## ppea2022013

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**Canonical URL:** [ppea2022013](https://www.imf.org/-/media/files/publications/pp/2022/english/ppea2022013.pdf)

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---

### EXECUTIVE SUMMARY — Context and Purpose
- Context:
  - Challenges: pandemic, spillovers from geopolitical shocks, and long-standing structural problems threaten balance of payments stability, especially for low-income and vulnerable middle-income countries.
  - SDR allocation: The $650 billion SDR allocation in August 2021 has supplemented members’ reserves.
  - Channeling SDRs: Scope to amplify SDR impact by channeling them from members with strong external positions to countries with greatest needs.
- Purpose of paper:
  - Details a proposal to establish the Resilience and Sustainability Trust (RST) to “provide affordable long-term financing to support countries undertaking macro-critical reforms to reduce risks to prospective balance of payment stability, including those related to climate change and pandemic preparedness.”
  - RST aims to complement IMF lending toolkit by addressing select longer-term structural challenges with macro-critical implications.

### A new IMF-administered Trust — design and objectives
- RST objectives:
  - Support policy reforms that reduce macro-critical risks associated with select longer-term structural challenges.
  - Augment policy space and financial buffers to mitigate risks—thereby contributing to prospective balance of payments (BoP) stability.
- Initial qualifying challenges:
  - Climate change and pandemic preparedness (other challenges may be added over time with contributor concurrence).
- Instrument for access:
  - RST loans accessed under the Resilience and Sustainability Facility (RSF).

### Eligibility and country groupings
- Eligibility (based on qualifying data as of October 2021):
  - All PRGT-eligible low-income countries.
  - All small states (population under 1.5 million) with per capita GNI below 25 times the 2021 IDA operational cutoff ($1,205).
  - All middle-income countries with per capita GNI below 10 times the 2021 IDA operational cutoff.
- Coverage at establishment:
  - 143 countries will be RST-eligible at establishment.
- Country groupings for margins/service charges:
  - Group A: All PRGT-eligible countries that are not presumed blenders — proposed margin: 55 basis points; service charge: zero.
  - Group B: Presumed blenders and certain small states — proposed margin: 75 basis points; service charge: 25 basis points on disbursement.
  - Group C: All other RST-eligible countries — proposed margin: 95 basis points; service charge: 50 basis points on disbursement.

### Lending terms and access
- Key terms:
  - Maximum maturity: 20-year maturity.
  - Grace period: 10½-year grace period.
  - Interest: Borrower pays SDRi plus applicable margin (tiered by group).
  - Interest-rate cap (modeling assumption and potential future policy): staff assumed a cap of 2¼ percent (including the margin) for Group A for modeling purposes.
- Access:
  - Overall cumulative access cap set at the lower of 150 percent of quota or SDR 1 billion.
  - Access norm: starting point norm of 75 percent of quota (neither ceiling nor floor).
  - No annual access limits; size of disbursements limited; phasing rules apply.
- Use of funds:
  - RST loans are liquid, fungible BoP support (not earmarked).
  - Can cover: (i) shorter-term BoP needs associated with implementation of reform measures; (ii) increase in medium-term policy space to implement priority spending; (iii) augment buffers (e.g., reserves, disaster funds).

### Qualification, safeguards, and conditionality
- Qualification for an RSF arrangement requires:
  - (i) a package of high-quality policy measures consistent with RST purpose;
  - (ii) a concurrent financing or non-financing program with “upper credit tranche” (UCT) quality policies (e.g., SBA, EFF, PLL, FCL, SCF, ECF, PCI, PSI) with at least 18 months remaining at approval (12 months during first 6 months of RST operations); and
  - (iii) sustainable debt and adequate capacity to repay the Fund.
- Conditionality:
  - RSF conditionality takes the form of Board reviews assessing “reform measures” (objectively monitorable actions).
  - The Guidelines on Conditionality apply only in limited general principles (national ownership, tailoring, parsimony, clarity, coordination); quantitative performance criteria, prior actions and structural benchmarks (as in UCT programs) are not used for RSF disbursements.
  - No cross-conditionality; reform measures may be separate from, but compatible with, concurrent UCT program conditionality.
- Phasing and disbursements:
  - A member’s total RSF access partitioned into disbursements linked to reform measures.
  - Presumption of equal access across disbursements; cumulative disbursements subject to phasing rules (no disbursement available immediately at approval).
  - Phasing ensures cumulative access subject to completion of a review does not exceed 50 percent of quota (exceptions possible).
  - Disbursements occur after Executive Board review affirms implementation or minor deviation.

### Financial architecture — three-account structure and contributor packages
- Three operational accounts:
  - Loan Account (LA): conduit for lending operations; funded by voluntary loan commitments (borrowing or note purchase agreements); LA contributors remunerated at SDRi (or lower by agreement).
  - Reserve Account (RA): principal financial buffer; funded by upfront unremunerated contributions (minimum 2 percent of LA commitment) and receives margin and service charge income and investment earnings.
  - Deposit Account (DA): long-term deposits (minimum 20 percent of LA commitment) remunerated at SDRi; invested to generate excess investment income to build net reserves and serve as a backstop.
- Contribution package:
  - Each LA contributor signs a “Contribution Package” comprising: (i) LA contribution; (ii) RA contribution (minimum 2 percent of LA commitment); and (iii) DA contribution (minimum 20 percent of LA commitment).
  - Standalone RA and DA contributions permitted (preferred maturity proposed at 10 years).
- Reserve-asset character:
  - LA and DA claims designed to have reserve asset characteristics (liquidity, high quality, encashability); RA contributions do not qualify as reserve assets.
- Encashment:
  - Borrowing agreements authorize encashment drawings by Trustee to fund early repayment requests by contributors with BoP/reserve need; contributors encashing must reconstitute once position improves.
- Investment strategy (DA and RA):
  - Short duration fixed-income (SDFI) strategy similar to IMF’s Fixed-Income Subaccount (FI) targeting an average expected margin of around 50 basis points above SDRi over a 3–4 year horizon; eligible investments high-quality fixed-income instruments; pooling with PRGT investments contemplated (subject to PRGT contributor consent).

### Resource mobilization and modeled financing needs
- Baseline and resource targets:
  - Baseline demand (Annex V): SDR 22 billion (US$31 billion) under baseline scenario (assumes 70 of 143 eligible countries seek financing).
  - To meet projected baseline demand and encashment buffer, RST would need to mobilize SDR 33 billion (some US$46 billion) in total resources in first five years (modeling assumes encashment buffer of 20 percent → total loan commitments SDR 27 billion).
  - Under baseline demand, initial RA balance of SDR 0.54 billion, and starting DA balance of SDR 5.4 billion are projected.
- Alternative demand scenarios:
  - High demand scenario: 25 percent above baseline → SDR 27.4 billion.
  - Low demand scenario: 25 percent below baseline → SDR 16.5 billion.
- Survey evidence:
  - 93 responses: 73 countries expressed interest in accessing RST (43 PRGT eligible; 15 small states).
  - Countries’ interests: climate change (69 countries) and pandemic preparedness (64 countries).
  - Near-term interest: 39 expressed interest once operational (late 2022), 29 preferred “whenever the need for a traditional IMF program arises.”
- Financial model outputs (baseline illustrative features):
  - Lending disbursement schedule: equal installments of SDR 4.4 billion annually for five years (peak credit SDR 22 billion).
  - Amortization starts in year 11; annual debt service peaks at SDR 2.7 billion.
  - RA balances start at SDR 544 million, reach SDR 1.8 billion in year 11, terminal RA SDR 3.4 billion after 25 years (stylized).
  - DA initial deposit SDR 5.4 billion, grows to SDR 5.8 billion by amortization start and SDR 6.4 billion after 25 years (based on excess investment returns).
  - Gross reserves rise from SDR 6.0 billion to SDR 7.4 billion; net reserves quadruple from SDR 0.54 billion to SDR 2.0 billion (illustrative).

### Stress tests, sensitivities, and financial resilience
- Stress testing scenarios included:
  - Lower investment returns, temporary arrears, permanent credit losses, encashment, combined adverse events, defaults by large borrowers, and higher/lower demand.
- Selected stress-test findings:
  - It is highly unlikely that tapping DA principal would become necessary.
  - Under a combination of adverse events, minimum gross reserves during repayment remain above 32 percent of credit outstanding and over 2.5 times annual debt service to loan contributors.
  - Minimum net reserves during repayment period remain SDR 1.5 billion in combined adverse-event scenario—enough to cover 71 percent of annual debt service and 7 percent of credit outstanding (staff simulations).
  - Expected Credit Loss (ECL) simulations: total ECL estimates range from 0. percent to 22 percent of projected minimum RA balance (SDR 0.54 billion); RA resources estimated to be more than adequate in illustrative example.

### Voluntary Trading Arrangements (VTAs) and SDR market implications
- Importance of VTAs:
  - Smooth functioning of voluntary SDR trading market critical for SDR channeling to RST.
  - Staff assessment: total SDR channeling to RST could be about SDR 33 billion (assuming contributions in SDRs).
- VTA market developments (as of mid-March 2022):
  - Number of VTA participants increased from 32 to 38; six new VTAs effective (Algeria; Brazil; Estonia (Republic of); Lithuania (Republic of); Oman; and Singapore).
  - New participants add about SDR 10 billion to voluntary market absorptive capacity.
- Channeling dynamics:
  - Deposit Account initial funding could require conversion of about SDR 5 billion via VTAs during/shortly after fundraising phase.
  - RST lending pass-through nature and linkage with Fund programs imply gradual impact on VTAs.

### Governance, legal basis, and safeguards
- Legal grounding:
  - RST grounded in Article V, Section 2(b) authority to provide financial and technical services and to establish administered accounts or trusts.
  - RST is an IMF-administered loan trust with the Fund as Trustee.
- Executive authority and creditor protections:
  - Executive Board has discretionary authority over RST decisions; creditor consent required for amendments to “protected provisions” affecting creditor interests (purposes, key financial parameters, prohibition on rescheduling, etc.).
  - Proposed consent process allows lapse-of-time assumption of consent after notification periods, with six-month post-effect window to request partial return of contributions for non-responders.
- Preferred creditor status:
  - RST lending presumes de facto preferred creditor status (PCS) akin to GRA and PRGT practice; IMFC could call for member recognition of de facto PCS.
  - PCS to be accompanied by safeguards: access caps, debt sustainability and capacity-to-repay requirements, and policy safeguards.
- Misreporting and overdue obligations:
  - Misreporting definitions include inaccurate information on implementation of reform measures or misreporting under concurrent UCT program; remedies include expectation of early repayment of non-complying disbursements.
  - Managing Director will not recommend RSF arrangements for members with overdue obligations to the Fund (GRA, SDA, SDR Department, PRGT, or RST).
  - Remedial framework: prevention, intensified collaboration, escalating remedial measures (suspension of access, possible removal from eligibility after specified periods).

### Governance reviews, review timing, and amendments
- Proposed first comprehensive review:
  - Review three years after RST becomes operational (or earlier if warranted) to assess experience and consider modifications (qualifying challenges, eligibility, margins/service charges, country groupings, reserve coverage, drawdown period through November 30, 2030, or sunset).
- Interest-rate review triggers:
  - An interest-rate review would be triggered if average SDRi rises above 1½ percent in any 12-month period and projections signal it will not decline below 1.5 percent in coming quarters.
  - Board could adopt an interest-rate cap for Group A via amendment following review (cap modeled at 2¼ percent in staff simulations).
- Amendment protections:
  - Protected provisions may only be amended with creditor consent; non-consenting contributors can suspend drawings and request partial return of RA/DA contributions proportional to uncommitted commitments.

### Operational readiness, fundraising, and costs
- Preconditions to commencement of lending operations:
  - (i) sufficient loan resources in nominal terms to meet initial demand in line with access policy; and
  - (ii) sufficiently broad pool of participating contributors to ensure encashability of LA claims.
- Interim capabilities:
  - RST can accept and hold RA and DA contributions and enter into loan agreements prior to start of lending operations.
- Fundraising:
  - Fundraising to begin immediately after establishment; initial focus on 26 countries historically participating in other IMF financing initiatives and active in VTA market.
- Administrative costs and staffing (medium-term incremental estimates assuming 33 active RSF programs/year):
  - Incremental direct costs for Operations: about $9-10 million, or 27-29 FTEs annually.
  - Trust Management costs: $5-6 million, or 16-18 FTEs annually.
  - Annual fully-loaded gross costs preliminarily estimated at about $18 million.
  - Cost recovery: management fee charged to Reserve Account; GRA reimbursed for administering costs; Board decisions on reimbursements in annual income paper starting FY24.

### Enterprise risks and mitigation
- Principal risk categories and mitigations:
  - Business operations: risk of duplication/mission creep — mitigate via coordination principles with other IFIs and initial narrow focus on climate and pandemic preparedness.
  - Financial risks: credit, liquidity, investment, VTA market pressure — mitigate via debt sustainability and CtR safeguards, access caps, reserve buffers, interest-rate review triggers, stress testing, and ensuring VTA participation.
  - Human resources: inadequate resourcing/skills — mitigate via resourcing plans, capacity building, and possible staff augmentation.
  - Reputational risks: low demand, fundraising shortfalls, policy reversals — mitigate via targeted outreach, wide eligibility, access caps, monitoring via Article IV and PFA, and 3-year policy review.

### Selected numerical and timing parameters (as stated)
- RST loan terms: 20-year maturity; 10½-year grace period.
- Access caps: lower of 150 percent of quota or SDR 1 billion.
- Contribution minimums: RA at least 2 percent of LA commitment; DA at least 20 percent of LA commitment.
- Initial resource need (first five years, baseline): SDR 33 billion (some US$46 billion).
- Baseline demand for loans: SDR 22 billion (US$31 billion).
- LA loan commitments to cover projected demand + 20 percent encashment buffer: SDR 27 billion total loan commitments.
- Initial RA balance (baseline): SDR 0.54 billion.
- Initial DA balance (baseline): SDR 5.4 billion.
- Modeled peak credit outstanding (baseline): SDR 21,951 million.
- Modeled peak annual debt service to lenders (baseline): SDR 2,689 million.
- Modeled gross reserves increase (example): from SDR 6.0 billion to SDR 7.4 billion.
- Modeled net reserves increase (example): from SDR 0.54 billion to SDR 2.0 billion.
- Modeled minimum net reserves during repayment under combined adverse events: SDR 1.5 billion.
- Survey responses: 93 responses; 73 countries expressed interest (69 climate; 64 pandemic preparedness).
- VTA market absorptive increase (mid-March 2022): six new VTAs increasing participants from thirty-two to thirty-eight, adding about SDR 10 billion absorptive capacity.
- Proposed first review: three years after operationalization (or earlier if warranted).
- Proposed drawdown period for first mobilization: through November 30, 2030; uniform DA maturity date for initial round: end-November 2050.
- Proposed DA/RA standalone preferred maturity: 10 years.

*Source: Proposal to Establish a Resilience and Sustainability Trust — ppea2022013 (excerpts).*

### EXECUTIVE SUMMARY

### ppea2022013 - EXECUTIVE SUMMARY

### Context
- Challenges: pandemic, spillovers from geopolitical shocks, and long-standing structural problems pose an enormous impediment for balance of payments stability and resilient and sustainable growth, especially for low-income and vulnerable middle-income countries.
- SDR allocation: The $650 billion SDR allocation in August 2021 has helped support economic stability by supplementing members’ reserves.
- Channeling SDRs: There is scope to amplify the effect of these SDRs by channeling them from countries with strong external positions to countries where the needs are the greatest.

### A new IMF-administered Trust
- IMFC support: The IMFC has supported channeling SDRs to a Resilience and Sustainability Trust (RST) established at the IMF to “provide affordable long-term financing to support countries undertaking macro-critical reforms to reduce risks to prospective balance of payment stability, including those related to climate change and pandemic preparedness.”
- Paper purpose: Based on multiple rounds of feedback from members and key stakeholders, this paper details a proposal for establishing the RST.

### Rationale and purpose
- Complementarity: The proposed RST complements the IMF’s existing lending toolkit by focusing on longer-term structural challenges that entail significant macroeconomic risks.
- Risks of inaction: Not addressing such challenges in a timely manner could have economic consequences with adverse fiscal, monetary, financial, and external implications.
- Constraints: Tight fiscal space, debt vulnerabilities, and limited access to long-term financing constrain many low-income and vulnerable middle-income countries from taking necessary actions that have a global public good nature.
- RST objectives:
  - Support policy reforms that reduce macro-critical risks associated with select longer-term structural challenges.
  - Augment policy space and financial buffers to mitigate the risks arising from such longer-term structural challenges—thereby contributing to prospective balance of payments (BoP) stability.
- Initial focus: RST loans would initially support measures addressing climate change and enhancing pandemic preparedness given their global public good nature; other challenges could be added over time.
- Use of funds: The RST would provide general BoP support to help meet a range of financing needs, including direct costs of RST-supported reforms and the augmentation of longer-term policy space and financial buffers to manage risks to prospective BoP stability.

### Eligibility and financing terms
- Eligible members:
  - All PRGT-eligible low-income countries.
  - All small states (population under 1.5 million) with per capita GNI below 25 times the 2021 IDA operational cutoff.
  - All middle-income countries with per capita GNI below 10 times the 2021 IDA operational cutoff.
- Terms:
  - Maturity: 20-year maturity.
  - Grace period: 10½-year grace period.
  - Interest: Borrowers paying an interest rate with a modest margin over the three-month SDR rate.
  - Tiered structure: A tiered interest structure would differentiate financing terms across country groups, with low-income members benefiting from more concessional terms (i.e., lower margin).

### Qualification, policies, and access
- Instrument: RST loans can be accessed under the Resilience and Sustainability Facility (RSF).
- To qualify for an RSF arrangement, a member would need:
  - (i) a package of high-quality policy measures consistent with the purpose of the Trust;
  - (ii) a concurrent financing or non-financing program with “upper credit tranche” (UCT) quality policies; and
  - (iii) sustainable debt and adequate capacity to repay the Fund.
- Access constraints:
  - Access would be based on the reforms’ strength and debt sustainability considerations.
  - Access capped at the lower of 150 percent of quota or SDR 1 billion.
- Coordination: Close coordination with the World Bank and other relevant MDBs/IFIs is envisaged to leverage comparative expertise and institutional knowledge.

### Governance
- Legal grounding: The proposed RST is grounded in the Fund’s legal framework for the establishment of IMF-administered trusts, and would be consistent with the Fund’s purposes.
- Trustee: Like the PRGT and other trusts previously established by the Fund, the Fund would be the Trustee of the RST.
- Executive authority: The Executive Board would have the authority to make discretionary decisions pertaining to the RST, with creditor consent needed to alter the fundamental terms of the Trust.
- Preferred creditor status: RST lending presumes the de facto preferred creditor status that applies to Fund financing under the GRA and PRGT.
- Review: It is proposed that the RST be reviewed three years after its creation, or earlier, if warranted.

### Financial architecture and demand
- Trust type: The RST is proposed to be a loan-based trust, broadly similar to the PRGT.
- Resource mobilization: RST resources would be mobilized on a voluntary basis from members with strong external positions who wish to channel their SDRs or currencies to support low-income and vulnerable middle-income countries.
- Safety and liquidity: The proposed financial structure ensures the safety and liquidity of contributors’ claims on the Trust while minimizing their budgetary costs, including through strong policy safeguards, a supportive multilateral context, an adequate reserve buffer, and a funding mechanism that helps maintain the reserve asset status of these claims.
- Operational accounts: Features will be operationalized through a Loan Account, a Reserve Account, and a Deposit Account.
- Financing need: To meet the projected baseline demand, the RST would need to mobilize SDR 33 billion (some US$46 billion) in total resources.
- Demand dynamics: A member survey suggests frontloaded demand for RST financing; the effects of the Russo-Ukrainian war could lead to additional RSF requests in tandem with more UCT programs.
- Market dependence: A smooth functioning SDR Voluntary Trading Arrangement (VTA) market would underpin successful RST operations.

### Risks and mitigation
- Potential risks identified:
  - IMF business operations: Risk if not coordinated well with other IFIs.
  - Finances: Credit, liquidity, and investment risks as well as pressure on the VTA market.
  - Human resources: Inadequate expertise and/or inadequate resourcing for the RST’s operations.
  - Reputation: Small size of trust due to fundraising shortfalls or low demand.
- Mitigation: RST policy design and financial modalities alleviate these risks, and the planned 3-year review provides room to course correct as needed.

*Source: EXECUTIVE SUMMARY (ppea2022013)*

### 8.      Article V, Section 2(b) authorizes the Fund if requested, to provide financial and

### 8.      Article V, Section 2(b) authorizes the Fund if requested, to provide financial and technical services to its members. This includes the establishment of administered accounts or trusts.

### Legal basis and compliance with Article V, Section 2(b)
- Article V, Section 2(b) authorizes the Fund, if requested, to provide financial and technical services to members, including establishment of administered accounts or trusts.
- Financial services under Article V, Section 2(b):
  - must be consistent with the purposes of the Fund;
  - must not be “on the account of the Fund”, meaning the GRA cannot bear any risk of loss in respect of the provision of these services;
  - cannot impose obligations on members without their consent.
- Historical and operational points:
  - The Special Disbursement Account (SDA) is funded with profits from sales of gold held by the Fund at the time of the Second Amendment.
  - The Fund has used SDA resources to provide financing to low-income countries under the PRGT (and its predecessor trusts) and grants under the PRG-HIPC Trust, the CCRT and the now-dissolved MDRI-I Trust.
  - Distinction between trust and administered account: a lending trust establishes a direct creditor relationship with borrowers with the Fund as trustee and the Executive Board taking discretionary decisions; a lending-related administered account normally leaves key financing terms to contributors with the Fund acting as administrator/agent.
- The RST meets the Article V, Section 2(b) conditions:
  - Consistent with the Fund’s balance of payments financing focus and Article I(iii) purpose to promote exchange stability (balance of payments stability defined as a member’s position that does not, and is not likely to, give rise to disruptive exchange rate movements).
  - Financial risk from RST operations would be borne entirely by contributors to the Trust and would not expose the GRA to any risk of loss.
  - Contributions and requests for RST financing would be completely voluntary; financing provided following a request and Board approval.

### Conceptual rationale — Economic considerations
- Longer-term structural challenges can cause large, negative macroeconomic and financial outcomes if not addressed; poorer countries often lack policy space to absorb these shocks.
- Pandemic and climate change illustrative evidence:
  - Disruptions and poor infrastructure maintenance cost households and firms at least $390 billion a year in low- and middle-income countries (2019 World Bank study).
  - The 2019 Climate Adaptation Report estimated targeted US$1.8 trillion climate investment in five areas by 2030 could generate US$7.1 trillion in net benefits globally, representing a return of almost 400 percent.
  - COVID-19 pandemic costs were recently estimated to rise to US$13.8 trillion through 2024 (IMF, 2022).
  - A G20 High Level Independent Panel report estimates investing in pandemic preparedness yields returns by reducing risk of events whose costs to government budgets alone are 300 times as large as the total additional spending per year.
- Policy trade-offs:
  - Addressing longer-term challenges typically requires frontloading costly measures whose benefits materialize over longer horizons, creating immediate fiscal costs and potential debt buildup without affordable long-term financing.
- Implication: Access to affordable long-term financing is critical to enable upfront action on climate change and pandemic preparedness that produces long-term gains.

### Balance of Payments (BoP) considerations
- IMF GRA and PRGT toolkit focus:
  - Original BoP problems were expected to be resolvable within three years or less (maximum SBA duration); “temporary use” of Fund resources implied maturities up to five years.
  - EFF (1974) lengthened maturities up to ten years and grace periods from 3¼ to 4½ years for structural problems.
  - In 1987 the Enhanced Structural Adjustment Facility (predecessor to PRGT) recognized protracted BoP problems and that single arrangements may not “fully resolve” BoP problems.
- RST role:
  - Adds to the lending toolkit by addressing risks to prospective BoP stability stemming from select macro-critical longer-term structural challenges.
  - Targets situations that may not yet be imminent BoP problems but increase the likelihood and severity of future shocks and undermine growth prospects.
- Types of BoP needs that RST could finance (climate and pandemics):
  - Climate-related:
    - Costs of climate-related public and/or private investments (e.g., green energy generation, coastal protection infrastructure, energy-efficient retrofitting).
    - Costs associated with climate-focused reforms (e.g., transitioning to green technologies).
    - Offsetting costs of policies for a just transition (e.g., augmenting targeted social assistance with unwinding of carbon subsidies).
    - Building policy space and buffers (e.g., establishing and augmenting disaster funds, multi-layered financial frameworks for disaster resilience, augmenting international reserves).
  - Pandemic preparedness:
    - Scaling-up basic health care infrastructure and human capital for deployment during pandemics.
    - Investing in early warning indicators and data collection/dissemination.
    - Creating policy buffers and financing contingency frameworks.
- Use of RST financing:
  - RST loans are liquid and fungible BoP support and are not earmarked for specific projects.
  - Loans can be used to:
    - cover shorter-term BoP needs stemming from implementation of RST-supported policies;
    - increase medium-term policy space to continue implementing priority spending associated with addressing longer-term structural challenges;
    - augment buffers against risks associated with prospective BoP stability stemming from these challenges.

### Lending toolkit considerations and operational design
- Maturities and concessionality:
  - RST financing will have significantly longer maturities than existing GRA and PRGT instruments to reflect longer horizons for payoffs from supported reforms.
  - Longer maturities, combined with envisaged modest interest rates, imply a high degree of concessionality compared to the GRA, appropriate given the global public goods nature of RST support and the intended borrower group (LICs, more vulnerable MICs, and small states).
- Distinct role in IMF toolkit:
  - RST is a third component complementing GRA and PRGT but is not intended to be a “lender of last resort” for short- to medium-term financing problems, nor part of the Global Financial Safety Net aimed at mitigating financial shocks.
  - RST financing aims to improve economic resilience and sustainability by addressing longer-term challenges that risk undermining prospective BoP stability.
- Interaction with UCT-quality programs:
  - RST financing would require a concurrent Fund arrangement or instrument supporting a program with UCT-quality conditionality (termed “UCT program” in this document) to:
    - provide policy safeguards that mitigate credit risk associated with RST financing and maintain reserve asset status of RST contributions;
    - mitigate risk of facility shopping (misuse of longer, cheaper RST financing to address problems normally under GRA/PRGT);
    - support a stable macroeconomic environment necessary to pursue long-term reforms and a catalytic role for the RST.
  - Distinctions between RST and UCT program:
    - RST focuses on downside scenarios associated with select longer-term challenges to lower probability and/or severity of resulting BoP problems.
    - A financing UCT program focuses on resolving an actual/protracted BoP problem under the baseline (for disbursing arrangements) or insuring against a potential BoP problem under a likely downside scenario (for precautionary arrangements).
    - Where no need for IMF BoP financing exists, signaling instruments like the PCI or PSI can provide a medium-term policy framework for the RST.
- Empirical access-to-markets note:
  - Staff analysis indicates only 24 of the 154 EMDEs had been able to issue sovereign bonds of maturity greater than 10 years for three successive years in the run-up to the pandemic.

*International Monetary Fund — Proposal to Establish a Resilience and Sustainability Trust (extract).*

### 20.      Multilateral context: Creating the RST requires broad  participation of creditors and

### 20.      Multilateral context: Creating the RST requires broad  participation of creditors and borrowers.

### Multilateral underpinnings and lender/borrower participation
- A supportive multilateral context, a strong lender base, a diversified borrower base, the expected de facto preferred creditor status (PCS), and adequate credit risk mitigation, including important policy safeguards and financial buffers, are essential underpinnings to successfully operationalizing the RST.
- Close coordination with the World Bank and other IFIs would be essential to provide coherent policy advice and to catalyze additional official and private financing where feasible.
- RST financing needs are modest relative to the large financing needs members face to address longer-term structural challenges.

### Additionality and prevention of facility substitution
- The RST’s purpose—to improve prospective BoP stability—is distinct from the focus of GRA and PRGT financing.
- By construction, the RST provides additional financing and does not serve as a substitute to the GRA and PRGT.
- Proposed safeguards to mitigate substitution risk include access caps and concurrence of RST financing with an on-track UCT program.

### Governance and financial architecture
- The proposed decisions and the instrument establishing the RST will set out:
  - the purposes of the RST,
  - the modalities of lending,
  - the financial structure, and
  - clear rules for the Fund’s governance and decision-making in administering the RST, including regarding requests for financing from the RST.
- The proposed RST’s financial structure is similar to that of the PRGT, with some necessary modifications to build up a large new trust from the ground up with appropriate safeguards.

### Coordination with multilateral agencies and role in catalyzing financing
- RST support should be part of a broader concerted international effort, complementing policy and financing support from other IFIs and development banks.
- RST support for overarching policy frameworks (for example, green public financial management) would:
  - improve integration of climate in policy formulation,
  - enhance governance, and
  - give more comfort to other public and private lenders and donors to provide project financing and technical assistance.
- Potential lenders, including regional development banks and bilateral partners, would benefit from the RST’s fiscal and debt sustainability framework that incorporates economic trade-offs.
- Underlying diagnostics developed by the member country and/or other IFIs, such as the World Bank, would be key inputs to identify main policy priorities that could be supported by different stakeholders, including the private sector.

### Integration with Fund Capacity Development (CD)
- Leveraging synergies between the Fund’s surveillance, lending, and CD will help design and implement RST reform measures.
- Fund CD with a medium-term programmatic approach can support RST reforms.
- Diagnostic tools cited as examples: the Climate Public Investment Management Assessment (C-PIMA) and the Climate Macroeconomic Assessment Program (CMAP) to identify and assess capacity and policy gaps relevant for RST operations.

### RSF purpose and framework
- The RST will provide loans through the Resilience and Sustainability Facility (RSF) under an arrangement (“RSF arrangement”) with design features elaborated in the document.
- Goal of RSF loans:
  - enhance economic resilience and sustainability,
  - contribute to prospective BoP stability by (i) supporting policy reforms to reduce risks from qualifying longer-term structural challenges and (ii) augmenting policy space and financial buffers to mitigate risks from these challenges.
- The RSF will be part of a policy and financing framework for structural transformation consistent with macroeconomic stability.
- Support under a qualifying UCT program will help restore or preserve medium-term external balance and provide the macroeconomic foundation for an RSF arrangement.

