## ppea2021077 ## Source details **Canonical URL:** [ppea2021077](https://www.imf.org/-/media/files/publications/pp/2021/english/ppea2021077.pdf) ## Other formats - [Markdown version](/-/media/files/publications/pp/2021/english/ppea2021077.pdf.md) - [Structured JSON version](/-/media/files/publications/pp/2021/english/ppea2021077.pdf.json) --- ### EXECUTIVE SUMMARY — Overview - The Fund temporarily increased access limits on Fund resources during the COVID-19 pandemic; these temporary increases expire at end-December 2021. - Absent policy changes, on January 1, 2022, access limits would revert to pre-pandemic levels or to the new PRGT annual access limit approved in July 2021. ### Key changes to access limits (as described) - On January 1, 2022: - GRA Annual Access Limit (AAL) would return to 145 percent of quota from 245 percent of quota. - PRGT Normal Annual Access Limit would return to 145 percent of quota from 245 percent of quota (reflecting the July 2021 PRGT reform). - RFI regular window and RCF Exogenous Shock (ES) window: - Annual Access Limit: would return to 50 percent of quota from 100 percent of quota. - Cumulative Access Limit: would return to 100 percent of quota from 150 percent of quota. - Large Natural Disaster (LND) windows of RCF and RFI: - Annual Access Limit: would return to 80 percent of quota from 130 percent of quota. - Cumulative Access Limit: would return to 133.33 percent of quota from 183.33 percent of quota. - The temporarily suspended limit on the number of disbursements under the RCF within a 12-month period would expire as of January 1, 2022. ### Staff proposal (summary) - Let all access limits return to pre-pandemic levels (or the new PRGT annual access limit), except: - Extend the cumulative access limits (CAL) for emergency financing instruments at current levels for another 18 months. - Maintain CAL at 150 percent of quota for RFI regular window and RCF exogenous shock window until end-June 2023. - Maintain CAL at 183.33 percent of quota for the Large Natural Disaster windows of the RFI and RCF until end-June 2023. - Reinstate from January 1, 2022 the limit on the number of disbursements under the RCF within a 12-month period. - Staff will develop an exit strategy towards a post-pandemic emergency financing access limit policy by end-June 2023. ### Rationale and balance - Proposal aims to: - Safeguard Fund resources and preserve the revolving nature of resources. - Allow countries room to access emergency financing instruments for urgent balance of payments (BoP) needs when an upper credit tranche-quality (UCT) program is either not feasible or not necessary. - Support transition from emergency financing (EF) toward UCT-quality arrangements. - Staff judges that returning GRA and PRGT access limits to lower levels would not unduly constrain countries’ access to future Fund financing overall, but immediate constraints arise from previous EF use under cumulative limits. ### Implications of returning to pre-pandemic limits - On annual access limits (AAL): - Limited impact on overall borrowing space without triggering Exceptional Access (EA) scrutiny: as of January 1, 2022, only two non-PRGT-eligible members would have no room before EA is triggered; one non-PRGT and one PRGT-eligible member would have less than 40 percent of quota of room before triggering higher scrutiny. - A transition rule applies for arrangements approved in specified windows (GRA financing approved between July 13, 2020 and end-2021 and PRGT financing approved between March 22, 2021 and end-2021): any 12-month period that includes any date during the window will be subject to an AAL of 245 percent of quota; other periods will be subject to an AAL of 145 percent of quota. - On emergency financing cumulative access limits (CAL): - Many countries have already used EF at or near 100 percent of quota. Reverting CAL to 100 percent of quota would prevent these countries from accessing RFI regular window or RCF ES window until they begin repurchasing/repaying these loans. - With CAL reverting to 100 percent of quota, repayment/repurchase timing implies long waits: 3 ¼ years for RFI and 5 ½ years for RCF to restore borrowing space absent early repayments. - As of end-2021, 47 countries (19 non-PRGT-eligible and 28 PRGT-eligible) are expected to have cumulative credit outstanding under the RCF and/or RFI at 100 percent of quota or higher. Eleven of these are Small Developing States (SDS); seven are Fragile and Conflict-Affected States (FCS). - On annual access to EF instruments: - By January 1, 2022, 7 countries would be constrained from accessing any EF instrument due to the AAL (Myanmar, Tonga, Guinea Bissau, Namibia, South Sudan, Tanzania and St. Vincent and