## ppea2023005 ## Source details **Canonical URL:** [ppea2023005](https://www.imf.org/-/media/files/publications/pp/2023/english/ppea2023005.pdf) ## Other formats - [Markdown version](/-/media/files/publications/pp/2023/english/ppea2023005.pdf.md) - [Structured JSON version](/-/media/files/publications/pp/2023/english/ppea2023005.pdf.json) --- ### Executive summary — economic context and policy rationale - The global economy remains on the back foot, with emerging markets and developing economies (EMDEs) facing uncertain prospects while coping with the pandemic’s legacies of higher debt and weaker external conditions. - EMDEs confront multiple shocks including spillovers from Russia’s war in Ukraine, post-pandemic tightening of global financial conditions, volatile food and fuel prices, supply chain shortfalls, tighter external financing, and slowdowns in major export markets. - Many countries entered this period with shrinking policy buffers, output scarring, and debt vulnerabilities remaining above pre-pandemic levels; median public debt ratio for EMDEs remains about 55 percent of GDP. - In this environment, members are more likely to need increased access to Fund resources to support pressing financing needs and adjustment efforts. - Given these pressures, the paper argues that temporary increases in access limits would help facilitate financing for member countries to support needed adjustment efforts ahead of the comprehensive access review tentatively planned for 2024 (after the conclusion of the 16th General Review of Quotas expected at end-2023). ### Proposed temporary modifications to GRA access limits (staff recommendation) - Proposal: temporarily increase GRA normal annual access limit from 145 percent of quota to 200 percent of quota. - Proposal: temporarily increase GRA normal cumulative access limit from 435 percent of quota to 600 percent of quota. - Duration: the proposed changes would be in place for 12 months (for the period from March 6, 2023 to March 5, 2024). - Contingency: staff would re-engage with the Executive Board on a proposal for an extension before the expiration of the 12-month period if circumstances warrant. - Rationale: - Changes would better support members in the adverse environment by addressing erosion of access limits relative to key economic metrics and facilitating timely access to financing prior to the next comprehensive review. - The proposed increase preserves the traditional 1:3 ratio of annual to cumulative GRA access limits. ### PRGT access limits: proposed approach and sequencing - Background: PRGT access limits were raised by 45 percent in 2021, bringing them into alignment with GRA access limits for the first time. - Current assessment: LICs’ financing needs are projected to further increase in the medium term; an increase in PRGT access limits in line with the proposed GRA increase would help address these needs. - Constraint: the PRGT faces a sizable subsidy resource gap in fundraising under the first stage of the 2021 funding strategy. - Staff proposal: - Defer any increase in PRGT access limits until more progress has been made in closing the PRGT subsidy resource gap and the PRGT is more adequately financed. - Operational trigger for review: the Executive Board would review PRGT access limits once sufficient subsidy resources have been pledged to the PRGT toward the stage 1 fundraising target of SDR 2.3 billion. - Example: attaining pledges for a further SDR 1 billion would bring total subsidy pledges to SDR 2 billion, closing the large majority of the existing fundraising gap. ### Trends in demand and PRGT resource use - GRA demand and arrangement composition: - After plateauing over 2017-18, demand for new GRA arrangements picked up in 2021-2022. - At end-2022, there were 23 GRA arrangements in effect. - Emergency financing demand broadly returned to annual 2010-2019 levels; two RFI purchases occurred in 2022. - Shift toward longer-duration commitments and increased use of Extended Fund Facility (EFF) arrangements. - GRA credit outstanding: - At end-2022, GRA credit outstanding reached SDR 96.9 billion. - Eight members (out of 50 members with outstanding credit from the Fund) had less than 100 percent of quota available for additional financing before reaching the exceptional access threshold. - PRGT usage and position: - Since March 2020, the Board approved 96 financing requests from 57 PRGT-eligible countries. - PRGT disbursements between 2020-2022 reached SDR 11.8 billion. - Total PRGT credit outstanding reached SDR 15.9 billion as of end-December 2022. - Of the 69 PRGT-eligible countries, 56 have credit outstanding. - PRGT baseline lending outlook through 2024 is now at almost SDR 30 billion in cumulative commitments. - Staff projects PRGT credit outstanding will peak in 2026-27 at around SDR 28 billion. - Subsidy pledges received amount to SDR 1 billion of the SDR 2.3 billion sought, leaving a fundraising gap of SDR 1.3 billion relative to the first stage target. ### Resource implications and enterprise risk