## ENHANCING THE EMERGENCY TOOLKIT - COVID-19 RESPONSE ## Source details **Canonical URL:** [ENHANCING THE EMERGENCY TOOLKIT - COVID-19 RESPONSE](https://www.imf.org/-/media/files/publications/pp/2020/english/ppea2020018.pdf) ## Other formats - [Markdown version](/-/media/files/publications/pp/2020/english/ppea2020018.pdf.md) - [Structured JSON version](/-/media/files/publications/pp/2020/english/ppea2020018.pdf.json) --- ### EXECUTIVE SUMMARY — Introduction - The Covid-19 pandemic has created severe disruption in the global economic and financial system, producing urgent and unprecedented financing needs for many emerging market and developing country (EMDC) members. - Staff estimates total EMDC financing needs could be in the region of $2.5 trillion for the rest of 2020. - The Fund had received requests or inquiries from 87 members for emergency financing or augmentation of existing arrangements, involving financing of around $27 billion, based on current access limits. - A companion Board paper addresses streamlining Board consideration of RCF and RFI requests and related emergency procedures. ### Key proposals to enhance the emergency toolkit - Temporary increase in access limits for: - Rapid Financing Instrument (RFI) — available to all members. - Rapid Credit Facility (RCF) — available to PRGT-eligible members. - The proposed increases would be approved on an exceptional basis for an initial period of six months, beginning from the date of the decision, and may be extended by the Executive Board. - All other policies governing financing under the RCF and the RFI remain unchanged. ### Specific RFI proposal - Increase annual and cumulative access limits under the regular window of the RFI from: - 50 percent of quota to 100 percent of quota (annual). - 100 percent of quota to 150 percent of quota (cumulative). - Rationale: - Address urgent BoP needs from prevention/containment and mitigation measures. - Immediate response has positive regional and global externalities. - The temporary increase is preferred over a long-term increase to limit moral hazard and facility shopping. - Existing policy safeguards remain in place (qualification requirements and limits to repeat use). ### RFI demand and supply implications (exact figures) - To date: - Requests or expressions of interest for RFI financing received from over 30 emerging market countries, with potential demand of SDR 23 billion under the proposed access limits. - Over 10 PRGT-eligible countries with potential access of about SDR 2½ billion of GRA resources under the RFI/RCF blend. - Staff estimates immediate potential RFI-related demand for GRA resources could increase to up to some SDR 60 billion, assuming more EMs come forward and meet access criteria. - Impact on forward commitment capacity (FCC): - Excluding FTP participants with potential for drawing on GRA resources under the RFI, the Fund’s 12-months FCC of about SDR 198 billion would decline to some SDR 171 billion. - The remaining FCC would be nearly three times above the higher potential demand. - Outlook: Demand for other Fund facilities could rise quickly and may require activation of the New Arrangements to Borrow to bolster FCC. ### Specific RCF and PRGT proposals - Increase annual and cumulative access limits under the RCF exogenous shock window from: - 50 percent of quota to 100 percent of quota (annual). - 100 percent of quota to 150 percent of quota (cumulative, net of repayments). - Estimated impact on PRGT demand and resources: - Increase PRGT emergency financing demand from SDR 4.4 billion to SDR 8.1 billion. - Available PRGT loan resources of SDR 8.4 billion could accommodate this increase. - Surge in PRGT credit will strain PRGT self-sustainability in the post-crisis period. - Fundraising: - Staff proposes to begin immediate fundraising efforts to secure more loan resources. - If sufficient additional loan resources are secured, staff will propose temporarily increasing the global annual normal access limit under all PRGT facilities from 100 percent of quota to 130 percent of quota (temporary through end-April 2021). - Staff estimate this measure would increase total demand for PRGT resources to around SDR 13 billion in 2020. - Operational constraints: - Current global limit on annual normal access under the PRGT (100 percent of quota) implies potential constraints on countries accessing full temporary RCF limits unless exceptional access requirements are satisfied. ### Ringfencing, timing, and follow-up financing - The temporary six-month period includes a Board review one month prior to expiry to decide on any extension and requires that any request using the higher limits be approved before the end of the six-month period. - Upon expiration