## ppea2025004

## Source details

**Canonical URL:** [ppea2025004](https://www.imf.org/-/media/files/publications/pp/2025/english/ppea2025004.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/pp/2025/english/ppea2025004.pdf.md)
- [Structured JSON version](/-/media/files/publications/pp/2025/english/ppea2025004.pdf.json)

---

### Executive summary — purpose, scope, and milestones
- Purpose: operational guidance on the Resilience and Sustainability Facility (RSF) for arrangement requests and reviews; complements IMF lending by providing longer-term, affordable financing to eligible members to address longer-term structural challenges from climate change and pandemic preparedness.
- Scope: updated to reflect early pilot experience and outcomes of the Interim Review of the RST and Review of Adequacy of Resources completed in May 2024; guidance applies to RSF arrangements in place as of January 8, 2025 and all subsequent requests.
- Key dates and operational milestones:
  - IMF Executive Board approved establishment of the RST in April 2022.
  - RST became operational in October 2022.
  - Interim review completed in May 2024.
  - As of end-November 2024, twenty arrangements have been approved to access RST financing under the RSF.
  - Document dated January 16, 2025.

### RSF objectives and intended uses
- Objectives:
  - (i) support policy reforms that reduce macro-critical risks associated with longer-term structural challenges; and
  - (ii) augment longer-term policy space and financial buffers to mitigate risks arising from such longer-term challenges (RST Board paper, ¶16).
- Intended uses of RSF financing (staff report should note):
  - (i) covering any shorter-term BoP/fiscal needs directly associated with implementation of RST-supported reforms;
  - (ii) increasing policy space for fiscal spending and reforms associated with qualifying longer-term structural challenges;
  - (iii) augmenting longer-term buffers to strengthen the member’s ability to face shocks linked with qualifying longer-term structural challenges (Board Paper, ¶16, 30).
- RSF loans are not earmarked for specific projects; RSF financing cannot be used on a precautionary basis and is expected to be drawn promptly after Board approval of an RSF disbursement (¶63, RST Board paper, ¶30).

### Eligibility and qualification (numeric thresholds preserved exactly)
- Eligibility (RST eligibility based on per capita income and population thresholds):
  - Criterion (i): an IMF member’s per capita gross national income (GNI) in 2020 (or 2019, if 2020 data is not available) does not exceed ten times the 2021 International Development Association (IDA) operational cutoff ($1,205).
  - Criterion (ii): it has a population below 1.5 million as of 2020, as reported by the World Bank (WB), and its per capita GNI in 2020 (or 2019, if 2020 data is not available) does not exceed twenty-five times the 2021 IDA operational cutoff.
  - The list of RST-eligible countries (Annex I) will be updated to reflect updated IDA operational cutoffs at periodic reviews synchronized with PRGT eligibility reviews on a two-year cycle.
  - Ad hoc eligibility decisions can be taken in interim periods to avoid disadvantaging a member that meets the eligibility criteria but is not on the list.
- Qualification criteria for an RSF arrangement (members should):
  - (i) present a high-quality package of reform measures that make significant progress toward strengthening prospective BoP stability by reducing macro-critical risks related to qualifying longer-term structural challenges (¶23-27).
  - (ii) have a concurrent on-track qualifying UCT-quality instrument with at least 18 months remaining at the time of RSF arrangement approval (qualifying UCT-quality instruments include: SBA, EFF, PLL, FCL, SCF, ECF, or PCI; SLL, SMP, RCF, RFI do not qualify) (¶10-14, ¶7 footnote).
  - (iii) have sustainable debt and adequate capacity to repay (¶15-17).

### Balance-of-Payments (BoP) needs and macroeconomic justification
- Objective: reduce prospective BoP risks and contribute to longer-term prospective BoP stability; in rare cases, RSF arrangements may also affect short- and medium-term BoP needs.
- Staff should illustrate in program documentation:
  - Risks to prospective BoP stability that may entail longer-term BoP financing needs associated with the qualifying longer-term structural challenges (¶21). These risks are a qualification criterion (separate from access-level criteria, see ¶42-45).
  - Where relevant, any direct short- to medium-term BoP financing needs arising from implementation of RSF-supported reforms; staff should provide precise estimates and include them in the fiscal or BoP frameworks.
  - Quantification is expected if feasible, but not required.
- Tools and models to inform BoP risk assessment and macroeconomic justification (Box 3):
  - DIGNAD: quantifies effect of natural disasters and benefits of resilient infrastructure and public investment efficiency.
  - Q-CRAFT: assesses fiscal risks from slow-moving climate effects.
  - CPAT: spreadsheet-based model for assessing climate mitigation policies.
  - IMF-ENV: general equilibrium model to simulate emissions and macroeconomic impacts (use requires RES support).
  - LIC-DSF and MAC-SRDSF frameworks: tailored stress tests and long-term modules to quantify debt sustainability risks from qualifying structural challenges.

