## EXECUTIVE SUMMARY ## Source details **Canonical URL:** [EXECUTIVE SUMMARY](https://www.imf.org/-/media/files/publications/pp/2022/english/ppea2022041.pdf) ## Other formats - [Markdown version](/-/media/files/publications/pp/2022/english/ppea2022041.pdf.md) - [Structured JSON version](/-/media/files/publications/pp/2022/english/ppea2022041.pdf.json) --- ### Purpose and proposal - Proposal to amend the Staff-Monitored Program (SMP) policy to allow for limited Executive Board involvement in a narrowly tailored subset of SMPs, to be called “Program Monitoring with Board Involvement” or “PMBs”. - PMBs would allow the Executive Board to opine on the robustness of a member’s policies to meet stated objectives under an SMP and to monitor implementation, while preserving the informal, staff-monitored nature of SMPs approved by Management. - PMBs are intended to support members in designing, implementing, and monitoring policies under often complex circumstances and to help build or rebuild a track record toward Upper Credit Tranche (UCT) Use of Fund Resources (UFR). ### Rationale and background - Under the Fund’s current toolkit, Executive Board monitoring and endorsement in non-financing contexts is limited to UCT-quality instruments (the Policy Coordination Instrument (PCI) and the Policy Support Instrument (PSI)); no existing instrument allows Board monitoring of programs that do not meet UCT-quality. - SMPs have historically been the Fund’s primary modality to build or rebuild track record for UCT-UFR and are informal agreements approved by Management and monitored by staff; they are generally sent only for information to the Executive Board. - A precedent exists in the HIPC Initiative where, in limited circumstances, the Executive Board could “endorse” SMP performance for HIPC Decision Point qualification where the Board agreed with staff that SMP policies met UCT-quality standards. - Concerns about preserving the “signaling” strength of Board endorsement motivate limiting any expanded Board role to narrowly defined cases. ### Eligibility and targeted circumstances for PMB use - PMBs would be available only to members seeking to establish or re-establish a track record for UCT-UFR and who meet either: - Criterion (i): are benefiting from an ongoing concerted international effort by the international community to provide substantial new financing/debt relief in support of the member’s policy program; or - Criterion (ii): have significant Fund credit outstanding under emergency financing instruments at the time they obtain new emergency financing. - Staff would strongly encourage members seeking an SMP who meet criterion (i) or (ii) to request a PMB. ### Proposed criteria and thresholds - For criterion (i): Whether there is an “ongoing concerted international effort by the international community to provide substantial new financing/debt relief” is a matter of staff and management judgment, considering factors such as: - The extent to which Fund members have expressed their commitment to provide financing/debt relief to a member; and - Whether the amount of such financing/debt relief, in total, would be likely to restore debt sustainability and close financing gaps in the context of a future Fund-supported program. - For criterion (ii): Criterion met if a member receives new emergency financing under the Rapid Credit Facility or the Rapid Financing Instrument, which brings total credit exposure outstanding from emergency financing at or above 100 percent of quota arising. ### Key features of the PMB (Staff Proposal) - Role of the Executive Board: - PMBs would continue to be approved by Management and monitored by staff for track-record building. - Drawing from the HIPC precedent, the Executive Board would be allowed to opine in a summing up on whether the policies under the PMB approved by Management are robust to meet the program’s objectives, and to monitor implementation through Board discussion at approval and in periodic reviews. - At PMB approval, the Executive Board would, in a summing up, indicate its assessment of the robustness of the member’s policy program to meet the stated objectives of the PMB and achieve the purpose of building or rebuilding a track record toward UCT-UFR. - In reviews, the Board would opine in a summing up whether it agrees with staff that the member is on track to achieve PMB objectives. - The Executive Board would not set conditionality or endorse a member’s policy measures as it does for UCT-quality instruments. - Availability: - A PMB would only be available to members seeking to establish or re-establish a track record for UCT-UFR and meeting either criterion (i) or (ii) above. - Program design: - Program design would follow current SMP guidance, tailored to the authorities’ objectives and member circumstances, and consistent with the overall objective to establish or re-establish a satisfactory track record. - A PMB could be targeted toward key macroeconomic or financial issues or could entail broader macroeconomic and financial reforms across sectors. - Voluntary but encouraged: - The PMB would remain technical assistance and voluntary for both the Fund and the member; strongly encouraged for members meeting eligibility criteria but not mandatory. - Communication and