assessment - Scenarios and estimated demand: - Under staff’s scenarios, total additional demand for GRA resources under the proposed increase could reach up to SDR 19-42 billion. - Estimates are conservative upper-bound; actual demand likely closer to the lower end of the range. - Liquidity and credit risks: - Impact on GRA resources and risks to the Fund from the proposed GRA changes are expected to be manageable. - Risks to the Fund’s liquidity and credit would be expected to rise but remain within historical ranges and acceptable risk tolerances. - Coverage for residual GRA credit risk from precautionary balances could decline by 3 to 5 percentage points by FY2024 under very conservative demand scenarios, but would remain within the Board-approved 20-30 percent range. - Mitigants include continued rigorous assessments under standard access policy criteria and potential income from higher lending that would support precautionary balances accumulation. - Enterprise risk considerations without the increase: - Member engagement risk, strategic risks (member disengagement and fragmented safety net), and reputational risks could arise from failing to increase access limits. - Operational scope and exclusions: - The proposal does not change specific access limits applicable to the Precautionary and Liquidity Line (PLL) and the Short-Term Liquidity Line (SLL); changes to these instruments will be considered in the forthcoming review of precautionary facilities. - Cumulative access limits of the Rapid Financing Instrument (RFI) and the Rapid Credit Facility (RCF), temporarily increased by the Executive Board in 2020, will require a follow-up discussion. ### Governance, timing, grandfathering, and follow‑up review - Governance and preparation: - The paper was prepared by the Strategy, Policy and Review, Finance, and Legal Departments and reflects informal discussions with Executive Directors. - Grandfathering and transition: - A limited grandfathering would facilitate exit from the temporarily higher access limits when they are lowered back to current levels. - Members not subject to the EA framework during the period would be grandfathered from application of the EA framework triggered by the lower levels for the remainder of existing arrangements. - Additional access from a new arrangement, outright purchase, or augmentation that would exceed the restored lower access limits would trigger the application of the EA framework. - Follow-up review: - A comprehensive review of access is tentatively planned for 2024 to assess GRA access limits in the context of outcomes of the 16th GRQ and to examine erosion of access limits against key metrics and other access-related policies. ### Legal amendment — temporary modification of Decision No. 14046-(08/18) - Amendment text (key operative change): - For the period from March 6, 2023 to March 5, 2024, the annual limit will be 200 percent of quota and the cumulative limit will be 600 percent of quota, net of scheduled repurchases. - These limits do not apply to requests for a Flexible Credit Line arrangement or a Short-Term Liquidity Line arrangement, but outstanding holdings arising under such arrangements are counted when applying limits for requests under other Fund facilities. - Transitional rollback safeguard (text): - The rollback to current limits after March 5, 2024 shall not cause members to be subject to the exceptional access policy after March 5, 2024 if they were not subject to it as of that date, unless post-March 5, 2024 access approvals would cause the member to exceed the restored limits. - Similar rollback protection applies to thresholds for High Combined GRA and PRGT Credit Exposures. ### Key numeric limits (explicit) - Annual limit (standard): 145 percent of quota - Cumulative limit (standard): 435 percent of quota, net of scheduled repurchases - Temporary annual limit (March 6, 2023 to March 5, 2024): 200 percent of quota - Temporary cumulative limit (March 6, 2023 to March 5, 2024): 600 percent of quota, net of scheduled repurchases - Rollback effective reference date: March 5, 2024 - PRGT first stage subsidy fundraising target: SDR 2.3 billion - PRGT subsidy pledges received (as reported): SDR 1 billion - Remaining PRGT fundraising gap (first stage): SDR 1.3 billion - PRGT baseline lending outlook through 2024: almost SDR 30 billion cumulative commitments - Projected PRGT credit outstanding peak in 2026-27: around SDR 28 billion - GRA credit outstanding at end-2022: SDR 96.9 billion - PRGT disbursements between 2020-2022: SDR 11.8 billion - Total PRGT credit outstanding as of end-December 2022: SDR 15.9 billion - Staff scenario additional GRA demand under proposal: SDR 19-42 billion - Median public debt ratio for EMDEs cited: about 55 percent of GDP - Precautionary balances coverage range (Board-approved): 20-30 percent - Duration of proposed temporary increase: 12 months ### Annex I — Exceptional Access Framework (high-level points) - Purpose: access limits act as safeguards for Fund resources, preserve the revolving