### Design and quality of RSF arrangements; Reform Measures (RMs)
- RSF arrangements should support a high-quality package of RMs that enable significant progress toward strengthening prospective BoP stability by reducing macro-critical risks associated with qualifying longer-term structural challenges.
- High-quality package characteristics (¶24):
  - Reduces macro-critical risks from qualifying longer-term structural challenges.
  - Consists of RMs that are critical, ambitious, and deep (together characterizing RMs as “strong”).
  - Normally, each individual RM should meet the “strong” standard, except in limited and well-justified cases.
- Strong RMs must satisfy:
  - Criticality: key to reducing risks to prospective BoP stability; close critical policy, legal, data, and institutional gaps.
  - Ambition: reforms unachievable within the same timelines absent the RSF arrangement; PN/SR should make the case for ambition (benchmarking where feasible).
  - Depth: lead to permanent institutional changes (legislative changes, long-lasting impact); medium-depth reforms may qualify if critical and sufficiently ambitious.
- Reforms generally excluded from being RMs:
  - Developing plans/strategies lacking clear implementation milestones.
  - Conducting research, technical and feasibility studies (except climate-smart feasibility studies for public investment projects).
  - Training or communication campaigns (can be commitments in MEFP/PS).
- Design, monitoring, and documentation requirements:
  - RMs must be specific, attributable to responsible entities, include targeted completion dates, expected outcomes and metrics where relevant, and be independently verifiable by IMF staff.
  - Use of MEFP and TMU to capture detailed specifications; climate Annex or pandemic preparedness note required in PNs/SRs.

### Policy additionality, parsimony, and synergies with UCT-quality instruments
- RMs should spur additional reform efforts compared to a no-RSF scenario and mitigate facility-shopping risks by being distinct from GRA and PRGT arrangements.
- RM packages should be parsimonious: focus on a few critical reforms with high ambition and depth.
- RSF-supported RMs should be distinct from UCT-quality conditionality but closely aligned to leverage synergies (e.g., stabilization measures in UCT-quality instruments; structural challenge reforms in RSF).
- Where governance weaknesses are critical to RSF objectives, governance-related conditionality can be included—placement depends on whether measures are broad (UCT-quality) or specific and critical (RSF).

### Access, phasing, disbursement rules, and lending terms (numeric fidelity)
- Access norms and caps:
  - Access to the RST is guided by the norm of 75 percent of quota and is capped at the lower of 150 percent of quota or Special Drawing Rights (SDR) 1 billion (¶46 and 47, RST Board paper).
  - Access at the norm expected for high-quality reform packages; access above the norm requires an exceptionally high-quality package and adequate CtR.
  - Access deviations consider: CtR, strength and ambition of the reform package, and BoP financing needs directly associated with the RMs.
- Phasing and disbursement constraints:
  - Disbursements are phased with each RM linked to one disbursement.
  - RSF disbursements continue to be limited to 50 percent of quota per review (applicable design constraint).
  - No RSF disbursement is available upon approval of an RSF arrangement.
  - Teams must specify proposed phasing in the SR at the time of the request; normally, phasing would be even across RMs.
  - Each RM must be implemented in its entirety to be assessed as met; no waiver of non-observance is possible.
  - RSF disbursements must be requested within 30 days of the completion of the Board review.
- Lending terms (key specifications):
  - Maximum maturity: 20 years.
  - Grace period: 10½ years.
  - Principal repayments: 20 equal semi-annual installments beginning 10½ years after each RSF disbursement.
- Interest margin and service charge groups:
  - Group A:
    - Margin: 55 basis points above the SDRi up to a cap of 2¼ percent.
    - Service charges: exempt from any service charges on RSF loan disbursements.
    - Composition: all PRGT-eligible countries that are not presumed blenders.
  - Group B:
    - Margin: 75 basis points above SDRi.
    - Upfront one-time service charge: 25 basis points on each RSF disbursement.
    - Composition: all “presumed blenders” (of PRGT and GRA resources) and all small states (below 1.5 million inhabitants) with per capita GNI below ten times the IDA operational income cutoff.
  - Group C:
    - Margin: 95 basis points above SDRi.
    - Upfront one-time service charge: 50 basis points for each RSF disbursement.
    - Composition: all other RST-eligible countries, i.e., all eligible (non-small) Middle Income Countries (MICs) and all small states with income above ten times the IDA operational income cutoff.
  - Margins and charges subject to Board reviews and adjustments.

