## ppea2020017

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---

### Purpose and role of the CCRT
- Provides debt relief to the Fund’s poorest and most vulnerable members to free up additional resources to cope with catastrophic disasters, including epidemics.
- Provides grants for debt relief in the wake of a catastrophic natural disaster or during a major public health disaster with international spillover potential.
- Aimed at freeing up budget resources for the poorest and most vulnerable countries with severely constrained capacities to handle such disasters.
- Used only in exceptional circumstances to complement the Fund’s primary function of providing temporary balance of payments support.
- Can help catalyze international donor support and capture positive externalities from containment efforts.
- The Fund’s ability to provide CCRT debt relief is limited by availability of grant resources and linked to donors’ willingness to replenish the CCRT.

### Historical use
- Haiti earthquake (2010): exceptional debt stock relief of SDR 178 million.
- Ebola outbreak enhancement (February 2015): SDR 68 million in debt service relief to Guinea, Liberia, and Sierra Leone.
- Complemented by emergency lending assistance of SDR 85 million approved by the Executive Board in fall 2014.

### How the CCRT operates
- Two windows:
  - Post-Catastrophe Relief (PCR) window — for catastrophic natural disasters.
  - Catastrophe Containment (CC) window (“health crisis window”) — for major public health disasters. This paper focuses on the CC window.
- CC window features:
  - Provides grants to pay off upcoming debt service to the Fund during major public health disasters.
  - Eases cash pressures when diverting scarce resources to service Fund obligations would be highly problematic.
  - Modest in liquidity impact but increases concessionality of Fund support and reduces debt burden on vulnerable countries.
  - Not primarily a tool for speedy assistance: eases cash pressures spread over two or more years and modest in size (generally 0—20 percent of quota) compared with emergency financing facilities that can provide 50 percent in a single disbursement.

### Eligibility and qualification for CC window
- Access is narrowly ringfenced due to scarce grant resources and exceptionality of debt relief.
- Eligibility limited to PRGT-eligible countries whose annual per-capita gross income level is below the prevailing IDA operational cut off, or twice that cut-off for small states.
- Currently 33 members eligible to access the CCRT, of which 29 have outstanding credit to the IMF.
- CCRT CC window covers only eligible debt owed to the Fund (PRGT or GRA at time of determination); Trust not usable by members with no outstanding debt to the Fund.
- Support expected to be provided as part of a broad package of bilateral and multilateral donor support.
- Qualification triggers under CCRT rules:
  - Executive Board determines, based on available information, that the country is experiencing a balance of payment need arising from a Qualifying Public Health Disaster (QPHD) that has occurred in the member’s territory, defined as:
    - (1) the sustained presence of a life-threatening epidemic that has spread across several areas of the member’s territory, causing significant economic disruption and creating a balance of payments need; and
    - (2) the epidemic has the capacity to spread, or is already spreading, rapidly both within and across countries, producing or threatening significant economic disruption and loss of life.
  - Executive Board determines that the macroeconomic policy framework outlined in the letter of intent is appropriate to address the balance of payments need.
- Economic disruption normally characterized by at least:
  - (a) a cumulative loss of real GDP of 10 percent; or
  - (b) a cumulative loss of revenue and increase of expenditures equivalent to a least 10 percent of GDP.
- Determinations may draw on assessments by national authorities, WHO, World Bank, and other relevant agencies; QPHD occurrence expected to be rare.

### Magnitude and form of relief
- Debt relief under CC window provided as grants to immediately pay off upcoming debt service to the Fund.
- Normally capped at the equivalent of 20 percent of quota, with higher amounts permitted under specific circumstances.
- Executive Board may increase grant support beyond 20 percent of quota in some circumstances, including to cover not more than the total amount of eligible debt falling due to the Fund during the ensuing two-year period.
- Provision of CCRT relief contingent on availability of funds in the trust.
- Eligible debt defined as all of the member’s debt to the Fund outstanding as of the date of determination, with specified exclusions.