Grenadines). - This number drops to 2 countries by April 1, 2022, and to 1 country by July 1, 2022. ### Operational and resource considerations - Access limits function as risk management safeguards: hard caps for EF instruments and thresholds that trigger higher scrutiny under EA frameworks for GRA and PRGT. - Temporary increases enabled rapid, adequate support across the membership during heightened uncertainty. - Demand for EF tapered after August 2020, though recovery remains uneven and uncertain for many lower income countries and disaster-prone members. - Staff judges that extending EF CALs at current levels until end-June 2023 would preserve borrowing space under EF instruments for most members with urgent BoP needs. ### Recent lending trends and program mix - Total number of new GRA arrangements: five in 2019 (excluding two blended arrangements) and seven in 2020 (excluding one blended arrangement); in 2021 to date, four GRA arrangements (excluding three blended arrangements) have been approved. - Increase in GRA arrangements in 2020 largely explained by approval of three Flexible Credit Line (FCL) arrangements (Colombia, Peru, and Chile). - Newly approved UCT-quality programs for PRGT-eligible countries: three in 2020 and seven in 2021 as of end-October, including three blended arrangements (Kenya, Senegal, and Cameroon). - Three new arrangements (all PRGT and blended arrangements) scheduled for Board discussions by end-2021. - Shift from EF to UCT-quality programs noted as deliberate to better tailor support to underlying BoP problems and larger financing needs. ### Staff proposal: extend the current RCF and RFI cumulative access limits for 18 months (detail) - Let the temporarily higher annual access limits expire and restore coherence of the Fund’s risk management framework. - Annual access limit (AAL) for EF considered critical given absence of UCT conditionality. - High volume of EF lending in 2020 increased Fund credit outstanding and added risks to the Fund’s lending portfolio. - Focus on extension of the temporary increase in the cumulative access limits (CAL) under EF instruments only. - Reinstate limit on number of disbursements under the RCF within a 12-month period: countries may not access the RCF more than twice within such 12-month period for periods starting from January 1, 2022. - Qualification requirements to be rigorously applied to preclude use of RCF/RFI when a UCT-quality program is more adequate and/or feasible. ### Table of proposed access limits (values preserved exactly as in source) - Pandemic period (until 12/31/2021) versus Staff proposal during 1/1/2022 – 6/30/2023: - Overall Access Limits — GRA: - Annual Access Limit: 245 → 145 - Cumulatve Access Limit: 435 → 435 - PRGT: - Normal Annual Access Limit: 245 → 145 - Normal Cumulatve Access Limit: 435 → 435 - Emergency Financing Instruments — RFI: - Regular window: - Annual Access Limit: 100 → 50 - Cumulatve Access Limit: 150 → 150 - Large Natural Disaster (LND) window: - Annual Access Limit: 130 → 80 - Cumulatve Access Limit: 183.33 → 183.33 - RCF (for PRGT-eligible countries): - Exogenous Shock (ES) window: - Annual Access Limit: 100 → 50 - Cumulatve Access Limit: 150 → 150 - Large Natural Disaster (LND) window: - Annual Access Limit: 130 → 80 - Cumulatve Access Limit: 183.33 → 183.33 ### Expected impacts and resource implications - Extension would leave adequate borrowing room to support urgent BOP needs under EF instruments subject to qualification requirements for most countries for the next 18 months. - All but six countries out of 78 with outstanding EF exposures would have borrowing space of 50 percent of quota or more. - Staff view: borrowing room of 50 percent of quota would provide an adequate cushion for possible emergency needs. - Under the proposal, 90 percent of countries with outstanding EF exposures would be able to access 50 percent of quota or more under EF instruments, compared to only 20 percent of such countries under the default option where all temporary increases expire at end-2021. - Impact on GRA resources from further temporary extension of the higher CAL for RFI expected to be limited; demand for RFIs in 2021 has tapered off substantially. - PRGT financing demand expected to remain high; under the Baseline scenario in the July Board paper, total PRGT lending could reach about SDR 21 billion during 2020–24, about two thirds under UCT-quality programs. - Board endorsed a two-stage funding strategy for the PRGT targeting to mobilize a further SDR 12.6 billion in PRGT loan resources and SDR 2.3 billion in new subsidy resources. - Staff estimates an 18-month extension could increase demand for emergency financing by about SDR 0.8–1.6 billion. - Mid-point of that