## TEMPORARY MODIFICATIONS TO ACCESS LIMITS UNDER THE LARGE NATURAL DISASTER WINDOW — EXECUTIVE SUMMARY ## Source details **Canonical URL:** [TEMPORARY MODIFICATIONS TO ACCESS LIMITS UNDER THE LARGE NATURAL DISASTER WINDOW — EXECUTIVE SUMMARY](https://www.imf.org/-/media/files/publications/pp/2021/english/ppea2021044.pdf) ## Other formats - [Markdown version](/-/media/files/publications/pp/2021/english/ppea2021044.pdf.md) - [Structured JSON version](/-/media/files/publications/pp/2021/english/ppea2021044.pdf.json) --- ### Introduction - The Fund temporarily increased certain access limits to its emergency financing (EF) instruments (Rapid Credit Facility (RCF) and Rapid Financing Instrument (RFI)) to support members during the COVID-19 pandemic. - The temporary increases did not apply to the Large Natural Disasters (“LND”) windows within the EF toolkit, reducing flexibility to respond to non-pandemic large natural disasters. - Proposal: temporarily increase by 50 percent of quota the annual access limit (AAL) and cumulative access limit (CAL) under the LND windows of the RCF and RFI through December 31, 2021, aligning these changes with other temporary EF access limit increases approved during the pandemic. - Date: June 8, 2021. ### Context and Rationale - Qualification for EF under the RCF and RFI requires: - (i) an urgent balance of payments (BOP) need, and - (ii) either resolution within one year with no major policy adjustments required, or lack of capacity to implement a Upper Credit Tranche (UCT)-quality program. - Pre-pandemic RCF/RFI access limits: - Regular sub-ceilings: AAL of 50 percent of quota and CAL of 100 percent of quota, net of scheduled repayments (applies to the “regular window” and the “exogenous shock window”). - When a natural disaster caused damage assessed to be equivalent to or exceed 20 percent of the member’s GDP (the “LND window”), RCF AAL and CAL were 80 percent of quota and 133.33 percent of quota, net of scheduled repayments; RFI AAL and CAL mirrored these increases. - Pandemic-era temporary increases (April 6, 2020): - Raised AAL and CAL under the RFI and the “exogenous shocks window” of the RCF by 50 percentage points to 100 and 150 percent of quota, respectively (net of scheduled repurchases and repayments); these increases were extended through December 31, 2021. - The LND window limits remained at 80 and 133.33 percent of quota, creating potential constraints for countries that used EF for pandemic-related needs and later face qualifying LNDs. ### Key Findings and Evidence - EF usage increased substantially: number of countries with EF credit outstanding rose from 22 at end-2019 to 73 at end-2020. - Based on outstanding EF exposure as of end-April 2021: - About two-thirds of countries with EF outstanding will have cumulative EF credit outstanding of 100 percent of quota or higher (19 GRA-only countries and 27 PRGT-eligible countries). - EF exposure will remain at or above 100 percent of quota for 19 countries through 2023, leaving only 33.3 percent of quota access under the LND CAL. - Specific countries noted as constrained by CAL given pandemic EF use plus pre-existing EF credit: - Dominica, Madagascar, Mozambique, Nepal, Samoa, and St. Vincent and the Grenadines. - Annual access constraints have declined rapidly; projected at end-June 2021: - Four GRA-only countries and nine PRGT-eligible countries with past 12-month EF access at or above 50 percent of quota. - One country is currently expected to request RCF assistance under the “LND window.” ### Discussion and Policy Rationale - The original intent of the higher LND limits was to allow access above regular RCF/RFI limits where natural disaster damage is assessed to be equivalent to or exceed 20 percent of GDP. - Increasing AAL and CAL for the LND windows by 50 percent of quota would: - Restore augmented access comparable to pre-pandemic intentions. - Ensure pandemic-related EF is truly additional. - The disaster damage threshold under the LND window (20 percent of GDP) remains appropriate to safeguard Fund resources and to limit higher access to large qualifying natural disasters. ### Safeguards and Resource Implications - Existing safeguards introduced in March 2021 for extensions of higher GRA and PRGT access limits apply to the proposed changes; no additional safeguards deemed necessary. - Safeguards include early consultations with the Board via informal briefings when access to Fund resources is elevated and rigorous application of EF qualification criteria with explicit discussion in staff reports to mitigate “facility arbitrage.” - Resource implications: - Proposed changes expected to have a modest impact on