### Uses of RSF support
- RSF helps address select qualifying longer-term structural challenges that create macro-critical risks to prospective BoP stability.
- Use of RST loans (general BoP support; not earmarked for specific projects) could include:
  - covering any shorter-term BoP/fiscal needs directly associated with implementation of RST-supported reforms;
  - increasing policy space for fiscal spending and reforms associated with qualifying longer-term structural challenges;
  - augmenting longer-term buffers to strengthen the member’s ability to face shocks linked with qualifying structural challenges.
- RSF arrangements are expected to be drawing (i.e., not used on a precautionary basis); available financing is expected to be drawn promptly after the Board approves an RSF disbursement.

### Interaction with UCT programs and potential BoP effects of RSF-supported reforms
- RSF-supported reforms may raise actual or prospective BoP needs. Examples:
  - expanding social safety nets to support fuel subsidy reform or transitioning to green technology could increase BoP needs;
  - green public financial management reforms may trigger higher imports for green investments;
  - accelerated decarbonization can gradually increase BoP needs as private sector investment in green technologies surges.
- RSF-supported reforms may lower actual or potential BoP needs. Examples:
  - fuel subsidy reforms and carbon taxes may improve prospective BoP stability and help achieve fiscal/BoP objectives of the accompanying UCT program;
  - decarbonization may lower sensitivity to energy price volatility over time, potentially freeing savings that could augment social assistance.
- An RSF arrangement would accompany a UCT program, but the UCT program must stand on its own (i.e., sufficient to address financing need and ensure medium-term external viability under the baseline scenario under the GRA, or make “significant progress” under the ECF of the PRGT).
- In Board documents, RSF financing would be recorded as separate from gap financing under the GRA and/or PRGT.

### Eligibility and qualification—targeting and thresholds
- Scarce RST resources should be targeted at LICs, vulnerable MICs, and small states.
- Initial RST eligibility proposed to be based on per capita income and population thresholds, using qualifying data available as of October 2021:
  - a. per capita GNI in 2020 (or 2019, if 2020 data is not available) does not exceed ten times the 2021 IDA operational cutoff ($1,205); or
  - b. population below 1.5 million as of 2020 (World Bank) and per capita GNI in 2020 (or 2019, if 2020 data is not available) does not exceed twenty-five times the 2021 IDA operational cutoff.
- Per capita income cutoff for small states is set higher because many small islands with relatively high incomes face significant longer-term climate risks and lack steady access to affordable long-term market financing.
- In instances where relevant GNI or population data are not available but countries are PRGT-eligible, those countries are proposed to be added to the RST eligibility list at establishment of the RST.

### Coverage and administration of eligibility
- Based on the proposed criteria, 143 countries will be RST-eligible at the time the RST is established.
- Countries that do not plan to request RST financing (e.g., potential RST contributors) may opt-out of the RST eligibility list at any time by notifying the Fund in writing.
- Future eligibility reviews:
  - A member will be added to the RST eligibility list if, based on the latest available qualifying data, its annual per capita GNI is (a) less than ten times the IDA operational cutoff; or (b) less than twenty-five times the IDA operational cutoff if it has a population below 1.5 million.
  - The first eligibility review will take place as part of the first review of the Trust.
  - Subsequent eligibility reviews would be synchronized and combined with PRGT eligibility reviews, which are undertaken on a biannual schedule.
  - Entry decisions in the interim period between reviews could be adopted on a stand-alone basis where delay would disadvantage the member (e.g., if the member wishes to request RSF support).
  - Future entrants to the PRGT would typically be added to the RST eligibility list at the same time, subject to an ad-hoc Executive Board decision.
  - Re-entry in the interim period would be possible for any country previously opted out or removed due to sanctions for overdue obligations to the Fund (assuming graduation criteria not met).

### Graduation rules and transitional provisions
- Proposed graduation conditions (all must be met):
  - (a) GNI has been above the applicable eligibility threshold for at least the last five years (for which qualifying data are available),
  - (b) GNI has not been on a declining trend in the same period (comparing the first and the last relevant annual data), and
  - (c) based on the latest qualifying data, GNI is at least 10 percent above the applicable eligibility threshold (i.e., 27.5 times the IDA operational cutoff for small states and 11 times IDA operational cutoff for other countries).
- Changes in the eligibility list should not interfere with an existing RSF arrangement or ongoing RSF discussions.
  - A member with an existing RSF arrangement at the time of a Board graduation decision may continue its RSF arrangement, including extensions or augmentations; removal from eligibility becomes effective only upon termination, expiry or cancellation of its ongoing RSF arrangement.
- It is proposed that if a member is no longer RST eligible under an Executive Board decision, there would be a transitional period of 5 months before such change becomes effective.
  - During the transitional period, a new RSF arrangement based on past or ongoing discussions may be approved by the Executive Board.
  - Members who become RST eligible would be able to access RST financing with immediate effect.

*Source: PROPOSAL TO ESTABLISH A RESILIENCE AND SUSTAINABILITY TRUST (excerpt).*

### 39.      To qualify for an RSF arrangement, eligible members would need to have: (i) a package

### To qualify for an RSF arrangement, eligible members would need to have: (i) a package

### Qualification criteria
- Eligible members must have:
  - (i) a package of high-quality reform measures addressing qualifying longer-term structural challenges;
  - (ii) a concurrent UCT program with at least 18 months remaining prior to its expiry; and
  - (iii) sustainable debt and adequate capacity to repay.
- Relevant policy and reform package:
  - Financing under an RSF arrangement would be based on a set of policies and reforms expected to help the member make significant progress toward strengthening the member’s prospective BoP stability by reducing macro-critical risks related to qualifying longer-term structural challenges.
  - A guidance note would elaborate on how to design and assess the strength of the package of structural reforms, typically developed by the Fund in consultation with other relevant institutions, including the World Bank.
- Qualifying UCT program:
  - An RSF arrangement would only be approved by the Executive Board when:
    - (a) The member is concurrently requesting approval of a qualifying IMF instrument supporting a program with UCT-quality conditionality or the completion of the review under such instrument, which, for the purpose of RSF qualification, would include SBA, EFF, PLL, FCL, SCF, ECF, PCI or PSI.
    - SMPs are excluded; emergency financing (RFI and RCF) would not qualify; SLL arrangements would not qualify given their short duration.
    - (b) There are at least 18 months remaining in the accompanying UCT program at the time of approval of the RSF arrangement.
      - Transitional provision: during the first 6 months from the date on which the RST becomes operational, ongoing and on-track UCT programs with as little as 12 months remaining would equally qualify.
- Debt sustainability and capacity to repay:
  - Approval of an RSF arrangement and completion of reviews will require the members’ debt to be assessed as sustainable in the medium-term under the applicable debt sustainability framework (LIC DSF or MAC SRDSF).
  - Requests for RSF arrangements and reviews would also require an assessment of the member’s capacity to repay the Fund.

### Lending terms and interest structure
- Purpose and overall terms:
  - RSF lending terms combine low interest rates with significantly longer maturities than in the GRA and the PRGT.
  - RSF loans are proposed to have a maximum maturity of 20 years.
  - Principal repayments to be made in 20 equal semi-annual instalments that begin 10½ years after the RSF disbursement.
- Interest rate and charges:
  - Borrower pays an interest rate with a modest margin over the 3-month SDR interest rate (SDRi).
  - Margin above the RST’s funding cost contributes to build-up of RST reserves and, together with service charges for some groups, covers administrative costs.
  - RSF borrowing would not be subject to surcharges; outstanding RST credit would not count towards the level-based threshold for GRA surcharges.
  - A commitment fee is not currently contemplated.
- Tiered margin and service-charge structure (country-group differentiated):
  - Group A:
    - All PRGT-eligible countries that are not presumed blenders.
    - This group currently comprises 51 countries.
    - Proposed margin: 55 basis points above the SDRi.
    - Exempt from any service charges on RSF loan disbursements.
  - Group B:
    - All presumed blenders under the Fund’s framework for blended access to GRA and PRGT resources and all non-PRGT eligible small states with per capita GNI below ten times the IDA operational income cutoff.
    - This group is currently composed of 27 countries.
    - Proposed margin: 75 basis points above SDRi.
    - Subject to an upfront one-time service charge of 25 basis points on each RSF loan disbursement.
  - Group C:
    - All other RST-eligible countries.
    - This group is currently composed of 65 countries.
    - Proposed margin: 95 basis points above SDRi.
    - Subject to an upfront one-time service charge of 50 basis points for each RSF disbursement.
- Interest-rate cap proposal and reviews:
  - To protect lowest income borrowers from rising market rates, an interest rate cap for Group A countries could be considered at future reviews.
  - Staff assumed a cap of 2¼ percent, including the margin, for modeling purposes.
  - A cap of 2¼ percent would ensure that, together with the 10½-year grace period and 20-year maturity, the concessionality of PRGT and RSF loans would be at roughly the same level when SDRi rises above 2 percent.
  - No interest rate cross-subsidization is envisaged at the start of the RST.
  - Interest-rate and service-charge margins are subject to Executive Board review; an interest rate review would be triggered, for example, if average SDRi were to rise above 1½ percent in any 12-month period and SDRi projections signal it is not expected to decline below 1.5 percent within the coming quarters.

### Access: caps, norms, and safeguards
- Overall cumulative access cap:
  - Proposed to be set at the lower of 150 percent of quota or SDR 1 billion.
- Annual and disbursement limits:
  - The RSF would have no annual access limits to facilitate flexibility in timing of RSF disbursement but would limit the size of disbursements.
- Access norm:
  - Starting point norm of 75 percent of quota.
  - The norm is neither a ceiling nor a floor; deviations may be considered based on:
    - (i) any direct short- to medium-term BoP needs associated with implementation of corresponding RSF-supported reforms;
    - (ii) strength and ambition of the package of RST-supported reforms;
    - (iii) capacity to repay the Fund, taking into account the member’s debt sustainability, debt carrying capacity, and composition of debt (in particular prevalence of de facto senior obligations, especially in cases of elevated debt vulnerabilities).
- Impact on debt profile:
  - RSF’s longer grace and repayment periods result in modest effects on annual gross financing needs (up to 15 percent of quota per year).

### Policy safeguards and alternatives to PS-HCC
- PS-HCC Policy (Policy Safeguards for High Combined Credit Exposure) would not apply to RSF financing.
- Rationale:
  - RSF focuses on prospective stability and longer-term needs; treating RSF access separately avoids substituting GRA access with RSF access.
- Built-in alternative safeguards in RSF design:
  - (i) debt sustainability requirements for RST qualification;
  - (ii) modest access caps;
  - (iii) access determination rules that explicitly account for debt vulnerabilities;
  - (iv) enhanced analysis of debt structure, debt sustainability, and capacity to repay.
- Modest debt service schedule:
  - Much longer grace and repayment periods reduce annual gross financing needs impact compared with GRA/PRGT financing.

### Lending modalities, duration, and conditionality
- Request and approval:
  - An RSF arrangement may only be approved by the Executive Board if the member either has an “on-track” UCT program with at least 18 months remaining until its expiration (12 months for RSF arrangements approved within the first six months of the RST’s operationalization), or is receiving approval for such a program concurrently with consideration of the RSF request.
  - Approval would normally take place at the time of approval of the request for the UCT program or at a review under the UCT program.
  - Authorities must request an RSF arrangement in writing (normally as part of the LOI for the UCT program documentation). The MEFP would describe broad policy intentions and specific structural reforms (“reform measures”) supported under the RSF arrangement.
- Duration:
  - Generally expected to coincide with the duration of a new UCT program or the remaining duration of an existing UCT program.
  - Minimum duration: 18 months (12 months for RSF arrangements approved within the first six months of the RST’s operationalization).
  - RSF arrangement would expire when all amounts available under the arrangement have been disbursed.
  - RSF arrangement would automatically terminate upon termination, cancellation or expiry of the accompanying UCT program.
  - RSF arrangement could be extended at time of request of an extension of the qualifying UCT program.
- Conditionality:
  - RSF conditionality shall take the form of Board reviews assessing reform measures.
  - A reform measure would be a single policy action or a set of very closely related actions constituting a single reform and designed to be objectively monitorable.
  - Reform measures must be clearly linked to addressing qualifying longer-term structural challenges and make a meaningful contribution toward strengthening the member’s prospective BoP stability.
  - Coordination with other IFIs/MDBs in the design of reform measures will be critical to complement their lending and help catalyze additional financing, including from private sources.

*Source: ppea2022013 - excerpt on RSF qualification, lending terms, access, safeguards, modalities, and conditionality.*

### 52.      RSF conditionality will follow the key principles underlying the Guidelines of

### RSF conditionality will follow the key principles underlying the Guidelines of Conditionality (GoC), with certain caveats.

### Principles and scope of RSF conditionality
- RSF conditionality will apply the following GoC principles: national ownership of reforms, tailoring to member’s circumstances, parsimony in the application of conditions, clarity in the specification of conditions, effective coordination with other multilateral institutions and the principle guiding the concept of a review by the Executive Board.
- There would be no cross-conditionality.
- Views of other institutions, particularly in non-core areas for the Fund, would be an important input (for the RST, particularly in assessing completion of the measures).
- Conditionality applicable to RST disbursements will consist of reviews assessing implementation of reform measures; none of the other types of conditionality provided under the GoC for lending in UCT programs—quantitative performance criteria and indicative targets, prior actions and structural benchmarks—will be used in RSF arrangements.
- Waivers of applicability and non-observance are not envisaged (see ¶58 on completion of reviews).
- The GoC focus on helping the member resolve its BoP problems (GoC ¶6(a)) will not apply to RSF conditionality; RSF conditionality is focused on improving prospective BoP stability.

### Relationship with concurrent UCT programs
- RSF conditionality will typically be separate from the conditionality of the concurrent UCT program, though select reform measures may be included in both.
- Reform measures must be compatible with the resolution (or prevention) of the BoP problem under the UCT program, but are not required to directly contribute to it.
- Reform measures will be specified separately from the conditionality under the concurrent UCT program.
- Reviews under a UCT program would not be impacted by delays in completion of reform measures; however, delays in completing reviews under the UCT program would delay RSF disbursements (see ¶58).
- Dual-purpose reforms: where implementation of the reform measure is critical to the success of the concurrent UCT program, the measure would also be included as part of the UCT program conditionality (typically as structural benchmarks; sometimes as prior actions) and assessed under UCT program policies.

### Timing, duration, and flexibility of reform measures
- Reform measures must be implemented within the duration of the RSF arrangement, with greater flexibility in timing.
- To access RSF disbursements, the reform measure would need to be implemented over the duration of the concurrent UCT program.
- Reform measure target dates would be indicative to account for the difficulty in gauging exact time needed for completion of reforms in relatively new policy areas.
- If a reform measure is also a structural benchmark or prior action under the UCT program it will be monitored and assessed under the relevant UCT framework.

### Macroeconomic framework and quantitative targets under UCT programs
- The macroeconomic framework and quantitative targets under the concurrent UCT program will include projections for RSF financing.
- RSF financing increases the overall financing envelope over the period of the UCT program.
- The macroeconomic framework will reflect allocation of RSF financing between expanding the fiscal envelope, reserve accumulation and any other uses.
- Performance criteria and indicative targets under the UCT program will reflect RSF financing under the baseline, and include adjustors linked to the expected timing of RSF disbursements (analogous to other exogenous sources of financing/revenue).
- If RSF financing does not materialize (because the reform measure is not implemented or delayed), these adjustors fully automatically offset its impact on the medium-term macroeconomic framework.
- Since benefits of RSF-supported reforms are expected to materialize in the longer term, no other changes to the medium-term macroeconomic framework in response to their non-implementation would be generally expected, although this would need to be assessed on a case-by-case basis.

### Illustrative reform measures (Box 1 — climate-related, preliminary and indicative)
- Staff will undertake detailed analysis and planning to define indicative areas and measures for RSF reform and conditionality, leveraging expertise inside and outside the institution and engaging with the World Bank and regional development banks.
- Climate-related reforms could support: (i) enhanced assessment of risks for climate-informed development strategies; (ii) improved adaptation that reduces costs of slow-moving climate change and climate-induced natural disasters; (iii) mitigation policies that reduce fiscal and balance of payments risks, while supporting the member to meet its international commitments; (iv) social protection strategies to mitigate the impact of climate shocks on the most vulnerable and support a just transition; (v) development and implementation of a climate finance strategy aligned with countries’ NDCs; (vi) building buffers to cope with shocks; (vii) frameworks that support the integration of climate in public financial management and allow for increased transparency on climate reporting; and (viii) regulatory and supervisory frameworks to better assess climate-related financial sector risks.

- Illustrative climate adaptation measures:
  - Approve a National Adaptation Plan, which: (1) identifies climate vulnerabilities and adaptation gaps; (2) identifies adaptation solutions, including cost estimates for all major projects; (3) mainstreams adaptation into national planning and PFM; and (4) monitors and reports progress regularly.
  - Adopt measures to achieve at least full cost recovery in water utility pricing while ensuring access to adequate water consumption of the vulnerable to maintain affordability.

- Illustrative climate mitigation measures:
  - Issue regulations on carbon pricing policy (e.g., removing exemptions, increasing carbon price levels, and expanding sector coverage).
  - Introduce/apply the standard VAT rate for electricity and fossil fuels.
  - Introduce/increase excises on coal, natural gas, and petroleum products.
  - Phase out agricultural subsidies that encourage emissions-intensive farming.

- Illustrative climate finance measures:
  - Approve a disaster risk financing strategy for both low impact/frequent events and higher impact/low frequency events, using a risk layering approach covering both risk retention (budget reallocation/augmentation) and risk transfer (climate risk insurance and climate-contingent loan rescheduling).

- Illustrative public investment management measures:
  - Define and publish climate-related elements among the criteria used by the government for the selection of all major public investment projects.
  - Establish a standard methodology to conduct mandatory climate-related analysis for the ex-ante appraisal of all major public investment projects.
  - Produce centralized guidance and/or establish a central support unit to assist government agencies on the preparation and costing of climate-aware public investment strategies.

- Illustrative public financial management measures:
  - Require that the climate implications of major new budget measures be systematically included in ex ante impact assessments and cost-benefit analyses and published in budget documents.
  - Develop a climate budget tagging system to improve allocation and monitoring of climate-related expenditure and publish report on climate-related expenditure alongside budget documents.
  - Develop a fiscal risk statement to include climate risks and natural disasters, and include narrative on risk management strategies, notably with respect to climate-related risks to public infrastructure assets.

### Disbursements, phasing, and reviews (¶56–¶58)
- Disbursements:
  - A member’s total RSF access would be partitioned into several disbursements linked to implementation of RSF reform measures.
  - Each disbursement, defined as a percentage of quota, will be associated with the implementation of one reform measure.
  - Presumption is for equal access across disbursements; exceptions could be made for reform measures demonstrably more consequential to prospective BoP stability and/or create larger actual BoP needs.

- Phasing (¶57):
  - Phasing will be specified at the time of the RSF request.
  - Each disbursement will have an availability date linked to the expected time of completion of the associated reform measure, which will generally mirror the availability date of a particular purchase/disbursement under the UCT program.
  - Multiple reform measures can be linked to the same availability date.
  - Phasing should ensure that the cumulative access of all disbursements subject to the completion of a review under the RSF arrangement does not exceed 50 percent of quota.
  - If there are delays, disbursements exceeding 50 percent of quota that become available following the completion of a review are not precluded.
  - No disbursement would be available immediately at the time of approval of the request for an RSF arrangement.

- Reviews (¶58):
  - RSF disbursements occur following completion of a review by the Executive Board.
  - Completion of an RSF review will require a Board assessment, based on staff’s recommendation included in the UCT program documentation, that the relevant reform measure was met.
  - The Board may, in rare cases, complete the review and approve the associated RSF disbursement where the reform measure was implemented with a minor deviation relative to its Board-approved design.
  - The Board, in assessing whether a deviation is minor, will consider whether the member has substantially implemented the reform measure such that the objective of the reform measure has been met.
  - The RST review will only make available the RST disbursement amounts corresponding to the reform measures that were assessed as implemented or implemented with minor deviation.
  - If a reform measure is assessed as not met and the deviation is not minor, the review would provide an opportunity to adjust (or replace) the reform measure on a forward-looking basis.
  - Reviews can be used to augment an RSF arrangement by increasing access of disbursements associated with existing reform measures with future availability dates or establishing new reform measures and associated disbursements.
  - Timing of reviews: regular reviews under an RSF arrangement are not warranted given indicative target dates; reviews will take place concurrently with reviews under the UCT program once the expected date of completion of a reform measure has passed and management recommends completion or modification.
  - To ensure RST disbursements only occur when the UCT program is on track, delays in completing reviews under the UCT arrangement would delay RSF reviews and attendant disbursements, even when reform measures are implemented on time.
  - Disbursement request: members would have 30 calendar days following completion of the review by the Executive Board to make a request (but no later than the end of the arrangement).
  - If a member fails to make a request within this period, the member may only request the disbursement in the 30-day period following the completion of a subsequent review under the RSF arrangement.

### Undisbursed amounts, cancellation, and expiration (¶59)
- An RSF arrangement expires when all amounts under the RSF arrangement have been disbursed.
- An RSF arrangement may be cancelled at any time by a member by notifying the Fund.
- The RSF arrangement would automatically terminate when the accompanying UCT program expires, is cancelled, or terminates.
- Undisbursed financing after the expiration of an RSF arrangement—which may arise because reform measures were not implemented or the UCT program went off-track, expired or was cancelled—would not be available thereafter.
- The member may request financing under a successor RSF arrangement—with access up to the overall cumulative access caps for the RSF (in quota and SDR terms)—and an appropriate successor UCT arrangement.

### Illustrative phasing and disbursement scenarios (Box 2)
- Example structure:
  - A hypothetical RSF arrangement approved together with an EFF has two reform measures phased for implementation ahead of the 2nd and 4th reviews.
  - If both reform measures are implemented on schedule, ex-ante and ex-post RSF phasings are identical (Scenario A).
  - If implementation of the second reform measure is only completed ahead of the 5th review under the EFF, the corresponding RSF review and disbursement would take place concurrently with the 5th EFF review (Scenario B).
  - All reform measures must be implemented ahead of the last completed review under the EFF for the full amount under the RSF arrangement to be disbursed (Scenario C).
  - Delays in completing UCT reviews (e.g., combined 4th/5th reviews or delayed 2nd review) lead to delayed RSF disbursements (Scenario D).
  - If a reform measure is implemented ahead of schedule but the UCT arrangement ends mid-way, the RSF arrangement terminates and related undisbursed amounts are not available (Scenario E).
- Note: Scenarios assume simultaneous requests for the RSF and the UCT arrangement. RSF requests at the time of a scheduled review under the UCT arrangement would not substantively affect the scenarios.

*Source: https://www.imf.org/-/media/files/publications/pp/2022/english/ppea2022013.pdf*

### 2. Schedules of disbursement for a more complex example

### 2. Schedules of disbursement for a more complex example

### Proposed schedule of disbursements and timing of reviews under ECF arrangement
- Context: Hypothetical RSF arrangement accompanied by a three-year ECF, both approved on October 31, 2022. Assumes four reform measures; measures 2 and 3 expected completed by the time of the second ECF review (same availability date—April 15, 2024). A separate table would specify content of reform measures 1–4.
- Board Approval
  - Condition: Executive Board approval of three-year arrangement under ECF
  - Amount: SDR 100.0 million
  - Percent of quota: 40
- April 15, 2023
  - Condition: Observance of PCs for December 31, 2022, continuous PCs and completion of first review
  - Amount: SDR 100.0 million
  - Percent of quota: 40
- October 15, 2023
  - Condition: Observance of PCs for June 30, 2023, continuous PCs and completion of second review
  - Amount: SDR 100.0 million
  - Percent of quota: 40
- April 15, 2024
  - Condition: Observance of PCs for December 31, 2023, continuous PCs and completion of third review
  - Amount: SDR 50.0 million
  - Percent of quota: 20
- October 15, 2024
  - Condition: Observance of PCs for June 30, 2024, continuous PCs and completion of fourth review
  - Amount: SDR 50.0 million
  - Percent of quota: 20
- April 15, 2025
  - Condition: Observance of PCs for December 31, 2024, continuous PCs and completion of fifth review
  - Amount: SDR 50.0 million
  - Percent of quota: 20
- October 15, 2025
  - Condition: Observance of PCs for June 30, 2025, continuous PCs and completion of sixth review
  - Amount: SDR 50.0 million
  - Percent of quota: 20
- Total: SDR 500.0 million; Percent of quota: 200
- Memo item: Quota SDR 250.0

### Proposed schedule of disbursements and timing of reviews under RSF arrangement
- October 15, 2023
  - Condition: Completion of RSF review of reform measure 1 implementation
  - Amount: SDR 50.0 million
  - Percent of quota: 20
- April 15, 2024
  - Condition: Completion of RSF review of reform measure 2 implementation
  - Amount: SDR 62.5 million
  - Percent of quota: 25
- April 15, 2024
  - Condition: Completion of RSF review of reform measure 3 implementation
  - Amount: SDR 62.5 million
  - Percent of quota: 25
- October 15, 2024
  - Condition: Completion of RSF review of reform measure 4 implementation
  - Amount: SDR 75.0 million
  - Percent of quota: 20
- Total: SDR 250.0 million; Percent of quota: 100

### F. Debt and Capacity to Repay Considerations — key safeguards and analytical requirements
- Rationale and scope
  - Additional debt and capacity to repay (CtR) safeguards proposed for RST lending to reflect lending nature and terms, borrower debt profiles, and to mitigate excessive accumulation of de facto senior debt.
  - Medium-term debt sustainability is a key qualification for accessing the RST (Section III.B).
- Required analyses to be included in Board documents for RST financing requests and augmentations:
  - (i) Composition of public debt, including the share of de facto senior debt.
  - (ii) Debt risk analysis over a longer time horizon (up to 20 years).
  - (iii) Extended CtR analysis covering the RSF repayment period, accounting for all Fund borrowing by the member.
- Purpose: Safeguards warranted by RSF’s longer repayment period and RSF access being outside the PS-HCC Policy; intended to avoid aggravating borrower debt vulnerabilities and address exposure to de facto senior/non-restructurable debt.

### Debt composition requirements
- Board documents must discuss structure of total public debt and projected evolution.
- External debt breakdowns to be shown in tables with two distinct classifications:
  - (i) De facto senior or difficult to restructure debt (debt to the IMF; debt to the World Bank and other international financial institutions; known collateralized debt) and other debt.
  - (ii) Multilateral versus official bilateral versus private debt.

### Long-term debt risk analysis
- Use of existing frameworks:
  - LIC Debt Sustainability Framework (DSF) requires a macroeconomic framework for a 20-year projection period, providing debt and debt service projections for full repayment horizon of RST financing.
  - Sovereign Risk and Debt Sustainability Framework for Market Access Countries (MAC SRDSF) provides a 10-year horizon for debt and GFN projections.
- Modules and stress tests:
  - Both frameworks have tailored stress tests for natural disasters.
  - MAC SRDSF includes optional modules for climate change, large amortizations, demographics, and natural resource scale-up/depletion.
- Requirement for RSF-linked programs:
  - These modules (except natural resource scale-up/depletion which is optional) will be required for program documents with a concurrent RSF arrangement.
  - For the climate change module, countries expected to discuss impact of climate change on key macro-fiscal variables (such as potential growth and spending) and, where feasible, draw long-term implications for debt using IMF CMAP, World Bank CCDR, or other country-specific work.

### Capacity to repay (CtR) requirements and procedures
- All relevant Board documents must present evolution of total IMF (PRGT+GRA+RST) projected debt and debt service to the Fund relative to key economic metrics over RST repayment period.
- Specifics:
  - Long-term (20 years) projections based on country-team data will be compared with available data from prior Fund lending, supported by standardized charts.
  - If CtR indicators signal relatively high risks, program documents must discuss severity of implied risks and how RSF and concurrent UCT program design (access, phasing, conditionality) seek to mitigate these risks.
  - Assessment normally based on baseline macroeconomic framework of the RSF request; may need to reflect downside scenarios if included in program documents (e.g., precautionary UCT arrangement).

### G. Overdue Obligations — eligibility and remedial framework
- Eligibility restriction:
  - Managing Director will not recommend an RSF arrangement if the member has overdue financial obligations to the Fund (GRA, Special Disbursement Account, SDR Department, or to the Fund as Trustee under RST or PRGT).
  - If a member under an RSF arrangement incurs overdue obligations as described, no further disbursements under the RSF until overdue obligations are settled in full.
  - If a member incurs overdue obligations to the RST, that member’s access to the GRA and PRGT would also be suspended.
- Strategy to prevent and remediate overdue obligations:
  - Three elements: prevention, intensified collaboration, remedial measures.
  - Preventative: Fund engagement through surveillance, policy advice, safeguards, technical assistance.
  - Intensified collaboration: assist cooperating members in establishing policy and payments performance, mobilizing resources, normalizing Fund relations.
  - Remedial measures: escalating measures if arrears arise and member does not cooperate.
- Remedial measures specifics:
  - Measures broadly similar to PRGT remedial measures; apply to members with overdue obligations who do not actively cooperate.
  - An escalating timetable would guide Executive Board consideration; application takes account of member circumstances.
  - Initial communication urging prompt payment sent to member and Executive Director; suspension of access to GRA, PRGT, and RST if obligations remain unsettled.
  - Overdue obligations (repayments of principal or payment of interest) to the RST would accrue interest equal to the applicable interest rate under the tier structure, subject to a minimum interest rate charge of the SDRi.
  - In protracted overdue cases, remedial measures could include removal from list of RST eligible countries (6 months after emergence of arrears) and declaration of noncooperation with the Trust (12 months after emergence of arrears); upon declaration, Fund could decide to suspend provision of technical assistance.
  - Remedial measures for RST do not extend as far as those for the GRA because overdue obligations in the GRA are breaches under the Articles of Agreement, whereas overdue obligations for Trust loans are not.
- Prioritization guidance:
  - Framework allows for and encourages prioritization of GRA repurchases and PRGT repayments.
  - Members encouraged to prioritize payments (arrears clearance or periodic partial/"token" payments) to the GRA and PRGT in cases where borrower has (or risks having) overdue financial obligations.