### Capacity to repay (CtR), debt sustainability (DSA), and CtR dashboard (numeric fidelity)
- Capacity to repay and debt sustainability requirements:
  - Debt must be assessed as sustainable over the medium term for staff to recommend and the Board to approve new RSF requests, augmentations, and review completions.
  - Teams should conduct rigorous DSAs using LIC-DSF and MAC-SRDSF frameworks, including natural disaster stress tests where applicable and the entire 20-year horizon (unless better alternatives available).
  - DSAs should discuss climate-related macro developments and risks in main text of Policy Notes/SRs and in DSA annex (Annex IV).
- CtR dashboard:
  - Required for new RSF arrangements and augmentations; must present eight metrics as standardized charts.
  - Structure:
    - Six time-series charts (projected from year of RSF request/augmentation to repayment horizon i.e., 20 years from last disbursement):
      - Stock indicators: projected stock of Fund credit outstanding relative to GDP; gross international reserves (GIR); public and publicly guaranteed (PPG) external debt (LIC) or public external debt (MAC).
      - Flow indicators: projected annual debt service to the Fund relative to (i) fiscal revenues (excluding grants for LIC DSF users), (ii) exports of goods and services, and (iii) PPG external debt service (LIC) or public external debt service (MAC).
    - Two cross-section charts: focus on highest peak credit indicators and compare to a subset of past financing programs with top exposures.
  - Comparator groups and interpretation:
    - Baseline comparator group: all approved UCT-quality disbursing programs supported by GRA or PRGT arrangements over the most recent decade.
    - Dashboards display median and interquartile ranges; levels above the 75th percentile require deeper analysis.
  - Use of judgment:
    - CtR must be assessed to be at least “adequate” for program requests to move forward; when elevated metrics exist, SR should discuss severity of risks and mitigation via RSF design, access, phasing, and UCT-quality instrument.

### Presentation of RSF financing in program tables (illustrative numeric examples)
- Principle: RSF financing must be additional to—and not substitute for—other IMF financing; UCT-quality instrument must “stand on its own.”
- Presentation rules:
  - RSF financing should be shown below the line, along with reserves, and illustrated separately from Fund financing under the UCT-quality instrument, after closure of any exceptional financing need.
  - International reserves shown to remain adequate and fiscal gaps closed through the program horizon without RSF financing.
  - Any measurable impact of RSF-supported reforms on BoP or fiscal projections should be accounted for in program documents.
  - If RMs generate direct costs, RSF disbursements can finance the additional financing gap and be presented as prospective financing separate from other IMF financing.
- Illustrative Country X program table entries (verbatim figures):
  - Total revenue and grants 2500 2500 2500
  - Total expenditure and net lending 4950 4950 4900
  - Current expenditure 3950 3900 3900
  - Capital expenditure 1000 1050 1000
  - Fiscal balance -2450 -2450 -2400
  - Domestic financing 1500 1500 1450
  - External financing 1000 1000 950
  - Budgetary assistance 200 200 200
  - Eurobond issuance 750 700 700
  - RSF disbursement (total) 50 100 50
  - Increase in government assets 50 500
  - of which RSF (not linked to RM fiscal costs) 50 500
  - Memorandum items: Fiscal balance excluding RSF spending -2450 -2400 -2400; Financing excluding RSF disbursement 2450 2400 2400; Domestic financing without RSF 1500 1500 1500; Domestics financing with RSF 1500 1500 1450
- Gross Financing Needs (Panel A) and BoP (Panel B) illustrative figures included verbatim in Annex II (see source excerpts).

### Coordination, catalytic role, and stakeholder engagement
- Coordination with WBG, WHO, MDBs, and partners:
  - Enhanced IMF-World Bank Group Cooperation Framework for Scaled-Up Climate Action and Principles for Stepped-up Cooperation with WBG and WHO on Pandemic Preparedness guide collaboration (Annex VI and Annex VIII).
  - Staff encouraged to consult development partners, private investors, and other stakeholders early in diagnostic phase; obtain Assessment Letters (ALs) where appropriate.
  - Enhanced Framework elements: joint identification of climate priorities, joint engagement matrix and timeline replacing certain RSF tables under enhanced approach.
- Catalytic role:
  - RSF-supported RMs should help lift barriers to official and private climate- and pandemic preparedness-related investment through policy reforms, capacity development, and signaling effect.
  - Examples of catalytic channels: integrating climate in PFM/PIM, realigning relative prices (fossil fuel subsidy reform, carbon pricing), establishing frameworks for green bonds/PPPs, improving data and project pipelines.
- Private finance crowd-in examples:
  - Rwanda: green investment facility expected to fund pipeline estimated at EUR 400 million, including EUR 130 million in private equity.
  - Barbados: part of RSF fiscal space used as equity for a Blue Green Bank; completed a debt-for-climate swap; supported by Green Climate Fund.

### Consultation, assessment letters, and use of external expertise
- Assessment Letters (ALs) from WBG/WHO:
  - WBG provides AL on authorities’ broader climate and/or pandemic preparedness policies ahead of RSF approval or review; ALs included as supplements to SR and in publication bundle.
  - For reviews, AL can be a streamlined update.
- Use of external expertise:
  - Country teams encouraged to leverage WB and other partner expertise; mission chiefs should lead meetings, invite WB/WHO with authorities’ consent, and ensure IMF staff retain independent assessment responsibility.
  - Avoid cross-conditionality: IMF may use partner inputs but must independently verify and assess completion of RMs.