publication: - Clear communication is critical to distinguish PMBs from SMPs and Board-monitored non-financing instruments (PCI and PSI). - Communications after the Board discussion would clearly indicate (i) that the PMB is monitored by staff and approved by Management; and (ii) the limited nature of the Board’s involvement—assessment against the PMB’s stated objectives and the track-record building purpose, not the UCT-quality standard. - Publication of PMB staff reports would be voluntary but presumed. - Safeguards and interaction with other policies: - By design, the PMB would not undermine the PCI and PSI or dilute the signaling effect of Board endorsement for UCT-quality programs. - The Executive Board assessment would be incorporated into the Press Release. - Under the Fund’s framework for Post Financing Assessments (PFA), members are expected to engage in PFA where total outstanding credit exceeds certain thresholds and the member is not implementing a Fund arrangement or an SMP. The Managing Director has flexibility to not recommend PFA where an SMP is expected to be in place within the next six months. Given that the PMB is a subset of the SMP, the exceptions in the PFA policy for SMPs would apply equally to PMBs. ### Scope, timing, and review - The PMB policy would be effective upon Executive Board endorsement and reviewed no later than end-September, 2023. - Members with existing SMPs who meet PMB criterion (i) or (ii) could avail themselves immediately of the new policy. - Experience with the PMB would be reviewed no later than end-September 2023 to determine whether to revise or eliminate the instrument as needed. ### Issues for discussion for Executive Directors - (i) Do Directors agree with the set of circumstances under which the proposed PMB would become available and the limited role of the Executive Board in the PMB as outlined? - (ii) Do Directors agree that clear communication is critical to distinguish the PMB from other monitoring instruments and that experience with the PMB should be reviewed no later than end-September 2023? ### Comparative summary of non-financing instruments (as presented) - Staff-Monitored Program (SMP): - Purpose: Track-Record Building - Eligible Members: All Non-UCT (*except for HIPC track record) - UCT-Quality Program: No (Management approval; Board’s endorsement of UCT-quality only in HIPC context) - BOP Need: None required - Duration: Generally 9–18 months (longer durations not precluded) - Policy Coordination Instrument (PCI): - Purpose: Signaling - Eligible Members: All - UCT-Quality Program: Yes - Approved by: Board - BOP Need: BOP need may exist, but would be expected to be met through financing from non-Fund sources - Duration: Normally 2–3 years (min. 6 months–4 years) - Policy Support Instrument (PSI): - Purpose: Signaling - Eligible Members: PRGT-eligible members - UCT-Quality Program: Yes - Approved by: Board - BOP Need: BOP need may exist, but would be expected to be met through financing from non-Fund sources - Duration: 1–4 years (can be extended to up to 5 years); at time of approval, must be in a broadly stable and sustainable macroeconomic position. ### Annex I. Non-Financing/Monitoring Instruments — Enterprise Risk Self-Assessment - Enterprise Risk Self-Assessment performed by staff with guidance from ORM to identify and assess enterprise risks to the Fund that may arise without the proposal and/or be incurred upon the approval of the proposal. - Member engagement — Identified risks and mitigations - Risk Name: Member engagement - Risk Description: - Under the Fund’s current toolkit, there is no non-financial instrument that would allow for the Executive Board involvement in opining/monitoring a member’s program that does not meet the qualifications of the PSI and PCI. - Risk Type: Risk of inaction - Risk to the Fund without the proposal: - Current (0–1 years) - Risks to the Fund incurred as a result of the proposal: - Board being seen as endorsing policies that fall short of UCT-quality could dilute the signaling effect of Board endorsement of UCT-quality programs. - Risk Mitigation: - The Board's role will be limited to opining on the robustness of a member’s policies to meet their stated objective under an SMP and monitoring its implementation. - The Executive Board’s assessment of a member’s policy strength would be against the stated objectives of its program and the overall objective of building or rebuilding a track record towards UTC-quality standard. - Risk Timeframe: Current (0–1 years) - Residual Risk Assessment: - Likelihood: Near Certain - Impact: Critical - Reputational — Identified risks and mitigations - Risk Name: Reputational - Risk Description: - Could undermine the utility of the SMP as a workhorse track record building instrument. - Risk Type: Risk incurred by proposal - Risk Mitigation: - Clear communication to emphasize the narrowly specified circumstances for the use the PMB and the limited role of the Executive Board will minimize the dilution of the Board's signaling effect. - Risk Timeframe: Current (0–1 years) - Residual Risk Assessment: - Likelihood: Possible - Impact: Moderate *Prepared by the Finance Department, the Legal Department, and the Strategy, Policy, and Review Department; September 19, 2022.