Evaluate whether the program is on track to achieve objectives using a backward-looking assessment (performance against quantitative PCs, structural and quantitative benchmarks, and prior actions) and a forward-looking assessment of prospects for successful implementation, including policy capacity and commitments. - First and subsequent review completion conditions: - (a) A PRS has been developed and made publicly available normally within the five previous years, but no more than six years, and covers the period leading up to and covering the date of the completion of the relevant review; and - (b) The PRS has been issued to the Executive Board as an EDD that has been the subject of staff analysis in the staff report of a request for an ECF arrangement or a review under an ECF arrangement. - Reviews update program design, specify forward-looking policies and conditionality, and are the main vehicle for modifications to program design (access, phasing, conditionality). - At approval and each review, the authorities’ LOI presents or updates their policy program and a staff report provides overall assessment. ### Timing of reviews, test dates, and disbursements (scheduling rules) - The timing of all reviews, test dates, and disbursements is summarized in a staff report table at approval and updated as needed at reviews. - Arrangement text for initial ECF request specifies test dates, reviews, availability dates, and disbursements for the first year. - The PC table attached to the LOI/MEFP should identify PCs, indicative targets, and adjustors for at least a 12-month period from the Board date. - Structural benchmark table should cover at least a 12-month period, indicating linkage to reviews and implementation dates. - The Decision attached to the staff report should specify all PCs and review/availability dates, normally over the next 12 months from the Board date. - First disbursement is made available upon approval of the arrangement; subsequent disbursements conditional on observance of PCs and a program review confirming satisfactory progress. - Disbursements and reviews under a standard three-year ECF are normally semi-annual, typically implying seven scheduled disbursements and six reviews (and thus six test dates with PCs). - Reviews must be scheduled no more than six months apart; there is flexibility to deviate (more frequent reviews) to align with national budget/reporting cycles or due to volatility/uncertainty. - In cases where arrangement is approved well before the first test date (e.g., four months or earlier), there may be only six disbursements and five reviews. - Reviews and disbursements could be more frequent and may shift frequency during an arrangement. - Test dates for PCs must be set so all scheduled disbursements can take place before the end of the arrangement, accounting for reporting lags and staff report preparation and circulation periods. - Availability dates should be set so all data needed to confirm observance of PCs at related test dates would have become available. - Reviews cannot be completed prior to the applicable availability date. - Program period typically starts somewhat before the Board approves the ECF arrangement and three to six months before the first test date under semiannual monitoring; it should normally not start more than three months prior to the Board meeting. ### Avoidance of blackout periods in ECF design - Unlike SBAs or EFF Arrangements, the ECF design avoids “blackout periods” because each disbursement links to completion of a specific review and observance of specific periodic PCs; therefore a disbursement is not blocked when a new test date passes and data are unavailable (such new test date applies to a future disbursement subject to a future review). ### Addressing interruptions: track records, combining reviews, and rephasing - Interruptions and delays in ECF-supported programs: - If caused by substantial policy slippages, it is often appropriate to establish a track record before completing the next review. - A track record could be informal (time-bound policy actions and targets), monitored formally under an SMP, or, for urgent financing due to an exogenous shock, the RCF (if applicable policy commitments are in place). - Combining reviews: - Two reviews can be combined when delays occurred and performance can be assessed against two test dates linked to successive reviews. - Combining three or more reviews is very unusual. - Combining reviews possible only if: - (i) Conditionality has been fully defined, including applicable PCs, and approved by the Board; - (ii) Data are available for measuring observance of conditionality for the reviews; and - (iii) Earliest dates for conclusion of the reviews in the text of the arrangement have all passed. - Reviews are typically combined when program is on track with respect to the most recent review and sufficient corrective action offsets earlier nonobservance. - If slippages relative to the most recent review are significant, combining reviews is inappropriate; authorities could request cancellation of the arrangement and consider support under a new instrument. - Alternatively, where earlier review performance was broadly satisfactory or corrected and program objectives remain attainable through modifications, the past review could be completed and a new future test date established, typically combined with rephasing of access. - Rephasing disbursements: - Disbursements may be rephased to change amounts associated with specified reviews and/or change number or timing of disbursements and reviews. - If delays cannot be accommodated by extensions or combining reviews alone, total access can be rephased into a new pattern of test dates and reviews, generally only after making full use of the maximum possible extension. - Access should never be rephased in a manner that would make it impossible for the member to get the full, undisbursed amount under the arrangement. - If rephasing would compress a very large amount of access into a short period (even with a potential extension), it may be appropriate to let the current arrangement expire or be cancelled and proceed to a new ECF arrangement with more attainable goals, unless there has been a very sharp turnaround in performance. ### Other relevant modalities and policy requirements - Ex Post Peer Reviewed Assessments: - As of July 2015, Ex Post Assessments (EPAs) have been discontinued and replaced by Ex Post Peer Reviewed Assessments. - Staff reports for new Fund-supported program requests are required to contain a succinct, peer-reviewed assessment for countries with longer term program engagement (LTPE), defined as having in place a Fund-supported financial arrangement for at least seven of the past 10 years. - Access to resources under ECF arrangements counts toward the policy on LTPE. - Post-Program Monitoring (PPM): - Outstanding ECF credit will be subject to PPM. - Normally, members with outstanding credit from the Fund in the GRA and/or PRGT exceeding 200 percent of quota or SDR 0.38 billion from the PRGT (and/or SDR 1.5 billion from the GRA) after the expiry of their arrangements are expected, upon the recommendation of the MD, to engage with the Fund in PPM. - Normally one stand-alone PPM paper is expected to be issued for Executive Board consideration within a twelve-month period. - Article IV cycle: - The 24-month cycle for Article IV consultations applies to members with an ECF arrangement. - Article IV consultations with members that have an on-track ECF arrangement are expected to be completed within 24 months after completion of the previous Article IV consultation. - If a program review is not completed by the date specified in the arrangement, the next Article IV consultation is expected to be completed by the later of (i) six months after the scheduled review date and (ii) 12 months, plus a grace period of three months after the previous Article IV consultation, unless the program review is completed earlier. - A member that has completed an ECF arrangement by drawing all amounts may remain on the 24-month cycle, unless it meets any criteria in paragraph 2 of Decision No. 14747-(10/96): (i) systemic or regional importance; (ii) perceived to be at risk or facing pressing policy issues of broad interest to the Fund; or (iii) outstanding Fund credit exceeding 145 percent of quota. - At the time of the final review, staff should assess whether the consultation cycle should be shortened back to 12 months based on these criteria, and the staff report should seek the Board’s approval if shortening is warranted. - Exchange system and data provision obligations: - Requirements under Article VIII Sections 2, 3, and 4, and Article XIV are discussed elsewhere; a standard continuous PC applies inter alia to non-introduction/intensification of exchange restrictions and non-introduction/modification of multiple currency practices. - Article VIII, Section 5 of the Fund’s Articles of Agreement does not apply to the provision of information that is required for the purposes of Fund financial assistance under the ECF. - Heavily Indebted Poor Country (HIPC): - Performance under an ECF arrangement can count toward the track record required for the HIPC decision point and completion point. - Minimum required track record: six months for the decision point and one year for the completion point. - Side letters: - Use of side letters in LIC programs has been extremely rare. - Side letters may be used when release of information on policy understandings at program request or review time would cause adverse market reaction or undermine authorities’ efforts to prepare domestic groundwork for a measure. *Source: pp110917-2017-handbook-of-imf-facilities-for-low-income-countries — Extended Credit Facility (excerpt).* ### CHAPTER II—STANDBY CREDIT FACILITY _____________________________________________________ 50 ### CHAPTER II—STANDBY CREDIT FACILITY ### A. Objectives and Qualification - Purpose: - The SCF provides concessional financing to LICs with actual or potential short-term balance of payments needs to assist eligible member countries in implementing programs aimed at achieving, maintaining, or restoring a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth. - A stable and sustainable macroeconomic position is characterized by the absence of a present or prospective balance of payments need and by domestic and external stability necessary to support strong and durable poverty reduction and growth; typically associated with sustainable fiscal and current account balances, limited debt vulnerabilities, adequate international reserves, and sufficient policy and institutional capacity. - Use of the SCF is appropriate for episodic, short-term financing and adjustment needs that are not expected to persist over the medium or longer term. Member countries facing potential but not present balance of payments needs may request an SCF arrangement on a precautionary basis. - Functional role: - SCF provides temporary concessional finance to smooth adjustment, strengthen international reserve positions, loosen financing constraints for public and private sectors, and catalyze additional donor financing. - Eligibility and qualification criteria: - Assistance under the SCF is available to all PRGT-eligible member countries that experience short-term balance of payments needs, unless (i) the predominant cause is a withdrawal in financial support by donors or (ii) the country faces a protracted balance of payments problem. - To qualify for the SCF, there should be an expectation that the member will achieve a stable and sustainable macroeconomic position in normally two years or less. - If resolution is expected to persist for three years or more, an ECF arrangement is appropriate. If expected to be established in more than two but less than three years, choice between SCF and ECF is case-by-case, bearing in mind that the minimum length for an ECF arrangement is three years and use of the SCF is normally limited to two and a half out of any five-year period assessed on a rolling basis. - Substantial structural reform or capacity building needs, or frequently recurring financing needs, indicate a protracted balance of payments problem (arguing for ECF); needs for a relatively front-loaded adjustment aimed at speedy restoration favor SCF. - SCF can support members experiencing actual (present or prospective) or potential balance of payments needs, provided the need is short term. - A precautionary SCF is possible when the member does not presently face needs but such needs are expected or there is a significant risk they could arise; individual disbursements can only be made based on the member’s representation of the existence of an actual (present) balance of payments need. - Qualification requires a Board finding that the member is implementing, or committed to implement, policies aimed at resolving balance of payments difficulties in the context of a policy program that meets UCT conditionality standards and aims to achieve, maintain, or restore a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction. - Evidence of capacity and commitment includes recent policy performance (including under a recent Fund-supported program) and institutional capacity; qualification is presumed (but must be established) for countries with an on-track PSI that experience or may experience a balance of payments need. - Countries not yet able to meet SCF qualification can build a track record through an SMP, or, in urgent cases, the RCF (assuming applicable policy commitments), or concurrent use of both. Countries with capacity to implement a UCT-quality program but with needs expected to be resolved within one year and no major policy adjustments needed may request RCF financing instead. ### B. Duration, Extensions, Cancellations, and Repeated Use - Duration limits: - SCF assistance is available for a minimum of 12 months and a maximum of 24 months from the date of Board approval. - Use is normally limited to two and a half years out of any five-year period, assessed on a rolling basis. - In rare cases, minor deviations from the two-and-a-half-year limit may be allowed (e.g., three distinct large exogenous shocks in a five-year period). - Past SCF arrangements treated in their entirety as precautionary (i.e., not one disbursement was made) and prospective SCF arrangements for which the Fund assesses that the member does not have an actual balance of payments need at approval are not counted towards the two and a half year limit. - SCF arrangements may be extended (including multiple times) subject to a 24-month maximum total duration. After expiration or cancellation, additional SCF arrangements may be approved if qualification criteria are met, including the overall time limit. - Extensions and rephasing: - Extensions can be requested by the member and must be approved by the Board before arrangement expiration; extensions only possible if needed to allow disbursement of amounts under the arrangement (cannot extend when all scheduled amounts have been disbursed). - SCF arrangements can be extended to allow disbursement of rephased amounts or to provide additional resources (augmentation) based on projected balance of payments developments, subject to appropriate conditions. - Extensions involving rephasing and/or augmentations would normally be approved by the Board on the basis of an LOI and in the context of a program review (where the review conclusion demonstrates the program is on track). In exceptional circumstances, such extensions may be approved outside a scheduled review, given documented policy understandings. - Short-term ("technical") extensions of a few weeks or months can be granted outside the context of a review when additional time is needed to complete a final review and make a final disbursement available, provided staff and authorities have reached or are expected to reach near-term policy understandings; Board approval generally via a short staff paper for LOT Board approval. - Cancellations: - SCF arrangements may be cancelled by the authorities at any time (e.g., when macroeconomic imbalances are resolved, when authorities no longer have capacity or commitment to implement the program, or when objectives/modalities of policies change substantially). ### C. Concurrent Use and Blending - Concurrent use restrictions and options: - The SCF cannot be used concurrently with the ECF; any pre-existing ECF must be cancelled before an SCF arrangement can be approved and vice versa. - A member cannot obtain RCF financing (or start an SMP) if an SCF arrangement is in place and on track. RCF financing during an SCF arrangement can be provided only when: - (i) SCF disbursements are not possible (e.g., due to policy slippages or delays in program discussions); - (ii) qualification requirements for the RCF are met, including the existence of an urgent balance of payments need and relevant policy commitments; and - (iii) the balance of payments need is primarily caused by a sudden exogenous shock. - When RCF access exceeds 18.75 percent of quota by using the “exogenous shocks” window or the “large natural disasters” window, policies should be appropriate to address the shock. - Policy commitments made in the context of an RCF disbursement (such as RCF concurrently with an SMP to provide a clear macroeconomic framework) could serve as a track record to bring the SCF-supported program back on track. In absence of an urgent need, a track record may be built through an SMP. - The SCF can be used concurrently with GRA financing under certain circumstances. - Interaction with PSI: - The SCF can be used flexibly in conjunction with a PSI. While a PSI does not provide automatic access to SCF financing, qualification for the SCF would be presumed for countries with an on-track PSI that experience or may experience a balance of payments need, provided relevant qualification requirements are met. - An on-track PSI with UCT-conditionality would reduce time needed to design an SCF-supported program. There is no need to cancel the PSI; an SCF can run concurrently with a PSI. PSI users can request concurrent precautionary SCF support during periods of increased uncertainty or risk. - If the PSI is off track, SCF approval would typically occur only after appropriate corrective actions have been taken. - Concurrent PSI+SCF modalities: - The two instruments would support a single economic program with a single set of program conditions, schedule of reviews, and other requirements largely mirroring stand-alone SCF or PSI arrangements. - Key differences include: - Choice of SCF duration (12 to 24 months) depends on financing and adjustment needs and is not necessarily tied to the PSI period. - If the SCF expiration date comes after that of the PSI, approval of a new PSI would normally take place only after expiration or cancellation of the SCF, since PSI qualification requires a broadly stable and sustainable macroeconomic position implying no IMF financing is needed. A new PSI could be approved if authorities intend to treat the SCF as precautionary. It may be possible to extend the existing PSI for a short period to complete the final review. - While an SCF arrangement does not require issuance of a PRS-related document, such a document must exist by the time of completion of the second and subsequent reviews under a PSI. - The review schedule for the PSI could remain on the “fixed review cycle” or be aligned to the more flexible SCF review cycle; shifting to the SCF schedule requires adjusting the standard PSI decision language so a PSI review can be completed later. - Blending: - (Content on blending begins after the supplied excerpt and is not included in this summary.) *International Monetary Fund — CHAPTER II: STANDBY CREDIT FACILITY (excerpt).* ### 104. Certain PRGT-eligible countries are expected to receive financial assistance through blended ### 104. Certain PRGT-eligible countries are expected to receive financial assistance through blended ### Blending policy and rationale - PRGT-eligible countries may receive financial assistance through blended PRGT and GRA resources, rather than relying on fully concessional Fund financing. - When financing is blended under a PRGT arrangement and an arrangement under the GRA, total access is determined based on the standard criteria, implying that total access should be comparable across country cases with similar balance of payments needs, program strength, and outstanding Fund credit, irrespective of whether the Fund’s financial assistance comes in the form of blended or PRGT-only resources. - Blending can provide a signal that the borrower is moving toward middle-income or emerging market status. - PRGT-eligible countries, including members qualifying for an SCF arrangement, would be expected to use either fully concessional or blended resources, rather than GRA-only financing, although they are always eligible for access to the Fund’s general resources. ### Presumptions and limitations on blending - Blending is presumed, including for precautionary SCF arrangements, for PRGT-eligible countries with either: - (i) per capita income above the prevailing operational cutoff used by IDA; or - (ii) sustained past and prospective market access and a per capita income that exceeds 80 percent of the IDA operational cutoff provided that (iii) they are not deemed to be at high risk of debt distress or in debt distress (as assessed by the most recent joint Bank-Fund LIC DSA). - These members (“presumed blenders”) are therefore expected to receive concessional financing only in a blend with GRA resources. - Non-presumed blenders can: - access PRGT resources exclusively up to the applicable PRGT access limits; and - if they meet applicable GRA policies (including program strength, capacity to repay, and debt sustainability), access GRA resources either standalone or in conjunction with PRGT resources, but should typically resort first to the PRGT up to the applicable access limits under an SCF arrangement. - If a non-presumed blender requests PRGT resources exclusively but financing needs exceed SCF access limits, the member will be expected to blend SCF resources with GRA resources, subject to meeting applicable GRA policies; the member will be expected to access GRA resources for the amount in excess of the applicable PRGT access limits. - Definition notes preserved from source: - As of July 2017, the IDA operational cutoff is US$1,005 (revised each year, typically in July). - A member is presumed to have had past market access if it tapped international financial markets during at least two of the last five years, with total access over the five years amounting to a minimum of 50 percent of quota. ### Modalities of blended SCF and SBA assistance - SCF resources will normally be provided together with GRA resources under the SBA when providing blended financial assistance. - Financing through the RFI under the GRA during an SCF arrangement would be expected only if the SCF-supported program is off track, in which case RFI purchases would typically be combined with disbursements under the RCF. - Blended assistance broadly mirrors stand-alone SCF arrangements (one- to two-year programs for short-term balance of payments needs, single set of program conditions, schedule of disbursements and reviews), with differences: - Disbursements would involve both SCF and SBA resources, implying lower average concessionality than under a stand-alone SCF arrangement. - SBA qualification requirements must be met—if the blend pushes (annual or cumulative) access above GRA normal limits, the member would also need to meet the Exceptional Access criteria. - Normally, effectiveness and expiration dates of SCF and SBA arrangements would be identical, but there could be situations blending an SBA of more than 24 months with a 2-year SCF if SCF qualification requirements are met, including absence of a protracted balance of payments need. - Reviews under the SBA component may require waivers of applicability under certain circumstances. - Each disbursement under an SCF arrangement is linked to a specific test date, whereas for GRA arrangements purchases are conditioned upon observance of the PCs relating to the most recent test date; resulting timing differences can mean SCF-component disbursements may be disbursed while SBA-component disbursements are not unless waivers are granted. ### Access — determination (main criteria) - Access is determined case-by-case based on standard criteria: - (i) the member’s present, prospective, and potential balance of payments needs (taking into account all projected balance of payments flows, including reserve accumulation and financing from other sources); - (ii) the strength of its program and capacity to repay the Fund (policy plans, adjustment effort, commitment to implement the program, institutional capacity, track record of policy implementation, and country circumstances such as vulnerabilities, imbalances, and debt sustainability); and - (iii) the amount of outstanding Fund credit and the member’s record of past use. - All else equal, higher access is generally associated with a stronger program, stronger track record, and stronger capacity to repay. - For precautionary arrangements the baseline scenario should be presented showing no Fund financing; each individual disbursement requires a member representation of the existence of a present balance of payments need, normally in an LOI. ### Access norms (unblended SCF arrangements) - Access norm is 90 percent of quota per 18-month arrangement for countries with total outstanding IMF credit under all concessional facilities of less than 75 percent of quota. - The norm is 56.25 percent of quota per arrangement for countries with outstanding concessional credit of between 75 percent of quota and 150 percent of quota. - For arrangements with duration more than 18 months, the norm is increased proportionally; for duration less than 18 months, the norm is decreased proportionally. - For countries with outstanding concessional credit above 150 percent of quota, norms do not apply; access is guided by the cumulative access limit of 225 percent of quota (300 percent of quota in exceptional cases), expectation of future need for Fund support, and the repayment schedule. - Access norms provide general guidance and are neither ceilings nor floors; access can deviate if warranted by the standard criteria. ### Access limits (global PRGT limits and exceptional access) - Total access under all concessional facilities is subject to “global” annual and cumulative limits, covering ECF, SCF, RCF, and ESF. - Total access to financing under the PRGT should normally not exceed 75 percent of quota per year across all concessional facilities (annual access limit). - This annual limit refers to past and future scheduled disbursements in any 12-month period, specifically: (i) actual disbursements under the RCF and past ECF and SCF arrangements at the time they became available; (ii) disbursements to date that became available under the current SCF arrangement, irrespective of whether drawn; and (iii) any future disbursements under the SCF at scheduled availability dates. - Total access under the PRGT should normally not exceed 225 percent of quota cumulatively, net of scheduled repayments. - The cumulative access limit requires total outstanding Fund concessional credit (including disbursements made available but not drawn in the current arrangement) cannot normally exceed 225 percent of quota at any point, based on projected disbursements and repayments. - Exceptional circumstances permitting access above normal limits require that: - (i) the country experiences an exceptionally large balance of payments need that cannot be met within normal limits; - (ii) it has a comparatively strong adjustment program and ability to repay the Fund (generally not met for countries with high risk of debt distress or in debt distress as defined under the joint Bank-Fund DSA, unless expected debt relief or restructuring reduces the risk to moderate or low); and - (iii) it does not have sustained past and prospective access to capital markets, and has income at or below the prevailing operational cutoff for IDA assistance. - Exceptional access is subject to hard caps of 100 percent of quota annually and 300 percent of quota cumulatively, net of scheduled repayments, across all concessional facilities. ### Precautionary SCF sub-ceiling and phasing of access - For SCF arrangements treated as precautionary at approval (potential but no actual balance of payments need): - annual access is limited to 56.25 percent of quota; and - average annual access (total access divided by length of arrangement in years) cannot exceed 37.5 percent of quota, with possibility to augment access later if an actual larger balance of payments need arises. - Phasing of SCF access, determined at approval, should mirror projected evolution of balance of payments needs and must take into account applicable annual access limits. - Access could be front-loaded or back-loaded depending on program strength and time profile of needs; significant frontloading could be appropriate in exceptional cases such as repayment of emergency assistance or clearance of overdue obligations. - Standard presentation practice: scheduled IMF disbursements, together with other exceptional financing items, should not exceed the overall balance of payments deficit in any given period; balance of payments should be fully financed at time of SCF approval and completion of each review, while residual financing gaps may appear in outer years. ### Access under blended financial assistance (specific rules) - When financing is blended under an SCF arrangement and a GRA arrangement, total access is determined based on the standard criteria; the above access norms do not apply, and access under blended financial assistance is subject to specific rules: - Access to the concessional (SCF) component of blended financial assistance is normally one-third of total access, with access to concessional resources capped at the norm applicable to unblended arrangements. All access above the norm would be met by GRA financing. - At approval of a new SCF arrangement involving blended GRA assistance, each scheduled disbursement should generally involve both SCF and GRA resources. For GRA resources, phasing and performance criteria apply only to purchases above the first credit tranche. The shares of SCF and GRA financing at each disbursement can be determined individually and need not remain constant across disbursements. - In cases of very large balance of payments needs (e.g., very large shocks or repurchases of GRA emergency assistance), access to concessional resources under blended financial assistance could reach the annual access limit of 75 percent of quota or possibly the exceptional annual access limit of 100 percent of quota if the criteria for exceptional concessional access are met (including that the country does not meet the income or market access criteria for blending). *International Monetary Fund — Standby Credit Facility (excerpt).