## EXECUTIVE SUMMARY ## Source details **Canonical URL:** [EXECUTIVE SUMMARY](https://www.imf.org/-/media/files/publications/pp/2024/english/ppea2024053.pdf) ## Other formats - [Markdown version](/-/media/files/publications/pp/2024/english/ppea2024053.pdf.md) - [Structured JSON version](/-/media/files/publications/pp/2024/english/ppea2024053.pdf.json) --- ### INTRODUCTION - Purpose: - Reference and primer on sovereign debt–related Fund policies focused on: - establishing that a program is “fully financed” (the financing assurances policy); - handling arrears owed by a member to its official and private creditors (the lending into arrears policies); - establishing safeguards for continued Fund lending at program reviews (financing assurances reviews); - the Fund’s general role in debt-restructuring situations. - Legal and operational context: - Replaces prior departmental guidance; Fund Executive Board Decisions remain primary legal authority. - Does not cover other debt-related policies (e.g., the Debt Limits Policy, Debt Sustainability Frameworks for Market-Access and Low-Income Countries). ### KEY PRINCIPLES ON DEBT AND ARREARS - Debt sustainability is essential; lending into an unsustainable public debt situation is precluded. - Debt is unsustainable when sustainability cannot be achieved through credible and sustainable policy adjustment and/or sufficiently concessional lending from all sources. - The Fund can lend under appropriate assurances when upfront restoration of sustainability via debt restructuring is not feasible, provided the member is on track to complete restructuring and restore sustainability on a forward-looking basis. - Arrears are discouraged; the Fund can lend into arrears only if program financing assumptions and debt sustainability are achieved and conditions of the relevant arrears policy are met. ### STRUCTURE OF THE NOTE (SUMMARY) - Section II: Financing assurances policy. - Section III: Arrears policies — when they apply and which specific policy applies. - Section IV: Application of the arrears policies. - Section V: Financing assurances reviews. - Section VI: Role of the Fund in sovereign debt restructurings. ### FINANCING ASSURANCES — OVERVIEW - Two senses of “financing assurances”: - Assurances required in every Fund arrangement that the Fund-supported program will be fully financed (no BOP financing gaps). - Assurances in arrangements where debt is unsustainable that sufficient financing will be provided—through debt treatment and/or new financing—to ensure debt sustainability on a forward-looking basis. - A Board “financing assurances review” may be required at each request for Fund resources during the program period. ### FINANCING ASSURANCES — GENERAL REQUIREMENT - All Fund-supported programs must demonstrate full external financing: - Program must combine policy adjustment and external financing to eliminate BOP financing gaps and restore medium-term external viability. - Once adjustment is set, full external financing needs are determined. - External financing sources include expected financing from official and private creditors (including (re)gaining market access) and envisaged debt restructuring. - Financing assurances are required at arrangement request and at each subsequent review during the program. - Policy applies to financing from: - General Resources Account (GRA); - Poverty Reduction and Growth Trust (PRGT); - Policy Coordination Instrument (PCI); - and to debt restructuring pursued in stand-alone emergency financing requests under the Rapid Credit Facility (RCF) and Rapid Financing Instrument (RFI). ### EXCEPTIONS — WHEN FINANCING ASSURANCES DO NOT APPLY - Stand-alone emergency financing with no debt restructuring (RCF and RFI). - Staff-Monitored Programs (SMP) and Program Monitoring with Board Engagement (PMB). - Flexible Credit Line and Short-term Liquidity Line (pre-qualification safeguards). - Reserve tranche purchases (within the first 25 percent of the member’s quota). - Use of SDR holdings. - Resilience and Sustainability Trust (RST) support provided alongside a Fund-supported program where assurances already satisfied. ### A. BASIC REQUIREMENTS — NEW FINANCING DURING THE PROGRAM PERIOD - Private sector financing assumptions: - Do not require assurances but must reflect reasonable expectations. - Staff should explain projection basis and may draw on recent issuances/loans, peers, and market consultations. - Official sector financing requirements: - (i) “firm commitments” of financing must be in place for the first twelve months of the arrangement; and - (ii) good prospects for adequate financing for the remaining program period beyond the first twelve months. - Commitments cover loans, grants, and other committed financing; must be credible and become “firm commitments” on a rolling basis. ### POST-PROGRAM PERIOD: SAFEGUARD REPAYMENTS AND SUSTAINABLE DEBT PATH - Staff must assess whether prospective policies deliver projected post-program macro performance that safeguards repayments to the Fund consistent with a sustainable debt path. - For GRA or PRGT Stand-by Credit Facility arrangements: - No financing gaps permitted in the post-program period at arrangement approval and each subsequent program review while Fund obligations are outstanding. - Where relevant, staff must assess good prospects for (re-)gaining market access at sufficient depth, maturity, and price to ensure capacity to repay the Fund, taking into account all sovereign maturities falling due in the post-program period as long as repayments to the Fund are outstanding. - Under Extended Credit Facility (ECF) arrangements: - Protracted BOP problem need not be resolved within the program period. - Post-program financing gaps may remain if staff is assured the member has capacity to repay the Fund and gaps are consistent with a sustainable debt path. ### B. ADDITIONAL REQUIREMENTS IN A PRE-EMPTIVE RESTRUCTURING CONTEXT - If new financing from official or private sector cannot fully finance the program, the Fund needs assurance that creditors’ claims will be restructured on sufficiently deep terms to restore BOP viability. - Financing assurances address restoring debt sustainability and ensuring the program is fully financed. - Policy does not prescribe allocation or sequencing between official and private creditors; allocation must ensure intercreditor equity concerns do not undermine successful restructuring. ### CONTRIBUTIONS FROM OFFICIAL BILATERAL CREDITORS - Staff must assess that a “credible official creditor process” (COCP) is in place and that the “key stage” in their process(es) has been reached for each relevant creditor. - Judgment requires understanding, for each creditor: - internal process steps; - key decision-makers; - creditor has necessary information on needed treatment and share; - expected execution timeframe (normally by the time of the first program review). - In absence of sufficient track record, a “specific and credible” assurance (written preferred) from an individual able to commit the creditor is required. - A “sufficient set” of official bilateral creditors: - Must account for the majority (above 50 percent) of total financing contributions required from official bilateral creditors over the program period. - Must include any standing creditor forum if applicable and any creditors with influence over the debtor. ### DEBT RELIEF FROM PRIVATE CREDITORS - Assurances derive from the Fund’s judgment that a credible process for debt restructuring is underway and likely to garner sufficient participation to restore debt sustainability. - Indicators of a credible process include: - prompt engagement of legal and financial advisors by the member; - launch of consultations with creditors; - design of the debt restructuring strategy, including instrument terms and inducements for participation. - Timing expectations: - Ideally undertaken before approval of the Fund arrangement. - Flexibility where delays occur; conclusion normally by the first review under the Fund arrangement. ### SPECIAL PROCEDURES AND REQUIREMENTS - Two-step processes: - May be acceptable if (i) a well-defined overarching framework is formally agreed by creditors; and (ii) strong upfront commitment by creditors in individual cases. - “Exceptionally high uncertainty” UCT arrangements require specific program design (scenario approach); see Appendix I. - Approval-in-Principle (AIP): - Board can approve an arrangement in principle with effectiveness conditional on receipt of financing assurances; further details in Appendix II. ### STAFF REPORT REQUIREMENTS (FINANCING ASSURANCES) - At every arrangement request and review staff must include a clear assessment of whether the program is fully financed. - Staff report should: - identify sources and timing of expected financing and any attached conditions; - in official-sector restructuring contexts, state that the key stage of each creditor’s COCP has been reached or, if insufficient track record, record specific and credible assurances received; - in private-sector restructuring contexts, record assessment that the “credible process” standard is met and basis for assessment; - follow special circumstances requirements in appendices. - If financing assurances are outstanding at issuance, staff report will be flagged and issued without a proposed decision; upon receipt of assurances a supplement with proposed decision should be issued. ### SCOPE OF THE ARREARS POLICIES - Fund’s arrears policies must be satisfied for the Fund to lend when a member is in arrears to external creditors. - Specific policies enabling lending into arrears: - Lending into Arrears (LIA); - Lending into Arrears to Official Bilateral Creditors (LIOA). - Arrears definition: - Arrears exist when any external payment obligation has not been paid in full at the time it is due, taking into account any applicable grace period or cross-default provision; no de minimis exemption; age of arrears does not affect applicability. ### PURPOSE AND KEY OBJECTIVES OF THE ARREARS POLICIES - Ensure the member will soon regularize relations with creditors, resolve arrears, and in a program context ensure medium-term external viability and post-program financing assurances. - Help tackle hold-out problems by removing veto power from creditors that could delay or derail program-consistent solutions. ### SCOPE AND APPLICABILITY (HIGHLIGHTS) - Policies apply where sovereign debtor has arrears to an external creditor and is requesting Fund financing; apply to requests and reviews for arrangements under GRA, PRGT, RFI, RCF, and by analogy to PCI. - Sovereign debtor requirement: debtor generally must be sovereign (including entities whose financial operations form part of budgetary process). - Residency of creditor: external = non-resident determined by place of legal incorporation. - Disputed claims doctrine: claims the Fund accepts as disputed do not give rise to arrears for Fund purposes; Executive Board makes final determination. ### WHICH PARTS OF THE ARREARS POLICIES APPLY - Determination is claim-by-claim; staff judges which policy applies and the Executive Board makes the final determination. - Categories include: - Direct Bilateral Claims of the official sector (OSI-related and non-OSI-related); - IFI claims (non-OSI-related and OSI-related, with NTP or LIOA applicability); - Arrears to non-sovereign creditors (subject to LIA); - Jurisdictional arrears (private-to-private arrears due to exchange restrictions, handled under LIA). ### DIRECT BILATERAL CLAIMS (KEY POINTS) - Direct Bilateral Claims: held by a government or agency acting on behalf of a government; includes claims where creditor-government guarantees are called. - Two-category split: - OSI-related: covered by past official-sector restructuring or requires official bilateral creditor participation under current program parameters; subject to LIOA. - Non-OSI-related: anticipated payment in full under current program; subject to Non-Toleration Policy (NTP). ### IFI CLAIMS (KEY POINTS) - IFIs: institutions with at least two sovereign members and no non-sovereign members. - IFI claims categorized as non-OSI-related (NTP applies) or OSI-related (generally NTP but LIOA may apply in certain circumstances). - Determination of de facto preferred creditor status informs application of NTP versus LIOA. ### ARREARS TO NON-SOVEREIGN CREDITORS - Includes arrears to private external creditors and public-sector entities not acting on behalf of a creditor country; subject to the LIA policy. - Scope limited to commercial contractual debt obligations (bank loans, suppliers’ credits, bonds); excludes non-debt obligations (e.g., unpaid dues, power purchase agreements). ### JURISDICTIONAL ARREARS - Arise when exchange controls prevent private residents from obtaining foreign exchange to service external private debt. - Rare (three cases identified since 2002); fall under elements of the LIA policy. ### STAFF REPORT REQUIREMENTS (ARREARS) - Identify type of each claim in arrears, amount, creditor, and date claim went into arrears. - Specify which arrears policy applies to each claim and provide information where judgment is involved. ### APPLYING THE ARREARS POLICIES — GENERAL POINTS - Policies to be applied once claim type and relevant policy are determined. - Payments in arrears due to factors outside debtor’s control (e.g., sanctions): compliance generally met when payments are made into escrow for full amount on contractual due date. ### A. NON-TOLERATION POLICY (NTP) - Applied in three situations; broader scope than LIA or LIOA. - For World Bank arrears: - Require either (i) upfront clearance before approval/completion of a review; or (ii) an agreed plan between the member and the World Bank on terms of clearance over a defined period. - For other IFIs: - Require a credible plan and projected financing to eliminate arrears over the program period (creditor concurrence not required). - For non-OSI direct bilateral claims: - NTP requires tacit approval of creditor to Fund financing, generally conveyed by non-objection of the creditor’s Executive Director at the Board meeting. ### B. LENDING INTO OFFICIAL ARREARS (LIOA) — OVERVIEW AND FOUR STRANDS - Applies to OSI-related Direct Bilateral Claims. - Four ways to satisfy LIOA; Strand 1 (Representative Standing Forum) is preferred. - Strand 1 (Representative Standing Forum): - Satisfied by an “adequately representative” restructuring agreement (e.g., Paris Club Agreed Minute or OCC MOU). - Pre-cut-off date debt eliminated for LIOA purposes for participating and non-participating creditors where agreement is adequately representative (> 50 percent of required official bilateral contributions). - Only the Paris Club or CF with Paris Club participation is considered a “representative standing forum” as of 2024. - Strand 2 (Consent): - Creditor consent to Fund financing despite arrears; consent should generally be received before staff report issuance and recorded in staff report. - “Deemed consent” procedures exist where creditor authorities cannot be reached. - Strand 3 (Three Criteria): - Criterion 1: Prompt Fund support essential and member pursuing appropriate policies. - Criterion 2: Debtor making good faith efforts to reach agreement with the creditor consistent with program parameters. - Criterion 3: Financing despite arrears would not unduly harm Fund’s ability to mobilize future official financing. - Staff must assess process and terms offered to creditors and burden-sharing implications. - Strand 4 (Additional Safeguards): - Applied where Strands 1–3 cannot be satisfied; choice between Standard Safeguards Approach and Enhanced Safeguards Approach. - Standard Safeguards Approach elements: - Capped initial access (not exceeding annual access limits under regular emergency financing window at approval); - Program conditionality (structural and/or quantitative); - Debtor commitment to good-faith efforts. - Enhanced Safeguards Approach (for exceptional access/high combined access or where creditors request additional support): - Includes Standard elements (except capped initial access) plus direct commitment by a “sufficient set” of creditors about restructuring intentions (sufficient set = majority above 50 percent of required official bilateral contributions; must include representative forum if applicable and creditors with influence). ### LIA (LENDING INTO ARREARS) AND PRIVATE CREDITORS - LIA applies to arrears to private creditors and non-sovereign creditors (including jurisdictional arrears). - Good-faith criterion requires debtor engagement, information sharing, and terms consistent with program parameters. - Jurisdictional arrears: - LIA may apply where urgent Fund support is essential and member is pursuing removal of exchange controls with good prospect for foreign exchange availability. - Emergency financing flexibility: - In exceptional circumstances (exogenous shocks, natural disasters) RCF/RFI may be provided despite arrears with debtor commitments to normalize relations and resolve arrears; differing procedural flexibility for LIOA and LIA in emergencies. ### FINANCING ASSURANCES REVIEWS (PARAGRAPHS 92–97) - Executive Board must complete financing assurances reviews alongside program reviews in certain cases: - Preemptive restructuring cases involving official bilateral claims until restructuring completed; - When tolerating arrears on official bilateral claims expected to be restructured but terms not finalized; - When tolerating arrears on private creditor claims (all program reviews subject to financing assurances reviews while private arrears outstanding). - Purpose: assess progress in restoring debt sustainability and safeguards for further Fund financing. - Instances preventing completion: restructuring not on track to provide timely or sufficient relief to restore debt sustainability by end-program. - Staff report requirements: present indicative schedule for restructuring steps at program outset and subsequent reviews; financing assurances review must be provided for in legal text. ### SAMPLE FINANCING ASSURANCES REVIEW LANGUAGE (BOX 2) - Example staff report language for program request and subsequent review illustrating how to document creditor engagement, expected timelines, and assessments under LIOA and LIA. - Guidance on financing assurances provision: continuous condition formulation example for PRGT contexts. ### ROLE OF THE FUND IN THE DEBT RESTRUCTURING PROCESS - Permissible Fund roles: - provide analysis and explain international architecture; - set the restructuring envelope (debt targets necessary to restore sustainability); - promote and facilitate debtor-creditor engagement (but not act as legal/financial advisor); - communications and limited “good offices” to convene parties. - Setting and explaining the envelope: - Restructuring targets should ensure program financing during program period and restore debt sustainability (stock and flow indicators). - LIC-DSF guidance: reduce risk of debt distress to moderate over medium-term; achieve in up to 5 years (or earlier in exceptional access). - Market Access Countries guidance: targets over a 10-year horizon; in normal access aim for debt sustainability probability normally at least 60 percent; in exceptional access target probability exceed 80 percent. - Representing restructuring in the DSA: - Baseline DSA should show evolution without restructuring and debt targets; illustrative scenarios can demonstrate feasibility. - LIC cases: baseline conservative—OSI treatments included only with MoU/agreed OCC MOU or signed bilateral agreements; PSI included once bond exchange or restructuring concluded. ### CREDITOR COORDINATION, PERIMETER, BURDEN SHARING, AND TERMS - Fund prefers representative standing fora but cannot insist on modalities. - Staff should not set perimeter or dictate burden sharing; can assess whether perimeter choices affect macro framework or debt targets. - Staff should not advocate specific restructuring terms but assess compatibility with program targets and provide technical inputs with debtor