### Funding status as of end-2019 and recent fund-raising
- CCRT balance as of end-December 2019: SDR 150 million.
- 2015 bilateral fund-raising campaign results:
  - Raised SDR 61 million in new grants from donors.
  - Transfers of MDRI-II resources of SDR 39 million.
- Underfunding exacerbated by doubling of quotas under the 14th quota review, which doubled size of eligible debt under CCRT.
- Historical initial funding sources included repurposing PCDR Trust (SDR 102 million) and transfers from MDRI-I and MDRI-II (SDR 13 and SDR 39 million, respectively).

### COVID-19 implications and potential financing needs
- COVID-19 pandemic likely to create substantial additional financing needs; QPHDs were expected to be rare, but COVID-19 morphed into a global pandemic.
- Under current CCRT framework, total needs to meet potential demand from COVID-19 could reach SDR 1.1 billion.
  - Worst-case scenario (COVID-19 spreads and causes significant disruption to all CCRT-eligible countries, all request maximum access of 20 percent of quota or total debt service falling due in next two years): approximately SDR 1.1 billion needed.
  - Of SDR 1.1 billion, SDR 680 million needed to cover debt service falling due in the next two years (2020Q2–2022Q1), starting with SDR 183 million and SDR 351 million to cover the next six and twelve months, respectively.
- Table summary (as presented):
  - First 2 years (2020:Q2-2022:Q1) — Debt service obligations to the Fund: 680
  - Remaining period (2022:Q2-2030:Q1) — Debt service obligations to the Fund: 2,908
  - Total (2020:Q2-2030:Q1) — Debt service obligations to the Fund: 3,588
  - Maximum CCRT-eligible debt service relief — First 2 years: 680; Remaining period: 447; Total: 1,127
  - As a share of (in percent): Total debt service obligations: 100 153 1
  - Quota (average across countries): 14620
- If only half of the most vulnerable eligible members needed CCRT support:
  - Financing needs in range SDR 440–800 million for full CCRT relief.
  - SDR 260–460 million to cover the next two years alone.
- United Kingdom pledge to kickstart fundraising: £150 million in new grants, half provided upfront; second half contingent on materialization of CCRT needs and as part of broader fundraising.

### Assessment of CCRT’s fitness for COVID-19
- CCRT works on a “first-come, first-served” basis and would cease providing support once cash balances exhausted — a severe limitation in a pandemic affecting many countries.
- Current cash balance of SDR 0.15 billion is barely enough to cover debt relief for three to four mid-sized countries, or the largest eligible country by quota.
- “Eligible debt” not tied to timing of debt service due — risk that support to countries without near-term debt service could exhaust CCRT, leaving countries with immediate needs unsupported.
- Difficult to pre-fund CCRT due to opportunity cost of donor budget resources; donors may face trade-offs between IMF debt relief contributions and stepped-up financing of their own aid agencies or other organizations.
- Qualification criteria for CC window not well suited to pandemics like COVID-19:
  - Designed with Ebola in mind — covers cases with a sustained, widespread life-threatening disease within a country with capacity to spread across countries.
  - COVID-19 circumstances differ: health crisis should be tackled early even when epidemic may not yet have widespread presence but can be expected to spread.
  - Economic disruption metrics—cumulative GDP loss of 10 percent or cumulative budgetary impact of 10 percent of GDP—may not be suitably calibrated for a global pandemic where near-term impact can be severe but may also abate quickly with resolute international action.

### Objective and proposed package to strengthen CCRT response to COVID-19
- Purpose: Raise substantial new grant contributions and target debt relief to members with the most immediate needs affected by the COVID-19 pandemic.
- Four broad elements:
  - (i) a strong fundraising campaign involving a broad spectrum of donors, including options that allow for contingent grants;
  - (ii) modifying the qualification criteria for providing debt service relief in a broader set of circumstances experienced by eligible countries that are affected in this pandemic;
  - (iii) “tranching” of debt service relief to ensure that all eligible countries can receive immediate relief limited to available amounts while fundraising continues;
  - (iv) limiting maximum grant support to the debt service due to the Fund in the first two years from the qualification decision by the Executive Board.