without extension, future RCF and RFI financing approvals revert to current access limits. - Outstanding credit resulting from disbursements/purchases during the six-month period may exceed annual and cumulative limits once the increase ceases to be effective; such credit will count towards applicable PRGT and GRA access limits. - For members that already received pandemic-related emergency support under current limits, additional rapid emergency financing may be approved where policy requirements are met; a short staff report with a supplemental LOI would suffice for Executive Board consideration. - In the case of the RCF, additional disbursements must observe the repeat use limit (the limit of two disbursements in a 12-month period). ### Risk management and justification - Ringfencing the reforms for six months balances higher lending risks with need for a swift Fund response. - Higher use of resources without UCT-quality policies increases operational, credit, and PRGT funding risks, mitigated by: - Internal review process. - Existing and prospective policies of requesting members to address the exogenous shock. - Prior actions if needed. - Fundraising. - Increasing RFI and RCF access limits to enable higher purchases and disbursements now is expected to mitigate the risk of much larger future Fund demands and reputational risks. ### Changes to access limits and emergency financing flexibility (summary of amendments) - Annual access limits under the RCF regular and exogenous shock window increased to 50 percent of quota. - Cumulative access limits under the RCF regular and exogenous shock window increased to 100 percent of quota, net of scheduled repayments. - Annual and cumulative access limits under the RFI moved to 50 percent of quota and 100 percent of quota, respectively, net of scheduled repurchases. - Annual and cumulative limits under the RCF and RFI large natural disaster windows increased from 60 to 80 percent of quota and from 100 to 133.33 percent of quota, respectively. - For cases where urgent balance of payments needs stem from a natural disaster resulting in damage equivalent to, or in excess of, 20 percent of GDP, members may qualify for the higher access limits under the RCF and RFI. - The 2018-19 Review of Facilities for LICs introduced a generalized increase in access limits for all concessional facilities, including the RCF and the RFI, to ensure symmetry in the emergency toolkit. ### Proposed Decisions — Amendments to the PRGT Instrument (selected points) - Section II, paragraph 2(b) amended to set RCF access limits as follows: - Standard annual limit: 50 percent of quota. - Standard cumulative limit: 100 percent of quota, net of scheduled repayments. - Disbursement cap: each disbursement shall not exceed 25 percent of quota except where the member requests assistance under the RCF to address an urgent balance of payments need resulting primarily from a sudden and exogenous shock (including a large natural disaster under (ii) below). - Natural disaster provision (RCF): annual and cumulative access limits shall be 80 percent of quota and 133.33 percent of quota, net of scheduled repayments, respectively, where (a) the member requests assistance to address an urgent balance of payments need resulting from a natural disaster that occasions damage assessed to be equivalent to or to exceed 20 percent of the member’s gross domestic product (GDP) and (b) the member’s existing and prospective policies are sufficiently strong to address the natural disaster shock. - Temporary pandemic period provision (RCF): for the period from [April 6, 2020] to [October 5, 2020], a member’s request for assistance under the RCF to address an urgent balance of payments need resulting primarily from a sudden and exogenous shock shall be subject to an annual access limit of 100 percent of quota and a cumulative access limit of 150 percent of quota, net of scheduled repayments. - Outstanding credit interactions: outstanding credit under the rapid-access component of the ESF or outstanding purchases from the General Resources Account under emergency post conflict/natural disaster assistance covered by Decision No. 12341-(00/117) shall count towards the annual and cumulative limits applicable to access under the RCF. With effect from July 1, 2015, any purchases from the General Resources Account under the Rapid Financing Instrument shall count towards the annual and cumulative limits applicable to access under the RCF. - The access limits set out in Section II, paragraph 2(b)(iii) of the PRGT Instrument shall be reviewed one month prior to the expiration of the period set out therein. ### Proposed Decisions — Amendments to the RFI Instrument (selected points) - Paragraph 5 of