consent. - State-contingent debt instruments (SCDIs): - Fund is open to SCDIs; staff to evaluate consistency with program financing and debt sustainability, legal risk, and modeling of payoffs. - Risks include novelty discounts, potential higher payments when repayment capacity is weak, adverse selection, and moral hazard. ### INFORMATION SHARING AND COMMUNICATIONS - Information sharing principles: - Phase One (pre-announcement): no non-public information sharing with creditors. - Phase Two (post-announcement, up to SLA): limited sharing of macro projections and financing envelope with debtor consent and confidentiality safeguards. - Phase Three (post-SLA and obtaining assurances): broader sharing (additional projection years, disaggregated creditor-level debt service), subject to confidentiality safeguards. - Full DSA sharing only in rare instances and normally only after Executive Board access/clearance (stand-alone DSA, DSA-related capacity development, or AIP route). - Staff may participate in creditor meetings with debtor permission; staff must not negotiate restructuring terms and must defer to authorities on communications. ### APPENDIX HIGHLIGHTS - Appendix II — Approval in Principle (AIP): - Board may approve an arrangement in principle where financing assurances are outstanding; a second Board decision on Lapse of Time makes arrangement effective upon receipt of assurances. - AIP period: initial deadline specified; renewal normally limited to one update (implying maximum AIP period of 6-8 months); renewal rules and required safeguards specified. - Appendix VI — Numerical example for “adequately representative” agreement (Cumulative $ Years 1 to 3): - External financing needs A = A1 + A2 + A3 + A4 + A5 = 2000 - A1 = 700 - A2 = 600 - A3 = 400 - A4 = 0 - A5 = A51 + A52 = 300 - A51 = 200 - A52 = 100 - External financing sources B = B1 + B2 + B3 + B4 + B5 = 1500 - B1 = 500 - B2 = 0 - B3 = 300 - B4 = 200 - B5 = B51 + B52 = 500 - B51 = 400 - B52 = 100 - Residual financing required from official bilateral creditors C = C1 + C2 = 500 - C1 = 150 - C2 = 350 - Total contribution by official bilateral creditors D = D1 + D2 = 1000 (100%) - D1 = 550 (55%) √ - D2 = 450 (45%) - Illustrative conclusion: Paris Club creditors account for 55% and therefore a Paris Club agreement would be considered adequately representative in this example. - Appendix I — Exceptionally High Uncertainty and UCT-quality engagement: - “Exceptionally high uncertainty” criteria and scenario-based program design (baseline and downside scenarios) with requirements for donor/creditor assurances and safeguards. - Financing assurances in such cases may require upfront “credible and specific” assurances and commitments covering baseline and contingent second-stage support. - Appendix X — State-Contingent Features in Restructurings: - Definitions, historical examples (GDP warrants, VRIs, macro-linked bonds), benefits and risks, IMF stance (open to use but Fund does not design instruments), and analytical steps to evaluate SCDIs’ impact on debt sustainability. *Source: Guidance Note on the Financing Assurances and Sovereign Arrears Policies (excerpts provided).* ### EXECUTIVE SUMMARY ### EXECUTIVE SUMMARY ### INTRODUCTION - Under its Articles of Agreement, the Fund may only provide financing to assist members to resolve their balance of payments problems and restore medium-term external viability, and may only do so under adequate safeguards. - Fund financing must support policies capable of resolving the member’s BOP problems and restoring medium-term external viability over a timeframe consistent with the revolving nature of Fund financing. - The Fund’s inter-related policies on financing assurances, debt sustainability, and debt restructuring are central to restoring medium-term external viability. - This note is a reference and primer on these sovereign debt–related Fund policies, focusing on: - establishing that a program is “fully financed” (the financing assurances policy); - handling arrears owed by a member to its official and private creditors (the lending into arrears policies); - establishing safeguards for continued Fund lending at program reviews (financing assurances reviews); - the Fund’s general role in debt-restructuring situations. - The note replaces prior departmental guidance and is the first comprehensive operational guidance on these policies; relevant Fund Executive Board Decisions remain the primary legal authority. - The note does not cover other debt-related policies (e.g., the Debt Limits Policy, Debt Sustainability Frameworks for Market-Access and Low-Income Countries) or specialized debt topics found elsewhere. ### KEY PRINCIPLES ON DEBT AND ARREARS - Debt sustainability is essential: lending into an unsustainable public debt situation would fail to restore medium-term external viability and would exacerbate the debt situation and pose financial and reputational risks to the Fund. - The Fund determines debt is unsustainable when sustainability cannot be achieved through credible and sustainable policy adjustment and/or sufficiently concessional lending from all sources. - Where upfront restoration of sustainability via a debt restructuring is not feasible, the Fund can lend under appropriate assurances that the member is on track to complete a restructuring and restore sustainability on a forward-looking basis. - The Fund encourages members to stay current on obligations; arrears are destructive and may signal unresolved BOP problems, but the Fund can lend into arrears if program financing assumptions and debt sustainability are achieved and certain conditions are met. - The note articulates for the first time in a single public document the Fund’s role in sovereign debt restructuring situations, while generally not involving itself in restructuring details except to determine the envelope of debt relief needed for debt sustainability. ### STRUCTURE OF THE NOTE (AS SUMMARIZED) - Section II: Financing assurances policy. - Section III: Arrears policies — when they apply and which specific policy applies. - Section IV: Application of the arrears policies. - Section V: Financing assurances reviews. - Section VI: Role of the Fund in sovereign debt restructurings. ### FINANCING ASSURANCES — OVERVIEW - Two senses of “financing assurances”: - Assurances required in every Fund arrangement that the Fund-supported program will be fully financed (no BOP financing gaps). - Assurances in the subset of arrangements where debt is unsustainable that sufficient financing will be provided—through debt treatment and/or new financing—to ensure debt sustainability on a forward-looking basis. - A Board “financing assurances review” may be required to confirm financing assurances at each request for Fund resources during the program period. ### FINANCING ASSURANCES — GENERAL REQUIREMENT - All Fund-supported programs must have full external financing: a program combines policy adjustment and external financing to eliminate BOP financing gaps and restore medium-term external viability. - Once adjustment is set, full external financing needs are determined. - External financing sources include expected financing from official and private sector creditors (including (re)gaining market access, if relevant) and any envisaged debt restructuring. - Financing assurances are required when requesting a Fund-supported program and at each subsequent review during the program. - The policy applies to programs providing financing from: - the Fund’s General Resources Account (GRA); - the Poverty Reduction and Growth Trust (PRGT); - the Policy Coordination Instrument (PCI); - and to debt restructuring pursued in stand-alone emergency financing requests under the Rapid Credit Facility (RCF) and Rapid Financing Instrument (RFI). ### EXCEPTIONS — WHEN FINANCING ASSURANCES DO NOT APPLY - Stand-alone emergency financing with no debt restructuring (i.e., under the RCF and RFI). - Staff-Monitored Programs (SMP) and Program Monitoring with Board Engagement (PMB). - Support under the Flexible Credit Line and the Short-term Liquidity Line where pre-qualification criteria provide safeguards. - Reserve tranche purchases (purchases within the first 25 percent of the member’s quota). - Use of SDR holdings. - Support from the Resilience and Sustainability Trust (RST). (Financing from the RST is only provided alongside a Fund-supported program where financing assurances would already be satisfied.) ### A. BASIC REQUIREMENTS - The Fund must be satisfied that program financing is adequate to fill external financing gaps: - during the program period to ensure external viability (comprising the first twelve months, and then the remainder of the program); - during the post-program period to ensure the member is in a position to repay the Fund. - New financing during the program period: - Private sector financing assumptions: - Do not need to be supported by assurances but must reflect reasonable expectations based on evolving conditions. - Staff should explain the basis for projections and may draw on terms and conditions of recent issuances/loans (including for peers) and scope for additional creditor exposure based on historical experience or direct consultations with market participants. - Analysis should consider authorities’ readiness to issue at prevailing/expected market conditions and likely market response to policy adjustment. - In a restructuring context, staff should draw on research concerning timing, terms, and conditions of market re-access. - Official sector financing requirements: - (i) “firm commitments” of financing must be in place for the first twelve months of the arrangement; and - (ii) there must be good prospects for adequate financing for the remaining program period beyond the first twelve months. - These cover loans, grants, and other committed financing (e.g., equity investments or non-OSI rescheduling of existing claims). - Assurances on official-sector financing for the upcoming 12-month period (or whatever period of the program remains) must be ascertained on a rolling basis; “good prospects” must become “firm commitments” or actual financing. - Practical judgment points: - The form and characterization of commitments from official creditors vary; staff should draw on the authorities’ representation and follow up with creditors where clarity is needed; staff should reach out early to creditors. - Commitments must be considered credible; the Board will assess firmness, advised by management and staff; written assurances may be sought but are not required. - Creditors’ assurances and commitments are reflected in program documents to be published; staff should manage sensitivities. - Different financing types (grants vs budget support loans vs project financing) have different BOP implications (e.g., project financing can entail high import content with little net BOP benefit). - Official creditors may set conditions on upcoming financing; to regard commitments as “firm,” staff must be satisfied the conditions are on track to be met. - When commitments are signaled by IFI financing partners with a track record and in specific amounts (or ranges), such commitments are deemed to meet the “firm commitments” standard; World Bank commitments may be conveyed at the staff level (after Management clearance). - For IFI partners without a substantial track record, firmness may need further examination; reductions in partner commitments during a program may make written communications for further commitments appropriate. *Source: Guidance Note on the Financing Assurances and Sovereign Arrears Policies, Executive Summary, October 31, 2024.* ### 13. With respect to the post-program period: staff needs to assess whether the member’s ### 13. With respect to the post-program period: staff needs to assess whether the member’s ### Post-program period: safeguard repayments and sustainable debt path - Staff must assess whether the member’s prospective policies deliver a projected post-program macroeconomic performance that adequately safeguards repayments to the Fund consistent with a sustainable debt path. - Fund-supported program in the Fund’s GRA or under a Stand-by Credit Facility arrangement under the PRGT: - Designed to restore the member to medium term external viability and resolve the BOP problem. - Policy measures needed for this purpose should be undertaken during the program period. - As long as obligations to the Fund are outstanding, staff needs to judge that there are no financing gaps in the post-program period both at arrangement approval and each subsequent program review. - Where relevant, staff must assess, based on a realistic macro-framework and the Debt Sustainability Analysis (DSA), that the member has good prospects for (re-)gaining access to capital markets at sufficient depth, maturity, and price to ensure capacity to repay the Fund and consistent with a sustainable debt path, taking into account all sovereign maturities falling due in the post-program period as long as repayments to the Fund are outstanding. - Under Extended Credit Facility (ECF) arrangements under the PRGT: - The member’s protracted BOP problem does not need to be resolved within the program period. - Any financing gaps in the post-program period for an ECF arrangement need to be such that, notwithstanding that sources to fill the gaps have not yet been identified, the Fund is assured that the member has the capacity to repay the Fund (irrespective of a successor arrangement), and that any gaps are consistent with a sustainable debt path. - Footnotes referenced: - If an adjuster is used, reflecting timing uncertainties, it does not alter the requirements on full financing assurances covering the baseline. - This is particularly true for fragile and conflict-affected states. See Staff Guidance Note on The Implementation of The IMF Strategy for Fragile and Conflict-Affected States (FCS). ### B. Additional Requirements in a Pre-Emptive Restructuring Context - If the Fund-supported program cannot be fully financed with new financing from the official or private sector: - The Fund will need assurance that creditors’ claims will be restructured on sufficiently deep terms to restore BOP viability. - Even if a program appears fully financed, a debt restructuring may still be needed to restore debt sustainability over the medium term. - Financing assurances address the need to restore debt sustainability and/or the need to ensure that the program is fully financed. - The policy does not prescribe the allocation of financing between official and private creditors; allocation must ensure intercreditor equity concerns do not undermine the judgment that the restructuring will be successful. - The policy does not require specific sequencing of financing assurances from official versus private creditors and can accommodate simultaneous processes; sequencing choices are made by the authorities and their advisors, in consultation with creditors. ### Contributions From Official Bilateral Creditors - Staff must assess that a “credible official creditor process” (COCP) is in place for all relevant creditors and that the “key stage” in their process(es) has been reached, signaling that debt relief will be delivered promptly. - To make this judgment staff should understand, for each creditor: - (i) the steps in the official bilateral creditor’s internal process; - (ii) the key decision-makers involved (i.e., those with authority to commit the creditor); - (iii) the creditor has been provided the necessary information to understand the depth of the needed treatment and the creditor’s share (i.e., macroeconomic outlook, debt targets, possible restructuring approaches); - (iv) the timeframe over which the treatment would be expected to be executed (which should be in line with the Fund’s expectation that the key terms of a restructuring would be agreed promptly, normally by the time of the first program review). - Staff should interact with the creditor and support its internal process, by providing information on a timely basis upon request and responding to creditor inquiries. - Nuances in COCP judgment: - Determination of whether the “key stage” has been reached is creditor-dependent and requires case-specific judgment; staff should defer to creditor authorities’ representation once a track record is established. - The assessment may vary by type of treatment sought from creditors (e.g., NPV-neutral reprofilings vs deeper treatments); failure to deliver a treatment in a timely manner requires revisiting the “key stage” assessment for that creditor. - Where an official creditor coordination mechanism is used—such as the Paris Club or the Common Framework (CF)—the features and track record of that mechanism’s processes should be taken into account. - For Paris Club treatments, the “key stage” is a preliminary indication derived verbally from the chair summing up at the end of the Paris Club meeting discussing the working paper. - For CF treatments, assurances can be derived similarly from creditor committee co-chairs’ summing-up when creditors meet to discuss needed treatment contours. - In the absence of a sufficient track record that the “key stage” had been reached: - Required determination can be made via receipt of a “specific and credible” assurance on debt relief/financing. - Modality is within management’s discretion; a written communication from the creditor is preferred. - Such assurance should be from an individual able to commit the creditor, show understanding of the debtor’s situation, and commit to actions to restore debt sustainability and financing in line with program parameters. - A “sufficient set” of official bilateral creditors: - Must account for the majority (above 50 percent) of the total financing contributions required from official bilateral creditors over the program period. - Must include any standing creditor forum if applicable and any creditors with influence over the debtor. - Remaining creditors are considered not material and assumed to restructure on program terms. - Creditors “with influence” indicators (examples): - Enforceable and economically meaningful collateral or collateral-like features that could significantly complicate a restructuring. - Creditor’s share in total debt stock or debt service flows being high (e.g., among the top three creditors). - Debtor’s total BoP relationship with the creditor country (trade and capital flows) is high (e.g., in the top three countries over the previous five years). - Case-specific mitigating factors must also be assessed (e.g., alternative sources of trade, collateral that directly generates repayment capacity). ### Debt Relief from Private Creditors - When private creditor debt relief is expected beyond arrangement approval, assurances derive from the Fund’s judgment that a credible process for debt restructuring is underway. - A “credible process” would result in sufficient creditor participation to restore debt sustainability and close financing gaps consistent with program macroeconomic parameters and official sector commitments. - Relevant considerations for judging a credible process include: - (i) prompt engagement of legal and financial advisors by the member; - (ii) launching of consultations with creditors; - (iii) design of the debt restructuring strategy, including terms of new instruments and use of inducements for creditor participation. - The Fund’s primary focus is on whether the process is credible and likely to garner sufficient participation to restore debt sustainability, not on specific restructuring design. - Timing expectations articulated by the Executive Board: - Debt restructuring should ideally be undertaken before approval of the Fund arrangement, while still being consistent with proposed program parameters. - Flexibility may be warranted where delays occur despite a credible process; in these cases, conclusion of the debt restructuring is contemplated for a later date—normally, by the first review under the Fund arrangement. - It would not be necessary to hold up Fund financing