### H. Post-Financing Assessment (PFA) and ongoing monitoring
- PFA application:
  - Outstanding credit to the RST would count towards the quota threshold under the PFA policy.
  - PFA expected for members not in a Fund arrangement where combined GRA/PRGT/RST credit outstanding exceeds 200 percent of quota.
  - In such cases, evolution and impacts of reform measures and monitoring member’s capacity to make RST repayments would be covered as part of the PFA.
- Absolute trigger consideration:
  - PFA policy provides absolute triggers of SDR 1.5 billion (GRA) and SDR 0.38 billion (PRGT).
  - Calibration of an absolute level of outstanding RST credit as a PFA trigger could be considered at the first review of the RST policy.
  - Interim initial trigger for PFA in absolute terms proposed to be set at same level as PRGT: SDR 0.38 billion.
- Discretionary PFA:
  - Managing Director has discretion to recommend PFA if developments suggest need for closer monitoring of member’s capacity to repay or call into question progress toward external viability.
- Ongoing monitoring post-arrangement:
  - Article IV consultations will be main vehicle to address longer-term structural challenges and follow up on IMF policy advice as long as issues remain macro-critical.
  - If residual BoP needs persist or a new BoP gap emerges, any follow-up UCT program would be expected to account for RSF repayments in debt sustainability and capacity to repay considerations.

### I. Misreporting framework and other lending policies
- Misreporting definitions under the RST:
  - Misreporting occurs when:
    - (i) member received a non-complying disbursement due to inaccurate information provided on implementation of a reform measure leading to incorrect assessment that (a) measure fully implemented when it was not, or (b) deviation was minor when it was not; or
    - (ii) there has been an Executive Board finding of misreporting under the accompanying UCT program that was not assessed as “de minimis” or waived by the Executive Board.
  - Noncomplying disbursements under the accompanying UCT program (other than de minimis or waived cases) also taint simultaneous RSF disbursements as noncompliant.
- Remedies and expectations:
  - In cases under (i), members expected to make an early repayment of the non-complying disbursement(s) unless Executive Board determines deviation is minor and objectives achieved notwithstanding misreporting.
  - In cases under (ii), the misreporting framework applicable to the UCT program applies; members expected to make early repayment unless misreporting under UCT program is de minimis or a waiver granted by Executive Board.
  - RST misreporting framework proposed to be procedurally analogous to PRGT framework, with noted exceptions.
- Applicability of other Fund policies:
  - Key Fund policies applicable to UCT programs (e.g., lapse of time (LOT) procedures, side letter policy) apply to RSF arrangements mutatis mutandis.
  - Under LOT procedures, an RSF review eligible for completion on LOT basis where underlying UCT arrangement/instrument meets LOT criteria and relevant reform measures have been met.
  - Governance issues critical to BoP resolution expected to be addressed under UCT program in line with the 2018 Governance Policy.
  - Standalone RSF arrangement documents considered country papers within scope of the Transparency Policy and the Open Archives Policy; same publication regime as documents on use of Fund resources.

### IV.A Governance — Trustee and Executive Board authority
- Trustee role and Executive Board powers:
  - Fund would act as Trustee of the RST, similar to the PRGT.
  - Executive Board has authority to take decisions on RST issues and to approve individual RSF arrangements, including decisions on eligibility, qualification, access, adjustments to certain financial parameters of the Trust (such as interest rates), and assessment of RSF conditionality.
  - Decisions regarding RST establishment, amendments and implementing decisions would be taken by a majority of votes cast, as is the case with most decisions in the PRGT.
  - Executive Board would have power to terminate the RST.

*Source: ppea2022013 - 2. Schedules of disbursement for a more complex example (PDF chapter).*

### 73.      Creditor consent would be required for changes to fundamental terms of the RST that

### ppea2022013 - 73.      Creditor consent would be required for changes to fundamental terms of the RST that

### Creditor consent and amendment protections (paras 73–74)
- Creditor consent is required for changes to fundamental terms of the RST that affect creditor interests, including the purposes clause, lending facilities, and key financial terms and structure.
- The RST Instrument specifies provisions that could only be amended with creditor consent (“protected provisions”).
- Protections assure contributors that no fundamental change would be made to the clause governing use of RST resources or to key financial parameters for creditors without their consent or an opportunity to suspend financial support for future trust operations.
- If a Loan Account contributor does not consent to an amendment:
  - Further drawings under its borrowing agreement to fund Trust loans would be suspended.
  - The contributor may request the partial return of its Deposit Account and Reserve Account contributions, in an amount proportional to the remaining uncommitted portion of its commitments under its Loan Account borrowing agreement.
  - The borrowing agreement remains open for encashment calls related to claims outstanding or committed prior to the effectiveness of the amendment; outstanding claims under such borrowing agreement remain outstanding and subject to repayment in accordance with the repayment schedule of the RST loans funded with drawings under the borrowing agreement.
- Where consent of a stand-alone contributor to an amendment of the Reserve Account or the Deposit Account is required, the non-consenting contributor may request repayment of its principal contribution, net of any losses or retained investment earnings.
- Proposed consent process:
  - Staff proposes that consent of a creditor would be assumed if the contributor was given adequate notice and appropriate time to respond and no response is received.
  - The RST Instrument would authorize the Board to set a first deadline for explicit consent, followed by a second deadline to those that did not respond within the first deadline.
  - The second formal notification would indicate that if no response is received, the contributor would be presumed to have consented to the amendment.
  - After the amendment becomes effective, any contributor that did not respond within the second deadline would have six months to notify the Fund of its objection to the amendment.
    - If such notification is received, the contributor would have the same rights regarding suspension of future drawings and partial return of its share in the deposit and reserve accounts as described above.
- Rationale: give contributors enough time to consider an amendment and to take actions to protect their contributions if necessary, but not to provide them with a veto through non-response.
- Staff is proposing a similar approach for the PRGT (¶96).

### Review timing and scope (para 75)
- Staff propose that the RST would be reviewed three years after it becomes operational, or sooner if warranted.
- The review could:
  - Take stock of the experience with the RST.
  - Consider modifications including in respect to qualifying longer-term challenges, eligibility, margin and service charge structure, country groupings, and reserve coverage.
  - Assess whether RST financing should extend beyond the current drawdown period (November 30, 2030) or be sunset at a future date.
  - Decide the frequency of future RST policy reviews, with expectation they would generally cover the policy areas included in the first review.
- An earlier review of the RST interest rate structure may be necessary depending on developments in the SDRi or unexpected events affecting financial sustainability of the RST.
- Such reviews would always trigger a review of country groupings.

### Coordination with the World Bank and other agencies (paras 76–78)
- RST lending operations would benefit from close coordination with the World Bank and other relevant agencies, including regional MDBs.
- IMF and World Bank staff have worked to develop broad principles for coordination on RST operations, with current staff notes concentrating on climate-related issues (to be customized for other long-term challenges).
- Coordination guided by principles reflecting each institution’s mandate and expertise (1989 IMF-World Bank Concordat).
- Five key areas for coordination:
  - Diagnostics:
    - RSF reform measures informed by country diagnostics from both institutions and national strategies.
    - For climate change, the Bank’s Country Climate and Development Reports (CCDR), complemented by Fund products such as Climate Change Policy Assessments (CCPAs), Climate Macroeconomic Assessments Programs (CMAPs), Climate Public Investment Management Assessment (C-PIMA), and Disaster Resilience Strategies (DRS).
    - If neither a CCDR nor a CMAP are available, RSF policy design would use other available information and discussions with other IFIs/regional MDBs and authorities.
  - Policy priorities:
    - Fund staff will identify policies to prioritize under the RST, in coordination with the World Bank, promoting complementarity with Bank operations and delineating responsibilities by mandate.
  - Conditionality:
    - The IMF’s Executive Board will establish RSF conditionality and assess compliance (consistent with the policy on not having cross-conditionality), drawing on World Bank staff advice in areas of Bank expertise.
    - RST conditionality designed taking into account conditionality guidelines, including capacity to implement.
  - Implementation supervision:
    - Bank staff envisaged to provide assessment letters on authorities’ climate policies at RSF approval and reviews where implementation is assessed.
    - Staff report and MEFP will document coordination with the Bank, including Bank engagement and technical assistance related to RST-supported reforms; cover note will acknowledge Bank inputs.
  - Program documentation:
    - A vehicle to document the coordinated approach for RST lending.
- Broad modalities for Fund–Bank staff engagement agreed, with confidentiality caveats.
- A coordination framework for pandemic preparedness will be developed by the start of RST operations, modeled on the climate blueprint and engaging stakeholders including the World Bank and WHO.

### Preferred Creditor Status (PCS) and safeguards (paras 79–81)
- Proposed lending framework presumes de facto PCS of RST loans, as is the case for Fund lending under the GRA and PRGT.
- The Fund’s de facto PCS is accepted by Fund members and the international creditor community by practice, not law, recognizing the public good nature of IMF financing.
- Under practice, creditors have excluded Fund’s claims from sovereign debt restructuring by exercising voluntary forbearance in enforcing their claims.
- To clarify intentions, the IMFC could call on all Fund members to recognize de facto PCS for RST claims, as it did for the Fund’s PCS in 1988.
- Major official bilateral creditors could recognize de facto PCS of RST claims via the Paris Club or the G20.
- De facto PCS for RST claims would be accompanied by additional safeguards:
  - Appropriate access policies, and debt sustainability and CtR safeguards to minimize the risk that RST obligations aggravate a member’s debt vulnerabilities.
  - Policy would encourage prioritizing payments to the GRA and PRGT over RST obligations when a borrower has overdue obligations to the Fund (see Section III.H) with no implication for the de facto PCS of the RST claims.

### Financial architecture: general framework and three pillars (paras 82–86)
- RST proposed as a loan-based trust administered by the IMF, with governance and financial structure broadly similar to the PRGT.
- Roles of the Executive Board, management, and staff for RST lending and other decisions would be broadly the same as for PRGT and GRA lending.
- Resources mobilized from voluntary contributions from members, including SDR channeling for LIC and more vulnerable middle-income members; expected bulk of contributions in SDRs, with possible provision in freely usable currencies.
- All claims of contributors on the RST denominated in SDRs.
- Key financial design challenges relative to PRGT:
  - RST requires sufficient loan resources and adequate financial buffers from the outset.
  - Members’ budgets constrained by the pandemic and parallel fundraising campaigns (e.g., PRGT, CCRT, IDA).
  - PRGT had a funded Reserve Account from establishment via SDA resources derived from gold sales profits; RST will not.
- Design objectives: ensure safety and liquidity of contributors’ claims while minimizing budgetary contributions via:
  - (i) strong policy safeguards, including link of RST lending to a UCT-quality program;
  - (ii) supportive multilateral context, including expected de facto PCS;
  - (iii) adequate reserve buffer expected to grow over time through lending and investment income, with significantly higher reserves by the time RST loan repayments come due;
  - (iv) funding mechanism combining modest upfront reserve account contributions with a much larger pool of loan resources and long-term deposits that create claims on the RST and retain reserve asset character (through early repayment/encashability and high asset quality);
  - (v) split of each contributor’s claims into resources for lending operations (drawn over time) and upfront long-term contributions to bolster reserves.
- Three financial pillars proposed (see Figure 1):
  - Loan Account (LA):
    - Conduit for lending operations, funded by voluntary loan commitments from contributors.
    - RST loans made on a pass-through basis by drawing on LA resources committed by contributors (loan or note purchase agreements).
    - Borrowing Agreements subject to uniform key substantive terms.
    - All LA contributors remunerated at interest rates up to the SDRi.
    - Borrowers pay the SDRi plus a modest margin to cover administrative expenses and reserve build up, and a service charge in some cases.
    - Repayments to LA contributors are on the same maturity schedule as amortization of borrowers’ RST credit outstanding.
    - LA contributors’ commitments include an encashment buffer available for drawings in the event another contributor requests early repayment of its LA claims for balance of payments or reserve position need.
  - Reserve Account (RA):
    - Principal financial buffer to manage credit and liquidity risk and cover administrative costs.
    - Funded through upfront contributions by contributors in proportion to their LA commitments.
    - Proposed structure starts with a relatively modest RA balance that grows over time from lending margins, service charges, and investment income, net of administrative costs.
    - RA principal contributions are not remunerated but entitle each contributor to a share of the Trust’s net assets at termination.
    - RST lending income from the margin transferred to the RA quarterly; service charges go directly into the RA.
    - RA resources can cover administrative expenses; margin and service charge income expected to fully cover these costs.
    - RA resources distributed to contributors based on share at liquidation; early partial distribution may occur based on assessment of adequacy of net reserves.
    - Pending use, RA resources invested in liquid, high-quality instruments per Executive Board guidelines.
  - Deposit Account (DA):
    - Adds to RST gross reserves, funded upfront by long-term deposits from LA contributors in proportion to LA commitments, remunerated at interest rates up to the SDRi.
    - Purpose: generate additional net investment income to build RST net reserves, minimizing residual risks to contributors’ claims.
    - Resources invested in liquid, high-quality assets per investment guidelines permitting liquidation at short notice for possible encashment in BoP/reserve need events.
- Contributors’ claims on the LA and DA have reserve asset characteristics, supported by multilayered risk management and possibility to encash claims in case of balance of payments or reserve position need.
- Quality and liquidity of claims backed by:
  - Policy safeguards (UTC linkage, conditionality, access cap, phasing rules, debt sustainability and CtR requirements, charges and repayment structures).
  - Multilateral context and de facto PCS (risk pooling, mitigation, donor support, arrears prevention/clearing arrangements).
  - Financial buffers designed to safeguard against financial risk and ensure high quality and liquidity of contributors’ claims from establishment.

*Italic: Source — ppea2022013, excerpts on creditor consent, coordination, PCS, and RST financial architecture*

### 87.      The proposed financial structure envisages adequate  financial buffers up-front, with

### ppea2022013 - 87.      The proposed financial structure envisages adequate  financial buffers up-front, with

### Financial structure and reserve buffers
- Gross reserves are initially funded through upfront contributions to the RA and long-term deposits (principal claims) in the DA.
- Net reserves, defined as gross reserves net of contributors’ claims on the DA, are initially modest but are expected to grow steadily funded by:
  - lending margins and service charges income;
  - excess investment income in the DA (net of SDRi paid to contributors);
  - investment income of the RA, net of administrative costs.
- The adequacy of reserves would be reviewed periodically together with the interest and charges’ structure, with a view to ensuring an adequate, but not excessive, degree of reserve coverage.

### Contribution packages, amounts, and maturities
- Each LA contributor signs a Contribution Package with three parts: the loan account contribution (borrowing agreement); an RA contribution; and a DA contribution.
- Contributions to the RA and DA would be 2 percent and 20 percent, respectively, of a contributor’s commitment to the LA at a minimum.
- DA contributions would have a uniform pre-specified maturity date, i.e., 20 years after the end of the agreed loan drawdown period when all LA claims are scheduled to have been repaid, irrespective of when final repayments under individual borrowing agreements take place.
- At DA maturity, the principal value of a DA contribution is returned to the respective contributor.
- Any excess investment returns attributed to the DA contribution would be transferred to the RA and counted as a contribution of the contributor to that account.
- The RA contribution and DA net investment income would remain in the RST pending distribution to contributors.
- At liquidation of the RST, following repayment of all LA claims and the repayment of the DA principal contributions and the associated transfer of excess investment income to the RA, each contributor would receive its calculated share in the total assets of the RA.

### Standalone contributions
- The Trust may receive “standalone” contributions to the RA and/or the DA unrelated to LA contributions.
- Standalone RA and DA contributions would bolster reserves at the outset and raise Trust income from investments.
- Standalone contributions to the LA (without RA and DA contributions) would increase the risk exposure of reserves and deposits from other contributors.
- Standalone RA and DA contributions would have a fixed maturity, guided by an investment duration consistent with reliably strengthening RST reserve accumulation; staff considers that such contributions should normally have a maturity of 10 years.
- Standalone RA and DA contributions bear the same risks within the RST as RA/DA contributions from a Contribution Package.

### Reserve-asset character of contributor claims: overview
- Many potential contributors prefer or require that their claims on the Loan and Deposit Account of the RST qualify as international reserves.
- Key reserve asset requirements: readily available for use in case of a BoP or reserve need (liquid) and generally high quality (low credit risk).
- Under the proposed architecture:
  - LA and DA claims would have the necessary characteristics of reserve assets.
  - RA contributions would not qualify as reserve assets.

### LA claims: asset quality and liquidity
- Asset quality of outstanding loan claims on the LA ensured by a multilayered credit risk management framework involving three pillars:
  1. policy safeguards (including requiring an accompanying UCT-program, conditionality, and RST access policies) to ensure borrowers have the capacity to service their debt;
  2. financial buffers in the RA and DA to protect contributors’ claims on the LA against potential arrears or credit losses;
  3. a supportive multilateral context (e.g., a cooperative arrears framework, a diversified borrower base, and envisaged de facto PCS).
- Liquidity of contributors’ claims on the LA ensured by an encashment regime:
  - Encashment regime stipulated in the RST instrument and incorporated into loan agreements (all LA contributors would have to allow for encashment drawings).
  - Contributors commit to provide access to their borrowing agreements for drawings in the event another contributor experiences a BoP need and requests early repayment of its loan claim.
  - Staff would manage undrawn commitments to preserve a buffer for possible encashment requests, parallel to the practice in the PRGT.
  - A lender encashing its RST loan resources would commit to again finance calls for drawings under its loan agreement once it no longer has a BoP need.
  - The encashment regime requires a sufficiently large pool of economically strong lenders.

### DA claims: asset quality and liquidity
- Asset quality reliant on an appropriate investment strategy:
  - DA assets invested in high-quality investment grade fixed-income instruments with limited risks to principal value and in line with general practices for investing reserves.
  - Generating returns above the SDRi will entail a certain degree of investment risk, especially over the short-term; short-term transient losses from mark-to-market volatility could arise but can be tolerated given medium-term resilience expectations.
  - Comprehensive policy safeguards, an adequately funded RA, and a supportive multilateral context (including de facto PCS) would mitigate risks to the value of claims on the DA.
  - The value of contributors’ claims on the DA (deposit principal and attributed cumulative investment earnings net of SDRi remuneration) would be assessed and reported at regular intervals.
- Liquidity ensured by investing DA deposit resources in high-quality instruments with sufficient liquidity to allow for encashment of individual contributors’ claims when they experience a BoP/reserve need.
  - A contributor encashing their claim on the DA would commit to reconstituting its deposit once it no longer has a BoP need.

### Investment strategy
- Investment assets in the DA and RA have a dual role: generating income for RST operations and providing security for RST loans.
- Main component: short duration fixed-income (SDFI) strategy; plus a relatively small liquidity component set aside in deposits for short-term operational cash requirements.
- SDFI component envisaged similar to the IMF’s Fixed-Income Subaccount (FI) strategy:
  - Objective: produce returns in excess of the three-month SDR interest rate (SDRi) by an average of around 50 basis points, while minimizing the frequency and extent of negative returns and underperformance over an investment horizon of three-to-four years.
  - Eligible investments: high-quality investment grade fixed-income instruments such as government and government agency obligations and credit instruments like corporate bonds and asset backed securities.
  - Majority actively managed in short duration diversified fixed-income instruments with external asset managers adjusting risk exposure to duration and credit according to market conditions.
  - The strategy has a proven track record for generating consistent returns in excess of the SDRi and is supported by diversification of risk premia.
- Risk considerations:
  - Market value fluctuations expected; strategy designed to limit excessive volatility and provide sufficient liquidity.
  - The strategy has a relatively high probability of achieving a positive margin above the SDRi over a three-to-four-year horizon with an average expected margin of around 50 basis points over time.
  - Probability of positive margin over shorter periods reduced under stress scenarios (e.g., if interest rates rise faster than anticipated); under such scenarios higher yield levels and an upward sloping curve would benefit returns over time allowing mark-to-market losses to be recovered.
- Operational detail:
  - Overnight cash balances expected to be invested in short-term instruments sponsored by the Fund’s custodian(s) or an affiliate.

### Pooling of investment assets and implications
- Pooling of RST investment assets (RA and DA in one pool) with those of other trusts, in particular the PRGT, would:
  - facilitate timely implementation of the investment strategy;
  - limit investment costs and setup time;
  - allow the RST to benefit from existing PRGT investment arrangements.
- Pooling is common practice among multilateral development banks; pooled investments incur significantly lower investment costs due to economies of scale.
- Pooling would not be expected to have material implications for PRGT contributors or PRGT investment operations.
- Detailed attribution under current record keeping arrangements would ensure shares of each account and contributor are tracked and could be expanded for pooled investments.

### Amendment to PRGT Instrument and consent process
- To enable pooling of RST assets with PRGT assets, an amendment to the PRGT Instrument is proposed, requiring the consent of subsidy account contributors.
  - PRGT Instrument, Section VII, Paragraph 2 currently precludes pooling of investments across trusts and is a protected provision; amending protected provisions requires consent of affected contributors.
  - There are a total of 154 current PRGT subsidy account contributors whose consent would be required to make the proposed amendment effective.
- Proposed consent-seeking process:
  - Following Executive Board approval of the amendment, a communication from the Fund would be sent to contributors to seek their explicit consent within six weeks.
  - Countries that do not wish to consent should notify the Fund in writing within the response window; a dissenting contributor could request back its subsidy contribution.
  - After the first deadline, staff would send a second formal communication requesting a response within a further period of four weeks.
  - If no response is received by the second deadline, the contributor is assumed to have consented to the amendment (lapse of time consent), with staff following up bilaterally to secure responses.
  - It is proposed that the contributor would be given six months after the amendment becomes effective to request the remaining share of its contribution to the PRGT subsidy accounts back if during this period it sent a communication to the Fund objecting to the amendment.
  - Contributors would be given clear communications about this additional six-month period and its implications.
  - If unexpected difficulties arise in securing the expected high level of consents, management could return to the Executive Board prior to the expiration of the second deadline to consider extending the consent period for a further limited time.

*Italic: Source — ppea2022013 (Excerpt provided) — PROPOSAL TO ESTABLISH A RESILIENCE AND SUSTAINABILITY TRUST*

### 99.      The proposed approach,  while new in the context  of PRGT amendments, is legally

### ppea2022013 - 99.      The proposed approach,  while new in the context  of PRGT amendments, is legally

### Legal permissibility and amendment modalities
- The proposed approach is legally permissible as it:
  - "appropriately protects the interests of affected PRGT contributors to have an opportunity to reject a proposed amendment while also taking into account the interests of other contributors and PRGT beneficiaries to have operations continue under an amended instrument."
- The PRGT Instrument is silent on the modalities for consent.
  - "While affirmative consent has been sought in the past, and will continue to be followed as the first step for the proposed amendment, adding a lapse of time element along with strong notice provisions and a significant period within which to request a buyout for creditors that do not respond provides appropriate safeguards to protect creditors’ interests."
- Rationale and safeguards:
  - "The underlying rationale of the amendment process for protected provisions is that a contributor can request its resources back if it does not consent to an amendment; the creditor does not have a veto over the amendment process."
  - Lapse of time element prevents individual contributors from vetoing amendments by non-response.
  - Contributors that do not respond within the deadlines are given an additional six months after the amendment has become effective to request their contribution back, providing a final opportunity to object and request repayment.
- Precedents and special cases:
  - No communication would be sent to any member with government recognition issues.
  - The approach was applied in the case of Venezuela in 2019 regarding the Interim Administered Account for Windfall Gold Sales Profits.

*Source: ppea2022013 - 99.      The proposed approach,  while new in the context  of PRGT amendments, is legally permissible.*

### Making the RST operational — conditions and interim steps
- Two general conditions for RST lending operations to commence:
  - (i) "sufficient loan resources in nominal terms to meet initial demand for RST resources in line with the envisaged access policy"
  - (ii) "a sufficiently broad pool of participating RST contributors to ensure encashability of LA claims"
- Operational sequence and interim capabilities:
  - Once the RST is formally established there will be an interim period to:
    - negotiate and make effective contribution agreements,
    - set up new financial systems,
    - engage with members on UCT-quality and RST-supported policies.
  - During the interim, the Trust can "accept and hold RA and DA contributions and enter into loan agreements prior to the start of RST lending operations."
  - Lending operations would commence once the Managing Director notifies the Executive Board that the two conditions are met and "sufficiently robust financial systems and processes are in place."
- Fundraising and contributors:
  - "Fundraising would be initiated immediately after the establishment of the RST."
  - Initial fundraising focus: a group of countries that have historically participated in other Fund financing initiatives and participate in the VTA market (a total of 26 countries).
  - Voluntary contributions from other VTA participants are encouraged to strengthen RST financial capacity given a tight implementation timetable.
- Financial systems and implementation:
  - Staff will implement necessary adjustments to the Fund’s financial systems and processes, leveraging existing Fund systems and expertise.
  - "An assessment of system readiness will precede the commencement of RST lending operations."
  - Implementation is "a significant and resource-intensive undertaking" with emphasis on safeguarding RST financial resources.

*Source: ppea2022013 - 99.      The proposed approach,  while new in the context  of PRGT amendments, is legally permissible.*

### Demand projections and financing scenarios (Section VI)
- Baseline demand projection:
  - "Demand for RST loans is estimated at around SDR 22 billion (US$31 billion) under a baseline scenario."
  - Baseline grounded on proposed income-based eligibility and sample of countries with a UCT-quality Fund-supported program in the past 10 years (70 countries of a total of 143 eligible countries).
  - Baseline assumption: "individual access would be 100 percent of quota for most countries, subject to a maximum nominal cap of SDR 1 billion."
- Composition of baseline demand:
  - "Just under half of the 70 RST borrowers would be non-blend PRGT eligible countries (Group A)"
  - "about one-fifth would be presumed blenders and non-PRGT eligible small states with income below 10 times the IDA operational income cutoff (Group B)"
  - "over one-third would be non-PRGT eligible MICs and higher-income small states (Group C)"
  - In absolute terms: "about SDR 10 billion of baseline demand would come from Groups A and B, and about SDR 12 billion from Group C."
- Uncertainty and alternative scenarios:
  - Sources of uncertainty: number of countries seeking support, economic/quota size, eligibility and qualification requirements, individual access levels, RST access policy changes.
  - High demand scenario: "25 percent above the baseline (SDR 27.4 billion)"
  - Low demand scenario: "25 percent below the baseline (SDR 16.5 billion)"
- Survey evidence and near-term interest:
  - Based on 93 responses, "73 countries (of which 43 are PRGT eligible countries) have expressed some form of interest in accessing the RST with 15 being small states."
  - Countries' interests: "climate change (69 countries) and pandemic preparedness (64 countries)."
  - "Most countries are interested in accessing the RST to support reforms targeting climate change (69 countries) and pandemic preparedness (64 countries)."
  - Timing: Of 73 interested respondents, "39 expressed interest in accessing the RST once it is operational (late 2022), with another 29 preferring 'whenever the need for a traditional IMF program arises'."
  - Assuming access of 100 percent of quota for most countries and an SDR 1 billion cap, "the total resources needed to meet the near-term demand of interested countries would be around SDR 21 billion, with around SDR 11.7 billion allocated to group C countries."
- Financial model and resource needs:
  - Model assumptions: encashment buffer of 20 percent (as in the PRGT), implying need to secure "a total of SDR 27 billion in voluntary loan contributions."
  - Contributors would include:
    - "an upfront reserve injection (in SDRs or currency) of 2 percent"
    - "an upfront long-term deposit of 20 percent relative to their loan commitments"
  - Based on baseline demand estimate, "the RST would need about SDR 33 billion in total resources to be provided in its first five years."
  - This would provide: "an initial RA balance of SDR 0.54 billion, and a starting DA balance of SDR 5.4 billion."
- Reserves accumulation and coverage:
  - Gross and net reserves trajectory:
    - Gross reserves increase "from SDR 6.0 billion to SDR 7.4 billion"
    - Net reserves quadruple "from SDR 0.54 billion to SDR 2.0 billion"
  - By the time loan amortization starts, gross reserves expected to cover "at least 35 percent of credit outstanding (between years 11 and 25), and at least 3 times annual debt service to loan resource contributors."
  - Net reserves would cover "at least 10 percent of credit outstanding and almost one year of debt service over the same period."
- Stress tests and sensitivities:
  - Stress tests considered: lower investment returns, temporary arrears, permanent credit losses, encashment, and combination of adverse events.
  - Additional sensitivity analysis: lower borrowing rates, defaults by large borrowers, and higher demand.
  - Worst scenarios: combined shock and simultaneous defaults by two of the largest borrowers.
  - Findings:
    - "It is highly unlikely that tapping the principal value of the DA would become necessary."
    - Under the combination of adverse events, minimum gross reserves during the repayment period remain "above 32 percent of credit outstanding, and over 2.5 times of annual debt service to loan contributors."
    - Minimum level of net reserves during the repayment period would be "SDR 1.5 billion, enough to cover 71 percent of annual debt service and 7 percent of credit outstanding."

*Source: ppea2022013 - 99.      The proposed approach,  while new in the context  of PRGT amendments, is legally permissible.*

### Voluntary Trading Arrangements (VTAs) and SDR market implications (Section VII)
- Importance:
  - "A smooth functioning of the voluntary SDR trading market will be critical for effective SDR channeling through the RST."
  - VTAs have supported SDR liquidity "for over thirty years."
- Factors determining VTA impact:
  - Total amount of SDRs channeled to the RST:
    - Staff initial assessment: "total SDR channeling to the RST could be about SDR 33 billion, assuming all projected contributions are made in SDRs."
    - Contributions can also be made in freely usable currencies, which "would not impact the voluntary SDR market."
  - SDRs converted as a result of lending to borrowers:
    - Baseline projections assume about "SDR -5 billion in RST lending per year starting in late 2022" (amounts and timing subject to considerable uncertainty).
    - Given the pass-through nature of RST borrowing and lending and linkage to Fund-supported programs, impact on VTAs would be gradual as the Trust draws on lenders' loan commitments to finance disbursements.
  - Channeling of SDR for investment purposes:
    - Channeling to the RST Deposit Account would have an early impact because those SDRs "would need to be converted into currencies for investment purposes."
    - These amounts could be "around SDR 5 billion during or shortly after the envisaged fundraising phase."
    - Result: an active period of VTA exchanges as the Deposit Account is initially funded.
- Efforts to expand and strengthen the voluntary market (Box 4):
  - Two-pronged approach initiated in late-Spring 2021:
    - (i) engagement with potential new VTA participants (twenty-three members) with strong external positions and no VTA,
    - (ii) requesting existing VTA participants to provide additional operational flexibility (transactional limits, trading currencies, notification periods).
  - Progress as of mid-March 2022:
    - "six new VTAs have been agreed and become effective, increasing the number of VTA participants from thirty-two to thirty-eight."
    - New participants—Algeria, Brazil, Estonia (Republic of), Lithuania (Republic of), Oman, and Singapore—together with one other prospective participant (Luxembourg) in advanced stages of completing domestic procedures, "would add about SDR 10 billion to the absorptive capacity of the voluntary market."
    - Many participants scaled up transactional limits and a few reduced notification period requirements; some provided additional currency flexibility under their VTAs.
  - Staff will continue engagement and "calls for additional members to sign VTAs."
- Historical VTA exchanges:
  - Of the SDR lending to the PRGT since 2018, "about half of the SDRs drawn were exchanged through the VTA's by the PRGT and disbursed in currencies to the borrowers."
  - Of loans disbursed in SDRs, "a small portion was exchanged by the borrowers into currencies through the VTAs while the balances were retained by borrowers in SDRs."