### Fundraising and donor modalities
- Management will formally approach a broad spectrum of the membership to seek contributions.
- Staff will work with potential donors to accommodate funding preferences, including the option of contingent grants where donors make firm pledges to disburse when certain triggers are met.
- The announcement by the UK to provide £150 million in two tranches, one of which would be contingent, is cited as an early signal.
- The Chinese authorities have also committed to help replenish the CCRT; several other members have indicated interest in providing support.

### Expansion of qualification criteria (QPHD alternative test)
- Rationale: The existing CC window criteria are suited to regionally concentrated epidemics; a global pandemic like COVID-19 requires an alternative test.
- Proposed alternative test for a Qualifying Public Health Disaster (QPHD):
  - A CCRT-eligible member will be deemed to have a QPHD if a life-threatening global pandemic (informed by the World Health Organization’s assessment) is inflicting severe economic disruption across the Fund’s membership and creating balance of payments needs on a scale that warrants a concerted international effort to support the poorest and most vulnerable countries through substantial additional grant support and debt service relief.
  - Eligibility remains limited to the poorest members: PRGT-eligible countries whose Gross National Income (GNI) per capita is below the IDA operational threshold level; for small states, less than twice the IDA operational cutoff.
  - Measures of GNI per capita and the IDA operational threshold are updated annually by the World Bank and published at the outset of the Bank’s fiscal year (July 1).
- Conditions for assessing qualification of CCRT-eligible countries under the CC window if the Board determines the presence of a QPHD:
  - The Executive Board determines, based on available information, that the country is experiencing an exceptional balance of payments need arising from the spread of the QPHD and the country’s response to it.
  - The Executive Board determines that the macroeconomic policy framework put in place by the authorities to address the balance of payments needs created by the global pandemic, as outlined in a letter of intent, is appropriate.

### Tranching of debt service relief
- Rationale: Donor disbursements may take time due to budget cycles; some donors may disburse only once concrete debt relief cases have arisen.
- Proposal:
  - “Tranche” delivery of debt service relief by initially committing relief for the first six months (or a specified shorter period based on available resources).
  - Additional tranches of relief would be committed only once sufficient resources have been secured.
  - Purpose: Avoid tying up scarce grant resources for just a few countries on a “first-come, first served” basis and allow fundraising to proceed in parallel with short-term relief to a larger number of countries.

### Capping the duration and targeting of debt service relief
- Current rule: Relief provided through the CCRT is normally limited to 20 percent of quota, irrespective of when the debt service to the Fund is due.
- Proposed change:
  - The amount of debt service relief would no longer be subject to the normal limit of 20 percent of quota.
  - Instead, relief would be subject to a cap equal to the cumulative debt service falling due to the Fund during the 24-month period following the Board qualification decision.
- Expected fiscal impact:
  - This would reduce the maximum financing need from SDR 1.1 billion under current rules to SDR 0.7 billion because some eligible countries do not have significant debt service falling due during the next two years.
  - The shift in the Fund’s support basis: from partly subsidizing global public good activities (containment efforts) to fully covering near-term debt service obligations to the Fund during the most pressing financing needs.

### Implementation steps and timeline
- Staff is preparing decisions to implement the above proposals and will finalize them in light of Executive Directors’ views during the Board meeting tentatively scheduled for Wednesday March 25.
- If there is broad support, decisions could be approved on a lapse-of-time basis soon after the Board meeting.
- The Managing Director and staff would in parallel embark on a formal fundraising campaign with a broad spectrum of the membership.

### Issues for Executive Directors / questions for discussion
- Do Directors agree there is an urgent need to raise new grant contributions to provide CCRT debt service relief to the Fund’s poorest and most vulnerable members to free up resources to cope with the fallout from the COVID-19 pandemic?
- Do Directors support adding an alternative test for qualification under the CC window, as outlined above, in the event of a global pandemic that inflicts such severe economic disruption that a concerted international effort to provide debt service relief to the poorest countries would be warranted?
- Do Directors support the proposed tranching of debt service relief commitments, subject to the availability of resources as outlined above, in order to provide immediate relief to all qualifying countries while moving in parallel with fundraising efforts?
- Do Directors agree that debt relief should aim to cover the debt service to the Fund falling due over the first two years, as outlined above?