until complete clarity regarding the terms of the operation exists. ### Special Procedures and Requirements - Two-step processes: - Official bilateral creditors may commit to a “two-step process” with an initial flow treatment followed by a stock treatment before the end of the Fund-supported program. - Key features allowing financing assurance: - (i) a well-defined and over-arching framework formally agreed by creditors to apply across cases; - (ii) in individual cases, a strong upfront commitment by the creditors. - Risks: can create uncertainty and risk that commercial creditors delay restructuring; generally appropriate only in international initiatives unless very specific circumstances justify it. - Procedures for members facing “exceptionally high uncertainty”: - When such a member seeks an upper-credit-tranche-quality (UCT) Fund arrangement, a specific program design and different approach to financing assurances are required. - Further details and requirements are set forth in Appendix I. - Approval-in-Principle (AIP) for members facing extended delays in obtaining financing assurances: - The Fund may approve an arrangement in principle, with the arrangement becoming effective once financing assurances sufficient to restore debt sustainability are received. - AIP may be appropriate when there is full agreement on member policies but delays are anticipated in receiving financing assurances and when it facilitates dialogue with creditors (e.g., by making public the DSA and full details of the Fund-supported program). - Further details and requirements are set forth in Appendix II. - Footnotes referenced: - Examples: two-step approach used during HIPC process; Paris Club used Evian approach for Iraq; Suriname example with flow treatment followed by second treatment because of prospect of oil revenues. - Changes to the Fund’s Financing Assurances Policy in the Context of Fund Upper Credit Tranche (UCT) Financing Under Exceptionally High Uncertainty, March 2023. ### Staff Report Requirements - For all programs, the staff report at every arrangement request and review must include a clear assessment of whether the program is fully financed. - Staff report should: - Specifically identify the sources and timing of expected financing, and whether any conditions are attached to such financing. - In official-sector restructuring contexts, state clearly that the key stage of each creditor’s (or creditor coordination mechanism’s) COCP has been reached. - If the Board has never before assessed a “key stage” for a specific creditor’s process, staff must explain the basis for the judgment that the COCP is in place, citing key elements and the creditor’s track record. - Subsequent cases for the same creditor need not repeat full explanation absent new developments. - If insufficient track record, staff report must include that specific and credible assurances have been received from a given official bilateral creditor (verbatim repetition not required). - In private sector restructuring contexts, record staff’s assessment that the “credible process” standard is met and provide the basis for that assessment (per paragraph 19). - Cover staff report requirements for special circumstances identified in paragraph 21 in the relevant appendices. - Per Fund policy (Guidelines on Conditionality): - Staff reports should normally only be issued to the Board once staff and management have assessed that all applicable Fund policies have been satisfied. - In very rare circumstances, management has issued a staff report to the Board prior to receiving financing assurances (or when other Fund policies were not met) if issuing the staff report will help secure needed assurances. - Where financing assurances are outstanding at issuance, the staff report will flag such lack on the cover page prepared by SEC for Board circulation, be issued without a proposed decision and without a firm Board meeting date on the cover. - Upon receipt of needed assurances, a supplement assessing sufficiency to restore debt sustainability and providing the proposed decision should be issued, and a Board date will be announced. - Consultation note: - Please consult with SPR Debt Policy Division on whether a specific creditor’s or creditor coordination mechanism’s COCP has been previously presented to the Board. ### Scope of the Arrears Policies - When a member is in arrears to external creditors, the Fund’s arrears policies must be satisfied for the Fund to lend. - The Fund encourages members to stay current on obligations to the extent possible, recognizing the destructive nature of external payments arrears to national and international prosperity (see Article I(v)). - Since 1970 the Fund has had a general policy on non-toleration of arrears unless a specific policy applies enabling the Fund to lend into sovereign arrears. - Specific policies that enable lending into arrears are: - Lending into Arrears (LIA); - Lending into Arrears to Official Bilateral Creditors (LIOA). *Guidance Note on the Financing Assurances and Sovereign Arrears Policies — excerpts.* ### 25. A key goal of the Fund’s arrears policies is to ensure that the member will soon ### ppea2024053 - 25. A key goal of the Fund’s arrears policies is to ensure that the member will soon ### Purpose and key objectives of the Fund’s arrears policies - Ensure the member will soon regularize its relations with creditors, resolve arrears, and in a program context ensure medium-term external viability and secure the financing assurance required for the post-program period. - Enable the Fund to tackle the hold-out problem by removing veto power from creditors and their ability to press for terms that are not program-consistent or to delay the process (noted as involving costs to the member and international community). 23 ### Scope and applicability (Section A: When Do the Arrears Policies Apply?) - General applicability: - Apply where a sovereign debtor has run arrears on a claim held by an external creditor and that debtor is requesting Fund financing (paragraph 27). - Apply when the Fund is lending its resources, including requests and reviews for arrangements under the GRA and any trust instruments such as the PRGT and RST; also to emergency financing under the RFI and RCF; and by analogy to the non-financing Policy Coordination Instrument. - Do not apply to SMPs or PMBs, as there is no Fund financing, although clearance of arrears should still be encouraged. 26 - Sovereign debtor requirement: - Debtor generally must be sovereign; sovereign includes entities whose financial operations form part of the budgetary process (Box 1). - Claims originally owed by other public/private creditors may become subject to the arrears policies if they become obligations of the government (e.g., a government guarantee is called). - One exception: the Lending into Arrears (LIA) strand that applies to jurisdictional arrears (non-sovereign arrears that arise from the imposition of exchange controls). 24 - Arrears definition: - Arrears arise when any external payment obligation has not been paid in full at the time it is due, taking into account any applicable grace period or cross-default provision. - No de minimis exemption; existence of arrears does not depend on magnitude, reason for nonpayment, creditor inaction, or debtor’s legal inability to pay. - Age of arrears does not affect applicability so long as the claim remains valid under governing law; not affected by additional grace periods that may be provided in the member’s TMU definition of the external arrears performance criterion. - If only some outstanding claims are in arrears, the policies apply only to that subset of claims. - Residency of creditor: - Policies apply based on residency of the creditor (external = non-resident), even where program documents/DSA define debt/arrears differently. - If any portion of a domestic-law debt claim is held by non-resident creditors, the entire issuance/claim falls within the arrears policy scope. - For residency: place of legal incorporation governs residency (domestic branch of foreign company = non-resident; domestic subsidiary of foreign company = resident). - Currency union central bank (CUCB) claims: for decentralized unions (Eurozone), only central CUCB (ECB) claims are external; own-sovereign claims on national central bank balance sheets are domestic. For centralized unions (CEMAC, ECCU, WAEMU), all CUCB claims on a member are considered domestic. - Disputed claims: - The arrears policies do not apply to claims in dispute; the Fund’s “disputed claims doctrine” arises from its duty of neutrality (paragraph 28). - Where the Fund accepts the member’s representation that validity or amount is in dispute, the disputed claim does not give rise to arrears for Fund purposes. 25 - The Executive Board makes the final determination of claims in dispute; to introduce a dispute on pre-existing arrears to which Fund policies have previously been applied, there should have been a material change in facts. - Disputed claims are taken into account as contingent claims in the DSA and could affect debt sustainability and program financing assurances. - Distinction from program/performance criterion scope: - Scope of arrears policies and scope of any performance criterion on non-accumulation of new external arrears (arrears PC) may differ (paragraph 29). - Arrears PC is continuous in nature; arrears policies apply to claims in arrears at time of Board consideration of a member’s request for Fund financing or subsequent reviews. - Fund classification of claims for policy purposes does not determine their treatment in a restructuring; Fund’s classification is internal and need not align exactly with Paris Club or CF practices. ### Staff report requirements - Staff reports for program cases must identify external arrears, including: - the amount of the claim, - the creditor, - the date when the claim went into arrears (owing to implications for arrears policies and external arrears PC). - For surveillance cases, including the above information would be good practice. - When the validity or amount of a claim is disputed, the first staff report following representation of the dispute should include a factual description of the claim and basis for the dispute; subsequently, absent material developments, staff need only note continuing dispute in a footnote and include the claim as a contingent claim in the DSA. ### Which parts of the arrears policies apply (Section B: Which Parts of the Arrears Policies to Apply) - Determination process: - Once arrears are established, staff must judge which part(s) of the policies to apply; the Executive Board makes the final determination on advice of management and staff (paragraph 31). - Determination is done on a claim-by-claim basis; early fact-finding discussions with debtor and creditors (including Paris Club or CF) may be critical. - Fund recognizes several categories of claims and corresponding arrears (paragraph 32). ### Arrears on Direct Bilateral Claims of the Official Sector - Definition of Direct Bilateral Claims (paragraph 33): - Held by a government or an agency acting on behalf of a government and originate from an underlying transaction where the creditor government or agency provided or guaranteed financing to the borrowing member. - Includes cases where claims originally extended by non-government creditors become Direct Bilateral Claims if they benefited from a creditor-government guarantee that is called. - Includes central bank swap lines and deposits at the debtor’s central bank extended on behalf of the government for BOP purposes. 26 - Excludes purchases of sovereign bonds for portfolio or reserve management purposes. - Assessment of “acting on behalf of government” (paragraph 34): - Take into account totality of circumstances; seek creditor authorities’ representation and supporting evidence. - Consider governance structure, whether claim originated from explicit government directions, and terms of financing; assess consistency of creditor representations. - Important exclusions to Direct Bilateral Claim definition (paragraph 35): - Secondary market purchases by official bilateral creditors (only primary market purchases by creditor government/entities acting on its behalf qualify). - Claims contractually part of a pooled voting mechanism with private creditors. Bonds with single-series CACs can be treated as Direct Bilateral Claims only where creditor government maintains continuous and full ownership of the entire bond series; Fund relies in first instance on creditor’s representation of continuous and full ownership. 27 - Two-category split for Direct Bilateral Claims (paragraph 36): - OSI-related: - A claim is OSI-related when covered by a past official-sector restructuring or when a debt restructuring, including participation from official bilateral creditors, is required under the current program parameters to ensure the program is fully financed, debt is sustainable, and Fund resources are adequately safeguarded. - An OSI-related classification holds even if the debtor’s situation improves and it could now pay the claim in full. OSI-related claims are subject to the Fund’s Lending into Official Arrears Policy (Section IV.B). - Rationale: avoiding perverse incentives that could arise if claims could be reclassified to non-OSI as debtor situation improves. 29 - Non-OSI-related: - A claim is non-OSI-related when not covered by a past restructuring and the current Fund-supported program anticipates payment in full; also includes claims previously restructured but where creditors clawed-back treatment because of a breach of Comparability of Treatment (CoT) requirements. - A claim originally non-OSI-related may be reclassified as OSI-related if subsequent economic developments require it. - Non-OSI-related direct bilateral claims are subject to the Fund’s Non-Toleration Policy (Section IV.A). 30 *Source: Guidance Note on the Financing Assurances and Sovereign Arrears Policies (excerpts provided).* ### 37. For the purposes of Fund policies, IFIs are defined as financial institutions with at least ### 37. For the purposes of Fund policies, IFIs are defined as financial institutions with at least ### Definition of IFIs - IFIs are financial institutions with at least two sovereign members and no non-sovereign members. - For these purposes, “sovereign” means that the members are countries, government agencies (see definition in Box 1), central banks, or public entities acting on behalf of a government (see definition in paragraph 27). - Institutions with private shareholders would not be considered IFIs (and their claims would instead fall under the LIA policy; go to Section IV. D below). ### Claims of IFIs subject to Fund arrears policies - Defined as claims originating from: - a transaction where the IFI provided or guaranteed financing to the borrowing member; or - support in the context of a BOP crisis in the form of bond purchases in the secondary market. - Facilities or purchase programs set up to undertake such purchases should be considered part of the Global Financial Safety Net (GFSN). - Logic generally applies only to sovereign bonds acquired under purchase programs of reserve currency union central banks (RCUCBs) or regional financing arrangements (RFAs). ### Important exclusions to IFI claims for Fund policy purposes - Certain IFI claims that do not relate to financing of a public-good nature: - Arrears on claims related to IFI financing of a global public-good nature are protected under the arrears policies. - Arrears on other types of claims—such as membership fees or treasury/investment operations—are considered to fall outside the arrears policies. - Certain bond purchases in the secondary market done for BoP support: - If an IFI that would be part of the GFSN indicates in its own public statements that it expects a claim to be treated pari-passu with privately held claims, the LIA policy would be applied to those claims. - IFI claims that are subject to vote pooling with the private sector: - Vote-pooled claims are excluded from the definition of IFI claims for the purposes of the arrears policies, even when done for BoP purposes as part of the GFSN. ### IFI claims — two categories for policy application - i. Non-OSI-related: - A claim is non-OSI-related when it is not covered by a past restructuring and the current Fund-supported program anticipates payment in full. - Such claims are subject to the Fund’s Non-Toleration Policy (go to Section IV. A below). - ii. Official Sector Involvement (OSI)-related: - A claim is OSI-related when it is covered by a past restructuring (e.g., a Paris Club or CF agreement post-dates the underlying claim or there was an announced restructuring outside the Paris Club or CF that covered the underlying claim), or when a debt restructuring including participation from official bilateral creditors is required under the current program parameters to ensure program financing, debt sustainability, and adequate safeguarding of the Fund’s resources. - Such claims are generally subject to the Fund’s Non-Toleration Policy, but may, in certain circumstances where the creditor community does not confer de facto preferred creditor status, become subject to the Fund’s Lending into Official Arrears Policy. ### Determining de facto preferred creditor status for OSI-related claims - The de facto preferred creditor status of the IFI must be determined because Fund arrears policies reflect the de facto special treatment granted by the official creditor community. - Two cases to consider: - IFI claims not likely to be restructured — NTP applies: - The NTP will always apply to arrears to the World Bank Group and will generally apply to arrears to other IFIs. - IFIs with broader/global membership (i.e., 50 percent or more of Fund’s total voting power) have been excluded from restructurings historically; staff must assume such IFIs will almost surely benefit from NTP unless Fund members explicitly indicate otherwise. - RFAs and RCUCBs will almost always benefit from NTP; staff must assume that is the case unless Fund members explicitly indicate the Board will not apply the NTP to such IFI. - IFI claims possibly falling within the perimeter of a restructuring — LIOA may be applied: - The Executive Board may decide to apply the LIOA to OSI-related IFI claims if factors suggest official creditors expect the IFI’s claims to be restructured. - Factors that increase the likelihood of LIOA treatment include: - The IFI has regional membership (understood to mean less than 50 percent of Fund’s total voting power). - The institution is not an RFA or RCUCB forming part of the GFSN. - The institution is inside the scope of a debt restructuring by the Paris Club or CF (including as a Paris Club member). - The Paris Club has included the institution’s claims in the scope of past restructurings. - The institution did not participate as a multilateral creditor in the HIPC Initiative (not applicable to IFIs established after HIPC). - The institution’s claims relate to a period when it was not seen as an IFI for Fund policies due to private shareholdings. ### Arrears to non-sovereign creditors - Includes arrears owed by sovereign debtors to: - private external creditors; and - public-sector entities that are not part of the budgetary process of the government in the creditor country or acting on behalf of the creditor country. - Also includes claims owed to multilateral institutions with one or more private sector shareholders. - Such arrears are subject to the LIA policy (go to Section IV. D below). ### Scope for arrears owed to non-sovereign creditors - Only arrears on underlying debt obligations arising from commercial financial obligations of a contractual nature that are not paid when due are subject to the Fund’s arrears policies (taking into account any contractual grace periods). - In determining whether an obligation is “debt,” the Fund shall assess characteristics of the obligation—especially whether it includes a deferral of payment—and contract