### Phasing, reviews, rephasing, LOT procedures, and monitoring
- Phasing and timing:
  - Teams must specify phasing in SR at request time; availability dates normally mirror UCT arrangement but can differ if justified.
  - RSF availability dates set independently for UCT-quality instruments without availability dates (PCI, PLL, FCL).
  - RMs must be implemented in time for staff assessment and inclusion in SR; if implemented after SR issuance, supplement procedures apply (including at least 5 business days to assess).
- Rephasing rules:
  - Rephasing possible upon Board approval; early implementation can allow advancement of availability date subject to conditions (one RM ahead of schedule, within 50 percent of quota per review, quality of remaining package preserved).
  - Modifications can be made only in the context of reviews; dropping an RM reduces access unless replaced.
- LOT procedures:
  - Eligible where review under underlying UCT-quality arrangement meets LOT criteria and RMs are met; LOT not appropriate for last RSF review.
- Monitoring and post-financing:
  - Safeguards assessment required under concurrent UCT-quality instrument; no separate RSF safeguards assessment.
  - Post-Financing Assessment (PFA) and Article IV consultations monitor developments following end of RSF and UCT instrument.
  - PFA triggered where GRA, PRGT, or RST credit outstanding exceeds 200 percent of quota, or nominal threshold SDR 0.38 billion RST credit outstanding.

### Misreporting, overdue obligations, and remedial measures
- Misreporting framework:
  - Misreporting defined as noncomplying disbursement due to inaccurate information leading to incorrect assessment of RM implementation or Executive Board finding of misreporting under concurrent UCT-quality instrument.
  - Where noncomplying disbursement made no more than four years prior to MD informing member, Board may require (a) early repayment or (b) no repayment if objectives achieved and deviation is minor.
  - If Board calls for early repayment, repayment expected within 30 days of Board decision.
- Overdue financial obligations:
  - MD will not recommend RSF arrangement if member has overdue financial obligations to the Fund; disbursements suspended until arrears cleared.
  - Overdue obligations to RST accrue interest equal to applicable interest rate under relevant tier structure, subject to minimum SDR charge.
  - Remedial measures for protracted arrears may include removal from RST-eligible list after 6 months, declaration of noncooperation after 12 months, and possible suspension of technical assistance.

### Mission conduct, documentation, and word count limits
- Mission leadership and timing:
  - Mission chiefs lead; encourage dedicated RSF mission days and broader counterpart engagement (environment, infrastructure, energy, agriculture, transport, health, social protection).
  - RSF SLA cannot precede UCT instrument SLA.
- Documentation requirements for PNs and SRs:
  - Executive summary to reference structural challenges and include RSF paragraph explaining BoP justification, financing amount, reform priorities, and enhanced collaboration request.
  - Policy discussion to highlight structural challenge and planned policies; RM matrix (Table 1) linking RMs to diagnostics, CD, outcomes; Table 2 summarizing development partner involvement.
  - Climate Annex and/or pandemic preparedness note for RSF requests; DSA write-up must explain how structural challenges and responses are reflected.
  - Additional RSF-specific tables: RM timeline and RSF phasing table.
- Proposed word count limits (Table 4 examples):
  - Joint RSF request/UCT/A4: PN 5,100; SR 10,500
  - Joint RSF request/UCT: PN 4,600; SR 10,100
  - Joint RSF review/UCT/A4: PN 3,600; SR 9,500
  - Joint RSF review/UCT: PN 3,600; SR 9,500

### Annex highlights and diagnostic tools
- Useful diagnostics (Section A and Box 2):
  - Climate diagnostics: CPD, C-PIMA, WB CCDR, Climate Change Knowledge Portal.
  - Pandemic diagnostics: UHPR, SPARs, JEEs, NAPHS, WB Pandemic Preparedness Assessments, HFPM, NHA.
  - Fund products: Article IV, Selected Issues, FSAP, Fiscal Transparency Evaluations, Fiscal Safeguards Reviews, Governance Assessments.
- Annex references:
  - Annex I: RST-eligible countries and group classification (as of October 2023).
  - Annex II: presentation examples for RSF financing in program tables (contains verbatim illustrative figures).
  - Annexes III/IV: guidance on Capacity to Repay (CtR) Assessments and DSAs for UCT-quality and RSF arrangements, including 20-year horizons and long-term modules.
  - Annex V: examples of strong climate RMs (mitigation, adaptation, institutions, financial sector).
  - Annex VI: Enhanced IMF-WBG Cooperation Framework details (joint engagement matrix, timelines).
  - Annex VII: governance framework application and diagnostics (2018 Framework).
  - Annex VIII: initial list of potential RMs to address pandemic preparedness with PFM-focused RM examples and coordination with WHO/WBG.