nature, support catalytic role of Fund financing, and act as thresholds triggering the exceptional access (EA) framework. - Exceptional access may be approved in excess of limits if four substantive criteria are met: - Criterion 1: exceptional balance of payments pressures requiring Fund financing beyond normal limits. - Criterion 2: debt sustainability in the medium term (or high probability that other financing, including restructuring, restores debt sustainability); for PRGT/LIC cases, LIC-DSF and ES/HAP safeguards apply. - Criterion 3: prospects of gaining or regaining private capital market access in a timely and adequate scale. - Criterion 4: member’s policy program provides a reasonably strong prospect of success. - PS-HCC (policy safeguards for high combined GRA and PRGT exposures) trigger thresholds are aligned with overall GRA access limits and would increase automatically with any approved increase in GRA access limits. *Source: ppea2023005 - Temporary Modifications to the Fund’s Annual and Cumulative Access Limits (selected excerpts).* ### EXECUTIVE SUMMARY ### EXECUTIVE SUMMARY ### Economic context and policy rationale - The global economy remains on the back foot, with emerging markets and developing economies (EMDEs) facing uncertain prospects while coping with the pandemic’s legacies of higher debt and weaker external conditions. - EMDEs confront multiple shocks including spillovers from Russia’s war in Ukraine, post-pandemic tightening of global financial conditions, volatile food and fuel prices, supply chain shortfalls, tighter external financing, and slowdowns in major export markets. - Many countries entered this period with shrinking policy buffers, output scarring, and debt vulnerabilities remaining above pre-pandemic levels; median public debt ratio for EMDEs remains about 55 percent of GDP. - In this environment, members are more likely to need increased access to Fund resources to support pressing financing needs and adjustment efforts. - Given these pressures, the paper argues that temporary increases in access limits would help facilitate financing for member countries to support needed adjustment efforts ahead of the comprehensive access review tentatively planned for 2024 (after the conclusion of the 16th General Review of Quotas expected at end-2023). ### Proposed temporary modifications to GRA access limits (staff recommendation) - Proposal: temporarily increase GRA normal annual access limit from 145 percent of quota to 200 percent of quota. - Proposal: temporarily increase GRA normal cumulative access limit from 435 percent of quota to 600 percent of quota. - Duration: the proposed changes would be in place for 12 months. - Contingency: if circumstances warrant, staff would re-engage with the Executive Board on a proposal for an extension before the expiration of the 12-month period. - Rationale: changes would better support members in the adverse environment by addressing erosion of access limits relative to key economic metrics and facilitating timely access to financing prior to the next comprehensive review. ### PRGT access limits: proposed approach and sequencing - Background: PRGT access limits were raised by 45 percent in 2021, bringing them into alignment with GRA access limits for the first time. - Current assessment: LICs’ financing needs are projected to further increase in the medium term; an increase in PRGT access limits in line with the proposed GRA increase would help address these needs. - Constraint: the PRGT faces a sizable subsidy resource gap in fundraising under the first stage of the 2021 funding strategy. - Staff proposal: defer any increase in PRGT access limits until more progress has been made in closing the PRGT subsidy resource gap and the PRGT is more adequately financed. - Operational trigger for review: the Executive Board would review PRGT access limits once sufficient subsidy resources have been pledged to the PRGT toward the stage 1 fundraising target of SDR 2.3 billion. ### Resource implications and enterprise risk assessment - Overall assessment: the impact on GRA resources and risks to the Fund from the proposed GRA changes are expected to be manageable. - Risk outlook: while risks to the Fund’s liquidity and credit would be expected to rise from these changes, such risks would remain well within historical ranges and acceptable risk tolerances. - Scope: the proposal does not change specific access limits applicable to the Precautionary and Liquidity Line (PLL) and the Short-Term Liquidity Line (SLL); changes to these instruments will be considered in the forthcoming review of precautionary facilities. - Note on rapid facilities: cumulative access limits of the Rapid Financing Instrument (RFI) and the Rapid Credit Facility (RCF), temporarily increased by the Executive Board in 2020, will require a follow-up discussion in the coming months. ### Governance, timing, and scope of the proposal - The proposed GRA access limit increases are temporary measures intended to address pressing financing needs during an unprecedented conjuncture and to bridge to the next comprehensive access review. - The paper was prepared by the Strategy, Policy and Review, Finance, and Legal Departments and reflects informal discussions with Executive Directors, who generally agreed on the need to increase GRA access limits on a temporary basis. - The paper does not propose changes to other policies linked to access levels (for example, Post Financing Assessments or the extended consultation cycle for Article IV consultations) given the temporary nature of the proposed changes. *International Monetary Fund. TEMPORARY MODIFICATIONS TO THE FUND’S ANNUAL AND CUMULATIVE ACCESS LIMITS. February 17, 2023.