*Source: ppea2022013 - 99.      The proposed approach,  while new in the context  of PRGT amendments, is legally permissible.*

### 112.      It is expected  that SDRs channeled to the RST could be absorbed by a well-functioning

### ppea2022013 - 112.

### Absorptive capacity and channeling of SDRs
- The scaled up absorptive capacity of the voluntary market following the General Allocation stands at about SDR 242 billion as at end-February 2022.
- It is expected that SDRs channeled to the RST could be absorbed by a well-functioning voluntary market.
- The estimated channeling of SDRs to the RST is SDR 33 billion; the scaled up absorptive capacity is expected to be sufficient for future exchanges of SDRs should the full amount (SDR 33 billion) be converted through the VTAs.

### Administrative expenses: implementation, steady-state costs, and funding
- Implementation will result in new gross demands for staff resources and additional gross budgetary resources in the “steady state.” The RST would be a separate entity from the GRA and PRGT.
- Set-up costs include: development of final RST design, fundraising, IT system configuration, and establishment of policies and guidance. Related costs were funded in FY22 through reprioritization and extensive staff overtime and will be funded in FY23 with a combination of temporary and permanent resources allocated to departments.
- Recurring “steady state” cost areas:
  - Trust management: execution of financial transactions under the Trust, reporting (including preparation of financial statements), external audit, resource mobilization and management, investment activity, financial and operational risk management, system support, periodic and ad-hoc reviews of RST lending policies and finances, and review/adjustments to policies related to financial terms and safeguards.
  - Operations: country program design and review, economic policy analysis and supporting analytical work in collaboration with the World Bank and other organizations, policy discussions with authorities, monitoring of program implementation (including assessments of reform target completion), and periodic policy review beyond financial terms and safeguards.
- Synergies: Linkage of RST access to UCT-quality programs would allow cost synergies by drawing on the existing resource base and avoiding duplication (e.g., mission travel, program documentation, country review process, and Board approvals).
- Medium-term incremental cost estimates (based on demand outlook and assumption of 33 active RSF programs on average each year):
  - Incremental direct costs for Operations: about $9-10 million, or 27-29 FTEs annually.
  - Cost of Trust Management (financial, policy, legal review to operate and safeguard the Trust): $5-6 million, or 16-18 FTEs annually.
  - Annual fully-loaded gross costs of the RST could be about $18 million (preliminary estimation using direct cost estimates and assuming broadly similar ratios of incremental overhead to direct costs as other expenditures).
- Budget impact and funding modalities:
  - Staff proposes a management fee for trust management activities, similar to that in place for CD-related trust funds. The fee would be categorized as receipts in the budget and affect the gross administrative budget but not the net administrative budget.
  - The fee would be initially set at a fixed scale, linked to estimated cost for trust management activities in relevant departments (FIN, LEG, and SPR) and drawn from the Reserve Account.
  - Estimates for actual trust management-related costs would be reported annually as part of the budget outturn report, with scale and structure of the management fee reviewed at that time.
  - Operational costs will be funded through the regular budget process through reprioritization, with the largest impact expected in area departments; individual departments would receive adequate incremental resources as needed.
  - The GRA would be reimbursed annually for the cost of administering the RST based on reasonable estimates of gross incremental costs to ensure cost recovery, consistent with the RST’s design as a self-sufficient trust. The scale of reimbursement to income would be calculated to exclude costs covered by the management fee.
  - Total costs administering the RST will be drawn from the Reserve Account for: a) budget receipt covering trust management; and b) income reimbursement covering all other costs (operations).
  - The annual income paper would report staff estimates of RST costs to be reimbursed to income. Decisions on annual reimbursements would be taken by the Board in the context of the Fund’s annual income paper starting from FY24.

### Enterprise risks and mitigation measures
- Enterprise risks span four key areas: business operations, finances, human resources, and the Fund’s reputation.
- Business risks and mitigation:
  - Risk: RST lending could duplicate other IFIs’ work.
    - Mitigation: Establish collaboration principles with other IFIs on specific qualifying structural challenges. Maintain the focus of RST lending on macro policies, not projects.
  - Risk: Greater focus outside Fund’s core areas could challenge ability to develop RSF programs, monitor conditionality, and cause mission creep.
    - Mitigation: Establish collaboration principles with other IFIs; begin with a limited set of qualifying structural challenges to ensure successful early operations.
  - Risk: Excessive frontloaded access under the RST could delay reforms agreed under the UCT program.
    - Mitigation: Limit disbursements to 50 percent of quota, guide access by a norm of 75 percent of quota, and limit overall access to 150 percent of quota or SDR 1 billion, whatever is smaller. RSF disbursements only occur at successful completion of a subsequent UCT program review.
- Financial risks and mitigation:
  - Risks: credit, liquidity, and investment risks; repayment capacity erosion from large non-restructurable debt or a sharp increase in the SDRi and global borrowing rates; cross subsidization risk if demand dominated by Group A countries; pressure on VTA market from high demand; severe market shock depleting RST Reserve Account investments.
  - Mitigations:
    - Maintain strong safeguards on debt sustainability, debt composition, and capacity to repay; rely on and maintain strong buffers in the financial architecture.
    - Conduct an interest rate review if the SDRi rises above an average of 1½ percent in any 12-month period or for any other unexpected event that could undermine the Trust’s financial health.
    - Conduct targeted outreach with potential beneficiary countries to boost awareness; wide eligibility perimeter and broad range of qualifying concurrent UCT programs to promote diverse borrower group; review policies and the margin and fee structure at the 3-year mark.
    - Ensure the absorptive capacity of the VTA market has been scaled up since the general SDR allocation; ensure potential RST contributors have VTAs in place.
    - Conduct stress tests and ensure projected resources in the Reserve Account would comfortably absorb any required provisions for credit losses under baseline and stress simulations; build up reserves before repayments begin.
- Human resource risks and mitigation:
  - Risk: Inadequate resourcing could strain over-extended staff; skill upgrading in emerging areas may not be rapid enough.
  - Mitigation: Develop detailed cost estimates and methodology for capturing relevant costs to ensure adequate resourcing; leverage ongoing investments in internal capacity building; consider staff and corresponding budget augmentation.
- Reputational risks and mitigation:
  - Risks: Low demand amid high expectations; high demand with insufficient contributions; reversal of RSF-supported policies after implementation.
  - Mitigations:
    - Low demand: Explore early potential beneficiaries, focusing on UCT programs in pace when RST becomes operational; conduct targeted outreach; review policies and experience at 3-year mark.
    - High demand with insufficient contributions: Assess demand based on historical experience and demand surveys; conduct early engagement with potential contributors; access caps to ensure RST resources can be used across many countries; review policies and experience at 3-year mark.
    - Policy reversal: Conduct post-RSF monitoring through Article IV consultations and PFA (where relevant).

### Annex I highlights: proposed RST-eligible members (notes)
- Notes: GNI data based on data current as of October 2021.
- Andorra, San Marino, and Venezuela excluded due to missing GNI data.

*Source: ppea2022013 - 112.*

### Annex II. Table 2. Concessionality of Resilience Sustainability Trust and selected IMF/World

### Annex II. Table 2. Concessionality of Resilience Sustainability Trust and selected IMF/World Bank Financing Instruments

### Concessionality estimates and scenarios (table summary)
- Table scope: In percent, unless otherwise indicated; as of February 22, 2022.
- Unified discount rate used: 5 percent.
- Scenarios presented: SDRi = 0.5, SDRi = 1.0, SDRi = 2.0, SDRi = 3.0.
- Lending terms shown in the table (grace period, maturity):
  - IMF ECF (PRGT): Grace period 5.5, Maturity (in years) 10.
  - IMF ECF/EFF blend: Grace period 5.5/4.5, Maturity 10.
  - IMF EFF (GRA): Grace period 4.5, Maturity 10.
  - RST Group A: Grace period 10, Maturity 20.
  - RST Group B: Grace period 10, Maturity 20.
  - RST Group C: Grace period 10, Maturity 20.
  - World Bank IDA Regular: Grace period 6, Maturity 38.
  - World Bank IDA Blend: Grace period 5, Maturity 30.
  - IBRD (illustrative Group B): Grace period 10, Maturity 20.

- Concessionality and interest rate outcomes by instrument and SDRi scenario:
  - IMF — ECF (PRGT) (Grace 5.5; Maturity 10):
    - SDRi = 0.5: Interest rate 0.00, Concessionality 32.2
    - SDRi = 1.0: Interest rate 0.00, Concessionality 32.2
    - SDRi = 2.0: Interest rate 0.25, Concessionality 30.6
    - SDRi = 3.0: Interest rate 0.25, Concessionality 30.6
  - IMF — ECF/EFF blend (5.5/4.5; 10):
    - SDRi = 0.5: Interest rate 0.00/1.5, Concessionality 25.1
    - SDRi = 1.0: Interest rate 0.00/2.00, Concessionality 22.7
    - SDRi = 2.0: Interest rate 0.25/3.00, Concessionality 18.3
    - SDRi = 3.0: Interest rate 0.25/4.00, Concessionality 14.3
  - IMF — EFF (GRA) (4.5; 10):
    - SDRi = 0.5: Interest rate 1.50, Concessionality 21.5
    - SDRi = 1.0: Interest rate 2.00, Concessionality 18.0
    - SDRi = 2.0: Interest rate 3.00, Concessionality 12.1
    - SDRi = 3.0: Interest rate 4.00, Concessionality 6.2
  - RST — Group A (10; 20):
    - SDRi = 0.5: Interest rate 1.05, Concessionality 41.1
    - SDRi = 1.0: Interest rate 1.55, Concessionality 35.9
    - SDRi = 2.0: Interest rate 2.25, Concessionality 28.7
    - SDRi = 3.0: Interest rate 2.25, Concessionality 28.7
  - RST — Group B (10; 20):
    - SDRi = 0.5: Interest rate 1.25, Concessionality 39.0
    - SDRi = 1.0: Interest rate 1.75, Concessionality 33.6
    - SDRi = 2.0: Interest rate 2.75, Concessionality 23.3
    - SDRi = 3.0: Interest rate 3.75, Concessionality 13.1
  - RST — Group C (10; 20):
    - SDRi = 0.5: Interest rate 1.45, Concessionality 37.0
    - SDRi = 1.0: Interest rate 1.95, Concessionality 31.3
    - SDRi = 2.0: Interest rate 2.95, Concessionality 21.0
    - SDRi = 3.0: Interest rate 3.95, Concessionality 10.8
  - World Bank — IDA Regular (6; 38):
    - SDRi = 0.5: Interest rate 0.75, Concessionality 53.3
    - SDRi = 1.0: Interest rate 0.75, Concessionality 53.3
    - SDRi = 2.0: Interest rate 0.75, Concessionality 53.3
    - SDRi = 3.0: Interest rate 0.75, Concessionality 53.3
  - World Bank — IDA Blend (5; 30):
    - SDRi = 0.5: Interest rate 2.00, Concessionality 35.2
    - SDRi = 1.0: Interest rate 2.00, Concessionality 35.2
    - SDRi = 2.0: Interest rate 2.00, Concessionality 35.2
    - SDRi = 3.0: Interest rate 2.00, Concessionality 35.2
  - World Bank — IBRD (illustrative Group B, 10; 20):
    - SDRi = 0.5: Interest rate 1.10, Concessionality 46.0
    - SDRi = 1.0: Interest rate 1.93, Concessionality 31.8
    - SDRi = 2.0: Interest rate 2.93, Concessionality 21.5
    - SDRi = 3.0: Interest rate 3.93, Concessionality 11.2

### Key assumptions and methodological notes (preserve exact wording/values)
- Source: staff estimates.
- Note 1: A unified discount rate of 5 percent is used to calculate the concessionality of individual loans.
- Note 2: Current interest rates.
- Note 3: Concessionality calculations for IMF and IBRD lending are based on the assumed SDR and LIBOR rates remaining constant for the life of the IMF or IBRD loan, given the variable rate nature of the loans. According to the PRGT interest rate mechanism last approved by the IMF's Executive Board in July 202 , for SDR rate < 2, ECF rate is zero; while for 2 ≤ SDR rate ≤  , ECF interest rate equals 0.25 percent. For EFF, interest rate is SDRi plus 100 basis points, surcharge is 200 basis points for outstanding credits above 187.5 percent of quota (zero for outstanding credits below 187.5 percent of quota) assuming timely repayment, commitment fee is zero assuming the amount is fully drawn, and service charge of 0.5 percent on amount drawn. For IBRD loans' current rate is 6-month USD LIBOR as of November 4, 2021, 0.21325 percent, plus respective margins, for future rates assuming LIBOR equals SDRi and, therefore, interest rates equal SDRi plus respective margins. For IDA loans, IDA fixed SDR rates, 0.75 for regular loans and loans to small economies and 2 percent for blended loans, have remained unchanged since their introduction; IDA’s financial planning is premised on holding these rates unchanged.
- Note 4: EFF for outstanding credit < 187.5 percent of quota.
- Note 5: Concessionality is a weighted average of grant elements: 1/3 ECF and 2/3 EFF.
- Note 6: For RST Group A, interest rate SDRi plus 55 basis points is capped at 2.25 percent, i.e., at SDRi = 2 percent and SDRi = 3 percent, the interest rate remains at 2.25 percent; service charge is zero percent. For RST Group B and C, interest rate is SDRi plus 75 basis points and 95 basis points and service charges 0.25 percent and 0.50 percent, respectively.
- Note 7: IDA loans comprise three groups of lending with different terms: (i) regular loans as illustrated in the table, (ii) loans for small economies, and (iii) loans for blending countries, also illustrated, with concessionality of 53.26 percent, 60.62 percent, and 35.18 percent, respectively. IDA also offers grants to some of its client countries.
- Note 8: There are four IBRD country groups (A, B, C, and D) with different margins added to 6-month USD SOFR; repayment terms are flexible and must fall within the policy limits of 35 years maximum final maturity (including the grace period) and 20 years maximum average repayment maturity. For illustrative purposes, table shows estimates for loans to IBRD Group B with 20 years maturity including 10 years of grace period and two equal repayments per annum; the front-end fee is 0.25 percent, while commitment fee is assumed zero. Margin for Group B is 1.35 percent, while for Groups A, C, and D the respective margins are 1.15 percent, 1.55 percent, and 1.80 percent.

### Annex III — Broad Principles for Bank-Fund Coordination in RST Operations (major points)
- RST focus and coordination rationale:
  - RST supports policy reforms addressing long-term structural challenges that pose risks to eligible members’ prospective BoP stability (e.g., climate change and pandemic preparedness).
  - RST lending operations would benefit from close coordination with the World Bank and potentially other MDBs given their expertise relevant to RST objectives.
- Guiding principles:
  - RST measures informed and expected to be consistent with country diagnostics developed in both institutions. On climate change, the Bank’s Country Climate and Development Reports (CCDR), if available, will be a critical input, complemented by the Fund’s Climate Change Policy Assessments (CCPAs) and potential successor CMAPs.
  - RST operations will focus on areas of Fund expertise, complemented by Bank expertise as needed. Governance: RST is Fund-administered; all RST conditionality measures are designed, monitored, and assessed by the Fund.
  - The purpose of RST lending is to support structural macro policy reforms that enhance long-term resilience and sustainability to improve prospective BOP stability; the Bank leads on development prospects and related policies and investments.
- Possible key steps for coordination (five key areas): (i) Diagnostics; (ii) Policy priorities; (iii) Conditionality; (iv) Implementation supervision; (v) Program documentation.
- Diagnostics:
  - Fund staff will draw on country diagnostics (including CCDRs and CMAPs) to assess the need for an RST-supported program. CCDRs are being rolled out in over 30 countries in FY22.
  - Fund surveillance products (Article IV, Selected Issues Papers) and national climate plans or Disaster Resilience Strategies would inform RST policy design.
- Policy priorities and conditionality:
  - Fund RST teams will coordinate with Bank counterparts on policy actions to promote complementarity with Bank-supported programs. Not all policy priorities become RST conditionality; some could be MEFP commitments in concurrent UCT-quality programs.
  - RST “reform measures” would satisfy the Fund’s Guidelines on Conditionality. Fund Executive Board establishes RST conditionality and assesses whether conditions are met, drawing on Bank advice in Bank expertise areas.
- Board documentation and assessment letters:
  - Fund staff will document coordination with the Bank in staff reports and MEFPs; Bank staff will provide an assessment letter on authorities’ climate-related policies. Timely provision of assessment letters is important to avoid delays in RST disbursements.
- Modalities/process of engagement — expected actions by Fund staff:
  - Share Fund diagnostic or analytical work (e.g., CMAP, Selected Issues papers) with Bank staff.
  - Engage early with Bank staff on RST reforms and incorporate outcomes into the RST/UCT arrangement Policy Note.
  - Draw on CCDR and Fund CD for climate-related RST reform measures.
  - Periodically share an advance calendar of expected RST operations and circulate RST-related background and conditionality sections of key documents to Bank staff with a 5-day turn around for comments.
  - Invite Bank staff to comment on the Policy Note and/or attend unified or separate Policy Consultation Meetings; participate in each other’s mission meetings on RST-related issues where feasible.
- Expected actions by Bank staff:
  - Engage Fund counterparts in CCDR preparation, particularly in macro-fiscal areas.
  - Engage early on design of RST-supported policies, provide comments on Fund drafts, join mission meetings as appropriate, and prepare Assessment Letters upon request in line with agreed timelines.

### Annex IV — Financial Architecture of the RST (key features)
- High-level design:
  - RST is a loan-based trust administered by the IMF, with a financial structure broadly similar to that of the PRGT.
  - Resources mobilized from voluntary contributions from members, including those wishing to channel SDRs for benefit of low-income and vulnerable middle-income members.
  - On-lending via the Loan Account (LA) at a moderate interest rate to cover funding and administrative costs and contribute to reserve build-up.
  - Accounts: Reserve Account (RA) and Deposit Account (DA) to build reserves and backstop the RA in unforeseen extreme tail risk events.
- Target size and drawdown/maturity rules:
  - Overall size of the Trust is initially targeted at SDR 33 billion.
  - Pre-specified, uniform drawdown period for loan disbursements through November 30, 2030.
  - Maximum maturity of 20 years for loan repayments, which start 10½ years after a disbursement.
  - Footnote: This is the latest date on which the Trust can draw on committed loan resources. Drawings for encashment purposes can extend up to 20 years after the end of the drawdown period.
- Reserve strategy:
  - Gross reserves initially funded through modest upfront contributions to the RA and long-term deposits to the DA.
  - Net reserves (gross reserves net of contributors’ long-term deposit claims on the DA) expected to grow over time through lending and investment income, net of RST administrative costs, so reserves are expected to be significantly higher by the time RST loan repayments come due.
  - Level of reserves to be reviewed periodically together with interest rate and service charge structure.
- Mobilization rounds and contributor flexibility:
  - A broad-based initial loan mobilization round would aim to secure resource commitments sufficient to meet expected demand until 2030.
  - While current architecture assumes a one-time resource mobilization, resources could be mobilized periodically based on Board decision, availability of Trust resources, and expected demand.
  - Contributors free to decide participation in any loan mobilization round and size of their commitment.
- Contributions — general considerations:
  - RST Instrument would set key financing terms and conditions for contributions including contributors’ rights and obligations; individual contribution agreements would reflect these terms and specify contribution amounts.
  - Some tailoring of individual agreements possible (e.g., media of payment) but key terms uniform across contributors.
  - Managing Director authorized to enter into individual contribution agreements; once finalized, agreements circulated to the Executive Board for information.

*Source: Annex II–IV, Proposal to Establish a Resilience and Sustainability Trust (IMF staff paper; figures and notes as presented).*

### 5.      Each LA contributor would sign a “Contribution Package” with three parts—an LA

### 5.      Each LA contributor would sign a “Contribution Package” with three parts—an LA contribution (borrowing agreement); an RA contribution; and a DA contribution.

### Contribution package structure and minimums
- Each contributor’s “Contribution Package” comprises three parts: an LA contribution (borrowing agreement); an RA contribution; and a DA contribution.
- Contributions to the RA and DA would be a minimum of 2 percent and 20 percent, respectively, of a contributor’s commitment to the LA.
- Resources committed under a borrowing agreement with the LA are drawn as needed during the pre-specified uniform drawdown period.
- DA and RA contributions are provided to the RST upfront.

### Standalone contributions to RA and DA
- The Trust may receive “standalone” contributions to the RA and the DA unrelated to LA contributions.
- Standalone contributors could be entities unable to make LA contributions but willing to support RA and/or DA.
- Standalone contributions bolster reserves at the outset and raise Trust income from investments, adding to net reserves over time.
- Standalone contributions would have a fixed maturity, with an investment duration consistent with reliably strengthening Trust reserve accumulation; a maturity of 10 years would be preferable.
- Note: these contributions would mature before RST loan repayments are completed and must be taken into account in reviews of RST reserves.

### SDR as unit of account and reporting
- The SDR would be the unit of account for RST financial reporting.
- All commitment of resources to the Loan Account of the RST would be denominated in SDRs, as would be any contributor claims to the LA, RA, and DA.
- SDR denomination of RST claims under borrowing agreements eliminates exchange rate risk as RST loans are SDR denominated.
- SDR denomination ensures uniform upfront contributions to the RA and DA expressed as a fixed percentage of the LA commitment and aligns RST reporting with the GRA and other Fund accounts.

### LA role and funding
- The LA is the RST’s conduit for lending operations, funded by voluntary commitments from contributors.
- Borrowing agreements with contributors would be subject to uniform key financial terms: claims under borrowing agreements would be remunerated at the SDRi, or lower with the agreement of the contributor, and agreements would provide for the same maturity structure as RST lending.
- Loans from the RST to borrowers would be made at the SDRi plus a modest margin (which varies by country grouping); some borrowers also pay a service charge.

### Key financial terms, conditions, and modalities
- Pass-through principle: the RST would draw on borrowing agreements as needed to finance disbursements and would repay lenders according to the RSF repayment schedule; at disbursement time the LA draws on lender(s)’ agreements, credits the LA as RST borrowing, and the LA disburses to borrowing members; repayments flow through the LA.
- Borrowing agreements specify committed LA resources for specified drawdown periods; loans to the RST would not be revolving.
- Resources to the LA can be provided under loan or note purchase agreements; loan claims and notes could be made transferable to other RST contributors, Fund members, and prescribed holders of SDRs.
- RST loan commitments under borrowing agreements and claims resulting from drawings would be SDR denominated; LA commitments must be expressed in SDRs to ensure fixed RA and DA percentage minimums and avoid SDR basket exchange rate fluctuation issues.
- Uniform maximum drawdown period: borrowing agreements provide for a pre-specified uniform drawdown period, i.e., through November 30, 2030. On an exceptional basis, the Managing Director could agree to shorter drawdown periods. All contribution agreements provide for drawings for encashment purposes for as long as RST loan claims remain outstanding. Any extension of the drawdown period or new drawdown period under a new mobilization round would require amendment of the RST Instrument and agreement of individual LA contributors.
- Drawings can be made for the benefit of all RST eligible members; LA contributors have no bilateral relationships with borrowing members and could apply notional earmarking in cases of domestic limitations.
- Proportionate Drawings: Trustee drawings aim for broadly balanced positions of loan resources among contributors over time.
- Media of transactions: drawings may be in SDR or freely usable currency; repayment of principal in SDR or a freely usable currency as specified; interest normally paid in SDRs to the SDR account in the SDR Department unless otherwise agreed.
- Maturity and grace period: RST loans proposed to have a maximum 20-year maturity, with repayment of each disbursement in 20 semiannual instalments starting 10 ½ years after the disbursement. The maturity schedule of claims under LA borrowing agreements would mirror RST loan maturities. Borrowing agreements can provide for shorter, renewable maturities, renewable unilaterally by the Trustee for maximum maturities aligned with RST loan repayment schedules.
- Encashability: borrowing agreements allow early repayment of outstanding claims if a contributor represents that its balance of payments and reserve position justify early repayment and the Trustee agrees; the encashing contributor must reopen its agreement for renewed drawings once its balance of payments improves sufficiently. Borrowing agreements would authorize drawings to fund encashment requests from other contributors.
- Interest rates for lenders’ LA claims: remunerated at the SDRi or lower by agreement. RST borrowers pay SDRi plus a margin differentiated by borrower groups; margin subject to periodic reviews.
  - Initial margin envisaged: 55 basis points for Group A, 75 basis points for Group B, and 95 basis points for Group C.
- Interest on overdue obligations: overdue principal or interest charged interest at the interest rate applicable to the loan claims on which obligations are overdue; the interest rate charge on overdue obligations will be subject to a minimum of the SDRi.
- Service charge: proposed tiered service charge on RST disbursements differentiating among the same three groups:
  - Group A: exempt from service charge.
  - Group B: service charge at 25 basis points.
  - Group C: service charge at 50 basis points.
- Net interest and service charge flows:
  - LA receives interest income from borrowers (SDRi plus margin) and makes interest payments to LA contributors (SDRi) whose agreements were drawn upon.
  - Margin income and service charges intended to cover RST administrative costs; margin income expected to contribute to build-up of RST reserves.
  - Margin income promptly transferred from the LA to the RA following the end of each financial quarter.
  - Service charges credited directly to the RA when paid by borrowers on the disbursement date of each loan.

### Interest rate reviews and potential cap
- Interest rate reviews undertaken as part of periodic reviews of the RST (normally at three-year intervals) or earlier if circumstances warrant.
- Initial margins and service charges established when the RST Instrument is approved.
- Staff view: earlier review should be triggered if the average SDRi were to rise above 1.5 percent in any 12-month period and if financial market indicators signal that the SDRi is not expected to decline below 1.5 percent within the coming quarters.
- An interest rate review could also be triggered by other unexpected events affecting RST financial sustainability.
- Considerations guiding reviews include adequacy of RST reserves, coverage of administrative costs, and appropriateness of financial terms to borrowers.
- An interest rate cap could be considered at a future review. A cap for LICs would imply a negative margin once the SDRi rises above a certain level, with foregone interest income funded from the RA; such a cap would only be established following an assessment of adequacy of RST net reserves over the lifecycle of the RST and would require prior consultation with LA contributors.

### Encashment framework and borrower arrears
- All borrowing agreements would authorize the Trustee to make drawings to fund early repayment of claims under borrowing agreements of other contributors in case of encashment requests; this encashability is a key pre-condition to ensure reserve asset status of LA claims.
- Many potential contributors indicated the need for their claims on the LA to have reserve asset status; the RST instrument requires borrowing agreements to authorize Trustee drawings to fund encashment requests by other contributors irrespective of whether a contributor wants encashability for its own claims.
- When drawing to finance RST lending, the Trust would leave a buffer for possible encashment requests and consider this when mobilizing LA resources.
- Borrowing agreements remain open for encashment calls for as long as RST loan claims remain outstanding (i.e., through November 30, 2050, assuming drawdown through November 30, 2030 and maximum 20-year RST loan maturities).
- An encashing contributor must reopen its agreement for drawings as soon as its balance of payments/reserve position improves sufficiently (evidenced by inclusion in the Financial Transactions Plan for transfers); undrawn portions become available for drawings, including encashment calls, with the objective of broadly balanced positions among contributors over time.

### Use of RA and DA in arrears and reserves hierarchy
- In the event of overdue obligations by RST borrowers, claims under LA contribution agreements would be repaid with RA resources according to the original maturity schedule for interest and principal payments.
- Only if an extreme tail risk event depletes the RA would DA resources be used as a backstop.
- Upon clearance of arrears, resulting payments to the RST would be directed to the DA and RA, with repayments first allocated to the DA for any amounts of DA principal used to repay LA contributors.
- No rescheduling of RST loans by the Trustee will be permitted.
- Interest at the SDRi plus the relevant margin charged on any overdue interest or principal from the date obligation becomes overdue.

### Credit quality assessment and provisioning
- The RST’s accounting policies will include a framework for assessing the credit quality of outstanding RST loans, which will determine provisions for credit losses, if any.
- Credit quality assessment grounded in the nature of RST lending and the IMF’s institutional status as Trustee, including credit risk management practices, interest on overdue repayments, and envisaged de facto PCS of the RST.
- These factors are expected to significantly reduce the likelihood of the RST recognizing a provision for credit losses in its financial statements.