GRA resources and small risks to PRGT sustainability, given the temporary nature and low likelihood of qualifying events. - Any mobilization of resources for the PRGT linked to these increases would be part of a broader concessional financing package developed alongside wider PRGT reforms. ### Staff Proposal (Decision Summary) - Temporarily increase by 50 percentage points of quota the AAL and CAL under the “LND windows” through December 31, 2021, consistent with prior April 2020 increases for other RCF/RFI windows. - Specific proposed changes: - Raise AAL under the “LND window” of the RCF and RFI from 80 to 130 percent of quota (net of scheduled repurchases and net of scheduled repayments). - Raise CAL under the “LND window” of the RCF and RFI from 133.33 to 183.33 percent of quota (net of scheduled repurchases and net of scheduled repayments). - Expected effect: increase by roughly 40 percent the number of countries with available borrowing space of 80 percent of quota in the event of a qualifying large natural disaster; at least 80 percent of quota would be available to all countries under AALs and create that amount of space for 10 potentially constrained countries under CALs. - Timing and review: - Changes effective through December 31, 2021. - The case for further extension to EF AALs and CALs will be examined after the 2021 Annual Meetings. ### Proposed Decisions for the Executive Board - Decision I: Amendment to the PRGT Instrument - Add sentence to section II, paragraph 2(b)(ii): “For the period from [date of Board approval of this decision] to December 31, 2021, these annual and cumulative access limits shall be 130 percent of quota and 183.33 percent of quota, net of scheduled repayments, respectively;” - Decision II: Amendment to the RFI Decision - Add sentence to paragraph 5 of the RFI Decision: “For the period from [date of Board approval of this decision] to December 31, 2021, these annual and cumulative access limits shall be 130 percent of quota and 183.33 percent of quota, net of scheduled repurchases, respectively.” ### Annex I — PRGT Instrument (Redlined) — Key Provisions - Section II, paragraph 2(b): - General rule: annual limit of 50 percent of quota, cumulative limit of 100 percent of quota, net of scheduled repayments. - Subparagraph (i): each disbursement shall not exceed 25 percent of quota except where addressing an urgent BOP need resulting primarily from a sudden and exogenous shock (including a large natural disaster under (ii)). - Subparagraph (ii) — Large natural disaster window: - 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: - (a) damage assessed to be equivalent to or to exceed 20 percent of GDP; and - (b) the member’s existing and prospective policies are sufficiently strong to address the natural disaster shock. - Transitional higher limits for a specified period: - “For the period from [date of Board approval of this decision] to December 31, 2021, these annual and cumulative access limits shall be 130 percent of quota and 183.33 percent of quota, net of scheduled repayments, respectively;” - Subparagraph (iii) — COVID-19/sudden exogenous shock period: - “for the period from April 6, 2020 to December 31, 2021, 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;” - Subparagraph (iv) — Interaction with other instruments: - Outstanding credit under rapid-access ESF or emergency post conflict/natural disaster assistance counts towards RCF limits. - With effect from July 1, 2015, RFI purchases count towards RCF limits. ### Annex II — RFI Decision (Redlined) — Key Provisions - Assistance in the form of outright purchases. - Base access limits: - Annual limit of 50 percent of quota; cumulative limit of 100 percent of quota, net of scheduled repurchases. - Temporary higher limits for April 6, 2020 to December 31, 2021: - Annual and cumulative limits shall be 100 percent of quota and 150 percent of quota, net of scheduled repurchases, respectively. - Large natural disaster conditions and alternative limits: - Annual access limit 80 percent of quota and cumulative access limit 133.33 percent of quota, net of scheduled repurchases, where damage is assessed to be equivalent to or to exceed 20 percent of GDP and policies are sufficiently strong. - Transitional higher limits for a specified period: - “For the period from [date of Board approval of this decision] to December 31, 2021, these annual and cumulative access limits shall be 130 percent of quota and 183.33 percent of quota, net of scheduled repurchases, respectively.” *Source: TEMPORARY MODIFICATIONS TO ACCESS LIMITS UNDER THE LARGE NATURAL DISASTER WINDOW — EXECUTIVE SUMMARY (pp. 1–8), June 8, 2021.