*Source: RESILIENCE AND SUSTAINABILITY FACILITY—UPDATED OPERATIONAL GUIDANCE NOTE (Executive Summary and selected excerpts), International Monetary Fund, January 16, 2025.*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Purpose and Scope
- Provides general guidance on the operationalization of the Resilience and Sustainability Facility (RSF) for arrangement requests and reviews.
- RSF complements the IMF lending toolkit by providing longer-term, affordable financing to eligible members to help address longer-term structural challenges from climate change and pandemic preparedness.
- Guidance updated to reflect experience from an early pilot phase and the outcomes of the Interim Review of the RST and Review of Adequacy of Resources completed in May 2024.
- Reviews under RSF arrangements in place as of January 8, 2025 and all subsequent requests will be guided by this note.

### Key Dates and Operational Milestones
- IMF Executive Board approved establishment of the RST in April 2022.
- RST became operational in October 2022.
- Interim review completed in May 2024.
- As of end-November 2024, twenty arrangements have been approved to access RST financing under the RSF.
- Document dated January 16, 2025.

### Operational Issues Covered
- The RSF framework, including objectives, eligibility and qualification.
- RSF arrangement design: identifying longer-term structural challenges; assessing associated Balance of Payments (BoP) risks; designing reform measures and high-quality reform packages; determining access levels.
- The catalytic role of RSF-supported reforms and financing.
- Coordinating diagnostics and reform priorities with outside expert stakeholders.
- The Enhanced IMF-World Bank Group Collaboration Framework for Scaled-Up Climate Action.
- The Principles for Stepped-up Cooperation with the World Bank Group and the World Health Organization on Pandemic Preparedness.
- Other RSF modalities, such as phasing, reviews, safeguards, and lending terms.
- Other operational considerations and documentation requirements.

### RSF Objectives
- Enhance members’ prospective Balance of Payments (BoP) stability by:
  - (i) supporting policy reforms that reduce macro-critical risks associated with longer-term structural challenges; and
  - (ii) augmenting longer-term policy space and financial buffers to mitigate risks arising from such longer-term challenges (RST Board paper, ¶16).
- Complement other IMF lending instruments that focus on short- and medium-term challenges by providing longer-term financing.

### Eligibility Criteria (numeric thresholds preserved exactly)
- RST eligibility is based on a combination of per capita income and population thresholds:
  - Criterion (i): an IMF member’s per capita gross national income (GNI) in 2020 (or 2019, if 2020 data is not available) does not exceed ten times the 2021 International Development Association (IDA) operational cutoff ($1,205).
  - Criterion (ii): it has a population below 1.5 million as of 2020, as reported by the World Bank (WB), and its per capita GNI in 2020 (or 2019, if 2020 data is not available) does not exceed twenty-five times the 2021 IDA operational cutoff.
- The list of RST-eligible countries (Annex I) will be updated to reflect updated IDA operational cutoffs at periodic reviews synchronized with PRGT eligibility reviews on a two-year cycle.
- Ad hoc decisions on eligibility could be taken in interim periods to avoid disadvantaging a member that meets the eligibility criteria but is not on the list.

### Qualification Criteria for an RSF Arrangement
Eligible members should:
- (i) present a high-quality package of reform measures that help the member make significant progress toward strengthening its prospective BoP stability by reducing macro-critical risks related to qualifying longer-term structural challenges (see ¶23-27).
- (ii) have a concurrent on-track qualifying UCT-quality instrument with at least 18 months remaining at the time of RSF arrangement approval to ensure adequate policy safeguards, support a stable macroeconomic environment in which RSF-supported reforms can be effective, and provide sufficient time for RSF-supported reform implementation (¶10-14).
  - Qualifying UCT-quality instruments include: Stand-by Arrangement (SBA), Extended Fund Facility (EFF), Precautionary and Liquidity Line (PLL), Flexible Credit Line (FCL), Stand-by Credit Facility (SCF), Extended Credit Facility (ECF) arrangement, or Policy Coordination Instrument (PCI). SLL arrangements, Staff Monitored Programs (SMP), and emergency financing such as RCF or RFI do not qualify (see ¶7, footnote).
- (iii) have sustainable debt and adequate capacity to repay (¶15-17).