### Proposed decision summary
- Single decision proposed for adoption by the Executive Board to implement amendments to the CCRT Instrument:
  - (i) Modification of the qualification criteria by adding an alternative test for a Qualifying Public Health Disaster (QPHD) in the event of a global pandemic causing severe economic disruption across the membership;
  - (ii) capping the maximum duration of debt service relief at two years from the date of the Board decision to grant relief;
  - (iii) tranching of grant assistance for debt relief, enabling the Board to approve debt relief for the first period not exceeding six months, with additional tranches to be approved based on available resources and expected needs of potentially qualifying members.
- The proposed decision does not affect the post-catastrophe relief (PCR) window of the Trust; no changes are proposed to that window.

*International Monetary Fund — ppea2020017*

### 2.      The CCRT complements the Fund’s traditional concessional financing facilities by

### ppea2020017 - 2.      The CCRT complements the Fund’s traditional concessional financing facilities by

### Purpose and role of the CCRT
- Provides debt relief to the Fund’s poorest and most vulnerable members to free up additional resources to cope with catastrophic disasters, including epidemics.
- Provides grants for debt relief in the wake of a catastrophic natural disaster or during a major public health disaster with international spillover potential.
- Aimed at freeing up budget resources for the poorest and most vulnerable countries with severely constrained capacities to handle such disasters.
- Used only in exceptional circumstances to complement the Fund’s primary function of providing temporary balance of payments support.
- Can help catalyze international donor support and capture positive externalities from containment efforts.
- The Fund’s ability to provide CCRT debt relief is limited by availability of grant resources and linked to donors’ willingness to replenish the CCRT.

### Historical use
- Haiti earthquake (2010): exceptional debt stock relief of SDR 178 million.
- Ebola outbreak enhancement (February 2015): SDR 68 million in debt service relief to Guinea, Liberia, and Sierra Leone.
- Complemented by emergency lending assistance of SDR 85 million approved by the Executive Board in fall 2014.

### How the CCRT operates
- Two windows:
  - Post-Catastrophe Relief (PCR) window — for catastrophic natural disasters.
  - Catastrophe Containment (CC) window (“health crisis window”) — for major public health disasters. This paper focuses on the CC window.
- CC window features:
  - Provides grants to pay off upcoming debt service to the Fund during major public health disasters.
  - Eases cash pressures when diverting scarce resources to service Fund obligations would be highly problematic.
  - Modest in liquidity impact but increases concessionality of Fund support and reduces debt burden on vulnerable countries.
  - Not primarily a tool for speedy assistance: eases cash pressures spread over two or more years and modest in size (generally 0—20 percent of quota) compared with emergency financing facilities that can provide 50 percent in a single disbursement.

### Eligibility and qualification for CC window
- Access is narrowly ringfenced due to scarce grant resources and exceptionality of debt relief.
- Eligibility limited to PRGT-eligible countries whose annual per-capita gross income level is below the prevailing IDA operational cut off, or twice that cut-off for small states.
- Currently 33 members eligible to access the CCRT, of which 29 have outstanding credit to the IMF.
- CCRT CC window covers only eligible debt owed to the Fund (PRGT or GRA at time of determination); Trust not usable by members with no outstanding debt to the Fund.
- Support expected to be provided as part of a broad package of bilateral and multilateral donor support.
- Qualification triggers under CCRT rules:
  - Executive Board determines, based on available information, that the country is experiencing a balance of payment need arising from a Qualifying Public Health Disaster (QPHD) that has occurred in the member’s territory, defined as:
    - (1) the sustained presence of a life-threatening epidemic that has spread across several areas of the member’s territory, causing significant economic disruption and creating a balance of payments need; and
    - (2) the epidemic has the capacity to spread, or is already spreading, rapidly both within and across countries, producing or threatening significant economic disruption and loss of life.
  - Executive Board determines that the macroeconomic policy framework outlined in the letter of intent is appropriate to address the balance of payments need.
- Economic disruption normally characterized by at least:
  - (a) a cumulative loss of real GDP of 10 percent; or
  - (b) a cumulative loss of revenue and increase of expenditures equivalent to a least 10 percent of GDP.
- Determinations may draw on assessments by national authorities, WHO, World Bank, and other relevant agencies; QPHD occurrence expected to be rare.