range is broadly in line with the allowance for EF for urgent BOP needs related to health and vaccine programs assumed in the July Baseline scenario. - Given other donors mobilizing vaccine financing, additional demand from the extension could be accommodated under the Baseline scenario without increasing Stage 1 mobilization targets. ### Additional staff actions and timeline - Staff proposes to prepare an exit strategy towards a post-pandemic emergency financing access limit policy by end-June 2023. - By end-June 2023 staff would review pandemic impact, the shift toward UCT-quality programs, and reassess the role and need of emergency financial assistance; present a more permanent solution thereafter. - Two proposed Executive Board decisions (Decision I and Decision II) to implement proposed amendments to the PRGT Instrument and the RFI Decision, with redlined texts set out in Appendices I and II. ### Operational safeguards emphasized - Outstanding disbursements from all RCF (and RFI) windows are included in calculating cumulative access and annual access limits. - For RCF regular window, a 25 percent of quota per disbursement limit applies (access limits for RCF regular window unchanged). - Staff reports accompanying any request for EF will continue to include explicit discussion on how qualification criteria are met, making a convincing case that the country either does not need or is unable (as distinct from unwilling) to put in place a UCT quality program at that juncture. ### Annex III. Transition Rule — Overview and application - The transition rule defines how the AALs (annual access limits) apply to new GRA and PRGT financing requests to accommodate the rolling nature of the AALs and the temporarily higher AALs in place till the end of 2021. - The window: - For GRA financing requests approved from July 13, 2020 until end-December 2021. - For PRGT financing requests approved from March 22, 2021 through end-December 2021. - Rule for assessment at a point in time after January 1, 2022: - Any 12-month period that includes any date during the window will be subject to an AAL of 245 percent of quota. - Other 12-month periods will be subject to an AAL of 145 percent of quota. ### Annex III. Transition Rule — Illustrative example (Country A) - Timeline and accesses: - Sep 15, 2021: RFI approved, access 100 percent of quota. - Mar 15, 2022: SBA approved, total amount 200 percent of quota with four tranches of 50 percent of quota each. - Sep 15, 2022: SBA Review 1 — tranche 2 (50 percent of quota). - Mar 15, 2023: SBA Review 2 — tranche 3 (50 percent of quota). - Backward-looking 12-month window at SBA approval (Mar 15, 2022): - Access = 100 percent (RFI) + 50 percent (first SBA tranche) = 150 percent of quota. - This is below the applicable AAL of 245 percent of quota. - Forward-looking 12-month window at SBA approval: - Access = 100 percent of quota. - This is below the applicable AAL of 145 percent of quota. - Without the transition rule: - The annual access of 150 percent of quota at SBA approval would have breached the AAL of 145 percent of quota and triggered Exceptional Access safeguards. - The rule provides a smooth transition in borrowing space for countries that received financing within 12 months prior to the return to pre-pandemic AALs. - During the period from January to end-October 2021, a total of 24 new financing requests, augmentations, re-phasing of access, and EF were approved, where the countries will benefit from the transition rule during 2022. *Prepared by the Strategy, Policy, and Review Department; Legal Department; and Finance Department. Approved by Guillaume Chabert, Yan Liu, and Zuzana Murgasova. November 29, 2021. Source: ppea2021077 (IMF).* ### EXECUTIVE SUMMARY ### EXECUTIVE SUMMARY ### Overview - The Fund temporarily increased access limits on Fund resources during the COVID-19 pandemic; these temporary increases expire at end-December 2021. - Absent policy changes, on January 1, 2022, access limits would revert to pre-pandemic levels or to the new PRGT annual access limit approved in July 2021. ### Key changes to access limits (as described) - On January 1, 2022: - GRA Annual Access Limit (AAL) would return to 145 percent of quota from 245 percent of quota. - PRGT Normal Annual Access Limit would return to 145 percent of quota from 245 percent of quota (reflecting the July 2021 PRGT reform). - RFI regular window and RCF Exogenous Shock (ES) window: - Annual Access Limit: would return to 50 percent of quota from 100 percent of quota. - Cumulative Access Limit: would return to 100 percent of quota from 150 percent of quota. - Large Natural Disaster (LND) windows of RCF and RFI: - Annual Access Limit: would return to 80 percent of