language is not necessarily conclusive; reference can be made to the definition of “debt” in the Debt Limits Policy. Staff should consult SPR and LEG as needed. - Included are arrears on: - bank loans, - suppliers’ credits (i.e., where the creditor contractually defers payment, or the good/service does not need to be paid on delivery), - bonds. - Not included are arrears on non-debt obligations, such as: - financial obligations originating from an arbitral award on an underlying non-debt claim, - unpaid dues, - payment on delivery, - power purchase agreements, - obligations to acquire assets. - Note: other obligations can nonetheless affect fiscal and debt sustainability analyses and debt-related conditionality where program definitions include such obligations. ### Jurisdictional arrears (private-to-private arrears due to exchange restrictions) - Jurisdictional arrears arise when exchange controls imposed by sovereign members cause private-sector residents to be unable to obtain foreign exchange to pay debt service on time to non-resident private creditors. - These arrears constitute a small subset of cases—staff identified three such cases since 2002. - Such arrears fall under an element of the Fund’s LIA policy (go to Section IV. D). ### Staff report requirements - Staff report should identify: - the type of each claim in arrears; and - the arrears policy that applies to each claim in arrears. - Where judgment is involved (e.g., in determining whether a claim is a Direct Bilateral Claim, whether an entity is an IFI, or which policy should apply to an IFI claim), staff should provide the Board the information necessary for the Board to make its judgment. - Additional details are especially important where staff recommend applying arrears policies differently from precedents (e.g., recommending LIOA to IFI claims given NTP treatment in other cases). - Appendix III provides details on recording OSI-related arrears in the DSA; programs should assume non-OSI-related arrears will be cleared in the near-term. ### Applying the arrears policies — general points - Once the type of arrear and relevant policy are determined, the policy must be applied. - This section discusses: - the Non-Toleration Policy (NTP), - the Lending into Official Arrears Policy (LIOA) (four strands), - the LIOA as applied to IFI arrears, - the Lending into Arrears Policy (LIA), - the LIA as applied to jurisdictional arrears, - special considerations in emergency financing situations. - The application of the arrears policies generally provides the Fund with adequate safeguards because policies encourage resolution of arrears in line with debt sustainability restoration and program financing space. ### Payments in arrears due to factors outside the debtor’s control - Where payments are in arrears due to factors outside the debtor’s control, such as international sanctions, arrears policies are generally considered met when payments are made into escrow. - This typically applies to arrears to official bilateral creditors under sanctions. - Payments into escrow should be for the full amount due and made on the contractual due date, taking into account any contractual grace period. - Note: payments into escrow will not address compliance with the external arrears performance criterion unless the TMU definition specifically permits. ### A. Non-Toleration Policy (NTP) — application overview - The NTP is applied in three situations (see Section III for determinations). NTP has broader scope than LIA or LIOA. - Arrears on a non-debt claim held by official creditors are subject to NTP in a non-OSI context, even where the underlying claim is not an extension of financing. - No financing assurances review is required for any of these cases. ### NTP application specifics - Arrears owed to the World Bank Group: - Fund requires either: - (i) upfront clearance of the arrears before approval of the Fund-supported program or completion of a review under the program; or - (ii) an agreed plan between the member and the World Bank on terms of clearance over a defined period. - Country teams should proactively reach out to World Bank counterparts to discuss progress and confirm an agreed plan. - Arrears owed to other IFIs: - NTP requires the debtor have a credible plan and projected financing to eliminate arrears over the program period. - The plan must be credible to Fund staff and ultimately the Executive Board; creditor concurrence is not required. - In legacy arrears covered by MDRI, an IFI’s broader commitment to that initiative can form the basis for staff’s assessment of a credible plan. - Arrears on Non-OSI claims held by official bilateral creditors: - NTP requires tacit approval of the creditor to Fund financing despite arrears, generally conveyed by the non-objection of the creditor’s Executive Director at the Board meeting. - Area Department staff should reach out to creditor Executive Directors in advance to ensure there will be no objection. - If an Executive Director signals that a creditor will object, the policy will not be met and the staff report cannot be issued until the arrears to that creditor are cleared or the creditor changes its position. *GUIDANCE NOTE ON THE FINANCING ASSURANCES AND SOVEREIGN ARREARS POLICIES — INTERNATIONAL MONETARY FUND* ### 51. Staff report requirements: ### 51. Staff report requirements: ### World Bank arrears; other IFI arrears; non-OSI Direct Bilateral Claims - For World Bank arrears, Staff reports should identify any arrears remaining at the time of issuance of the staff report to the Board and provide details of the agreed plan for their resolution. For LICs, the DSA, as a joint Bank-Fund document, would generally be a good place to report the agreed plan. - For other IFI arrears, the staff report should record the fact of the arrears and the plan for arrears clearance, and this should be reflected in the program and DSA assumptions. - For arrears on non-OSI Direct Bilateral Claims: - The tacit approval should not be recorded in the staff report, but the arrears would need to be reported. - For program financing purposes (including for the DSA), it should be assumed that these non-OSI arrears will be cleared in the near-term (i.e., normally within 6-12 months), and the determination as to whether the program is fully financed should be made on this basis. ### B. Lending Into Official Arrears (LIOA) as applied to Direct Bilateral Claims — overview - The LIOA policy applies to OSI-related Direct Bilateral Claims. - The LIOA policy may be satisfied in four ways; Strand 1 (Representative Standing Forum) is the first—and preferred—way. - Where the debtor requests emergency financing (under the RCF or the RFI), the policy allows for flexibility in exceptional circumstances (see section F). ### Strand 1: Representative Standing Forum — key features - Satisfied through an “adequately representative” restructuring agreement by a representative standing forum (e.g., Agreed Minute for the Paris Club or MOU from an Official Creditor Committee (OCC) including Paris Club under the CF). - Pre-cut-off date debt would be considered eliminated for purposes of the LIOA policy for both participating and non-participating creditors. - If a bilateral agreement is not concluded with a creditor by the deadline set forth in the forum’s restructuring agreement (i.e., the Agreed Minute or MOU), the arrears to that creditor would be judged to arise anew for the purposes of this policy unless the Fund judges that the debtor is making “best efforts.” - “Best efforts”: determined case-by-case; generally requires the debtor to reach out to the creditor periodically—typically at every review; for longstanding legacy arrears (over 5 years), one final written communication reiterating willingness to restructure under Paris Club Agreed Minute terms would suffice going forward until the creditor is willing to accept such terms. - If staff cannot support that the debtor is making “best efforts” at any request for Fund financing or review, approval of the arrangement or completion of the review may only proceed where consent is received from the creditor(s). - An “adequately representative agreement” provides a majority of total financing contributions required from official bilateral creditors over the program period (share > 50 percent). - “Contributions” are limited to debt relief and any form of new financing (loans, bond financing, guarantees and grants) that directly help meet the program’s financing and/or debt sustainability targets. - To calculate the majority share, country teams must obtain in advance data on: - (i) official bilateral debt service falling due during the program period; and - (ii) new financing provided/committed by official bilateral creditors during the program period (as reflected in the BOP projections). - Representativeness is assessed as the ratio of expected financing contributions by standing forum creditors relative to total financing required from all official bilateral creditors. - Only the Paris Club or CF with Paris Club participation is considered a “representative standing forum” for the purposes of the LIOA policy as of 2024. ### Staff report requirements under Strand 1 - The staff report should note that the agreement is adequately representative and that, on this basis, the arrears including to nonparticipating official bilateral creditors can be considered eliminated for the purposes of the LIOA policy. - The staff report should add the “best efforts” assessment whenever required. - For new applications of Strand 1 after the April 9, 2024, adoption of the relevant policy change, a financing assurances review would be required at each review until the bilateral agreements are signed. - Appendix III describes how arrears should be reported in the DSA when the LIOA is applied. ### Strand 2: Consent — operational and staff report requirements - Where an adequately representative agreement is not available, the LIOA policy may be satisfied where the creditor(s) provide consent to Fund financing despite the arrears. Consent does not cover an agreement or commitment to resolve arrears. - The Fund should encourage parties to reach an agreement during the period of the arrangement. - Consent may be provided or withdrawn at any time. If consent is withdrawn, Fund management cannot recommend Board approval or completion of a review unless one of the other LIOA strands is satisfied. - Two routes if Executive Directors representing creditor countries object: - Staff must be prepared to demonstrate that the three criteria (Strand 3) are satisfied. - For any creditor to whom the three criteria cannot be applied, failure to provide consent (or withdrawal) re-routes the LIOA to Strand 4. - Staff report requirements and operational guidance: - Timing of consent: Consent should generally be received before the staff report is issued to the Board and be recorded explicitly in the staff report. If a creditor requests more time, the staff report should only be issued where staff has determined the three criteria are met (if criteria are not met and consent has not been received, management cannot recommend approval). The staff report can be circulated noting the creditor requested more time and that a staff statement on the creditor’s position will be issued one week ahead of the Board meeting. The analysis of the three criteria should not be included while awaiting consent; a staff supplement one week prior to the Board meeting should clarify whether consent has been received and, if not, set out the assessment of the three criteria. - Typical modality of consent: Area department should reach out to relevant Executive Director(s) while preparing the staff report (or earlier) to secure explicit consent. Consent is generally conveyed through the Executive Director but may be conveyed directly from the authorities; the Executive Director should be informed. Consent does not need to be in writing, though written consent is advisable for record-keeping. - “Deemed consent” where creditor authorities cannot be reached: If Executive Director reports difficulties or delays, a streamlined approach is available. The country team should request consent to be received no later than one week before expected circulation of the staff report. The Executive Director(s) would be informed that anything other than an objection (including no response by this deadline) would indicate consent and that this “deemed consent” would be noted in the staff report. ### Strand 3: Application of the Three Criteria — overview and assessment elements - If neither an adequately representative agreement nor creditor consent is available, the LIOA policy may be satisfied through application of the LIOA’s “Three Criteria”: - Criterion 1: Prompt financial support from the Fund is considered essential, and the member is pursuing appropriate policies. Where prompt support is not required, the member should be encouraged to resolve its arrears prior to seeking Fund financing. - Criterion 2: The debtor is making good faith efforts to reach agreement with the creditor on a contribution consistent with the parameters of the Fund-supported program—i.e., the absence of an agreement is due to the unwillingness of the creditor to provide such a contribution. - Criterion 3: The decision to provide financing despite the arrears would not have an undue negative effect on the Fund’s ability to mobilize official financing packages in future cases. - Criterion 1: Will be satisfied by construction in the case of a disbursing Fund arrangement. Not applicable when policy is applied by analogy to non-financing arrangements (e.g., Policy Coordination Instrument). ### Assessing Criterion 2 — “good faith” elements: process and terms offered - Process elements staff will consider: - Whether the debtor has approached the creditor either bilaterally or through a relevant grouping of official bilateral creditors (including ad hoc creditor committees). - Whether the debtor has offered to engage in substantive dialogue with the creditor and has sought a collaborative process to reach agreement. - Whether the debtor has provided the creditor relevant information on a timely basis. - “Relevant information” would generally include (i) exchange of current macroeconomic and debt data, (ii) disclosure of the proposed treatment for different creditor classes, and (iii) transparency around macro policy assumptions (to the extent such information can be disclosed). - Terms offered: The Fund will consider whether terms offered to official bilateral creditors: - are consistent with the parameters of the Fund-supported program (terms resulting in contributions that exceed program requirements would generally not indicate good faith); and - do not imply a contribution that is “disproportionate” relative to other official bilateral creditors. - Ways to assess burden-sharing implications include nominal shares, NPV shares, and net financing shares. If measures yield different results, staff must determine which are most relevant taking into account case specifics. This is the only instance where staff must explicitly assess comparability of treatment among creditors. ### Assessing Criterion 3 — Fund’s ability to mobilize future official financing - Staff will consider the signal the decision would send to official bilateral creditors as a group, given the specific circumstances. - Considerations include: - Size of contributions: Criterion 3 would normally not be satisfied where it is being applied to an official creditor or group of creditors accounting for the majority of total financing contributions required from official bilateral creditors over the program period. - Staff should provide a breakdown in the staff report of relative shares of contributions by creditors to whom the three criteria are being applied. - Track record: Assessment would consider the creditor’s track record of providing contributions in past debt restructurings under Fund-supported programs; staff should provide a brief description of the creditor’s overall track record in the five most recent restructurings in which the creditor held claims, and discuss expectations for future cooperation where relevant. - Other considerations: Case-specific factors that mitigate risks for mobilizing financing (e.g., dynamics specific to debtor and creditor creating incentives that would not affect other cases) would be taken into account. *GUIDANCE NOTE ON THE FINANCING ASSURANCES AND SOVEREIGN ARREARS POLICIES INTERNATIONAL MONETARY FUND* ### 64. Staff report requirements. Staff’s assessment of each criterion must appear in the staff ### 64. Staff report requirements. Staff’s assessment of each criterion must appear in the staff ### Staff report requirements (general) - Staff’s assessment of each criterion must appear in the staff report the first time it is conducted; subsequent assessments may cross-reference earlier staff reports for the details but must still assess that the criteria are met. - Refer to Appendix VII for suggested language in policy notes and staff reports. ### Strand 4: Application of Additional Safeguards — determination steps - Application of Strand 4 requires a determination that Strands 1-3 cannot be satisfied. Staff should go about this determination as follows: - Staff should always start by determining whether Strand 1 is available via communication with the secretariat of the applicable “representative standing forum” and by calculating whether the creditors involved could generate an adequately representative agreement (see paragraph 54 above). - In the event Strand 1 is not available: - Regarding Strand 2, staff should ask as early as possible for consent. If consent is not forthcoming from any creditor to whom Strand 3 cannot be applied within four weeks after a staff’s request to that creditor, then Strand 2 is considered to be unavailable. Staff may choose to extend this deadline, if deemed useful (i.e., if there are indications that consent may be forthcoming). - Staff can assess Strand 3 per the section above. - The assessment of which strand should be used is not necessarily static over the course of an entire program. Examples: - If Strand 1 becomes available before a Board meeting, then the approach would revert to Strand 1 (but all existing agreements on safeguards would remain in place). - If additional safeguards are warranted as the program progresses, as dictated by the requirements of the financing assurances review, a case may move from Strand 1 to Strand 4 (Standard Safeguards) and from there to Strand 4 (Enhanced Safeguards). - In the event that Strand 2 and/or 3 are available but the request is for exceptional access, then Strand 4 should be used. ### Strand 4: choice of safeguards approach - Once staff assesses that Strand 4 applies, then a determination must be made on which safeguards approach to apply: - The Standard Safeguards Approach. - Default Strand 4 approach for normal access cases. - Would not apply where: - (i) there is an explicit request from any representative standing forum, or any other creditor to whom the three criteria could not be applied, for additional Fund support to facilitate creditor coordination efforts; or - (ii) a representative standing forum or any other creditor to whom the three criteria could not be applied signals that it has no intention to restructure in line with program parameters. - The Enhanced Safeguards Approach. - Applicable to all exceptional access (GRA or PRGT) or high combined access (GRA+PRGT) to Fund financing to which the LIOA policy applies that do not fall under Strand 1. - Also covers normal access cases where one or both of the two exclusions noted for the Standard Safeguards Approach apply. ### Standard Safeguards Approach — required elements - When applying the Standard Safeguards Approach, staff should utilize a combination of program design elements and debtor commitments to establish safeguards: - Capped initial access. - A case applying Standard Safeguards Approach will only proceed where the initial disbursement or