### Magnitude and form of relief
- Debt relief under CC window provided as grants to immediately pay off upcoming debt service to the Fund.
- Normally capped at the equivalent of 20 percent of quota, with higher amounts permitted under specific circumstances.
- Executive Board may increase grant support beyond 20 percent of quota in some circumstances, including to cover not more than the total amount of eligible debt falling due to the Fund during the ensuing two-year period.
- Provision of CCRT relief contingent on availability of funds in the trust.
- Eligible debt defined as all of the member’s debt to the Fund outstanding as of the date of determination, with specified exclusions.

### Funding status as of end-2019 and recent fund-raising
- CCRT balance as of end-December 2019: SDR 150 million.
- 2015 bilateral fund-raising campaign results:
  - Raised SDR 61 million in new grants from donors.
  - Transfers of MDRI-II resources of SDR 39 million.
- Underfunding exacerbated by doubling of quotas under the 14th quota review, which doubled size of eligible debt under CCRT.
- Historical initial funding sources included repurposing PCDR Trust (SDR 102 million) and transfers from MDRI-I and MDRI-II (SDR 13 and SDR 39 million, respectively).

### COVID-19 implications and potential financing needs
- COVID-19 pandemic likely to create substantial additional financing needs; QPHDs were expected to be rare, but COVID-19 morphed into a global pandemic.
- Under current CCRT framework, total needs to meet potential demand from COVID-19 could reach SDR 1.1 billion.
  - Worst-case scenario (COVID-19 spreads and causes significant disruption to all CCRT-eligible countries, all request maximum access of 20 percent of quota or total debt service falling due in next two years): approximately SDR 1.1 billion needed.
  - Of SDR 1.1 billion, SDR 680 million needed to cover debt service falling due in the next two years (2020Q2–2022Q1), starting with SDR 183 million and SDR 351 million to cover the next six and twelve months, respectively.
- Table summary (as presented):
  - First 2 years (2020:Q2-2022:Q1) — Debt service obligations to the Fund: 680
  - Remaining period (2022:Q2-2030:Q1) — Debt service obligations to the Fund: 2,908
  - Total (2020:Q2-2030:Q1) — Debt service obligations to the Fund: 3,588
  - Maximum CCRT-eligible debt service relief — First 2 years: 680; Remaining period: 447; Total: 1,127
  - As a share of (in percent): Total debt service obligations: 100 153 1
  - Quota (average across countries): 14620
  - (Source: IMF Staff Calculations)
- If only half of the most vulnerable eligible members needed CCRT support:
  - Financing needs in range SDR 440–800 million for full CCRT relief.
  - SDR 260–460 million to cover the next two years alone.
- United Kingdom pledge to kickstart fundraising: £150 million in new grants, half provided upfront; second half contingent on materialization of CCRT needs and as part of broader fundraising.

### Assessment of CCRT’s fitness for COVID-19
- CCRT works on a “first-come, first-served” basis and would cease providing support once cash balances exhausted — a severe limitation in a pandemic affecting many countries.
- Current cash balance of SDR 0.15 billion is barely enough to cover debt relief for three to four mid-sized countries, or the largest eligible country by quota.
- “Eligible debt” not tied to timing of debt service due — risk that support to countries without near-term debt service could exhaust CCRT, leaving countries with immediate needs unsupported.
- Difficult to pre-fund CCRT due to opportunity cost of donor budget resources; donors may face trade-offs between IMF debt relief contributions and stepped-up financing of their own aid agencies or other organizations.
- Qualification criteria for CC window not well suited to pandemics like COVID-19:
  - Designed with Ebola in mind — covers cases with a sustained, widespread life-threatening disease within a country with capacity to spread across countries.
  - COVID-19 circumstances differ: health crisis should be tackled early even when epidemic may not yet have widespread presence but can be expected to spread.
  - Economic disruption metrics—cumulative GDP loss of 10 percent or cumulative budgetary impact of 10 percent of GDP—may not be suitably calibrated for a global pandemic where near-term impact can be severe but may also abate quickly with resolute international action.