quota from 130 percent of quota. - Cumulative Access Limit: would return to 133.33 percent of quota from 183.33 percent of quota. - The temporarily suspended limit on the number of disbursements under the RCF within a 12-month period would expire as of January 1, 2022. ### Staff proposal - Let all access limits return to pre-pandemic levels (or the new PRGT annual access limit), except: - Extend the cumulative access limits (CAL) for emergency financing instruments at current levels for another 18 months. - Maintain CAL at 150 percent of quota for RFI regular window and RCF exogenous shock window until end-June 2023. - Maintain CAL at 183.33 percent of quota for the Large Natural Disaster windows of the RFI and RCF until end-June 2023. - Reinstate from January 1, 2022 the limit on the number of disbursements under the RCF within a 12-month period. - Staff will develop an exit strategy towards a post-pandemic emergency financing access limit policy by end-June 2023. ### Rationale and balance - The proposal aims to: - Safeguard Fund resources and preserve the revolving nature of resources. - Allow countries room to access emergency financing instruments for urgent balance of payments (BoP) needs when an upper credit tranche-quality (UCT) program is either not feasible or not necessary. - Support transition from emergency financing (EF) toward UCT-quality arrangements. - Staff judges that returning GRA and PRGT access limits to lower levels would not unduly constrain countries’ access to future Fund financing overall, but immediate constraints arise from previous EF use under cumulative limits. ### Implications of returning to pre-pandemic limits - On annual access limits (AAL): - Limited impact on overall borrowing space without triggering Exceptional Access (EA) scrutiny: as of January 1, 2022, only two non-PRGT-eligible members would have no room before EA is triggered; one non-PRGT and one PRGT-eligible member would have less than 40 percent of quota of room before triggering higher scrutiny. - A transition rule applies for arrangements approved in specified windows (GRA financing approved between July 13, 2020 and end-2021 and PRGT financing approved between March 22, 2021 and end-2021): any 12-month period that includes any date during the window will be subject to an AAL of 245 percent of quota; other periods will be subject to an AAL of 145 percent of quota. - On emergency financing cumulative access limits (CAL): - Many countries have already used EF at or near 100 percent of quota. Reverting CAL to 100 percent of quota would prevent these countries from accessing RFI regular window or RCF ES window until they begin repurchasing/repaying these loans. - With CAL reverting to 100 percent of quota, repayment/repurchase timing implies long waits: 3 ¼ years for RFI and 5 ½ years for RCF to restore borrowing space absent early repayments. - As of end-2021, 47 countries (19 non-PRGT-eligible and 28 PRGT-eligible) are expected to have cumulative credit outstanding under the RCF and/or RFI at 100 percent of quota or higher. Eleven of these are Small Developing States (SDS); seven are Fragile and Conflict-Affected States (FCS). - On annual access to EF instruments: - By January 1, 2022, 7 countries would be constrained from accessing any EF instrument due to the AAL (Myanmar, Tonga, Guinea Bissau, Namibia, South Sudan, Tanzania and St. Vincent and Grenadines). - This number drops to 2 countries by April 1, 2022, and to 1 country by July 1, 2022. ### Operational and resource considerations - Access limits function as risk management safeguards: hard caps for EF instruments and thresholds that trigger higher scrutiny under EA frameworks for GRA and PRGT. - Temporary increases enabled rapid, adequate support across the membership during heightened uncertainty. - Demand for EF tapered after August 2020, though recovery remains uneven and uncertain for many lower income countries and disaster-prone members. - Staff judges that extending EF CALs at current levels until end-June 2023 would preserve borrowing space under EF instruments for most members with urgent BoP needs. ### Figures and annexes referenced (content inventory) - Figure 1. Fund Financial Support, 2002–2021. - Figure 2. EF Cumulative Borrowing Space Upon Expiration of Temporary High Access. - Figure 3. Fund’s Lending During the Pandemic. - Figure 4. Cumulative Borrowing Space Under Staff Proposal. - Table 1. Access Limits by Type of Instruments. - Table 2. Staff Proposal on Access Limits by Type of Instruments. - Annexes I–IV and Appendices I–II (timeline of modifications, countries with approved EF, transition rule, countries with limited annual borrowing space, and legal/instrument texts). *Prepared by the Strategy, Policy, and Review Department; Legal Department; and Finance Department. Approved by Guillaume Chabert, Yan Liu, and Zuzana Murgasova. November 29, 2021.