purchase (upon arrangement approval) does not exceed the annual access limits under the regular window of the Fund’s emergency financing instruments. - Phasing should be aligned with the member’s BOP needs and policies; the pace of implementation of adjustment measures would need to be adjusted accordingly. - Program conditionality. - Staff should consider conditionality to provide additional safeguards. - In line with the Guidelines on Conditionality, program conditionality should only be proposed where the measures are reasonably within the member’s direct or indirect control and are of critical importance for achieving the goals of the member’s program or for monitoring the implementation of the program. - Two relevant types (see Section VI.D for further discussion): - Structural conditionality. - Can cover debt transparency, information sharing, or milestones in the process within the control of the authorities. - Focus on measures that can help keep a restructuring process on track. - Should be discussed with the debtor’s legal and financial advisors to ensure alignment with timeline and strategy. - Conditionality should not be set on measures outside the debtor’s control, such as reaching agreement on the restructuring, though authorities may make commitments of their intentions in the letter of intent or MEFP. - Quantitative conditionality. - Would generally involve standard program targets on net international reserves and fiscal targets. - Focus on ensuring that any payments to creditors are in line with program parameters. - Where a debtor has defaulted on most or all creditors, comprehensive conditionality with full coverage of below-the-line public sector accounts would strengthen the debtor’s ability to ensure comparable treatment among creditors. - Quantitative targets would be set under the assumption that the debtor would continue to run arrears or settle arrears on terms consistent with program parameters. - Such conditionality should be discussed with the debtor’s legal and financial advisors to ensure staff understands the full structure of debt and debt service. - Debtor commitment to good-faith efforts. - A case applying Standard Safeguards Approach will only proceed where the debtor has made a commitment to pursue good-faith efforts to reach agreement with official bilateral creditors. - “Good faith” would be defined as it is under LIOA Strand 3, considering both process and terms offered (paragraph 62). - This should generally be in the form of a letter to creditors, and the MEFP/LOI should reflect the debtor authorities’ commitment. ### Enhanced Safeguards Approach — required elements - The Enhanced Safeguards Approach should include: - The conditionality and debtor commitment elements of the Standard Safeguards Approach (the capped initial access would be dropped). - A direct commitment to the Fund by a “sufficient set” of creditors about their restructuring intentions—i.e., that they intend to restructure the claims in line with program parameters. - See paragraph 18 above for the definition of a “sufficient set”. - Once such a commitment has been received, arrears to other official bilateral creditors would be deemed away for the purposes of the Fund’s arrears policies. - The commitment would be in the form of financing assurances, as described in paragraphs 15-17—i.e., that a key stage in the COCP has been reached, or specific and credible assurances where a COCP assessment cannot be made. - Per the definition of a sufficient set, such commitments must involve any representative creditor forum if applicable and any creditors with influence over the debtor. ### Staff report requirements specific to Strand 4 - The policy note should provide an explanation of why Strand 4 applies and a preliminary description of the proposed safeguards. - The Staff report should explain: - Why Strand 4 was invoked, noting why Strands 1-3 could not be applied. - Why the Enhanced Safeguards Approach applied to normal access cases, where relevant, including a transparent accounting of the creditor forum or creditor that requested greater Fund support for creditor coordination efforts, or which signaled an unwillingness to restructure. - For the Standard Safeguards Approach, staff reports should document the set of safeguards deployed and the rationale for any conditionality proposed (in line with the Guidelines on Conditionality). - For the Enhanced Safeguards Approach, beyond documenting the debtor commitment and conditionality proposed, staff reports should explain, for each creditor in the sufficient set, the basis for the COCP assessment (or specific and credible assurances where COCP is not available) (see Section II.B). - Where changing circumstances warrant an increase in safeguards over the course of a program, in line with financing assurances reviews requirements, the staff report should explain what the circumstances are and how the proposed measures provide the requisite safeguards. *Source: GUIDANCE NOTE ON THE FINANCING ASSURANCES AND SOVEREIGN ARREARS POLICIES (excerpts provided).* ### 79. Staff should encourage debtor authorities to clearly communicate to its creditors the ### Staff should encourage debtor authorities to clearly communicate the perimeter of claims subject to restructuring ### Clarity on perimeter of claims (Paragraph 79) - Staff should encourage debtor authorities to clearly communicate to its creditors the perimeter of claims subject to restructuring as early as possible. - Early specification of the perimeter (including claims held on non-government public sector entities) helps private creditors make progress toward an agreement among themselves and with the debtor. - Providing this clarity is the debtor's responsibility; staff should convey the expectation that the debtor do this at the outset of the debt restructuring process. - This expectation helps the Fund establish the requisite assurances under the LIA policy that the debt restructuring will restore debt sustainability. - Beyond establishing an expectation as part of the assessment of good faith, the Fund cannot (and should not) do more; the debtor should determine the perimeter of claims for a PSI and/or the terms demanded from various private creditors consistent with program parameters and objectives, and the Fund should not interfere (see Section VI). - Reference: 69 ### Principle 3 — Opportunity for creditors to provide input (Paragraph 80) - The debtor should provide creditors with the early opportunity to give input on the design of restructuring strategies and the design of individual instruments. - Input is generally obtained through ongoing dialogue where creditors indicate individual preferences that may feed into a menu of options. - Private creditors should be encouraged to provide indicative restructuring scenarios consistent with program parameters to make debt resolution more efficient. ### Principle 4 — Terms of the offer (Paragraphs 81–82) - Any terms offered to creditors by the member should be consistent with the parameters of the Fund-supported program. - Good faith engagement requires that a debt restructuring proposal—if made before the Executive Board meeting—be broadly in line with what is needed to restore debt sustainability as reflected in program parameters. - The financial terms factor into the good faith assessment to ensure the debtor does not offer too light a restructuring that would fail to restore sustainability under program parameters. - Offering too deep a restructuring would be in line with program parameters and not necessarily indicate bad faith, though it could undermine the assessment that a restructuring will be achieved in line with program parameters. - Specific creditor actions or circumstances: - Creditors will often request terms inconsistent with program parameters; notwithstanding lack of progress, the two LIA criteria can be assessed to be met, assuming the program would continue to be financed by arrears and that creditors will eventually recognize the necessity of restructuring in line with program parameters. - The presence of collateral can complicate LIA application; impact depends on type and enforceability of collateral and whether it undermines the assumption that arrears will finance the program and that creditors will ultimately restructure in line with program parameters. Example noted: Chad (2021) where oil sale contract structure made it impossible to run arrears to its commercial creditor. In such cases, the Fund may require assurances from that commercial creditor to complete a financing assurances review. - Reference: Guidance Note on Implementing the Debt Limits Policy in Fund-Supported Programs, May 2021. ### Non-restructuring situations and assessment of good faith (Paragraph 83–84) - Sovereign arrears to private creditors may arise for reasons unrelated to need for debt restructuring (e.g., administrative issues or difficulties effecting payments). - Standard “good faith” principles applied to the extent relevant; debtor must engage creditor(s) to resolve arrears. - In assessing debtor’s good faith efforts and progress, staff should account for: - Sufficient frequency in dialogue with creditors, taking into account complexity of creditor base, previous creditor responses, and logistical factors preventing debtor outreach; - Whether terms offered by debtor or demanded by creditors are consistent with program parameters; and - Any case-specific factors preventing progress in dialogue. - Staff report requirements: at policy note stage, staff should prepare a preliminary assessment of the LIA criteria, to be verified after discussion with authorities on mission for a final determination at the staff report stage. A sample assessment for the staff report stage is set out in Box 2 and Appendix IX. Staff are encouraged to obtain information from debtor authorities and creditors. So long as a member has outstanding arrears to private creditors, all program reviews are subject to financing assurances reviews (see paragraphs 19-20). ### LIA policy and jurisdictional arrears (Paragraphs 85–86) - Arrears policies can apply to jurisdictional arrears (see Section IV.E); LIA policy helps draw attention to arrears on debt-service payments arising from imposition of exchange controls. - LIA operates in tandem with Article VIII, Section 2(a) to convey need to eliminate exchange controls and consequent arrears to the extent possible. - Nuanced application: a. Fund lending despite non-sovereign jurisdictional arrears should be on a case-by-case basis, and only where: (i) prompt Fund support is essential for successful implementation of the member’s adjustment program; and (ii) the member is pursuing appropriate policies and making a good faith effort to facilitate a collaborative agreement between private debtors and their creditors, and a good prospect exists for removal of exchange controls. b. Sovereign’s role differs from sovereign arrears: sovereign should remove underlying exchange controls; removal would help resolve non-sovereign arrears. Sovereign can also indicate how foreign exchange will be made available to service underlying claims. Assessment that LIA policy is met should be supported by description of member’s timeline for removal of exchange controls and anticipated availability of foreign exchange. - Staff report requirements: Policy notes should flag application of the policy and prepare a preliminary assessment of the criteria. Staff should contact SPR and LEG if they anticipate applying LIA due to non-sovereign arrears from exchange controls. - Reference: 70 ### Application in emergency situations (Paragraphs 87–91) - Arrears policies provide flexibility for emergency financing cases (RCF or RFI) in “exceptional circumstances,” allowing financing without further procedural steps. Fund support in such cases is expected to advance normalization of relations with creditor(s) and resolution of arrears so subsequent arrangements again become subject to arrears policies. - Even in emergencies, best course in restructuring is to work toward a UCT-quality program. Urgent BOP needs should not undermine efforts to secure a UCT-quality program; if feasible, a UCT program should be pursued. - Emergency financing may still be appropriate even if a UCT program has been negotiated or approval in principle (AIP) exists; staff must account for exceptional circumstances that may invalidate the agreed program and necessitate re-negotiation. Renegotiation feasibility and timeframe differ by strand and safeguards approach. - Exceptional circumstances for RCF/RFI requests require: (i) urgent BOP need arises from exogenous shocks (e.g., adverse shocks to key commodity markets or developments with or in a key trading partner) or natural disasters (e.g., hurricane, widespread flooding); and (ii) extraordinary demands on affected government leave insufficient time for debtor to undertake “good faith efforts to reach agreement with its creditors.” Urgent BOP impacts from sources common to restructuring situations (policy-driven endogenous dynamics of a debt crisis) are not “exceptional circumstances.” The second prong typically met only for recent arrears with no long-standing dialogue; for long-standing arrears, regular arrears policies apply. - Flexibility differences between LIOA and LIA: - LIOA: If exceptional circumstances exist, Fund may provide RCF or RFI financing despite arrears to official bilateral creditors without seeking creditor consent or assessing the three criteria. Fund would require debtor commitment to make good-faith efforts toward resolving arrears and to promote creditor coordination (e.g., ensuring comparable treatment among creditors). - LIA: If exceptional circumstances exist, Fund may provide RCF or RFI financing despite arrears to private creditors without assessing whether the good-faith criterion has been met. Fund would require debtor commitment to make good-faith efforts toward resolving arrears. - Staff report requirements: staff should elaborate on exceptional circumstances, explain why a UCT program is infeasible and why insufficient time exists for good-faith efforts, and explain how Fund financing will help normalize relations and resolve arrears, including debtor commitments. ### Financing assurances reviews (Paragraphs 92–97) - Executive Board must complete a financing assurances review alongside program reviews in certain cases: - In preemptive restructuring cases (pre-default) involving restructuring of official bilateral claims until restructuring completed; - When the Fund is tolerating arrears on official bilateral claims expected to be restructured but for which terms are not finalized; - When the Fund is tolerating arrears on debt claims to private creditors, regardless of whether a restructuring is expected. If no restructuring of private claims is expected, the review requires only a judgment that the LIA policy continues to be met (see Section IV.D). - Financing assurances reviews are not required when arrears to official bilateral creditors exist but a restructuring is not expected. - Financing assurances reviews are supported by indicative information about expected restructuring process at program outset and subsequent reviews. Staff should consult authorities, legal and financial advisors, creditors, and any creditor forum involved. - Purpose: assess progress in restoring debt sustainability and whether sufficient safeguards exist for further Fund financing; determine whether debtor’s adjustment efforts are undermined by debtor-creditor developments and whether existence of arrears is temporary and does not undermine medium-term external viability and capacity to repay the Fund. The recommendation to complete the review requires staff judgment that, in light of progress, the Fund should continue providing access to resources. - Instances preventing completion of a financing assurances review: - Indications restructuring process is not on track to provide timely or sufficient relief to restore debt sustainability. - Debt sustainability will not be restored by end-program. Timeline for restructurings varies, but debt sustainability must be restored by end of the program. Historically, before arrangement approval, restructuring announced and steps taken toward agreement. AIP with both official and private creditors expected before first review, with completion of debt exchange or bilateral agreements by the second review. Process can be more protracted in practice (examples given: Suriname (2021), Zambia (2022), Sri Lanka (2023), Ghana (2023)), but expectation remains of delivery by end-program. - Additional safeguards: where review cannot conclude sufficient safeguards, specification of additional safeguards could help address the problem. Under LIOA, standard safeguards may be added if strand 1 faces delays; standard safeguards may be supplemented or upgraded to enhanced safeguards where strand 4 applies; enhanced safeguards may lead to requirements to deliver on previous assurances if developments call prior assurance into question. Executive Board can calibrate message in its Summing Up. - Staff report requirements: - Program request (or staff report for first review with outstanding arrears) should present clear depiction of expected steps and schedule for debt restructuring based on information from debtor and advisors, covering key steps (e.g., information sharing, offers). Timeline is indicative and subject to change; staff report should indicate creditors involved and process utilized (e.g., Paris Club, CF, or bilateral discussions). Delays may not block completion if progress remains on track to restore debt sustainability within program period. Financing assurances review must be provided for in legal text of Fund arrangement and decisions completing the reviews. - Subsequent reviews while arrears remain outstanding or until preemptive restructuring is completed must detail staff’s support for completion of the financing assurances review and include sufficient information to track progress against the indicative schedule and assess whether progress remains on track to meet overall program objectives. *Guidance Note on the Financing Assurances and Sovereign Arrears Policies (selected excerpts).