* ### 120. Access under an SCF arrangement can be augmented to help meet a larger balance of ### pp110917-2017-handbook-of-imf-facilities-for-low-income-countries - 120. Access under an SCF arrangement can be augmented to help meet a larger balance of ### Augmentation of SCF access - Augmentation can be used to help meet larger balance of payments needs or to support a strengthening of the program; not appropriate if the SCF-supported program is off track (in which case RCF financing could be appropriate). - Augmentation may be justified if access was initially constrained by a high risk of debt distress that later subsided. - Augmentation may be justified when an SCF arrangement period is extended and the extension involves balance of payments needs not originally included in the determination of access. - Under the TIM, augmented access not exceeding 10 percent of quota will be available to compensate for balance of payments shortfalls arising from trade liberalization measures implemented by other countries. - Determination of access for an augmentation is based on standard access criteria, including balance of payments need and strength of the program. - No formal norms on augmentation size, though many augmentations have been in the range of 15–45 percent of quota (pre-14th General Review of Quotas), with a few cases well above this range. - Staff reports supporting augmentation requests should explicitly discuss the basis for the augmentation and its size with reference to main access criteria and applicable access norms and limits. ### Augmentations under blended arrangements and timing - For augmentations of arrangements presumed to involve blended PRGT and GRA resources, total financing mix over the arrangement must follow rules on access under blended arrangements, including that total access (post-augmentation) to concessional financing would normally be one third of total overall access to Fund resources with a cap at the norm applicable to unblended arrangements. - Augmentations would normally be approved at the time of a scheduled review. - When underlying balance of payments problems are so acute that augmentation cannot await the next scheduled review, an augmentation can be requested between scheduled reviews (ad hoc review), subject to: - Assessment by the Fund as Trustee that the program is on track to achieve its objectives at the time of augmentation (otherwise RCF may be requested). - Board assessment of observance of continuous performance criteria or justification for a waiver, that prior actions (if applicable) have been met, and that policies are suitable and consistent with program objectives. - Consideration of exogenous developments and periodic performance criteria linked to future disbursements. ### Modalities for augmentations at ad hoc reviews - Requests expected to be supported by a short staff report and a Letter of Intent (LOI) describing nature and size of the problem, policies to address balance of payments difficulties, and relevant program implementation information. - Augmentations of access at ad hoc reviews are available to the member in a single disbursement following Board approval; there is no limit on such a disbursement subject to overall access limits and norms. - The augmentation is subject to blending rules and may be supplemented by a corresponding augmentation under the GRA. - The amount of the disbursement is limited to what is immediately needed by the member; additional amounts can be requested in the context of a regular program review. - The new disbursement approved at an ad hoc review is subject to observance of continuous performance criteria (PCs), including accuracy of information on PC implementation and any prior actions; it is not subject to periodic PCs and other conditions linked to remaining disbursements. - If the scheduled review associated with the most recent availability date preceding the augmentation request has not been completed, an augmentation request cannot be approved at an ad hoc review. - A member may request an undrawn disbursement made available upon Board approval of the augmentation until the availability date of the next scheduled disbursement. - Augmentation requests at ad hoc reviews that do not exceed 12.5 percent of quota are eligible for approval on a LOT basis. - A scheduled review following an ad hoc review to consider an augmentation is expected to undertake a comprehensive review of policies and cannot be completed on a LOT basis. ### Limits on unilateral reduction of access - The Fund cannot unilaterally reduce access under the SCF; authorities could request a reduction in access, for instance, in case of a marked and unexpected improvement in the balance of payments. ### Procedural safeguards on high access requests—DSAs and informal Board meetings - Financing requests are subject to procedural safeguards aimed at protecting PRGT-eligible members’ debt sustainability and the Fund’s concessional resources. - A DSA is required for any financing request under the PRGT (augmentation or new arrangement) if it: - (i) involves exceptional access to concessional resources; - (ii) brings total access (cumulative disbursements) under all concessional facilities to more than 60 percent of quota, based on cumulative past and future scheduled disbursements in any 24-month period, specifically including (a) actual disbursements under the RCF, ECF, ESF, and past SCF arrangements at the time they became available (date of Board decision), (b) disbursements to date that became available under the current SCF arrangement, irrespective of whether drawn, and (c) any future scheduled disbursements under the SCF; or - (iii) involves a member country with a high risk of debt distress or in debt distress. - All DSAs (full and updates) should be prepared jointly by Fund and Bank staff and must be submitted to both the IMF and IDA’s Executive Boards. - An early informal Board meeting is required if a PRGT financing request would: - (i) involve exceptional access to concessional financing; or - (ii) bring total access under all concessional facilities to more than 135 percent of quota, based on cumulative past and future scheduled disbursements in any 36-month period, specifically including (a) actual disbursements under the RCF, ECF, ESF, and past SCF arrangements at the time they became available, (b) disbursements to date that became available under the current SCF arrangement, irrespective of whether drawn, and (c) any future scheduled disbursements under the SCF. - Information to the Board for such early informal meetings would typically be a two to three page note including: factors underlying the large balance of payments need (taking into account donor financing), summary of main policy measures and macroeconomic framework, expected strength of the program and capacity to repay the Fund, analysis of debt vulnerabilities reflecting all projected debt financing including from the Fund, reference to impact on the Fund’s concessional resources, likely timetable for discussion with authorities, and a selected indicators table and standard DSA charts if possible. - The early informal meeting should take place before staff reaches understandings, ad referendum, with the authorities. - Staff should provide early notice to the Board (for example in an informal country matters session) of upcoming arrangement requests or augmentations where the envisaged financing commitment would have a large impact on the Fund’s overall concessional resources. - Exception: requirement for a new DSA or a Board brief in high access cases does not apply for new financing requests of 5 percent or less of quota. ### Financing terms - Repayments of SCF credit are made in nine equal semiannual installments, subject to a four-year grace period from the date of the first disbursement and eight-year final maturity. - Authorities may decide to make early reimbursements at any time, but would not be expected to do so. - Interest is paid semiannually. - The interest rate on SCF credit is currently set at zero percent, but subject to biennial Board reviews that take account of developments in world interest rates. - At each review, interest rates would normally be adjusted if warranted by the prevailing SDR rate, within a 0.0–0.75 percent range for the SCF. - The new interest rate would apply to all outstanding SCF credit. - The next such review is scheduled for December 2018. - A small availability fee applies to precautionary use of SCF resources: a fee at 0.15 percent per annum is levied on the undrawn portion of the amount available for drawing each six-month period under an SCF arrangement. ### Financing assurances, arrears, and safeguards - SCF arrangements can only be approved (and reviews completed) when the program is fully financed under the Fund’s policy on financing assurances. - Staff should confirm there are no unfilled financing gaps over the 12 months immediately following approval of the arrangement (and completion of each review) and that there is a clear expectation the program will be fully financed through the remainder of the arrangement period. - Assurances should also be given that the member country has the capacity to repay the Fund based on medium-term balance of payments projections and, for new arrangements and augmentations, the standardized table on indicators of capacity to repay the Fund. ### Arrears policy and treatment - Under the Fund’s policy of non-toleration of sovereign arrears to official multilateral and creditors, the Fund generally calls for resolution of existing arrears to official multilateral creditors and non-accumulation of new arrears during the program. - Existing arrears need not be settled immediately; they can be addressed in various ways depending on creditor type; country teams should seek guidance from LEG and SPR. - Macroeconomic program assumptions under SCF should be consistent with expected resolution of existing arrears to official multilateral creditors; staff should have reasonable assurances that arrears clearance understandings are realistic. - Treatment of arrears to official bilateral creditors: - Category 1: If arrears arise where parameters do not require restructuring of the underlying claim, the Fund maintains a policy of non-toleration; tacit approval (non-objection) of an official bilateral creditor’s Executive Director has been deemed sufficient in practice. - Category 2: If arrears arise where restructuring of such claims is required under program parameters, the Fund may provide financing notwithstanding arrears only under carefully circumscribed circumstances. - Arrears to private external creditors are covered by the Fund’s LIA policy. The Fund can lend in a situation of sovereign arrears to private external creditors only where: - (i) prompt Fund support is considered essential for successful implementation of the member’s adjustment program; and - (ii) the member is pursuing appropriate policies and is making a good faith effort to reach a collaborative agreement with private creditors (or facilitate such an agreement) and good prospects exist for removal of exchange controls. - When the LIA policy applies, each Fund disbursement under an arrangement is subject to a financing assurances review considering whether adequate safeguards for further use of Fund resources remain in place and whether the member’s adjustment efforts are undermined by creditor-debtor developments. - SCF-supported programs should also address domestic arrears as part of overall program design; specification depends on country context and fiscal framework. ### Overdue obligations to the Fund - If a member is in arrears to the Fund in the GRA, the Special Disbursement Account, the SDR Department, or to the Fund as Trustee (including the PRGT), a request for IMF financing, including under the SCF, will not be approved and disbursements under an existing arrangement will be suspended until arrears are cleared. - After one month of overdue obligations, the Managing Director will notify the Executive Board that an obligation is overdue. - For protracted arrears (arrears of more than six months’ duration), annual reports are to be issued to the Executive Board, except for status changes. - The Managing Director may recommend postponing for up to one-year periods the Executive Board’s consideration of a report regarding a member’s overdue obligations in exceptional circumstances where there is no basis for an earlier evaluation of the member’s cooperation. - While a member is in arrears to the Fund, policy support can only be provided through surveillance, technical assistance and, under certain circumstances, SMPs. - Remedial measures for PRGT arrears include removal from the list of PRGT-eligible countries, declaration of noncooperation and suspension of technical assistance. *Source: Excerpt from Handbook of IMF Facilities for Low-Income Countries (SCF section).* ### 135. As a general principle, staff should aim to complete a safeguards assessment prior to ### STANDBY CREDIT FACILITY ### Safeguards Assessments - Staff should aim to complete a safeguards assessment prior to Executive Board approval of a new SCF arrangement, but no later than the first review under the arrangement and for all augmentations for existing arrangements. - Once the first review under the program has passed, subsequent staff reports should highlight the status of assessment and, if not completed, reasons for its delay. - Safeguards assessments are conducted for each new arrangement; an update assessment is not required for: - successor arrangements where an assessment was completed no more than 18 months prior to the approval of the successor arrangement; or - central banks with a strong track record, if previous assessment was completed within four years and no substantial issues were identified in the prior assessment or subsequent monitoring. - Safeguards assessments relate to the borrowing members’ central banks; a separate fiscal safeguards review may be required in some cases involving direct budget financing. - A summary of safeguards issues should be reflected in the main body of staff reports for as long as Fund credit remains outstanding. - The safeguards process evaluates the central bank’s framework covering governance, auditing, financial reporting, control systems, and legal autonomy over the life of an arrangement and for as long as Fund credit remains outstanding. - Staff reports should discuss status of safeguards assessments, significant recommendations on legislative amendments, and problems in obtaining access to data and deviations from commitments relating to safeguards recommendations. - Safeguards assessment recommendations may be incorporated into conditionality or structural measures under the member’s program. - Close cooperation and coordination between FIN, other functional departments, and area departments is essential; FIN should be kept informed of safeguards issues including timing of new arrangements and reviews. ### Program Objectives and Design - SCF-supported programs aim to achieve, maintain, or restore a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth. - SCF-supported programs should typically aim to maintain or achieve: - (i) strong and durable poverty reduction and growth, - (ii) low or moderate inflation, - (iii) sustainable fiscal and current account balances, - (iv) limited debt vulnerabilities, - (v) adequate international reserves, - (vi) sufficient policy and institutional capacity to implement appropriate macroeconomic policies. - Program design should be aligned with the country’s poverty reduction and growth objectives and specific policy objectives should be clearly articulated in the LOI/MEFP and staff report. - Typical policy areas included in program objectives: - Fiscal policies: (i) fiscal stance anchored for macro stability and fiscal/debt sustainability, (ii) revenue and spending policies account for growth and social objectives, (iii) budgets guided by medium-term fiscal frameworks to the extent possible. - Monetary policies: consistent with inflation, exchange rate, and reserve objectives, while taking cyclical considerations into account. - Exchange rate policies: ensure a unified exchange rate and a real exchange rate level broadly in line with fundamentals, supporting a stable and sustainable external position consistent with adequate growth. - Financial sector policies: geared toward financial stability and deepening to foster investment and forestall financial crises. - Public financial management reforms: ensure resources are tracked, reported, and targeted appropriately; public debt management to support debt sustainability; revenue reforms to broaden the revenue base and enhance tax efficiencies. - Other structural reforms critical for achieving macroeconomic objectives. ### Role of SCF Financial Support - SCF balance of payments support can assist countries in smoothing the adjustment process toward a stable and sustainable macroeconomic position. - Fund financial support can: - strengthen the international reserve position, - provide liquidity for external payments, - relax external financing constraints and loosen domestic liquidity constraints of public and private sectors. - By reducing the need for retrenchment in public and private savings-investment balances, Fund financing enhances policy options (allowing less contractionary fiscal, monetary, and exchange rate policies) and cushions private sector adjustment (e.g., investment and import declines). - The appropriate mix of financing and public/private adjustment is determined case-by-case. - A member may use the domestic counterpart of SCF resources to finance, directly or indirectly, the government budget deficit, consistent with the Fund’s legal framework if the member has balance of payments problems and an appropriate program. - Direct budget support may be appropriate when: - (i) the program envisages the entire amount of Fund support is used to meet a present or prospective balance of payments need, - (ii) loosening fiscal financing constraints is an important macroeconomic objective, - (iii) the central bank cannot or should not lend to the government (legal/institutional reasons) while the domestic financial sector is too shallow or unstable. - Staff reports should justify use of domestic counterpart for budget financing and discuss safeguards implications. - Under the safeguards policy, a fiscal safeguards review of state treasury should be conducted for all arrangements before the first program review where a member requests exceptional access to Fund resources, and at program approval if the member expects that at least 25 percent of the funds will be directed to financing the state budget. - The fiscal safeguards review requirement also applies when a member requests exceptional access during an arrangement, unless a fiscal safeguards review was completed within the previous 18 months. ### Links to Poverty Reduction Strategies (PRS) and Social Spending - SCF-supported programs should be aligned with the country’s poverty reduction and growth objectives. - Specific guidance on PRS linkages: - Any financing request or program review under the SCF must be accompanied by a statement, normally in the LOI or MEFP, of how the program advances the country’s poverty reduction and growth objectives; description expected to be more detailed at initial program request. - If a PRS document exists, the SCF-supported program should be consistent with PRS objectives in the context of promoting a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth. - PRS documents are not required for approval or review of an SCF arrangement due to SCF’s short-term focus; when a future PSI- or ECF-supported program is under consideration, staff should inform authorities early about definitions and timelines for EDD requirements to ensure adequate time for the PRS process. - Social and other priority spending should be safeguarded and, whenever appropriate, increased under SCF-supported programs; monitored through explicit program targets, typically an indicative floor on social and other priority spending whenever possible. - The definition of social or other priority spending should be consistent with the authorities’ poverty reduction and growth objectives. - If tracking such expenditures is not feasible, program documentation should report measures to develop an adequate tracking system; staff should monitor progress and the program may include structural benchmarks as appropriate. ### Debt Sustainability Analysis (DSA) - SCF-supported programs should be underpinned by a thorough DSA to inform medium-term debt strategies and fiscal frameworks. - Country teams should engage authorities in preparing DSAs, discuss results, and share final files with relevant officials. - DSAs for LICs (full DSAs and updates) should be prepared jointly with the World Bank; country teams should involve other relevant MDBs. Joint DSAs are required for PRGT-eligible countries that also have access to IDA resources. - As a general rule, a DSA should be produced at least once every calendar year. - A fully elaborated DSA is required at least once every three years, or whenever circumstances have changed significantly since the previous DSA, with shorter annual updates in interim years possible in absence of such significant changes. - Full DSAs should be prepared in periods of heightened domestic, external, or global risk. - The timing of a DSA may be driven by program requirements; design of debt limits under an SCF arrangement is systematically related to assessment of debt vulnerabilities. - Determination of access to concessional resources needs to take account of the country’s debt vulnerabilities based on the most recent DSA; a DSA may be needed for higher access financing requests (augmentation or new arrangement). - DSAs for LICs should be presented as self-contained documents and normally prepared using the LIC DSF; for countries with durable and substantial market access, the market-access template can be used. - LIC DSF analysis includes three components: - A forward-looking analysis (20-year projection) of debt and debt-service dynamics under a baseline scenario, alternative scenarios, and standardized stress tests; - An explicit rating of the risk of external debt distress (low, moderate, high, or in debt distress) based on indicative country-specific debt-burden thresholds that depend on quality of policies and institutions; and an assessment of the overall risk of debt distress; - Recommendations on a borrowing (and lending) strategy and other crucial macro policies to limit the risk of debt distress while maximizing the resource envelope to achieve the country’s development objectives. ### Collaboration with the World Bank and Other Development Partners - Fund staff should consult closely with all major development partners active in the country when designing and monitoring an SCF-supported program. - JMAP calls on Bank and Fund country teams to consult at least once a year to identify the country's key macroeconomic and structural reform challenges and coordinate work plans. ### Conditionality - Conditionality under an SCF arrangement ensures Fund resources support meeting program objectives with adequate safeguards to Fund resources. - Conditions will normally consist of macroeconomic variables and structural measures reasonably within the member’s direct or indirect control and that are: - (i) of critical importance for achieving program goals or monitoring implementation, or - (ii) necessary for implementing specific provisions of the IMF Articles of Agreement or policies adopted under them. - Conditions outside the Fund’s core expertise require a detailed explanation of their critical importance. - SCF-supported programs must meet the UCT conditionality standard, requiring commitment and capacity by authorities to implement policies adequate to correct external imbalances and enable repayment to the Fund. - The adjustment path is determined on the basis of country circumstances, policy constraints, and severity of balance of payments needs; adjustment effort required to attain full sustainability would not be expected to extend much beyond the expiration date of the SCF arrangement. - Conditionality should be limited to policies critical to achieving the part of the adjustment process covered by the arrangement; the SCF typically permits less flexibility than the ECF in timing of measures. - Specification of Program Conditions: - Conditionality will include quantitative periodic and continuous PCs, typically quantitative and structural benchmarks, and prior actions if necessary. - Conditionality is set at approval and updated at program reviews; conditionality should normally be set (or modified) by the Board before the test date. - For establishment (or modification) of post-dated PCs, program documents must be signed and circulated to the Board along with the staff report before the test date. - Prior actions are measures to be adopted prior to Fund approval, completion of a review, or granting of a waiver with respect to a PC when critical for successful implementation; applied parsimoniously and specified in clear, objective, and unambiguous terms. - Prior actions should in principle be implemented at least five working days before the Board discussion and defined in the LOI/MEFP and cross-referenced in the relevant Board Decision. - Quantitative PCs would normally be set on a semi-annual basis and tied to semi-annual program reviews; quantitative benchmarks (indicative targets) would normally be quarterly. - Where closer monitoring or flexibility is needed, quantitative PCs and reviews could be scheduled no more than six months apart, with each review associated with a set of PCs and a disbursement. - Conditionality should cover the 12 months following the Board meeting (initial approval or review). - Under semiannual monitoring, PCs would normally be established for two future test dates at approval and at each review (except penultimate and final reviews). Under quarterly monitoring, PCs should normally be set for four future test dates, and in any case not less than for two future test dates. *https://www.imf.org/-/media/files/publications/pp/2017/pp110917-2017-handbook-of-imf-facilities-for-low-income-countries.pdf* ### 152. Quantitative periodic PCs typically include measures of net international reserves, central ### pp110917-2017-handbook-of-imf-facilities-for-low-income-countries - 152. ### Quantitative and Indicative Performance Criteria (PCs) - Quantitative periodic PCs typically include measures of net international reserves, central bank domestic assets, domestic and fiscal balances or financing, and any other macro-critical indicators. - Public debt conditionality is normally required when a member faces significant debt vulnerabilities, or when there are merits to using debt limits instead of, or as a complement to, "above-the line" fiscal conditionality. - PCs are usually subject to program adjustors that reflect deviations from projected external flows. - Indicative targets should include a floor on social and other priority spending where possible, and may include other indicators such as reserve money. - Continuous PCs always include, inter alia, commitments related to non-introduction or intensification of certain exchange restrictions and on non-introduction or modification of multiple currency practices. - Other continuous PCs typically include the non-accumulation of external payments arrears. ### Structural Benchmarks in SCF Arrangements - SCF arrangements should cover structural reforms that are deemed to be critical for achieving a stable and sustainable macroeconomic position in the short term. - Structural benchmarks are critical measures intended to serve as clear markers in the assessment of progress in the implementation of critical structural reforms in the context of a program review. - Structural benchmarks should be used as parsimoniously as possible, and their macro-criticality explicitly justified in program documents, ideally in the structural benchmark table. - Reviews are the primary tool for monitoring performance on structural elements; specific objectives should be defined for periods covered by individual reviews, with related structural benchmarks that are critical for achieving the program’s objectives. - The appropriate number of structural benchmarks depends on country-specific factors; SCF arrangements would typically contain less than five structural benchmarks per semiannual review. - The use of structural PCs was discontinued in 2009. - Any structural benchmark that is significantly delayed can be re-dated and re-linked to the next program review if it remains macro-critical; benchmarks that are no longer implementable as defined may be replaced or modified if still critical to program goals. ### Waivers and Modifications of Conditionality - A waiver for non-observance of a PC may be granted if the Fund is satisfied that the program will nevertheless be successfully implemented because of the minor or temporary nature of the nonobservance or because of remedial actions taken by the authorities. - Upon verification that a PC was not met, a request for a waiver of its nonobservance can be made by the member in the LOI. If staff supports the waiver, justification is provided in the staff report, which will include a proposed decision on the waiver. - Waivers for nonobservance are only required for quantitative PCs that are tied to the specific disbursement and to the review that is being completed (and for any standard continuous PC that has been missed). - Waivers of applicability could in principle be granted if information necessary to assess observance is unavailable, but in the case of the SCF, waivers of applicability would be highly unusual. - In arrangements with blended financing, waivers of applicability will be required for the GRA-financed arrangement if the review is being conducted after the most recent test date has passed and data are not yet available. - With respect to the GRA financial arrangement, the member may purchase any amount available based on earlier completed reviews if the purchase is requested within 45 days of the most recent test date and all the conditions specified in paragraph 2 of the Reduction of Blackout Periods in GRA arrangements decision (Decision No. 14407-(09/105)) are met. - Modifications to program conditionality set by the Board may be appropriate when departures from PCs are expected to occur, provided that the targets remain macro-critical. Requests for such modifications must be submitted to the Board before the relevant test date has been passed and approved by the Board before information on observance of the PC is available, normally in the context of a program review. - In exceptional cases, modifications can be approved by the Board outside a review if authorities and staff have common understandings documented in a revised or new LOI with an updated PC table and, where relevant, TMU. Board approval requires a staff report discussing reasons for the modification and program status. ### Misreporting and Noncomplying Disbursements - Misreporting occurs when members with a Fund-supported program obtain resources on the basis of inaccurate information regarding observance of quantitative or continuous PCs or prior actions (a “noncomplying disbursement”). - Under the SCF arrangement, a noncomplying disbursement occurs when (i) the Fund makes a disbursement on the basis of a finding that applicable conditions established for that disbursement have been observed and (ii) that finding later proves to be incorrect. - Upon evidence that a member may have received a noncomplying disbursement, the MD shall inform the member promptly. If the MD determines that the member did receive a noncomplying disbursement, the MD shall promptly notify the member and submit a report to the Executive Board with