* ### 10. Meanwhile, follow-up UCT-quality programs have been picking up more recently, ### Staff Proposal: Extend the Current RCF and RFI Cumulative Access Limits for 18 Months ### Recent lending trends and program mix - Total number of new GRA arrangements: five in 2019 (excluding two blended arrangements) and seven in 2020 (excluding one blended arrangement); in 2021 to date, four GRA arrangements (excluding three blended arrangements) have been approved. - Increase in GRA arrangements in 2020 largely explained by approval of three Flexible Credit Line (FCL) arrangements (Colombia, Peru, and Chile). - Newly approved UCT-quality programs for PRGT-eligible countries: three in 2020 and seven in 2021 as of end-October, including three blended arrangements (Kenya, Senegal, and Cameroon). - Three new arrangements (all PRGT and blended arrangements) scheduled for Board discussions by end-2021. - Shift from EF to UCT-quality programs noted as deliberate to better tailor support to underlying BoP problems and larger financing needs. ### Rationale for reverting most temporary increases and extending EF CAL - Staff proposes letting the temporarily higher annual access limits expire and restoring coherence of the Fund’s risk management framework. - Annual access limit (AAL) for EF considered critical given absence of UCT conditionality. - High volume of EF lending in 2020 increased Fund credit outstanding and added risks to the Fund’s lending portfolio. - Proposal focuses on extension of the temporary increase in the cumulative access limits (CAL) under EF instruments only. ### Staff proposal (main elements) - Extend the current level of the EF CAL for 18 more months (until end-June 2023), while letting the temporary increases in all other access limits expire at end-2021. - Specific reversions at end-2021: - AAL on overall financing in the GRA and under the PRGT would revert to 145 percent of quota. - AAL under the RFI regular window and the RCF ES window would revert to 50 percent of quota. - AAL under the LND window of the RFI and RCF would revert to 80 percent of quota. - Maintain CALs until end-June 2023: - CAL for the RFI regular window and the RCF exogenous shocks window would be maintained at 150 percent of quota. - CAL for the RFI/RCF large natural disaster window would be maintained at 183.33 percent of quota. - Reinstate limit on number of disbursements under the RCF within a 12-month period: countries may not access the RCF more than twice within such 12-month period for periods starting from January 1, 2022. - Qualification requirements to be rigorously applied to preclude use of RCF/RFI when a UCT-quality program is more adequate and/or feasible. ### Table of proposed access limits (values preserved exactly as in source) - Pandemic period (until 12/31/2021) versus Staff proposal during 1/1/2022 – 6/30/2023: - Overall Access Limits — GRA: - Annual Access Limit: 245 → 145 - Cumulatve Access Limit: 435 → 435 - PRGT: - Normal Annual Access Limit: 245 → 145 - Normal Cumulatve Access Limit: 435 → 435 - Emergency Financing Instruments — RFI: - Regular window: - Annual Access Limit: 100 → 50 - Cumulatve Access Limit: 150 → 150 - Large Natural Disaster (LND) window: - Annual Access Limit: 130 → 80 - Cumulatve Access Limit: 183.33 → 183.33 - RCF (for PRGT-eligible countries): - Exogenous Shock (ES) window: - Annual Access Limit: 100 → 50 - Cumulatve Access Limit: 150 → 150 - Large Natural Disaster (LND) window: - Annual Access Limit: 130 → 80 - Cumulatve Access Limit: 183.33 → 183.33 ### Expected impacts and resource implications - Extension would leave adequate borrowing room to support urgent BOP needs under EF instruments subject to qualification requirements for most countries for the next 18 months. - All but six countries out of 78 with outstanding EF exposures would have borrowing space of 50 percent of quota or more. - Staff view: borrowing room of 50 percent of quota would provide an adequate cushion for possible emergency needs. - Under the proposal, 90 percent of countries with outstanding EF exposures would be able to access 50 percent of quota or more under EF instruments, compared to only 20 percent of such countries under the default option where all temporary increases expire at end-2021. - Impact on GRA resources from further temporary extension of the higher CAL for RFI expected to be limited; demand for RFIs in 2021 has tapered off substantially. - PRGT financing demand expected to remain high; under the Baseline scenario in the July Board paper, total PRGT lending could reach about SDR 