## POLICY SAFEGUARDS FOR COMBINED GRA-PRGT HIGH EXPOSURE — EXECUTIVE SUMMARY

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---

### Introduction and Rationale
- Under current Fund lending policies, requests for access to Fund financing in excess of specified thresholds are subject to enhanced scrutiny under the Exceptional Access (EA) frameworks for the GRA and the PRGT; these operate independently.
- Staff proposes safeguards broadly aligned with the GRA exceptional access policy to apply where combined GRA and PRGT credit exposure exceeds the GRA thresholds, to mitigate financial risks to the PRGT and the GRA arising from high combined credit.
- The proposed policy builds on existing safeguards to Fund resources (GRA and PRGT as Trustee) and aims to ensure a more coherent application of policy safeguards across the membership.
- Exception: the proposed policy safeguards would not apply to a member’s request for GRA resources that exceed the combined thresholds if such request is a request within the first credit tranche.

### Key Statistics on Current Access Limits and Recent Adjustments
- GRA annual access limit: "245 percent of quota" through "April 6, 2021", after which, absent extension, it will revert to "145 percent of quota".
- GRA cumulative access limit: "435 percent of quota", net of scheduled repurchases.
- PRGT normal annual access limit: "150 percent of quota" through "April 6, 2021", after which, absent extension, it will revert to "100 percent of quota".
- PRGT normal cumulative access limit: "300 percent of quota", net of scheduled repayments.
- PRGT EA hard caps: annual "183.33 percent of quota" (until "April 6, 2021", after which it reverts to "133.33 percent of quota") and cumulative "400 percent of quota".
- Noted combined case: combined ECF/EFF arrangement with Ethiopia in December 2019, in the combined amount of "700 percent of quota".

### Proposed Scope and Triggering Conditions
- New policy safeguards would apply where combined access to GRA and PRGT resources would exceed specified thresholds derived from the GRA EA thresholds.
- The safeguards must be satisfied for Board approval of any request for Fund financing (including augmentation) that would result, at any point, in:
  - annual access to the sum of GRA and PRGT resources exceeding the equivalent to the quota-based annual limit on access to the GRA; or
  - cumulative access, net of scheduled repurchases and repayments, to the sum of GRA and PRGT resources exceeding the equivalent to the quota-based cumulative limit on access to the GRA.
- The safeguards would apply irrespective of whether the credit is to the GRA only or also includes credit to the PRGT and would be adjusted to remain aligned with future changes in the GRA EA thresholds.
- The safeguards apply to requests for rephasing of scheduled purchases or disbursements if rephasing would cause the combined annual access threshold to be exceeded and, prior to the rephasing, none of the high combined exposure thresholds had been exceeded.

### Core Criteria Required to Support Combined High-Access Financing
- The following criteria would need to be met at approval, at each program review and augmentation, and for requests under the Rapid Financing Instrument and Rapid Credit Facility where thresholds are exceeded (including when exceeded by augmentation or rephasing):

- (i) Exceptional Balance of Payments Need
  - The member is experiencing or has the potential to experience exceptional balance of payments pressures on the current account or capital account, resulting in a need for Fund financing that cannot be met without combined access to PRGT and GRA resources in amounts exceeding the GRA-equivalent thresholds.

- (ii) Adequate Containment of Public Debt Sustainability Risks
  - The risks to the sustainability of public debt are adequately contained, evidenced by:
    - For members for whom the LIC-DSF is warranted:
      - A rigorous and systematic analysis indicates a high probability that public debt is sustainable in the medium term (generally met for LIC-DSF assessments of low or moderate overall risk of public debt distress); or
      - Where public debt is not assessed to be sustainable with high probability, combined access above the proposed thresholds will only be made available if the member’s policies and other financing (which may include debt restructuring) restore public debt sustainability with high probability (i.e., to a point where the LIC-DSF would yield low or moderate overall risk of public debt distress) either:
        - within "36 months from Board approval of the financing request" or within the period of a newly approved arrangement (whichever is longer); or
        - within the remaining period of an arrangement in cases of augmentation or rephasing (with the option to request an extension of the arrangement if the remaining period is too short).
    - For members for whom the MAC DSA is warranted: the debt sustainability requirements for providing exceptional access to GRA resources are met.
  - The public debt concept covers public (domestic and external) debt and incorporates relevant contingent liabilities, including those potentially arising from private external indebtedness.

- (iii) Program Credibility and Capacity
  - The member’s policy program provides a reasonably strong prospect of success, including credible adjustment plans and institutional and political capacity to deliver the adjustment.