recommendations. - The Board may decide either (a) that the member shall be expected to repurchase/repay the disbursed amount, or (b) that the nonobservance will be waived. Waivers will normally be granted only when the deviation was minor or temporary, or if the member had adopted additional measures appropriate to achieve the objectives supported by the relevant decision on the disbursement. - When the Executive Board finds the noncomplying disbursement has been made but the nonobservance was de minimis misreporting (i.e., so small as to be trivial with no impact on performance assessment), a waiver for nonobservance shall be granted by the Executive Board. De minimis misreporting will not be published in a staff report. ### Purpose and Conduct of Program Reviews - Program reviews evaluate whether the program is on track to achieve its objectives based on backward-looking assessment (performance against quantitative PCs, structural and quantitative benchmarks, and prior actions) and forward-looking assessment of prospects for successful implementation. - At the consideration of the final review under an SCF arrangement, and assuming no further program support from the Fund is expected, the scope of the forward-looking assessment could be more limited than for previous reviews. - Reviews update program design by specifying forward-looking policies and conditionality and are the main vehicle for modifications to program design (access, phasing, conditionality). At approval and for each review, the authorities’ LOI presents or updates their policy program, and a staff report provides an overall assessment. ### Timing of Reviews, Test Dates, and Disbursements - The timing of all reviews, test dates, and disbursements is summarized in a staff report table at approval of an SCF arrangement and updated as needed at reviews. - The Arrangement text attached to the staff report for the initial SCF request specifies the test dates, reviews, availability dates, and disbursements for the first year of the arrangement. - The quantitative indicator table (“PC table”) attached to the LOI/MEFP should clearly identify PCs, indicative targets, and adjustors for at least a 12-month period from the Board date of program approval or review. - The structural benchmark table should cover measures over at least a 12-month period, indicating the reviews individual benchmarks are linked to. - The Decision attached to the staff report should specify all PCs and review/availability dates normally over the next 12 months from the Board date of program approval/review. - The first disbursement is made available upon approval of the arrangement; subsequent disbursements are conditional on observance of PCs and a program review confirming satisfactory progress and continued adequate safeguards. - Disbursements and reviews under an SCF arrangement are expected to normally be semiannual, or quarterly when closer monitoring is needed. Test dates and review dates must be scheduled no more than six months apart. - The test dates for PCs must be set so all scheduled disbursements can occur before the end of the SCF arrangement, taking into account reporting lags and staff report preparation/circulation periods. Availability dates should be set so all data needed to confirm observance at related test dates will have become available. Reviews cannot be completed prior to the applicable availability date. - The program period supported by an SCF arrangement would typically start somewhat before the Board approves the SCF arrangement, and three to six months before the first test date under semi-annual monitoring. The program period should normally not start more than three months prior to the Board meeting, and in any case not before the authorities and staff have discussed the parameters of the program. - In contrast to SBAs, the design of an SCF arrangement typically avoids “blackout periods” because each disbursement is linked to completion of a specific review and observance of specific periodic PCs. ### Addressing Interruptions: Track Records, Combined Reviews, and Rephasing - Interruptions and delays in SCF-supported program implementation may be addressed by establishing a track record before completing the review. A track record could be informal, monitored under an SMP, or via the RCF in case of urgent financing needs, or concurrent use of instruments. - If bringing the program back on track requires modification of disbursement/review timing, options include extensions of the arrangement, combining reviews, rephasing of access, or combination of these measures. - Two reviews can be combined when delays have occurred and performance can be assessed against two test dates linked to successive reviews. Combining three or more reviews is very unusual. - Combining reviews is possible only if: (i) conditionality has been fully defined and approved by the Board; (ii) data are available for measuring observance; and (iii) anticipated dates for conclusion of the reviews in the arrangement text have all passed. - Reviews are typically combined when the program is on track with respect to the most recent review and sufficient corrective action has offset earlier nonobservance. If slippages for the most recent review are significant, combining reviews is not appropriate; cancellation and possible new support may be considered. - Disbursements may be rephased to change amounts associated with specified reviews and/or change the number or timing of disbursements and reviews. If delays cannot be accommodated by extensions or combining reviews, the total amount of access can be rephased into a new pattern of test dates and reviews, generally only after making full use of the maximum possible extension. - Access should never be rephased in a manner that would make it impossible for the member to get the full, undisbursed amount under the arrangement. If rephasing would compress a very large amount of access into a short period of time after substantial delays, it would normally be appropriate to let the current arrangement expire or for the member to cancel it and proceed to a new SCF arrangement unless there has been a very sharp turnaround in performance. *Source: Excerpt from pp110917-2017-handbook-of-imf-facilities-for-low-income-countries (content unit provided).* ### 171. A number of additional modalities and policy requirements apply to the SCF, including the ### STANDBY CREDIT FACILITY / RAPID CREDIT FACILITY (excerpt) ### SCF — Additional modalities and policy requirements - Ex-Post Peer Review Assessments (EPA) - Access to resources under SCF arrangements counts toward the policy on LTPE, except if the arrangement was treated in its entirety as precautionary and no disbursements were made. - Members that have had a UCT arrangement in place for at least seven out of the past 10 years, and for whom an EPA has not been prepared in the past five years, an ex post peer review assessment should be prepared in time to be considered by the Board at the time of a request for a new Fund-supported program. - PPM (Policy Paper/Maintenance) - Outstanding SCF credit will be subject to PPM. - Normally, members with outstanding credit from the Fund in the GRA and/or PRGT exceeding 200 percent of quota or SDR 0.38 billion from the PRGT (and/or SDR 1.5 billion from the GRA) after the expiry of their arrangements are expected, upon the recommendation of the MD, to engage with the Fund in PPM of their economic developments and policies. - Normally one stand-alone PPM paper is expected to be issued for Executive Board consideration within a twelve-month period. - Article IV consultation cycle - The 24-month cycle for Article IV consultations applies to members with an SCF arrangement. - Article IV consultations with members that have an on-track SCF arrangement in place would be expected to be completed within 24 months after the completion of the previous Article IV consultation. - If a program review is not completed by the date specified in the arrangement, the next Article IV consultation would be expected to be completed by the later of (i) six months after the scheduled review date and (ii) 12 months, plus a grace period of three months after the previous Article IV consultation, unless the program review has been completed prior to the later of these two dates. - A member that has completed an SCF by drawing all amounts may remain on the 24-month cycle, if it does not meet any of the criteria specified in paragraph 2 of Decision No. 14747-(10/96), as amended: (i) the member is of systemic or regional importance; (ii) the member is perceived to be at risk, or is facing pressing policy issues of broad interest to the Fund membership; or (iii) the member has outstanding Fund credit exceeding 145 percent of quota. - At the time of the final review under the arrangement, staff should assess whether the consultation cycle should be shortened back to 12 months, based on the criteria mentioned above; the staff report for the final review should seek the Board’s approval of such shortening. - Where the arrangement is cancelled by the member or expires with undrawn amounts, the member will remain on the existing cycle, unless the Executive Board determines a different cycle will apply based on the above criteria. - Exchange system obligations and data provision - Requirements under Article VIII Sections 2, 3, 4, and Article XIV are discussed elsewhere; a standard continuous PC applies, inter alia, to the non-introduction or intensification of exchange restrictions and on the non-introduction or modification of multiple currency practices. - Article VIII, Section 5 does not apply to the provision of information that is required for the purposes of Fund financial assistance under the SCF. - HIPC - Performance under an SCF arrangement can count toward a track record of strong policy performance under Fund-supported programs required for the HIPC decision point and completion point. - The minimum required track record for the decision point is six months and one year for the completion point. - Side letters - Side letters may be used when release of information on policy understandings at the time of a program request or review would cause adverse market reaction or undermine the authorities’ efforts to prepare the domestic groundwork for a measure. - Use of side letters in LIC programs has been extremely rare. ### RCF — Objectives and scope - The RCF provides low-access concessional financing with limited conditionality to LICs facing an urgent balance of payments need. - Purpose and objective - The RCF provides rapid concessional financial assistance as outright disbursements to LICs facing urgent balance of payments needs, including those caused by exogenous shocks, natural disasters, and emergence from conflict, as well as domestic instability, emergencies, and fragility. - Designed for situations where a multi-year UCT-quality Fund-supported program is either not necessary (e.g., due to the transitory nature of the adjustment need and the financing) or not feasible (e.g., due to the member’s limited capacity, including in post-conflict, disaster, or other fragile situations). - The RCF assists countries by providing temporary concessional support to smooth economic adjustment, help replenish international reserves, loosen financing constraints, provide policy support, and catalyze additional financing from donors. - Effective date and context - The RCF became effective on January 7, 2010, as part of a comprehensive reform of the IMF’s facilities for LICs. ### RCF — Eligibility and qualification - Assistance under the RCF is available to PRGT-eligible member countries that face urgent balance of payments needs unless (i) the balance of payments difficulties are predominantly caused by a withdrawal in financial support by donors or (ii) a UCT-quality program is both feasible and necessary. - Definitions and qualification criteria - An urgent balance of payments need is characterized by a present balance of payments need that, if not addressed, would result in immediate and severe economic disruption. - The RCF can only be used if it is either not feasible or not necessary to implement a Fund-supported program with a UCT-conditionality standard. - A member would normally qualify for the RCF if either: - the balance of payments need is expected to be resolved within one year and no major policy adjustments are necessary; or - a UCT-quality Fund-supported program cannot be put in place owing to limited policy implementation capacity or when the urgency of the need calls for assistance before a UCT-quality program can be put in place. - For countries seeking to build a track record toward a UCT-quality program, the use of an SMP to build such a track record would normally be the preferred option; policy commitments in the context of a recent RCF disbursement can be used to build the policy track record required to support a repeat RCF disbursement. - Ex ante policy undertakings - Qualification requires a Letter of Intent (LOI) outlining policies and additional understandings, typically including a commitment not to introduce or intensify exchange and trade restrictions. - Sufficient policy capacity and commitment to implement the policies must exist to safeguard Fund resources and demonstrate cooperation with the Fund to find solutions for balance of payments difficulties. ### RCF — Repeated use and limits - General - RCF resources are provided as outright loan disbursements and not phased under an arrangement. - The RCF can accommodate one-off disbursements or repeated disbursements over a limited period for recurring or ongoing urgent financing needs. - Policy commitments under the RCF should typically be used (similar to an SMP) to facilitate an eventual transition to a UCT-quality program, normally supported under an ECF arrangement. - Limitations and sub-ceilings to avoid weak policies or moral hazard - A member may not receive more than two RCF disbursements in any 12-month period. - A member can qualify for an RCF disbursement only if one or more of the following apply: - no RCF disbursements have been made in the past three years; - the balance of payments need was caused primarily by a sudden, exogenous shock (qualifying under an “exogenous shocks” window) or under the “large natural disaster” window where damage is assessed to be equivalent to or exceed 20 percent of the member’s GDP; - the member country has established a track record of adequate macroeconomic policies for a period of about six months prior to the request. ### RCF — Concurrent use and blending - Concurrent use - A member cannot obtain RCF financing if a UCT-quality financial arrangement (e.g., under the ECF or SCF) is in place and on track. - RCF financing during an ECF or SCF arrangement can be provided only when: - disbursements under the ECF or SCF arrangement are not possible (e.g., due to policy slippages or delays in program discussions); - qualification requirements for the RCF are met, including an urgent balance of payments need and relevant policy commitments; and - the balance of payments need giving rise to the RCF request is primarily caused by a sudden exogenous shock. - When access under the RCF exceeds 18.75 percent of quota by using the “exogenous shocks” window or the “large natural disasters” window, existing and prospective policies should be sufficiently strong to address the shock. - RCF-supported policies could serve as a track record to bring the ECF- or SCF-supported program back on track. - The RCF can be used concurrently with GRA financing under certain circumstances. - Blending and program sequencing - The RCF can be combined with programs supported under the PSI or monitored under an SMP. - Satisfactory performance under a PSI or SMP for at least six months would normally satisfy the track record requirement for repeated use of the RCF and would facilitate rapid disbursement. - A short LOI together with a short staff paper would normally suffice for requesting an RCF loan disbursement when an urgent balance of payments need arises during an on-track PSI or SMP. - In case of program slippages under a PSI, RCF-supported policies (similar to an SMP) could help build a track record for bringing the PSI-supported program eventually back on track. *Excerpt from pp110917-2017-handbook-of-imf-facilities-for-low-income-countries — section on SCF modalities and Chapter III (RCF) as provided.* ### 181. Certain PRGT-eligible countries are expected to receive financial assistance through blended ### Certain PRGT-eligible countries are expected to receive financial assistance through blended ### Blending: presumptions and modalities - Blending can signal that the borrower is moving toward middle-income or emerging market status. - PRGT-eligible countries, including members qualifying for support under the RCF, should typically use either fully concessional or blended resources, rather than GRA-only financing, although they are always eligible for access to the Fund’s general resources provided that they meet the GRA requirements. - Blending of RCF and GRA resources is subject to the following presumptions and limitations: - Blending is presumed for PRGT-eligible countries with either (i) per capita income above the prevailing operational cutoff used by the IDA or (ii) sustained past and prospective market access and a per capita income that exceeds 80 percent of the IDA operational cutoff, provided that (iii) they are not deemed to be at high risk of debt distress or in debt distress (as assessed by the most recent joint Bank-Fund LIC Debt Sustainability Analysis (DSA)). These members (“presumed blenders”) are therefore expected to receive concessional financing only in a blend with GRA resources. - Non-presumed blenders can access PRGT resources exclusively up to the applicable PRGT access limits. To the extent that they meet applicable GRA policies (including program strength, capacity to repay, and debt sustainability), they may access GRA resources, either on a standalone basis or in conjunction with PRGT resources, but should typically resort first to the PRGT up to applicable access limits under the RCF. - Where a non-presumed blender requests to use PRGT resources exclusively, but its financing needs cannot be met within the applicable RCF access limits, the member may blend access under an RCF disbursement with GRA resources, subject to meeting applicable GRA policies. The member will be expected to access GRA resources for the amount in excess of the applicable PRGT access limits. - When providing financial assistance with blended resources, RCF resources will normally be provided together with GRA resources under the RFI. Use of the RCF in conjunction with financing under GRA arrangements would only be expected in cases where programs financed under the pre-existing SBA or EFF arrangements are off track; in this case, RCF financing would normally be provided together with RFI resources. - Modalities and documentation of blended RCF-GRA financing are broadly the same as for a stand-alone RCF disbursement; main differences: - Financing would typically involve both RCF and GRA resources, implying lower average concessionality of the Fund’s financial support than under stand-alone RCF support. - RFI qualification requirements must be met when applicable. ### Determination of access—main criteria - Access under the RCF is determined case-by-case based on: - (i) the member’s (present) balance of payments need (taking into account all balance of payments flows, including reserve accumulation and financing from other sources); - (ii) the strength of its policies and capacity to repay the Fund (policy plans, adjustment effort, commitment to implement the program, institutional capacity, track record of policy implementation, and country circumstances such as vulnerabilities, imbalances, and debt sustainability); - (iii) the amount of outstanding Fund credit and the member’s record of past use. - All else equal, higher access is generally associated with a stronger program, stronger track record, and stronger capacity to repay. - Individual RCF disbursements may not exceed the member’s present balance of payments need and would typically be less than total financing needs; RCF support is expected to catalyze financing from donors and creditors. - Members requesting individual disbursements must normally represent (typically in an LOI) that they are experiencing an urgent balance of payments need. - In repeated RCF disbursements, timing and amounts would not be expected to mirror projected financing needs due to limits on number of disbursements and sub-ceilings; disbursements often cover only a small part of total financing needs. - If urgent financing needs persist and transition to a UCT program is not expected in the near term, access should be set so successive disbursements can be accommodated under applicable RCF access sub-ceilings. ### Access limits (global and RCF sub-ceilings) - Total access under all concessional facilities is subject to global annual and cumulative limits (ECF, SCF, RCF, ESF): - Total access to financing under the PRGT should normally not exceed 75 percent of quota per year across all concessional facilities. - Total access to financing under the PRGT should normally not exceed 225 percent of quota cumulatively, net of scheduled repayments. - The annual access limit refers to past and future scheduled disbursements in any 12-month period, specifically: - (i) any actual disbursements under the RCF and past ECF and SCF arrangements at the time they became available (i.e., the date of the Board decision that makes the disbursement available), - (ii) any disbursements to date that became available under the current ECF or SCF arrangement, irrespective of whether they have been drawn or not, - (iii) any future disbursements under the current ECF or SCF arrangement, at the scheduled availability dates. - The cumulative access limit requires that total outstanding Fund concessional credit (including disbursements that were made available but not drawn in the context of the current arrangement) cannot normally exceed 225 percent of quota at any point in time based on projected disbursements and repayments. - Exceptional access above normal global limits can be made available if: - (i) the country experiences an exceptionally large balance of payments need that cannot be met within the normal limits (e.g., very large external shocks, very low levels of reserves), - (ii) the country has a comparatively strong adjustment program and ability to repay the Fund—this criterion would generally not be met for countries with a high risk of debt distress or those in debt distress unless expected debt relief or restructuring is projected to reduce risk to a moderate or low level, - (iii) the country does not have sustained past and prospective access to capital markets, and has income at or below the prevailing operational cutoff for assistance from IDA. - Exceptional access is subject to hard caps of 100 percent of quota annually and 300 percent of quota cumulatively across all concessional facilities. - RCF-specific sub-ceilings: - 18.75 percent of quota per year (i.e., over any 12-month period) and 75 percent of quota on a cumulative basis (total stock of RCF credit outstanding at any point in time). - Purchases under the RFI made since July 1, 2015 count towards the applicable RCF annual and cumulative sub-ceilings. - Augmented access under special windows: - Under the “exogenous shocks” window: up to 37.5 percent of quota per year and up to 75 percent of quota cumulatively, subject to conditions. - Under the “large natural disasters” window: up to 60 percent of quota per year where damage is assessed to be equivalent to or exceed 20 percent of the member’s GDP and up to 75 percent of quota cumulatively, provided: - (i) the primary cause of the balance of payments need is a sudden exogenous shock other than a withdrawal in financial assistance by donors, - (ii) existing and prospective policies are sufficiently strong to address the shock. - The amount of augmented access cannot exceed the size of the financing need created by the exogenous shock. - There are no norms for access under the RCF; the sub-ceilings on RCF access should not be considered norms. Individual disbursements are typically below annual sub-ceilings. ### Access under blended financial assistance - When RCF disbursements are blended with concurrent GRA disbursements, total access to financial assistance (e.g., RCF together with RFI) is determined based on the standard criteria, implying comparable total access across countries with similar needs, policies, and outstanding Fund credit, irrespective of whether assistance is blended or PRGT-only. - Analogous to blended financial assistance elsewhere, access to the concessional (RCF) financing component of blended assistance would normally be one-third of total access, with initial access to resources capped at the annual access limit of 37.5 percent of quota (or 75 percent of quota under the “exogenous shocks” window or the “large natural disasters” window). The remainder of total access would be met by GRA financing. ### Procedural safeguards on high access requests—DSAs and informal Board meetings - Staff reports for any RCF disbursement should provide an up-to-date assessment of debt vulnerabilities, explicitly referencing the impact of new borrowing from all sources, including prospective IMF disbursements. - A new DSA is required for PRGT financing requests if any of the following apply: - (i) it involves exceptional access to concessional resources; - (ii) it brings total access (cumulative disbursements under all concessional facilities) to more than 60 percent of quota, based on cumulative past and future scheduled disbursements in any 24-month period (including actual disbursements under RCF, ESF, and past ECF and SCF at the time they became available; disbursements to date that became available under current ECF or SCF irrespective of drawdowns; and future scheduled disbursements under current ECF or SCF); - (iii) it involves a member country with a high risk of debt distress or in debt distress. - All DSAs (full DSAs and updates) should be prepared jointly by Fund and World Bank staff and must be submitted to both the IMF and IDA’s Executive Boards. - An early informal Board meeting is required if a PRGT financing request would: - (i) involve exceptional access to concessional financing; or - (ii) bring total access (cumulative disbursements under all concessional facilities) to more than 135 percent of quota, based on cumulative past scheduled (not necessarily drawn) and future scheduled disbursements in any 36-month period (including specified categories of disbursements). - Information to the Board for such meetings would typically be a 2–3 page note including factors underlying the large balance of payments need, summary of needed main policy measures and macroeconomic framework, expected program strength and capacity to repay, analysis of debt vulnerabilities reflecting all projected debt financing including IMF, reference to the impact on the Fund’s concessional resources, likely timetable of discussion with authorities, and a selected indicators table and, if possible, standard DSA charts. The meeting should take place before staff reaches understandings, ad referendum, with the authorities. - Staff would provide early notice to the Board (for instance in an informal country matters session) of upcoming financing requests where the envisaged financing commitment, in absolute terms, would have a large impact on the Fund’s overall concessional resources. - Exception: the requirement for a new DSA or a Board brief in high access cases does not apply for new financing requests of 5 percent or less of quota. ### Financing terms (RCF) - Repayments of RCF credit are made in 10 equal semiannual installments, subject to a 5.5-year grace period from the date of the first disbursement and 10-year final maturity. - The authorities may decide to make early repayments at any time, but would not be expected to do so. - Financing under the RCF carries a zero interest rate. ### Financing assurances, arrears, and safeguards - The Fund’s policy on financing assurances requires that financial arrangements can only be approved (and reviews can only be completed) when the program is fully financed. In contrast to ECF and SCF arrangements, such financing assurances are not required for RCF disbursements. - Staff reports for RCF requests should provide information on projected financing gaps. - To the extent the RCF may be used to build a track record for a UCT-quality arrangement, the staff report should discuss prospects for financing assurances that would be required for such an arrangement. - Assurances should be given that the member country has the capacity to repay the Fund based on medium-term projections of the balance of payments and the standardized table on indicators of the capacity to repay the Fund. *Handbook of IMF Facilities for Low-Income Countries (excerpts).