### Balance-of-Payments Needs Under the RSF (Box 1)
- Objective: reduce prospective BoP risks and contribute to longer-term prospective BoP stability; in rare cases, RSF arrangements may also affect short- and medium-term BoP needs.
- Staff should illustrate in program documentation:
  - Risks to prospective BoP stability that may entail longer-term BoP financing needs associated with the relevant longer-term structural challenges (¶21). These risks are a qualification criterion for an RSF arrangement (separate from access-level criteria, see ¶42-45). Staff should leverage diagnostics and available modelling tools (Box 3) to illustrate the challenges to prospective BoP stability and substantiate the relevance of the proposed package of reforms to mitigating these prospective risks. Quantification, if feasible, is expected, but not required.
  - Where relevant, any direct short to medium-term BoP financing needs arising from implementation of RSF-supported reforms; staff should provide precise estimates and include them in the fiscal or BoP frameworks. Any positive short-to-medium-term BoP impact from RSF-supported reforms should also be captured to the extent possible.

### Design and Quality of RSF Arrangements
- Guidance details steps for:
  - Identifying vulnerabilities associated with qualifying challenges (¶16 onwards).
  - Assessing prospective BoP stability risks.
  - Designing a high-quality package of reforms and the characteristics of strong reform measures (RMs).
  - Determining access levels (including process for determining access summarized in Figure 1).
- The April 2022 Board Paper and the 2024 interim review emphasize the need for a “package of high-quality reform measures.” Qualification typically summarized in a “detailed statement of reform measures” in the MEFP.

### Coordination, Catalytic Role, and Modalities
- The note addresses the catalytic role of RSF-supported reforms and financing.
- Covers coordination with outside expert stakeholders and detailed guidance on the Enhanced IMF-World Bank Group Cooperation Framework for Scaled-Up Climate Action and the Principles for Stepped-up Cooperation with the World Bank Group and WHO on Pandemic Preparedness.
- Details other RSF arrangement modalities: phasing and reviews, safeguards, RSF lending terms, operational considerations (pre-mission, mission, post-mission work), and documentation requirements.
- Annexes provide detailed tools and examples to assist country teams, including:
  - Annex I: RST-eligible countries as of October 2023 and country group classifications regarding financial terms.
  - Annex II: examples of presentation of RSF financing in standard Fund-supported program tables.
  - Annexes III and IV: guidance on Capacity to Repay (CtR) Assessments and Debt Sustainability Assessments (DSAs) for UCT-quality and RSF arrangements.
  - Annex V: examples of strong RMs for climate.
  - Annex VI: detailed guidance on the Enhanced IMF-World Bank Group Cooperation Framework for Scaled-Up Climate Action.
  - Annex VII: key aspects of the 2018 Governance Framework relevant for RSF arrangements.
  - Annex VIII: an initial list of potential RMs to address pandemic preparedness.

*Source: RESILIENCE AND SUSTAINABILITY FACILITY—UPDATED OPERATIONAL GUIDANCE NOTE (Executive Summary), International Monetary Fund, January 16, 2025.*

### 8. Program documents should describe how the RSF reforms and financing would

### ppea2025004 - 8. Program documents should describe how the RSF reforms and financing would

### Purpose and intended uses of RSF reforms and financing
- The purpose of the RSF reforms and financing is to help members address the longer-term structural challenges of climate change and pandemic preparedness, with the goal of strengthening their prospective (future) balance of payments stability.
- The staff report for the RSF arrangement request (and any relevant SR outlining significant changes in the design of the RSF arrangement) should note the intended uses of the RSF financing, which can include:
  - (i) covering any shorter-term BoP/fiscal needs directly associated with implementation of RST-supported reforms;
  - (ii) increasing policy space for fiscal spending and reforms associated with qualifying longer-term structural challenges; and
  - (iii) augmenting longer-term buffers to strengthen the member’s ability to face shocks linked with qualifying longer term structural challenges (Board Paper, ¶16, 30).
- Any direct costs related to the implementation of RMs should be described in detail.
- Current BoP needs not directly linked to RSF reforms should be covered by the UCT-quality instrument (¶13, Annex II).

### Transparency and program documentation requirements
- Authorities are expected to publicly state their intentions for the use of the RSF financing in the Memorandum of Economic and Financial Policies/Program Statement (MEFP/PS).
- Such statements should ideally be grounded in and refer to the authorities broader strategy for climate or pandemic preparedness, keeping in mind that RSF loans are not earmarked for specific projects.
- If RSF financing is intended as budget support, general IMF policies on budget support apply, including specifying this in program documents and ensuring appropriate arrangements between the Central Bank and the Ministry of Finance are in place.
- RSF arrangements cannot be used on a precautionary basis; available financing is expected to be drawn promptly after the Board approves an RSF disbursement (¶63, RST Board paper, ¶30).
- Examples of acceptable public statements and staff report language are provided (including statements tying RSF use to budgetary efforts, resilience building, augmenting international reserves).