*Source: Proposal to Establish a Resilience and Sustainability Trust (excerpt).*

### 16.      The RA is the RST’s principal financial buffer to manage financial risks and protect

### ppea2022013 - 16.      The RA is the RST’s principal financial buffer to manage financial risks and protect

### Reserve Account (RA): purpose and core features
- Purpose:
  - Principal financial buffer to manage financial risks and protect contributors’ claims on the RST.
  - To cover the RST’s administrative costs.
  - Available to fund temporary interest and principal arrears, and to absorb provisions for credit losses and potential ultimate credit losses (write-offs).
  - To cover costs of administering the RST through reimbursement of the GRA.
- Resources of the RA consist of:
  - (i) upfront unremunerated contributions by contributors in proportion (a minimum of two percent) to their respective LA commitments;
  - (ii) any additional standalone unremunerated contributions to the RA unrelated to an LA contribution;
  - (iii) transfers of net interest income from the LA;
  - (iv) service charge income paid by borrowers of RST loans;
  - (v) investment earnings on RA balances;
  - (vi) transfers of excess investment earnings from the DA; and
  - (vii) transfers of payments of overdue principal or interest from the LA.
- Minimum principal contribution:
  - The minimum RA principal contribution is 2 percent of total LA commitments; contributors may provide higher contributions in excess of the 2 percent minimum.
- Standalone RA contributions:
  - Authorized for contributors generally not in a position to contribute to the LA.
  - Standalone contributions have a fixed maturity with a preferred maturity of 10 years.
  - Standalone contributions are subject to the same risk of principal loss as any other RA contribution while outstanding.
- No reserve asset status:
  - RA contributions are not encashable and do not count as international reserve assets of contributors.
  - RA contributors do not have the right to request early repayment of their contributions in the event of a balance of payments need.
- Principal buffer and use sequence:
  - RA resources are used first in case of overdue obligations on RST loans—transfers to the LA to ensure continued payments of interest and principal under LA borrowing agreements.
  - If both RA and DA principal have been used (in extreme tail risk events), payments from arrears clearance are first directed to the DA until any principal amounts used from the DA have been replenished.
  - Any provisioning for accounting purposes (e.g., IFRS 9) would be first charged against the LA, and corresponding amounts would be transferred from the RA.
- Administrative expenses:
  - RA resources would be used to cover administrative expenses.
  - Margin and service charge income are expected to more than cover administrative expenses.
- Investment authority:
  - The Managing Director of the Trust would be authorized to invest RA assets pending their use, in accordance with guidelines approved by the Executive Board.
- Distribution mechanism and contributor share:
  - Each contributor’s calculated share in the RA is based on:
    - (i) its original principal contribution;
    - (ii) attributed net investment earnings/losses on calculated share;
    - (iii) any transfers of excess investment returns from the DA attributed to its contribution following the repayment of the DA principal contribution;
    - (iv) amounts related to repayment of overdue obligations where payments to LA contributors were funded with DA investment earnings, attributed among RA contributors based on their share in the DA; and
    - (v) use of RA resources to make payments on overdue obligations to LA contributors, and payment of administrative expenses, proportional to each contributor’s overall share.
- Terminal distribution:
  - At liquidation of the RST, following repayment of all LA claims and maturity of the DA and transfer of excess investment income to the RA, each contributor receives its calculated share in the total assets of the RA.
  - Contributors may direct their share in the terminal distribution to other IMF-administered Trusts.
- Early distribution:
  - The Trustee may decide on an early partial distribution of RA resources to all contributors, in proportion to their share, if coverage from net reserves of remaining RST loans justifies it.
  - Such decision is based on assessment of RA resources and excess investment returns in the DA (the net reserves of the RST).
  - Contributors may direct their share in an early distribution to other IMF-administered Trusts or their own accounts.

### Deposit Account (DA): purpose and core features
- Purpose:
  - To generate additional reserves for the Trust and minimize residual risks to contributors’ claims on the RST.
  - (i) Bolster gross reserves upfront, including in early years when RA balances are modest.
  - (ii) Invest assets to generate investment earnings above the SDRi over time to build sizeable additional net reserves before borrowers start repaying RST loans.
  - (iii) Act as a backstop to the RA in unforeseen extreme tail risk events, providing an orderly mechanism for pooling residual risks.
- Funding:
  - Funded upfront by long-term deposits denominated in SDR from LA contributors in proportion to their LA commitments.
  - Each LA contributor is expected to make a DA deposit equivalent to at least 20 percent of its LA commitment; higher percentages permitted.
- Standalone DA contributions:
  - Authorized for members that are not LA contributors.
  - Standalone contributions have a fixed maturity with a preferred maturity of 10 years.
  - Remuneration for standalone DA contributions could not exceed the SDRi.
- Remuneration:
  - Lenders’ claims on the DA remunerated at the SDRi (or lower), with interest paid following the end of each quarter.
- Investment of DA resources:
  - Invested in liquid, high-quality assets aiming to generate investment income in excess of the SDRi to build additional net reserves while allowing for encashment.
  - Managing Director of the Trust authorized to invest DA assets under Executive Board–approved guidelines.
- DA as backstop to the RA:
  - DA resources used for credit protection only in extreme tail risk scenarios where RA resources are insufficient.
  - If RA resources are exhausted, DA resources could be used, first using all excess investment returns before using DA principal.
  - When RST borrowers clear overdue obligations, payments would first be allocated to the DA; once DA principal is fully replenished, clearance is directed to the RA.
  - Use of excess returns attributed to each DA contributor according to its share in total excess returns, with a corresponding addition to its RA contribution.
  - Use of principal, if necessary, allocated according to share in total DA principal claims, with replenishment allocated on the same basis.
  - In provisioning events, non-cash transfers from the DA to the LA would be made to ensure the LA is made whole; provisions can be reversed if credit quality improves, reversing non-cash transfers.
  - In attributing losses for encashment of DA principal, provisions allocated first to excess investment earnings, then to DA principal.
  - Given the RST’s multilayered credit risk management framework and envisaged de facto PCS, likelihood of DA backstop being applied is expected to be extremely low.
- Encashability and encashment operations:
  - DA contributors have the right to request early repayment of their DA principal prior to maturity, net of any attributed losses or excess investment returns, if the contributor represents that its balance of payments and reserve position justify the early repayment and the Trustee agrees.
  - Any excess investment income attributed to the encashing contributor remains in the DA pending DA maturity or early distribution or activation of DA backstop, at which time it is transferred to the RA as that contributor’s RA contribution.
  - Encashment funded by liquidation of DA assets equivalent to the principal amount of the deposit, net of any attributed losses.
  - Investment earnings attributed to the deposit and retained in the DA would not be returned on encashment; they remain in the DA and continue to accrue.
  - Encashment reduces the amount of a contributor in the account but does not eliminate DA contributor status.
- Reconstitution after encashment:
  - If the member’s balance of payments and reserves position becomes sufficiently strong again (as evidenced by inclusion in the Financial Transaction Plan for use of the Fund’s holdings of its currency in GRA purchase transactions), the contributor would have to reconstitute its deposit in a timely manner for an amount equivalent to the SDR value of the amount received under encashment.
- Reserve asset status:
  - Lenders’ claims on the DA count as their international reserves based on the RST’s risk framework, investment in high-quality assets, and encashability of DA claims.
- Maturity:
  - Maturity of DA contributions based on maximum final maturity of loans funded under the RST resource mobilization round.
  - With a proposed drawdown period through end-November 2030 of the first round and a maximum loan maturity of 20 years, the uniform maturity date of DA contributions in the initial round would be end-November 2050.
  - The uniform date applies even where drawdown period under an individual LA agreement is shorter than end-November 2030.
- Distribution and early distribution of DA principal:
  - At maturity, the principal amount of the original deposit is returned to a creditor, net of any attributed losses; investment returns attributed to the deposit transferred to the RA and counted as the contributor’s RA contribution.
  - Trustee may decide on an early distribution of part or all of DA principal if justified based on net reserve coverage of RST loans on a prudent forward-looking basis.
  - Early reserve distributions are first done from the DA and attributed to principal; if DA principal fully repaid, excess investment earnings attributed to each DA contributor transferred to the RA and attributed to the contributor’s RA share.
- Termination:
  - In liquidation of the Trust, DA contributors receive their principal net of any attributed losses; remaining accumulated DA excess investment earnings transferred to RA and distributed per RA rules.

### Interaction between RA and DA, risk sharing, and backstop mechanics
- Multilayered protection:
  - RA is the principal buffer; cumulative excess DA investment returns provide an additional layer of protection.
  - DA backstop minimizes residual risks to contributors’ total claims by pooling residual risk in extreme tail events.
- Backstop mechanics in an extreme tail risk scenario:
  - Book value of contributors’ claims on the DA would be temporarily reduced, first using the pool of DA investment returns (in proportion to attributed shares) and then DA principal.
  - This sequencing minimizes the chances of DA principal being reduced.
  - Payments from borrowers clearing overdue obligations are first allocated to the DA; once DA principal replenished, clearance goes to the RA.
  - Replenishment: reductions in DA principal would be replenished first as repayments or reversals occur.
- Accounting and provisioning:
  - Provisions for accounting (e.g., IFRS 9) handled via transfers among LA, RA, and DA as described, with non-cash transfers and reversals allowed where credit quality improves.

### Key numeric parameters and dates (as stated)
- Minimum RA principal contribution: 2 percent of total LA commitments.
- Preferred maturity of standalone RA and DA contributions: 10 years.
- Expected DA deposit by each LA contributor: at least 20 percent of its LA commitment.
- Drawdown period of first round: through end-November 2030.
- Maximum loan maturity: 20 years.
- Uniform maturity date of DA contributions in initial round: end-November 2050.

*Source: Excerpt from the RST proposal (pp. 12–80) in the supplied content unit.*

### Annex V. Demand Projections and Financing Scenarios

### Annex V. Demand Projections and Financing Scenarios

### Demand Projections
- Total baseline demand for RST financing is estimated at SDR 22 billion.
- Eligibility and uptake assumptions:
  - 143 RST-eligible countries (criteria: 2020 GNI per capita below 10 times the IDA operational income cutoff and countries with population size < 1.5 million and GNI per capita below 25 times the IDA operational cutoff).
  - Assumption: all eligible countries that had a UCT-quality program over the past 10 years would request RST financing → 70 countries seeking RST financing.
- Country access assumptions:
  - Individual country access assumed at 100 percent of quota for most countries, subject to a nominal cap on access of SDR1 billion.
  - Countries with quotas greater than 3 percent of their respective nominal GDP are assumed to receive access of 50 percent of quota.
  - Countries with Flexible Credit Lines in the last decade that meet income eligibility are not assumed to request access under the baseline.

### Interest Rate Structure (Tiered)
- SDRi is assumed to rise over time, stabilizing at 3 percent by year 9 of the projection period.
- Borrowers pay SDRi plus a margin and may be subject to service charges. Country groups:
  - Group A:
    - Composition: all PRGT-eligible countries that are not presumed blenders (Syria proposed included in Group A).
    - Margin: 55 basis points above the 3-month SDRi.
    - Service charges: exempt from any service charges on RST disbursements.
  - Group B:
    - Composition: presumed blenders and all small states (below 1.5 million inhabitants) with per capita GNI below ten times the IDA operational income cutoff.
    - Margin: 75 basis points above SDRi.
    - Service charges: upfront one-time service charge of 25 basis points levied on each RST disbursement.
  - Group C:
    - Composition: all other RST-eligible countries (eligible non-small MICs and all small states with income above ten times the IDA operational income cutoff).
    - Margin: 95 basis points above SDRi.
    - Service charges: upfront one-time service charge of 50 basis points on each RST disbursement.

### Financial Model (Illustrative Features)
- Demand for RST financing: SDR 22 billion, disbursed evenly over the first five years of the Trust.
- Loan terms:
  - 20-year final maturity.
  - 10½-year grace period.
  - Borrowers pay tiered interest rates and service charges per group.
- Contributions:
  - Contributors sign contribution agreements with three parts: a loan contribution; a reserve account contribution; and a deposit contribution.
  - Bulk of contributions expected in SDRs; loan resources in freely usable currencies possible.
- Loan Account (LA):
  - Total loan commitments assumed to cover projected demand plus a 20 percent encashment buffer → SDR 27 billion.
  - SDRi paid to lenders on drawn loan commitments.
- Reserve Account (RA):
  - Initial funding through upfront reserve injections equivalent to 2 percent of contributors’ respective loan commitments.
  - Reserve balances increase over time from RST lending margins and investment returns, net of administrative costs.
  - Balances in the RA are invested and earn returns at SDRi + 45 basis points.
- Deposit Account (DA):
  - Funded upfront by long-term deposits provided by contributors, remunerated at the SDRi.
  - Initial DA balance equivalent to 20 percent of each contributor’s loan commitment.
  - Balances in the DA are invested and earn returns at SDRi + basis points (text placeholder in source retains "basis points" with no numeric amount).
- Gross and net reserves:
  - Gross reserves = total balances in RA + DA.
  - Net reserves = gross reserves net of DA principal liability (equivalent to RA plus any cumulative excess DA investment returns).

### Financial Stocks and Flows — Baseline
- Lending operations:
  - Disbursements: equal installments of SDR 4.4 billion annually for five years.
  - Credit peaks at SDR 22 billion.
  - Amortization starts in year 11.
  - Annual debt service due to lenders peaks at SDR 2.7 billion.
  - All loans fully repaid after 25 years.
- Reserve Account (RA):
  - RA balances start at SDR 544 million.
  - RA reaches SDR 1.8 bn in year 11 when amortization starts.
  - Terminal value after 25 years (excluding cumulative DA excess investment returns) would total SDR 3.4 billion.
- Deposit Account (DA):
  - Lenders deposit upfront SDR 5.4 billion in the DA.
  - DA grows to SDR 5.8 billion by the time amortization starts and to SDR 6.4 billion after 25 years (based on excess investment returns above remuneration at the SDRi).
- Coverage and buffers:
  - Gross RST reserves (RA + DA) cover at least 35 percent of credit outstanding in the repayment period (years 11-25), and more than 3 times debt service.
  - Net reserves (RA balances plus cumulative excess DA investment returns) are at least SDR 2.2 billion during the repayment period (years 11-25).
  - Net reserves cover at least 10 percent of total credit outstanding and one year’s worth of total debt service.
- Terminal value:
  - Net reserves after 2 years when all loans have been repaid would be SDR 4.3 billion — an eight-fold increase from inception — under the stylized assumption of no further RST lending after the first 5 years and continued margin accumulation.

### Adverse Events (Stress Tests) — Illustrative Outcomes
- Lower returns:
  - If investment returns for the RA and the DA are 20 basis points below baseline, minimum net reserve cushion during repayment falls from SDR 2.2 billion to SDR 2.0 billion; minimum reserve coverage ratios not significantly affected.
- Temporary arrears:
  - If 10 percent of debt service (principal and interest) is not paid for five years (years 8-12) and arrears cleared thereafter:
    - Minimum total reserve coverage ratio over credit outstanding declines from 35 percent to 34 percent.
    - Net reserve cushion of at least SDR 1.8 billion remains during the repayment period.
    - Debt service coverage ratios not significantly affected.
- Permanent credit losses:
  - If 10 percent of principal due in the first five years of the repayment period (years 11-15) is never repaid:
    - Minimum net reserve cushion in the repayment period declines modestly to SDR 2.1 billion; minimum reserve coverage ratios not significantly affected.
- Encashment by a lender:
  - If one contributor encashes its entire loan and DA principal in one year, minimum reserve coverage ratios not significantly affected.
- Combined adverse events:
  - If all above adverse events materialize:
    - Minimum total and net reserve coverage ratios to credit outstanding decline from 35 and 10 percent to 32 and 7 percent, respectively.
    - Net reserve cushion of at least SDR 1.5 billion remains during the repayment period.

### Additional Sensitivity Analysis
- Uniform margin on lending:
  - If interest margin paid by borrowers is uniformly 75 basis points, minimum total reserve coverage relative to credit outstanding improves modestly; net reserve cushion at least SDR 2.3 billion during the repayment period.
- Lower administrative costs:
  - If annual administrative costs are SDR 18 million rather than SDR 25 million (baseline hypothetical), minimum reserve coverage ratios not significantly affected.
- Default by largest borrower:
  - Permanent default by two of the largest borrowers on interest and principal due during the repayment period (SDR 2 billion) would:
    - Moderately impact minimum reserve coverage ratios relative to credit outstanding (credit outstanding assumed to decline in outer years).
    - Cause a more substantial decline in minimum reserve coverage ratios relative to debt service.
    - Reduce minimum net reserve cushion to SDR 0.8 billion (vs. SDR 2.2 billion in baseline).
- Higher or lower demand by borrowers:
  - If demand is 25 percent greater than baseline: net reserve cushion during repayment would be SDR 2.8 billion (vs. SDR 2.2 billion baseline).
  - If demand is 25 percent lower than baseline: net reserve cushion during repayment would be at least SDR 1.5 billion (vs. SDR 2.2 billion baseline).

### Expected Credit Losses (ECL) Assessment
- Simulations use the Fund’s existing ECL calculation model as a proxy at the point when credit outstanding is at its peak (SDR 22 billion).
- Portfolio allocated into three buckets: (i) unchanged credit quality; (ii) deteriorated credit quality (significant increase in credit risk); and (iii) default (protracted arrears).
- Probability-weighted losses calculated for three scenarios: (i) baseline (on-time payments); (ii) protracted arrears cleared after 7 years; and (iii) ultimate failure to pay, to arrive at total ECL.
- Simulation results:
  - Estimates of total ECL range from 0. percent to 22 percent of the projected minimum RA balance (SDR 0.54 billion).
  - Resources in the RA as estimated in the illustrative example would be more than adequate to absorb ECL under impairment assessments, implying that the DA principal would not be affected by credit losses even in severe stress scenarios.

*Source: Annex V. Demand Projections and Financing Scenarios (ppea2022013).*

### Annex V. Table 3. RST – Projected Balances and Reserve Coverage  under Various Scenarios

### Annex V. Table 3. RST – Projected Balances and Reserve Coverage  under Various Scenarios

### Resource Mobilization and Demand
- Total resources needed:
  - Lower returns: 33,207
  - Interest and payment arrears: 33,207
  - Permanent default on principal: 33,207
  - Encashment of one contributor: 33,207
  - Combined adverse events: 33,207
  - Lower demand: 33,207
  - Uniform margin on lending: 24,905
  - Lower administrative costs: 33,207
  - Default by large borrowers: 33,207
  - Higher demand: 41,509
- Loan resources, including encashment buffer:
  - Lower returns: 27,219
  - Interest and payment arrears: 27,219
  - Permanent default on principal: 27,219
  - Encashment of one contributor: 27,219
  - Combined adverse events: 27,219
  - Lower demand: 27,219
  - Uniform margin on lending: 20,414
  - Lower administrative costs: 27,219
  - Default by large borrowers: 27,219
  - Higher demand: 34,024
- Initial cash capital contribution to Reserves Account:
  - Lower returns: 544
  - Interest and payment arrears: 544
  - Permanent default on principal: 544
  - Encashment of one contributor: 544
  - Combined adverse events: 544
  - Lower demand: 544
  - Uniform margin on lending: 408
  - Lower administrative costs: 544
  - Default by large borrowers: 544
  - Higher demand: 680
- Upfront investment to Deposit Account:
  - Lower returns: 5,444
  - Interest and payment arrears: 5,444
  - Permanent default on principal: 5,444
  - Encashment of one contributor: 5,444
  - Combined adverse events: 5,444
  - Lower demand: 5,444
  - Uniform margin on lending: 4,083
  - Lower administrative costs: 5,444
  - Default by large borrowers: 5,444
  - Higher demand: 6,805
- Demand from borrowing countries:
  - Lower returns: 21,951
  - Interest and payment arrears: 21,951
  - Permanent default on principal: 21,951
  - Encashment of one contributor: 21,951
  - Combined adverse events: 21,951
  - Lower demand: 21,951
  - Uniform margin on lending: 16,463
  - Lower administrative costs: 21,951
  - Default by large borrowers: 21,951
  - Higher demand: 27,439
- of which group A:
  - Lower returns: 5,598
  - Interest and payment arrears: 5,598
  - Permanent default on principal: 5,598
  - Encashment of one contributor: 5,598
  - Combined adverse events: 5,598
  - Lower demand: 5,598
  - Uniform margin on lending: 4,199
  - Lower administrative costs: 5,598
  - Default by large borrowers: 5,598
  - Higher demand: 6,998
- of which group B:
  - Lower returns: 4,320
  - Interest and payment arrears: 4,320
  - Permanent default on principal: 4,320
  - Encashment of one contributor: 4,320
  - Combined adverse events: 4,320
  - Lower demand: 4,320
  - Uniform margin on lending: 3,240
  - Lower administrative costs: 4,320
  - Default by large borrowers: 4,320
  - Higher demand: 5,400
- Peak credit outstanding:
  - Lower returns: 21,951
  - Interest and payment arrears: 21,951
  - Permanent default on principal: 21,951
  - Encashment of one contributor: 21,951
  - Combined adverse events: 21,951
  - Lower demand: 21,951
  - Uniform margin on lending: 16,463
  - Lower administrative costs: 21,951
  - Default by large borrowers: 21,951
  - Higher demand: 27,439
- Peak annual debt service to lenders (interest and repayments):
  - Lower returns: 2,689
  - Interest and payment arrears: 2,689
  - Permanent default on principal: 2,689
  - Encashment of one contributor: 2,689
  - Combined adverse events: 2,689
  - Lower demand: 2,689
  - Uniform margin on lending: 2,017
  - Lower administrative costs: 2,689
  - Default by large borrowers: 2,689
  - Higher demand: 3,361
- Peak stock of arrears (interest and principal):
  - Lower returns: -
  - Interest and payment arrears: -
  - Permanent default on principal: 503
  - Encashment of one contributor: 659
  - Combined adverse events: -
  - Lower demand: 1,161
  - Uniform margin on lending: -
  - Lower administrative costs: -
  - Default by large borrowers: 2,104
  - Higher demand: -

### Reserves
- Reserve Account balance at start of repayment period:
  - Lower returns: 1,843
  - Interest and payment arrears: 1,818
  - Permanent default on principal: 1,486
  - Encashment of one contributor: 1,799
  - Combined adverse events: 1,843
  - Lower demand: 1,418
  - Uniform margin on lending: 1,303
  - Lower administrative costs: 1,943
  - Default by large borrowers: 1,937
  - Higher demand: 1,572
- Deposit Account balance at start of repayment period:
  - Lower returns: 5,754
  - Interest and payment arrears: 5,614
  - Permanent default on principal: 5,754
  - Encashment of one contributor: 5,754
  - Combined adverse events: 5,521
  - Lower demand: 5,384
  - Uniform margin on lending: 4,316
  - Lower administrative costs: 5,754
  - Default by large borrowers: 5,754
  - Higher demand: 7,193
- Minimum total reserves in repayment period:
  - Lower returns: 7,597
  - Interest and payment arrears: 7,433
  - Permanent default on principal: 7,240
  - Encashment of one contributor: 7,554
  - Combined adverse events: 7,365
  - Lower demand: 6,693
  - Uniform margin on lending: 5,619
  - Lower administrative costs: 7,698
  - Default by large borrowers: 7,691
  - Higher demand: 6,267
- Minimum net reserves in repayment period:
  - Lower returns: 2,154
  - Interest and payment arrears: 1,989
  - Permanent default on principal: 1,797
  - Encashment of one contributor: 2,110
  - Combined adverse events: 2,155
  - Lower demand: 1,484
  - Uniform margin on lending: 1,536
  - Lower administrative costs: 2,254
  - Default by large borrowers: 2,247
  - Higher demand: 823

### Minimum reserve coverage ratios (in percent)
- Total reserves to credit outstanding:
  - Lower returns: 35
  - Interest and payment arrears: 35
  - Permanent default on principal: 34
  - Encashment of one contributor: 35
  - Combined adverse events: 34
  - Lower demand: 32
  - Uniform margin on lending: 35
  - Lower administrative costs: 36
  - Default by large borrowers: 36
  - Higher demand: 34
- Net reserves to credit outstanding:
  - Lower returns: 10
  - Interest and payment arrears: 9
  - Permanent default on principal: 8
  - Encashment of one contributor: 10
  - Combined adverse events: 10
  - Lower demand: 7
  - Uniform margin on lending: 10
  - Lower administrative costs: 10
  - Default by large borrowers: 10
  - Higher demand: 9
- Total reserves to debt service:
  - Lower returns: 302
  - Interest and payment arrears: 293
  - Permanent default on principal: 300
  - Encashment of one contributor: 285
  - Combined adverse events: 293
  - Lower demand: 266
  - Uniform margin on lending: 297
  - Lower administrative costs: 312
  - Default by large borrowers: 307
  - Higher demand: 261
- Net reserves to debt service:
  - Lower returns: 100
  - Interest and payment arrears: 91
  - Permanent default on principal: 94
  - Encashment of one contributor: 82
  - Combined adverse events: 99
  - Lower demand: 71
  - Uniform margin on lending: 94
  - Lower administrative costs: 110
  - Default by large borrowers: 104
  - Higher demand: 41

### Assumptions
- Return on the Deposit Account above SDRi:
  - Baseline: 0.45%
  - Adverse scenarios: 0.25%
- Return on the Reserve Account above SDRi:
  - Baseline: 0.45%
  - Adverse scenarios: 0.25%
- Margins over SDRi paid by borrowers (see note 10):
  - Group A: 0.55% (baseline) and 0.75% (sensitivity)
  - Group B: 0.75% (baseline and sensitivity)
  - Group C: 0.95% (baseline) and 0.75% (sensitivity)
- Administrative costs (in SDR million): 25.0 (baseline) and 18 (sensitivity)
- Amounts encashed and losses shown in scenarios:
  - Amount of loan encashed: 944 (under applicable scenarios)
  - Amount of investment encashed: 234 (under applicable scenarios)
  - Amount of interest arrears: 503 (under applicable scenarios)
  - Amount of default by borrower: 659 (under applicable scenarios) and (2,375) for one sensitivity

### Notes and Scenario Definitions (as provided)
- For illustrative purposes, all RST loans are assumed to be evenly disbursed in the first five years, and there are no future loan mobilization rounds. Each loan has a 20-year maturity and 10-year grace period. Terminal balances are calculated as the residual financial assets 25 years after inception of the Trust. Lenders are remunerated at SDRi rate which is expected to normalize at 3% in medium to long term. (Note 1)
- Values in red represent the variables being shocked under the various scenarios. (Note 2)
- Baseline with temporary arrears on 10% of principal and interest payments in years 8-12, all repaid in year 13. (Note 3)
- Baseline with permanent default on 10% of principal repayments over years 11-15. (Note 4)
- Baseline with permanent default by two largest borrowers on interest and principal starting in year 11. (Note 4b)
- Assuming an encashment by one contributor of the entire loan and deposit principal in year 7. (Note 5)
- Assuming lower returns, temporary arrears on 10% of principal and interest payments in years 8-12 (repaid in year 13), default on 10% or repayments in years 11-15, and encashment by one contributor of the entire loan and deposit principal in year 7. (Note 6)
- Assuming all borrowers pay the same margin of 75bp over SDRi rate on their borrowings. (Note 7)
- Assuming all lenders contribute 2% of their loan commitments in the first year of operations. (Note 8)
- Assuming all lenders deposit an amount equivalent to 20 percent of their loan commitment in the Deposit Account. Deposits are remunerated at the SDRi and the principal is returned at termination. (Note 9)
- Group definitions and margin details: Group A includes PRGT-eligible countries that are not presumed blenders, group B includes presumed blenders and small states with GNI per capita below 10 times IDA threshold, and group C includes all other eligible members that are not included in groups A or B. Group A borrowers pay SDRi rate plus a margin of 55pb up to a cap of 2.25%, group B borrowers pay SDRi plus 75bp and 25bp service charge on drawings, and group C borrowers pay SDRi rate plus 95bp and 50bp service charge on drawings. Demand projections are based on a subset of eligible countries which had a UCT-quality arrangement in the past 10 years. (Note 10)
- Reserve Account and Deposit Account balance, starting from year 11. (Note 13)
- Reserve Account and cumulative net income earned on Deposit Account balance, starting from year 11. (Note 14)
- Starting from year 11. (Note 15)

*Source: Annex V. Table 3. RST – Projected Balances and Reserve Coverage under Various Scenarios (SDR million), ppea2022013 - Annex V. Table 3. RST – Projected Balances and Reserve Coverage under Various Scenarios.*

### 6.      The RST Instrument sets out the legal framework for the RST’s structure and

### ppea2022013 - 6.      The RST Instrument sets out the legal framework for the RST’s structure and

### Overview
- The RST Instrument establishes the legal framework for the Resilience and Sustainability Trust (RST), defining purposes, resources, and terms for financing using RST resources.
- The Instrument is divided into ten sections, with three appendices, and broadly follows the form and structure of the PRGT Instrument.

### Structure and contents of the RST Instrument (section-by-section)
- Section I
  - Sets out the purposes of the RST, its constitutive accounts, and the unit of account and media of payment for contributions.
  - Identifies qualifying longer-term structural challenges that RST financing may address: climate change and pandemic preparedness.
  - Notes that additional qualifying longer-term structural challenges may be added by Executive Board decision with concurrence of contributors representing 70 percent of total commitments to the RST under borrowing agreements in effect when concurrence is sought.
  - Clarifies that expansion of qualifying challenges is not an amendment of the Instrument but is enabled by the Instrument itself, subject to the 70 percent contributor concurrence requirement.

- Section II
  - Sets out the financing framework of the Resilience and Sustainability Facility (RSF), including maximum access, phasing of access, conditionality, reviews, and disbursements.
  - Clarifies that the Guidelines on Conditionality (Decision No. 12864-(02/102), as amended) will not apply to conditionality under RSF arrangements except for general principles: national ownership, tailoring to member circumstances, clarity in specification of reform measures, and effective coordination with other multilateral institutions.
  - Addresses terms of RSF loans, including their 20-year maturity, differentiated service charges and margins.
  - Groups RST-eligible members into three country groups (A, B and C) for purposes of margin and service charge.
  - States that changes in the margin or service charge, and an interest rate cap, could be implemented through amendment of the RST Instrument.
  - Encourages members with overdue financial obligations to the RST, the GRA or the PRGT, or at risk of such arrears, to prioritize meeting obligations to the GRA and/or the PRGT over RST loan obligations.
  - Clarifies that the Fund may not reschedule the repayment of any RST loan.

- Section III
  - Establishes authority to receive contributions.
  - Requires that contributions to the Loan Account be accompanied by contributions to the Deposit Account and to the Reserve Account of at least 20 percent and 2 percent, respectively, of the amount committed to the Loan Account.
  - Allows contributions to Deposit and Reserve Accounts in excess of these ratios.
  - Permits contributions to the Reserve Account and/or Deposit Account that are not accompanied by a Loan Account contribution; maturities of such contributions to be agreed between the Managing Director and the contributor, taking into account the investment strategy of the RST.

- Section IV
  - Sets out structure and operations of the Loan Account.
  - Authorizes borrowing under loan and note purchase agreements for on-lending and establishes key financial parameters (e.g., interest rate).
  - Provides for a common drawdown period for loan commitments through end-November 2030.
  - Sets contributors’ obligation to meet encashment claims of other contributors and provides for suspension of drawings under certain conditions.