* ### 200. The Fund’s policy of non-toleration of sovereign arrears to official multilateral creditors ### The Fund’s policy of non-toleration of sovereign arrears to official multilateral creditors ### Arrears to official multilateral creditors - The Fund’s policy of non-toleration of sovereign arrears to official multilateral creditors remains generally applicable in the context of RCF support. - The Fund generally calls for the resolution of existing arrears to official multilateral creditors and non-accumulation of new arrears. - Existing arrears need not necessarily be settled immediately—they can be addressed in a number of ways, depending on the type of creditor. - Country teams should seek guidance from LEG and SPR on the application of the policy to specific creditors. ### Arrears to official bilateral creditors - The Fund’s policy on arrears to official bilateral creditors remains generally applicable in the context of RCF support. - Two general treatment categories: - Category 1: If arrears arise in a program where the economic parameters do not require a restructuring of the underlying claim, the Fund maintains a policy of non-toleration. In practice, tacit approval of an official bilateral creditor’s Executive Director (i.e., non-objection at the Board meeting) has been deemed sufficient to satisfy this policy. - Category 2: If arrears arise in a program where a restructuring of such claims is required under the program parameters, the Fund may provide financing notwithstanding those arrears only under carefully circumscribed circumstances. - Country teams should seek guidance from LEG and SPR on which category applies in particular cases. - Exception for a small subset of emergency situations (e.g., aftermath of a natural disaster): - The Fund may provide financing under the RCF despite arrears owed to official bilateral creditors without assessing whether the three criteria above have been satisfied or obtaining the creditor’s consent. - It is expected that Fund support would help advance normalization of relations with official bilateral creditors and the resolution of arrears. ### Arrears to private external creditors and the LIA policy - The Fund’s LIA policy covers sovereign arrears to private external creditors and non-sovereign arrears arising from exchange controls. - Under LIA, the Fund can lend, on a case-by-case basis, in a situation of sovereign arrears to private external creditors only where: - (i) prompt Fund support is considered essential for the successful implementation of the member’s adjustment program; and - (ii) the member is pursuing appropriate policies and is making a good faith effort to reach a collaborative agreement with its creditors (or to facilitate a collaborative agreement between private debtors and their creditors and good prospects exist for the removal of exchange controls). - For the RCF, these LIA conditions may not be required in all cases, in particular in the wake of a conflict or natural catastrophe. - Staff reports should in any event provide information on arrears to private external creditors. ### Domestic arrears - RCF-supported economic policies should take into account the presence of any domestic arrears. - The specification of policies related to domestic arrears will depend on the country context, in particular, the fiscal framework (see Appendix II). ### Overdue obligations to the Fund - If a member is in arrears to the Fund in the GRA, the Special Disbursement Account, the SDR Department, or to the Fund as Trustee (including the PRGT), a request for IMF financing (including under the RCF) will not be approved and disbursements under an existing arrangement will be suspended (PRGT Instrument, Section II, paragraph 1(e)(3) and 3(g)) until the arrears are cleared. - After one month, the MD will notify the Executive Board that an obligation is overdue. - In the case of protracted arrears (i.e., arrears of more than six months’ duration), annual reports are to be issued to the Executive Board, except for status change. - The MD may recommend postponing for up to one-year periods the Executive Board’s consideration of a report regarding a member’s overdue obligations in exceptional circumstances where the MD judges that there is no basis for an earlier evaluation of the member’s cooperation with the Fund. - While a member is in arrears to the Fund, policy support can only be provided through surveillance, technical assistance and, under certain circumstances, SMPs. - Remedial measures for dealing with PRGT arrears include removal from the list of PRGT-eligible countries, declaration of noncooperation and suspension of technical assistance. ### Safeguards assessments policy under the RCF - A member’s request for RCF assistance requires a commitment to undergo a safeguards assessment and to provide Fund staff access to the central bank’s most recently completed external audit reports (whether or not the audit is published); the member shall authorize its external auditors to hold discussions with staff. - The commitment and authorization are to be provided at the time of the formal written request for RCF resources. - Timing and modalities of the assessment are determined case-by-case depending on the institutional and administrative capacity of the central bank. - It is presumed the safeguards assessment would have been completed before Board approval of any subsequent arrangement to which the Fund’s safeguards policy applies. - The safeguards process involves continuous analysis of information obtained primarily through documents and discussions with authorities and the central bank’s external auditors, evaluating governance, auditing, financial reporting, control systems, and legal autonomy. - Close cooperation and coordination between FIN, other functional departments, and area departments is essential; FIN should be kept informed by area departments of safeguards issues, including logistical issues such as timing of new arrangements. ### Policy objectives for RCF support - RCF policy standard is more flexible than for UCT-quality arrangements (ECF and SCF), but member policies should not compound balance of payments difficulties and should aim to make progress toward achieving or restoring a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth. - RCF-supported policies should address, though not necessarily resolve, macroeconomic imbalances and maintain or move toward: - strong and durable poverty reduction and growth; - low or moderate inflation; - sustainable fiscal and current account balances; - limited debt vulnerabilities; - adequate international reserves; and - sufficient policy and institutional capacity to implement appropriate macroeconomic policies. - Near-term RCF-supported policies should be clearly articulated in the LOI/MEFP and staff report, and be consistent with the country’s medium- and longer-term policy objectives, which typically include: - Fiscal policies: (i) fiscal stance well anchored to ensure macroeconomic stability and fiscal/debt sustainability; (ii) revenue and spending policies take account of growth and social objectives; (iii) budgets guided by medium-term fiscal frameworks to the extent possible. - Monetary policies: consistent with inflation, exchange rate, and reserve objectives, taking account of cyclical considerations. - Exchange rate policies: ensure a unified exchange rate and a real exchange rate level broadly in line with fundamentals, consistent with adequate growth. - Financial sector policies: geared toward financial stability and deepening to foster investment and forestall financial crises. - Public financial management reforms: ensure resources are tracked, reported, and targeted appropriately; public debt management to support debt sustainability; revenue reforms to broaden the base and enhance efficiency. - Other structural reforms critical for macroeconomic objectives. ### Role of RCF financial support and budget financing - RCF balance of payments support can assist countries in smoothing adjustment toward a more stable and sustainable macroeconomic position. - Fund financial support can be used to replenish international reserves and provide liquidity for external payments. - By relaxing external financing constraints, Fund support also loosens domestic liquidity constraints for public and private sectors, reducing the need for retrenchment in public and private savings-investment balances and enhancing policy options. - The appropriate mix of financing and public/private adjustment is determined case-by-case. - Use of the domestic counterpart of RCF resources to finance, directly or indirectly, the government budget is consistent with the Fund’s legal framework if the member has balance of payments problems and is implementing a program to resolve them. - Direct budget financing may be appropriate when: - (i) policies envisage the entire amount of Fund support is used to meet a present or prospective balance of payments need; - (ii) loosening fiscal financing constraints is an important macroeconomic objective under the policies; and - (iii) the central bank cannot or should not lend to the government (legal or institutional reasons) while the domestic financial sector is too shallow or unstable, or the central bank plays a largely passive domestic policy role (e.g., currency board or fully dollarized economy). - Staff reports should justify use of domestic counterpart for budget financing and discuss safeguards implications where relevant. ### Links to poverty reduction strategies and social spending - RCF-supported policies should generally be aligned with the country’s own poverty reduction and growth objectives. - Specific guidance on PRS linkages: - Any RCF financing request must be accompanied by a statement, normally in the LOI or MEFP, of how the RCF-supported policies advance the country’s poverty reduction and growth objectives; this linkage may be indirect (e.g., through macroeconomic stability). - Where a relevant PRS document exists, the LOI/MEFP description could cross-reference it; RCF policies should take into account and generally be consistent with PRS objectives in promoting a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth. - PRS documents are not required for RCF disbursements. - Whenever a future ECF- or PSI-supported program is under consideration, staff should inform authorities early about definitions and timelines for EDD requirements to ensure adequate time for the PRS process. - Social and other priority spending should be safeguarded and, whenever appropriate, increased under RCF-supported policies. - When LOI/MEFP includes indicative targets (e.g., establishing a track record), these should include a floor on social and other priority spending, whenever possible. - Definition of social or other priority spending should be consistent with authorities’ poverty reduction and growth objectives. - Where tracking such expenditures is not feasible, RCF documentation should report measures envisaged to develop an adequate tracking system; staff should monitor progress and the program may include relevant structural measures. ### Debt Sustainability Analysis (DSA) - RCF-supported policies should be underpinned by a thorough DSA to inform medium-term debt strategies and fiscal frameworks. - Country teams should engage authorities in preparing DSAs, discuss results, and share final files with relevant officials. - DSAs for LICs should be prepared jointly with the World Bank, and country teams should involve other relevant MDBs. Joint DSAs are required for all PRGT-eligible I countries that also have access to IDA resources. - Timing and frequency: - As a general rule, a DSA should be produced at least once every calendar year. - A fully elaborated DSA is required at least once every three years, or whenever circumstances have changed significantly since the previous DSA, with shorter annual updates in interim years possible in the absence of such significant changes. - Full DSAs should be prepared in periods of heightened domestic, external, or global risk. - The precise timing of a DSA may be driven by other IMF policy requirements. - A DSA may need to be prepared for higher access financing requests. - DSAs for LICs should be presented as self-contained documents and normally prepared using the LIC DSF; for countries with durable and substantial market access, the template for market access countries can be used instead. - The LIC DSF analysis includes three components: - A forward-looking analysis ("20-year projection") of debt and debt-service dynamics under a baseline scenario, alternative scenarios, and standardized stress tests; - An explicit rating of the risk of external debt distress (low, moderate, high, or in debt distress) based on indicative country-specific debt-burden thresholds that depend on the quality of policies and institutions; and an assessment of the overall risk of debt distress; - Recommendations on a borrowing (and lending) strategy and other crucial macro policies to limit the risk of debt distress while maximizing the resource envelope to achieve the country’s development objectives. *Source: pp110917-2017-handbook-of-imf-facilities-for-low-income-countries - The Fund’s policy of non-toleration of sovereign arrears to official multilateral creditors* ### 215. Fund staff should consult closely with all major development partners active in the country ### pp110917-2017-handbook-of-imf-facilities-for-low-income-countries - 215. Fund staff should consult closely with all major development partners active in the country ### Consultation with development partners and JMAP - 215. Fund staff should consult closely with all major development partners active in the country when designing and monitoring RCF-supported policies. - The JMAP approved by the Boards of the World Bank and IMF calls on Bank and Fund country teams to consult with each other at least once a year to identify the country's key macroeconomic and structural reform challenges and coordinate work plans in support of addressing these challenges. ### Conditionality principles (RCF) - 216. Conditionality attached to Fund financial support is intended to ensure that Fund resources support the member’s policy objectives with adequate safeguards to the Fund’s resources. - Conditions will normally consist of macroeconomic variables and structural measures that are reasonably within the member’s direct or indirect control and that are generally either: - (i) of critical importance for achieving the goals of the program (or for monitoring program implementation), or - (ii) necessary for the implementation of specific provisions of the IMF Articles of Agreement or policies adopted under them. - When conditions are outside the Fund’s core expertise, a more detailed explanation of their critical importance is required. - 217. The RCF does not require a UCT-quality economic program, and does not involve ex post conditionality (i.e., quantitative or continuous performance criteria), a time-bound arrangement, or formal program reviews. The RCF provides for outright disbursements based on a number of ex ante policy undertakings. ### Prior actions - 218. Prior actions could be specified but only in exceptional circumstances when it is critical that a measure be taken prior to RCF assistance. - Prior actions may be appropriate after severe policy slippages to establish authorities’ capacity and commitment. - Prior actions should be implemented no later than five working days before the Board discussion and defined in the LOI/MEFP and cross-referenced in the Board Decision approving disbursements. ### Monitoring policies under the RCF - 219. RCF disbursements do not require understandings on a program of economic policies other than general ex ante policy undertakings, including commitment to cooperate with the Fund and not introduce measures that would compound the country’s balance of payments difficulties. - RCF policy commitments can: - provide general policy support; - establish a track record of economic performance (similar to an SMP); - help monitor implementation of UCT-quality economic policies when appropriate. - RCF support can be provided with staff recommendations on macroeconomic policies, monitoring of economic performance, specific policy commitments and indicative targets, or any combination thereof. - 220. For RCF-supported track records, the LOI/MEFP would typically set out agreed monitorable quantitative and structural indicators (indicative targets or benchmarks) with specific test dates and deadlines. - Design of monitoring is flexible and may mirror SMPs or past EPCAs without requiring a time-bound program period. - Targets do not have the status of PCs; waivers are not required if missed and program adjustors are not needed. - Quantitative periodic indicative targets could include measures of: - net international reserves, - central bank domestic assets, - domestic and fiscal balances or financing, - external debt, - social and other priority spending where possible, - any other relevant macro-critical indicators. - Continuous measures could include commitments related to: - non-introduction of certain exchange restrictions and multiple currency practices, - non-accumulation of external arrears. - RCF-supported policy track records could include an agenda for macro-critical structural reforms with flexibility on timing. - Structural benchmarks should be critical measures, used parsimoniously, macro-criticality explicitly justified in program documents, ideally in a structural benchmark table. - Structural benchmarks do not require a specific target date but should indicate the envisaged time frame. ### Misreporting and noncomplying disbursements - 221. Misreporting occurs when members obtain Fund resources on the basis of inaccurate information regarding observance of quantitative or continuous PCs or prior actions (a “noncomplying disbursement”). - Because there are no PCs under the RCF, a noncomplying disbursement can only occur with respect to misreporting of prior actions (if applicable), specifically when: - (i) the Fund makes a disbursement based on a finding that all prior actions established for that disbursement have been observed, and - (ii) that finding later proves to be incorrect. - Upon evidence of a possible noncomplying disbursement: - the MD shall inform the member promptly; - after consultation, if the MD determines a noncomplying disbursement occurred, the MD shall promptly notify the member and submit a report to the Executive Board with recommendations. - The Executive Board may decide: - (a) that the member shall be expected to repurchase/repay the disbursed amount, or - (b) that the nonobservance will be waived. - Waivers will normally be granted only when the deviation was minor or temporary, or if, subsequent to the disbursement, the member adopted additional measures appropriate to achieve the objectives supported by the disbursement decision. - 222. Whenever the Executive Board finds a noncomplying disbursement was made but that the nonobservance was de minimis misreporting, a waiver for nonobservance shall be granted by the Executive Board. - De minimis misreporting will not be published in a staff report. ### Track records for repeated RCF use and transitions - 223. The RCF can be used to build a track record of policy performance to enable repeated disbursements and support transition to a UCT-quality arrangement. - RCF involves outright disbursements without formal program reviews; no pre-determined phasing of disbursements or test dates. - Track records would typically include agreed monitorable quantitative and structural indicators. - Test dates for quantitative targets can be monthly, quarterly, semi-annual, or annual, or a combination. - Test dates should provide useful information for assessing performance in advance of potential future Fund support. - If a clear policy framework is needed, an RCF could be used concurrently with an SMP. - 224. A track record of adequate macroeconomic policies is required for an RCF disbursement when the member has received RCF financing in the past three years and does not qualify under the “exogenous shocks” window or the “large natural disasters” window. - Such a track record would normally cover at least six months immediately prior to the disbursement. - The staff report should assess past policy performance against previously specified policy objectives and targets. - Track record period would normally start around the time relevant track record objectives and policies become clear, specifically no earlier than the first substantive policy discussions and no later than the time ad referendum understandings were reached on such targets. - Approval of a repeated disbursement is based on a finding that the member’s overall policy performance was adequate, considering severity of the economic situation and the member’s capacity. - In exceptional cases where no pre-determined monitorable objectives exist, the track record could be based on the Fund’s assessment that macroeconomic policies have been adequate at least over the most recent six-month period. ### Other relevant policies and modalities - 225. Additional modalities and policy requirements applicable to the RCF include: - Ex Post Peer Review Assessments: Access to RCF resources does not count toward the policy on LTPE or the requirement to conduct an Ex Post Peer Reviewed assessment. - PPM: Outstanding RCF credit will be subject to PPM. Normally, members with outstanding Fund credit in the GRA and/or PRGT exceeding 200 percent of quota or SDR 0.38 billion from the PRGT (and/or SDR 1.5 billion from the GRA) after expiry of arrangements are expected, upon MD recommendation, to engage with the Fund in PPM of their economic developments and policies. Normally one standalone PPM paper is expected to be issued for Executive Board consideration in a twelve-month period. - Article IV cycle: RCF support does not alter the regular (typically 12-month) cycle for Article IV consultations. - Exchange System obligations under Articles VIII and XIV and Data Provision under Article VIII, Section 5: Requirements under Article VIII Sections 2, 3, 4 and Article XIV are discussed in IMF (2006d). The Fund may require members to furnish information necessary for its activities, including program monitoring. - HIPC: A period of performance under an RCF-supported monitorable track record can count toward the track record of strong policy performance required for the HIPC decision point. The minimum required track record for the decision point is six months. - Side letters: Use of side letters in LIC programs has been extremely rare. Side letters may be used when release of information on policy understandings at the time of a program request or review would cause adverse market reaction or undermine the authorities’ efforts to prepare domestic groundwork for a measure. *Source: pp110917-2017-handbook-of-imf-facilities-for-low-income-countries, paragraphs 215–225 and 226–229.* ### 230. Board approval of a PSI also requires, in particular, a finding by the Board that the member is ### POLICY SUPPORT INSTRUMENT ### Qualification and Board finding - Board approval of a PSI requires a finding by the Board that the member is committed to implement its policy framework in the context of a program that meets UCT-conditionality standards and aims to maintain or consolidate a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth. - Qualification requires assurances that the authorities have the capacity and commitment to implement their program, as evidenced by recent policy performance (including under a recent Fund-supported program), and that institutional capacity is sufficient to maintain or consolidate a stable and sustainable macroeconomic and debt position, while deepening structural reforms in key areas and addressing circumstances that may affect macroeconomic performance. ### Eligibility and institutional capacity - A PSI is available to any member that meets the criteria set out in the PSI policy, including those with a good track record of macroeconomic management and institutions of sufficient quality to support continued good performance, including in responding to shocks. - Assessment of institutional quality will take into account the track record of macroeconomic policy implementation and qualitative indicators of capacity. - Qualification also requires a Board finding that the member seeks to maintain a close policy dialogue with the Fund, through the Fund’s endorsement and assessment of its economic and financial policies under a PSI. ### Assessment indicators and thresholds - Staff will assess PSI qualification using two groups of indicators: indicators of macroeconomic performance and of policy and institutional capacity. - Macroeconomic performance indicators include: GDP growth, inflation, reserve adequacy, fiscal and current account balances, and an indicator of debt sustainability. - Quality of policies and institutions is measured using past program performance (last three years) – on the basis of conditionality met/not met, delayed and combined reviews, and implementation of structural reforms. - For countries without a recent Fund-supported program, staff will assess implementation of macroeconomic program and structural reform agenda as assessed in recent Article IV staff reports. - A minimum CPIA threshold score of 3.25 will be used as the cut-off level needed to attain the “medium institutional capacity” category used in the LIC DSA. - Countries that have recorded a significant decline in their CPIA score over the last three years will not normally be expected to meet the standards for approval of a PSI. - Countries above both groups of indicators’ benchmarks would be potentially eligible; final assessment takes country-specific circumstances into account. Countries below benchmarks may make a case for qualification by demonstrating a strong program and implementation capacity. - Countries not currently meeting PSI qualification requirements can build a track record through an SMP or, in case of urgent financing needs, the RCF (assuming applicable policy commitments are in place). ### Duration, extensions, cancellations, and repeated use - Initial PSI duration can be approved for one to four years from the date of the Board decision approving the PSI, and may be later extended. - Requests for three-year PSIs have been the norm and are expected to remain the default length for medium-term PSIs at approval. - A PSI may be extended (including multiple times) subject to an overall maximum duration of five years. - After expiration, cancellation, or termination of a PSI, a successor PSI may be approved if qualification criteria are met; there is no limit on the number of successor PSIs. - Extensions involving establishment of additional test dates and reviews are normally approved by the Board on the basis of an LOI and in the context of a program review; in exceptional circumstances extensions may be approved outside a scheduled review with documented policy understandings and a staff report. - Short-term technical extensions (a few weeks or months) can be granted outside the context of a review, typically via a short staff paper for LOT Board approval. - A PSI may be cancelled by the authorities at any time (e.g., when financing or adjustment needs extend beyond the short term, capacity or commitment to implement the program is lacking, objectives/policies change substantially, or the authorities no longer seek Fund support). - Automatic termination of a PSI occurs upon: (a) noncompletion of two consecutive PSI scheduled reviews (or, with concurrent SCF use, if no scheduled review is completed within 12 months of the completion of the last scheduled review); (b) the member incurring overdue financial obligations to the GRA or PRGT; or (c) approval of an ECF arrangement for that member. ### Concurrent use with other instruments - A PSI cannot be used concurrently with an ECF arrangement, but countries with an approved PSI can receive financial support under the SCF or RCF without canceling the PSI. - Qualification for an SCF arrangement is presumed for countries with an on-track PSI that experience a balance of payments need, provided SCF qualifications are met; the SCF can be requested as precautionary for potential or prospective needs. - Key differences when PSI and SCF are used concurrently: - SCF qualification requirements must be met at SCF approval, including existence of a present, prospective, or potential balance of payments need. Use of the SCF is normally limited to 2.5 years out of any 5-year period, assessed on a rolling basis, with exceptions for precautionary SCF arrangements and SCF arrangements where the Fund assesses no actual BoP need. - SCF duration choice (between 12 and 24 months) depends on financing and adjustment needs and is not necessarily tied to the PSI period. - If the SCF expiration date comes after the PSI, approval of a new PSI would normally take place only after expiration or cancellation of the SCF, because PSI qualification requires a broadly stable and sustainable macroeconomic position (implying no IMF financing is needed) at PSI approval. A new PSI could be approved if the authorities intend to treat the SCF as precautionary. It may be possible to extend the existing PSI for a short period to complete the final review. - An SCF arrangement does not require a PRS-related document, but such a document must exist by the time of completion of the first and subsequent reviews under a PSI or the requirement must be otherwise met. - The PSI review schedule could remain on the “fixed review cycle” or be aligned to the more flexible review cycle of the SCF. - Access to RCF support is presumed for countries with an approved PSI that subsequently experience an urgent balance of payments need, subject to RCF qualification requirements. - Countries meeting criteria that create a presumption for blending would be expected to receive blended GRA and PRGT resources if they experience a balance of payments need during a PSI-supported program; PRGT-eligible countries should typically use fully concessional or blended resources rather than GRA-only financing, although they remain eligible for general resources if policies are met. - Members may use an SMP (or, in case of urgent financing needs and assuming applicable policy commitments are in place, the RCF) to establish a track record for a PSI. - The normal procedure to bring an off-track PSI-supported program back on track is completing the next scheduled review after appropriate corrective actions rather than through an SMP. ### Financing assurances, arrears, and safeguards - Financing assurances: PSIs require the same financing assurances as Fund financial arrangements; PSIs can only be approved (and reviews completed) when the program is fully financed. - Staff should confirm no unfilled financing gaps over, normally, the next 12 months immediately following PSI approval (and completion of each review) and a clear expectation that the program will be fully financed through the remainder of the PSI period. - When PSI support is provided alongside SCF or RCF financial assistance, assurances should be given that the country has capacity to repay the Fund through medium–term balance of payments projections and the standardized table on indicators of the capacity to repay the Fund. - Arrears: - Fund policies on sovereign external arrears to official creditors apply analogously to the PSI; the Fund generally calls for resolution of existing arrears to official creditors and non-accumulation of new arrears during the program. - It is not expected that PSI users would have external arrears given the qualification requirement of a broadly stable and sustainable macroeconomic position; where external arrears exist they can be addressed depending on creditor type, with guidance from LEG and SPR. - Macroeconomic program assumptions under the PSI should be consistent with expected resolution of any existing arrears to official creditors; staff should have reasonable assurances that arrears clearance understandings are realistic. - Sovereign arrears to private external creditors and non-sovereign arrears arising from exchange controls are covered by the LIA policy, which applies analogously to the PSI. - PSI-supported programs should address domestic arrears as part of overall program design; specification of domestic arrears policies depends on country context and the fiscal framework. - Overdue obligations to the Fund: - A member in arrears to the Fund in the GRA, or to the Fund as Trustee (including the PRGT), is not eligible for PSI support. If a member were to incur arrears into GRA or PRGT, any existing approved PSI would be terminated. - Safeguards assessments: - A safeguards assessment is not required for a PSI, but members with a PSI are encouraged to undertake one voluntarily to enhance accountability, transparency, and institutional strength of their central banks and to facilitate quick access to Fund resources if needed. - The safeguards process analyzes documents and discussions with authorities and central bank external auditors, evaluating governance, auditing, financial reporting, control systems, and legal autonomy. - Close cooperation between FIN, other functional departments, and area departments is essential; FIN should be kept informed by area departments of safeguards issues, including timing of new arrangements and reviews. ### Program objectives and design - All PSI-supported programs aim at maintaining or consolidating a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth. - Specifically, PSI-supported programs should aim to maintain or consolidate: - strong and durable poverty reduction and growth, - low or moderate inflation, - sustainable fiscal and current account balances, - limited debt vulnerabilities, - adequate international reserves, - sufficient policy and institutional capacity to implement appropriate macroeconomic