* ### EXECUTIVE SUMMARY ### EXECUTIVE SUMMARY ### Purpose and proposal - Proposal to amend the Staff-Monitored Program (SMP) policy to allow for limited Executive Board involvement in a narrowly tailored subset of SMPs, to be called “Program Monitoring with Board Involvement” or “PMBs”. - PMBs would allow the Executive Board to opine on the robustness of a member’s policies to meet stated objectives under an SMP and to monitor implementation, while preserving the informal, staff-monitored nature of SMPs approved by Management. - PMBs are intended to support members in designing, implementing, and monitoring policies under often complex circumstances and to help build or rebuild a track record toward Upper Credit Tranche (UCT) Use of Fund Resources (UFR). ### Rationale and background - Under the Fund’s current toolkit, Executive Board monitoring and endorsement in non-financing contexts is limited to UCT-quality instruments (the Policy Coordination Instrument (PCI) and the Policy Support Instrument (PSI)); no existing instrument allows Board monitoring of programs that do not meet UCT-quality. - SMPs have historically been the Fund’s primary modality to build or rebuild track record for UCT-UFR and are informal agreements approved by Management and monitored by staff; they are generally sent only for information to the Executive Board. - A precedent exists in the HIPC Initiative where, in limited circumstances, the Executive Board could “endorse” SMP performance for HIPC Decision Point qualification where the Board agreed with staff that SMP policies met UCT-quality standards. - Concerns about preserving the “signaling” strength of Board endorsement motivate limiting any expanded Board role to narrowly defined cases. ### Eligibility and targeted circumstances for PMB use - PMBs would be available only to members seeking to establish or re-establish a track record for UCT-UFR and who meet either: - Criterion (i): are benefiting from an ongoing concerted international effort by the international community to provide substantial new financing/debt relief in support of the member’s policy program; or - Criterion (ii): have significant Fund credit outstanding under emergency financing instruments at the time they obtain new emergency financing. - Staff would strongly encourage members seeking an SMP who meet criterion (i) or (ii) to request a PMB. ### Proposed criteria and thresholds - For criterion (i): Whether there is an “ongoing concerted international effort by the international community to provide substantial new financing/debt relief” is a matter of staff and management judgment, considering factors such as: - The extent to which Fund members have expressed their commitment to provide financing/debt relief to a member; and - Whether the amount of such financing/debt relief, in total, would be likely to restore debt sustainability and close financing gaps in the context of a future Fund-supported program. - For criterion (ii): Criterion met if a member receives new emergency financing under the Rapid Credit Facility or the Rapid Financing Instrument, which brings total credit exposure outstanding from emergency financing at or above 100 percent of quota arising. ### Key features of the PMB (Staff Proposal) - Role of the Executive Board: - PMBs would continue to be approved by Management and monitored by staff for track-record building. - Drawing from the HIPC precedent, the Executive Board would be allowed to opine in a summing up on whether the policies under the PMB approved by Management are robust to meet the program’s objectives, and to monitor implementation through Board discussion at approval and in periodic reviews. - At PMB approval, the Executive Board would, in a summing up, indicate its assessment of the robustness of the member’s policy program to meet the stated objectives of the PMB and achieve the purpose of building or rebuilding a track record toward UCT-UFR. - In reviews, the Board would opine in a summing up whether it agrees with staff that the member is on track to achieve PMB objectives. - The Executive Board would not set conditionality or endorse a member’s policy measures as it does for UCT-quality instruments. - Availability: - A PMB would only be available to members seeking to establish or re-establish a track record for UCT-UFR and meeting either criterion (i) or (ii) above. - Program design: - Program design would follow current SMP guidance, tailored to the authorities’ objectives and member circumstances, and consistent with the overall objective to establish or re-establish a satisfactory track record. - A PMB could be targeted toward key macroeconomic or financial issues or could entail broader macroeconomic and financial reforms across sectors. - Voluntary but encouraged: - The PMB would remain technical assistance and voluntary for both the Fund and the member; strongly encouraged for members meeting eligibility criteria but not mandatory. - Communication and publication: - Clear communication is critical to distinguish PMBs from SMPs and Board-monitored non-financing instruments (PCI and PSI). - Communications after the Board discussion would clearly indicate (i) that the PMB is monitored by staff and approved by Management; and (ii) the limited nature of the Board’s involvement—assessment