### Procedural and Operational Features
- Main elements of the procedural requirements under the GRA EA policies would also apply to the new safeguards; details are provided in Annex I of the source.
- The proposal does not change existing GRA and PRGT EA policies and existing PRGT high-access policies, which would continue to apply when triggered.
- Early Board consultation:
  - An informal Board meeting is required as soon as management determines that new or augmented access to GRA and/or PRGT resources exceeding the HCC Thresholds may be appropriate.
  - Staff will circulate a confidential note in advance setting out a preliminary evaluation of the three substantive criteria and including factors underlying the exceptional Balance of Payments need, brief summary of main policy measures and macro framework, assessment of a reasonably strong prospect of success (including a capacity to repay table), impact on Fund resources (including concessional resources), preliminary DSA assessment and charts, data quality deficiencies, likely timetable, and a Selected Economic Indicators table.
- Consultation with Executive Directors:
  - Additional consultations between the informal meeting and Board consideration will normally be expected to keep the Board abreast of program-financing parameters, assumed rollover rates, economic developments, progress in negotiations, and timetable changes.
- Staff reports:
  - The case for financing above the HCC Thresholds will be discussed in staff reports at approval and at each program review where the request would result in credit exceeding the specified thresholds; reports are expected to discuss impact on Fund resources, including concessional resources and credit risk exposure.
- Ex post evaluation (EPE):
  - An EPE by staff of arrangements entailing combined access exceeding the proposed thresholds will be expected within a year after the end of the arrangement.
  - An EPE will not be required where the proposed combined credit exposure safeguards are triggered by a request for an outright purchase or disbursement.
- Concurrence with PRGT/GRA EA procedures:
  - Where envisaged use of Fund resources also entails PRGT high access or PRGT EA, both PRGT procedures and the proposed safeguards’ procedures will apply.
  - Where envisaged use also entails GRA EA, both GRA EA procedures and the proposed safeguards’ procedures will apply.
  - In cases that entail both PRGT high access or EA and GRA EA, only the EA procedures under the PRGT and GRA will apply.
  - Early Board consultation in concurrent cases will involve one informal Board meeting and a single concise note meeting substantive informational requirements under applicable policies.
- Additional procedural notes:
  - Use of the two sets of safeguards is called for because PRGT exceptional access is currently limited to poorer PRGT-eligible countries that lack market access and PRGT exceptional access criteria are designed to ensure that result.
  - Implementation of high-access procedures for RCF requests is suspended through October 5, 2020 given activation of the Pandemic Emergency Procedures.

### Rationale for Not Including a Market Access Criterion
- The proposed safeguards do not include a market access criterion analogous to the GRA EA framework because the majority of PRGT-eligible members do not have significant access to international capital markets and rely more heavily on official sector support.
- Requiring restoration of market access would represent an unattainable bar for many PRGT-eligible countries.
- The requirement of sufficient improvement in key debt indicators over the arrangement period (or "36 months") to reach low or moderate risk of debt distress provides reasonable assurance of the member’s ability to repay the Fund.

### Illustrative Exposure Data (as of end-July 2020)
- Number of Fund members with PRGT credit outstanding: "58".
- PRGT credit outstanding (countries with outstanding PRGT credit exceeding "150 percent of quota"):
  - Chad: "299"
  - Cameroon: "215"
  - Mali: "209"
  - Niger: "208"
  - Ghana: "200"
  - Burkina Faso: "200"
  - Rwanda: "185"
  - Grenada: "183"
  - Central African Republic: "176"
  - Sierra Leone: "176"
  - Madagascar: "175"
  - Benin: "173"
  - Togo: "171"
  - Malawi: "169"
  - Mozambique: "167"
  - Guinea: "160"
  - Mauritania: "157"
- Selected combined and projected combined credit exposures:
  - Armenia: "302" (noting Armenia graduated from the PRGT-eligibility list in 2013 but still has outstanding PRGT credit of about "32 percent of quota")
  - Ethiopia: "750" (peak projected credit exposure example)
  - Cote d'Ivoire: "283"
  - Chad: "299"
  - Cameroon: "235"
  - Mali: "246"
  - Niger: "219"
  - Moldova: "209"
  - Ghana: "200"
  - Malawi: "201"

### Implementation Notes and Context
- The specification of the debt sustainability safeguard seeks a pragmatic approach broadly comparable with the GRA EA criterion while recognizing methodological differences between the LIC-DSF and the MAC DSA.
- A broader reassessment of lending policies affecting low income countries, informed by the coronavirus pandemic, will be brought to the Board in the coming months.
- Historical note: since approval of the current PRGT lending architecture in 2009, no PRGT-eligible country has accessed a combination of GRA and PRGT resources above the quota-based thresholds equivalent to those that apply under the GRA access limits, except for the Ethiopia combined ECF/EFF case in December 2019 ("700 percent of quota").