policies. *pp110917-2017-handbook-of-imf-facilities-for-low-income-countries - pp.230–254* ### 255. The design of a PSI-supported program should be aligned with the country’s own poverty ### 255. The design of a PSI-supported program should be aligned with the country’s own poverty ### Program design and core policy objectives - Specific policy objectives should be clearly articulated in the LOI/MEFP and associated staff report for a new PSI and would typically include: - Fiscal policies, where (i) the fiscal stance is well anchored to help ensure macroeconomic stability and fiscal/debt sustainability, (ii) revenue and spending policies take due account of the country’s growth and social objectives, and (iii) budgets are guided by medium-term fiscal frameworks to the extent possible. - Monetary policies that are consistent with inflation, exchange rate, and reserve objectives, while taking due account of cyclical considerations. - Exchange rate policies that ensure a unified exchange rate and a real exchange rate level that is broadly in line with fundamentals, ensuring a stable and sustainable external position consistent with adequate growth. - Financial sector policies geared toward financial stability and deepening with a view to fostering investment and forestalling financial crises. - Public financial management reforms aimed at ensuring that resources are tracked, reported, and targeted appropriately (including by providing adequate resources for social and other priority spending), public debt management aimed at supporting debt sustainability, and revenue reforms aimed at broadening the revenue base, and enhancing tax efficiencies. - Other structural reforms that are critical for achieving the program’s macroeconomic objectives, with a focus on “second-generation reforms” aimed at enhancing the country’s growth potential and the capacity to manage volatility. - Footnote reference in source: 208. ### Links to Poverty Reduction Strategies (PRS) and social spending - PSI-supported programs should be aligned with the country’s own poverty reduction and growth objectives (paragraph 256). - Guidance on PRS linkages: - New PSI requests and PSI reviews are expected to be accompanied by a statement, normally in the LOI or MEFP, of how the PSI advances the country’s poverty reduction and growth objectives. Where a relevant PRS document exists, the LOI/MEFP description could cross-reference the PRS document and the PSI-supported program should be consistent with PRS objectives in the context of maintaining a broadly stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth. The description is expected to be more detailed at the time of the initial request for a PSI or when a new EDD is produced. The EDD is a PRS document that meets the requirements defined below and in Appendix V. - The EDD may take two forms: (i) an existing national development plan or strategy document on the country’s PRS; or (ii) a newly prepared document on the country’s PRS. The EDD would need to meet minimum standards and countries would be encouraged to follow good practice guidelines.210 PRSPs already issued to the Board at the time of the approval of the current PRS policy (June 22, 2015) and subject to a staff analysis in a staff report of a PSI request or review would be deemed to satisfy requirements for EDD, but remain subject to requirements on coverage and expiration of EDD. - Staff should inform authorities at an early stage about definitions and timelines for EDD requirements (Appendix V) to ensure adequate time for the PRS process. - A PRS document is not required at initial Board consideration of the PSI request, but the first (and every subsequent) review under the PSI can only be completed if: - (a) the member has a PRS that has been developed and made publicly available normally within the previous five years, but no more than six years, and covers the period leading up to and covering the date of the completion of the relevant review; and - (b) the PRS document has been issued to the Executive Board as an EDD that has been the subject of staff analysis in the staff report of a request for a PSI or a review under a PSI. - Staff views on the PRS are to be provided in program documentation; the staff report should discuss how policies pursued under the PSI contribute to the member’s PRS. - A letter of assessment of the authorities’ PRS should be requested from the World Bank to inform Fund staff and the Board; the letter is circulated to the Board at the same time as the EDD. - Staff would report to the Board on PRS implementation by including a discussion of relevant developments in the implementation of policies supporting the member’s PRS. Staff assessment of PRS implementation is done in the context of a PRS Implementation Review (PIR), by the time of the fourth review. PRS implementation following its launch would also be tracked in the member’s LOI/MEFP. - Social and other priority spending: - Should be safeguarded and, whenever appropriate, increased under PSI-supported programs (paragraph 257). - This objective could be monitored through explicit program targets, for instance through an indicative floor on social and other priority spending. - The definition of social or other priority spending should be consistent with the authorities’ poverty reduction and growth objectives. - Where such expenditures are not tracked, program documentation could report on progress in developing a tracking system. - Staff should alert authorities that the Fund’s concessional financial support generally includes conditionality related to safeguarding social and other priority spending where feasible. ### Debt Sustainability Analysis (DSA) - PSI-supported programs should be underpinned by a thorough DSA to inform medium-term debt strategies and fiscal frameworks (paragraph 258). - Country teams should engage with authorities in preparing DSAs, discuss results, and share final files with relevant officials. - DSAs for LICs should be prepared jointly with the World Bank, and country teams should involve other relevant MDBs. Joint DSAs are required for PRGT-eligible countries that also have access to IDA resources. - Timing and frequency: - As a general rule, a DSA should be produced at least once every calendar year. - A fully elaborated DSA is required at least once every three years, or whenever circumstances have changed significantly since the previous DSA, with shorter annual updates in the interim years possible in the absence of such significant changes. - Full DSAs should be prepared in periods of heightened domestic, external, or global risks. - Program linkages: - The design of debt limits in the PSI is systematically related to the assessment of countries’ debt vulnerabilities (see Appendix II). - Where PSI support is provided alongside RCF or SCF support, determination of access to concessional resources needs to take account of debt vulnerabilities based on the most recent DSA; a DSA may need to be prepared for higher access financing requests. - DSA presentation and templates: - DSAs for LICs should be presented as self-contained documents (see Appendix I). - They should normally be prepared using the LIC DSF, although for countries with durable and substantial access to market financing, the market-access template can be used. - The LIC DSF analysis includes three components:211 - A forward-looking analysis (20-year projection) of debt and debt-service dynamics under a baseline scenario, alternative scenarios, and standardized stress tests; - An explicit rating of the risk of external debt distress (low, moderate, high, or in debt distress) based on indicative country-specific debt-burden thresholds that depend on the quality of policies and institutions in the country; and an assessment of the overall risk of debt distress; and - Recommendations on a borrowing (and lending) strategy to limit the risk of debt distress, while maximizing the resource envelope to achieve the country’s development objectives. ### Collaboration with the World Bank and other development partners - Fund staff should consult closely with all major development partners active in the country when designing and monitoring a PSI-supported program (paragraph 261). - The JMAP approved by the Boards of the World Bank and IMF calls on Bank and Fund country teams to consult at least once a year to identify key macroeconomic and structural reform challenges and coordinate work plans (see Appendix I).212 ### Conditionality: principles and specification - Conditionality under a PSI assesses whether a member’s policies are strong enough to meet program objectives (paragraph 262). - Conditions will normally consist of macroeconomic variables and structural measures reasonably within the member’s direct control and that are either (i) of critical importance for achieving program goals (or for monitoring program implementation), or (ii) necessary for implementation of specific provisions of the IMF Articles of Agreement or policies adopted under them. In some cases, conditions may be outside the Fund’s core expertise, requiring a more detailed explanation of their critical importance. - References to Guidelines on Conditionality cited: IMF (2010b and 2006a).213 - UCT-conditionality standard: - PSI-supported programs must meet the UCT-conditionality standard, requiring the commitment and capacity by authorities to implement policies adequate to correct external imbalances and enable repayment to the Fund within the specified maturity period if Fund resources are used or credit is outstanding under the GRA or PRGT (paragraph 263). - Specification of program conditions (paragraphs 264–270): - Program conditionality will include quantitative periodic and continuous ACs (assessment criteria), typically indicative targets and structural benchmarks, and prior actions if critical. - Conditionality is set at approval and updated at program reviews. Conditionality should normally be set (or modified) by the Board before the test date. - For establishment (or modification) of post-dated ACs, program documents must be signed and circulated to the Board along with the staff report before the test date. - Prior actions: - Measures expected to be adopted prior to IMF approval of a PSI, completion of a review, or granting of a waiver with respect to an AC when critical for successful implementation. - Applied parsimoniously and specified in clear, objective, and unambiguous terms. - Should be implemented at least five working days before the Board discussion. - Defined in the LOI/MEFP and cross-referenced in the relevant Board Decision. - Expected to be less frequent than in Fund financial arrangements. - Timing of quantitative ACs and benchmarks: - Quantitative ACs would normally be set on a semiannual basis and tied to semiannual program reviews. - Quantitative benchmarks (indicative targets) would normally be specified on a quarterly basis. - Review dates may be set at different intervals to align with the member’s budget cycle when warranted by circumstances. - The interval between scheduled review dates may not exceed six months and there should be ACs associated with each review. - Conditionality should cover all test dates that fall within the 12 months after the Board meeting. - At initial approval and each review, ACs must be established for the shorter of (a) the next two scheduled reviews or (b) the remaining period of the PSI. - Typical quantitative ACs: - Measures of net international reserves, central bank domestic assets, domestic and fiscal balances or financing, limits on external debt, and other macro-critical indicators. - ACs are usually subject to program adjustors reflecting deviations from projected external flows. - Indicative targets should include a floor on social and other priority spending where possible, and may include other indicators such as reserve money. - Continuous ACs: - Always include commitments related to non-introduction or intensification of exchange restrictions and on non-introduction or modification of multiple currency practices. - Other continuous ACs typically include the non-accumulation of external payments arrears. - Public debt conditionality would normally be required when a member faces significant debt vulnerabilities, or when there are merits to using debt targets instead of, or as a complement to, "above-the-line" fiscal conditionality.214 - Structural benchmarks: - PSI-supported programs normally include an agenda for macro-critical structural reforms, focusing on “second-generation reforms.” - Structural benchmarks are critical measures intended as clear markers for progress in implementing critical structural reforms in the context of a program review. - Used parsimoniously; macro-criticality must be explicitly justified in program documents. - Reviews judge progress on structural elements; specific objectives should be defined for periods covered by reviews with related structural benchmarks critical for program objectives. - The appropriate number of structural benchmarks depends on country factors and capacity; PSI-supported programs would typically contain less than five structural benchmarks per semiannual review. - The use of structural ACs was discontinued in 2009. - Delays and modifications: - If implementation of a structural benchmark is delayed beyond the test date, the measure will be found not to have been met but can be proposed as a new structural benchmark linked to the next program review if it remains macro-critical. - If implementation appears no longer possible as originally defined, a new or modified benchmark may be appropriate if critical to achieve program goals. ### Waivers, modifications, and review completion - Waivers for nonobservance of an AC: - May be granted if the Fund is satisfied that the program will nevertheless be successfully implemented because of the minor or temporary nature of the nonobservance or remedial actions taken by authorities (paragraph 271). - Unlike Fund financial arrangements, a formal request from the member is not required under the PSI, and the staff report title need not state that waivers are proposed. - Waivers for nonobservance are only approved for quantitative ACs tied to the review being completed or for continuous ACs that have been missed. - Waivers of applicability: - Are not possible under a PSI. Where authorities do not provide data on performance allowing determination of observance of an assessment criterion or that a waiver is warranted, the corresponding review cannot be completed (paragraph 272). - In such cases, the review will nevertheless assess performance against other ACs and program elements for which data were available. - Modifications to conditionality: - May be appropriate when departures from ACs are expected, e.g., when basic program assumptions were not realized or significant unforeseen developments occur, provided new targets remain macro-critical. - Requests for modifications must be submitted to the Board before the relevant test date and approved by the Board before information on observance of the AC is available, normally in a program review. - In exceptional cases, modifications of ACs can be approved by the Board outside a review if authorities and staff have common understandings documented in a revised or new LOI with an updated AC table, and, where relevant, TMU. - Such out-of-review modifications could be appropriate if original targets are no longer critical due to developments beyond authorities’ control (including staff errors). - Board approval requires a staff report discussing reasons for the modification, why it is proposed outside the review context, the status of the program, and relevant policy understandings. *Source: pp110917-2017-handbook-of-imf-facilities-for-low-income-countries — excerpt. https://www.imf.org/-/media/files/publications/pp/2017/pp110917-2017-handbook-of-imf-facilities-for-low-income-countries.pdf* ### 274. The framework for dealing with misreporting under the PSI is tailored specifically to the PSI ### pp110917-2017-handbook-of-imf-facilities-for-low-income-countries - 274. The framework for dealing with misreporting under the PSI is tailored specifically to the PSI ### Misreporting framework for the PSI - The PSI misreporting framework is tailored to PSI modalities and the fact that the PSI does not entail the UFR; it is simplified compared to the UFR misreporting framework (para. 274). - Article VIII, Section 5 of the Fund’s Articles of Agreement does not apply to information provided solely for PSI purposes; it does apply when such information is otherwise subject to Article VIII, Section 5 (para. 274, footnote). - Board decisions approving a PSI or completing a review under a PSI are conditioned on the accuracy of information reported by the member on performance under assessment criteria (ACs) and implementation of prior actions (para. 275). - When evidence indicates inaccurate reporting within the preceding three years, the MD shall promptly inform the member; “inaccuracy” is interpreted as in financial arrangements (para. 275). - If, after consultation, the MD finds the member reported inaccurate information, the MD shall promptly notify the member (para. 275). - Board consideration of misreporting normally occurs at the next scheduled PSI review based on a combined misreporting/review staff report, but can be earlier if warranted (para. 276). - The Executive Board reassesses program performance in light of revised information; this reassessment will not retroactively reverse a past Board decision completing a review (para. 276). - When the Board determines misreporting has occurred (except de minimis cases), relevant information on the Board decision and any impact on past Board assessments will be published. There are no waivers under the PSI misreporting framework (para. 277). ### Purpose and completion requirements for Program Reviews - Program reviews evaluate whether the program is on track to achieve objectives, using backward-looking assessment (performance against quantitative ACs, structural and quantitative benchmarks, and prior actions) and forward-looking assessment of implementation prospects (para. 278). - The first and every subsequent review can only be completed if: - (a) the member has a PRS document developed and made publicly available normally within the five previous years, but no more than six years, covering the period leading up to and covering the date of the review; and - (b) the PRS has been issued to the Executive Board as an EDD that has been the subject of staff analysis in the staff report of a request for a PSI or a review under a PSI (para. 278). - Completion of a review by the Board signifies the Fund’s assessment that the program is on track; noncompletion signals the program is off track (para. 279). - Noncompletion of two consecutive scheduled reviews automatically terminates the PSI (para. 279). ### Review scheduling, test dates, and documentation timelines - Timing of all reviews and test dates is summarized in a staff report table at PSI approval and updated as needed (para. 281). - The AC table attached to the LOI/MEFP should identify ACs and indicative targets, including adjustors, for at least a 12-month period from the Board date of PSI approval or review (para. 281). - Structural benchmark table should cover measures over at least a 12-month period, indicating linked reviews (para. 281). - Test dates for quantitative ACs are linked to reviews that will be conducted irrespective of program status; test dates should be aligned with the country’s budget cycle where possible and scheduled at most six months apart (para. 282). - Test dates must be set so all scheduled reviews can take place before the end of the PSI period, accounting for reporting lags and staff report preparation and circulation (para. 283). - All program documentation for a review should normally be issued to the Board within four months following the test date for the quantitative ACs linked to that review; the LOI shall in any case be issued prior to the test date for the earliest periodic quantitative ACs linked to the next scheduled review (para. 284). - Footnote: The staff report can be issued up to one month after that test date (para. 284, footnote 219). - Board discussion is expected normally two weeks after issuance of documentation, in line with circulation periods (para. 284). - The program period supported by a PSI would typically start somewhat before Board approval and three to six months before the first test date under semiannual monitoring; the program period should normally not start more than three months prior to the Board meeting (para. 285). ### Interaction with other instruments and concurrent arrangements - If a member implementing a PSI also has an SCF arrangement, program reviews under the SCF should be scheduled at the same time as PSI reviews and PC under the SCF shall normally be established for the same test dates as ACs under the PSI; a single set of documents should normally be issued to the Board (para. 286). - When used concurrently with the SCF, review schedules can be aligned either with PSI’s fixed cycle or SCF’s flexible cycle. If PSI remains on fixed cycle, documentation for a PSI review must be issued to the Executive Board before the next relevant test date irrespective of performance (para. 286). - Shifting a PSI to the SCF review schedule requires amending the approved PSI so a PSI review can be completed later (para. 286). ### Noncompletion of reviews and restoration of program track - If performance is not sufficiently strong or forward-looking understandings cannot be reached, a staff report must still be circulated to the Board normally within four months of the test date of the periodic ACs linked to that review and in any event prior to the test date linked to the next scheduled review (para. 287). - The report will assess performance relative to program objectives, indicate divergences between staff and authorities, and recommend that the review not be completed at this time; staff will elaborate on steps needed to bring the program back on track (para. 287). - Returning to an uncompleted review is in principle possible but very rare, as related documentation would have to be issued to the Board prior to the test linked to the review; this option is not available if the review is the second consecutive uncompleted scheduled review (paras. 288–289). - Noncompletion of two consecutive scheduled reviews (or, if concurrent with SCF, no scheduled review completed within 12 months of the last completion) causes automatic lapse of the PSI as of the date of the Board’s second consecutive decision not to complete a scheduled review (para. 290). - An SMP may be appropriate in some circumstances to reestablish a track record for a future Fund-supported program under the PSI, SCF, or (rarely) ECF after a PSI has lapsed in this fashion (para. 290). ### Other relevant policies and modalities associated with a PSI - Ex-Post Peer Review Assessments: Engagement under the PSI does not count toward determining the policy on LTPE. For members where an ex post peer review assessment is otherwise required, such assessments are expected to be conducted and presented to the Executive Board at the time of the request for a PSI (para. 291, bullet). - PPM: PSI engagement provides an alternative vehicle for PPM for members subject to such monitoring due to outstanding obligations to the Fund. Members with a PSI are treated similarly to members with Fund financial arrangements or SMPs for PPM purposes; PSI staff reports should include a section on the member’s capacity to repay the Fund (para. 291, bullet). - Article IV cycle: The 24-month cycle for Article IV consultations applies to members with a PSI; specifics: - Article IV consultations with members that have an on-track PSI would be expected to be completed within 24 months after the completion of the previous Article IV consultation. - If a program review is not completed by the date specified in the arrangement, the next Article IV consultation would be expected to be completed by the later of (i) six months after the scheduled review date and (ii) 12 months plus a grace period of three months after the previous Article IV consultation, unless the program review is completed earlier (para. 291, bullet). - A member that has completed a PSI by completing all reviews may remain on the 24-month cycle, unless criteria in paragraph 2 of Decision No. 14747-(10/96) apply: (i) systemic or regional importance; (ii) perceived to be at risk or facing pressing policy issues of broad interest; or (iii) outstanding Fund credit exceeding 145 percent of quota. At the final review staff should assess whether consultation cycle should be shortened to 12 months (para. 291, bullet). - Exchange system obligations under Articles VIII and XIV and Data Provision under Article VIII, Section 5: Requirements under Article VIII Sections 2, 3, 4, and Article XIV are discussed elsewhere; a standard continuous AC applies inter alia to non-introduction/intensification of exchange restrictions and to non-introduction/modification of multiple currency practices (para. 291, bullet). - HIPC: Countries qualifying for HIPC debt relief would not meet the qualification standard for a PSI; PSI-supported programs are not included in programs specified by the PRGF-HIPC Trust Instrument for establishing HIPC track records (para. 291, bullet). - Side letters: Use of side letters in LIC programs is extremely rare; they may be used when release of information on policy understandings at request or review would cause adverse market reaction or undermine authorities’ preparation of domestic groundwork for a measure (para. 291, bullet). ### Appendix I — Documentation and review process (introduction) - All staff papers concerning the UFR, other program support (PSI and SMP) and surveillance for a particular country are prepared by area department-led mission teams; area department and SPR have joint responsibility for clearance prior to submission to management (Appendix I, para. 1). - Review process involves LEG and FIN; other functional departments review according to internal rules and follow the review-on-demand principle (Appendix I, para. 1). - Pre-mission early consultation: Mission teams are encouraged to consult informally with SPR (and if relevant FIN or LEG) at an early stage in cases where new financing or program support is envisaged, to get information on relevant Fund policies including choice of LIC instrument, access and phasing, PRS and DSA requirements, early Board briefings, safeguards, external arrears, financing assurances, misreporting, exchange restrictions, as applicable (Appendix I, para. 2). *Italic: Content derived from pp110917-2017-handbook-of-imf-facilities-for-low-income-countries, pages 274–127 as supplied.* ### 3. Policy Note (PN): In preparation for policy discussions with country authorities (UFR, ### 3. Policy Note (PN): In preparation for policy discussions with country authorities (UFR, surveillance, and other program support) ### Purpose and required content of the Policy Note (PN) - Area departments will prepare a PN for policy discussions with country authorities. - The PN should include a sufficient exposition of: - (i) background diagnostics (including recent developments); - (ii) the economic outlook; - (iii) the staff’s and the authorities’ positions on key policy issues; - (iv) program objectives and design where relevant; - (v) risks and mitigation measures. - Supportive charts should be included. - The PN should always include the standard set of macroeconomic tables (see subsection below). - Divergences of views with reviewing departments, brought up during the Policy Consultation Meeting (PCM), should be flagged upfront in the PN. - The final PN should be sent to management for clearance. - Procedures for management clearance should be decided jointly by the area department and SPR according to the criteria in Table 1. ### Standard macroeconomic and program tables required - Standard macroeconomic tables include: - (a) selected economic indicators; - (b) government accounts (in national currency and percent of GDP); - (c) monetary survey (central bank accounts and commercial bank accounts); - (d) the balance of payments. - Program tables should include: - (a) a table with quantitative conditionality (the “PC table”) that covers: - (i) previously established targets and outturns (PCs and indicative targets) over at least the past 12 months, - (ii) PCs established for the next 12 months (from the expected Board date), - (iii) indicative targets through the end of the calendar year (or fiscal year) for which policies are being discussed; - (b) a structural benchmark table covering: - (i) the implementation status of previously established benchmarks, - (ii) benchmarks covering the next 12 months, highlighting their timing and macro criticality; - (c) a table with the approved and proposed schedule of disbursements and reviews; - (d) financing requirements and sources; - (e) the member’s capacity to repay the Fund (in the case of new financing requests or augmentations, or if the macroeconomic environment has changed significantly). ### Background material, attachments, and coordination with functional departments - Area departments are encouraged to attach concise and focused appendices to the PN, including: - analytical underpinnings of program design, - exchange rate assessment, - HIPC/MDRI issues, - others as applicable. - Where the DSA is required, the DSA graph and tables should be attached to the PN. - Attaching draft staff reports is not encouraged. - Area departments can request cross-country information and analysis from functional departments. - To obtain timely inputs, area departments should informally contact functional departments about one to two months before the scheduled mission. ### PN length, circulation, and variants - A full PN—typically three–four pages of text—to be circulated for departmental review is required for: - all missions, staff visits, and authorities’ visits with substantive policy discussions that are not mostly covered in a previously cleared PN. - Shortened PN: - Should be shorter for missions and visits whose aim is to continue policy discussions based on a previously cleared full PN. - Appropriate for staff visits aimed at holding substantive discussions on key budget parameters if consistent with the macroeconomic framework in a previous full PN. - Should include a brief update on recent developments, the status of discussions, and justification for any proposed changes to the previous PN. - For technical or information-seeking staff visits: - A short memorandum—to be circulated to review departments for information only—would be sufficient provided area departments and SPR agree there is no change in the policy line or economic circumstances since the last staff report and/or PN. ### Policy Consultation Meetings (PCM) and review process - A PCM should be held approximately two to three weeks prior to missions. - The PCM should establish a firm idea of what the final PN will look like, discussing issues and ideally reaching agreement. - Review departments should ensure the “right” people (able to speak for their department on the policy line) attend the meeting. - Functional departments may send technical experts but this status should be made clear. - All policy issues should ideally be raised at the PCM (not opened up subsequently). - PCM participants are encouraged to check at the end of the PCM that they share the same