*International Monetary Fund — CCRT discussion as provided in source content.*

### 18.      To ensure that the CCRT can provide effective support to the Fund’s poorest and most

### ppea2020017 - 18.      To ensure that the CCRT can provide effective support to the Fund’s poorest and most

### Objective and proposed package
- Purpose: Raise substantial new grant contributions and target debt relief to members with the most immediate needs affected by the COVID-19 pandemic.
- The proposed policy and funding package involves four broad elements:
  - (i) a strong fundraising campaign involving a broad spectrum of donors, including options that allow for contingent grants;
  - (ii) modifying the qualification criteria for providing debt service relief in a broader set of circumstances experienced by eligible countries that are affected in this pandemic;
  - (iii) “tranching” of debt service relief to ensure that all eligible countries can receive immediate relief limited to available amounts while fundraising continues;
  - (iv) limiting maximum grant support to the debt service due to the Fund in the first two years from the qualification decision by the Executive Board.

### Fundraising and donor modalities
- Broad fundraising and contingent grants:
  - Management will formally approach a broad spectrum of the membership to seek contributions.
  - Staff will work with potential donors to accommodate funding preferences, including the option of contingent grants where donors make firm pledges to disburse when certain triggers are met.
  - The announcement by the UK to provide £150 million in two tranches, one of which would be contingent, is cited as an early signal.
  - The Chinese authorities have also committed to help replenish the CCRT; several other members have indicated interest in providing support.

### Expansion of qualification criteria (QPHD alternative test)
- Rationale: The existing CC window criteria are suited to regionally concentrated epidemics; a global pandemic like COVID-19 requires an alternative test.
- Proposed alternative test for a Qualifying Public Health Disaster (QPHD):
  - A CCRT-eligible member will be deemed to have a QPHD if a life-threatening global pandemic (informed by the World Health Organization’s assessment) is inflicting severe economic disruption across the Fund’s membership and creating balance of payments needs on a scale that warrants a concerted international effort to support the poorest and most vulnerable countries through substantial additional grant support and debt service relief.
  - Eligibility remains limited to the poorest members: PRGT-eligible countries whose Gross National Income (GNI) per capita is below the IDA operational threshold level; for small states, less than twice the IDA operational cutoff (small states: income threshold would be twice that level).
  - Measures of GNI per capita and the IDA operational threshold are updated annually by the World Bank and published at the outset of the Bank’s fiscal year (July 1).
- Conditions for assessing qualification of CCRT-eligible countries under the CC window if the Board determines the presence of a QPHD:
  - The Executive Board determines, based on available information, that the country is experiencing an exceptional balance of payments need arising from the spread of the QPHD and the country’s response to it.
  - The Executive Board determines that the macroeconomic policy framework put in place by the authorities to address the balance of payments needs created by the global pandemic, as outlined in a letter of intent, is appropriate.

### Tranching of debt service relief
- Rationale: Donor disbursements may take time due to budget cycles; some donors may disburse only once concrete debt relief cases have arisen.
- Proposal:
  - “Tranche” delivery of debt service relief by initially committing relief for the first six months (or a specified shorter period based on available resources).
  - Additional tranches of relief would be committed only once sufficient resources have been secured.
  - Purpose: Avoid tying up scarce grant resources for just a few countries on a “first-come, first served” basis and allow fundraising to proceed in parallel with short-term relief to a larger number of countries.

### Capping the duration and targeting of debt service relief
- Current rule: Relief provided through the CCRT is normally limited to 20 percent of quota, irrespective of when the debt service to the Fund is due.
- Proposed change:
  - The amount of debt service relief would no longer be subject to the normal limit of 20 percent of quota.
  - Instead, relief would be subject to a cap equal to the cumulative debt service falling due to the Fund during the 24-month period following the Board qualification decision.
- Expected fiscal impact:
  - This would reduce the maximum financing need from SDR 1.1 billion under current rules to SDR 0.7 billion because some eligible countries do not have significant debt service falling due during the next two years.
  - The shift in the Fund’s support basis: from partly subsidizing global public good activities (containment efforts) to fully covering near-term debt service obligations to the Fund during the most pressing financing needs.