### Cases, Applicability, and Interaction with Exceptional/High Access Rules
- If a financing request would trigger GRA exceptional access (EA) policy and the high combined credit exposure safeguards, the high combined credit exposure safeguards would not be applied because meeting the GRA EA criteria is deemed sufficient.
- If a financing request would trigger both the PRGT EA policy and the high combined credit exposure safeguards, both sets of safeguards would be applied:
  - PRGT EA criteria must be met for access to PRGT resources in excess of the applicable PRGT access limits.
  - The proposed combined credit exposure safeguards must be met when combined access to GRA and PRGT resources would exceed thresholds equivalent to the applicable GRA access limits.
- If a financing request would trigger both the PRGT and GRA EA policies and the high combined credit exposure safeguards, both the GRA EA and PRGT EA policies would apply, while the combined credit exposure safeguards would be deemed to be met.

### HCC Thresholds and Scope (Proposed Decision highlights)
- The Fund will not approve financing requests in the GRA or under the PRGT in an amount above the High Combined GRA and PRGT Credit Thresholds (the “HCC Thresholds”) unless satisfied that the substantive criteria and procedural requirements are met.
- The HCC Thresholds arise when a member’s annual or cumulative access (net of scheduled repurchases and repayments) to the sum of GRA and PRGT resources exceeds, in quota terms, the equivalent of the annual or cumulative limit applicable to access by members to GRA resources set forth in paragraph 2 of Decision No. 14064-(08/18), adopted February 22, 2008, as amended.
- The HCC Thresholds shall adjust automatically to any changes in the access limits set forth in Decision No. 14064-(08/18), adopted February 22, 2008, as amended (the “GRA Access Decision”).
- The new framework applies to:
  - new GRA and/or PRGT arrangements;
  - augmentation of access under a new arrangement or an arrangement already in place at policy effectiveness;
  - new financing under the Rapid Credit Facility or the Rapid Financing Instrument;
  - rephasing of access under a new arrangement that causes the annual HCC threshold to be exceeded where the arrangement was previously not subject to the new policy.
- The proposed policy safeguards are not intended to apply to access to GRA resources that is limited to the first credit tranche.

### Substantive Criteria Required When HCC Thresholds Are Exceeded (paragraph 3)
- (a) Exceptional balance of payments need:
  - The member is experiencing or has the potential to experience exceptional balance of payments pressures on the current account or capital account, resulting in a need for Fund financing that cannot be met without giving rise to access in excess of the HCC Thresholds.
- (b) Risks to sustainability of public debt are adequately contained, evidenced by:
  - For members subject to the LIC-DSF:
    - I. A rigorous and systematic analysis indicates that there is a high probability that the member's public debt is sustainable in the medium term. This is generally considered to be met for countries assessed under the LIC-DSF to be at low or moderate overall risk of public debt distress; or
    - II. Where public debt is assessed to be sustainable but not with high probability (including where overall risk is high or in debt distress), or where debt is assessed unsustainable ex ante, access above HCC Thresholds will only be made available if the member’s policies and financing from sources other than the Fund, which may include debt restructuring, restores public debt sustainability with high probability (generally considered to be met for countries assessed under the LIC-DSF to be at low or moderate overall risk of public debt distress):
      - (i) within 36 months from Board approval in the case of a new Fund arrangement, purchase under the RFI or loan under the RCF, or within the period of the new arrangement, whichever is longer, or
      - (ii) within the remaining period of an arrangement, in cases where the Board approves a request for an augmentation or a rephasing of access under the arrangement.
  - For members subject to the MAC DSA: the debt sustainability requirements that apply to exceptional access in the GRA, set forth in paragraph 3(b) of the GRA Access Decision and in BUFF/16/9 (1/27/2016), are to be met.
- (c) Program prospects:
  - The member’s policy program provides a reasonably strong prospect of success, including adjustment plans and institutional and political capacity to deliver that adjustment.

### Procedural Requirements (paragraph 4) and Annex I Highlights
- Subject to paragraph 5, the procedural requirements regarding Board consultations, staff reports and ex-post evaluations as set forth in Annex I of SM/20/137 shall apply to cases involving access in excess of the HCC Thresholds.
- Staff reports must discuss the impact on Fund resources, including concessional resources and credit risk exposure, unless a separate supplement is prepared.
- An EPE by staff of arrangements entailing combined access exceeding the proposed thresholds will be expected within a year after the end of the arrangement (with exceptions for outright purchases/disbursements).