* ### Box 2. Sample Financing Assurances Review Language for Staff Report ### Box 2. Sample Financing Assurances Review Language for Staff Report ### Sample language — Staff Report for Program Request - On January 1, Debtor announced a restructuring of external debt and hired legal and financial advisors. As part of the restructuring announcement, Debtor declared a moratorium on external debt service payments and is now in arrears to Bilateral Creditors A and B and external bondholders. - Debtor and its advisors have held technical meetings with Bilateral Creditors A and B in February and April. - The prime minister of Debtor is planning to hold discussions with the president of Bilateral Creditor A in June and with the prime minister of Bilateral Creditor B in July. - It is expected that an agreement in principle with official bilateral creditors will be achieved before the first program review. - [Assessment of the LIOA policy.] - Debtor has conducted preliminary discussions with the creditor committee for bondholders and shared information on the scope of the debt restructuring and preliminary debt targets. - Debtor and its advisors expect to make an initial proposal immediately following Board consideration of this program request, with an eye toward launching an exchange in October. - [Assessment of the LIA policy.] ### Sample language — Staff Report for Subsequent Review - As anticipated at the program request, agreement in principle was reached with Bilateral Creditor A in August on a restructuring in line with program parameters. - While both high-level and technical discussions have continued with Bilateral Creditor B, agreement has not yet been reached. However, it is expected that further discussions [during the Annual Meetings] will allow for additional progress such that agreement in principle within the next few weeks is likely. - [Assessment of the LIOA policy.] - On the private-sector side, the Debtor and the creditor committee have exchanged proposals. - While the Debtor’s offer was assessed to be in line with program parameters, the bondholder’s offer would have breached the debt target. - The Debtor intends to make a counteroffer shortly. - While the initial expectation of an October bond exchange is increasingly unlikely, the exchange is still expected before the second program review. - [Assessment of the LIA policy.] - Given that the restructuring remains on track to achieve program objectives, staff supports the completion of the financing assurances review. ### Guidance on financing assurances provision - Consult with LEG. The provision on financing assurances should follow the one used in the LIA context and should be a continuous condition. - Example formulation in the PRGT context: “[Member] will not request a disbursement under this arrangement ... until the Trustee has determined that with regard to each disbursement, for so long as [Member] has outstanding sovereign external payments arrears to [official bilateral creditors], a financing assurances review has been completed.” - If a financing assurances review is required under both the LIA and LIOA policy, only one financing assurances review covering both types of arrears will need to be completed. ### Role of the Fund in the Debt Restructuring Process — overview (paragraphs 98–100) - The Fund’s role in a debt restructuring in the context of expected and existing Fund arrangements stems from the need to apply the financing assurances and lending into arrears policies, guided by principles such as the duty of neutrality and uniformity of treatment. - Elements of the Fund’s role include: - providing analysis and explaining the international architecture for resolution to the member; - setting the restructuring envelope; - promoting and facilitating debtor-creditor engagement; - communications. - Fund staff cannot perform the functions of financial and legal advisors. - The Fund can play a supportive role where there is no Fund arrangement existing or expected; provisions in this section apply by analogy in that context. - In surveillance, the Fund may assess a member’s debt as unsustainable based on a DSA with macro framework projections using the authorities’ current and expected policies. - Members can request capacity development in the context of their debt restructuring efforts (e.g., analysis on debt sustainability and cash flow, assistance on debt management), though DSA-related capacity development in a restructuring context is generally not advisable absent a Fund-supported program to anchor policies. - Where no up-to-date Fund assessment is readily available, the member or its official creditors may request an assessment letter providing a clear and candid assessment of macro-economic conditions and prospects and related structural policies. ### Supporting the authorities as they decide whether to restructure (paragraphs 101–103) - Any new request for Fund financing must be supported by a DSA, based on realistic macro assumptions and policy measures, showing that debt is sustainable. The Fund utilizes two frameworks: - LIC DSF covering low-income countries. - MAC SRDSF covering all other countries. - Staff must share and explain DSA results in detail, ensuring authorities understand assumptions, calculations, and outputs. - If debt is assessed as unsustainable: - Staff should explain that the Fund is precluded from providing financing unless the member takes steps to restore debt sustainability over the medium term, including through a debt restructuring. - Staff should note that debt restructuring is not always the only way to restore sustainability; grants or highly concessional support from official creditors may help, but commitments need to be judged by staff as credible and specific or as deriving from a COCP. - For requests for exceptional access to Fund financing, heightened scrutiny applies: the member must take steps to restore debt sustainability with high probability if debt is unsustainable. If debt is sustainable but not with high probability, it must be assessed that the member is receiving financing from other creditors on a scale and terms that: (i) help restore the member’s debt sustainability prospects and (ii) provide sufficient safeguards for Fund resources. - The decision whether to restructure rests solely with the debtor sovereign; the Fund cannot require a member to restructure and staff should not interfere in private contracts. - Staff should: - urge authorities to remain current on obligations to the extent possible; - not advise actions that could lead to a default or suspension of payments; - encourage authorities to engage legal and financial advisors to design and implement restructuring strategy. ### Setting and explaining the envelope for a debt restructuring (paragraphs 104–108) - The Fund helps define the restructuring “envelope” necessary to restore debt sustainability and will work with authorities to define a realistic macroeconomic framework that balances adjustment and financing. - Staff should account for how the restructuring would affect macro aggregates, the financial system, financial markets pricing of debt, exchange rates, and other financial instruments, and understand the perimeter (e.g., domestic debt restructuring impacts). - The macro baseline should maintain a central tendency to avoid optimistic or overly conservative biases that could lead to insufficient relief or overly complex contingent instruments. Establishing Debt Targets (paragraphs 105–106) - Targets should: - establish financing assurances for the program by generating external financing during the program period at sufficient scale and timing to close financing gaps (with domestic financing assumptions consistent with program assumptions on key macro parameters); - establish that debt sustainability (i.e., external viability) will be restored — typically requiring targets covering relevant DSA ratios at an appropriate time frame (e.g., DSA stock ratios such as debt to GDP, debt to exports; debt service ratios like debt service to revenues); - establish that the Fund’s post-program financing assurances requirements are met (no financing gaps and capacity to repay); this would typically require targets to cover relevant flow indicators in the DSA (e.g., gross financing needs or debt service ratios) ordinarily for 5 years after the arrangement ends. - There may be specific circumstances where other debt targets are set, in line with the Fund’s Debt Limits Policy. - In calibrating targets, it is important that debt sustainability is fully restored and not knife-edge; appropriate buffers should be included to reduce the likelihood that moderate shocks necessitate a second restructuring. Country-specific guidance on targets (paragraph 106) - LIC-DSF countries: - Restructuring targets should be set to reduce the risk of debt distress to moderate. - This needs to be achieved over the medium-term for normal access cases, and by the end of the program period or three years (whichever is earlier) in exceptional access cases. - The moderate risk of external debt distress is assessed for the DSA that would apply at end-program and is typically seen as achieved by the debt indicators (PV of external debt to GDP and to exports, and external debt service to exports and to revenues) declining below the threshold for the relevant debt carrying capacity in 5 years (or earlier, as relevant, in EA cases) from program approval. - Market Access Countries: - Targets should be set to make debt sustainable in normal access cases, and sustainable with high probability in exceptional access cases. - These are assessed for a 10-year horizon guided by the medium-term modules of the SRDSF. - In normal access cases, debt targets should be consistent with a probability of sustainable debt that exceeds 50 percent by a sufficient buffer (normally at least 60 percent probability). - In exceptional access cases, debt targets should be consistent with a probability of sustainable debt that exceeds 80 percent. Adjustments to targets (paragraph 107) - Restructuring targets should only be adjusted under exceptional circumstances (e.g., discovery of exploitable natural resource wealth; a natural disaster). - Inclusion of appropriate buffers when setting targets can limit the need for adjustments. Representing the restructuring in the DSA (paragraph 108) - The initial baseline DSA should show: (i) the evolution of debt aggregates without a restructuring; and (ii) the debt targets — allowing legal and financial advisors to identify the needed scale of relief. - The baseline DSA can be complemented by an illustrative scenario (or alternative scenarios) to demonstrate feasibility of restoring debt sustainability; the illustrative scenario should ordinarily be based on the authorities’ restructuring strategy, or past restructurings if no strategy exists. - Teams can apply judgment about which scenarios to show in DSAs in GRA program reviews; in protracted restructurings, presenting a pre-restructuring baseline until a majority of creditors have reached an AIP on a treatment can help show how the restructuring envelope is changing. - The OSI treatment can be incorporated based on financing assurances provided or the application of the LIOA policy, depending on the case; PSI can be incorporated based on an assessment of a credible process to reach that treatment. - In LIC cases, a more conservative approach for program reviews is called for: the baseline generally only reflects OSI treatments when an MoU is agreed with an OCC (or bilateral agreement signed if outside an OCC process) and PSI treatments when a bond exchange or loan restructuring has concluded. The decision to include an OSI treatment in the baseline can be informed by the assessment of COCP. Residual official creditors’ restructurings can be incorporated on the basis of a representative agreement with a permanent standing forum or other application of the LIOA. Residual private claims can be incorporated in line with the authorities' restructuring strategy or under CoT assumptions, once settlement has been reached with the majority of private creditors included in the debt restructuring perimeter. *Guidance Note on the Financing Assurances and Sovereign Arrears Policies — Box 2 and excerpts on the Fund’s role in the debt restructuring process.* ### 109. The Fund should promote debtor-creditor engagement both in preemptive and post- ### ppea2024053 - 109. The Fund should promote debtor-creditor engagement both in preemptive and post- ### Creditor coordination - Staff should promote creditor coordination but cannot insist on specific modalities. - The Fund prefers to work with a representative standing forum; this is possible in most cases and has demonstrable value (e.g., internalizes information sharing challenges and helps handle CoT concerns). - Outside representative fora, staff should promote information sharing between creditors (e.g., about any agreements reached), including by encouraging the borrowing member to facilitate this. - Failure to share information can undermine debtor-creditor relations and delay completion of a financing assurances review. - Creditor coordination may encompass simultaneous efforts by official bilateral and private creditors; the choice of such modality is for the debtor authorities, their advisors, and creditors. - Staff should be prepared to support broader information sharing requirements if that modality is selected. ### Perimeter, burden sharing, and comparability of treatment - Fund staff should not set the perimeter of the restructuring and should only address burden sharing among creditors in limited circumstances; these roles are the preserve of the authorities and their advisors. - The Fund can typically accept unequal burden sharing across or within creditor groups so long as debt restructuring targets are achieved. - Staff may need to assess and convey whether perimeter choices impact the macro framework or debt targets (e.g., restructuring domestic law debt held by the domestic financial system may create financial stability issues that rebound onto the macro framework and impede capital inflows or trigger outflows; some perimeter choices could make it all-but-impossible to reach program targets). - Staff may need to discuss capital flow management measures (CFMs) that implicate the Institutional View (IV) on the Liberalization and Management of Capital Inflows. - Countries may on occasion take temporary measures affecting both capital inflows and outflows in support of a debt restructuring (example noted: Ukraine 2024). - Use of CFMs should be guided by the IV and country-specific circumstances; several cases exist where CFMs would be appropriate under the IV. - In crisis circumstances, restrictions on outflows may be useful as part of an overall policy package tackling underlying economic imbalances. - Re-introduction of controls may be appropriate where liberalization has outpaced the economy’s capacity to safely handle capital flows. - Imposition of inflow CFMs could be appropriate where there is an inflow surge and other macroeconomic policy options are not available. - Pre-emptive inflow CFM/MPMs that are macroprudential in nature can be appropriate in narrow circumstances where capital inflows could contribute to systemic financial risks from stock vulnerabilities. - Staff should focus on whether burden sharing choices are likely to achieve the requisite high creditor participation to restore debt sustainability in line with program parameters; if not, staff should convey the problem to debtor authorities. - Staff should not advise authorities or creditors on CoT considerations; creditors assess comparability over different dimensions (NPV reduction, face-value reduction, and maturity extension/financing over the program). - Staff may stay apprised of creditor views and do basic calculations for the Fund’s purposes to assess participation prospects. - Under the LIOA policy, staff must sometimes assess whether the debtor is asking for a disproportionate contribution from the creditor relative to other official bilateral creditors; this factor is considered in determining whether the debtor is acting in good faith. - Staff should not encourage payment or non-payment of a particular creditor but may alert debtor authorities if payment of one creditor may threaten participation of others, including through CoT considerations. ### Terms and conditions - Fund staff should not advocate for specific terms and conditions but should help assess whether offers are compatible with program targets on debt sustainability and financing. - Authorities and their advisors decide on terms to offer different creditors (including contingencies); the Fund’s assessment effectively sets the amount of overall debt relief that needs to be provided. - Staff should provide assessments when requested by the debtor member and do so as quickly as possible. - Direct staff engagement with creditors to assess their offers must be authorized by the debtor authorities; the debtor authorities must be a party to any discussions between staff and creditors unless the debtor agrees otherwise. - Staff should not help creditors engineer the most favorable proposal. ### State-contingent terms and contingencies - State-contingent elements can include upside instruments (e.g., warrants tied to oil revenues or specific economic performance indicators such as debt carrying capacity, GDP) and downside protections (e.g., natural disaster contingencies). - Staff must evaluate complexities and risks of clawback of relief if official creditors assess CoT has not been respected. - Appendix X discusses state contingencies and the Fund’s approach in more detail. ### Information sharing - Staff should facilitate debtor-creditor engagement through information sharing (Appendix VIII provides complete details). - Fund staff can explain to creditors the macro-framework and the DSA, including debt targets and financing needs, subject to confidentiality undertakings and debtor consent. - Explaining the program and restructuring parameters may require extensive exchanges with creditors, including on broader Fund targets (e.g., reserve adequacy) and policies. - Provision of such information may be important to secure financing assurances from official creditors and to advance negotiations with private creditors, particularly when a default may be imminent. - Limitation: the DSA itself should not be shared prior to Executive Board approval of an arrangement; country staff reports and parts thereof (in draft or final form) should not be shared outside the Fund prior to Board issuance and publication. Underlying information and assumptions may be shared in other formats as needed. - Fund staff may participate in debtor meetings with private creditors with the debtor’s permission; staff should not normally be present when detailed restructuring terms are negotiated with private creditors but can attend general sessions discussing program aspects and debt restructuring targets. - With the debtor’s permission, Fund staff has attended at least one meeting with creditors in almost all restructuring cases over the last 20 years. - Fund staff has a long-standing practice of close cooperation with representative standing fora (including under HIPC); staff typically shares information underlying the debt sustainability analysis, financing envelope estimates, and answers creditor questions about process, program parameters, and data (examples noted: Paris Club involvement in Chad, 2021; Ethiopia, 2021; Zambia, 2022). - Staff should engage with individual official creditors bilaterally in the context of COCP assessments, providing information as necessary (see paragraph 15). ### Facilitating negotiations - Staff may not enter into negotiations on the macro-framework and program assumptions with creditors; decisions on the macroeconomic framework and design of the financing plan remain in the sole purview of the Fund. - Following a default, creditors may express views on program adjustment and financing parameters; Fund staff should actively listen but not cede decision authority. - When requested by both debtor and creditors, the Fund can use its “good offices” to bring parties together in a limited, technical role (e.g., offering a venue, reviewing the nature of the issue, and general terms for dispute settlement). - The Fund does not participate in negotiations or exhaustively analyze the issues, and Fund staff cannot seek contributions from specific creditors on the debtor member’s behalf. - Example referenced: The Gambia in 2019. ### Staff report requirements - Staff reports should describe developments in debtor-creditor engagement. - Much information on engagement will be captured by staff report requirements for financing assurances, arrears policies, or financing assurances reviews. ### Program conditionality - Fund conditionality can incentivize progress on debt restructuring, secure financing assurances, and ensure safeguards for the Fund. - The Fund is precluded from lending if lack of progress leads to a reassessment that sustainability is not restored in a forward-looking manner. - The Fund has sometimes used program conditionality to support intermediate steps in debt restructuring processes; LIOA strand 4 envisions conditionality to help establish safeguards for Fund financing to go forward (see paragraph 67). - Conditionality on restructuring must reflect country circumstances and be consistent with the Fund’s Guidelines on Conditionality. - Restructuring conditionality should only be included where the measure is reasonably within the member’s direct or indirect control and is either: - (i) of critical importance for achieving the program’s goals or for monitoring implementation; or - (ii) necessary for implementation of specific provisions of the Articles or policies adopted