### Implementation steps and timeline
- Staff is preparing decisions to implement the above proposals and will finalize them in light of Executive Directors’ views during the Board meeting tentatively scheduled for Wednesday March 25.
- If there is broad support, decisions could be approved on a lapse-of-time basis soon after the Board meeting.
- The Managing Director and staff would in parallel embark on a formal fundraising campaign with a broad spectrum of the membership.

### Issues for Executive Directors / questions for discussion
- Do Directors agree there is an urgent need to raise new grant contributions to provide CCRT debt service relief to the Fund’s poorest and most vulnerable members to free up resources to cope with the fallout from the COVID-19 pandemic?
- Do Directors support adding an alternative test for qualification under the CC window, as outlined above, in the event of a global pandemic that inflicts such severe economic disruption that a concerted international effort to provide debt service relief to the poorest countries would be warranted?
- Do Directors support the proposed tranching of debt service relief commitments, subject to the availability of resources as outlined above, in order to provide immediate relief to all qualifying countries while moving in parallel with fundraising efforts?
- Do Directors agree that debt relief should aim to cover the debt service to the Fund falling due over the first two years, as outlined above?

### Proposed decision summary (from the proposed decision paper)
- A single decision is proposed for adoption by the Executive Board to implement amendments to the CCRT Instrument:
  - (i) Modification of the qualification criteria by adding an alternative test for a Qualifying Public Health Disaster (QPHD) in the event of a global pandemic causing severe economic disruption across the membership;
  - (ii) capping the maximum duration of debt service relief at two years from the date of the Board decision to grant relief;
  - (iii) tranching of grant assistance for debt relief, enabling the Board to approve debt relief for the first period not exceeding six months, with additional tranches to be approved based on available resources and expected needs of potentially qualifying members.
- The proposed decision does not affect the post-catastrophe relief (PCR) window of the Trust; no changes are proposed to that window.

*Source: Catastrophe Containment and Relief Trust—Policy Proposals and Funding Strategy (staff paper and proposed decision).*

### 3. The proposed decision also does not affect eligibility for relief under the Trust.

### 3. The proposed decision also does not affect eligibility for relief under the Trust.

### Eligibility for Trust relief
- Eligible members continue to be those PRGT-eligible members whose GNI per capita is below the IDA operational threshold; or, for small countries, below twice the IDA operational threshold.

### Modification of qualification criteria — alternative QPHD test (paragraph 18 of SM/20/74)
- Proposal: add an alternative test for a Qualifying Public Health Disaster (QPHD) to the CC window to cover a life-threatening global pandemic.
- Under the new test, the Board may determine that a QPHD exists where:
  - a life-threatening global pandemic is inflicting severe economic disruption across the Fund’s membership and is creating balance of payments needs on such a scale as to warrant a concerted international effort to support the poorest and most vulnerable countries through substantial additional grant support and debt service relief.
- An eligible member can receive relief even if there is no sustained presence of the disease within its territory (i.e., relief may be granted under the global pandemic test without local sustained disease presence).
- For relief under the new global pandemic QPHD, the Executive Board will determine that a global pandemic exists; such a determination will be guided by assessments of the World Health Organization.

### Capping maximum duration of debt service relief (paragraph 18 of SM/20/74)
- Proposal: limit grants for debt service relief under the CC window to a maximum of two years from the initial decision to grant relief.
- This changes the current provision, under which the Fund may provide grant assistance for debt relief generally up to the equivalent of 20 percent of quota (which may be exceeded in specific cases), and under which relief is provided regardless of when debt service falls due.

### Tranching of grant assistance for debt relief (paragraph 18 of SM/20/74)
- Proposal: approve grants for debt service relief in tranches.
- Initial tranche: period not exceeding six months from:
  - the date of the determination by the Executive Board that there is a QPHD under paragraph 3(a)(ii)(I); or
  - from the date of the Board determination that a global pandemic exists under paragraph 3(a)(ii)(II).
- Subsequent tranches: approved by the Trustee taking into account the availability of resources in the Trust and the likely needs of other potentially qualifying members.