the RFI Decision amended to set RFI access limits as follows: - Standard annual limit: 50 percent of quota. - Standard cumulative limit: 100 percent of quota, net of scheduled repurchases. - Temporary pandemic period provision (RFI): for the period from [April 6, 2020] to [October 5, 2020], the annual and cumulative access limits shall be 100 percent of quota and 150 percent of quota, net of scheduled repurchases, respectively. - Natural disaster provision (RFI): the annual access limit shall be 80 percent of quota and the cumulative access limit shall be 133.33 percent of quota, net of scheduled repurchases, where (i) the member requests assistance under the RFI to address an urgent balance of payments need resulting from a natural disaster that occasions damage assessed to be equivalent to or to exceed 20 percent of the member’s gross domestic product (GDP), and (ii) the member's existing and prospective policies are sufficiently strong to address the natural disaster shock. - The access limits set out in paragraph 5(A) of the RFI Decision shall be reviewed one month prior to the expiration of the period set out therein. ### Redlined text excerpts (preserved language highlights) - PRGT Instrument redlined language preserves changes including: - "(b) Subject to the provisions in subparagraphs (i) to (iv) below, The the access of each eligible member under the RCF shall be subject to an annual limit of 50 percent of quota, and a cumulative limit of 100 percent of quota, net of scheduled repayments..." - "(ii) the annual and cumulative access limits under the RCF shall be 80 percent of quota and 133.33 percent of quota, net of scheduled repayments, respectively, where... damage assessed to be equivalent to or to exceed 20 percent of the member’s gross domestic product (GDP)..." - "(iii) for the period from [April 6, 2020] to [October 5, 2020], a member’s request for assistance under the RCF... shall be subject to an annual access limit of 100 percent of quota and a cumulative access limit of 150 percent of quota, net of scheduled repayments;..." - RFI redlined language preserves: - "Assistance under this Decision shall be made available to members in the form of outright purchases. Access by members to resources under this Decision shall be subject to (a) an annual limit of 50 percent of quota, and (b) a cumulative limit of 100 percent of quota, net of scheduled repurchases, provided that:" - "(A) for the period from [April 6, 2020] to [October 5, 2020], the above annual and cumulative access limits shall be 100 percent of quota and 150 percent of quota, net of scheduled repurchases, respectively; and" - "(B) the annual access limit shall be 80 percent of quota and the cumulative access limit shall be 133.33 percent of quota, net of scheduled repurchases, where (i) the member requests assistance under the RFI to address an urgent balance of payments need resulting from a natural disaster that occasions damage assessed to be equivalent to or to exceed 20 percent of the member’s gross domestic product (GDP), and (ii) the member's existing and prospective policies are sufficiently strong to address the natural disaster shock." ### Supplementary proposal — Handling PRGT high-access (HA) procedures under emergency financing requests - Proposal: suspend implementation of high-access (HA) procedures for all requests for financing under the Rapid Credit Facility (RCF) during the period for which the Board has activated Pandemic Emergency Procedures. - HA procedures are triggered when: - a request for Fund financing brings total access to more than 180 percent of quota over a 36-month period, or - total outstanding credit from the PRGT exceeds or is projected, given proposed commitments, to exceed 225 percent of quota. - The 225 percent of quota credit threshold was added in the 2019 Review of Facilities for Low-Income Countries to provide extra scrutiny against a backdrop of heightened debt vulnerabilities. - HA procedures require an informal Board session based on a short staff note that includes discussion of program strength, capacity to repay, and debt vulnerabilities. - Rationale for suspension: urgent nature of financing needs during the pandemic calls for streamlining procedures; if RCF annual access limit is increased to 100 percent, accessing the maximum amount would trigger HA procedures in up to 10 cases—some by small margins. - Document prepared by: Strategy, Policy, and Review Department, Legal Department, and Finance Department. - Approved by: Petya Koeva Brooks, Yan Liu, and Christian Mumssen. - Date noted at end of the supplementary proposal: April 3, 2020. *IMF — Enhancing the Emergency Financing Toolkit — COVID-19 Response (excerpts).