against the PMB’s stated objectives and the track-record building purpose, not the UCT-quality standard. - Publication of PMB staff reports would be voluntary but presumed. - Safeguards and interaction with other policies: - By design, the PMB would not undermine the PCI and PSI or dilute the signaling effect of Board endorsement for UCT-quality programs. - The Executive Board assessment would be incorporated into the Press Release. - Under the Fund’s framework for Post Financing Assessments (PFA), members are expected to engage in PFA where total outstanding credit exceeds certain thresholds and the member is not implementing a Fund arrangement or an SMP. The Managing Director has flexibility to not recommend PFA where an SMP is expected to be in place within the next six months. Given that the PMB is a subset of the SMP, the exceptions in the PFA policy for SMPs would apply equally to PMBs. ### Scope, timing, and review - The PMB policy would be effective upon Executive Board endorsement and reviewed no later than end-September, 2023. - Members with existing SMPs who meet PMB criterion (i) or (ii) could avail themselves immediately of the new policy. - Experience with the PMB would be reviewed no later than end-September 2023 to determine whether to revise or eliminate the instrument as needed. ### Issues for discussion for Executive Directors - (i) Do Directors agree with the set of circumstances under which the proposed PMB would become available and the limited role of the Executive Board in the PMB as outlined? - (ii) Do Directors agree that clear communication is critical to distinguish the PMB from other monitoring instruments and that experience with the PMB should be reviewed no later than end-September 2023? ### Comparative summary of non-financing instruments (as presented) - Staff-Monitored Program (SMP): - Purpose: Track-Record Building - Eligible Members: All Non-UCT (*except for HIPC track record) - UCT-Quality Program: No (Management approval; Board’s endorsement of UCT-quality only in HIPC context) - BOP Need: None required - Duration: Generally 9–18 months (longer durations not precluded) - Policy Coordination Instrument (PCI): - Purpose: Signaling - Eligible Members: All - UCT-Quality Program: Yes - Approved by: Board - BOP Need: BOP need may exist, but would be expected to be met through financing from non-Fund sources - Duration: Normally 2–3 years (min. 6 months–4 years) - Policy Support Instrument (PSI): - Purpose: Signaling - Eligible Members: PRGT-eligible members - UCT-Quality Program: Yes - Approved by: Board - BOP Need: BOP need may exist, but would be expected to be met through financing from non-Fund sources - Duration: 1–4 years (can be extended to up to 5 years); at time of approval, must be in a broadly stable and sustainable macroeconomic position. *Prepared by the Finance Department, the Legal Department, and the Strategy, Policy, and Review Department; September 19, 2022.* ### Annex I. Non-Financing/Monitoring Instruments ### Annex I. Non-Financing/Monitoring Instruments ### Enterprise Risk Self-Assessment — Overview - This ex-ante risk assessment is performed by staff with guidance from ORM. It is used to identify and assess enterprise risks to the Fund that may arise without the proposal and/or be incurred upon the approval of the proposal.1/ ### Member engagement — Identified risks and mitigations - Risk Name: Member engagement - Risk Description: - Under the Fund’s current toolkit, there is no non-financial instrument that would allow for the Executive Board involvement in opining/monitoring a member’s program that does not meet the qualifications of the PSI and PCI. - Risk Type: Risk of inaction - Risk to the Fund without the proposal: - Current (0–1 years) - Risks to the Fund incurred as a result of the proposal: - Board being seen as endorsing policies that fall short of UCT-quality could dilute the signaling effect of Board endorsement of UCT-quality programs. - Risk Mitigation (description of mitigation of new risks incurred by the proposal): - The Board's role will be limited to opining on the robustness of a member’s policies to meet their stated objective under an SMP and monitoring its implementation. - The Executive Board’s assessment of a member’s policy strength would be against the stated objectives of its program and the overall objective of building or rebuilding a track record towards UTC-quality standard. - Risk Timeframe: Current (0–1 years) - Residual Risk Assessment: - Likelihood: Near Certain - Impact: Critical ### Reputational — Identified risks and mitigations - Risk Name: Reputational - Risk Description: - Could undermine the utility of the SMP as a workhorse track record building instrument. - Risk Type: Risk incurred by proposal - Risk Mitigation: - Clear communication to emphasize the narrowly specified circumstances for the use the PMB and the limited role of the Executive Board will minimize the dilution of the Board's signaling effect. - Risk Timeframe: Current (0–1 years) - Residual Risk Assessment: - Likelihood: Possible - Impact: Moderate *Source: Annex I. Non-Financing/Monitoring Instruments — Enterprise Risk Self-Assessment (pp. 9–11).* --- _Source: https://www.imf.org/-/media/files/publications/pp/2022/english/ppea2022041.pdf_