### Special Cases and Interactions with Exceptional/High Access Rules (paragraph 5)
- (a) If combined access would exceed any HCC Thresholds and the GRA portion would also exceed the annual or cumulative access limit to GRA resources:
  - The criteria in paragraph 3 shall not apply and the GRA Criteria shall apply.
  - The procedural requirements in paragraph 4 and the procedural requirements for exceptional access in the GRA shall both apply.
- (b) If combined access would exceed any HCC Thresholds and the PRGT portion would also exceed the normal annual or cumulative access limit to PRGT resources:
  - The criteria in paragraph 3 shall apply, and the PRGT Criteria shall also apply for access to PRGT resources above the PRGT normal access limits.
  - The procedural requirements in paragraph 4 and the procedural requirements for exceptional access to PRGT resources shall both apply.
- (c) If combined access would exceed any HCC Thresholds and also the respective annual or cumulative access limits in the GRA and under the PRGT:
  - The criteria in paragraph 3 shall not apply, and the GRA criteria shall apply, in addition to application of the PRGT criteria for access to PRGT resources above the PRGT normal access limit.
  - The procedural requirements in paragraph 4 shall not apply, and both the procedural requirements for exceptional access in the GRA and for exceptional access to PRGT resources shall apply.
- (d) If combined access would exceed any HCC Thresholds and also the thresholds that give rise to high access in the PRGT:
  - The criteria in paragraph 3 shall apply, and the procedural requirements for high access in the PRGT and the procedural requirements in paragraph 4 shall also apply.

### Exclusions and Calculation Rule (paragraph 6)
- Access to GRA resources that is limited to the first credit tranche in the GRA shall not be included in calculating the HCC thresholds.
- The framework for HCC set out in this decision shall not apply to financing approved to support the clearance of protracted arrears in the context of the HIPC Initiative for any access equivalent to amounts covered by HIPC Initiative debt relief.

*International Monetary Fund — POLICY SAFEGUARDS FOR COMBINED GRA-PRGT HIGH EXPOSURE: EXECUTIVE SUMMARY.*

### EXECUTIVE SUMMARY

### POLICY SAFEGUARDS FOR COMBINED GRA-PRGT HIGH EXPOSURE — EXECUTIVE SUMMARY

### Introduction and Rationale
- Under current Fund lending policies, requests for access to Fund financing in excess of specified thresholds are subject to enhanced scrutiny under the Exceptional Access (EA) frameworks for the GRA and the PRGT; these operate independently.
- Staff proposes safeguards broadly aligned with the GRA exceptional access policy to apply where combined GRA and PRGT credit exposure exceeds the GRA thresholds, to mitigate financial risks to the PRGT and the GRA arising from high combined credit.
- The proposed policy builds on existing safeguards to Fund resources (GRA and PRGT as Trustee) and aims to ensure a more coherent application of policy safeguards across the membership.

### Key Statistics on Current Access Limits and Recent Adjustments
- GRA annual access limit: "245 percent of quota" through "April 6, 2021", after which, absent extension, it will revert to "145 percent of quota".
- GRA cumulative access limit: "435 percent of quota", net of scheduled repurchases.
- PRGT normal annual access limit: "150 percent of quota" through "April 6, 2021", after which, absent extension, it will revert to "100 percent of quota".
- PRGT normal cumulative access limit: "300 percent of quota", net of scheduled repayments.
- PRGT EA hard caps: annual "183.33 percent of quota" (until "April 6, 2021", after which it reverts to "133.33 percent of quota") and cumulative "400 percent of quota".
- Noted combined case: combined ECF/EFF arrangement with Ethiopia in December 2019, in the combined amount of "700 percent of quota".

### Proposed Scope and Triggering Conditions
- New policy safeguards would apply where combined access to GRA and PRGT resources would exceed specified thresholds derived from the GRA EA thresholds.
- The safeguards must be satisfied for Board approval of any request for Fund financing (including augmentation) that would result, at any point, in:
  - annual access to the sum of GRA and PRGT resources exceeding the equivalent to the quota-based annual limit on access to the GRA; or
  - cumulative access, net of scheduled repurchases and repayments, to the sum of GRA and PRGT resources exceeding the equivalent to the quota-based cumulative limit on access to the GRA.
- The safeguards would apply irrespective of whether the credit is to the GRA only or also includes credit to the PRGT and would be adjusted to remain aligned with future changes in the GRA EA thresholds.
- Exception: the proposed policy safeguards would not apply to a member’s request for GRA resources that exceed the combined thresholds if such request is a request within the first credit tranche.

### Core Criteria Required to Support Combined High-Access Financing
- The following criteria would need to be met at approval, at each program review and augmentation, and for requests under the Rapid Financing Instrument and Rapid Credit Facility where thresholds are exceeded (including when exceeded by augmentation or rephasing):

i. Exceptional Balance of Payments Need
- The member is experiencing or has the potential to experience exceptional balance of payments pressures on the current account or capital account, resulting in a need for Fund financing that cannot be met without combined access to PRGT and GRA resources in amounts exceeding the GRA-equivalent thresholds.