understanding of what was agreed and to thereafter work interactively toward finalizing the PN. - Reviewing departments are encouraged to circulate any cross-country and technical analyses ahead of the PCM and to give the area department an informal heads up of the issues they intend to raise (but avoid extensive written comments). ### Cover memorandum for PN and management clearance - The final PN should be sent to management for clearance with a cover memorandum. - The cover memorandum should provide concise and candid information on: - (i) key issues—economic situation, including vulnerabilities to an external or financial crisis; - (ii) staff’s main recommendations; - (iii) main issues raised in the review process, including reconciliation of diverging departmental views as appropriate; - (iv) any controversial aspects. - The cover memorandum should clarify the requested management action. - SPR will review the cover memorandum but does not “clear it”—any departmental disagreements should be fully reflected in the cover memorandum. - The protocol for management clearance of the cover memorandum is provided in Table 1. ### On mission: LOI/MEFP, TMU, side letters, concluding statements, and press releases - LOI/MEFP: - For new financing/program requests and program reviews, the authorities must sign a statement (LOI) that sets out the policies and measures they intend to pursue in line with their Fund-supported program, typically with an accompanying MEFP. - The LOI must be signed by representatives of agencies responsible for formulating and implementing the policy commitments in the LOI/MEFP (standard practice: minister of finance and governor of the central bank, though the latter may not be appropriate in currency unions). - Signature by presidents and prime ministers is also possible. - For routine program reviews, a more detailed LOI could, in some cases, obviate the need for an MEFP, provided a previous MEFP discussed policies applicable to the 12-month period following the review. - The LOI/MEFP should draw out specific actions and usually contain: - (i) a table with quantitative performance criteria that cover the next 12 months (from the Board date) and indicative targets that extend through the end of the calendar year (or fiscal year) for which policies are being discussed; - (ii) a structural benchmark table, with benchmarks covering the next 12 months, highlighting their timing and macro criticality. - The LOI should include the standard consultation clause requiring authorities to consult with the Fund ahead of any revisions to measures outlined in the MEFP. - For the initial program/financing request and at each review, the LOI/MEFP should specify how the program advances the country’s poverty reduction and growth objectives and policies; description expected to be more detailed at initial request or when a new EDD has been transmitted to the Executive Board. - In cases where a relevant PRS document exists, the LOI/MEFP could cross-reference it; where none exists, program documentation should outline the country’s medium-term poverty reduction and growth objectives and policies. - A draft LOI/MEFP should be discussed during the mission and authorities advised that understandings are reached with staff ad referendum—subject to Fund management approval. Authorities should not sign the LOI prior to management approval. - Technical Memorandum of Understanding (TMU): - For new program/financing requests, the LOI/MEFP must be accompanied by a TMU that clearly and precisely defines the PCs under the program, including definitions of indicators, coverage of government and the monetary authorities, exchange rate valuation for program purposes, program adjustors, data submission requirements, etc. - Standard language on the definition for external debt should also be included. - Side letters: - Use of side letters in LIC programs has been extremely rare. - Side letters may be used when release of information on policy understandings at the time of a program request or review would cause adverse market reaction or undermine authorities’ efforts to prepare domestic groundwork for a measure. - Concluding Statement: - Mission Concluding Statements summarize discussions between country authorities and an IMF staff team. - They are agreed by the country authorities and the IMF mission team and can be posted on the IMF website if desired by both. - For Article IV missions, teams typically leave a Concluding Statement with authorities recapitulating the mission’s assessment and policy advice. - A Concluding Statement can also be useful for missions that do not result in understandings on new financing/program requests or program reviews. - End-of-mission Press Release: - Missions often issue a press statement at the end of a mission, especially when understandings on a new program/financing request or program review are reached. - Missions should inform authorities of their intention to issue a press statement. - Missions are encouraged to inform the COM country press officer or Media Relations of press plans and should clear the written statement before release. - The mission should give the authorities an opportunity to review the draft press statement. ### Post-mission work: reporting, staff reports, tables, and DSA - Back-to-Office Report (BTO): - The mission chief should send a BTO to management within two working days of the mission's return to headquarters. - The BTO should be short (up to two pages), mention the nature of the mission (with mission members listed in a footnote), and the key issues, with an attached Selected Economic Indicators table. - Staff Report: - A staff report is required for an Article IV consultation, initial program or financing request, and at the time of each program review. This includes the ECF, SCF, RCF, PSI, and SMP. - Short staff reports to the Board are required where program design is modified between reviews. - All such staff reports should include: - (i) background diagnostics (including recent economic and political developments); - (ii) the economic outlook, including downside risks and debt vulnerabilities (referring to the most recent DSA); - (iii) the authorities’ policy objectives and plans; - (iv) a staff appraisal of the key policy issues. - Where applicable, staff appraisals should make recommendations for approvals of requests for: - (i) waivers of nonobservance of PCs; - (ii) extension of arrangement; - (iii) augmentation; - (iv) rephasing; - (v) modification of existing PCs; - providing justification that builds on material in the main body of the report. - For combined UFR and Article IV staff reports, Article IV coverage should remain comprehensive and deal with all relevant issues, especially medium- or longer-term policy issues. - Staff reports for members subject to safeguards assessments and monitoring should include a summary safeguards paragraph on the status of safeguards issues, including any significant recommendations on legislative amendments involving parties external to the central bank, problems in obtaining access to data, and deviations from commitments relating to safeguards recommendations. - Program documents involving initial requests for ECF, SCF, RCF, or PSI: - Should set out overall program objectives and specific policy understandings. - Staff reports should explain the choice of instrument, determination and phasing of access, and the design of conditionality. - Program staff reports, both initial requests and reviews, should discuss key near-term policy goals and commitments (typically over the next 12 months), and program financing. - Staff reports for program reviews should discuss performance relative to program conditionality. - Required tables in staff reports: - Full set of macroeconomic tables: (a) selected economic indicators; (b) government accounts (in national currency and percent of GDP); (c) monetary survey (central bank accounts and commercial bank accounts); (d) the balance of payments. - A standard table on Millennium Development Goals (MDG) indicators should be included in staff reports about once a year (normally staff reports covering Article IV consultations and request for new Fund-supported programs). - Staff report tables for program requests or reviews should also include: - (a) the approved and proposed schedule of disbursements and reviews; - (b) financing requirements and sources; - (c) the member’s capacity to repay the Fund (in the case of new financing requests or augmentations, or if the macroeconomic environment has changed significantly). - If there has been a significant change in the macro-environment, the staff report should include staff’s qualitative assessment of the member’s capacity to repay the Fund. - LOI/MEFP attachments to program requests or reviews should include: - (a) a table with quantitative conditionality (the “PC table”) that covers: - (i) previously established targets and outturns (PCs and indicative targets) over at least the past 12 months—alternatively, reporting on past performance relative to quantitative targets can be included as a separate table in the staff report; - (ii) PCs established for the next 12 months (from the expected Board date); - (iii) indicative targets through the end of the calendar year (or fiscal year) for which policies are being discussed; - (b) a structural benchmark table covering: - (i) the implementation status of previously established benchmarks—alternatively, reporting on the status of previously established structural benchmarks can be included as a separate table in the staff report; - (ii) benchmarks covering the next 12 months, highlighting their timing and macro criticality. - Management Clearance Memo: - Management clearance of staff reports is based on a clearance note that states the main issues addressed in the report, lays out any differences in views among departments, explains any significant deviations from the PN, and highlights potentially controversial issues. - A copy of the staff report’s Executive Summary should be attached. - Debt Sustainability Analysis (DSA): - A Joint Bank-Fund low-income country DSA (LIC DSA) should be prepared once a year for PRGT-eligible countries that also have access to IDA resources. - A DSA (or DSA update) may also be required to support the proposed level of access. - The main conclusions of the DSA and its update should be discussed in the body of the staff report. - The DSA or its update is subject to the same review process as a staff report and, when finalized, if not published as a stand-alone document, should be included as a supplement to the staff report. - The final versions of the DSA files (external and fiscal templates) should be submitted to the SPR review box at the time the DSA (and staff report) is sent to the Board. *pp110917-2017-handbook-of-imf-facilities-for-low-income-countries - 3. Policy Note (PN): In preparation for policy discussions with country authorities (UFR, surveillance, and other program support)* ### 23. Informational Annex: An informational annex should be issued as a supplement to ECF, ### 23. Informational Annex: An informational annex should be issued as a supplement to ECF, ### Informational annex; Statistical Issues annex; posting and clearance - The informational annex should be issued as a supplement to ECF, SCF, RCF, PSI, SMP, and Article IV reports. - The annex comprises: - Relations with the Fund and Bank-Fund Collaboration, including the JMAP matrix. - Relations with other Multilateral Institutions, if applicable. - A Statistical Issues annex should be included at least for Article IV reports. - Annexes are subject to departmental review but do not require management clearance. - Annexes should not be attached to the staff report. At the time of issuance of the staff report to the Board, annexes should be: - Sent to Secretary’s Department (SEC). - Posted on the web as a supplement to the staff report. ### Summing Up and Chairman’s Statement (UFR and combined discussions) - Requirement: - All stand-alone UFR discussions and combined UFR with Article IV discussions require both a Summing Up and Chairman's Statement. - Purpose and content distinctions: - Summing Up: - Intended to present the Executive Board's formal views on the key issues at stake. - For combined UFR with Article IV discussions: contains a section on key policy issues discussed in the Article IV consultation followed by a separate short section at the end on key program issues. - For stand-alone UFR discussion: only the program-issues section is required. - Should cover core areas: recent economic performance or performance under the program, the economic outlook, risks and challenges, and macroeconomic and structural policy issues. - Should have a clear forward-looking element and, for a program country, include what directors consider the most critical elements for the success of the program. - When the Executive Board approves staff appraisal to shorten the Article IV consultation cycle, the Summing Up should reflect such approval. - Should summarize issues in a readily understandable way and avoid sentences that are overly long or complex, or long lists of topics or measures and acronyms not widely known or previously defined. - Chairman’s Statement: - Prepared after the Executive Board adopts a decision regarding a country's use of Fund resources, or completes a discussion about a country's participation in the HIPC initiative or a country's PRSP-related document. - Intended to inform the public of the Board's decision on a UFR program and the Board's overall policy message. - Should convey a few (three to four) points on which the Board placed emphasis. - Should not attempt to cover the discussion as a whole or reflect divergent Directors' views. - Does not attribute statements to directors. - Staff should exercise caution when referring to highly market-sensitive issues. - Appendix Table 2. Summing Up, Chairman’s Statement, and Press Release (requirements by discussion type): - Stand-alone UFR: Summing Up = Yes; Chairman's Statement = Yes; Press Release = No - Combined UFR with Article IV: Summing Up = Yes; Chairman's Statement = Yes; Press Release = Yes - Combined Ex Post Assessment/UFR: Summing Up = Yes; Chairman's Statement = Yes; Press Release = Yes - Stand-alone Post Program Monitoring or Ex Post Assessment: Summing Up = Yes; Chairman's Statement = No; Press Release = Yes ### Press Releases and Staff Statements - Press Releases: - COM issues Press Releases for new arrangements and reviews, containing the Chairman’s statements. - Area Departments prepare the background section, to be reviewed by SPR upon demand. - COM prepares the initial draft, including the Chairman’s statement, and requests comments from the area department, LEG, FIN, and the executive director of the country in question. - Note: Public Information Notices (PINs) ceased on July 2013 and have been consolidated into the Press Releases series. - Staff Statements: - Prepared as needed if new or additional information becomes available after submission of the staff report to the Board and before the Board meeting. - The statement should explicitly mention whether the new information changes the thrust of staff’s assessment in the staff report. - The statement should be sent to SPR for clearance. - The statement should be sent to management for their information and SEC for Board circulation, at least four days before the Board meeting. ### Other required documents and processes - Ex Post Peer Reviewed Assessment (EPA): - Required for all members considered as having LTPE, defined as having in place a Fund-supported financial arrangement for at least seven of the past 10 years. - Time spent under the PSI and arrangements treated as precautionary does not count towards LTPE. - For members meeting the LTPE definition and without an EPA in the past five years, an EPA should be prepared if a successor arrangement is contemplated and be considered by the Board at the time of a request for a new arrangement. - Staff should conduct an ex post peer review assessment at the beginning of successor program negotiation or during the Article IV consultation, whichever is earlier, and incorporate its lessons in the new program design. - Ex post peer review assessments should be presented to the Executive Board for consideration as part of the staff report for request of a new program (i.e., as an annex or in the main text of the report). - Joint Bank-Fund LIC DSA: - Should be prepared annually for PRGT-eligible countries with access to IDA resources. - A fully elaborated DSA is required at least once every three years, or whenever circumstances have changed significantly since the previous DSA, with shorter annual updates in the interim years possible in the absence of such significant changes. - Full DSAs should be prepared in periods of heightened domestic, external, or global risk. - A DSA (or DSA update) may also be required to support the proposed level of access. - DSAs should be prepared as self-contained documents, normally issued as a supplement to staff reports, and include a clear description of macroeconomic assumptions without referring to the Fund staff report. - Full DSAs should be concise (four to five pages, excluding figures and tables or any appendices). - LIC DSA updates (between full DSAs) would be lighter exercises and consist of a very short write up covering important changes from the previous DSA and including the usual set of tables and charts. - All DSAs must be prepared jointly by both institutions, regardless of whether the DSA is included in a Board document of one institution only, and must be submitted to both the IMF’s and World Bank Executive Boards, be it for discussion or for information. - PRS documentation (Economic Development Document—EDD): - For the ECF and PSI, an EDD is required to be issued to the Board for completion of the first and subsequent reviews. - The PRS covered in the EDD must have been developed normally within five years but no more than six years leading up to and covering the relevant review. - An assessment of the country’s PRS has to be requested from World Bank staff and circulated to the Fund Executive Board for information. - Joint Management Action Plan (JMAP): - Under the JMAP, Bank and Fund country teams document the results of an annual consultation in a joint memorandum for files, identifying: - (i) the key macroeconomic and macro-critical structural challenges facing the country; - (ii) policies and reforms to address these challenges and each institution’s priorities for supporting these reforms; - (iii) respective work plans and outputs for the next 12 to 24 months, together with tentative mission schedules and delivery dates (summarized in an “action matrix” appended to the memorandum); - (iv) information, analytical cross support, and other inputs (e.g., assessment letters) needed from institutional counterparts, including agreed delivery dates; - (v) any substantive disagreement on any of the above issues. - When a Fund team prepares a staff report, it is expected to document Bank-Fund Collaboration in the appendix to the staff report; to avoid duplication, the appendix can be an appropriately reformatted version of the memorandum. - Review of Joint Fund-Bank Documents: - Staff of both institutions should communicate at the outset with their counterparts to discuss respective review requirements and agree on a coordinated timetable for all joint documents that require review by both institutions and consideration by the Boards. - Assessment Letters: - Typically produced in response to requests from multilateral or bilateral donors or creditors, in particular, the World Bank and other multilateral institutions, although requests may come directly from the member country. - Assessment Letters should: - Contain a clear and candid assessment of the member’s macroeconomic conditions and prospects, and of macroeconomic and related structural policies. - Specifically: (i) identify existing macroeconomic imbalances and structural distortions; (ii) indicate to what extent current and planned policies are dealing with (or perhaps contributing to) these imbalances and distortions; and (iii) highlight policy areas where there are major outstanding concerns. - Be derived from and consistent with the most recently available report (PNs, staff reports, etc.), to the extent possible. - Contain an account of the Fund’s relations with the member country, including, where relevant, program discussions. - Not include language directly encouraging or discouraging assistance from donors. - Assessment Letters are subject to the same SPR review and clearance procedures as program-related documents, and they require management approval. - Circulation to the Board for information is required at the time of external dissemination. - Assessment Letters may be published on the IMF's external website or by the recipient institutions only with the consent of the authorities. - HIPC Documents: - If a country satisfies all eligibility criteria and requests HIPC assistance, the sequence is: preliminary HIPC document, decision point document, and completion point document. - HIPC documents, including HIPC DSAs, are produced jointly with the Bank and are reviewed by both institutions. Standard Fund procedures apply for review, clearance, and submission to the Board. - Disbursements between reviews of available but undrawn amounts under SCF arrangements: - A country may draw between reviews previously approved but undrawn amounts under the SCF if: - (i) its representation of a balance of payments need meets the requirements of the PRGT instrument; - (ii) the most recently scheduled review under the arrangement prior to the request has been completed; - (iii) available information indicates that its continuous PCs are being met. - The Trust Instrument precludes staff from challenging a member’s representation of a balance of payments need prior to providing the requested disbursement. - The Trust Instrument indicates that if subsequently the Board decided that the disbursement took place in the absence of a need, it could seek repayment with interest normally within 30 days of its decision that early repayment is required. - For a country to draw between reviews, it must send a letter to the MD communicating and explaining the decision. Staff will then circulate a short note for information to the Board, attaching the letter of the authorities. A press release is issued shortly afterwards. ### Length limits for country documents (management-approved July 22, 2014; applicable for notes/reports sent to management on or after September 1, 2014) - Management requested that documents subject to word limits indicate both the actual word count and the applicable limit in the cover note, and that staff indicate reasons for significant deviation in the cover note. - Summary Table. Length Limits for Country Documents* (In words) - Policy notes Limits: - Typical surveillance and on-track programs: 2,800 - High vulnerability, G20 country and other global financial center, program request, program cases that are off-track, and combined AIV/UFR-PSI-SMP: 3,600 - Attachments (indicative limit; not for Management clearance): 6,000 (or draft staff report, consistent with limits below) - Staff Reports Limits (excluding annexes): - Stand-Alone AIV: regular: 6,000 - Stand-Alone AIV: G20 and global financial center: 9,500 - Stand-Alone UFR, PSI, SMP: request: 6,000 - Stand-Alone UFR, PSI, SMP: review: 5,000 - Exceptional access UFR: 9,500 - Combined AIV/UFR-PSI-SMP: 9,500 - Annexes (indicative limit; excluding DSA, informational annex, LOI, MEFP, TMU, and proposed decision): 2,000 - Footnote: The limits would exclude the cover page/memo, (text) tables, (text) figures, the RAM, the ESR country page, and annexes regarding follow up to previous staff AIV advice or FSAP recommendations. ### Appendix II. Quantitative Conditionality — Periodicity and Definitions - General frequency and phasing: - Under Fund-supported programs for LICs, quantitative PCs—or ACs in the case of the PSI—shall be phased no more than six months apart. - In practice, PCs are usually set on a semiannual basis and tied to semiannual program reviews, while quantitative benchmarks (also referred to as indicative targets) are normally specified for the intervening quarters. - When closer monitoring is helpful, PCs and reviews could be at quarterly intervals (e.g., in the context of significant short-term volatility and/or uncertainty). - There is scope for some flexibility in setting specific test dates relative to strict three/six-monthly cycles, for example to align monitoring with national budget/reporting cycles, as long as deviations are minor. - Coverage of test dates: - Quantitative periodic conditionality should cover all test dates that fall within the 12 months after the Board meeting (initial approval or review). - Under semiannual monitoring, PCs would normally be established for two future test dates at the time of approval of the arrangement and at each review (except for the penultimate and final reviews). - The table of quantitative conditionality (the “PC table”) attached to the LOI/MEFP should clearly identify PCs, indicative targets, and adjustors for at least a 12-month period from the Board date of the program approval or review. - Indicative targets should extend through the end of the calendar year (or fiscal year) for which policies are being discussed. - Definitions and Technical Memorandum of Understanding (TMU): - Precise definitions of PCs should be set out in a TMU attached to the LOI. - PCs and indicative targets for the main economic and financial indicators should be defined simply and clearly, and in a manner that makes it easy and relatively quick to measure. - Measurement conventions: - Quantitative periodic conditionality is normally set as cumulative flows or changes in stocks from a single reference date (normally, the beginning of a calendar or fiscal year) through each test date. - The first reference date, set at the time of approval of a new financial arrangement or PSI, would have to coincide with or predate the start of the program period. - The reference date would usually be moved ahead by one year on an annual basis. - If appropriate, certain indicative targets (for instance on monetary aggregates or international reserves) may be set as period averages (e.g., over a number of days before or after the end-quarter date). - Typical indicators included as PCs: - Measures of net international reserves. - Central bank domestic assets. - Domestic and fiscal balances or financing. - Limits on external debt, where applicable. - Non-accumulation of external payments arrears. - Any other macro-critical indicators. - PCs are often subject to program adjustors that reflect deviations from projected external flows. - Indicative targets should include a floor on social and other priority spending where possible. ### Appendix II. Quantitative Conditionality — Fiscal Targets - Fiscal target design: - Programs should have fiscal PCs and indicative targets that are based on appropriate analytical fiscal indicators and have the desired institutional coverage. - Fiscal targets should aim to cover all relevant government entities and transactions. - Most targets are specified at the level of the central government or the general government, with the general government being the appropriate choice where sub-national governments have major fiscal responsibilities and relevant data are available. - Fiscal PCs should generally cover both budgetary and extra-budgetary activities of the government. - In all cases, the TMU should provide a clear definition of what is included in the term “government” (e.g., central, central and local, or including nonfinancial public organizations) for purposes of fiscal PCs. *Source: pp110917-2017-handbook-of-imf-facilities-for-low-income-countries - 23. Informational Annex: An informational annex should be issued as a supplement to ECF,* ### 7. Fiscal conditionality should be set on the indicator(s) that are most crucial for achieving ### pp110917-2017-handbook-of-imf-facilities-for-low-income-countries - 7. Fiscal conditionality should be set on the indicator(s) that are most crucial for achieving ### Fiscal conditionality and fiscal anchors - The program’s near-term fiscal anchor is normally monitored through a performance criterion (PC) on either: - a credit aggregate (e.g., net domestic financing of the government or net banking system credit to the government), or - a deficit measure (e.g., the overall deficit or the primary deficit of the government), or - some combination of the above. - When addressing broad macroeconomic concerns, a deficit measure is more appropriate as a PC. - The overall deficit excluding grants is often a good summary guide to the impact of fiscal policy on aggregate demand and inflation. - The overall deficit including grants contains the governments’ borrowing requirement and debt accumulation. - Country-specific focus: - Many LICs: near-term fiscal anchor focuses on domestic revenues and spending (excluding more volatile receipts and outlays related to donor support). - Countries with relatively high capacity: may focus on the overall fiscal deficit. - Oil exporters: may focus on non-oil balances. - Adjustors may be used to correct for volatile or one-off flows. - Where debt sustainability is a concern, the primary fiscal balance is sometimes used as an alternative to the overall balance. - Indicative fiscal targets may be set on: - domestic revenue, - domestic arrears, - social and other priority spending. - Data considerations: - The quality, accuracy, and timeliness of data determine precise definitions of fiscal targets and whether targets should be PCs or indicative targets. - Exceptional receipts: - Exceptional receipts (e.g., proceeds from privatization or from a petroleum fund) should normally be defined as a financing item, though provisions may allow some or all of these resources to be spent. - Underlying economics should guide treatment: one-off receipts should not finance permanent expenditure increases. ### Social and priority spending - Social and other priority spending should generally be safeguarded in Fund-supported programs in LICs. - Monitor through explicit program targets, typically an indicative floor on social and other priority spending, whenever possible. - Definition should be consistent with authorities’ poverty reduction and growth objectives. - If tracking is not feasible, program documentation should report measures envisaged to develop an adequate tracking system. - Staff should monitor progress in establishing tracking systems; structural benchmarks may be included if appropriate. ### Monetary targets - Monetary developments are normally monitored with a PC on net domestic assets (NDA), either of the central bank or the banking system (central bank NDA more likely in many LICs). - NDA may be defined as reserve money minus net international reserves or reserve money minus net foreign assets. - Indicative targets may be included on reserve money, banking sector credit, or broad money when money or credit growth are significant concerns. - Some arrangements have set a PC on reserve money instead of NDA; choice depends on program priorities, monetary regime, and importance placed on protecting/increasing net international reserves versus controlling inflation. - Money targets set as PCs should include an adjustor for changes in the reserve requirement, if applicable. - Monetary