### Key elements of the proposed amendment to Section III, Paragraph 3 of the Instrument (selected provisions)
- Qualification for Assistance (3(a)(i)):
  - An eligible member shall qualify for immediate debt relief under the CC window when the Trustee determines that (I) the member is experiencing a balance of payments need arising from a Qualifying Public Health Disaster specified in subparagraph (ii)(I) or (ii)(II); and (II) the macroeconomic policy framework put in place by the member to address the balance of payments need created by the public health disaster and the ensuing policy response is appropriate.
- Definition of Qualifying Public Health Disaster (3(a)(ii)):
  - (I) Life-threatening epidemic with sustained presence across several areas of the member’s territory causing significant economic disruption and creating a balance of payments need. For purposes of this subparagraph (I), the magnitude of economic disruption would normally be characterized by at least:
    - (a) a cumulative loss of real GDP of 10 percent; or
    - (b) a cumulative loss of revenue and increase of expenditures equivalent to at least 10 percent of GDP.
    - Such economic disruption is measured relative to staff estimates made prior to the onset of the public health disaster and reflects, inter alia, curtailments on movement of people and products and related declines in production, exports, tax revenues, and international visitors, and surges in government outlays on relief and containment efforts.
  - (II) A life-threatening global pandemic inflicting severe economic disruption across the Fund’s membership and creating balance of payments needs on such a scale as to warrant a concerted international effort to support the poorest and most vulnerable countries through substantial additional grant support and debt service relief.
- Guidance for determinations (3(a)(iii)):
  - For subparagraph (ii)(I), the Fund may be guided by assessments of national authorities, the World Health Organization, the World Bank, and other relevant agencies.
  - For subparagraph (ii)(II), the Fund shall make a determination guided by assessments of the World Health Organization.
- Request for CC Window Assistance (3(b)):
  - A member requesting assistance shall describe the nature of the public health disaster and the balance of payments needs arising from it, measures being taken to contain the disaster (including budgetary reallocations), and the macroeconomic policies it is pursuing or plans to pursue to address its balance of payment difficulties.
- Amount and Delivery of Assistance (3(c)):
  - (i) Upon determination that a member qualifies, the Trustee will approve grant assistance for debt service relief for an initial tranche covering the member’s eligible debt falling due within a period not exceeding six months from the date of the qualification decision (for subparagraph (ii)(I)) or from the date of the Board determination that a global pandemic exists (for subparagraph (ii)(II)). Subject to availability of Trust resources, additional tranches may be approved provided that the total amount shall not exceed the cumulative debt service falling due to the Fund within two years from the date of the qualification decision (for subparagraph (ii)(I)) or from the date of the Board determination that a global pandemic exists (for subparagraph (ii)(II)).
  - (ii) The amount of the grant assistance approved in any tranche will be equivalent to the total amount of the member’s eligible debt falling due within the period covered under the respective tranche. In approving each tranche, the Trustee shall take into account availability of resources and likely need of other potentially qualifying members.
  - (iii) The Managing Director will report to the Executive Board periodically on the availability of resources for CC window relief to inform the Trustee’s decision on commitment of resources for additional tranches.
  - (iv) Upon approval of a member’s request, the Trustee shall disburse to a subaccount established for the benefit of the member a Trust grant in the amount necessary to repay the member’s eligible debt to the Fund falling due within the specified period. Eligible debt is defined as all of the member’s debt to the Fund (including to the Fund as Trustee) that was outstanding as of the date of the determination that the member is qualified to receive grant assistance under this window, and in respect of which the member had made regular scheduled debt service payments (principal and interest) before such determination, but excludes any debt scheduled to be repaid with assistance under other debt relief trusts administered by the Fund or under paragraph 2 of this Section.

*International Monetary Fund — ppea2020017*

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_Source: https://www.imf.org/-/media/files/publications/pp/2020/english/ppea2020017.pdf_