ii. Adequate Containment of Public Debt Sustainability Risks
- The risks to the sustainability of public debt are adequately contained, evidenced by:
  - For members for whom the LIC-DSF is warranted:
    - A rigorous and systematic analysis indicates a high probability that public debt is sustainable in the medium term (generally met for LIC-DSF assessments of low or moderate overall risk of public debt distress); or
    - Where public debt is not assessed to be sustainable with high probability, combined access above the proposed thresholds will only be made available if the member’s policies and other financing (which may include debt restructuring) restore public debt sustainability with high probability (i.e., to a point where the LIC-DSF would yield low or moderate overall risk of public debt distress) either:
      - within "36 months from Board approval of the financing request" or within the period of a newly approved arrangement (whichever is longer); or
      - within the remaining period of an arrangement in cases of augmentation or rephasing (with the option to request an extension of the arrangement if the remaining period is too short).
  - For members for whom the MAC DSA is warranted: the debt sustainability requirements for providing exceptional access to GRA resources are met.
- The public debt concept covers public (domestic and external) debt and incorporates relevant contingent liabilities, including those potentially arising from private external indebtedness.

iii. Program Credibility and Capacity
- The member’s policy program provides a reasonably strong prospect of success, including credible adjustment plans and institutional and political capacity to deliver the adjustment.

### Procedural and Operational Features
- Main elements of the procedural requirements under the GRA EA policies would also apply to the new safeguards; details are provided in Annex I of the source.
- The proposal does not change existing GRA and PRGT EA policies and existing PRGT high-access policies, which would continue to apply when triggered.
- The safeguards apply to requests for rephasing of scheduled purchases or disbursements if rephasing would cause the combined annual access threshold to be exceeded and, prior to the rephasing, none of the high combined exposure thresholds had been exceeded.

### Rationale for Not Including a Market Access Criterion
- The proposed safeguards do not include a market access criterion analogous to the GRA EA framework because the majority of PRGT-eligible members do not have significant access to international capital markets and rely more heavily on official sector support.
- Requiring restoration of market access would represent an unattainable bar for many PRGT-eligible countries.
- The requirement of sufficient improvement in key debt indicators over the arrangement period (or "36 months") to reach low or moderate risk of debt distress provides reasonable assurance of the member’s ability to repay the Fund.

### Illustrative Exposure Data (as of end-July 2020)
- Number of Fund members with PRGT credit outstanding: "58".
- PRGT credit outstanding (countries with outstanding PRGT credit exceeding "150 percent of quota"):
  - Chad: "299"
  - Cameroon: "215"
  - Mali: "209"
  - Niger: "208"
  - Ghana: "200"
  - Burkina Faso: "200"
  - Rwanda: "185"
  - Grenada: "183"
  - Central African Republic: "176"
  - Sierra Leone: "176"
  - Madagascar: "175"
  - Benin: "173"
  - Togo: "171"
  - Malawi: "169"
  - Mozambique: "167"
  - Guinea: "160"
  - Mauritania: "157"
- Selected combined and projected combined credit exposures shown in the source:
  - Armenia: "302" (noting Armenia graduated from the PRGT-eligibility list in 2013 but still has outstanding PRGT credit of about "32 percent of quota")
  - Ethiopia: "750" (peak projected credit exposure example)
  - Cote d'Ivoire: "283"
  - Chad: "299"
  - Cameroon: "235"
  - Mali: "246"
  - Niger: "219"
  - Moldova: "209"
  - Ghana: "200"
  - Malawi: "201"

### Implementation Notes and Context
- The specification of the debt sustainability safeguard seeks a pragmatic approach broadly comparable with the GRA EA criterion while recognizing methodological differences between the LIC-DSF and the MAC DSA.
- A broader reassessment of lending policies affecting low income countries, informed by the coronavirus pandemic, will be brought to the Board in the coming months.
- Historical note: since approval of the current PRGT lending architecture in 2009, no PRGT-eligible country has accessed a combination of GRA and PRGT resources above the quota-based thresholds equivalent to those that apply under the GRA access limits, except for the Ethiopia combined ECF/EFF case in December 2019 ("700 percent of quota").

*International Monetary Fund — POLICY SAFEGUARDS FOR COMBINED GRA-PRGT HIGH EXPOSURE: EXECUTIVE SUMMARY.*

### 10.      Cases may arise where proposed access levels would constitute EA under the GRA

### 10.      Cases may arise where proposed access levels would constitute EA under the GRA and/or PRGT while also meeting the thresholds for high combined credit exposure safeguards

### Applicability and interaction of safeguards
- When a financing request would trigger GRA exceptional access (EA) policy and the high combined credit exposure safeguards, the high combined credit exposure safeguards would not be applied because meeting the GRA EA criteria is deemed to be a sufficient safeguard.
- When a financing request would trigger both the PRGT EA policy and the high combined credit exposure safeguards, both sets of safeguards would be applied:
  - PRGT EA criteria must be met for access to PRGT resources in excess of the applicable PRGT access limits.
  - The proposed combined credit exposure safeguards must be met when combined access to GRA and PRGT resources would exceed thresholds equivalent to the applicable GRA access limits.
- When a financing request would trigger both the PRGT and GRA EA policies and the high combined credit exposure safeguards, both the GRA EA and PRGT EA policies would apply, while the combined credit exposure safeguards would be deemed to be met.