### Concurrent UCT-quality instrument — requests, reviews, and termination
- An RSF arrangement should be approved concurrently with either the approval of, or the completion of a review under a qualifying UCT-quality instrument with at least 18 months remaining until its expiration (see ¶49, RST Board paper).
- For FCL arrangements only, the approval of an RSF arrangement could take place on a stand-alone basis after the approval of the FCL arrangement.
- No RSF arrangement review can be completed outside of the concurrent UCT-quality instrument reviews, except in the FCL case noted above.
- Delays in completing reviews under the concurrent UCT-quality instrument delay RSF arrangement reviews.
- The RSF arrangement automatically terminates when the concurrent UCT-quality instrument expires or is cancelled (exceptions referenced in para 11).
- If accompanied by more than one qualifying UCT-quality instrument and one expires/terminates, the RSF arrangement may continue, at the request of the member, as long as it is accompanied by at least one qualifying UCT-quality instrument.
- Extensions and transitions:
  - The duration of the concurrent UCT-quality instrument may be extended to allow a member to qualify for an RSF arrangement, consistent with decisions and policies governing the UCT-quality instrument.
  - If fewer than 18 months remain in the concurrent UCT-quality instrument, the member may request its extension in the Letter of Intent (LOI).
  - A member’s request for extension cannot be approved on the basis of the RSF financing request alone; country teams should support it with considerations related to the UCT-quality instrument (e.g., need to complete the expanded set of UCT-quality instrument reforms).
  - Alternatively, authorities can cancel the ongoing UCT-quality instrument and request a new UCT-quality instrument of at least 18 months together with a request for approval of an RSF arrangement.
- Continuation when transitioning between UCT-quality instruments is permitted only if all the following criteria are met:
  - The RSF arrangement must always be accompanied by a concurrent UCT-quality instrument; a new qualifying UCT-quality instrument must be approved and effective immediately upon termination/cancellation of the existing instrument (i.e., at the same Board meeting);
  - The remaining period of the RSF arrangement (including any extensions) does not exceed the duration of the new UCT-quality instrument, and the minimum duration of the RSF arrangement across the two UCT-quality instruments is observed;
  - The criteria for approving an RSF arrangement remain satisfied at the time of approval of the new concurrent UCT-quality instrument;
  - The RMs remain generally appropriate, or are being modified as necessary, and conditions remain in place for their successful completion;
  - For all qualifying UCT-quality instruments other than FCL arrangements, the most recent review under the existing UCT-quality instrument was completed no more than 10 months prior to the date of the Executive Board approval of the new concurrent UCT-quality instrument, and prior to the change in circumstances the member’s performance under the program was satisfactory;
  - For FCL arrangements, the Executive Board must have, within the previous 12 months, either approved the FCL arrangement or, in the second year of the FCL arrangement, completed the mid-term review under the FCL arrangement.

### Presentation of RSF financing in program documents
- RSF financing must be additional to—and not substitute for—other IMF financing. The UCT-quality instrument must “stand on its own” in terms of financing and adjustment.
- The Financing Assurances Policy applicable to the concurrent UCT-quality program requires:
  - (i) firm commitments of financing to be in place for the upcoming 12 months; and
  - (ii) good prospects that there will be adequate financing for the remaining program period beyond the upcoming 12 months.
- RSF financing may not be used to close any financing gaps; the UCT-quality instrument must be assessed as sufficient to address financing needs expected during the program period under the baseline scenario under the GRA or make “significant progress” under the ECF of the PRGT.
- The RSF can only finance BoP needs directly stemming from the implementation of RSF-supported RMs.
- If additional BoP needs not stemming from RSF-supported RMs emerge, they should be addressed through augmentation of access under the UCT-quality instrument and policy adjustment, not through RSF financing.
- Presentation rules:
  - RSF financing should be shown below the line, along with reserves, and illustrated separately from Fund financing under the UCT-quality instrument, after closure of any exceptional financing need.
  - International reserves should be shown to remain adequate and fiscal gaps closed through the program horizon without RSF financing.
  - Any measurable impact of RSF-supported reforms on BoP or fiscal projections should be accounted for in program documents and in the macroeconomic projections.
  - If there are direct costs from RMs, the additional financing gap can be financed by RSF disbursements—presented as prospective financing separate from other IMF financing.
  - RSF disbursements continue to be limited to 50 percent of quota per review (applicable design constraint).