under them. - Conditionality on debt restructuring can only be included after authorities have decided to restructure and may not interfere in contractual relationships (e.g., by requiring default or mandating actions on specific claims). - Three types of conditionality relevant in a debt restructuring context: - Quantitative performance criteria (e.g., on net international reserves and fiscal targets) that have implications for ability to service debt and must be consistent with the restructuring strategy. - Prior actions (measures expected before Fund approval or the completion of a review when “critical for the successful implementation of the program”). - Structural benchmarks (for measures not objectively monitored or where non-implementation would not by itself warrant interruption of purchases or disbursements), serving as “clear markers” of progress. - The appropriate conditionality depends on whether a restructuring is preemptive or post-default: - Preemptive restructurings: negotiations are normally more advanced; agreement should usually be reached by the first review or before approving an arrangement. Where conditionality is appropriate, it tends to be set on relatively advanced steps. - Post-default restructurings: programs often allow more time for restructuring; conditionality typically consists of intermediate steps toward finalizing the debt operation. - Appendix XI summarizes specific program conditionality and commitments included in recent Fund arrangements involving restructuring of privately held sovereign debt. - Restructuring-related conditionality may not be necessary if actions are sufficiently addressed by the arrears policies or preemptive restructuring policy; when formal conditionality is not used, the envisioned timeline and actions should be described in the authorities’ LOI or MEFP per financing assurances review requirements. - Empirical note: The average time between the start and completion among eight preemptive restructurings that took place during 2014-20 was about eight months (see Table 1 in The International Architecture for Resolving Sovereign Debt Involving Private-Sector Creditors—Recent Developments, Challenges, And Reform Options). ### Dealing with Fund-related conditions imposed by creditors - Creditors may seek to link debt relief to Fund-related conditions; such practices should be discouraged. - Example: a flow treatment provided upfront while a stock treatment near the end of a Fund-supported program is conditioned on successful completion of a program review. - These creditor-imposed conditions can reduce creditor uncertainty but can also create significant risks, including undue pressure on the Fund and Fund staff and uncertainty tied to mechanisms such as debt-relief clawbacks. - If such conditions are needed to reach a deal, staff should be clear about risk-reducing modalities, including: - Linking relief to staff-level agreements (rather than Board approvals). - Using reward-based (rather than punishment-based) incentives. *Italic: Guidance Note on the Financing Assurances and Sovereign Arrears Policies (excerpt).* ### Appendix XI discusses examples from Fund-supported programs since 2010. ### ppea2024053 - Appendix XI and Appendix I excerpts ### Fund communications during debt restructurings - Staff must not share confidential information without the debtor member’s permission; staff should defer to the authorities to handle communications. - Staff may “correct the record” with a factual statement on process, if needed. - The member should clear with Fund staff how staff views on a potential proposal are represented in any cleansing statement. - Staff may make factual statements on actions (e.g., participation in discussions, explanation of the macro-framework to creditors, provision to the authorities of staff’s assessment of a proposal) but detailed confidential advice or assessments require the authorities’ authorization. - A public statement by the Fund’s Managing Director or by Fund staff may sometimes be useful if requested by the debtor authorities, particularly when a deadline is approaching; such statements: - Should not support particular restructuring terms/offers. - Should support the efficient resolution of the restructuring and could confirm consistency with program parameters. - Should be discussed and reviewed by the Communications Department, the Monetary and Capital Markets Department, LEG, SPR, and management. - Staff should explain Fund policies and their application to relevant creditors; involve SPR and/or LEG when dealing with private creditors’ legal and financial advisors. - Fund staff and Management can assist debtor authorities in obtaining financing assurances from official bilateral creditors and IFIs; such efforts should be led by the debtor country authorities and can be escalated to Fund Management level. ### Defining “exceptionally high uncertainty” for UCT-quality engagement (assessment criteria) - “Exceptionally high uncertainty” is characterized by a combination of factors: - i. It originates in an exogenous shock beyond the authorities’ control. - ii. The impact depends on events fundamentally outside authorities’ control, at least in the near-term. - iii. It involves severe and continuing balance of payment impacts, making the scale of the BoP challenge difficult to assess with usual confidence associated with UCT lending (example: a large-scale war). - iv. No one scenario is sufficiently “central”; significant adverse tail risks exist where the shock and/or its impacts could continue beyond the usual Fund program timeframe. - v. The ability of official bilateral creditors to ensure debt sustainability through upfront debt write-downs is impaired due to lack of a sufficiently “central” scenario, so broader sources of financing must be catalyzed. - A procedural safeguard is required to launch Fund engagement (generally an informal meeting to engage Executive Directors, though a formal Board meeting may be appropriate). The Board would need to consider whether exceptionally high uncertainty exists and whether the Fund would accept higher risks to pursue an arrangement. ### Program design under exceptionally high uncertainty (scenario approach) - Programs must be designed to work in a range of scenarios rather than around a single central scenario; two sufficiently separated scenarios should be set out: - a. Baseline scenario: - Built on an assumption about how the exogenous factors evolve (e.g., a large-scale war winding down). - Needs to resolve the BoP problem and restore medium term external viability per standard UCT requirements. - Requires a detailed DSA indicating that debt sustainability can be restored over the medium term, together with adequate financing assurances and safeguards including on capacity to repay the Fund. - b. Downside scenario: - Captures the significant risk that exogenous factors persist. - Should push assumptions to the limit where a Fund-supported program would still be able to meet its objectives. - Requires contingent adjustment policies and external financing that address the BoP problem and restore medium-term external viability while providing safeguards, taking into account any grants and/or highly concessional financing committed by donors as a backstop. - Program design requirements: - a. Consistent program assumptions on baseline and downside scenarios at approval and subsequent reviews; management and staff should draw on expertise of other organizations where assumptions lie beyond their competency. - b. Assessment that the member is sufficiently committed and has capacity to implement the program, including provision of necessary data for monitoring; may require establishing a track record (e.g., under a staff monitored program, or PMB). - c. A program of sufficient length to allow adjustment and room to accommodate a wider range of assumptions and contingency adjustments; if uncertainty lasts too long, the program may no longer be feasible. - d. Sufficient donor support on appropriately concessional financial terms, committed to cover the program period and beyond, including contingent donor support to complement stronger policy adjustments under the downside scenario. - e. Financing assurances from donors and creditors regarding debt sustainability (on both baseline and downside scenarios). - f. Adequate safeguards for repayment to the Fund, including in tail risk scenarios beyond the downside scenario. - Management and staff must judge feasibility and credibility of such a UCT program design and consistency with legal and policy requirements before circulating a UFR request to the Board and at subsequent reviews. If uncertainty dissipates, revert to standard baseline-focused approach; if it persists, maintain two-scenario structure; if it escalates or continues too long, further Fund lending under the arrangement would become infeasible. ### Financing assurances in cases of exceptionally high uncertainty - Official bilateral creditors’ assurances (two-stage contingent approach): - a. Upfront “credible and specific” assurance covering what is needed in the baseline scenario to restore debt sustainability; could be cast as a flow then stock treatment (per HIPC), though scale of second-stage debt relief commitment should be clear. - b. Upfront assurance to provide necessary financial support to restore debt sustainability in a second stage once the exceptionally high uncertainty abates within the program (or based on best estimate at last program review). The program’s downside scenario would provide an upfront estimate of possible scale of needed financial support; scenarios and commitments updated at each program review. - Assurances to be given by a recognized creditor forum, and/or directly (in line with the Fund’s standards for such assurances). - Private creditor approach (nuances): - Where arrears exist to private creditors, the LIA policy requirements apply and the two criteria of the policy must be met; extra flexibility is needed in assessment as agreement may not be possible before end of the exceptional uncertainty. - Creditors may agree to a standstill, or a restructuring keyed to the “baseline,” leaving pre-default status insufficient to restore sustainability across scenarios; staff must assess that a credible process exists to deliver necessary restructuring by reference to factors including: - (i) whether the authorities have announced the final restructuring; - (ii) consistency of communications to creditors about program parameters in the context of the standstill and expected second restructuring; - (iii) retention of legal and financial advisors by the authorities; - (iv) sharing of relevant information with creditors, including potential envelope for the restructuring under program space between baseline and downside. ### Assurance on capacity to repay the Fund (safeguards) - The Fund would require an assurance on the member’s capacity to repay the Fund from official creditors/donors for safeguards purposes: - a. Should be extended by a significant group of creditors/donors; generally, a “significant group” would represent at least 50 percent of voting power at the Fund’s Executive Board. - b. Would confirm creditors’/donors’ recognition of the Fund’s de facto preferred creditor status (PCS) and complement the Fund’s risk management framework to prevent overdue financial obligations to the Fund; management, staff and the Board must assess at program outset and each review that scenarios giving rise to overdue obligations are very unlikely and adequate safeguards are in place. - c. May take different forms but would need to be public; normally, a public statement from the creditors or a suitable written statement from Executive Directors representing relevant official bilateral creditors/donors would suffice, and the statement would need to be in the public domain. - d. If Fund financing commitments are proposed to be augmented, the group of creditors/donors would need to extend their assurance accordingly. - e. The assurance would cease to be effective upon approval of a new arrangement for the member (unless specifically renewed). - The assurance would also become ineffective if a member can no longer exercise its rights and obligations in the Fund (e.g., where there is no government recognized for the member by the international community). ### Emergency financing and additional safeguards - For members facing exceptionally high uncertainty seeking emergency financing (RFI/RCF), additional safeguards beyond Section IV.F may be needed to ensure restoration of debt sustainability; one approach is to receive assurances from creditors that cover both debt relief and capacity to repay. - Such an approach should only be considered in a stand-alone RFI/RCF context in a true emergency where other options are not feasible, given broader messaging risks. - The Board should be duly informed to confirm it is prepared to take the added balance sheet risk; an early engagement with the Board could be pursued, supported by short documentation explaining: - (i) urgent need for access to Fund resources and no time to agree a Fund-supported program; - (ii) adjustment and financing safeguards to be sought, including details; - (iii) there is an international effort to support the member and the Fund is called upon to act. - Following RFI/RCF disbursement, a follow up process involving the Board would be needed to report on progress (e.g., through surveillance or post-program monitoring modalities). *GUIDANCE NOTE ON THE FINANCING ASSURANCES AND SOVEREIGN ARREARS POLICIES (Appendix XI and Appendix I), INTERNATIONAL MONETARY FUND* ### Appendix II. Approval in Principle ### Appendix II. Approval in Principle ### AIP: purpose and basic procedure - AIP (Approval in Principle) is a procedural tool to bridge engagement gaps while safeguards are sought. - AIP involves: - A first decision by the Board approving a Fund arrangement in principle based on a complete understanding between the Fund and the member on policies, but where financing assurances have not been secured. - Once financing assurances have been obtained, a second decision by the Board is required for the arrangement to become effective, and this is adopted on a Lapse of Time (LOT) basis. ### Elements specified under the AIP procedure - Period between approval in principle and effectiveness: - The first decision must specify a date by which AIP would lapse (a deadline for the second decision to be adopted on a LOT basis). - Factors in determining the deadline include: ensuring the program would not become stale; ensuring the program was indeed being implemented; ensuring delay would not distort phasing under the arrangement. - This deadline can usefully align with the expected timeline in a program for a review, which is about 3-4 months in rapidly evolving situations. - Timeframe and circumstances for renewal: - Renewal would normally be subject to a limit of 3-4 months (implying a maximum AIP period of 6-8 months). - Such an update is only allowed once with respect to an arrangement request. - The member’s right to request a new program at any point remains, but there is a strong incentive to stay within AIP to avoid questions about capacity to implement a program. - Renewal requirements: - An AIP can only be renewed if the use of the AIP tool is still considered worthwhile (i.e., effort to establish necessary safeguards would still be on track and likely to deliver). - To complete a renewal, staff must assess that the overall program is being implemented and remains on track. - New information may require minor updates (e.g., to adjust availability dates and test dates) or more significant macro-framework updates and/or updates where implementation issues need correction. - Prior actions would be expected to correct implementation shortfalls and could draw on conditions in the original program, with any use consistent with the Guidelines on Conditionality. - The proposed extension and new LOI/MEFP/TMU must be put forward for full Board consideration, supported by a new staff report. - The Board must be informed if AIP would be allowed to lapse without renewal or achievement of the second decision, including an explanation of the reasons. - Required safeguards in a restructuring context: - Requirements under the financing assurances policy and the LIOA policy would have to be met to proceed; these could be broader than just financing assurances. - The Fund would require adequate safeguards to proceed. - Safeguards must be clearly specified in the conditions required for the second decision under AIP (i.e., to make the arrangement effective) for a program involving a debt restructuring. ### Program design and operational guidance under AIP - Program design should recognize that safeguards might only be received during the extended AIP period. - This can be handled with: - Suitably conservative financial programming. - Use of adjusters on targets that would be affected if financing assurances and thus Fund disbursement arrive earlier or later than expected. - It is possible for program design to be based on semi-annual reviews notwithstanding a possible AIP renewal in three months; in that instance a set of Indicative Targets at the three-month point would be essential to support AIP renewal. ### Use, governance, and practical considerations - AIP is a potential tool, not a requirement; its use is governed by circumstances. - Staff should aim to bring a UCT program forward as fast as possible (utilizing the proposed Strand 4 under LIOA and tools like stand-alone DSA approval to overcome information sharing barriers towards securing safeguards). - In some instances, consultations with a standing forum, other official bilateral creditors, and the debtor countries’ debt advisors may reveal more time is needed to secure necessary safeguards; AIP could be a good option then. - The Fund’s Executive Board would have the opportunity, through the Summing Up, to calibrate the message to the debtor and creditors about the urgency in supplying the necessary safeguards. *Source: Appendix II. Approval in Principle — ppea2024053* ### Appendix VI. Calculating Whether an Agreement is “Adequately ### Appendix VI. Calculating Whether an Agreement is “Adequately Representative” ### Numerical example: External financing needs and sources (Cumulative $ Years 1 to 3) - External financing needs - A = A1 + A2 + A3 + A4 + A5 = 2000 - Current account deficit excluding official grants and interest payments A1 = 700 - Increase in gross international reserves A2 = 600 - Debt service due to private creditors 1/ A3 = 400 - Debt service due to multilateral creditors A4 = 0 - Debt service due to official bilateral creditors 1/ A5 = A51 + A52 = 300 - Paris Club A51 = 200 - Non-Paris Club A52 = 100 - External financing sources - B = B1 + B2 + B3 + B4 + B5 = 1500 - Foreign direct investment B1 = 500 - Other financial account flows (other than the financing items below) B2 = 0 - Financing provided by private creditors (including debt service relief) B3 = 300 - Financing provided by multilaterals (including net Fund purchases and grants) B4 = 200 - Financing provided by official bilateral creditors 2/ B5 = B51 + B52 = 500 - Paris Club B51 = 400 - Non-Paris Club B52 = 100 - Residual: financing required from but not yet provided by official bilateral creditors 2/ 3/ - C = C1 + C2 = 500 - Paris Club C1 = 150 - Non-Paris Club C2 = 350 - Memo item: Total contribution by official bilateral creditors - D = D1 + D2 = 1000 (100%) - Paris Club D1 = B51 + C1 = 550 (55%) √ - Non-Paris Club D2 = B52 + C2 = 450 (45%) - Illustrative conclusion from the example: - Paris Club creditors account for 55% of contributions provided and/or required from official bilateral creditors in this example. Hence, a Paris Club agreement in this case would be considered adequately representative and official bilateral arrears would be deemed eliminated for the purposes of the Lending Into Official Arrears policy. - Footnotes from the example: - 1/ This example assumes that