### Grandfathering and effective date
- Fund financing commitments under existing arrangements approved prior to the adoption of the new policy safeguards would be grandfathered.
- The new policy safeguards for high combined credit exposure would take effect immediately following the adoption of the Board Decision and would apply to requests for:
  - (i) a new Fund arrangement and augmentation of access or rephasing under such arrangements,
  - (ii) an augmentation of access under an existing arrangement, or
  - (iii) a new outright loan or purchase under the Rapid Credit Facility (RCF) and/or Rapid Financing Instrument (RFI),
  where such requests trigger the combined high credit exposure safeguards.
- The policy would not apply to commitments already made under arrangements approved before the new policy takes effect unless the member requests augmentation of access under such arrangements or additional Fund financing (e.g., financing under the RCF and/or RFI) that triggers the combined credit exposure safeguards.
- Requests for rephasing (without augmentation) of access under commitments in Fund arrangements approved prior to adoption of the new policy would not be subject to the new policy safeguards.

### HCC Thresholds and scope (Proposed Decision highlights)
- The Fund will not approve financing requests in the GRA or under the PRGT in an amount above the High Combined GRA and PRGT Credit Thresholds (the “HCC Thresholds”) unless satisfied that the substantive criteria and procedural requirements are met.
- The HCC Thresholds arise when a member’s annual or cumulative access (net of scheduled repurchases and repayments) to the sum of resources in the GRA and under the PRGT exceeds, in quota terms, the equivalent of the annual or cumulative limit applicable to access by members to GRA resources set forth in paragraph 2 of Decision No. 14064-(08/18), adopted February 22, 2008, as amended.
- The HCC Thresholds shall adjust automatically to any changes in the access limits set forth in Decision No. 14064-(08/18), adopted February 22, 2008, as amended (the “GRA Access Decision”).
- The new framework applies to:
  - new GRA and/or PRGT arrangements;
  - augmentation of access under a new arrangement or an arrangement already in place at policy effectiveness;
  - new financing under the Rapid Credit Facility or the Rapid Financing Instrument;
  - rephasing of access under a new arrangement that causes the annual HCC threshold to be exceeded where the arrangement was previously not subject to the new policy.
- The proposed policy safeguards are not intended to apply to access to GRA resources that is limited to the first credit tranche.

### Substantive criteria required when HCC thresholds are exceeded (paragraph 3)
- (a) Exceptional balance of payments need:
  - The member is experiencing or has the potential to experience exceptional balance of payments pressures on the current account or capital account, resulting in a need for Fund financing that cannot be met without giving rise to access in excess of the HCC Thresholds.
- (b) Risks to sustainability of public debt are adequately contained, evidenced by:
  - For members subject to the LIC-DSF:
    - I. A rigorous and systematic analysis indicates that there is a high probability that the member's public debt is sustainable in the medium term. This is generally considered to be met for countries assessed under the LIC-DSF to be at low or moderate overall risk of public debt distress; or
    - II. Where public debt is assessed to be sustainable but not with high probability (including where overall risk is high or in debt distress), or where debt is assessed unsustainable ex ante, access above HCC Thresholds will only be made available if the member’s policies and financing from sources other than the Fund, which may include debt restructuring, restore public debt sustainability with high probability (generally considered to be met for countries assessed under the LIC-DSF to be at low or moderate overall risk of public debt distress):
      - (i) within 36 months from Board approval in the case of a new Fund arrangement, purchase under the RFI or loan under the RCF, or within the period of the new arrangement, whichever is longer, or
      - (ii) within the remaining period of an arrangement, in cases where the Board approves a request for an augmentation or a rephasing of access under the arrangement.
  - For members subject to the MAC DSA: the debt sustainability requirements that apply to exceptional access in the GRA, set forth in paragraph 3(b) of the GRA Access Decision and in BUFF/16/9 (1/27/2016), are to be met.
- (c) Program prospects:
  - The member’s policy program provides a reasonably strong prospect of success, including adjustment plans and institutional and political capacity to deliver that adjustment.