* ### EXECUTIVE SUMMARY ### EXECUTIVE SUMMARY ### Introduction - The Covid-19 pandemic has created severe disruption in the global economic and financial system, producing urgent and unprecedented financing needs for many emerging market and developing country (EMDC) members. - Staff estimates total EMDC financing needs could be in the region of $2.5 trillion for the rest of 2020. - The Fund had received requests or inquiries from 87 members for emergency financing or augmentation of existing arrangements, involving financing of around $27 billion, based on current access limits. - A companion Board paper addresses streamlining Board consideration of RCF and RFI requests and related emergency procedures. ### Key proposals to enhance the emergency toolkit - Temporary increase in access limits for: - Rapid Financing Instrument (RFI) — available to all members. - Rapid Credit Facility (RCF) — available to PRGT-eligible members. - The proposed increases would be approved on an exceptional basis for an initial period of six months, beginning from the date of the decision, and may be extended by the Executive Board. - All other policies governing financing under the RCF and the RFI remain unchanged. ### Specific RFI proposal - Increase annual and cumulative access limits under the regular window of the RFI from: - 50 percent of quota to 100 percent of quota (annual). - 100 percent of quota to 150 percent of quota (cumulative). - Rationale: - Address urgent BoP needs from prevention/containment and mitigation measures. - Immediate response has positive regional and global externalities. - The temporary increase is preferred over a long-term increase to limit moral hazard and facility shopping. - Existing policy safeguards remain in place (qualification requirements and limits to repeat use). ### RFI demand and supply implications (exact figures) - To date: - Requests or expressions of interest for RFI financing received from over 30 emerging market countries, with potential demand of SDR 23 billion under the proposed access limits. - Over 10 PRGT-eligible countries with potential access of about SDR 2½ billion of GRA resources under the RFI/RCF blend. - Staff estimates immediate potential RFI-related demand for GRA resources could increase to up to some SDR 60 billion, assuming more EMs come forward and meet access criteria. - Impact on forward commitment capacity (FCC): - Excluding FTP participants with potential for drawing on GRA resources under the RFI, the Fund’s 12-months FCC of about SDR 198 billion would decline to some SDR 171 billion. - The remaining FCC would be nearly three times above the higher potential demand. - Outlook: Demand for other Fund facilities could rise quickly and may require activation of the New Arrangements to Borrow to bolster FCC. ### Specific RCF and PRGT proposals - Increase annual and cumulative access limits under the RCF exogenous shock window from: - 50 percent of quota to 100 percent of quota (annual). - 100 percent of quota to 150 percent of quota (cumulative, net of repayments). - Estimated impact on PRGT demand and resources: - Increase PRGT emergency financing demand from SDR 4.4 billion to SDR 8.1 billion. - Available PRGT loan resources of SDR 8.4 billion could accommodate this increase. - Surge in PRGT credit will strain PRGT self-sustainability in the post-crisis period. - Fundraising: - Staff proposes to begin immediate fundraising efforts to secure more loan resources. - If sufficient additional loan resources are secured, staff will propose temporarily increasing the global annual normal access limit under all PRGT facilities from 100 percent of quota to 130 percent of quota (temporary through end-April 2021). - Staff estimate this measure would increase total demand for PRGT resources to around SDR 13 billion in 2020. - Operational constraints: - Current global limit on annual normal access under the PRGT (100 percent of quota) implies potential constraints on countries accessing full temporary RCF limits unless exceptional access requirements are satisfied. ### Ringfencing, timing, and follow-up financing - The temporary six-month period includes a Board review one month prior to expiry to decide on any extension and requires that any request using the higher limits be approved before the end of the six-month period. - Upon expiration without extension, future RCF and RFI financing approvals revert to current access limits. - Outstanding credit resulting from disbursements/purchases during the six-month period may exceed annual and cumulative limits once the increase ceases to be effective; such credit will count towards applicable PRGT and GRA access limits. - For members that already received pandemic-related emergency support under current limits, additional