part of debt service coming due is canceled or rescheduled. - 2/ It may include grants, new financing, as well as debt service relief. - 3/ In this example, it includes all debt service relief provided plus new financing. ### Procedural guidance for calculating majority share - Required data country teams must obtain in advance: - i) official bilateral debt service falling due during the program period; and - ii) new financing provided/committed by official bilateral creditors during the program period (as reflected in the BOP projections). ### Contextual notes (from adjacent guidance) - The table is akin to the “external financing requirements” table in staff reports and is used to identify whether a Paris Club agreement is “adequately representative” for the purposes of the Lending Into Official Arrears policy. - The calculation of representativeness aggregates: - contributions already provided by official bilateral creditors (B51, B52) and - contributions required/expected from official bilateral creditors (C1, C2), - to form the total D = D1 + D2 and derive shares (e.g., Paris Club 55%). *International Monetary Fund — Appendix VI, Guidance Note on the Financing Assurances and Sovereign Arrears Policies* ### 9. Sharing DSAs with the World Bank is subject to special rules: ### 9. Sharing DSAs with the World Bank is subject to special rules: ### Joint LIC-DSF and SRDSF engagement with the World Bank - LIC-DSFs are produced jointly; Fund staff must engage World Bank staff from the earlier stages of mission preparation, discussions, and analysis. - When sharing information related to a joint Fund-Bank LIC-DSF, staff should recognize the joint role with the World Bank and consult first with World Bank staff. - For the SRDSF, sharing of country staff reports (including drafts) with World Bank staff prior to issuance to the Fund’s Executive Board is permitted under the terms of the Bank-Fund Concordat. - In most instances, mission chiefs retain discretion on whether specific material should be shared, regardless of classification. - Where the SRDSF sharing regime applies, it creates no issue for sharing more broadly. ### Information sharing principle for restructurings - Broad guiding principle: Fund staff should provide creditors enough information, especially once specific and credible financing assurances are needed, to enable debt restructuring scenarios that meet program financing parameters and debt sustainability targets. ### D. Information Sharing Through the Debt Restructuring Phases Phase One: Pre-Announcement - Before the member has announced its intention to seek a debt restructuring, the Fund should not share any non-public information with creditors. - Decision to seek a debt restructuring is for the debtor authorities; Fund staff should not engage or share non-public information with creditors until the authorities make such an announcement. - At this stage, all information related to debt sustainability could be considered market sensitive. - Published staff reports may be shared and referenced by staff. - For countries using the SRDSF, staff cannot share information related to the mechanical signal on debt sustainability with creditors that is not available in a published report. Phase Two: Post-Announcement and Program Design, up to a Staff Level Agreement (SLA) - Creditors often seek access to information underlying the Fund’s debt sustainability analysis during program design. - Reasons to share limited information with creditors include: - To show why debt is unsustainable (e.g., debt or gross financing needs increase unsustainably over time or another stress metric reaches unsafe levels), potentially underpinned by staff’s preliminary calibration of the program macroframework. - To convey key macro parameters under the potential Fund-supported program so creditors can understand program design. - Staff can discuss preliminary views as embodied in the numbers presented but should signal willingness to receive information from and hear creditors’ views. - With the debtor authorities’ consent and subject to confidentiality safeguards, staff may consider sharing certain information on the financing envelope and key financing assumptions once the program macro-framework is close to being stabilized and with clear signals that information may change as the SLA is finalized. - Information that could be shared at this stage includes: - Macroeconomic projections, including growth and inflation rate projections, balance of payment forecasts, exchange rate projections, monetary and central bank accounts in detail, plus explanations of underpinning assumptions/analysis. - Fiscal projections, with explanation of assumptions/analysis and rationale for targets. - The financing envelope and key financing assumptions, including disaggregated domestic and external financing, debt service projections, and public debt targets relating to Fund-supported programs (such as parameters that ensure debt sustainability, the medium-term targets for the stock and liquidity indicators, and average and maximum gross financing needs). Phase Three: Post SLA and Obtaining Assurances - After reaching SLA, greater information sharing is necessary to secure financing assurances and conclude restructuring agreements. - Additional information that can be shared subject to confidentiality safeguards includes: - Additional years of projections beyond usual macroframework inclusion; further disaggregation of data (e.g., debt stock or debt service to individual creditors or between amortizations and interest payments). - Public debt targets relating to the program (parameters that ensure debt sustainability, medium-term targets for stock and liquidity indicators, and average and maximum gross financing needs). - Modeling questions: staff may answer modeling questions from official bilateral creditors (for example, on the range of magnitudes of the present value reduction that could deliver program targets and whether program targets can be achieved without a nominal haircut). Responses must be framed as technical and not normative assessments from the Fund. - Technical engagement should be pursued early to help accelerate official bilateral creditors’ decision to join an official creditor committee. - Higher degree of information sharing may carry over to subsequent reviews under a Fund arrangement; staff may need to update the macroeconomic framework but should not expect significant deviations post-arrangement approval unless circumstances warrant. Significant changes to program parameters require departmental review and Fund management approval prior to sharing. Circumstances and counterparties for broader sharing (paragraph 16 examples) - Official bilateral creditors from whom financing assurances are required: - Sharing broader data may be more appropriate given Executive Directors’ roles and established frameworks (e.g., Paris Club or Common Framework). - If shared with Paris Club, default position should be to also share with non-Paris Club official creditors, subject to debtor authorities’ consent, confidentiality understandings, and the creditor’s criticality to restore debt sustainability. - Multilateral creditors (World Bank Group outside LIC-DSF, other IFIs, RFAs): - May need broader data review when asked to provide new money to fill financing gaps in a Fund-supported program; long-standing relationships and confidentiality understandings make broader sharing more comfortable, but authorities’ consent remains important. - Private sector creditors: - Sharing broader data with private creditors is expected to be rarer; may raise confidentiality concerns and intercreditor equity issues. - Sharing with private creditors requires debtor authorities’ consent and assurance of confidentiality (e.g., sharing with advisors only). ### E. Other Information Sharing During a Debt Restructuring a. Sharing of the Full DSA - In select and very rare instances, the debtor and creditor(s) may insist on provision of the full DSA, which must be provided first to the Executive Board. - Options for earlier Executive Board access so the DSA can be published sooner (each requires first issuing the DSA to the Executive Board before publication): - Modality 1: Request for DSA-related capacity development (CD) from the authorities; full discussion of the TA report with authorities; provision of the TA report to Executive Directors for information, with authorities’ consent to publish. This was done for Argentina in 2020. Under CD dissemination policy, the DSA is provided to the Executive Board for information, not endorsement. Best applied in surveillance contexts. - Modality 2: Stand-alone DSA. Examples include several standalone DSAs prepared for Greece in the UFR context in 2015 and surveillance context in 2016 that the Executive Board agreed to publish. Applicable in surveillance or program contexts. - Modality 3: Executive Board approval in principle (AIP) of the program. AIP can be recommended where staff and authorities have full agreement on policies and only creditor agreement on debt sustainability/financing assurances prevents arrangement approval. Under AIP, member receives no financing until Fund determines debt sustainability is restored upon receipt of financing assurances. The staff report including the DSA is presumed published under the transparency policy. This was done for Greece’s SBA in 2017. b. Information Sharing in the Surveillance Context - Staff must be more circumspect sharing information with creditors without a Fund-supported program and an MEFP: - Staff generally cannot talk with precision about authorities’ intended policies or expected macroeconomic framework; thus staff cannot specify what would make the situation sustainable in terms of debt targets. - Staff can discuss published surveillance work, staff’s views about the macroeconomic outlook and debt sustainability, and the assumptions that fed into this, making clear these represent staff views. - In an ongoing Article IV consultation, staff should listen to creditors’ views to inform staff judgment; staff’s views, taking into account feedback from the authorities, remain dispositive for preparing the DSA. - Authorities may request staff to provide views via technical assistance (first modality for full DSA sharing described above), involving: (i) request for DSA-related CD; (ii) full discussion of the CD report with authorities; (iii) provision of the CD report to the Fund’s Executive Board for information, with authorities’ consent to publish. This process was done for Argentina in 2020. c. Information Sharing with Civil Society - Authorities are encouraged to share information with civil society at each phase of the debt restructuring process and to listen to views, subject to: - Pre-debt restructuring announcement: same considerations as for creditors (paragraph 12) apply—no non-public information should be shared. - Post-debt restructuring announcement: authorities must proceed subject to confidentiality safeguards; confidential or market sensitive information cannot be shared. - Staff and authorities may discuss any published information. - In a surveillance context, the same considerations outlined for creditors apply to civil society. ### Appendix IX. Example of a Standardized LIA Assessment (selected entries) - Prompt: Fund support is considered essential for the successful implementation of the member’s adjustment program. - Arcadia has experienced exceptional balance of payments pressures from current and capital accounts. Official reserves remain very low, covering only 45 percent of short-term debt and well below the 100 percent ARA benchmark of the Fund. - The member is pursuing appropriate policies: - Substantial fiscal consolidation since the beginning of 2016 has helped reduce the primary deficit; monetary policy has been tightened to control inflation and avoid exchange rate overshooting. - Arcadia authorities committed to continue these policies and have set out an ambitious agenda of structural reforms (see Table X). - The member is making a good faith effort to reach a collaborative agreement with its creditors: - Early dialogue with creditors: an initial round of discussions was held in New York in early April 2024. Authorities committed to meet on a quarterly basis until the debt restructuring is agreed. - Shares relevant information: authorities shared composition of end-2023 debt stock, creditor composition, major subcategories of debt instruments (and information on main financial terms), upcoming debt service, any collateral involved, macroeconomic projections for 2024-29, and parameters of a debt operation to restore sustainability consistent with the Fund-supported program. - Early opportunity for creditor input: creditors could submit views via an online platform introduced by authorities in May. - Representative committee status: heterogeneity of Arcadia’s creditors has prevented emergence of a representative committee; authorities will negotiate with any group representing legitimate creditors. *Guidance Note on the Financing Assurances and Sovereign Arrears Policies* ### Appendix X. State-Contingent Features in Restructurings ### Appendix X. State-Contingent Features in Restructurings ### Definitions and forms of SCDIs - Sovereign state-contingent debt instruments (SCDIs) are instruments that bear contractual debt service obligations tied to a pre-defined state variable. - Broad categories: - Continuous adjustment instruments (e.g., payments tied to nominal GDP). - Discrete adjustment instruments (e.g., royalties from an oil discovery; changes to debt carrying capacity in the LIC DSF). - “Extendible” designs where maturity or grace period automatically extends upon a pre-defined shock (example: 2015 Grenada bond “hurricane clause” triggering a one-off debt service deferral on a hurricane of given intensity). - Macro-linked bonds that become a bond in the future, with nominal value and coupon stream set based on future macro variables. ### Historical use and recent examples - Past upside instruments and examples: - GDP warrants in Argentina (2005/10), Greece (2012), and Ukraine (2015). - Upside linked to Citizenship by Investment revenues in Grenada (2015). - “Value recovery rights” linked to GDP, oil prices, and terms of trade in Brady restructurings (1980s and 1990s). - Recent bond restructuring examples: - Value Recovery Instrument (VRI) linked to future oil revenues in Suriname (2023). - Instruments linked to future debt carrying capacity and exports in Zambia (2024). - A macro-linked bond in Ukraine (2024). ### Economic case, benefits, and risks - Potential benefits: - Link debt service to capacity to pay, increasing fiscal space in bad states and allowing greater policy flexibility. - Broaden investor base and enable investor risk diversification. - Enhance resilience of the international financial system and potentially reduce incidence and cost of sovereign debt crises if widely adopted. - Key risks and complications: - High novelty and liquidity premium demanded by investors in early market development. - Design flaws leading to higher payments to creditors when debtor repayment capacity is worse. - Adverse selection and moral hazard risks. - Undesirable pricing effects on conventional debt; pro-cyclical investor demand. - Migration of excessive risk to the private sector and adverse political economy incentives. - Market practice: - SCDIs tend to be heavily discounted by the market. - Use is often limited to restructurings where upside instruments act as a “sweetener.” - Exception noted: Climate Resilient Debt Clauses (CRDCs) tend to be priced more favorably, though use outside restructurings remains rare. ### IMF stance and staff responsibilities - The Fund is open to the use of SCDIs and does not design them in restructurings; design is to be discussed among authorities, creditors, and legal/financial advisers. - Fund staff responsibilities and focus: - Evaluate whether SCDI potential impact is consistent with program financing and debt sustainability. - Assume legal advisors will mitigate litigation risk but inquire about legal risks given novelty. - Do not take a position on SCDI discount relative to actuarially fair value per se; focus is on implications for debt sustainability and program objectives. ### Calculating impact on debt sustainability and financing in restructurings - Key analytical steps: - Establish which creditors will require SCDIs. Note: SCDIs are normally requested by the private sector; official creditors must be consulted. - Determine whether official creditors perceive comparability of treatment (CoT) to be met ex ante or will assess based on ex-post payoffs; if unclear, staff should assume ex-post clawbacks in line with standard CoT clauses in official sector debt agreements. - Evaluate whether restructuring proposals meet debt targets when an SCDI is part of the package: - Debt targets must be met under the baseline scenario. - Probability of breaching debt targets should remain below benchmark levels. - Techniques underpinning the SRDSF fanchart module can be used; staff should consult SPR for modeling assistance. - Assess whether risks are too large considering SCDI payoffs, the types and magnitude of shocks, and their correlations. - Assess risk of large payments occurring in scenarios where debt targets are exceeded, reserves are inadequate, or triggers do not perfectly correlate with capacity to pay. ### Design considerations and staff actions when SCDIs conflict with program parameters - If an SCDI is not in line with program parameters, staff should provide feedback on problematic design elements. - Specific guidance: - SCDIs that leave exposures uncapped or provide upside to investors in states where repayment capacity is diminished are normally not supported in Fund programs. - Simple trigger rules risk temporary positive shocks producing permanently higher debt burdens; one solution is multi-layered rules and downside triggers, though these can exacerbate liquidity and pricing challenges. - Instrument design attributes to consider: automaticity; continuous vs discrete adjustments; symmetric vs asymmetric payoffs; timing and definition of triggers. ### Illustrative IMF program commitments involving restructuring (selected examples from Appendix table) - Grenada ECF 2014: - Conditionality: Prior Action / Intermediate. - Specific language: seek agreement on a debt restructuring consistent with closing the financing gap and reducing debt to 60 percent of GDP by 2020; obtain financing assurances from the Paris Club; develop timetable for restructuring discussions with private creditors through mid-2014. - Ecuador EFF 2020 / RFI 2020: - MEFP: consent solicitation deferred payments worth over USD 800 million until August 15; during grace period, authorities to put forward a second consent solicitation to restructure outstanding debt. - Cyprus EFF 2013: - Structural Benchmark / Finalization. - Specific language: Roll over and extend the maturity of at least €1 billion of domestic debt held by residents through a voluntary debt exchange covering maturities falling due in 2013-15 and roll over the €1.9 billion recapitalization bond of CPB by [First Review]. - Jamaica EFF 2013: - Prior Action / Finalization. - Specific language: complete a debt exchange for domestic government bonds consistent with a reduction in the public debt-to-GDP ratio by 2020 equivalent to at least 8.5 percent of GDP. - Jamaica SBA 2010: - Prior Action / Finalization. - Specific language: launch and complete debt exchange achieving an estimated saving of over 3 percent of GDP in FY2010/11 and a reduction in the amount of debt maturing during 2010-2012 by at least two thirds. - Suriname EFF 2021 and Zambia ECF 2022 are noted elsewhere in the Appendix in the context of engagement with private creditors and timelines for finalization. _International Monetary Fund — Appendix X. State-Contingent Features in Restructurings_ --- _Source: https://www.imf.org/-/media/files/publications/pp/2024/english/ppea2024053.pdf_