- Section V
  - Sets out framework for the Reserve Account, including resources and permitted use.
  - Establishes the unremunerated nature of contributions to the Reserve Account and provides for investment of Reserve Account resources.
  - Addresses distributions from the Reserve Account.

- Section VI
  - Sets out provisions related to the Deposit Account: resources and use, remuneration, maturity, right to encashment in case of balance of payments need, and distribution regime.

- Section VII
  - Establishes a regime, in line with the PRGT, for transfer of RST claims to other Fund members and certain official entities.

- Section VIII
  - Addresses administration of the RST.
  - Provides that operational procedures that apply to the GRA apply to the RST (e.g., determination of exchange rates).
  - Provides for separation of RST assets while allowing investment pooling; addresses audits and financial reporting.

- Section IX
  - Deals with duration of the RST and liquidation of its assets.
  - RST will remain in existence as long as the Executive Board considers it necessary to conduct and wind up its business.
  - Liquidation of Reserve and Deposit Accounts addressed in relevant sections; remaining resources after liabilities discharged will be distributed to contributors to the Reserve Account.

- Section X
  - Addresses amendments to the Instrument.
  - Generally allows amendment by decision of the Trustee (the Executive Board) adopted by a majority of votes cast.
  - Identifies a set of protected provisions that may only be amended with the consent of contributors; these protect contributors’ interests regarding RST purposes and financial contributions.
  - Protected provisions include:
    - purposes of the RST (Section I, paragraph 1);
    - maturity of RST loans (Section II, paragraph 4(b));
    - prohibition on rescheduling of RST loans (Section II, paragraph 4(j));
    - key Loan Account provisions (Section IV, paragraphs 2-5), including maximum drawdown period, permitted use of drawings, suspension of drawings, and payment of interest and principal;
    - key Reserve Account provisions (Section V, paragraphs 2-4), including use of Reserve Account resources and distribution;
    - key Deposit Account provisions (Section VI, paragraphs 2-5), including remuneration, maturity and use;
    - separation of RST assets and prohibition on RST assets being used to discharge Fund liabilities (Section VIII, paragraph 2(a) and (b));
    - provisions related to liquidation of the Trust (Section IX, paragraph 2);
    - the provision that sets out the protected provisions (Section X, paragraph 2) itself.
  - Sets out a regime for consent and implications if a contributor does not consent to an amendment of a protected provision, including suspension of further drawings under the non-consenting contributor’s borrowing agreement and potential request for partial return of Deposit and Reserve Account contributions equivalent to the remaining uncommitted portion of total commitments under Loan Account borrowing agreements.
  - States that borrowing agreements remain open for encashment calls related to claims outstanding or committed prior to effectiveness of the amendment; outstanding claims remain subject to repayment in accordance with repayment schedule of RST loans funded with drawings under the borrowing agreement.

- Section XI
  - Sets rules governing reviews of the RST Instrument.
  - Provides for a review of the operation of the Trust (including eligibility, adequacy of resources and reserve coverage, and levels of margins, service charges and interest) within three years of when the RST can commence lending operations.

- Appendix 1
  - Sets out the misreporting framework applicable to the RST.
  - Establishes when misreporting occurs under an RSF arrangement and circumstances where a member may be expected to make an early repayment.
  - Follows existing misreporting frameworks under the GRA and PRGT with one important difference: misreporting under an RSF arrangement includes inaccurate information relating to implementation of a reform measure or misreporting under a concurrent UCT-quality arrangement or instrument.
  - Proposes a limitation period of four years from the time of the non-complying disbursement.
  - States that disbursements non-complying solely due to misreporting under the concurrent UCT-quality instrument are subject to the same limitation period that applies to the accompanying UCT-quality instrument.

- Appendix 2
  - Provides for a series of escalating measures in the event of overdue financial obligations to the RST, largely following PRGT procedures.

- Appendix 3
  - Sets out the initial classification of RST-eligible members to groups A, B, and C for purposes of service charge and margin.
  - Notes this appendix will be updated if members are determined RST-eligible on an ad hoc basis or in RST eligibility reviews.

### Majorities, consent requirements, and amendment process
- Proposed decisions may be adopted by a majority of votes cast.
- Proposed change to the PRGT Instrument regarding pooling PRGT assets additionally requires consent of current contributors to the PRGT’s subsidy accounts.
- Staff proposes a two-step consent process for contributors:
  - First period: six-week period seeking explicit consent of all contributors.
  - Second period: four-week period requesting response from contributors that did not respond in the first period.
  - After the second period, contributors who did not respond are assumed to have consented.
  - Contributors have an additional six months after the amendment becomes effective to communicate objection and request return of remaining share of their contributions to PRGT subsidy accounts.

### Reviews, periodicity, and financial triggers
- Operation of the RST is subject to periodic and ad hoc Executive Board reviews as Trustee.
- First review to occur no later than 3 years after operationalization of the RST.
  - The first review will be comprehensive: access policies, eligibility for Trust loans, adequacy of resources and reserve coverage, country groups and interest margins and service charges.
  - Subsequent review periodicity to be determined as part of the first review.
- Reviews of eligibility and country group assignments aim to synchronize with PRGT eligibility reviews (currently on a two-year cycle), with option for ad hoc additions.
- Reviews of interest margins and service charges will be part of periodic reviews; an earlier review can be triggered by unexpected events affecting RST financial sustainability.
- Specific trigger: if the average SDR interest rate (SDRi) were to rise above 1.5 percent in any 12-month period, and financial market indicators signal that the SDRi is not expected to decline below 1.5 percent within the coming quarters, a review of interest margins could take place. At that time, the Board could adopt a cap on interest rates for Group A countries by amendment to the instrument, after consultation with Loan Account contributors.

### Proposed Decisions — Decision 1 (establishment and consequential amendments)
- Section A — Resilience and Sustainability Trust Instrument, Effectiveness and Reimbursement
  - With effect from May 1, 2022, the Fund adopts the Instrument to Establish the Resilience and Sustainability Trust that is annexed to the decision as Attachment A.
  - Lending operations of the Trust shall not start until the Managing Director has notified the Executive Board that, in her view, the Trust is ready to commence such operations.
  - Cost of administering the Trust will be covered from the Trust’s Reserve Account through annual payments to the General Resources Account based on reasonable estimates of such costs:
    - Payments will cover (i) a management fee for trust management activities and (ii) a reimbursement to cover all other gross incremental costs of the RST.

- Section B — Consequential Amendments to other Fund Decisions
  - Proposed amendments in Section B shall become effective on May 1, 2022, provided that the proposed amendment of Section VII, Paragraph 2(a) of the PRGT Instrument proposed under Paragraph 10(b) becomes effective only after contributors to the subsidy accounts of the PRGT have consented as set out in the two-step consent process described above.
  - Contributors are given a first period of six weeks to respond, followed by a second four-week period for non-responders; non-response after the second period is deemed consent, provided contributors have six months after expiration of the second period to request return of remaining share in the relevant subsidy account.

*Source: Proposal to Establish a Resilience and Sustainability Trust — Proposed Decisions and Instrument (pp. 6–12 of the source content).*

### 4.      Paragraph 3 of Decision No. 13561-(05/85), as amended, is revised to read as follows:

### ppea2022013 - 4.      Paragraph 3 of Decision No. 13561-(05/85), as amended, is revised to read as follows:

### Policy Support Instrument (PSI) — Eligibility and Termination
- Revised Paragraph 3 (Decision No. 13561-(05/85)):
  - “3. Members with  overdue financial obligations to the  Fund’s General Resources Account (GRA), to the  PRGT, or to the Resilience and Sustainability  Trust (RST) are not eligible for a PSI.”
- Revised Clause (a) of paragraph 20 (Decision No. 13561-(05/85)):
  - “20. A PSI for a member will terminate upon: (a) the relevant member incurring overdue financial  obligations to the  GRA, PRGT or RST; or ...”

### Policy Coordination Instrument (PCI) — Scope, Eligibility, and Termination
- Revised Paragraph 2 (Decision No. 16230-(17/62)):
  - “2.    Upon request, the Fund  will be prepared to provide the technical services described in this Decision to members that: (a) at the time of the request for a PCI do not require and are not seeking financial  assistance from the General Resources Account  (“GRA”) or Poverty Reduction and Growth Trust (“PRGT”); and (b) seek to maintain  a close policy dialogue with  the Fund,  through the  Fund’s endorsement and assessment of their economic and financial  policies, under a PCI.”
- Revised Paragraph 4 (Decision No. 16230-(17/62)):
  - “4. The PCI will be available to all member countries for the purposes outlined in paragraph 1, without  further qualification criteria, except members with  overdue financial  obligations to the Fund’s GRA, to the PRGT, or to the Resilience and Sustainability Trust (“RST”).”
- Revised Paragraph 6 (Decision No. 16230-(17/62)) — approval conditions:
  - “6. A  member’s request for a PCI may be approved only if the  Fund is satisfied that: (a) the  policies set forth in the member’s Program Statement meet the standards of upper credit tranche conditionality;  (b) the member’s program will be carried out, and in particular, that the member is sufficiently  committed to implement the program; and (c) the member does not need and is not seeking Fund  financial support from the GRA or PRGT at the  time of approval of a PCI.”
- Revised Paragraph 20 (Decision No. 16230-(17/62)) — termination:
  - “20. A PCI for a member will terminate upon: (a) the relevant member incurring overdue financial  obligations to the  GRA, PRGT, or RST; (b) noncompletion  of a review for a twelve-month  period; or (c) the approval for the relevant member of an arrangement with the Fund other than a SBA or SCF arrangement or an arrangement under the Resilience and Sustainability Facility.  Approval of access under the  Rapid Financing  Instrument  or Rapid Credit Facility  will not  cause termination  of a PCI.”

### Poverty Reduction and Growth Trust (PRGT) — Revisions to Instrument and Appendices
- Revised Section II, Paragraph 1(e)(3) of the PRGT Instrument:
  - “(3) The Managing Director shall not recommend for approval, and the Trustee shall not approve, a request for a disbursement under the RCF or an arrangement under this Instrument  whenever the member has an overdue financial obligation to the Fund in the General Resources Account, the  Special Disbursement Account,  or the SDR Department, or to the Fund  as Trustee (including  as Trustee of the  Resilience and Sustainability  Trust), or while the  member is failing to meet a repurchase expectation to the Fund pursuant to Decision No. 7842-(84/165)  on  the  Guidelines  on Corrective Action,  or is failing to meet a repayment expectation pursuant to Section II,  paragraph 3(c) or the provisions of Appendix I  to this Instrument,  or is failing to meet a repayment expectation pursuant to the provisions of Appendix I of the Instrument  to Establish the Resilience and Sustainability Trust, Annex to Decision No. [RST Decision  I].”
- Revised Section VII, Paragraph 2(a) of the PRGT Instrument:
  - “(a) The resources of the Trust shall be kept separate from the property and assets of all other accounts of the Fund, including other trusts and administered accounts, and shall be used only for the  purposes of the Trust in  accordance with this Instrument; provided however that  for investment  purposes, resources of the Trust may be pooled with  resources of other trusts or accounts administered by the Fund for the benefit of others under arrangements that  allow for the  attribution  of pooled investments to each relevant trust or account.”
- Revised Paragraph 1 of Appendix II of the PRGT Instrument (suspension on overdue obligations):
  - “1. Whenever  a member fails to settle a financial  obligation on time, the  staff will immediately  send a communication  urging the  member to make the payment promptly; this  communication  will  be followed up through the  office of the Executive Director concerned. At  this stage, the member’s access to the Fund’s  resources, including Poverty Reduction and Growth Trust, Resilience and Sustainability  Trust, and HIPC  resources, will have been suspended.”
- Revised Paragraph 5 of Appendix II of the PRGT Instrument (reporting and public statements):
  - “5. A  report by the Managing Director to the Executive  Board will be issued two months after a financial  obligation has become overdue, and will be given substantive consideration by the Executive Board one month  later. The report will request that the Executive Board limit  the member’s use of Trust resources. A brief factual statement  noting the  existence and amount  of arrears outstanding for more than  three months  will be posted on the member’s country-specific  page on the Fund’s external website. This statement will also indicate that  the member’s access to the Fund’s resources, including Poverty Reduction and Growth Trust, Resilience and Sustainability  Trust, and HIPC  resources, has been and will remain suspended for as long as such arrears remain outstanding. A press release will be issued following  the Executive Board decision to limit  the member’s use of the Trust resources. A similar press release will be issued following a decision to lift  such limitation.  Periods between subsequent reviews of reports on the member’s arrears by the Executive Board will normally not  exceed six months. The Managing Director may recommend advancing the Executive  Board’s consideration of the reports regarding overdue obligations. The Managing Director may also recommend postponing for up to one-year periods the Executive  Board’s consideration of a report regarding a member’s overdue obligations in exceptional circumstances where the Managing Director judges that  there is no basis for an earlier evaluation of the member’s cooperation with the Fund.”

### Overdue Financial Obligations — Procedures for Dealing with Members with Arrears
- Revised text (Procedures adopted August 17, 1989; amended August 22, 2001):
  - “When  a member has overdue financial  obligations outstanding for more than  three months, a brief factual statement noting  the existence and the amount of such arrears will be posted on the  member’s country-specific page on the Fund’s  external website. The statement  will  be updated as necessary. It will also indicate that  the  member’s access to the Fund,  including  PRGT, RST and HIPC  resources, has been and will  remain suspended for as long as arrears remain outstanding.”

### Stand-By and Extended Arrangements — Standard Forms (Revisions)
- Revised Paragraph 4 of Attachment A to Decision No. 10464-(93/130):
  - “4. (Member) will  not make purchases under this stand-by arrangement during any period in which  (Member): (i) has an overdue financial obligation to the Fund or is failing to meet a repurchase expectation in  respect of a noncomplying  purchase pursuant to Decision No. 7842-(84/165) on the Guidelines on Corrective Action; (ii) is failing to meet a repayment obligation to the PRG Trust established by Decision No. 8759-(87/176)  PRGT, as amended, or a repayment expectation to that Trust pursuant to the provisions of Appendix I to the PRG Trust Instrument; or (iii) is failing to meet a repayment obligation to the  Resilience and Sustainability  Trust (RST) established by Decision No. [RST Decision  1], or a repayment expectation to that  Trust pursuant to the provisions of Appendix II to the RST Instrument.”
- Revised Paragraph 4 of Attachment B to Decision No. 10464-(93/130):
  - “4. (Member) will  not make purchases under this extended arrangement during any period in which  (Member): (i) has an overdue financial obligation to the Fund  or is failing to meet a repurchase expectation in  respect of a noncomplying  purchase pursuant to Decision No. 7842-(84/165) on the Guidelines on Corrective Action; (ii) is failing to meet a repayment obligation to the PRG Trust established by Decision No. 8759-(87/176)  PRGT, as amended, or a repayment expectation to that Trust pursuant to the provisions of Appendix I to the PRG Trust Instrument; or (iii) is failing to meet a repayment obligation to the  Resilience and Sustainability  Trust (RST) established by Decision No. [RST Decision  1], or a repayment expectation to that  Trust pursuant to the provisions of Appendix II to the  RST Instrument.”

### Lapse of Time Completion of Program Reviews — Resilience and Sustainability Facility (RSF)
- Addition to paragraph 2 of the Attachment to Decision A-13207 (August 28, 2009), as amended:
  - “A review under a Resilience and Sustainability Facility  arrangement would be eligible for completion on a lapse of time  basis where (i) the  review under the accompanying arrangement or instrument  supporting the  member’s upper credit tranche-quality program meets the criteria for completion on a lapse of time basis set out above; and (ii) staff has determined that all reform measures to be assessed under the review have been implemented.”

### Post Financing Assessment (PFA) — Thresholds Triggering PFA
- Revised Paragraph 1 of Decision No. 13454-(05/26):
  - “1. If  outstanding credit to a member exceeds any of the thresholds specified below:  
    - (a) 200 percent of quota for credit from the  Fund’s General Resources Account (GRA), or from the Fund  as Trustee of the Poverty  Reduction  and  Growth  Trust  (PRGT), or from the Fund as Trustee of the Resilience and Sustainability Trust (RST), or a combination  thereof; or  
    - (b) an amount equivalent to SDR 1.5 billion for credit from the Fund’s GRA; or  
    - (c) an  amount  equivalent  to SDR 0.38 billion from the PRGT; or  
    - (d) an amount equivalent to SDR 0.38 billion from the RST,  
  and the  member does not have a program supported by a Fund arrangement or is not implementing  a staff monitored program with reports issued to the Executive Board, or the member does not have a program supported by a Policy Support Instrument  (PSI), or Policy Coordination Instrument  (PCI), the member will be expected to engage in Post Financing  Assessment (PFA)  discussions with the  Fund involving the monitoring  of its economic developments and policies upon the recommendation of the  Managing Director. Where the  above criteria are met, the Managing Director shall recommend PFA  to the Executive  Board, unless, in the view of the  Managing Director, the member’s circumstances (in particular, the strength of the member’s policies, its external position, or the fact that a successor arrangement, PCI, PSI  or a staff monitored program is expected to be in place within  the  next six months) are such that  the process is unwarranted. PFA  will normally cease when  the member’s outstanding credit falls below all of the  applicable thresholds above.”

### Transparency Policy Decision — Publication Consent
- Revised Paragraph 4.b of Decision No. 15420-(13/61):
  - “4.b. The Managing Director will generally not recommend that the Executive Board approve a request for (i) access to resources in the  General Resources Account, the PRGT or the Resilience and Sustainability  Trust, or (ii) access to Fund  resources under the HIPC  Trust, or (iii) assistance through a PSI or a PCI,  unless that  member explicitly consents to the  publication of the  associated staff report. For purposes of this paragraph 4(b), approval of the use of the  Fund’s resources includes the completion of a review under an arrangement and assistance through a PSI or a PCI  includes the completion of a review under the PSI or the PCI. In the case of the PCI, where a member does not provide consent to publication  of an interim performance update, the Managing Director may take this into account when determining whether to recommend that  the Executive  Board approve a subsequent review of the member’s PCI.”

### Resilience and Sustainability Trust (RST) — Eligibility List and Criteria
- Decision 2 — RST-eligible members:
  - Members on the list annexed as Attachment B are eligible to receive financing under the RST.
- Entry criteria (paragraph 2.a):
  - A member will be added if its annual per capita GNI is:
    - (a) less than ten times the IDA operational cut-off; or
    - (b) less than twenty-five times the IDA operational cut-off if the member has a population below 1.5 million.
- Graduation criteria (paragraph 2.b):
  - A member will be removed if:
    - (a) its GNI has been above (i) ten times the IDA operational cutoff or (ii) twenty-five times the IDA operational cutoff if the member has a population below 1.5 million, for at least the last five years for which qualifying data are available,
    - (b) has not been on a declining trend in the same period (comparing the first and the last relevant annual data), and
    - (c) based on the latest qualifying data, is at least ten percent above (i) ten times the IDA operational cutoff or (ii) twenty-five times the IDA operational cutoff if the member has a population below 1.5 million.
- Data and review timing (paragraph 2.c and paragraph 5):
  - Assessments of per capita GNI will normally be based on World Bank data using the ATLAS methodology; other data sources may be used in exceptional circumstances.
  - Qualifying data shall be data in respect of which the most recent observation relates to a calendar year that is not more than 30 months in the past at the time of the assessment.
  - The criteria and the RST-eligibility list shall be reviewed and updated three years after the RST becomes operational for lending and thereafter in conjunction with reviews of concessional financing eligibility under Decision No. 14521-(10/3), January 11, 2010, as amended.
- Opt-out and re-entry (paragraph 3 and paragraph 5):
  - Any member without an RSF arrangement in effect can elect to opt out by written notification; removal is effective immediately upon receipt.
  - Members removed as a sanction for overdue obligations may be considered for re-entry in interim decisions if they do not meet graduation criteria at the time of re-entry.

### Investment Guidelines and Repeal
- Decision 3:
  - The Fund adopts the Guidelines for Investing PRG, RS, PRG-HIPC, and CCR Trust Assets as set forth in Attachment C.
  - “The Guidelines for Investing PRG, PRG-HIPC, and CCR Trust Assets adopted by Decision No. 17200-(22/3),  adopted January 12, 2022 are hereby repealed.”

### Attachment A — Instrument to Establish the Resilience and Sustainability Trust
- Attachment A begins the Instrument to Establish the Resilience and Sustainability Trust and states:
  - “To help fulfill its purposes, the International Monetary Fund (the “Fund”), pursuant to Article V,”

*Source: https://www.imf.org/-/media/files/publications/pp/2022/english/ppea2022013.pdf*

### Section 2(b) of the Fund’s Articles of Agreement, has adopted this Instrument  to Establish the

### ppea2022013 - Section 2(b) of the Fund’s Articles of Agreement, has adopted this Instrument  to Establish the

### Section I. General Provisions — Purposes, Accounts, Unit of Account, Media of Payment
- Purposes of the Trust:
  - Assist in fulfilling the purposes of the Fund by providing loans (“Trust loans”) under the Resilience and Sustainability Facility (“RSF”) to eligible members to enhance economic resilience and sustainability by:
    - (i) supporting policy reforms that reduce risks associated with longer-term structural challenges facing the member, and
    - (ii) augmenting policy space and financial buffers to mitigate the risks arising from such longer-term structural challenges—thereby contributing to the member’s prospective balance of payments stability.
  - Trust loans may be provided to support eligible members to address Qualifying Longer-term Structural Challenges relating to:
    - (i) climate change, and
    - (ii) pandemic preparedness.
  - The Trustee may expand the list of Qualifying Longer-term Structural Challenges with the concurrence of contributors representing 70 percent of total commitments under the Loan Account.

- Trust Accounts and Resources:
  - Operations and transactions conducted through a Loan Account, a Deposit Account and a Reserve Account.
  - Resources of the Trust shall be held in these accounts, each maintained for specified purposes.

- Unit of Account and Denomination:
  - The SDR shall be the unit of account for the Trust.
  - Trust loans, commitments to and claims resulting from contributions to the Trust shall be denominated in SDR.

- Media of Payment of Contributions:
  - Contributions to the Loan Account, the Deposit Account and the Reserve Account shall be provided in SDRs, in accordance with arrangements made by the Trustee for the holding and use of SDRs, or in freely usable currencies.
  - Payments by the Trust to contributors shall be made in SDRs or such other media as may be agreed between the Trustee and such contributors.

### Section II. Trust Loans — Eligibility, Arrangements, Reviews, and Conditionality
- Eligibility:
  - Members listed in the Annex to Decision No. [RST Decision 2] shall be eligible (“RST-eligible members”).

- Financing under RSF Arrangements — key procedural and operational provisions:
  - An RST-eligible member may request financing under the RSF up to the maximum overall access specified in Paragraph 2(a) of this Section.
  - Financing shall be committed and made available under an approved RSF Arrangement to support structural reforms that aim to reduce and/or mitigate risks associated with Qualifying Longer-term Structural Challenges.
  - An RSF Arrangement shall normally be approved concurrently with, or aligned to the review/approval of, a qualifying UCT-quality instrument (Stand-by Arrangement; Extended Arrangement under the Extended Fund Facility; Precautionary and Liquidity Line or Flexible Credit Line (“FCL”); Policy Coordination Instrument; Policy Support Instrument; Standby Credit Facility; Extended Credit Facility).
  - Duration and timing:
    - Duration generally expected to coincide with the duration of the concurrent qualifying UCT-quality instrument when approval is requested at the same time, or with the remaining duration of an existing qualifying UCT-quality instrument when approval is requested at the time of a review.
    - Minimum duration of an RSF arrangement: no less than 18 months.
    - For RSF arrangements approved during the period of 6 months from the date of the notification in paragraph 2 of Decision [RST Decision 1], minimum duration: no less than 12 months.
    - RSF arrangements shall not extend beyond the duration of the concurrent qualifying UCT-quality instrument. If the concurrent qualifying UCT-quality instrument terminates/expires/is cancelled, the RSF Arrangement will automatically terminate at the same time.
    - RSF Arrangement may be extended at the time of an extension of the concurrent qualifying UCT-quality instrument if:
      - (i) additional time is required to complete the identified Reform Measures; or
      - (ii) additional Reform Measures are identified for completion during the remainder of the RSF Arrangement period.

  - Reform Measures:
    - Member must present a detailed statement of the structural reforms it intends to implement during the RSF Arrangement (“Reform Measures”).
    - Reform Measures should be measures expected to help the member make significant progress toward strengthening prospective balance of payments stability by reducing macro-critical risks associated with Qualifying Longer-term Structural Challenges.
    - At approval and at each review the Trustee shall be satisfied that:
      - (i) the Reform Measures meet the standards specified in paragraph 5 above;
      - (ii) the member’s debt is sustainable in the medium-term under the applicable debt sustainability framework; and
      - (iii) the member’s capacity to repay the Trust is assessed to be adequate.

  - Commitment, Disbursement and Phasing:
    - RSF Arrangement will specify total amount of resources committed, earliest availability date for each disbursement and expected timing of reviews.
    - No disbursement shall be made available upon approval of an RSF Arrangement.
    - Each Reform Measure will be linked to one disbursement; implementation monitored through reviews.
    - Phasing limit: total amount of disbursements made available at a single review limited to not more than 50 percent of the member’s quota, except that if delays occur in implementation or reviews, related RSF disbursements may become subject to a later review and total disbursements approved at that review may exceed 50 percent of the member’s quota.
    - Reviews under an RSF Arrangement shall take place concurrently with the completion of reviews under the accompanying qualifying UCT-quality instrument.
    - At a review, the Executive Board of the Trustee will assess implementation of Reform Measures for which the member requests a disbursement and for which the relevant availability date has passed, and reach new understandings as necessary for the remainder of the RSF Arrangement.

  - Disbursement conditions:
    - Each disbursement requires:
      - (i) completion of a review under the RSF arrangement, following the relevant availability date, based on an assessment by the Trustee that the specified Reform Measure linked to that disbursement was implemented or that any deviation was minor; and
      - (ii) completion of the corresponding review under the accompanying qualifying UCT-quality instrument.
    - Where an RSF Arrangement is approved concurrently with an FCL arrangement, the RSF Arrangement shall establish the schedule of stand-alone reviews and associated RSF disbursements following completion of such reviews.
    - A member may cancel an RSF Arrangement at any time by notifying the Trustee; cancellation has no effect on the accompanying qualifying UCT-quality instrument.
    - An RSF Arrangement will terminate automatically once all access under such arrangement has been disbursed.
  - Conditionality:
    - The Guidelines on Conditionality (Decision No. 12864-(02/102), adopted September 25, 2002) shall not apply to conditionality under RSF arrangements except for certain general principles to the extent relevant for Reform Measures: national ownership, tailoring of Reform Measures to member’s circumstances, clarity in specification of Reform Measures and effective coordination with other multilateral institutions.

### Section II. Paragraph 2 — Amount of Financing (Access limits, norms, availability)
- Overall access cap for each RST-eligible member:
  - Capped at the lower of:
    - (i) 150 percent of quota; and
    - (ii) SDR 1 billion.

- Access norms and exceptions:
  - The Trustee may establish access norms to guide determination of access.
  - Access below or above such norms may be approved taking into account:
    - (i) any direct short- to medium-term balance of payments needs associated with implementation of the Reform Measures;
    - (ii) the strength and ambition of the Reform Measures; and
    - (iii) the member’s capacity to repay the Trust, considering debt sustainability, debt carrying capacity and composition of the member’s debt, including obligations owed to the GRA and the PRGT.

- Adjustments to access:
  - Subject to maximum overall access, access may be increased at the time of a review by:
    - providing additional disbursements linked to additional Reform Measures; or
    - increasing amount of already phased disbursements in view of commitments to strengthen existing Reform Measures.
  - Access may be reduced at the time of any review if requested by a member.

- Resource availability:
  - Any commitment of Trust resources shall be subject to availability of such resources.

- Restrictions related to arrears and overdue obligations:
  - The Managing Director shall not recommend, and the Trustee shall not approve, a request for an RSF Arrangement whenever the member has an overdue financial obligation to the Fund in the GRA, the Special Disbursement Account, the SDR Department, or the Fund as Trustee of this Trust or of the PRGT, or while the member is failing to meet a repurchase expectation to the Fund pursuant to Decision No. 7842-(84/165) on the Guidelines on Corrective Action, or is failing to meet a repayment expectation pursuant to Section II, paragraph 3(c) of the PRGT or Appendix 1 of such Trust, or a repayment expectation pursuant to the provisions of Appendix I to this Instrument.
  - If a member has overdue financial obligations arising from a Trust loan, and overdue financial obligations in the GRA or to the Fund as Trustee of the PRGT, or is at risk of incurring such arrears, the member is encouraged to prioritize meeting obligations to the GRA and/or the PRGT over obligations under Trust loans.

### Section II. Paragraph 3 — Disbursements (Scheduling, rephasing, timelines, sanctions)
- General:
  - Any commitment subject to availability of Trust resources.

- Rephasing:
  - If a disbursement does not become available as scheduled due to delays in implementation of Reform Measures or delays in completion of reviews under the accompanying qualifying UCT-quality instrument, the Trustee may rephase disbursements over the remaining period of the RSF Arrangement.

- Timelines:
  - Following completion of a review under an RSF Arrangement, and subject to rephasing rules, the disbursement shall be requested no later than 30 calendar days of the completion of the review and shall be made on the earliest value date for which necessary notifications and payment instructions can be issued by the Trustee.
  - If a disbursement is not completed within 30 calendar days, the member may again request the disbursement within 30 days from the completion of the next review.

- Misreporting and noncomplying disbursements:
  - Provisions of Appendix I of this Instrument shall apply.

- Suspension:
  - Disbursements under an RSF Arrangement to a qualifying member shall be suspended in all the cases specified in Paragraph 2(e) of this Section.

### Section II. Paragraph 4 — Terms of Trust Loans (Currency, repayment, interest, charges, classification)
- Currency:
  - Trust loans shall be disbursed in SDRs or in a freely usable currency, as determined by the Trustee.

- Repayment schedule:
  - Trust loans shall be repaid in twenty equal semi-annual installments beginning ten and a half years from the date of each disbursement.