* ### 11. The recent demand for GRA resources reflects the countercyclical nature of Fund ### 11. The recent demand for GRA resources reflects the countercyclical nature of Fund ### Recent demand, composition, and UCT-quality arrangements - After plateauing over 2017-18, demand for new GRA arrangements— including arrangements approved for precautionary use (“precautionary”) and for blenders—picked up in 2021-2022. - At end-2022, there were 23 GRA arrangements in effect (“active arrangements”). - Emergency financing (EF) demand has broadly returned to annual 2010-2019 levels: the number of approved RFI purchases dropped substantially from its COVID-19 peak, with two RFI purchases in 2022. - GRA demand has shifted toward longer-duration commitments: - Increased use of Extended Fund Facility (EFF) arrangements with longer maturities. - The number of new extended arrangements approved in 2021 was seven (including three GRA-PRGT blended arrangements), the highest since the previous uptick in 2016. - Box 1 observations on UCT-quality arrangements since 2020: - The number of countries with active UCT-quality arrangements since the COVID-19 pandemic has been generally lower than in other crisis periods, driven by: - A temporary increase in the use of RCF and RFI emergency financing in the early phase of the COVID-19 pandemic. - Exceptionally easy global financing conditions combined with the 2021 general SDR allocation, which boosted global liquidity and reserve buffers. - Since early 2021 the number of UCT arrangements has risen steadily, driven mainly by surging demand from LICs, including blenders. - The worsening global outlook and tightening financial conditions in 2022 increased pressure on EMDEs, with “active” requests for arrangements showing a steady climb. ### GRA credit outstanding and access constraints - At end-2022, GRA credit outstanding reached SDR 96.9 billion, with total commitments climbing to levels not observed since the GFC. - Based on credit outstanding at end-December 2022: - Eight members (out of 50 members with outstanding credit from the Fund) had less than 100 percent of quota available for additional financing from the Fund before reaching the exceptional access threshold. - Since 2016, GRA annual and cumulative access limits have eroded against standard access metrics (GDP, current payments, capital inflows, and external financing needs). - The erosion is evident for all Fund members on an aggregated level and appears more pronounced for EMDEs, specifically relative to GDP and current payments. - This erosion is due in part to access limits not having been reviewed following the completion of the 15th GRQ, which concluded with no increase in quotas. - The situation faced by members could be comparable to 2009, when access limits were doubled in the context of the GFC. ### Staff proposal for modifying GRA access limits - Staff proposes a temporary increase in the annual GRA access limits to 200 percent of quota and in the cumulative GRA access limit to 600 percent of quota. - The proposed increase preserves the traditional 1:3 ratio of annual to cumulative GRA access limits. - The increase aims to restore the Fund’s risk tolerance to levels more consistent with the Board-endorsed level at the end of the last review of access limits in 2016. - The temporarily less restrictive annual limit would provide immediate additional breathing room without triggering enhanced scrutiny of the EA framework at near-term higher uncertainty levels. - Duration and extension: - The higher GRA limits would apply for 12 months and could be extended with a Board decision. - Staff would re-engage with the Executive Board on a proposal for an extension before the expiration of the 12-month period. - Grandfathering and transition: - A limited grandfathering would facilitate exit from the temporarily higher access limits when they are lowered back to current levels. - Members not subject to the EA framework during the period would be grandfathered from the application of the EA framework triggered by the lower levels for the remainder of existing arrangements (including in the event of a rephasing at unchanged overall access). - Additional access from a new arrangement, outright purchase, or augmentation in an amount that would exceed the restored lower access limits would trigger the application of the EA framework. - Scope