### Procedural requirements for high combined exposure cases (Annex I)
- Early Board consultation:
  - An informal Board meeting is required as soon as management determines that new or augmented access to GRA and/or PRGT resources exceeding the HCC Thresholds may be appropriate, including rephasing of approved access that would cause thresholds to be exceeded where thresholds were not previously exceeded.
  - In advance of the meeting, staff will circulate a confidential note setting out the preliminary evaluation of the three substantive criteria and including:
    - factors underlying the exceptional Balance of Payments need, taking into account financing from donors;
    - brief summary of main policy measures and the macro framework;
    - assessment of a reasonably strong prospect of success, including capacity to repay and a capacity to repay table;
    - impact on Fund resources, including the impact on the Fund’s concessional resources;
    - analysis of debt vulnerabilities, including a preliminary DSA assessment and typically DSA charts;
    - discussion of any deficiencies in the quality/transparency of public debt data;
    - likely timetable for discussion with authorities; and
    - a Selected Economic Indicators table.
- Consultation with Executive Directors:
  - Additional consultations between the informal meeting and Board consideration of the staff report will normally be expected to keep the Board abreast of program-financing parameters, assumed rollover rates, economic developments, progress in negotiations, substantial changes, and timetable changes.
- Staff reports:
  - The case for financing above the HCC Thresholds based on the three substantive criteria will be discussed in staff reports at approval of the new financing request and at each program review where the request would result in credit exceeding the specified thresholds.
  - The staff report is expected to discuss the impact on Fund resources, including concessional resources and credit risk exposure to the Fund, unless a separate supplement is already prepared.
- Ex post evaluation (EPE):
  - An EPE by staff of arrangements entailing combined access exceeding the proposed thresholds will be expected within a year after the end of the arrangement.
  - An EPE will not be required where the proposed combined credit exposure safeguards are triggered by a request for an outright purchase or disbursement.
- Concurrence with PRGT/GRA EA procedures:
  - Where envisaged use of Fund resources also entails PRGT high access or PRGT EA, the PRGT high access/EA informational procedures and the procedures under the proposed policy safeguards will both apply.
  - Where envisaged use of Fund resources also entails GRA EA, the GRA EA procedures and the procedures under the proposed policy safeguards will both apply.
  - In cases that entail both PRGT high access or EA and GRA EA, only the EA procedures under the PRGT and GRA will apply.
  - Early Board consultation in concurrent cases will involve one informal Board meeting and a single concise note meeting substantive informational requirements under applicable policies.
- Additional procedural notes:
  - Use of the two sets of safeguards is called for because PRGT exceptional access is currently limited to poorer PRGT-eligible countries that lack market access and PRGT exceptional access criteria are designed to ensure that result.
  - Implementation of high-access procedures for RCF requests is suspended through October 5, 2020 given activation of the Pandemic Emergency Procedures.

### Comparative view: GRA, PRGT, and High Combined Credit Exposure safeguards (Box 2 — summary)
- Criterion 1 (Balance of payments need):
  - GRA/PRGT: Exceptional balance of payments pressures requiring Fund financing beyond normal limits.
  - HCC Safeguards: Exceptional pressures resulting in combined access to PRGT and GRA resources exceeding thresholds equivalent to GRA limits.
- Criterion 2 (Debt sustainability):
  - GRA: High probability that public debt is sustainable in the medium term; exceptional access only if sustainability or sufficient external financing restores it with high probability.
  - PRGT: Member has a comparatively strong adjustment program and ability to repay the Fund; generally not met for countries with high risk of debt distress unless expected debt relief/restructuring reduces risk to moderate/low.
  - HCC Safeguards: Risks to sustainability are adequately contained, evidenced by LIC-DSF or MAC DSA standards described above (including the 36 months timeline condition where applicable).
- Criterion 3 (Market access prospects):
  - GRA: Prospects of gaining or regaining access to private capital markets within a timeframe and scale to meet Fund obligations.
  - PRGT: Countries without sustained past access to international financial markets and with income at or below prevailing operational cutoff for IDA assistance.
- Criterion 4 (Program prospects):
  - Both PRGT and HCC Safeguards: The policy program provides a reasonably strong prospect of success, including institutional and political capacity to deliver adjustment.

*Source: POLICY SAFEGUARDS FOR COMBINED GRA-PRGT HIGH EXPOSURE (excerpts).*

### 4.  Subject to paragraph 5 below, the procedural requirements regarding Board consultations,

### 4.  Subject to paragraph 5 below, the procedural requirements regarding Board consultations,

### Scope and applicability
- Applies to financing requests in the GRA or under the PRGT that would result in access above the High Combined GRA and PRGT Credit Thresholds ("HCC Thresholds") as defined in paragraph 2 of the Revised Proposed Decision.
- HCC arises when a member’s annual or cumulative access (net of scheduled repurchases and repayments) to the sum of resources in the GRA and under the PRGT exceeds, in quota terms, the equivalent of the annual or the cumulative limit (net of scheduled repurchases) applicable to access by members to GRA resources set forth in paragraph 2 of Decision No. 14064-(08/18), adopted February 22, 2008, as amended (the “HCC Thresholds”).
- The HCC Thresholds shall adjust automatically to any changes in the access limits set forth in Decision No. 14064-(08/18), adopted February 22, 2008, as amended (the “GRA Access Decision”).