Policy Consultation Clause (MPCC): - Can be used to provide flexibility and incentivize development of a coherent framework for monetary analysis and monitoring. - Suitable for countries with: minimal fiscal dominance, relatively low and stable inflation, good track record of monetary policy implementation, and commitment to strengthen policy framework. - MPCC would include a quantified macroeconomic framework with quarterly or semiannual monetary aggregate or inflation targets set normally within a single tolerance band, assessed during program reviews. - Deviations from the band trigger a consultation with the Executive Board as part of the general review process focusing on: (i) broad assessment of monetary policy stance and program track, (ii) reasons for deviations, and (iii) proposed remedial actions. - When consultation is triggered, access to Fund resources would be interrupted until it takes place and the relevant program review is completed. - MPCC programs would include a NIR floor, as a PC, to maintain external sustainability and safeguard the use of Fund resources. - Indicative targets related to monetary policy (e.g., on NDA or credit to the government) could be included to address country-specific risks. - If inflation is selected as central target, a narrower inner band could be used as an early warning mechanism triggering informal consultation with Fund staff. - Monetary ceilings are not required for currency board arrangements or monetary union members, except where rules give some degree of control over credit growth—then a monetary ceiling may be included. ### Targets for international reserves - International reserves are normally monitored by setting a floor on official net international reserves (NIR) of the central bank. - The PC definition should specify precise coverage of the monetary authority where it differs from central bank net foreign assets. - In programs with Fund disbursements made directly to the Treasury account at the central bank (direct budget financing), a composite central bank–Treasury aggregate should be used for NIR and NDA PCs. - Example mechanics: Fund disbursement to Treasury account can increase central bank gross reserves while increasing Treasury liabilities to the Fund, leaving composite NIR unchanged. - Usability requirement: - NIR should include only convertible, liquid, and unpledged assets that constitute claims on nonresidents, net of short-term foreign liabilities that are public or publicly guaranteed; outstanding stock of Fund credit is netted out. - Assets that are counterparts to foreign currency reserve requirement liabilities are often excluded from NIR. - Foreign liabilities are loan, deposit, swap, and forward liabilities to residents and nonresidents whose value is guaranteed in foreign currency terms. - TMU should specify if liabilities to the participants to the SDR department are included. - Valuation effects: - Valuation effects from exchange rate changes or price of gold should be excluded when defining NIR floors. - TMU should specify set of exchange rates and gold valuation used to calculate NIR. - Constant accounting exchange rates should be used (e.g., prevailing at the end of the previous year) and may be updated periodically. - NDAs and net credit to the government should also be calculated using accounting exchange rates where foreign currency items are important. - Currency board and monetary union: - For currency board arrangements, the PC should specify exact coverage of foreign reserve backing. - Floors on international reserves are not required for monetary union members. ### Public debt limits - Objective: prevent build-up of unsustainable debt while allowing flexibility to raise financing for productive investment. - Policy reform: - Policy last reformed in 2014 and new guidelines became effective in June 2015. - Use of public debt conditionality: - Should normally be included in Fund arrangements and PSIs when a member faces significant debt vulnerabilities or when debt limits are preferable to, or complement, above-the-line fiscal conditionality. - Appropriate form differs between countries that normally rely on concessional external financing and those that do not. - For countries normally reliant on concessional official external financing: - Debt sustainability assessed using the LIC-DSF (conducted jointly by World Bank and Fund staff). - Assessment informed by risk of external debt distress and, where relevant, overall risk of debt distress. - Conditionality by risk category: - Low risk of external debt distress: limits on external public debt typically not required. - Moderate risk: program conditionality would include a PC on the present value (PV) of new external debt. The PC covers all forms of external debt (non-concessional and concessional) and is specified in PV terms (except under circumstances identified elsewhere). - High risk or in debt distress: non-concessional external debt allowed only under exceptional circumstances; conditionality would include a PC on the nominal level of non-concessional external debt, and a PC or indicative limit on the level of concessional external debt. - Exceptions where monitoring capacity is weak: - Pending improvements, debt conditionality would take the form of a PC specified in nominal terms on non-concessional external debt, coupled with a memorandum item on the nominal level of concessional external debt. - Exceptions for countries with significant links to international capital markets: - For moderate risk: may monitor debt accumulation through a PC on total nominal public debt rather than separate domestic and external limits. - For high risk: limits set as a PC on nominal level of foreign currency non-concessional debt and a PC or IT on nominal level of foreign currency debt. - Debt conditionality explicitly covering domestic borrowing warranted where overall risk of debt distress signals significant vulnerabilities related to domestic public debt unless already captured by fiscal conditionality. - For countries not normally reliant on concessional official external financing: - Debt sustainability assessments use the MAC DSA. - Public debt limits typically established in nominal terms; may limit total public debt or sub-categories. - Definitions and parameters: - Public sector debt should normally cover public and publicly guaranteed debt and typically refer to debt of the nonfinancial public sector. - Appropriate criterion for defining external debt (residency or currency) depends on country circumstances. - PV of debt at time contracted is calculated by discounting borrower’s future debt service on this debt using a unified discount rate of 5 percent. - Concessional debt is defined as debt with grant element of at least 35 percent. - Borrowing plan requirement: - Program documents should include a borrowing plan used to derive quantitative debt limits. - Borrowing plans help assess implementation of debt conditionality in program reviews. - Borrowing plan features typically disclosed: breakdown of sources of new borrowings across concessionality mix; maturity and currency composition; uses of financing. - Where disclosure could adversely affect ability to obtain favorable borrowing terms, adequate flexibility and discretion should be exercised. ### Payments arrears - Where external or domestic payments arrears exist, quarterly indicative targets or performance criteria may be set for phased elimination. - Concept of government must be clearly defined for these purposes (e.g., whether state-owned enterprises or social security and pension funds are included). - Measurement method for arrears should be specified. - Domestic arrears measurement and controllability issues: - Significant measurement and controllability problems may preclude use of domestic arrears limits as PCs. - Judgment on whether limits on domestic arrears should be PCs or indicative targets should consider commitment control, measurement systems, and data quality. _Italic: https://www.imf.org/-/media/files/publications/pp/2017/pp110917-2017-handbook-of-imf-facilities-for-low-income-countries.pdf_ ### 25. Continuous PCs always include, inter alia, commitments related to non-introduction of ### 25. Continuous PCs always include, inter alia, commitments related to non-introduction of ### Continuous periodic conditions (PCs) - Continuous conditionality covers: - (i) imposition or intensification of restrictions on the making of payments and transfers for current international transactions; - (ii) introduction or modification of multiple currency practices; - (iii) conclusion of bilateral payments agreements that are inconsistent with Article VIII; and - (iv) imposition or intensification of import restrictions for balance of payments reasons. - These continuous PCs are always included in the text of all Fund arrangements. - Given their non-quantitative nature, continuous PCs are usually not listed in the PC table. - Other continuous PCs typically include the non-accumulation of external payments arrears. - Where external debt ceilings are set at zero, these should also be specified as continuous PC. - Monitoring: staff should ascertain continuous compliance with the PC, based on representation by the authorities. ### H. Wage Bill Ceilings - Guidance: - The use of wage bill ceilings over extended periods of time should be avoided. - Ensure flexibility in application and require a clear justification in program documents. - Wage bill ceilings should be used selectively and limited to circumstances when they are designed as short-term measures when first-best options are not available. - Use of medium-term expenditure frameworks and strengthened budget and payroll systems is preferable and expected to obviate the need for wage ceilings over time. - When countries might need substantial technical assistance to develop such systems, wage ceilings may be needed in exceptional cases based on macroeconomic considerations. ### I. Adjustors — purpose and design principles - Purpose: - Protect the program from foreseeable shocks beyond the authorities’ immediate control. - Pre-specify the policy response to deviations from program assumptions without compromising the objective and predetermined nature of PCs applying to disbursement of Fund resources. - Adjustors are automatic and distinct from waivers, modifications of PCs, and adjustments during program reviews. - Main design principles: - Used sparingly, aimed at limiting need for major policy adjustments in face of uncertainty and volatility of key economic variables such as export prices, foreign financing, privatization receipts, or certain policy actions (bank recapitalization, changes in reserve requirements). - Simple and clearly defined, including in the TMU and PC table. - Intended for temporary deviations; lasting or large deviations should be addressed in program reviews. - Based on realistic projections; avoid adjustors that would effectively relax the program (example: allowing domestic bank financing to compensate for persistent overestimation of external financing). - Technical points: - By convention, adjustors are applied to ceilings/floors set for the PCs rather than to actual outturns. - If several adjustors apply to the same PC, they should apply to the net cumulative sum of deviations from the program assumptions for these variables. - Unless the potential shock affects money demand, an adjustor on net international reserves should have a symmetric adjustor (opposite sign) on net domestic assets. - Distinguish between project and program financing. - Common usages: - (i) Deviations from projected external program grants and lending (budget/balance of payments support) lead to adjustment of the NIR floor, the NDA ceiling, and the net domestic financing of the government ceiling. - (ii) Deviations from projected external project lending lead to adjustment of the overall fiscal balance floor if applicable (no adjustor needed if fiscal deficit concepts exclude project financing and expenditures). - (iii) Deviations from projected fiscal revenues lead to (usually partial) adjustment in the overall fiscal balance floor or net domestic financing of the government ceiling. - Often useful to apply adjustors symmetrically and apply symmetric caps. - Specification: - The TMU should define the adjustors, including variables subject to adjustment, explicit adjustment formulas, trigger events, caps, and thresholds. - The baseline projection for the economic indicator that gives rise to potential adjustment of PCs should be included in the PC table and a footnote should indicate the adjustor mechanism. ### Appendix III — Staff-Monitored Programs (SMPs) and track records (overview) - SMPs: - Informal agreements between national authorities and Fund staff to monitor implementation of the authorities’ economic program to establish a track record for a new Fund financial arrangement, Fund emergency assistance, or resumption of an existing arrangement gone off track. - SMPs resemble Fund-supported programs in form but are not required to meet UCT conditionality standards and are not endorsed by the Fund’s Executive Board. - Typical uses in LIC context: - When limited institutional capacity, domestic fragility or instability, weak economic policy implementation, or absence of financing assurances raise doubts about capacity/commitment to implement a UCT-quality program. - When a country’s program supported by a Fund financial arrangement has gone off track and a track record is needed to provide assurances that authorities can achieve program objectives. - When a member country has overdue obligations to the Fund; careful examination of financing situation is needed given probable subsequent request for a Fund arrangement or resumption. - Design of SMPs: - Should be consistent with goal to build a track record; policies should be sufficiently ambitious to provide a basis for proceeding to a Fund financial arrangement. - Staff should refrain from reaching an understanding on an SMP if a consistent policy package is not in place. - For a PRGT-eligible member, ultimate objective of an SMP is to help move to a UCT-quality program aimed at progressing toward a stable and sustainable macroeconomic position consistent with strong and durable poverty reduction and growth. - HIPC decision-point use: - Under certain circumstances, the Board could find that an SMP may count toward the track record for moving to the decision point under the HIPC Initiative if macroeconomic and structural reform policies under the SMP meet UCT-quality policy standards. - Reaching the HIPC decision point using an SMP of UCT-quality policies requires Board assessment that member’s performance under the SMP has been satisfactory for a sufficient period of time (in practice, a minimum of six months) since the Board’s initial determination of UCT-quality policy standards. - Arrears and RAP eligibility: - For members not eligible for a Rights Accumulation Program (RAP), an SMP with UCT-quality conditionality would qualify only if members have no arrears to the Fund, and, where they have arrears to the World Bank, an agreed financing plan and timetable for normalizing relations with the Bank are in place. - RAP-eligible members would not be required to clear existing arrears to the Fund either prior to or during an SMP, but would be expected to remain current on new obligations falling due to the Fund during the period of the SMP. - RAP-eligible members that have emerged from conflict with severely limited payments capacity may, to the extent payments capacity requires it, be allowed to accumulate new arrears to the Fund during the duration of the SMP. - SMP format and content: - SMPs should closely resemble a Fund-supported program in form, including specification of a quantified macroeconomic framework and structural reform agenda to be monitored through quantitative benchmarks (normally on a quarterly basis) and structural benchmarks. - Choice of indicators to monitor under an SMP should be similar to those appropriate under an eventual UCT-quality program. - SMP-supported policies should be consistent with member’s poverty reduction and growth objectives; requests for an SMP should be accompanied by a statement, normally in the LOI or MEFP, of how the program advances those objectives. - SMPs should include safeguards on social and other priority spending, such as an indicative floor on social and other priority spending, defined by the authorities, where possible. - If an EDD document exists, SMP policies should be consistent with the objectives of the EDD; if not, SMP documentation should outline the country’s medium-term poverty reduction and growth objectives and policies or refer to previous staff reports and update as necessary. - If an EDD document does not exist and the SMP is aimed at building a track record for an ECF arrangement or PSI, staff should alert the authorities on Definitions and Timeliness for EDD Documentation requirements (Appendix V). ### B. Choice of track record: SMPs, informal track records, and RCF support - Purpose: provide additional assurances about authorities’ capacity and commitment to implement a UCT-quality program aimed at moving toward or maintaining a stable and sustainable macroeconomic position. - Distinction from prior actions: - Track records are distinct from prior actions, whose primary purpose is to ensure implementation of measures immediately critical to underpin upfront implementation; prior actions may be necessary to start or continue an SMP when significant doubts exist about capacity and commitment. - Three types of track records for PRGT-eligible members: - (i) Informal track records: time-bound near-term policy actions and targets agreed informally between staff and authorities; require interdepartmental review and management clearance, typically based on a PN. - (ii) SMPs. - (iii) RCF-supported policies: typically involve time-bound indicative targets and structural benchmarks specified at time of request for an RCF disbursement. - Use cases and complementarities: - Informal track records: appropriate when reasonable near-term prospects that authorities will implement a UCT-quality program or take near-term corrective actions. - SMPs: appropriate when significant uncertainty exists about capacity and commitment to implement or bring back on track a UCT-quality program in near term (significant policy slippages, sharply deteriorated political/economic environment, absence of adequate financing assurances). - RCF support: can help build a track record when (i) a member experiences an urgent financing need caused by a sudden exogenous shock and (ii) there are adequate safeguards to the Fund’s resources. - Access to RCF assistance is not possible if the member has overdue obligations to the Fund; RCF support requires a safeguards assessment and authorization for staff access to the central bank’s most recently completed external audit reports and discussions with external auditors. - Where a clear and explicit policy framework is needed to establish a track record toward a UCT-quality arrangement, SMP is normally preferred. ### C. Track record period - Typical durations: - SMP track record period normally expected to cover a minimum of six months and two test dates. - SMP track record would not be expected to extend beyond 18 months (longer durations not precluded). - Track records for the RCF would normally cover at least six months. - Duration for informal track records is more flexible and depends on country circumstances. - Start date: - Track record period for an SMP, RCF, or informal track record would normally start around the time the relevant track record objectives and policies become clear. - Track record periods should start no earlier than the first time substantive policy discussions on near-term macroeconomic targets were held between the country team and the authorities, based on management approval of the policies and track record period; e.g., in a PN. - Track record periods should not start much later than the time staff and authorities reach understandings on specifics of the track record. ### Appendix IV. HIPC and MDRI — key elements and eligibility thresholds - The HIPC Initiative: - Launched in 1996, enhanced in 1999, and supplemented in 2005 by the MDRI. - The list of countries potentially eligible for debt relief under the HIPC Initiative was ring-fenced in 2006 and in 2010. - Eligibility criteria summary: - PRGT-eligible countries pursuing or program supported by the IMF by October 1, 1996 or having adopted such a program between October 1, 1996 and December 31, 2006, who have received or are eligible to receive assistance to the full extent available under traditional debt relief mechanisms, whose debt ratios at end-2004 and end-2010, after hypothetical application of traditional debt relief mechanisms, were assessed to have exceeded the HIPC Initiative debt thresholds. - To qualify for debt relief under the HIPC Initiative a member’s PV of external public and publicly-guaranteed debt based on end-2004 and end-2010 data must exceed 150 percent of exports or 250 percent of revenue. - The fiscal revenue threshold only applies if exports to GDP are at least 30 percent and revenue to GDP 15 percent. *Source: Handbook of IMF Facilities for Low-Income Countries (excerpts).* ### 2. If a country satisfies all eligibility criteria and decides to request HIPC Initiative assistance, a ### 2. If a country satisfies all eligibility criteria and decides to request HIPC Initiative assistance, a ### Eligibility and Decision Point Conditions - A Preliminary HIPC document (prepared jointly with the World Bank) will be issued to the Boards informing them that the country meets the HIPC eligibility criteria. The document will: - include a streamlined discussion of the debt situation and the policy track record and a loan-by-loan HIPC DSA; - provide preliminary estimates of the costs and timing of debt relief; and - discuss in broad terms the conditionality envisaged for reaching the completion point. - Conditions that must be met to reach the HIPC decision point (the point at which the Trustee decides whether a member qualifies for assistance under the Initiative and the amount of assistance to be provided): - The country’s debt burden indicators must be above the HIPC Initiative debt sustainability thresholds based on the most recent data for the year immediately prior to the decision point. - A track record of policy performance under a Fund-supported program immediately preceding the decision point is required. While the HIPC Trust Instrument states that normally a three-year track record is needed, in practice a track record with a minimum of six months’ duration has been required. - Programs that count toward qualification include those supported by ECF, SCF, or Extended Arrangements, or, on a case-by-case basis as determined by the Board, SBA, RAP, RFI, and RCF. - Under the RAP, a member in arrears to the Fund will be able to earn rights, conditioned on satisfactory performance under an adjustment program monitored by the Fund, toward a disbursement from the Fund once the member’s overdue obligations have been cleared and upon approval of a successor arrangement by the Fund. Somalia and Sudan are the only two remaining countries that are eligible for the RAP. - An SMP can count toward the track record when the Executive Board agrees that its macroeconomic and structural policies meet the policy standards associated with programs supported by UCT arrangements or under the PRGT. Liberia was the only country thus far to have used an SMP to reach the decision point. - A satisfactory poverty reduction strategy set out in a PRSP, I-PRSP, PRSP preparation status report or annual progress report (APR) must be in place and must have been subject to an analysis in a Joint Staff Advisory Note (JSAN) also issued to the Executive Board. - The PRS document must have been issued to the Executive Board normally within the previous 12 months but in any case within the previous 18 months. ### Interim HIPC Assistance - A country that has reached decision point may begin receiving interim HIPC assistance subject, inter alia, to: - (i) the existence of satisfactory participation assurances from creditors (in practice, assurances from creditors jointly holding at least 70 percent of HIPC-eligible debt); and - (ii) the requirement that the Fund-supported program remains on track in order for interim assistance to be disbursed. - Disbursement limits for interim assistance: - A country may receive up to 20 percent (in NPV terms) of total assistance committed for each 12-month period following the decision point and up to 60 percent of the total of the assistance committed prior to completion point - (or 25 percent and 75 percent, respectively, in exceptional circumstances). ### Completion Point Conditions - Conditions to reach the HIPC completion point (when the Trustee decides to disburse remaining undisbursed assistance committed for a qualifying member, together with any MDRI or MDRI-like relief): - A track record of at least six months of policy performance under an ECF, SCF, or Extended Arrangement has been established in the period immediately preceding the completion point. - The member has a stable macroeconomic position. - A full PRSP must have been adopted and satisfactorily implemented for at least one year preceding the completion point, as evidenced by an APR issued to the Executive Board and subject to a JSAN. - The APR must have been issued normally within the previous 12 months but in any case within the previous 18 months. The JSAN must also have been issued to the Executive Board. - All floating completion point triggers, the structural conditions set at the decision point, must have been implemented. - Satisfactory participation assurances from creditors (in practice, assurances from creditors jointly holding at least 80 percent of HIPC-eligible debt) should have been obtained. ### Documentation, Analysis, and Timelines - Program documents are expected to adequately reflect progress under the HIPC Initiative, including: - status of preparation or implementation of an I-PRSP/PRSP, and implementation of the completion point triggers; - possible timing for reaching the completion point and any obstacles toward it. - Separate documents are prepared for both the decision point and the completion point. - HIPC debt relief analysis (HIPC DRA): - Requires a loan-by-loan data reconciliation to determine the member’s current external debt situation. - Is a joint exercise among SPR and World Bank staff and, where appropriate, the relevant regional development bank, which dispatch a mission to the country to perform the data reconciliation. - The entire process of conducting the HIPC DRA and preparing an HIPC document may take between 18 and 24 weeks from pre-mission preparation to Board meeting. - The HIPC DRA should not be confused with the LIC DSA, which is undertaken annually jointly by Bank and Fund staff and employs a different methodology. - Treatment of prospective debt relief: - May differ between the macro framework (which is expected to reflect realistic assumptions, including prospects for debt relief) and the HIPC DRA (which should reflect the legal situation regarding debt and demonstrate the unsustainable debt burden before debt relief). ### MDRI (Multilateral Debt Relief Initiative) - The HIPC Initiative was supplemented in 2005 by the MDRI, which was to provide 100 percent debt relief on eligible debt to eligible countries, including HIPC-eligible countries that have reached the HIPC completion point and whose performance since reaching the completion point has not deteriorated substantially. - The MDRI was provided by four IFIs—the IMF, IDA, AfDB, and IADB. - A member’s eligibility for assistance under the MDRI-I Trust was based on: - its PRGT-eligibility; - annual per capita income of US$380 or less on the basis of the 2004 gross national income (Atlas method) from the World Bank’s Operational Manual as updated on July 21, 2005; - has debt outstanding to the Fund, including to the Fund as Trustee, as of December 31, 2004; and - in the case of a HIPC eligible or potentially eligible member, the member has reached the completion point under the HIPC Initiative. - Status of the MDRI: - The MDRI is no longer an active initiative as there is currently no MDRI eligible debt outstanding and the MDRI-I and MDRI-II Trusts were accordingly liquidated in 2015. - Questions on the HIPC Initiative and the MDRI should be addressed to SPR’s Debt Policy Division. ### Interaction with Poverty Reduction Strategy (PRS) Requirements - The HIPC Initiative introduced in 1999 the PRS approach and established documentation requirements centered on the PRSP. The same HIPC-based PRS documentation was used to underpin Fund-supported programs for PRGT-eligible countries. - The PRS requirements under the HIPC Initiative remain unchanged by the Fund’s June 22, 2015 policy on poverty reduction strategies; countries under the HIPC Initiative continue to be subject to the same PRS documentation requirements in place before June 2015 for the purposes of reaching decision and completion points. - Key PRS documentation notes (contextual): - The PRS document (PRSP, I-PRSP, PRSP preparation status report, or APR) required for HIPC decision and completion points must be subject to JSAN analysis and be issued to the Executive Board normally within the previous 12 months but in any case within the previous 18 months. *International Monetary Fund — Appendix IV. HIPC AND MDRI (extracted content).