- Interest:
  - Interest on the outstanding balance of Trust loans, including any overdue repayments of Trust loans, and interest on any overdue interest payments to the Trust shall be charged at a rate equal to the sum of:
    - (i) the rate of interest on the SDR, and
    - (ii) the applicable margin pursuant to subparagraphs (e) and (f) below,
    - provided that the interest rate charge on all overdue obligations will be subject to a minimum of the SDR interest rate.
  - Interest shall accrue daily and shall be paid in SDR promptly after April 30, July 31, October 31, and January 31 of each year.

- Service charge:
  - The Trustee may levy a service charge, set as a percentage of the amount of the disbursement, to be paid by a member at the time of a disbursement.

- Classification of members for margin and service charge (subparagraph (e)):
  - (i) Group A: RST-eligible members that are also PRGT-eligible (or that have per capita gross national income at or below the income threshold for entry onto the PRGT-eligibility list) and who are not presumed to blend PRGT and GRA resources pursuant to the Decision No. 17028-(21/71) – (“Blending Framework”).
  - (ii) Group B: RST-eligible members who are presumed to blend PRGT and GRA resources under the Blending Framework or who have a population below 1.5 million and per capita income below ten times the International Development Association operational cut-off as determined pursuant to paragraph 2(c) of Decision No. [RST Decision 2].
  - (iii) Group C: all other RST-eligible members.
  - The initial classification of members is set out in Appendix III.

- Margins and service charges (exact rates):
  - Applicable margin:
    - Group A: 55 basis points
    - Group B: 75 basis points
    - Group C: 95 basis points
  - Service charge levied on disbursements:
    - Group A: zero
    - Group B: 25 basis points
    - Group C: 50 basis points

- Transition and review:
  - In the event of a subsequent change in group classification of a member with an arrangement in effect at the time of such change, for applying the service charge and margin to any loan disbursements under that arrangement (including commitments not yet disbursed or later augmentations), the member will be treated as remaining in the group it was in at the time of approval of that arrangement.
  - The margin and service charge shall be reviewed pursuant to Section XI, either at periodic reviews of the RST or earlier if warranted. In setting the margin and service charge, the Trustee shall take into account borrowing costs for RST-eligible members, projected net reserve coverage for Trust loans over the lifecycle of the Trust, and costs of administrating the Trust.

- Rescheduling:
  - The Trustee may not reschedule the repayment of Trust loans.

### Section II. Paragraph 5 — Modifications
- Effect of modifications:
  - Any modification of the provisions applicable to Trust loans will affect only Trust loan disbursements made after the effective date of the modification.
  - Subject to Paragraph 4(c), any modification of the interest rates (including the margins) shall apply to interest accruing after the effective date of the modification.

*Source: ppea2022013 - Section 2(b) of the Fund’s Articles of Agreement, has adopted this Instrument  to Establish the*

### Section III. Contributions to the Trust

### Section III. Contributions to the Trust

### Authority to Receive Contributions to the Trust
- The Trustee may receive contributions of resources for the Loan Account, the Reserve Account, and the Deposit Account on such terms and conditions as may be agreed between the Trustee and the respective contributor, subject to the provisions of this Instrument.
- The Trustee may only accept a contribution to the Loan Account where the contributor also makes corresponding contributions to:
  - the Reserve Account equal to at least two percent of its Loan Account contribution amount; and
  - the Deposit Account equal to at least twenty percent of its Loan Account contribution amount.
- The Trustee may receive stand-alone contributions to the Reserve Account and/or the Deposit Account.

### Authority of the Managing Director
- For the purpose of receiving contributions to the Loan Account, the Reserve Account, and the Deposit Account pursuant to paragraph 1 of this Section, the Managing Director of the Trustee is authorized to enter into agreements with contributors and to make the necessary arrangements in accordance with the provisions of this Instrument.

### Section IV. The Loan Account

### Resources
- The term “borrowing agreement” comprises loan and note purchase agreements.
- The term “Trust borrowing” comprises loans made to the Trust and notes issued by the Trust.
- Resources held in the Loan Account shall consist of:
  - (i) the proceeds of Trust borrowing; and
  - (ii) repayments of principal and payments of interest on Trust loans funded with drawings under borrowing agreements to the Loan Account, subject to Section V, paragraph 1(f) and Section VI, paragraph 1(c) of this Instrument.
- Loan Account resources may be held temporarily in short-term instruments pending transfer and use in operations.

### Drawdown Period under Borrowing Agreements
- The drawdown period for extending Trust loans shall extend through November 30, 2030.
- On an exceptional basis, the Managing Director may agree on a shorter drawdown period than November 30, 2030.
- Drawings pursuant to Paragraph 3(b) of this Section may be made for as long as claims under Trust loans remain outstanding.

### Drawings under Borrowing Agreements
- The Trustee may draw under borrowing agreements to fund Trust loans.
- The Trustee may draw to fund early repayment of outstanding Trust borrowing under another borrowing agreement with the Loan Account (“encashment”) where:
  - a contributor requesting early repayment represents that its balance of payments and reserve position (or that of a relevant member of the Fund if the contributor is the central bank or other official institution of such member) justify the early repayment; and
  - the Trustee, having given this representation the overwhelming benefit of any doubt, agrees.
- As from the effective date of such early repayment, a contributor whose borrowing agreement has been drawn to fund an encashment call shall have the same rights to repayment as the contributor requesting the encashment had with respect to the encashed claim, including rights to repayments of principal and payments of interest pursuant to Paragraph 5 of this Section IV.
- Drawings under subparagraphs (a) and (b) shall be made with the objective of maintaining over time broad proportionality of drawings relative to commitments under borrowing agreements of contributors.

### Temporary Suspension of Drawings under Borrowing Agreements
- A contributor’s request for early repayment pursuant to paragraph 3(b) shall suspend calls under its borrowing agreement.
- Calls under a contributor’s borrowing agreement shall also be automatically suspended when the currency of the relevant member is no longer included for transfers in the Fund’s Financial Transactions Plan.
- Following any suspension under the above subparagraphs, drawings shall be resumed as soon as the balance of payments and reserve position of the relevant member have improved as evidenced by inclusion of its currency for transfers in the Fund’s Financial Transactions Plan.

### Payments of Principal and Interest
- The Trust shall make payments of principal and interest on its borrowing for the Loan Account from payments into the Loan Account of principal and interest made by borrowers under Trust loans.
- The Trustee shall pay interest on outstanding Trust borrowing at the interest rate set forth in the relevant borrowing agreement, provided that the rate of interest may not exceed the SDR interest rate.
- The Trust shall pay interest on a quarterly basis, normally promptly after April 30, July 31, October 31, and January 31 of each year to the account of the relevant member in the SDR Department or as otherwise agreed.
- Each drawing under a borrowing agreement shall be repaid in accordance with the repayment schedule for Trust loans as set out in Section II, paragraph 4(b).
- The Trustee may repay part or all of the outstanding drawing under any borrowing agreement at any time prior to maturity in the event of early repayment to the corresponding Trust loan.

### Transfers from the Loan Account to the Reserve Account and Deposit Account
- Margin income from Trust loans that accumulates in the Loan Account shall be transferred on a quarterly basis promptly after April 30, July 31, October 31, and January 31 of each year to:
  - fully replenish any use of Deposit Account principal contributions pursuant to Section VI, Paragraph 1(c); and then
  - to the Reserve Account.

### Section V. Reserve Account

### Resources
- Resources held in the Reserve Account shall consist of:
  - (a) proceeds of contributions to the Reserve Account pursuant to Section III, Paragraph 1;
  - (b) payment of service charges pursuant to Section II, Paragraph 4(d);
  - (c) transfers of margin income from the Loan Account pursuant to Section IV, Paragraph 6;
  - (d) net earnings from investment of resources held in the Reserve Account pursuant to Paragraph 3;
  - (e) transfers of net earnings from temporary holdings of Loan Account resources pending their use in operations pursuant to Section IV, Paragraph 1(b);
  - (f) payments of overdue principal or interest or interest thereon under Trust loans and repayments of principal under Trust loans to the extent Reserve Account or Deposit Account resources have been used to make payments to a contributor due to timing or amount differences between scheduled principal repayments to the contributor and principal repayments under Trust loans; provided however that any of these payments and repayments may only be made into the Reserve Account after the Deposit Account’s principal contributions are fully replenished pursuant to Section VI, Paragraph 1(c); and
  - (g) transfers of net investment income attributable to contributors’ contributions to the Deposit Account upon full repayment of these contributions pursuant to Section VI, Paragraph 5(d).

### Remuneration and Share in Reserve Account Resources
- Contributions to the Reserve Account shall not be remunerated.
- Each Reserve Account contributor shall have a proportional share in the Reserve Account balances.
- Net investment earnings in the Deposit Account attributed to a contributor’s contribution and transferred to the Reserve Account in accordance with Section VI, Paragraph 5(d) shall be included in that contributor’s share in the Reserve Account.

### Investment and Use of Resources
- Pending use, resources in the Reserve Account shall be invested in accordance with guidelines adopted by the Trustee, which may be amended from time to time.
- The resources held in the Reserve Account shall be used by the Trustee to:
  - (1) make repayments of principal and payments of interest pursuant to borrowing agreements for the Loan Account, to the extent receipts from borrowers under Trust loans are insufficient to cover payments to contributors to the Loan Account as they become due and payable;
  - (2) pay for the costs of administering the Trust; and
  - (3) make distributions to contributors to the Reserve Account pursuant to Paragraph 4.

### Distributions
- Contributions to the Reserve Account shall have no fixed maturity, provided that the Managing Director may agree to a fixed maturity for stand-alone contributions to the Reserve Account taking into account the investment strategy of Reserve Account resources.
- For any stand-alone contribution to the Reserve Account that matures before liquidation of the Reserve Account, an amount equal to the lesser of:
  - (i) the original contribution amount; or
  - (ii) the relative share of that contribution amount in the Reserve Account,
  shall be distributed to the respective contributor by the maturity date of that contribution.
- The contributor shall receive any remaining amount attributable to its contribution upon liquidation of the Reserve Account pursuant to subparagraph (c) or as part of an early distribution pursuant to subparagraph (d).
- Upon liquidation of the Trust, all resources in the Reserve Account, including accumulated income and net of liabilities authorized to be discharged by the Reserve Account, shall be distributed to contributors in proportion to their shares.
- Prior to liquidation, and only following full repayment of all Deposit Account principal contributions in accordance with Section VI, Paragraph 5(b) and (c), the Trustee may decide to distribute a portion of Reserve Account balances if the Trustee determines such distribution can be justified in light of the reserve coverage from remaining Reserve Account balances for the remaining life cycle of the Trust. Any distribution would be made in proportion to each contributor’s share.

### Section VI. Deposit Account

### Resources
- Resources held in the Deposit Account shall consist of:
  - (a) proceeds of contributions to the Deposit Account pursuant to Section III, Paragraph 1;
  - (b) net earnings from investment of resources held in the Deposit Account pursuant to Paragraph 4(a); and
  - (c) payments of overdue principal or interest or interest thereon under Trust loans, repayments of principal under Trust loans to the extent Reserve Account or Deposit Account resources have been used to make payments to a contributor due to timing or amount differences between scheduled principal repayments to the contributor and principal repayments under Trust loans, and any margin income from Trust loans, to replenish any amounts of Deposit Account principal contributions used to make payments due under borrowing agreements for the Loan Account pursuant to Paragraph 4(b)(2) of this Section.

### Remuneration and Share in Deposit Account Resources
- Contributions to the Deposit Account shall be remunerated at the SDR interest rate, provided that individual contribution agreements can provide for a rate lower than the SDR interest rate.
- The share of a contributor in the Deposit Account shall be based on its principal contributions to this account.
- Investment earnings and losses shall be attributed to contributors in proportion to their share.

### Maturity of Deposit Account Contributions
- The maturity date of contributions to the Deposit Account by contributors that are also contributors to the Loan Account under Section III, Paragraph 1(b) shall be November 30, 2050.
- The maturity date for stand-alone contributions to the Deposit Account pursuant to Section III, Paragraph 1(c) shall be as agreed between the Managing Director and the contributor, taking into account the investment strategy for resources in this account.

### Investment and Use
- Resources in the Deposit Account shall be invested in accordance with guidelines adopted by the Trustee which may be amended from time to time.
- The Trustee shall use resources in the Deposit Account to:
  - (1) make payments of interest and repayments of principal to contributors to the Deposit Account; and
  - (2) make repayments of principal and payments of interest under borrowing agreements for the Loan Account, to the extent receipts from borrowers under Trust loans and resources under the Reserve Account are insufficient to cover payments to contributors to the Loan Account as they become due and payable; provided however that all resources attributable to accumulated net investment earnings, if any, in the Deposit Account shall first be used in proportion to each contributor’s share in these earnings before resources attributable to contributors’ principal contributions to the Deposit Account shall be used for making these payments.

### Payments of Interest and Repayments of Principal to Contributors to the Deposit Account
- Interest on the principal amount shall be calculated and accrued daily.
- The Trust shall pay interest on a quarterly basis promptly after April 30, July 31, October 31, and January 31 of each year to the account of the relevant member in the SDR Department or as otherwise agreed by the Trustee and the contributor.
- Contributions to the Deposit Account shall be repaid upon maturity of the respective contributions or the liquidation of the Deposit Account, whichever is earlier.
- The Trustee may make early repayments of part or all of Deposit Account principal contributions prior to maturity or liquidation if the Trustee determines such distribution can be justified in light of the net reserve coverage based on resources in the Reserve Account and any remaining resources in the Deposit Account, including accumulated net investment earnings, for the remaining life cycle of the Trust.
- Following full repayment of any contributor’s contribution to the Deposit Account, the accumulated net investment earnings in the Deposit Account attributable to that contributor shall be transferred to the Reserve Account under that contributor’s contribution.
- A contributor may seek early repayment of all or part of principal if the contributor represents that its balance of payments and reserve position (or that of the relevant member if the contributor is the central bank or other official institution of such member) justify the early repayment, and the Trustee, having given this representation the overwhelming benefit of any doubt, agrees.
- The contributor shall reconstitute any repaid amount once its balance of payments and reserve position (or that of the relevant member of the Fund if the contributor is the central bank or other official institution of such member) improves as evidenced by inclusion of the member’s currency for transfers in the Fund’s Financial Transactions Plan.

### Section VII. Transfer of Claims

### Contributors’ Right to Transfer Claims
- Any contributor shall have the right to transfer at any time all or part of any claim on the Loan Account or the Deposit Account or its share in the Reserve Account to:
  - any member of the Fund;
  - the central bank or other fiscal agency designated by any member for purposes of Article V, Section 1 of the Fund’s Articles of Agreement (“other fiscal agency”); or
  - any official entity prescribed as a holder of SDRs pursuant to Article XVII, Section 3 of the Fund’s Articles of Agreement.

### Condition on the Transfer
- The transferee shall, as a condition of the transfer, notify the Trustee prior to the transfer that it accepts all obligations of the transferor relating to the transferred claim with respect to renewal of maturities, as applicable, and shall acquire all rights of the transferor with respect to repayments of principal and payments of interest, as applicable, on the transferred claim or contribution.
- Any right to encashment for drawings under borrowing agreements pursuant to Section IV, Paragraph 3 and for Deposit Account claims pursuant to Section VI, Paragraph 5(e) shall be acquired only if:
  - the transferee is a member of the Fund or the central bank or other fiscal agency of a member; and
  - at the time of transfer, the balance of payments and reserve position of the relevant member is considered sufficiently strong, as evidenced by inclusion of its currency for transfers under the Fund’s Financial Transactions Plan.

*Source: ppea2022013 - Section III. Contributions to the Trust*

### Section VIII. Administration of the Trust

### Section VIII. Administration of the Trust

### Trustee
- (a) The Trust shall be administered by the Fund  as Trustee. Decisions and other actions taken by the Fund  as Trustee shall be identified  as taken in that  capacity.
- (b) Subject to the provisions of this Instrument,  the Fund in administering the Trust shall apply the same rules as apply to the operation of the General Resources Account of the Fund.
- (c) The Trustee, acting through its Managing Director, is authorized:
  - (1) to make all arrangements, including the establishment of accounts in the name of the International  Monetary Fund,  which  shall be accounts of the  Fund as Trustee, with  such depositories as the Trustee deems necessary; and
  - (2) to take all other administrative measures that the  Trustee deems necessary to implement  the provisions of this Instrument.

### Separation of Assets and Accounts, Audits and Reports
- (a) The resources of the Trust shall be kept separate from the property and assets of all other accounts of the Fund, including other trusts and administered accounts, and shall be used only for the purposes of the Trust in accordance with  this Instrument;  provided however that for investment purposes, resources of the Trust may be pooled with resources of other trusts or accounts administered by the Fund  for the benefit of others under arrangements that  allow for the  attribution of pooled investments  to each relevant trust or account.
- (b) The property and assets held in the other accounts of the Fund shall not be used to discharge liabilities or meet losses arising out of the  administration of the  Trust. The resources of the Trust shall not be used to discharge liabilities or meet losses arising out of the administration of other accounts of the  Fund or other accounts administered by the  Fund.
- (c) The Trustee shall maintain  separate financial records and prepare separate financial statements for the Trust.
- (d) The external audit firm selected under Section 20 of the Fund’s By-Laws shall audit the financial transactions and records of the Trust. The audit shall relate to the financial  year of the Fund.
- (e) The Fund shall report on the resources and operations of the Trust in the  Annual  Report of the Executive Board to the Board of Governors of the Trustee and shall include in that Annual Report the report of the external audit firm on the Trust.

*Source: ppea2022013 - Section VIII. Administration of the Trust*

### Appendix III. RST  Country Groupings for Interest

### Appendix III. RST Country Groupings for Interest and Margin Purposes

### Country Groupings (Groups A, B, C)
- The Appendix lists country groupings designated as Group A, Group B, and Group C for interest and margin purposes.
- Group listings are presented as enumerated country lists under each Group heading (as in the source).

### Selected entries from Groups (as listed in the source)
- Group C (examples as listed):  
  - 1 Albania  
  - 2 Algeria  
  - 3 Angola  
  - 4 Antigua and Barbuda  
  - 5 Argentina  
  - 6 Armenia  
  - 7 Azerbaijan  
  - 8 Bahamas, The  
  - 9 Barbados  
  - 10 Belarus
- Group B (examples as listed):  
  - 1 Bangladesh  
  - 2 Belize  
  - 3 Benin  
  - 4 Bhutan  
  - 5 Cambodia  
  - 6 Cameroon  
  - 7 Comoros  
  - 8 Côte d'Ivoire  
  - 9 Equatorial Guinea  
  - 10 Eswatini
- Group A (examples as listed):  
  - 1 Afghanistan  
  - 2 Burkina Faso  
  - 3 Burundi  
  - 4 Cabo Verde  
  - 5 Central African Republic  
  - 6 Chad  
  - 7 Democratic Republic of Congo  
  - 8 Djibouti  
  - 9 Dominica  
  - 10 Eritrea

*Italicized full group listings are provided in the source document.*

---

### Attachment B. RST-Eligible Members

### Purpose
- Lists members eligible for RST with flags indicating PRGT status and Small State status, and provides 2020 GNI per capita (USD) and 2020 population (thousands).

### Representative member entries (exact values as listed)
- Afghanistan — PRGT: 1; Small State: 0; 2020 GNI per capita (USD): 500; 2020 Population (thousands): 38,928  
- Albania — PRGT: 0; Small State: 0; 2020 GNI per capita (USD): 5,210; 2020 Population (thousands): 2,838  
- Algeria — PRGT: 0; Small State: 0; 2020 GNI per capita (USD): 3,550; 2020 Population (thousands): 43,851  
- Angola — PRGT: 0; Small State: 0; 2020 GNI per capita (USD): 2,230; 2020 Population (thousands): 32,866  
- Bangladesh — PRGT: 1; Small State: 0; 2020 GNI per capita (USD): 2,010; 2020 Population (thousands): 164,689  
- China — PRGT: 0; Small State: 0; 2020 GNI per capita (USD): 10,610; 2020 Population (thousands): 1,402,112  
- India — PRGT: 0; Small State: 0; 2020 GNI per capita (USD): 1,900; 2020 Population (thousands): 1,380,004  
- Nigeria — PRGT: 0; Small State: 0; 2020 GNI per capita (USD): 2,000; 2020 Population (thousands): 206,140  
- Pakistan — PRGT: 0; Small State: 0; 2020 GNI per capita (USD): 1,280; 2020 Population (thousands): 220,892  
- Russian Federation — PRGT: 0; Small State: 0; 2020 GNI per capita (USD): 10,690; 2020 Population (thousands): 144,104

Notes:
- GNI data based on data current as of October 2021.
- Andorra, San Marino, and Venezuela excluded due to missing GNI data.

---

### Attachment C. Guidelines for Investing PRG, RS, PRG‑HIPC, and CCR Trusts’ Assets

### General provisions
- These Guidelines apply to the Poverty Reduction and Growth Trust (“PRG Trust”), the Resilience and Sustainability Trust (“RS Trust”), the Trust for Special Poverty and Growth Operations for the Heavily Indebted Poor Countries and Interim ECF Subsidy Operations (“PRG-HIPC Trust”), and the Catastrophe Containment and Relief Trust (“CCR Trust”).
- “Investment Assets” means resources of each Trust available for investment and subject to these Guidelines.
- The Managing Director is responsible for implementing the investment policies and shall:  
  - establish effective decision-making and oversight arrangements;  
  - adopt measures to avoid actual or perceived conflicts of interest;  
  - adopt responsible investing principles that incorporate environmental, social, and governance (ESG) considerations;  
  - establish specific risk control measures and monitoring mechanisms.  
- The Managing Director shall consult with the Executive Board regarding key conflicts of interest policies and responsible investment principles.
- Annual reports on investment activities of the Trusts shall be provided to the Executive Board; ad hoc reports as warranted.
- Investment Assets shall be managed by external asset managers, except:  
  - investments in obligations of the Bank for International Settlements (BIS) and central bank deposits, and  
  - temporary interim management following termination of an external manager.
- The Managing Director shall select external asset managers of the highest professional standards.
- Adequate custody and safekeeping measures shall be established.
- Investment Assets of the Trusts shall be audited by the Fund’s external auditors and included in the annual financial statements.
- The Executive Board shall review these Guidelines and the Fund’s relevant conflict of interest policies at least every five years.

---

### Investment of Assets of the PRG Trust

### Investment objectives
- Purposes: (a) to generate income to support self-sustaining operations of the PRG Trust, (b) to provide security to lenders to the PRG Trust, and (c) to provide adequate liquidity for operational needs.
- Return target: generate a margin of 90 basis points above the three-month SDR rate, over a long-term investment horizon of at least 10 years.

### Target asset allocation (percent of Investment Assets of the PRG Trust)
- 60 percent in liquidity and short duration fixed-income components (specific allocation between these to be established by the Managing Director)  
- 15 percent in a component of corporate bonds  
- 5 percent in a component of emerging market government bonds  
- 20 percent in a component of global equities

### Eligible investments — liquidity component
- Limited to BIS deposits and central bank deposits, with maximum maturity of up to one year and denominated in SDR or currencies included in the SDR basket.

### Short duration fixed-income component (paragraph 16)
- Structure: two tranches — Tranche 1 (shorter-duration, actively managed) and Tranche 2 (longer-duration, buy-and-hold); maximum average duration of 3 years.
- Tranche 1 eligible asset classes: Group 1 and Group 2 asset classes.
- Tranche 2 eligible asset classes: Group 1 asset classes.
- Asset transfers between Tranche 1 and Tranche 2 and allocation of future inflows/outflows determined by the Managing Director.

### Definitions — Group 1 and Group 2 asset classes
- Group 1 asset classes limited to:  
  - debt obligations issued by national governments of members or their central banks;  
  - debt obligations issued by national agencies of members;  
  - debt obligations issued by supranational institutions; and  
  - obligations issued by the BIS, including deposits with the BIS and MTIs;  
  all denominated in SDR or currencies in the SDR basket.
- Group 2 asset classes limited to:  
  - debt obligations issued by national governments of members or their central banks denominated in non-SDR currencies selected by the Managing Director or, upon authorization, by external managers (currency selection based on ex-ante criteria);  
  - debt obligations denominated in SDR or SDR-basket currencies comprising: (I) securities issued by subnational governments; (II) mortgage-backed and other asset-backed securities; (III) covered bonds; and (IV) short-dated unsecured corporate bonds; and  
  - cash-equivalent investments with maturities of one year or less, denominated in SDR or SDR-basket currencies.

### Limits and divestment
- Up to the maximum 40 percent of the total value of the short duration fixed-income component may be invested in Group 2 asset classes; breaches require prompt action to restore the limit.
- Managing Director to establish parameters for corporate bond, emerging market government bond, and global equity components (and may exceptionally permit national government debt in the corporate bond component).
- Residual cash balances may be held temporarily uninvested or in short-term instruments sponsored by the custodian(s) or an affiliate.
- Liquidity component managed to meet operational needs.
- Short duration fixed-income component managed per paragraph 16.
- Corporate bonds, emerging market government bonds, and global equities shall be managed passively, except emerging markets equities may be managed actively.
- Rebalancing: allocation rebalanced at least annually to minimize deviation from targets in paragraph 14 or more frequently if significant deviation.
- Minimum credit ratings (at time of acquisition, except for obligations of the BIS, central bank deposits, uninvested cash balances and equities):  
  - corporate bonds: at least BBB- (Standard & Poor’s long-term rating scale)  
  - all other assets: at least BBB+ (Standard & Poor’s long-term rating scale)  
- Managing Director may establish higher credit ratings for eligible individual asset classes.
- For unrated assets, Managing Director may infer a credit rating consistent with market practice.
- Divestment: eligible investments that cease to meet rating thresholds or become otherwise ineligible shall be divested within three months, except corporate bonds which may be divested or retained per modalities established by the Managing Director.
- Safeguards: Managing Director shall establish safeguards against short selling and financial leverage.
- Use of derivatives: permitted for managing interest rate risk, currency hedging, or reducing costs in the context of portfolio balancing, benchmark replication and market access.
- Currency composition: liquidity, short duration fixed-income, and corporate bond components shall be aligned with, or hedged to, the SDR basket composition.

---

### Investment of Assets of the RS Trust

### Investment management and objectives
- Purposes: (a) to generate income to support RS Trust operations, (b) to provide security for RS Trust loans, and (c) to provide adequate liquidity for RS Trust withdrawal needs.
- Investment Assets shall be invested in liquidity and short duration fixed-income components, with the specific allocation between these two components to be established by the Managing Director.
- Liquidity component managed to meet operational needs.
- Short duration fixed-income component investment objective: achieve investment returns in SDR terms that exceed the 3-month SDR interest rate by a margin of 50 basis points over time while minimizing the frequency and extent of negative returns and underperformance over an investment horizon of three to four years.

### Eligible investments — liquidity component
- Limited to BIS deposits and central bank deposits, maximum maturity up to one year, denominated in SDR or currencies included in the SDR basket.

### Short duration fixed-income component (paragraph 33)
- Structure: two tranches — Tranche 1 (shorter-duration, actively managed) and Tranche 2 (longer-duration, buy-and-hold); maximum average duration of 3 years.
- Tranche 1 eligible asset classes: Group 1 and Group 2 asset classes (as defined below).
- Tranche 2 eligible asset classes: Group 1 asset classes.
- Asset transfers between Tranche 1 and Tranche 2 and allocation of future inflows/outflows determined by the Managing Director.

### Definitions — Group 1 and Group 2 asset classes (RS Trust)
- Group 1 asset classes limited to:  
  - debt obligations issued by national governments of members or their central banks;  
  - debt obligations issued by national agencies of members;  
  - debt obligations issued by supranational institutions; and  
  - obligations issued by the BIS, including deposits with the BIS and MTIs;  
  all denominated in SDR or the currencies included in the SDR basket.
- Group 2 asset classes limited to:  
  - debt obligations issued by national governments of members or their central banks denominated in non-SDR currencies selected by the Managing Director or, upon authorization, by external managers (currency selection based on ex-ante criteria);  
  - debt obligations denominated in SDR or SDR-basket currencies comprising: (I) securities issued by subnational governments; (II) mortgage-backed and other asset-backed securities; (III) covered bonds; and (IV) short-dated unsecured corporate bonds; and  
  - cash-equivalent investments with maturities of one year or less, denominated in SDR or SDR-basket currencies.
- Up to the maximum 40 percent of the total value of the short duration fixed-income component may be invested in Group 2 asset classes; breaches require prompt action to restore the limit.

*Italic: Source — ppea2022013 - Appendix III. RST Country Groupings for Interest and Margin Purposes (PDF).*

### 34.  In  addition to investing  in the assets as set out above, residual cash balances may be held

### ppea2022013 - 34.  In  addition to investing  in the assets as set out above, residual cash balances may be held

### Residual cash balances and short-term instruments
- Residual cash balances may be held temporarily uninvested, or in the short-term instruments sponsored by the custodian(s) or an affiliate.

### Minimum credit ratings (RST and related)
- Except for obligations of the BIS, central bank deposits, and uninvested cash balances, all assets in which the RS Trust invests must have a credit rating equivalent to at least BBB- for corporate bonds and BBB+ for all other assets (based on Standard & Poor’s long-term rating scale) by a major credit rating agency at the time of acquisition.
- The Managing Director may establish higher credit ratings for eligible individual asset classes.
- In cases where an asset is not directly rated, the Managing Director may determine whether a credit rating may be inferred for such asset in a manner that is consistent with market practice.

### Divestment rules (RST)
- Any eligible investment that ceases to meet the rating threshold under paragraph 35 or otherwise becomes ineligible after acquisition shall be divested within three months, except that corporate bonds which fail to meet the rating threshold under paragraph 35 after acquisition may be divested or continue to be retained in accordance with modalities established by the Managing Director.

### Limits on investment activities (RST)
- The Managing Director shall establish adequate safeguards against short selling and financial leverage.
- Derivatives may be used for managing interest rate risk, currency hedging, or reducing costs in the context of portfolio balancing, benchmark replication and market access.
- The currency composition of the liquidity and short duration fixed-income components shall be aligned with, or hedged to, the SDR basket composition.