rapid emergency financing may be approved where policy requirements are met; a short staff report with a supplemental LOI would suffice for Executive Board consideration. - In the case of the RCF, additional disbursements must observe the repeat use limit (the limit of two disbursements in a 12-month period). ### Risk management and justification - Ringfencing the reforms for six months balances higher lending risks with need for a swift Fund response. - Higher use of resources without UCT-quality policies increases operational, credit, and PRGT funding risks, mitigated by: - Internal review process. - Existing and prospective policies of requesting members to address the exogenous shock. - Prior actions if needed. - Fundraising. - Increasing RFI and RCF access limits to enable higher purchases and disbursements now is expected to mitigate the risk of much larger future Fund demands and reputational risks. *Prepared by the Strategy, Policy, and Review Department, Legal Department, and Finance Department; approved by Petya Koeva Brooks, Yan Liu, and Christian Mumssen.* ### 37.5 to 60 percent of quota, while the cumulative access limits were maintained at 75 percent of quota. A member ### ENHANCING THE EMERGENCY TOOLKIT - COVID-19 RESPONSE ### Changes to access limits and emergency financing flexibility - Annual access limits under the RCF regular and exogenous shock window increased to 50 percent of quota. - Cumulative access limits under the RCF regular and exogenous shock window increased to 100 percent of quota, net of scheduled repayments. - Annual and cumulative access limits under the RFI moved to 50 percent of quota and 100 percent of quota, respectively, net of scheduled repurchases. - Annual and cumulative limits under the RCF and RFI large natural disaster windows increased from 60 to 80 percent of quota and from 100 to 133.33 percent of quota, respectively. - For cases where urgent balance of payments needs stem from a natural disaster resulting in damage equivalent to, or in excess of, 20 percent of GDP, members may qualify for the higher access limits under the RCF and RFI. - The 2018-19 Review of Facilities for LICs introduced a generalized increase in access limits for all concessional facilities, including the RCF and the RFI, to ensure symmetry in the emergency toolkit. ### Proposed Decisions — Amendments to the PRGT Instrument - Section II, paragraph 2(b) of the Instrument to Establish the Poverty Reduction and Growth Trust (“PRGT Instrument”) amended to set RCF access limits as follows: - Standard annual limit: 50 percent of quota. - Standard cumulative limit: 100 percent of quota, net of scheduled repayments. - Disbursement cap: each disbursement shall not exceed 25 percent of quota except where the member requests assistance under the RCF to address an urgent balance of payments need resulting primarily from a sudden and exogenous shock (including a large natural disaster under (ii) below). - Natural disaster provision (RCF): annual and cumulative access limits shall be 80 percent of quota and 133.33 percent of quota, net of scheduled repayments, respectively, where (a) the member requests assistance to address an urgent balance of payments need resulting from a natural disaster that occasions damage assessed to be equivalent to or to exceed 20 percent of the member’s gross domestic product (GDP) and (b) the member’s existing and prospective policies are sufficiently strong to address the natural disaster shock. - Temporary pandemic period provision (RCF): for the period from [April 6, 2020] to [October 5, 2020], a member’s request for assistance under the RCF to address an urgent balance of payments need resulting primarily from a sudden and exogenous shock shall be subject to an annual access limit of 100 percent of quota and a cumulative access limit of 150 percent of quota, net of scheduled repayments. - Outstanding credit interactions: outstanding credit under the rapid-access component of the ESF or outstanding purchases from the General Resources Account under emergency post conflict/natural disaster assistance covered by Decision No. 12341-(00/117) shall count towards the annual and cumulative limits applicable to access under the RCF. With effect from July 1, 2015, any purchases from the General Resources Account under the Rapid Financing Instrument shall count towards the annual and cumulative limits applicable to access under the RCF. - The access limits set out in Section II, paragraph 2(b)(iii) of the PRGT Instrument shall be reviewed one month prior to the expiration of the period set out therein. ### Proposed Decisions — Amendments to the RFI Instrument - Paragraph 5 of the RFI Decision amended to set RFI access limits as follows: - Standard annual limit: 50 percent of quota. - Standard cumulative limit: 100 percent of quota, net of scheduled repurchases. - Temporary pandemic period provision (RFI): for the period from [April 6, 2020] to [October 5, 2020], the annual and cumulative access limits shall be 100 percent of quota and 150 percent of quota, net of scheduled repurchases, respectively. - Natural disaster provision (RFI): the annual access limit shall be 80 percent of quota and the cumulative access limit shall be 133.33 percent of quota, net of scheduled repurchases, where (i) the member requests assistance under the RFI to address an urgent balance of payments need resulting from a natural disaster that occasions damage assessed to be equivalent to or to exceed 20 percent of the member’s gross domestic product (GDP), and (ii) the member's existing and prospective policies are sufficiently strong to address the natural disaster shock. - The access limits set out in paragraph 5(A) of the RFI Decision shall be reviewed one month prior to the expiration of the period set out therein. ### Redlined text excerpts (Instrument and RFI) - PRGT Instrument redlined language preserves the above changes, including: - "(b) Subject to the provisions in subparagraphs (i) to (iv) below, The the access of each eligible member under the RCF shall be subject to an annual limit of 50 percent of quota, and a cumulative limit of 100 percent of quota, net of scheduled repayments..." - "(ii) the annual and cumulative access limits under the RCF shall be 80 percent of quota and 133.33 percent of quota, net of scheduled repayments, respectively, where... damage assessed to be equivalent to or to exceed 20 percent of the member’s gross domestic product (GDP)..." - "(iii) for the period from [April 6, 2020] to [October 5, 2020], a member’s request for assistance under the RCF... shall be subject to an annual access limit of 100 percent of quota and a cumulative access limit of 150 percent of quota, net of scheduled repayments;..." - RFI redlined language preserves: - "Assistance under this Decision shall be made available to members in the form of outright purchases. Access by members to resources under this Decision shall be subject to (a) an annual limit of 50 percent of quota, and (b) a cumulative limit of 100 percent of quota, net of scheduled repurchases, provided that:" - "(A) for the period from [April 6, 2020] to [October 5, 2020], the above annual and cumulative access limits shall be 100 percent of quota and 150 percent of quota, net of scheduled repurchases, respectively; and" - "(B) the annual access limit shall be 80 percent of quota and the cumulative access limit shall be 133.33 percent of quota, net of scheduled repurchases, where (i) the member requests assistance under the RFI to address an urgent balance of payments need resulting from a natural disaster that occasions damage assessed to be equivalent to or to exceed 20 percent of the member’s gross domestic product (GDP), and (ii) the member's existing and prospective policies are sufficiently strong to address the natural disaster shock." ### Supplementary proposal on handling PRGT high-access (HA) procedures under emergency financing requests - Proposal: suspend implementation of high-access (HA) procedures for all requests for financing under the Rapid Credit Facility (RCF) during the period for which the Board has activated Pandemic Emergency Procedures. - HA procedures are triggered when: - a request for Fund financing brings total access to more than 180 percent of quota over a 36-month period, or - total outstanding credit from the PRGT exceeds or is projected, given proposed commitments, to exceed 225 percent of quota. - The 225 percent of quota credit threshold was added in the 2019 Review of Facilities for Low-Income Countries to provide extra scrutiny against a backdrop of heightened debt vulnerabilities. - HA procedures require an informal Board session based on a short staff note that includes discussion of program strength, capacity to repay, and debt vulnerabilities. - Rationale for suspension: urgent nature of financing needs during the pandemic calls for streamlining procedures; if RCF annual access limit is increased to 100 percent, accessing the maximum amount would trigger HA procedures in up to 10 cases—some by small margins. - Document prepared by: Strategy, Policy, and Review Department, Legal Department, and Finance Department. - Approved by: Petya Koeva Brooks, Yan Liu, and Christian Mumssen. - Date noted at end of the supplementary proposal: April 3, 2020. *IMF — Enhancing the Emergency Financing Toolkit — COVID-19 Response (excerpts).* --- _Source: https://www.imf.org/-/media/files/publications/pp/2020/english/ppea2020018.pdf_