* ### EXECUTIVE SUMMARY ### EXECUTIVE SUMMARY ### Introduction - The Fund temporarily increased certain access limits to its emergency financing (EF) instruments (Rapid Credit Facility (RCF) and Rapid Financing Instrument (RFI) ) to support members during the COVID-19 pandemic. - The temporary increases did not apply to the Large Natural Disasters (“LND”) windows within the EF toolkit, reducing flexibility to respond to non-pandemic large natural disasters. - Proposal: temporarily increase by 50 percent of quota the annual access limit (AAL) and cumulative access limit (CAL) under the LND windows of the RCF and RFI through December 31, 2021, aligning these changes with other temporary EF access limit increases approved during the pandemic. - Date: June 8, 2021. ### Context and Rationale - Qualification for EF under the RCF and RFI requires (i) an urgent balance of payments (BOP) need, and (ii) either resolution within one year with no major policy adjustments required, or lack of capacity to implement a Upper Credit Tranche (UCT)-quality program. - Pre-pandemic RCF/RFI access limits: - Regular sub-ceilings: AAL of 50 percent of quota and CAL of 100 percent of quota, net of scheduled repayments (applies to the “regular window” and the “exogenous shock window”). - When a natural disaster caused damage assessed to be equivalent to or exceed 20 percent of the member’s GDP (the “LND window”), RCF AAL and CAL were 80 percent of quota and 133.33 percent of quota, net of scheduled repayments; RFI AAL and CAL mirrored these increases. - Pandemic-era temporary increases (April 6, 2020) raised AAL and CAL under the RFI and the “exogenous shocks window” of the RCF by 50 percentage points to 100 and 150 percent of quota, respectively (net of scheduled repurchases and repayments); these increases were extended through December 31, 2021. - The LND window limits remained at 80 and 133.33 percent of quota, creating potential constraints for countries that used EF for pandemic-related needs and later face qualifying LNDs. ### Key Findings and Evidence - EF usage increased substantially: number of countries with EF credit outstanding rose from 22 at end-2019 to 73 at end-2020. - Based on outstanding EF exposure as of end-April 2021: - About two-thirds of countries with EF outstanding will have cumulative EF credit outstanding of 100 percent of quota or higher (19 GRA-only countries and 27 PRGT-eligible countries). - EF exposure will remain at or above 100 percent of quota for 19 countries through 2023, leaving only 33.3 percent of quota access under the LND CAL. - Specific countries noted as constrained by CAL given pandemic EF use plus pre-existing EF credit: Dominica, Madagascar, Mozambique, Nepal, Samoa, and St. Vincent and the Grenadines. - Annual access constraints have declined rapidly; projected at end-June 2021: four GRA-only countries and nine PRGT-eligible countries with past 12-month EF access at or above 50 percent of quota. - One country is currently expected to request RCF assistance under the “LND window.” ### Discussion and Policy Rationale - The original intent of the higher LND limits was to allow access above regular RCF/RFI limits where natural disaster damage is assessed to be equivalent to or exceed 20 percent of GDP. - Increasing AAL and CAL for the LND windows by 50 percent of quota would restore augmented access comparable to pre-pandemic intentions and ensure pandemic-related EF is truly additional. - The disaster damage threshold under the LND window remains appropriate to safeguard Fund resources and to limit higher access to large qualifying natural disasters. ### Safeguards and Resource Implications - Existing safeguards introduced in March 2021 for extensions of higher GRA and PRGT access limits apply to the proposed changes; no additional safeguards deemed necessary. - Safeguards include early consultations with the Board via informal briefings when access to Fund resources is elevated and rigorous application of EF qualification criteria with explicit discussion in staff reports to mitigate “facility arbitrage.” - Resource implications: - Proposed changes expected to have a modest impact on GRA resources and small risks to PRGT sustainability, given the temporary nature and low likelihood of qualifying events. - Any mobilization of resources for the PRGT linked to these increases would be part of a broader concessional financing package developed alongside wider PRGT reforms. ### Staff Proposal (Decision Summary) - Temporarily increase by 50 percentage points of quota the AAL and CAL under the “LND windows” through December 31, 2021, consistent with prior April 2020 increases for other RCF/RFI