* ### APPENDIX V. POVERTY REDUCTION STRATEGY ### APPENDIX V. POVERTY REDUCTION STRATEGY ### Overview and purpose - The Economic Development Document (EDD) is the PRS-related documentation to be issued to the Executive Board as an EDD that has been the subject of staff analysis in the staff report of a request for an ECF arrangement or PSI, or a review under an ECF arrangement or PSI. - Where the EDD does not cover a 12-month forward-looking period, the member is expected to document in the LOI/MEFP: - (a) the procedures underway to establish a successor EDD; and - (b) the relevance of the current EDD for the coming year. - EDDs must meet minimum standards and can take two forms: - i) existing national development plans documenting countries’ PRS; or - ii) a new EDD focused on elements of the PRS that are macro-relevant under a Fund-supported program (around 10-15 pages). - Authorities should be informed at an early stage about PRS and EDD requirements when an ECF- or PSI-supported program is under consideration (including cases supported under an SMP, RCF, or SCF), and PRS production can be aligned with other domestic policy cycles. - The EDD (existing national PRS or newly prepared) is to be accompanied by a cover letter from the member country to the MD, which will be deemed part of the EDD issued to the Board. The cover letter should: - describe the role of the national document issued as an EDD or the new EDD in guiding the member’s PRS and the participatory process; and - inform the date when the national document issued as the EDD was publicly announced and the period it is covering. - Where parts of an existing national development plan are outdated or missing minimum content, the cover letter may be used to update or include complementary analysis to meet minimum standards and align with good practice guidelines. ### Minimum standards — core elements required in an EDD (Appendix Box 2) - Strategy or plan: - The EDD should describe an overall strategy or plan for poverty reduction and growth. - Specific policy elements: - The EDD should describe how the strategy would be pursued through specific policies, including macroeconomic and financial policies. These could include specific projects, infrastructure plans, and/or goals for public expenditure prioritization. - The relationship between these policy elements and the overall strategy should be clear. - Launch date and timeframe for implementation: - The EDD should define a launch date and implementation period. Example given: the strategy could indicate it became effective on July 1, 2016 and covers the period 2016–2020. - Extent of participatory process: - The EDD should note whether there was a participatory process and, if so, the nature of that process. - If a proposed EDD falls short of minimum standards: - Staff will indicate additional content needed. - A newly-drafted, streamlined EDD could be modified to cover missing content ahead of submission to the Executive Board. - If a national PRS fails to meet minimum standards, staff could request a newly-prepared EDD or ask the member to provide the missing elements via the cover letter to the MD. - ECF or PSI staff reports and LOIs/MEFPs should discuss how significant weaknesses in the poverty reduction strategy, including those identified through the PIR, have been addressed. ### Good practice guidelines for an EDD (Appendix Box 3) A comprehensive and operationally relevant EDD or associated cover letter would include the following elements beyond minimum standards: - Existing poverty situation and trends: - Describe the existing poverty situation and recent trends, referencing direct and indirect measures such as household income-expenditure surveys and health/social indicators. - Factors influencing poverty: - Identify recognized determinants of poverty and known bottlenecks to poverty reduction to guide strategy and policy choice. - Strategy for poverty reduction: - Describe the member’s PRS with emphasis on macro-related aspects: approaches to foster sustained, strong growth in national incomes and policies to ensure inclusive income growth (e.g., safety nets, better targeting of expenditures). - Reference progress in implementing policies under earlier Fund-supported program(s). - Specific policies: - Document intended policies under the PRS and their targeted impact on poverty reduction and social development, including priorities for public spending (health, education), financial inclusion for households and SMEs, and steps to reduce bureaucratic impediments to investment and job creation. - Include discussion of institutional capacity building, technical assistance needs, and expected donor coordination and contributions. - Fiscal and debt framework: - Prioritize development spending needs based on a realistic assessment of fiscal space. - Define priority social spending and indicative targets in the LOI/MEFP of ECF/PSI-supported program documentation. - Discuss how financing the PRS would impact the country’s debt strategy. - Spending effectiveness: - Note steps being taken to strengthen the efficiency of public spending and value for money in public spending programs. - Safety nets and risk mitigation: - Discuss steps to mitigate negative spillovers and risks from adjustment policies and external shocks (e.g., social safety nets, arrangements to foster food security). - Participatory process: - Countries are strongly encouraged to seek Civil Society Organizations (CSOs) inputs during EDD preparation; authorities are responsible for consultation levels to ensure broad ownership. ### Participatory processes, Bank assessment, and publication - Participatory processes are strongly encouraged but not required: - The EDD must clarify whether a participatory process took place and, if so, its nature. - An assessment letter from World Bank staff must be requested when an EDD is received by IMF staff: - It provides Bank staff’s perspective on strengths and weaknesses of the member’s strategy and identifies priority action areas and risks for implementation. - It should be requested at the time an EDD is received and, following clearance by Bank Management, will be circulated to the Fund Board at the same time as the EDD to help inform the Board. The assessment letter will not be published by the Fund. - Distribution and publication: - EDDs are not distributed in paper format; they are registered by SEC as official Board documents and posted to IMF Connect for Executive Directors and designated member authorities. - Publication of PRS documents and JSANs is voluntary but presumed; a member’s explicit consent is required for publication. - The MD will not recommend approval of (i) an ECF arrangement or completion of a review under such arrangement, or (ii) an HIPC decision point or completion point decision, or (iii) a member’s request for initial approval or review of a PSI, if the member does not explicitly consent to publication of the PRS-related document (I-PRSP, PRSP, PRSP preparation status report, PRSP annual progress report, or EDD). - Staff should obtain explicit consent to publication during the mission and the management clearance note should state that the authorities have consented to publication. ### Monitoring PRS implementation — PRS Implementation Review (PIR) - Staff reporting expectations: - Staff are expected to report to the Board on PRS implementation through regular reporting and a periodic in-depth analysis. - Regular staff reports would discuss relevant developments in implementing policies supporting the member’s PRS (e.g., budget resource prioritization and outturns, adoption of social safety nets, progress in growth-promoting reforms). - PIR specifics: - The new PRS policy involves less frequent Fund staff reviews; a PRS Implementation Review (PIR) is expected to be conducted by the time of the fourth review under the ECF arrangement or PSI (i.e., once for any given ECF arrangement or PSI). - The PIR is not mandatory for decisions on ECF and PSI support but is considered a good practice based on informal consultations and dialogue with country authorities and stakeholders, including the World Bank. - The PIR outcome is to be documented in the staff report and is expected to cover: - (i) performance relative to PRS benchmarks and monitoring indicators; - (ii) observed linkages between the PRS and national systems and processes (e.g., budget monitoring and planning); and - (iii) the coming year’s policy intentions, particularly as reflected in the budget. - The PIR is encouraged as a “good practice” that could be conducted independent of a Fund program relationship, such as in Fund surveillance activities. ### Poverty Reduction Strategy under the HIPC Initiative - For HIPC decision or completion points: - HIPC-eligible countries must build a track record of satisfactory performance on the basis of programs supported by, inter alia, the ECF. - The new PRS policy applies to ECF arrangements preceding decision and completion points under the HIPC Initiative. - HIPC Instrument requirements remain unchanged: - Remaining HIPC-eligible countries must continue to document their PRS in line with HIPC Initiative PRS documentation requirements to reach decision and completion points. - An EDD used for ECF financing could be modified, with updates and confirmation of an appropriate participatory process as required for a PRSP, and reissued as a PRSP to the Board to meet HIPC decision or completion point requirements. - The member would still need to produce an APR to confirm satisfactory implementation of the PRS for at least one year by the HIPC completion point. - PRS documents defined for HIPC (Appendix Box 4): - Interim Poverty Reduction Strategy Paper (I-PRSP): a transitional document setting out a preliminary poverty reduction strategy as a precursor to a first full PRSP; use of I-PRSPs will be phased out as countries are expected to produce their first full PRSPs. - PRSP Preparation Status Report: reports updates to the preliminary strategy set out in an I-PRSP in anticipation of a full PRSP. - Poverty Reduction Strategy Paper (PRSP): prepared in a participatory process involving a broad range of stakeholders; sets out a comprehensive three-year poverty reduction strategy (may be extended to as much as five years) assessing poverty determinants and proposing integrated multiyear institutional, structural, and sectoral interventions within a consistent macroeconomic framework. - Annual Progress Report (APR): reports on implementation of the PRSP and updates it as appropriate. *Source: APPENDIX V. POVERTY REDUCTION STRATEGY, Handbook of IMF Facilities for Low-Income Countries.* ### 23. Fund staff will recommend approval of an operation under the HIPC Initiative if, among ### 23. Fund staff will recommend approval of an operation under the HIPC Initiative if, among others, the PRS requirements for HIPC Initiative decisions set out in the PRG-HIPC Trust Instrument are met ### PRS requirements for HIPC decision and completion points - Decision point documentary requirements: - A satisfactory PRS must be set out in an I-PRSP, PRSP preparation status report, PRSP or APR that has been issued to the Board normally within the previous 12 months but in any case within the previous 18 months, and which has been analyzed in a JSAN that has also been issued to the Board. - Completion point documentary and implementation requirements: - A requirement for the satisfactory implementation of a full PRSP for at least a year, as evidenced by an APR that has been issued to the Board normally within the previous 12 months (but in any case within the previous 18 months) and has been analyzed in a JSAN also issued to the Board. - Timing of Board determinations: - The Executive Boards’ determinations as to whether the HIPC Initiative decision point and completion point conditions related to the members’ PRS are met will be made at the time of the decision and completion points rather than at the time the JSAN for the PRS document is submitted to the Boards (including where PRS documents were circulated to the Boards some time before the HIPC Initiative decision). ### Appendix Box 5 — Summary of PRS-Related Conditions for Assistance Under the HIPC Initiative - At the decision point: - A member shall have in place a satisfactory PRS set out in an I-PRSP, PRSP preparation status report, PRSP or APR that has been issued to the Board normally within the previous 12 months but in any case within the previous 18 months, and which has been analyzed in a JSAN that has also been issued to the Board. - At the completion point: - A member shall have in place a PRSP and implemented satisfactorily the strategy therein described for at least one year by the completion point. - Evidence of satisfactory implementation of the PRSP should be provided in an APR that has been issued to the Executive Boards normally within the previous 12 months but in any case within the previous 18 months and analyzed in a JSAN that has also been issued to the Board. ### Joint Staff Advisory Notes (JSANs) for HIPC purposes - Role and retention: - JSANs retained their role for the PRS documentation required to reach the decision and completion points under the HIPC Initiative. - Purpose and content: - The JSAN is prepared jointly by the staffs of the Bank and the Fund containing an analysis of the strengths and weaknesses of the PRS of the member concerned and identifying priority areas for strengthening the PRS during implementation. - For an interim PRSP, the JSAN should focus on the roadmap for preparing the strategy, provide advice on these preparations, and consider the need for technical assistance. - Tone and focus: - A key objective is to provide focused, frank, and constructive feedback to country authorities. - JSANs should identify a limited number of priority areas in the PRS expected to be addressed, including in the context of existing or possible future ECF-supported programs. - While frank, the JSAN should avoid normative language assessing the PRS as a whole or language suggesting that the PRS document meets or falls short of overall standards. - Concluding discussion points: - A JSAN for an I-PRSP or PRSP, if to be discussed, should end with suggested points for discussion by the Executive Boards of the Fund and the Bank and highlight: - (i) priority action areas for strengthening the PRS; and - (ii) areas where (a) there are inconsistencies between the PRS and its policy framework and the analytical basis that underpins Bank- and Fund-supported programs that reflect existing analysis; or (b) further analysis is needed or adjustments to the strategy are expected. - Preparation responsibilities: - Bank and Fund staffs should divide responsibilities in preparing the JSAN, contributing in their areas of primary institutional competencies while reaching a common understanding in overlapping areas. ### Other issues: circulation, Board discussion, and publication - Circulation to the Boards: - For the HIPC Initiative, the PRS documents and the corresponding JSANs are issued to the Executive Board in the EBD series as soon after the PRS documents are officially received. - A PRSP or I-PRSP will be issued together with the accompanying JSAN for Board discussion when feasible. If the JSAN is not ready, issuance of the PRS document should not be held up. - JSANs can be issued for discussion or information to the IMF Executive Board. APRs are normally issued for information of the Boards (except for APRs and the associated JSAN for APRs used to document one year of satisfactory implementation of the PRS for the purposes of the HIPC completion point which are issued for discussion). - Board discussion sequencing and circulation periods: - Executive Board discussions at the Bank and the Fund should preferably be scheduled within five working days of each other; the institution taking an operational decision would normally have the later Board date. - The Fund’s minimum circulation period for PRS documents and JSANs is two weeks, with an additional business day required for document dissemination. - The Bank generally requires a three week circulation period and additional time for document preparation. - In cases in which operational decisions are being made at both institutions, the sequencing of Board meetings will need to be made judgmentally. - Publication policy: - The publication of PRS documents and JSANs is voluntary, but presumed. A member’s consent is required for their publication. - The Managing Director (MD) will not recommend approval of: - (i) an ECF arrangement or completion of a review under such arrangement, - (ii) an HIPC decision point or completion point decision, or - (iii) a member’s request for initial approval or review of a PSI, - if the member concerned does not explicitly consent to the publication of the PRS-related document (i.e., I-PRSP, PRSP, PRSP preparation status report, PRSP annual progress report, or EDD). - Staff should discuss the authorities’ publication intention during the mission and obtain explicit consent prior to submitting relevant UFR or PSI documents to management for clearance. The management clearance note should specifically state that the authorities have consented to publication. - When authorities’ consent has been received, the SEC’s transmittal memo to the PRS document should indicate this, and PRSPs, APRs and EDDs may be published immediately after formal transmission to the Bank and/or the Fund when circulated for information. --- ### Appendix VI. PRGT eligibility — key elements and numerical thresholds - Review cycle: - PRGT eligibility will be reviewed by the Executive Board every two years, with the next review scheduled for 2019. - Entry criteria (summary): - A Fund member will be added to the list of PRGT-eligible countries if: - (i) its annual per capita gross national income is below the operational IDA cut-off (based on the latest available qualifying data)—For small and microstates, see literal c. below; and - (ii) the sovereign does not have capacity to access international financial markets on a durable and substantial basis as defined below. - Graduation criteria (summary): - A PRGT-eligible country will graduate if it meets either or both the income and market access criteria, and does not face serious short-term vulnerabilities: - Income test: - The country’s annual per capita GNI: (a) has been above the IDA operational cutoff for at least the last five years (for which qualifying data are available); (b) has not been on a declining trend in the same period (comparing the first and the last relevant annual data); and (c) based on the latest available qualifying data, is at least twice the operational IDA cutoff. - Market Access test: - The sovereign has the capacity to access international financial markets on a durable and substantial basis, and their annual per capita GNI is above the IDA operational cutoff (based on the latest available qualifying annual data) and has not been on a declining trend during the last five years for which qualifying data is available, comparing the first and last relevant data available. - Absence of short-term vulnerabilities: - The country must not face serious short-term vulnerabilities, including: (i) the absence of risks of a sharp decline in income, or of a loss of market access; (ii) limited debt vulnerabilities as indicated by the most recent debt sustainability analysis, including, for members whose debt has been assessed under the DSF for LICs, a risk of external debt distress that is moderate or less and with the member not facing a heightened overall risk of debt distress reflecting significant vulnerabilities related to domestic debt and/or private external debt; and (iii) confirmation that overall debt vulnerabilities remain limited taking into account developments and prospects since the most recent DSA. - Exception: - For a member whose annual per capita GNI exceeds the applicable income graduation threshold by 50 percent or more, graduation from PRGT eligibility will not be subject to the assessment of serious short-term vulnerabilities. However, such an assessment by the Executive Board will be required if the member has an “IDA-grant only” or “IDA loan-grant mix” status at the World Bank. - Measurement details and qualifying data: - Qualifying data: data in respect of which the most recent observation relates to a calendar year that is not more than 30 months in the past at the time of the assessment. - From July 2017, the operational cut-off for IDA eligibility is US$1,165, based on 2016 GNI income per capita. The operational cut-off is updated annually in July. - Market access criterion numerical thresholds: - Under the first test, evidence of capacity would normally be public sector issuance or guaranteeing of external bonds or disbursements under public and publicly guaranteed external commercial loans in international markets during at least two and three of the last five years (for which data are available) for entry and graduation, respectively, in a cumulative amount over that period equivalent to at least 25 and 50 percent of the country’s Fund quota, for entry and graduation, respectively, at the time of the assessment. - As an alternative, a country could be deemed to meet the market access criterion if there was convincing evidence that the sovereign could have tapped international markets on a durable and substantial basis even though the scale or duration of actual public sector borrowing fell short of the specified thresholds. - Small and microstate exceptional treatment: - Definitions: - Small countries: population below 1.5 million. - Microstates: population below 200,000. - Entry for small countries (microstates): - Will be added to the PRGT eligibility list if: (i) the sovereign does not have capacity to access international financial markets on a durable and substantial basis; and (ii) per capita GNI is less than twice (five times) the IDA operational threshold (based on the latest available annual qualifying data). - Graduation for small countries (microstates) — three criteria (income or market access, and absence of serious short-term vulnerabilities): - Income: annual per capita GNI: (i) has been above the IDA operational threshold for at least the last five years; (ii) has not been on a declining trend in the same period; and (iii) is currently at least three (six) times the IDA threshold (based on the latest available qualifying data) for small countries (microstates). - Market access: same market access standard as for other countries, and the member’s annual per capita GNI is above the IDA operational cutoff and has not been on a declining trend during the last five years. - Absence of serious short-term vulnerabilities: small countries (microstates) that meet either income or market access will graduate if they do not face serious short-term vulnerabilities as described above. - With respect to the risk of a sharp decline of income, a small country (microstate) generally would not be expected to graduate if there is a serious risk of a decline in income to less than three (six) times the operational IDA cutoff. *Source: Excerpts from Appendix V, Appendix VI, and related sections of the provided IMF handbook content.* ### 3. The CCR Trust has two windows: (i) a Post-Catastrophe Relief (PCR) window, to provide ### 3. The CCR Trust has two windows: (i) a Post-Catastrophe Relief (PCR) window, to provide ### Overview - The CCR Trust has two windows with different purposes, qualification criteria, and assistance terms: - Post-Catastrophe Relief (PCR) window: exceptional assistance after catastrophic natural disasters. - Catastrophe Containment (CC) window: assistance to contain fast-spreading public health disasters with international spillover potential. - Debt relief under either window is not provided on debt scheduled to be repaid with assistance of other debt relief trusts administered by the IMF or via the other window of the CCR Trust. - Provision of debt relief is conditional upon the availability of resources in the CCR Trust at the time of the decision on the relief. ### Post-Catastrophe Relief (PCR) Window — Eligibility and Scope - Eligibility: - Limited to eligible low-income member countries experiencing an exceptional balance of payments need arising from a catastrophic natural disaster that has: - directly affected normally at least one-third of the population; and - destroyed more than one-quarter of the country’s productive capacity, as estimated by early indications such as destroyed structures and impact on key economic sectors and public institutions, or caused damage deemed to exceed 100 percent of GDP. - The assessment of the impact should be based on available information, including preliminary estimates. - Flow relief: - Qualifying members would receive flow relief on debt service to the IMF falling due in the period from the date of the debt relief decision to the second anniversary of the disaster. - Relief applies to debt outstanding at the time of the disaster (on which regular scheduled debt service payments were made before the disaster) plus any IMF disbursement made normally within four months following the disaster. - Stock (debt cancellation) relief: - Full cancellation of a country’s stock of debt to the IMF is possible in more severe cases as part of a concerted debt relief effort by official creditors. - Conditions for considering debt cancellation: - Disaster has created or exacerbated substantial and protracted balance of payments needs arising from recovery efforts expected to persist beyond the flow relief period. - Resources freed by debt stock relief are critical for meeting these needs. - Updated DSA after the disaster indicates the member has a high level of debt in relation to GDP or exports prior to delivery of any debt relief, typically resulting in an assessment that the member is in debt distress or has a high risk of debt distress. - Timing and assessment: - Decision could be made at any point in the period from six to 24 months following the disaster (subject to the track record requirement). - Assessment based on catastrophe’s long-term impact on infrastructure, human capital, and policy capacity, prospects for GDP, exports and revenues, and the country’s debt vulnerabilities as measured by an updated DSA. - Additional requirements for debt stock relief: - (i) A concerted effort within the international community, evidenced by satisfactory assurances regarding debt relief to be provided by the member’s other official sector creditors whose debts account for at least eighty percent of the member’s total sovereign external debt outstanding to official creditors (less amounts due to the Fund) at the time of the disaster; - (ii) The member has provided assurances that it will cooperate in an effort to find solutions to its balance of payments problems and will refrain from any inappropriate policies that could compound these problems; - (iii) The member has established a track record of adequate macroeconomic policies, normally for at least six months immediately preceding the decision to disburse debt stock relief. - Eligible debt stock: - Debt outstanding on the second anniversary of the disaster or on the date of the IMF decision to disburse debt stock relief, whichever is later. ### Catastrophe Containment (CC) Window — Eligibility and Assistance Terms - Purpose: - Provide immediate debt relief to eligible low-income member countries experiencing a balance of payments need arising from a qualifying public health disaster. - Qualifying public health disaster definition: - Life-threatening epidemic with sustained presence and spread across several areas of the afflicted country, causing significant economic disruption and creating a balance of payments need, and which has the capacity to spread or is already spreading to other countries. - The significant economic disaster is characterized by at least: - (i) a cumulative loss of real GDP of 10 percent; or - (ii) a cumulative loss of revenue and increase of expenditures equivalent to at least 10 percent of GDP. - Disruption is measured relative to staff estimates made prior to the disaster. - Assessment could be guided by national authorities, the World Health Organization, the World Bank, and other relevant agencies. - Policy framework requirement: - The Executive Board must determine that the country has in place an appropriate macroeconomic policy framework to address the balance of payments need and an appropriate ensuing policy response. - Request process: - Member must provide a letter of intent explaining the nature of the public health disaster, the balance of payments needs created, and measures and policies being pursued to contain the disaster (including reallocation of budgetary resources for containment purposes) and address balance of payments problems. - If there has recently been a disbursement under a current arrangement or under the RCF, the member may update and refer to existing policy undertakings in the letter of intent. - Immediate debt relief mechanics: - Eligible low-income countries receive up-front grants to immediately pay off upcoming debt service to the IMF on eligible debt, up to a maximum of 20 percent of quota. - Only debt outstanding on the date of the decision, which is not in arrears, is eligible for relief. - Exceptional larger support — three cases: - Case 1: Exceptionally burdensome near-term IMF debt service - Relief could be provided in the amount necessary to eliminate the exceptional burden, not to exceed the amount of debt service due in the period of two years since the date of the decision. - Case 2: Broad-based international effort - If a broad-based international effort exists and a strong expectation that IMF assistance would be catalytic from a significant majority of official bilateral creditors on similar terms, relief could be provided to repay the full amount of the member’s eligible debt to the Fund falling due within the period during which bilateral official creditors are expected to provide debt relief, up to a maximum of two years from the date of the decision. - Case 3: Country rated at high risk of debt distress or in debt distress - Additional assistance could be provided to prevent significant deterioration of debt indicators (relative to pre-epidemic projections) resulting from the country taking on new debt to respond to the epidemic. - Debt relief would be in the amount needed to ensure that the eligible debt to the Fund incurred in response to the qualifying public health disaster has a grant element of 80 percent. - IMF assistance in response to the qualifying public health disaster is assistance committed and disbursed in the period from the onset of epidemic up to the date of the decision determining qualification for the assistance and which was made available to the member to address its balance of payments needs created by the public health disaster. - Procedural note: - When the Managing Director sees merit in providing such additional exceptional support, a consultation with the Executive Directors is required in the form of an informal meeting before the proposal is issued for Board consideration. - Historical example: - Assistance to the three Ebola-affected countries (Guinea, Liberia, and Sierra Leone) via the CC window was provided in February—March 2015 in the total amount of SDR 68 million (equivalent to US$95.5 million). ### Key numeric thresholds and precise terms (exact as in source) - PCR qualification thresholds: - directly affected normally at least one-third of the population; - destroyed more than one-quarter of the country’s productive capacity; - caused damage deemed to exceed 100 percent of GDP. - PCR timing and coverage: - flow relief on debt service to the IMF falling due from the date of the debt relief decision to the second anniversary of the disaster; - IMF disbursement made normally within four months following the disaster counted for relief. - Debt stock relief timing: - decision could be made at any point in the period from six to 24 months following the disaster; - requirement of satisfactory assurances by other official creditors whose debts account for at least eighty percent of the member’s total sovereign external debt outstanding to official creditors (less amounts due to the Fund) at the time of the disaster; - track record normally for at least six months immediately preceding the decision. - CC Window numerical criteria: - immediate up-front grants to pay IMF debt service up to a maximum of 20 percent of quota; - qualifying public health disaster characterized by at least a cumulative loss of real GDP of 10 percent or a cumulative loss of revenue and increase of expenditures equivalent to at least 10 percent of GDP; - exceptional relief not to exceed the amount of debt service due in the period of two years since the date of the decision in Case 1; - exceptional relief up to a maximum of two years from the date of the decision in Case 2; - grant element target of 80 percent for eligible debt in Case 3. - Historical disbursement example: - SDR 68 million (equivalent to US$95.5 million) provided in February—March 2015 to Guinea, Liberia, and Sierra Leone via the CC window. *pp110917-2017-handbook-of-imf-facilities-for-low-income-countries - 3. The CCR Trust has two windows: (i) a Post-Catastrophe Relief (PCR) window, to provide* --- _Source: https://www.imf.org/-/media/files/publications/pp/2017/pp110917-2017-handbook-of-imf-facilities-for-low-income-countries.pdf_