### Other Trust Assets — Investment objectives (PRG-HIPC and CCR Trusts)
- The Investment Assets of the PRG-HIPC and CCR Trusts shall be invested to enhance returns subject to the liquidity requirements of each Trust while limiting the risk of impairment of capital over an investment horizon of no more than three years.

### Eligible investments (PRG-HIPC and CCR Trusts)
- Investment Assets of each Trust shall be invested in a liquidity component and an investment component, with the specific allocation determined by the Managing Director.
- Liquidity component:
  - Limited to BIS deposits and central bank deposits, in each case with a maximum maturity of up to one year and denominated in SDR or currencies included in the SDR basket.
- Investment component:
  - Limited to marketable obligations issued by a member or by a national official financial institution of a member that are denominated in SDR;
  - Marketable obligations issued by a member or by a national official financial institution of a member whose currency is in the SDR basket and that are denominated in the currency of that member;
  - Marketable obligations issued by international financial organizations and denominated in SDR or in a currency in the SDR basket;
  - Deposits with a commercial bank, a national financial institution of a member, or an international financial institution that are denominated in SDR or in a currency in the SDR basket.
- The investment component shall have a maximum average duration of three years.

### Investment management (PRG-HIPC and CCR Trusts)
- The liquidity component shall be managed to meet the operational needs of the respective trust.
- The investment component shall be managed actively except for investments in obligations of the BIS and central bank deposits managed by the Managing Director.

### Currency composition rebalancing (PRG-HIPC and CCR Trusts)
- The currency composition of the Investment Assets of the PRG-HIPC and CCR Trusts shall be rebalanced periodically to the SDR basket composition.

### Minimum credit ratings (PRG-HIPC and CCR Trusts)
- Except for obligations of the BIS, central bank deposits and uninvested cash balances, all assets in which the PRG-HIPC Trust and CCR Trust invest must have a credit rating equivalent to at least A (based on Standard & Poor’s long-term rating scale) by a major credit rating agency at the time of acquisition.
- In cases where an asset is not directly rated, the Managing Director may determine whether a credit rating may be inferred for such asset in a manner that is consistent with market practice.

### Divestment rules (PRG-HIPC and CCR Trusts)
- Any eligible investment that ceases to meet the rating threshold in paragraph 48 or otherwise becomes ineligible after acquisition shall be divested within three months.

### Limits on investment activities (PRG-HIPC and CCR Trusts)
- The Managing Director shall establish adequate safeguards against short selling and financial leverage.
- Derivatives shall be prohibited except for forwards entered into for purposes of currency hedging with eligible issuers under paragraph 43.

### Use of currencies
- Investment which does not involve an exchange of currency shall be made only after consultation with the member whose currency is to be used, or, when an exchange of currencies is involved, with the consent of the issuers of such currencies.

### Policy Support Instrument (PSI) — applicability and structure (redlined changes)
- PSI eligibility:
  - Available upon request to members eligible for assistance under the Poverty Reduction and Growth Trust (PRGT) and that: (a) have a policy framework focused on consolidating macroeconomic stability and debt sustainability, while deepening structural reforms; and (b) seek to maintain a close policy dialogue with the Fund through endorsement and assessment under a PSI.
- A PSI is a decision of the Executive Board setting forth a framework for assessment and endorsement of a member’s economic and financial policies.
- Duration:
  - A PSI may be approved for a duration of one to four years, and may be extended up to an overall maximum period of five years.
- Members with overdue financial obligations to the GRA, PRGTF Trust or the Resilience and Sustainability Trust (RST) are not eligible for a PSI.
- The member’s Program Documents:
  - Initial Program Documents will include: (a) a macroeconomic policy framework, including a quantified framework for at least the first 12 months under the PSI, with quantitative targets set at regular intervals, and proposed assessment criteria for the first twelve months; and (b) key structural measures needed to meet program objectives.
- Applicability of certain UFR policies:
  - The Guidelines on Conditionality (Decision No. 12864-(02/102), September 25, 2002) shall apply where relevant and except where this Decision sets forth different or more specific provisions.
- Other Fund policies apply by analogy to PSIs: (a) requirement of full program financing; (b) arrears to official sector and external private creditors; (c) use of side letters; and (d) Guidelines on Public Debt Conditionality in Fund Arrangements.
- Termination of a PSI:
  - A member may cancel a PSI at any time by notifying the Fund.
  - A PSI terminates upon: (a) the member incurring overdue financial obligations to the GRA, or PRGT, RST; or (b) noncompletion of two consecutive PSI scheduled reviews; provided that, in lieu of clause (b), for members whose PSI reviews are scheduled at the same time as ESF- or SCF-supported program reviews, the PSI will terminate if no scheduled review is completed within twelve months of the completion of the last scheduled review; or (c) approval for the relevant member of an arrangement under the Extended Credit Facility of the PRGT.
- Periodic review:
  - The Fund will review application of this Decision at intervals of five years.

### Policy Coordination Instrument (PCI) — framework (Decision No. 16230-(17/62))
- Objective:
  - Support countries in designing and implementing policies through a full-fledged macroeconomic program to (a) prevent crises and build buffers, (b) enhance macroeconomic stability, or (c) address macroeconomic imbalances.
- Eligibility:
  - Available upon request to members that: (a) at the time of the request do not require and are not seeking financial assistance from the GRA or PRGT; and (b) seek to maintain a close policy dialogue with the Fund through endorsement and assessment under a PCI.
- Duration:
  - A PCI may be approved for a duration of six months to four years, and may be extended up to an overall maximum period of four years.
- PCI availability:
  - The PCI will be available to all member countries for the purposes outlined in paragraph 1, without further qualification criteria, except members with overdue financial obligations to the GRA, PRGT, or RST.
- Member’s Program Statement:
  - Initial Program Statement will include: (a) a macroeconomic policy framework based upon a quantified framework for at least the first twelve months under the PCI; (b) Standard Continuous Targets; and (c) either Quantitative Targets or Reform Targets, or both, set for at least the first twelve months.
- Termination of a PCI:
  - A member may cancel a PCI at any time by notifying the Fund.
  - A PCI will terminate upon: (a) the member incurring overdue financial obligations to the GRA, or PRGT or RST; (b) noncompletion of a review for a twelve-month period; or (c) approval for the member of an arrangement with the Fund other than an SBA or SCF arrangement or an arrangement under the Resilience and Sustainability Facility. Approval of access under the Rapid Financing Instrument or Rapid Credit Facility will not cause termination of a PCI.
  - In the case of cancellation or termination, a brief factual statement noting such shall be published.
- Periodic review:
  - The Fund will review application of this Decision five years after its adoption or after the tenth PCI is approved by the Executive Board, whichever is first, or earlier if warranted.

### Instrument to Establish Poverty Reduction and Growth Trust — selected provisions
- Section II, (e) General Provisions:
  - (1) A member may not obtain assistance from the Trust under the ECF, SCF or ESF at the same time. A member may obtain assistance under the RCF when it has an ECF, ESF, or SCF arrangement in place if (a) disbursements under the relevant arrangement are delayed due to delays in program implementation, nonobservance of conditions attached to disbursements or delays in reaching new understandings when necessary, and (b) the member’s balance of payments need giving rise to the request for assistance under the RCF is caused primarily by a sudden and exogenous shock.
  - (2) Commitments under arrangements under this Instrument may be made for the period through December 31, 2024.
  - (3) The Managing Director shall not recommend for approval, and the Trustee shall not approve, a request for a disbursement under the RCF or an arrangement under this Instrument whenever the member has an overdue financial obligation to the Fund in the General Resources Account, the Special Disbursement Account, or the SDR Department, or to the Fund as Trustee (including as Trustee of the Resilience and Sustainability Trust), or while the member is failing to meet a repurchase expectation to the Fund pursuant to Decision No. 7842-(84/165) on the Guidelines on Corrective Action, or is failing to meet a repayment expectation pursuant to Section II, paragraph 3(c) or the provisions of Appendix I to this Instrument, or is failing to meet a repayment expectation pursuant to the provisions of Appendix I of the Instrument to Establish the Resilience and Sustainability Trust, Annex to Decision No. [RST Decision 1].

### Section VII. Administration of the Trust — Trustee and implementation
- Paragraph 1. Trustee:
  - (a) The Trust shall be administered by the Fund as Trustee. Decisions and other actions taken by the Fund as Trustee shall be identified as taken in that capacity.
  - (b) Subject to the provisions of this Instrument, the Fund in administering the Trust shall apply the same rules as apply to the operation of the General Resources Account of the Fund.
  - (c) The Trustee, acting through its Managing Director, is authorized:
    - (i) to make all arrangements, including establishment of accounts in the name of the International Monetary Fund, which shall be accounts of the Fund as Trustee, with such depositories of the Fund as the Trustee deems necessary; and
    - (ii) to take all other administrative measures that the Trustee deems necessary to implement the provisions of this Instrument.

### Separation of assets, audit and reports
- (a) The resources of the Trust shall be kept separate from the property and assets of all other accounts of the Fund, including other trusts and administered accounts, and shall be used only for the purposes of the Trust in accordance with this Instrument; provided however that for investment purposes, resources of the Trust may be pooled with resources of other trusts or accounts administered by the Fund for the benefit of others under arrangements that allow for the attribution of pooled investments to each relevant trust or account.
- (b) The property and assets held in the other accounts of the Fund shall not be used to discharge liabilities or to meet losses arising out of the administration of the Trust. The resources of the Trust shall not be used to discharge liabilities or to meet losses arising out of the administration of the other accounts of the Fund.
- (c) The Fund shall maintain separate financial records and prepare separate financial statements for the Trust.
- (d) The external audit firm selected under Section 20 of the Fund’s By-Laws shall audit the financial transactions and records of the Trust. The audit shall relate to the financial year of the Fund.
- (e) The Fund shall report on the resources and operations of the Trust in the Annual Report of the Executive Board to the Board of Governors and shall include in that Annual Report the report of the external audit firm on the Trust.

### Appendix II — Procedures for addressing overdue financial obligations to the PRGT
- Purpose:
  - Procedures aim at preventing the emergence or accumulation of overdue financial obligations to the Poverty Reduction and Growth Trust and at eliminating existing overdue obligations.
- Implementation trigger:
  - These procedures will be implemented whenever a member has failed to make a repayment of principal or payment of interest to the Trust (“financial obligation”).
- Immediate action on missed payment:
  - 1. Whenever a member fails to settle a financial obligation on time, the staff will immediately send a cable communication urging the member to make the payment promptly; this communication will be followed up through the office of the Executive Director concerned. At this stage, the member’s access to the Fund’s resources, including Poverty Reduction and Growth Trust, Resilience and Sustainability Trust, and HIPC resources, will have been suspended.

*International Monetary Fund — Proposal to Establish a RST: Proposed Decisions and Instrument (excerpts).*

### 5. A report by the Managing Director to the Executive  Board will be issued two  months after a

### 5. A report by the Managing Director to the Executive Board will be issued two months after a

### Procedures for members with overdue financial obligations
- A report/complaint by the Managing Director is issued two months after a financial obligation has become overdue, and will be given substantive consideration by the Executive Board one month later.
- The report will request that the Executive Board limit the member’s use of Trust resources.
- Periods between subsequent reviews of reports on the member’s arrears by the Executive Board will normally not exceed six months.
- The Managing Director may recommend advancing the Executive Board’s consideration of the reports regarding overdue obligations.
- The Managing Director may recommend postponing for up to one-year periods the Executive Board’s consideration of a report regarding a member’s overdue obligations in exceptional circumstances where the Managing Director judges that there is no basis for an earlier evaluation of the member’s cooperation with the Fund.

### Public disclosure and suspension of access
- When a member has overdue financial obligations outstanding for more than three months, a brief factual statement noting the existence and amount of such arrears will be posted on the member’s country-specific page on the Fund’s external website.
- The statement will indicate that the member’s access to the Fund’s resources, including Poverty Reduction and Growth Trust, Resilience and Sustainability Trust, and HIPC resources, has been and will remain suspended for as long as such arrears remain outstanding.
- The statement will be updated as necessary.

### Press releases and Annual Report
- A press release will be issued following the Executive Board decision to limit the member’s use of the Trust resources. A similar press release will be issued following a decision to lift such limitation.
- A press release will be issued following the Executive Board’s decision to limit the member’s use of the general resources or, if the member has overdue obligations in the SDR Department, to suspend its right to use SDRs; a similar press release will be issued following a decision to lift such limitation or suspension.
- The Annual Report and the financial statements identify those members with overdue obligations outstanding for more than six months.

### Stand-By and Extended Arrangements — restrictions
- Under the Form of Stand-By Arrangement (Attachment A) and Form of Extended Arrangement (Attachment B):
  - (Member) will not make purchases under the arrangement during any period in which (Member): (i) has an overdue financial obligation to the Fund or is failing to meet a repurchase expectation pursuant to Decision No. 7842-(84/165); or (ii) is failing to meet a repayment obligation to the PRG Trust established by Decision No. 8759-(87/176) PRGT, as amended, or a repayment expectation pursuant to Appendix I to the PRG Trust Instrument; or (iii) is failing to meet a repayment obligation to the Resilience and Sustainability Trust (RST) established by Decision No. [RST Decision 1], or a repayment expectation to that Trust pursuant to the provisions of Appendix II to the RST Instrument.

### Lapse of time procedures for completion of program reviews
- The Fund approves lapse of time procedures for completion of program reviews as set out in the Attachment to Decision A.
- Eligibility for lapse of time completion requires all of the following conditions to apply:
  (i) the relevant arrangement does not involve exceptional access;
  (ii) the most recent program review under the relevant arrangement was not concluded on a lapse of time basis;
  (iii) the relevant review is to be completed under an ECF or an SCF arrangement and does not take place immediately after completion of an ad-hoc review under an ECF or SCF arrangement pursuant to Section II, paragraph 2(h) of the PRGT Instrument;
  (iv) the review to be completed does not raise general policy issues requiring Board discussion;
  (v) all prior actions for the review have been met;
  (vi) the review does not introduce major changes in the objectives or design of the program, including but not limited to, major changes in conditionality for future reviews, the combination of future reviews envisaged under the arrangement, the rephasing of disbursements, or an augmentation of access other than an augmentation of access not exceeding 12.5 percent of a member quota approved pursuant to Section II, paragraph 2(h) of the PRGT Instrument; and
  (vii) performance under the member’s program does not raise concerns as to whether the review should be completed, in particular as a result of deviations, other than minor deviations, from the quantitative performance criteria and structural benchmarks.
- A review under a Resilience and Sustainability Facility arrangement would be eligible for lapse of time completion where (i) the review under the accompanying arrangement or instrument supporting the member’s upper credit tranche-quality program meets the criteria above; and (ii) staff has determined that all reform measures to be assessed under the review have been implemented.
- Procedures for proposing lapse of time: the Managing Director’s proposal is made at the time of circulation of the staff paper and the cover memorandum will (i) include a deadline for Executive Directors to object; (ii) specify the date upon which the decision will become effective if no objection is received; (iii) specify a reserved date for discussion if an Executive Director objects; and (iv) explain reasons why lapse of time completion is warranted.

### Post Financing Assessment (PFA)
- PFA is expected when outstanding credit to a member exceeds any of the thresholds specified below and the member does not have a program supported by a Fund arrangement or is not implementing a staff monitored program with reports issued to the Executive Board, or does not have a program supported by a PSI or PCI:
  a. 200 percent of quota for credit from the Fund’s General Resources Account (GRA), or from the Fund as Trustee of the PRGT, or from the Fund as Trustee of the RST, or a combination thereof;
  b. an amount equivalent to SDR 1.5 billion for credit from the Fund’s GRA; or
  c. an amount equivalent to SDR 0.38 billion from the PRGT; or
  d. an amount equivalent to SDR 0.38 billion from the RST.
- Where the above criteria are met, the Managing Director shall recommend PFA to the Executive Board, unless the Managing Director judges the member’s circumstances make the process unwarranted (e.g., strength of policies, external position, or a successor arrangement or program expected within the next six months).
- PFA will normally cease when the member’s outstanding credit falls below all applicable thresholds.
- The Managing Director may also propose PFA when outstanding credit is below the thresholds if developments suggest the need for closer monitoring.

### 2018 Review of the Fund’s Transparency Policy — publication consent requirements
- The Managing Director will not recommend Executive Board approval for:
  (i) an arrangement under the PRGT or completion of a review under such arrangement, or
  (ii) a HIPC decision point or completion point decision, or
  (iii) a member’s request for a PSI or the completion of a review under a PSI,
  if the member does not explicitly consent to publication of its I-PRSP, PRSP, PRSP preparation status report, PRSP annual progress report (APR) or Economic Development Document (“EDD”) (Document 10 or Document 15, as the case may be).
- The Managing Director will generally not recommend that the Executive Board approve a request for:
  (i) access to resources in the GRA, or the PRGT or the Resilience and Sustainability Trust, or
  (ii) access to Fund resources under the HIPC Trust, or
  (iii) assistance through a PSI or a PCI,
  unless that member explicitly consents to the publication of the associated staff report.
- For purposes of paragraph 4(b), approval of the use of the Fund’s resources includes completion of a review under an arrangement and assistance through a PSI or a PCI includes completion of a review under the PSI or the PCI.
- In the case of the PCI, where a member does not provide consent to publication of an interim performance update, the Managing Director may take this into account when determining whether to recommend that the Executive Board approve a subsequent review of the member’s PCI.

### Investment guidelines — general provisions and responsibilities
- These Guidelines establish investment objectives and policies to guide investment of resources of the PRG Trust, RS Trust, PRG-HIPC Trust, and CCR Trust.
- Investment Assets consist of resources transferred from the Special Disbursement Account (SDA) and donor contributions to the respective Trust.
- The Managing Director is responsible for implementing the investment policies and shall:
  (a) establish effective decision-making and oversight arrangements;
  (b) take measures to avoid actual or perceived conflicts of interest;
  (c) adopt responsible investing principles that incorporate environmental, social, and governance (ESG) considerations into the investment process; and
  (d) establish specific risk control measures and mechanisms to monitor observance by asset managers.
- The Managing Director shall consult with the Executive Board regarding key conflicts of interest policies and responsible investment principles and arrangements.
- The Managing Director shall provide annual reports to the Executive Board on the investment activities of the Trusts; ad hoc reports as warranted.
- Investment Assets of the Trusts shall be managed by external managers, except the Managing Director is authorized to manage:
  (a) investments in obligations of the Bank for International Settlements (BIS) and central bank deposits; and
  (b) other Investment Assets of the Trusts on an interim basis following termination of an external asset manager pending transfer to another external asset manager.
- The Managing Director shall only select external asset managers of the highest professional standards and shall establish adequate custody and safekeeping measures.
- Investment Assets of the Trusts shall be audited by the Fund’s external auditors and included in the annual financial statements of the Fund.
- The Executive Board shall review these Guidelines and relevant conflict of interest policies at least every five years.

### Investment of assets of the PRG Trust — objectives and allocations
- Investment objectives for the PRG Trust Investment Assets:
  (a) to generate income to support the self-sustaining operations of the PRG Trust;
  (b) to provide security to lenders to the PRG Trust; and
  (c) to provide adequate liquidity for the PRG Trust’s operational needs.
- The return target of the PRG Trust’s investment is to generate a margin of 90 basis points above the three-month SDR rate, over a long-term investment horizon of at least 10 years.
- Target asset allocation (as a percent of the Investment Assets of the PRG Trust):
  - 60 percent in liquidity and short duration fixed-income components, with the specific allocation between these two components to be established by the Managing Director;
  - 15 percent in a component of corporate bonds;
  - 5 percent in a component of emerging market government bonds;
  - 20 percent in a component of global equities.
- Eligible investments — liquidity component:
  - Limited to BIS deposits and central bank deposits, each with a maximum maturity of up to one year and denominated in SDR or currencies included in the SDR basket.
- Short duration fixed-income component guidelines:
  - The component consists of two tranches and shall have a maximum average duration of 3 years.
  - Tranche 1 assets shall be managed actively. Eligible asset classes for Tranche 1 are Group 1 and Group 2 asset classes.
  - Tranche 2 assets shall be managed according to a buy-and-hold investment approach. Eligible asset classes for Tranche 2 are Group 1 asset classes.
  - Asset transfers between Tranche 1 and Tranche 2 and allocation of future inflows/outflows to tranches determined by the Managing Director.
- Definitions of Group asset classes:
  - Group 1 asset classes limited to:
    A. debt obligations issued by national governments of members or their central banks;
    B. debt obligations issued by national agencies of members;
    C. debt obligations issued by supranational institutions; and
    D. obligations issued by the BIS, including without limitation deposits with the BIS and MTIs;
    all denominated in SDR or the currencies included in the SDR basket.
  - Group 2 asset classes limited to:
    A. debt obligations issued by national governments of members or their central banks denominated in non-SDR currencies selected by the Managing Director or, upon authorization by the Managing Director, by external managers, provided any currency selection is based on ex-ante criteria determined by the Managing Director;
    B. debt obligations denominated in SDR or the currencies included in the SDR basket, comprising: (I) securities issued by subnational governments; (II) mortgage-backed and other asset-backed securities; (III) covered bonds; and (IV) short-dated unsecured corporate bonds; and
    C. cash-equivalent investments with maturities of one year or less, denominated in SDR or the currencies included in the SDR basket.
- Risk limit for Group 2 exposure:
  - Up to the maximum 40 percent of the total value of the short duration fixed-income component may be invested in Group 2 asset classes; breach of this limit shall require prompt action to bring the short duration fixed-income component back within the established limit.

*Italic: IMF — Proposal to Establish a RST — Proposed Decisions and Instrument (excerpts).*

### 17.  The Managing Director shall establish the parameters for determining the  specific assets

### 17.  The Managing Director shall establish the parameters for determining the  specific assets eligible for the  corporate bond, emerging market government bond and global equity components, and for duration and currency requirements for the corporate bond and emerging market government bond components. On an exceptional basis, the Managing Director may permit the inclusion  of debt obligations issued by national governments of members or their central banks in the corporate bond component.

### Eligible assets and parameters
- Corporate bond, emerging market government bond, and global equity components: specific assets and duration and currency requirements to be established by the Managing Director.
- Exceptional allowance: debt obligations issued by national governments of members or their central banks may be included in the corporate bond component at the Managing Director’s discretion.
- Residual cash balances: may be held temporarily uninvested, or in short-term instruments sponsored by the custodian(s) or an affiliate.

### Investment management (PRG Trust and general)
- Liquidity component: shall be managed to meet the operational needs of the PRG Trust.
- Short duration fixed-income component: shall be managed in accordance with paragraph 16 (as referenced).
- Corporate bonds, emerging market government bonds, and global equities: shall be managed passively, except emerging markets equities which may be managed actively.

### Target asset allocation rebalancing
- Rebalancing frequency: allocation of the Investment Assets of the PRG Trust shall be rebalanced at least annually to minimize deviation from the allocation targets under paragraph 14 or more frequently in the event of significant deviation.

### Minimum credit ratings (PRG Trust)
- Rating thresholds at acquisition (based on Standard & Poor’s long-term rating scale):
  - Corporate bonds: at least BBB-.
  - All other assets (except obligations of the BIS, central bank deposits, uninvested cash balances and equities): at least BBB+.
- The Managing Director may establish higher credit ratings for eligible individual asset classes.
- For assets not directly rated: the Managing Director may determine whether a credit rating may be inferred in a manner consistent with market practice.

### Divestment (PRG Trust)
- Any eligible investment that ceases to meet the rating threshold under paragraph 23 or otherwise becomes ineligible after acquisition shall be divested within three months.
- Exception: corporate bonds which fail to meet the rating threshold after acquisition may be divested or continued to be retained in accordance with modalities established by the Managing Director.

### Limits on investment activities (PRG Trust)
- The Managing Director shall establish adequate safeguards against short selling and financial leverage.
- Derivatives: may be used for managing interest rate risk, currency hedging, or reducing costs in the context of portfolio balancing, benchmark replication and market access.
- Currency composition: of the liquidity, short duration fixed-income, and corporate bond components shall be aligned with, or hedged to, the SDR basket composition.

### INVESTMENT OF ASSETS OF THE RS TRUST

### Investment management and objectives (RS Trust)
- Purposes of Investment Assets: (a) to generate income to support RS Trust operations, (b) to provide security for RS Trust loans, and (c) to provide adequate liquidity for the RS Trust’s withdrawal needs.
- Investment components: liquidity and short duration fixed-income components; specific allocation to be established by the Managing Director.
- Liquidity component: shall be managed to meet the operational needs of the RS Trust.
- Short duration fixed-income component objective: achieve investment returns in SDR terms that exceed the 3-month SDR interest rate by a margin of 50 basis points over time while minimizing the frequency and extent of negative returns and underperformance over an investment horizon of three to four years.

### Eligible investments (RS Trust)
- Liquidity component limits: BIS deposits and central bank deposits, each with a maximum maturity of up to one year and denominated in SDR or currencies included in the SDR basket.
- Short duration fixed-income component guidelines (paragraph 33):
  - Overall maximum average duration: 3 years.
  - Structure: two tranches:
    - Tranche 1: shorter-duration, managed actively; eligible asset classes = Group 1 and Group 2.
    - Tranche 2: longer-duration, managed on a buy-and-hold approach; eligible asset classes = Group 1.
  - Asset transfers between Tranche 1 and Tranche 2 and allocation of future inflows/outflows: determined by the Managing Director.
- Group 1 asset classes limited to:
  - A. debt obligations issued by national governments of members or their central banks;
  - B. debt obligations issued by national agencies of members;
  - C. debt obligations issued by supranational institutions;
  - D. obligations issued by the BIS, including without limitation deposits with the BIS and MTIs;
  - all denominated in SDR or currencies in the SDR basket.
- Group 2 asset classes limited to:
  - A. debt obligations issued by national governments of members or their central banks denominated in non-SDR currencies selected by the Managing Director or, upon authorization by the Managing Director, by external managers, provided any currency selection is based on ex-ante criteria determined by the Managing Director;
  - B. debt obligations denominated in SDR or currencies in the SDR basket, comprising: (I) securities issued by subnational governments; (II) mortgage-backed and other asset-backed securities; (III) covered bonds; and (IV) short-dated unsecured corporate bonds;
  - C. cash-equivalent investments with maturities of one year or less, denominated in SDR or currencies in the SDR basket.
- Limit on Group 2 exposure: Up to the maximum 40 percent of the total value of the short duration fixed-income component may be invested in Group 2 asset classes; breach requires prompt action to return within the established limit.
- Residual cash balances: may be held temporarily uninvested, or in short-term instruments sponsored by the custodian(s) or an affiliate.

### Minimum credit ratings (RS Trust)
- Except for obligations of the BIS, central bank deposits, and uninvested cash balances, all assets must have a credit rating equivalent to at least BBB- for corporate bonds and BBB+ for all other assets (based on Standard & Poor’s long-term rating scale) by a major credit rating agency at the time of acquisition.
- The Managing Director may establish higher credit ratings for eligible individual asset classes.
- For assets not directly rated: the Managing Director may determine whether a credit rating may be inferred consistent with market practice.

### Divestment (RS Trust)
- Any eligible investment that ceases to meet the rating threshold under paragraph 35 or otherwise becomes ineligible after acquisition shall be divested within three months.
- Exception: corporate bonds which fail to meet the rating threshold after acquisition may be divested or continued to be retained in accordance with modalities established by the Managing Director.

### Limits on investment activities (RS Trust)
- The Managing Director shall establish adequate safeguards against short selling and financial leverage.
- Derivatives: may be used for managing interest rate risk, currency hedging, or reducing costs in the context of portfolio balancing, benchmark replication and market access.
- Currency composition: of the liquidity and short duration fixed-income components shall be aligned with, or hedged to, the SDR basket composition.

### OTHER TRUST ASSETS (PRG-HIPC and CCR Trusts)

### Investment objectives
- Investment Assets of the PRG-HIPC and CCR Trusts: invested to enhance returns subject to liquidity requirements while limiting the risk of impairment of capital over an investment horizon of no more than three years.

### Eligible investments
- Structure: liquidity component and an investment component; specific allocation determined by the Managing Director.
- Liquidity component limits: BIS deposits and central bank deposits, each with a maximum maturity of up to one year and denominated in SDR or currencies included in the SDR basket.
- Investment component limited to:
  - marketable obligations issued by a member or by a national official financial institution of a member that are denominated in SDR;
  - marketable obligations issued by a member or by a national official financial institution of a member whose currency is in the SDR basket and that are denominated in the currency of that member;
  - marketable obligations issued by international financial organizations and denominated in SDR or in a currency in the SDR basket;
  - deposits with a commercial bank, a national financial institution of a member, or an international financial institution denominated in SDR or in a currency in the SDR basket.
- Investment component maximum average duration: three years.

### Investment management
- Liquidity component: managed to meet operational needs of the respective trust.
- Investment component: shall be managed actively except for investments in obligations of the BIS and central bank deposits managed by the Managing Director.

### Currency composition rebalancing
- The currency composition of the Investment Assets of the PRG-HIPC and CCR Trusts shall be rebalanced periodically to the SDR basket composition.

### Minimum credit ratings (PRG-HIPC and CCR Trusts)
- Except for obligations of the BIS, central bank deposits and uninvested cash balances, all assets must have a credit rating equivalent to at least A (based on Standard & Poor’s long-term rating scale) by a major credit rating agency at the time of acquisition.
- For assets not directly rated: the Managing Director may determine whether a credit rating may be inferred consistent with market practice.

### Divestment (PRG-HIPC and CCR Trusts)
- Any eligible investment that ceases to meet the rating threshold in paragraph 3648 or otherwise becomes ineligible after acquisition shall be divested within three months.

### Limits on investment activities (PRG-HIPC and CCR Trusts)
- The Managing Director shall establish adequate safeguards against short selling and financial leverage.
- Derivatives: shall be prohibited except for forwards entered into for purposes of currency hedging with eligible issuers under paragraph 3143.

### Use of currencies
- Investment which does not involve an exchange of currency: shall be made only after consultation with the member whose currency is to be used.
- Investment involving an exchange of currencies: shall be made with the consent of the issuers of such currencies.

*Source: ppea2022013 - 17.  The Managing Director shall establish the parameters for determining the  specific assets eligible for the corporate bond, emerging market government bond and global equity components, and for duration and currency requirements for the corporate bond and emerging market government bond components.*

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_Source: https://www.imf.org/-/media/files/publications/pp/2022/english/ppea2022013.pdf_