windows. - Specific proposed changes: - Raise AAL under the “LND window” of the RCF and RFI from 80 to 130 percent of quota (net of scheduled repurchases and net of scheduled repayments). - Raise CAL under the “LND window” of the RCF and RFI from 133.33 to 183.33 percent of quota (net of scheduled repurchases and net of scheduled repayments). - Expected effect: increase by roughly 40 percent the number of countries with available borrowing space of 80 percent of quota in the event of a qualifying large natural disaster; at least 80 percent of quota would be available to all countries under AALs and create that amount of space for 10 potentially constrained countries under CALs. - Timing and review: - Changes effective through December 31, 2021. - The case for further extension to EF AALs and CALs will be examined after the 2021 Annual Meetings. ### Proposed Decisions for the Executive Board - Decision I: Amendment to the PRGT Instrument - Add sentence to section II, paragraph 2(b)(ii): “For the period from [date of Board approval of this decision] to December 31, 2021, these annual and cumulative access limits shall be 130 percent of quota and 183.33 percent of quota, net of scheduled repayments, respectively;” - Decision II: Amendment to the RFI Decision - Add sentence to paragraph 5 of the RFI Decision: “For the period from [date of Board approval of this decision] to December 31, 2021, these annual and cumulative access limits shall be 130 percent of quota and 183.33 percent of quota, net of scheduled repurchases, respectively.” *Source: TEMPORARY MODIFICATIONS TO ACCESS LIMITS UNDER THE LARGE NATURAL DISASTER WINDOW — EXECUTIVE SUMMARY (pp. 1–8), June 8, 2021.* ### Annex I. Instrument to Establish the Poverty Reduction and ### Annex I. Instrument to Establish the Poverty Reduction and Growth Trust—Redlined Version of Section II, paragraph 2(b) ### Introductory Section - Establishes the Poverty Reduction and Growth Trust (the “Trust”) to be administered by the International Monetary Fund (the “Fund”) as Trustee (the “Trustee”). - The Trust “shall be governed by and administered in accordance with the provisions of this instrument.” ### Section II. Trust Loans — Paragraph 2. Amount of Assistance - General rule: - “Subject to the provisions in subparagraphs (i) to (iv) below, 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, including where the assistance is requested to address an urgent balance of payments need resulting primarily from a sudden and exogenous shock and the member’s existing and prospective policies are sufficiently strong to address the exogenous shock:” - Subparagraph (i): - “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);” - Subparagraph (ii) — Large natural disaster window: - 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: - (a) “the member requests assistance under the RCF 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.” - Transitional higher limits for a specified period: - “For the period from [date of Board approval of this decision] to December 31, 2021, these annual and cumulative access limits shall be 130 percent of quota and 183.33 percent of quota, net of scheduled repayments, respectively;” - Subparagraph (iii) — COVID-19/sudden exogenous shock period: - “for the period from April 6, 2020 to December 31, 2021, 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;” - Subparagraph (iv) — Interaction with other instruments: - “outstanding credit by a member 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.” ### Annex II. Rapid Financing Instrument—Redlined Version of Paragraph 5 - Form of assistance: - “Assistance under this Decision shall be made available to members in the form of outright purchases.” - Base access limits: - “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:” - Temporary higher limits for April 6, 2020 to December 31, 2021: - “A. for the period from April 6, 2020 to December 31, 2021, the above annual and cumulative access limits shall be 100 percent of quota and 150 percent of quota, net of scheduled repurchases, respectively;” - Large natural disaster conditions and alternative limits: - “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.” - Transitional higher limits for a specified period: - “For the period from [date of Board approval of this decision] to December 31, 2021, these annual and cumulative access limits shall be 130 percent of quota and 183.33 percent of quota, net of scheduled repurchases, respectively.” *Annex I and Annex II, ppea2021044 — Instrument to Establish the Poverty Reduction and Growth Trust (Redlined).* --- _Source: https://www.imf.org/-/media/files/publications/pp/2021/english/ppea2021044.pdf_