and timing: - At this stage staff does not propose changes to access limits for GRA precautionary instruments that have specific access limits (the PLL and the SLL). The FCL does not have any access limits. - Modifications to EF cumulative access limits will be handled in a different workstream. - Follow-up review: - A comprehensive review of access is tentatively planned for 2024 to assess GRA access limits in the context of outcomes of the 16th GRQ and to examine erosion of access limits against key metrics and other access-related policies. ### Modifications to PRGT access limits and PRGT financial position - Background on PRGT limits: - The PRGT access limits were last reviewed and raised in July 2021, bringing them into alignment with the GRA access limits for the first time. - PRGT access limits can be adjusted in the context of comprehensive reviews of LIC facilities or on an ad hoc basis. - The 2021 ad hoc review included a 45 percent increase in PRGT access limits. - Risk and safeguards: - Increasing PRGT access limits would imply an increase in risk tolerance compared to current access levels and require the Executive Board, as trustee of the PRGT, to determine acceptability from a risk perspective. - Other safeguards would continue to apply: phasing of access, program design and conditionality, debt sustainability and capacity to repay requirements, safeguards assessments, strategy on overdue financial obligations, and de facto preferred creditor status. - PRGT financing shortfall and funding strategy: - The current financial status of the PRGT is very stretched by high loan demand and shortfalls in subsidy pledges. - In 2021 the Board agreed a two-stage funding strategy to ensure a self-sustained PRGT in the medium-term: - First stage target: seek SDR 2.8 billion in additional subsidy resources, including SDR 0.5 billion to be generated from internal resources and SDR 2.3 billion in the form of bilateral contributions. - Second stage: to be discussed in 2024/25 as part of the comprehensive review of concessional financing and policies. - As of the reporting in this chapter, subsidy pledges received amount to SDR 1 billion of the SDR 2.3 billion sought, leaving a fundraising gap of SDR 1.3 billion relative to the first stage target. - The pipeline of new borrowing is expected to be considerably above the baseline estimates made in 2021, which, together with higher interest rates to be subsidized and lower returns on investments, would result in a significantly larger subsidy gap in order to attain the SDR 1.6 billion SDR annual lending envelope in real terms after 2024 (the baseline loan demand estimate was SDR 20 billion for 2020–2024). *International Monetary Fund* ### 1.65 billion in annual lending capacity originally envisaged for the PRGT post-2025. Higher lending ### ppea2023005 - 1.65 billion in annual lending capacity originally envisaged for the PRGT post-2025. Higher lending ### Trends in the Use of PRGT Resources and Evolution of PRGT Access Metrics - Since March 2020, the Board approved 96 financing requests from 57 PRGT-eligible countries. - Two-thirds of approvals constituted outright purchases under the RCF or RFI/RCF blends. - PRGT disbursements between 2020-2022 reached SDR 11.8 billion, almost five times the pre-pandemic annual average. - Total PRGT credit outstanding reached SDR 15.9 billion as of end-December 2022, more than twice the historical average. - RCF requests and combined RFI/RCF requests made up roughly 90 percent of the SDR 5.9 billion in new PRGT financing between March and July 2020. - For the subsequent 2½ years, close to 90 percent of new approved financing came from ECF arrangements. - Of the 69 PRGT-eligible countries, 56 have credit outstanding, with just six countries having triggered enhanced safeguards, the high-access procedure, and/or policy safeguards for high combined credit (PS-HCC). - Most PRGT-eligible countries currently have room under the existing access limits, though a number of LICs could be constrained under concurrent multiple shocks and may need to request exceptional access arrangements with stricter safeguards. - PRGT loan demand has increased more than expected since the April 2022 PRGT adequacy review, driven by larger-than-anticipated high-access requests and new demand for emergency financing under the Food Shock Window. - The PRGT baseline lending outlook through 2024 is now at almost SDR 30 billion in cumulative commitments, just below the July 2021 high case of SDR 33 billion commitments. - Staff projects PRGT credit outstanding will peak in 2026-27 at around SDR 28 billion, exceeding the July 2021 and April 2022 baseline estimates by about one-third. - Since 2021, median access in relation to median GDP has fallen by about 9 percent; access relative to current payments has fallen by about 13 percent; median access-to-capital flows ratio increased significantly in 2022; median external financing needs-to-access is expected to remain close to 2021 levels over the near term. ### Staff Proposal to