21 billion during 2020–24, about two thirds under UCT-quality programs. - Board endorsed a two-stage funding strategy for the PRGT targeting to mobilize a further SDR 12.6 billion in PRGT loan resources and SDR 2.3 billion in new subsidy resources. - Staff estimates an 18-month extension could increase demand for emergency financing by about SDR 0.8–1.6 billion. - Mid-point of that range is broadly in line with the allowance for EF for urgent BOP needs related to health and vaccine programs assumed in the July Baseline scenario. - Given other donors mobilizing vaccine financing, additional demand from the extension could be accommodated under the Baseline scenario without increasing Stage 1 mobilization targets. ### Additional staff actions and timeline - Staff proposes to prepare an exit strategy towards a post-pandemic emergency financing access limit policy by end-June 2023. - By end-June 2023 staff would review pandemic impact, the shift toward UCT-quality programs, and reassess the role and need of emergency financial assistance; present a more permanent solution thereafter. - Two proposed Executive Board decisions (Decision I and Decision II) to implement proposed amendments to the PRGT Instrument and the RFI Decision, with redlined texts set out in Appendices I and II. ### Operational safeguards emphasized - Outstanding disbursements from all RCF (and RFI) windows are included in calculating cumulative access and annual access limits. - For RCF regular window, a 25 percent of quota per disbursement limit applies (access limits for RCF regular window unchanged). - Staff reports accompanying any request for EF will continue to include explicit discussion on how qualification criteria are met, making a convincing case that the country either does not need or is unable (as distinct from unwilling) to put in place a UCT quality program at that juncture. *Source: ppea2021077 (IMF).* ### Annex III. Transition Rule ### Annex III. Transition Rule ### Overview - The transition rule defines how the AALs (annual access limits) apply to new GRA and PRGT financing requests to accommodate the rolling nature of the AALs and the temporarily higher AALs in place till the end of 2021. - Application of the annual access limits requires consideration of the member’s access to Fund resources in any 12-month period on a rolling basis, which involves combinations of forward- and backward-looking elements. ### Application to GRA and PRGT financing requests (the "window") - The window: - For GRA financing requests approved from July 13, 2020 until end-December 2021. - For PRGT financing requests approved from March 22, 2021 through end-December 2021. - During the window, different annual access limits may apply over the course of arrangements: 145 and 245 percent of quota. - Rule for assessment at a point in time after January 1, 2022: - Any 12-month period that includes any date during the window will be subject to an AAL of 245 percent of quota. - Other 12-month periods will be subject to an AAL of 145 percent of quota. ### Illustrative example (Country A: emergency RFI followed by 18-month SBA) - Timeline and accesses: - Sep 15, 2021: RFI approved, access 100 percent of quota. - Mar 15, 2022: SBA approved, total amount 200 percent of quota with four tranches of 50 percent of quota each. - Sep 15, 2022: SBA Review 1 — tranche 2 (50 percent of quota). - Mar 15, 2023: SBA Review 2 — tranche 3 (50 percent of quota). - Backward-looking 12-month window at SBA approval (Mar 15, 2022): - Access = 100 percent (RFI) + 50 percent (first SBA tranche) = 150 percent of quota. - This is below the applicable AAL of 245 percent of quota. - Forward-looking 12-month window at SBA approval: - Access = 100 percent of quota. - This is below the applicable AAL of 145 percent of quota. - Without the transition rule: - The annual access of 150 percent of quota at SBA approval would have breached the AAL of 145 percent of quota and triggered Exceptional Access safeguards. ### Rationale and effect - The rule provides a smooth transition in borrowing space for countries that received financing within 12 months prior to the return to pre-pandemic AALs. - It prevents inadvertent triggering of Exceptional Access criteria for arrangements where part of the 12-month window overlaps the temporary higher limits in the window. ### Empirical note - During the period from January to end-October 2021, a total of 24 new financing requests, augmentations, re-phasing of access, and EF were approved, where the countries will benefit from the transition rule during 2022. *International Monetary Fund — Annex III. Transition Rule* --- _Source: https://www.imf.org/-/media/files/publications/pp/2021/english/ppea2021077.pdf_