### Criteria for approval when access would exceed the HCC Thresholds (paragraph 3)
- Subject to paragraph 5, the criteria that must be satisfied are:
  - (a) The member is experiencing or has the potential to experience exceptional balance of payments pressures on the current account or capital account, resulting in a need for Fund financing that cannot be met without giving rise to access in excess of the HCC Thresholds.
  - (b) Risks to the sustainability of public debt are adequately contained, evidenced by, and subject to, the standards set forth below:
    - A. For members subject to the Bank-Fund Debt Sustainability Framework for Low-Income Countries (the “LIC-DSF”):
      - I. A rigorous and systematic analysis indicates that there is a high probability that the member's public debt is sustainable in the medium term. This is generally considered to be met for countries that are assessed under the LIC-DSF to be at low or moderate overall risk of public debt distress; or
      - II. Where the member’s public debt is assessed to be sustainable but not with high probability (which includes cases where the member’s overall risk of public debt distress is assessed to be high or in debt distress), or where the member’s debt is assessed to be unsustainable ex ante, access to resources in excess of the HCC Thresholds will only be made available if the combination of the member’s policies and financing from sources other than the Fund, which may include debt restructuring, restores public debt sustainability with high probability (generally considered to be met for countries that are assessed under the LIC-DSF to be at low or moderate overall risk of public debt distress) (i) within 36 months from Board approval in the case of a new Fund arrangement, purchase under the RFI or loan under the RCF, or within the period of the new arrangement, whichever is longer, or (ii) within the remaining period of an arrangement, in cases where the Board approves a request for an augmentation or a rephasing of access under the arrangement.
    - B. For members subject to assessments of debt sustainability under the Debt Sustainability Framework for Market Access Countries, this criterion will be met where a rigorous and systematic analysis indicates that the same debt sustainability requirements that apply to exceptional access in the GRA, set forth in paragraph 3(b) of the GRA Access Decision and in BUFF/16/9 (1/27/2016), are met.
  - (c) The member’s policy program provides a reasonably strong prospect of success, including not only the member’s adjustment plans but also its institutional and political capacity to deliver that adjustment.

### Procedural requirements (paragraph 4)
- Subject to paragraph 5, the procedural requirements regarding Board consultations, staff reports and ex-post evaluations as set forth in Annex I of SM/20/137 shall apply to cases involving access in excess of the HCC Thresholds.

### Special cases and interactions with exceptional/high access rules (paragraph 5)
- Where access would exceed any HCC Thresholds and involve exceptional access to GRA resources and/or high access or exceptional access to PRGT resources, the following rules apply:
  - (a) If combined access would exceed any HCC Thresholds and the GRA portion would also exceed the annual or cumulative access limit to GRA resources:
    - The criteria in paragraph 3 of this Decision shall not apply and the criteria applicable to exceptional access to GRA resources set forth in paragraph 3 of the GRA Access Decision (the “GRA Criteria”) shall apply.
    - The procedural requirements set forth in paragraph 4 of this Decision and the procedural requirements for exceptional access in the GRA shall both apply.
  - (b) If combined access would exceed any HCC Thresholds and the PRGT portion would also exceed the normal annual or cumulative access limit to PRGT resources:
    - The criteria set forth in paragraph 3 of this Decision shall apply, and the criteria set forth in Section II, Paragraph 2(a) of the PRGT Instrument annexed to Decision No. 8759-(87/176) ESAF, adopted December 18, 1987, as amended (the “PRGT Criteria”) shall also apply for access to PRGT resources above the PRGT normal access limits.
    - The procedural requirements set forth in paragraph 4 of this Decision and the procedural requirements for exceptional access to PRGT resources shall both apply.
  - (c) If combined access would exceed any HCC Thresholds and also the respective annual or cumulative access limits in the GRA and under the PRGT:
    - The criteria set forth in paragraph 3 of this Decision shall not apply, and the GRA criteria shall apply, in addition to the application of the PRGT criteria for access to PRGT resources above the PRGT normal access limit.
    - The procedural requirements set forth in paragraph 4 of this Decision shall not apply, and both the procedural requirements for exceptional access in the GRA and for exceptional access to PRGT resources shall apply, respectively.
  - (d) If combined access would exceed any HCC Thresholds and also the thresholds that give rise to high access in the PRGT:
    - The criteria set forth in paragraph 3 of this Decision shall apply, and the procedural requirements for high access in the PRGT and the procedural requirements set forth in paragraph 4 of this Decision shall also apply.

### Exclusions and calculation rule (paragraph 6)
- Access to GRA resources that is limited to the first credit tranche in the GRA shall not be included in calculating the HCC thresholds.
- The framework for HCC set out in this decision shall not apply to financing approved to support the clearance of protracted arrears in the context of the HIPC Initiative for any access equivalent to amounts covered by HIPC Initiative debt relief.

*POLICY SAFEGUARDS FOR COMBINED GRA-PRGT EXPOSURE—REVISED PROPOSED DECISION.*

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_Source: https://www.imf.org/-/media/files/publications/pp/2020/english/ppea2020039.pdf_