Defer the Review of PRGT Access Limits - Aggregate LIC additional financing needs through 2026 are estimated at some US$440 billion, of which US$170 billion is required to address the legacy of COVID and rebuild external buffers. - An adverse slower-recovery scenario would increase those needs by another US$100 billion. - Staff recognizes the strong case for increasing PRGT access limits but proposes deferring a review of PRGT access limits until the PRGT is more adequately financed. - Staff recommends evaluating an increase in PRGT access limits once additional subsidy resource pledges bring total bilateral pledges close to the stage 1 target of SDR 2.3 billion needed to finance near-term PRGT demand. - Example: attaining pledges for a further SDR 1 billion would bring total subsidy pledges to SDR 2 billion, closing the large majority of the existing fundraising gap. - If the SDR 2.3 billion threshold is reached while the higher GRA limits are in place, staff would return to the Executive Board with updated analysis as the basis for considering an increase in PRGT access limits. - Access limits would also be part of the comprehensive review of concessional facilities in 2024/25. - In parallel, efforts to bolster loan resources and reserve coverage will continue. ### Resource Implications of Staff Proposal — Summary of Proposal - Staff proposes increasing the annual GRA access limit to 200 percent of quota and the cumulative GRA access limit to 600 percent of quota for 12 months, extendable by Board decision. - Proposal aims to: ease constraints on members accessing Fund resources, restore Fund risk tolerance to levels consistent with the 2016 review, and preserve the 1:3 ratio of annual to cumulative GRA access limits. - Proposal includes limited grandfathering to facilitate exit from temporarily higher access limits: members not subject to the EA framework during the higher access period would be grandfathered from application of the EA framework when limits are lowered. - Table of access limits (in percent of quota): - Current Limits -> Staff Current Proposal (next 12 months) - GRA Annual Access Limit: 145 -> 200 - GRA Cumulative Access Limit: 435 -> 600 - PRGT Annual Access Limit: 145 -> 145 1/ - PRGT Cumulative Access Limit: 435 -> 435 1/ - High combined GRA and PRGT credit (HCC thresholds) Annual Access Limit: 145 -> 200 - High combined GRA and PRGT credit (HCC thresholds) Cumulative Access Limit: 435 -> 600 - 1/ Subject to the Executive Board review PRGT an increase of PRGT access limits in line with the newly proposed GRA access limits would be considered once sufficient subsidy resources have been pledged to the PRGT. ### Impact on Fund Resources — GRA Resource Implications and Scenarios - Annual and cumulative GRA access limits are thresholds for higher standards and scrutiny under the EA policy, not hard caps. - Standard (non-exceptional access) policy criteria continue to apply for determining access: size of balance of payments need, strength of program policies, track record, debt sustainability, capacity to repay. - Staff used scenario analysis modeling members utilizing additional borrowing space; approach produces upper-bound estimates by assuming all members are qualified and all arrangements increase access during the 12-month window. - Under staff’s scenarios, total additional demand for GRA resources under the proposed increase could reach up to SDR 19-42 billion. - Because estimates are conservative and upper-bound, actual demand likely closer to the lower end of the range. - Staff assesses the impact on Fund liquidity as manageable but subject to uncertainty and warrants close monitoring of liquidity and credit developments. - Staff’s simulations exclude the PLL, SLL and RFI as no change is proposed in the respective specific limits under these instruments at this stage. ### Enterprise Risk Considerations - Risk to the Fund Without Access Limit Increase: - Member engagement risk: failure to increase could hinder the Fund’s ability to respond to members’ needs and require greater use of exceptional access policies and procedures. - Strategic risks: inadequate response could trigger member disengagement and increased reliance on self-insurance, swap lines, or regional financing arrangements, fragmenting the global safety net and causing excessive adjustment for some members. - Reputational risks: Fund may be perceived as lacking alignment with members’ needs, reducing trust in institutional effectiveness. - Risks to the Fund Under the Access Limit Increase: - Impact on adequacy and liquidity of lending resources is expected to be limited and manageable even under extreme scenarios, but remains uncertain and requires close monitoring. - Credit risks: raising access limits temporarily relaxes a credit risk safeguard by raising thresholds that trigger higher scrutiny under exceptional access policies, which could raise debt sustainability risks including possible increases in non-restructurable debt. - Mitigants: actual higher access would still be determined by rigorous assessments under standard access policy criteria; members would not automatically qualify for higher access. - Coverage for residual GRA credit risk from the Fund’s precautionary balances could decline by 3 to 5 percentage points by FY2024 under very conservative demand scenarios, but would remain within the Board-approved 20-30 percent range. - These are upper-bound estimates assuming no income from additional lending due to temporarily higher access limits. - In practice, higher Fund credit would increase income and accelerate precautionary balances accumulation, mitigating the decline over time. - An interim review of the adequacy of precautionary balances before the regular two-year review cycle could serve as risk mitigation if warranted. ### Implications for and Changes to Other Policies - The proposed increase in GRA overall access limits will automatically adjust thresholds that trigger policy safeguards for high combined GRA and PRGT credit (HCC thresholds) because those thresholds are set at the same levels as overall GRA access limits. - Under the proposed limited grandfathering, following expiration and reversal to current levels, members not subject to HCC safeguards during the higher access period would be grandfathered from application of those safeguards triggered by the lower levels. - Staff does not propose changes to thresholds of outstanding credit that call for an annual Article IV consultation cycle or thresholds for determining expectations of a member’s participation in Post Financing Assessments (PFAs). - Current thresholds for outstanding credit (i.e., outstanding credit above 145 percent of quota) that warrant an annual Article IV cycle would be maintained. - PFA absolute thresholds remain linked to the minimum floor of GRA precautionary balances and PRGT reserve account balances, not to access limits. - The quota-based threshold has been a feature of post program monitoring since 2005 and was last reviewed by the Board in 2021; staff views it as appropriate to maintain. *Source: IMF staff paper (selected excerpts).* ### 1. Paragraph 2 of Decision No. 14046-(08/18), as amended, shall be further amended to read ### 1. Paragraph 2 of Decision No. 14046-(08/18), as amended, shall be further amended to read ### Amendment — Overall access limits (text) - “2. The overall access by members to the Fund’s general resources shall be subject to (i) an annual limit of 145 percent of quota; and (ii) a cumulative limit of 435 percent of quota, net of scheduled repurchases. For the period from March 6, 2023 to March 5, 2024, the annual limit will be 200 percent of quota and the cumulative limit will be 600 percent of quota, net of scheduled repurchases. These limits will not apply in cases where a member requests a Flexible Credit Line arrangement or where a member requests a Short-Term Liquidity Line arrangement, although outstanding holdings of a member’s currency arising under such arrangements will be taken into account when applying these limits in cases involving requests for access under other Fund facilities.” ### Transitional rollback and exceptional access safeguard (text) - “The roll back of the temporary increase in access limits set forth under this decision shall not cause members to be subject to the exceptional access policy after March 5, 2024 if they were not subject to the said policy as of that date, unless following March 5, 2024 the Executive Board approves access to the Fund’s general resources account under a new arrangement, or through an augmentation of access under an arrangement that was in place on March 5, 2024, or through an outright purchase under the RFI, in an amount that would cause the member to exceed the overall annual or cumulative access limits in place at that time.” - “The roll back of the temporary increase in the thresholds for High Combined GRA and PRGT Credit Exposures resulting from the roll back of the temporary increase in access limits set forth under this decision shall not cause members to be subject to the policy safeguards for high combined GRA and PRGT exposures set forth under Decision No. 16873-(20/91) after March 5, 2024 if they were not subject to the said policy as of that date, unless following March 5, 2024 the Executive Board approves access to the Fund’s general resources account and/or to the Poverty Reduction and Growth Trust under a new arrangement, or through an augmentation of access under an arrangement that was in place on March 5, 2024, or through an outright purchase under the RFI or RCF, in an amount that would cause the member to exceed the High Combined GRA and PRGT Credit thresholds in place at that time.” ### Key numeric limits (explicit) - Annual limit (standard): 145 percent of quota - Cumulative limit (standard): 435 percent of quota, net of scheduled repurchases - Temporary annual limit (March 6, 2023 to March 5, 2024): 200 percent of quota - Temporary cumulative limit (March 6, 2023 to March 5, 2024): 600 percent of quota, net of scheduled repurchases - Rollback effective reference date: March 5, 2024 ### Applicability note (text) - These limits do not apply to requests for a Flexible Credit Line arrangement or a Short-Term Liquidity Line arrangement, but outstanding holdings arising under such arrangements are counted when applying limits for requests under other Fund facilities. --- ### Annex I — Fund’s Exceptional Access Framework (key points) - Purpose: Access limits are safeguards for Fund resources, preserve revolving nature, support catalytic role of Fund financing, and act as thresholds for triggering the exceptional access (EA) framework. - Current overall access limits stated: 145 percent of quota annually and 435 percent of quota cumulatively, net of scheduled repurchases/repayments. - Proposed temporary increase for GRA: 200 percent annually and 600 percent cumulatively. - Exceptional access may be approved in excess of limits if four substantive criteria are met. - Sub-limits on access under the RCF and RFI are hard caps (critical safeguards absent UCT conditionality). - PS-HCC (policy safeguards for high combined GRA and PRGT exposures): - Trigger thresholds: combined access above 145 percent of quota annually and/or above 435 percent of quota cumulatively, net of repayments and repurchases. - These thresholds increase automatically to align with any approved increase in GRA access limits (i.e., to 200 percent annually and 600 percent cumulatively under the proposed increase). ### Exceptional access procedure (summary) - Management informs the Board promptly in an informal meeting when exceptional access may be appropriate. - A note is shared with the Board assessing: the member’s balance of payments problem, needed policy measures, basis for EA, and preliminary evaluation of the criteria. - For PRGT exceptional access requests, assessment includes impact on concessional resources. - Additional consultations and information sharing occur between the informal meeting and the Board’s formal consideration. ### Four substantive criteria for exceptional access (overview) - Criterion 1: The member is experiencing or has the potential to experience exceptional balance of payments pressures on the current account or the capital account, resulting in a need for Fund financing that cannot be met within the normal limits. - Criterion 2: A rigorous and systematic analysis indicates a high probability that the member’s public debt is sustainable in the medium term; if unsustainable ex ante, exceptional access only if financing from sources other than the Fund restores debt sustainability with a high probability; financing from other sources may include intended debt restructuring. - For PRGT/LIC cases, application of LIC-DSF and ES/HAP safeguard rules as detailed in the source text. - Criterion 3: The member has prospects of gaining or regaining access to private capital markets within a timeframe and on a scale that would enable meeting obligations falling due to the Fund. - Criterion 4: The member’s policy program provides a reasonably strong prospect of success, including institutional and political capacity to deliver adjustment. --- ### Annex II — Redline Version: Proposed Modifications (selected provisions) - Restated overall access limits (same as amendment): annual limit of 145 percent of quota; cumulative limit of 435 percent of quota, net of scheduled repurchases. - Temporary modification (text included in redline): For the period from March 6, 2023 to March 5, 2024, the annual limit will be 200 percent of quota and the cumulative limit will be 600 percent of quota, net of scheduled repurchases. - Exceptional access criteria (paragraph 3 text preserved): - (a) Exceptional balance of payments pressures requirement (as in Criterion 1). - (b) Debt sustainability requirement (as in Criterion 2), with explicit application only to public (domestic and external) debt and incorporation of relevant contingent liabilities including those potentially arising from private external indebtedness. - (c) Prospects of regaining/gaining private capital market access (as in Criterion 3). - (d) Policy program provides a reasonably strong prospect of success (as in Criterion 4). - PLL-specific cumulative cap (paragraph 4): - When exceptional access is approved under a PLL arrangement pursuant to paragraph 3, such access, combined with the member’s access to the Fund’s resources under other PLL arrangements, shall in no event exceed a cumulative limit of 500 percent of quota, net of scheduled repurchases. - Procedures (paragraph 5): BUFF/02/159 (9/20/02), BUFF/03/28 (3/5/03), and BUFF/05/68 (4/13/05) procedures apply to cases involving access in excess of the limits set forth in this Decision. - Review clause (paragraph 6): This Decision shall be reviewed on an as needed basis in accordance with Decision No. 15764-(15/39), adopted April 23, 2015. *Source: ppea2023005 - Temporary Modifications to the Fund’s Annual and Cumulative Access Limits (text provided).* --- _Source: https://www.imf.org/-/media/files/publications/pp/2023/english/ppea2023005.pdf_