### Member’s capacity to repay and debt sustainability
- Additional safeguards apply to RSF arrangements. All Board documents for RSF financing requests and augmentations must include analysis and discussion of:
  - (i) an extended capacity to repay (CtR) analysis that covers the RSF repayment period, taking into account all Fund borrowing by the member;
  - (ii) debt risk analysis over a longer time horizon (up to 20 years); and
  - (iii) the composition of public debt, including the share of de facto senior debt.
- Requests for new RSF arrangements and augmentations require enhanced analysis of the member’s CtR:
  - Program documents should include a set of standardized charts on capacity to repay (CtR “dashboard”) for the repayment period of RSF loans.
  - Dashboards illustrate the evolution of total projected credit outstanding to the Fund (PRGT+GRA+RST) and debt service to the Fund in relation to key economic metrics over the course of the RSF repayment period (20 years), and compare it with available data from past Fund financing arrangements.
  - Dashboards are prepared by country teams in collaboration with the Finance Department (FIN) and are additional to the standard CtR table; they inform the bottom-line assessment in the CtR paragraph.
  - When financing requests would result in comparatively elevated levels of key CtR indicators, program documents must examine the severity of implied risks and explain how RSF design—including access and phasing, and the accompanying UCT-quality instrument—seeks to mitigate these risks.
  - SRs completing reviews under an RSF arrangement must include a paragraph with a bottom-line CtR assessment informed by a standard CtR table with the CtR dashboard being optional (¶63).
- Debt sustainability requirement:
  - Debt must be assessed as sustainable over the medium term for staff to recommend and the Board to approve a new RSF request, augmentation of access, and completion of reviews under RSF arrangements.
  - Teams should conduct a rigorous debt sustainability assessment using established analytical and policy frameworks—Low-Income Country (LIC) Debt Sustainability Framework (DSF) and Market Access Country (MAC) Sovereign Risk and Debt Sustainability Framework (SRDSF).
  - Assessments should include the natural disaster stress test if applicable, and cover long-term risks by including the entire 20-year horizon in the LIC DSA and the long-term modules in the MAC SRDSF (unless better alternative estimates are available) on long-term amortizations, demographic developments (including their impact on health and pension-related expenditures), and climate change (including mitigation and adaptation expenses).
  - Country teams for LICs and MACs are expected to use tools, flexibility and customization to discuss: (i) adverse effects of climate change on debt sustainability; and/or (ii) potential costs and benefits of climate action; and where applicable (e.g., hydro-carbon exporters) (iii) debt sustainability implications of global decarbonization efforts.
  - Use of alternative scenarios, and early consultation with the WB for LIC-DSF climate-related discussions, are encouraged.
  - Discussion of debt sustainability, including climate-related macro developments and risks, should be included in the main text of Policy Notes (PN) and SRs as well as in the DSA annex (Annex IV).

### RSF arrangement design (overview)
- RSF arrangements should support a high-quality package of reform measures that enable significant progress towards strengthening the member’s prospective BoP stability by reducing macro-critical risks associated with qualifying longer-term structural challenges.
- RMs should be:
  - grounded in solid diagnostics of vulnerabilities (Section A);
  - based on an assessment of the risks to prospective BoP stability (Section B);
  - fully owned by the authorities; and
  - enable critical, deep and ambitious reforms (Section C).
- Access to RSF financing is guided by a norm and disbursements are phased with each RM linked to one disbursement (Section D).

*Source: RESILIENCE AND SUSTAINABILITY FACILITY—UPDATED OPERATIONAL GUIDANCE NOTE (excerpts from provided content).*

### 18. The assessment of the qualifying longer-term structural challenges needs   to be

### 18. The assessment of the qualifying longer-term structural challenges needs to be

### Diagnostics to underpin RSF assessment and preparation
- No single diagnostic is mandatory for designing an RSF arrangement; the set of diagnostics used should be collectively strong enough to comprehensively assess the qualifying longer-term structural challenges that the RSF arrangement aims to address.
- LIC DSF and MAC SRDSF staff guidance notes specify when such assessment requires running an updated DSA and when the assessment can be done on the basis of a recent DSA.
- Natural disaster stress test requirement:
  - All small states vulnerable to natural disasters and countries that meet the frequency criteria (2 natural disasters in a 3-year window) and economic loss criteria (above 5 percent of Gross Domestic Product (GDP)) are required to run a natural disaster stress test.
- Examples of country-level diagnostics referenced:
  - Dominican Republic 2023 Article IV consultation: includes a customized scenario where nominal depreciation is higher than the baseline and the cost of adaptation is calibrated to country specific investments.
  - Costa Rica Third Review Under the Extended Arrangement Under the Extended Fund Facility, Request for an Arrangement Under the Resilience and Sustainability Facility: uses a scenario based on a customized baseline.

### Recommended analytical products (when available)
- Climate change diagnostics:
  - IMF’s Climate Policy Diagnostic (CPD)
  - Climate Public Investment Management Assessment (C-PIMA)
  - World Bank’s Country Climate and Development Report (CCDR)
  - Climate Change Knowledge Portal
- Pandemic preparedness diagnostics:
  - Universal Health and Preparedness Reviews (UHPR)
  - State Party Annual Reports (SPARs)
  - Joint External Evaluations (JEEs)
  - National Action Plans for Public Health Security (NAPHS)
  - WB Pandemic Preparedness Assessments and Public Expenditure Reviews
  - Health Financing Progress Matrix Assessments (HFPM)
  - National Health Accounts (NHA)
  - Reports from regional health agencies
- Fund surveillance and capacity development products:
  - Article IV and Selected Issues papers
  - Financial Sector Assessment Program (FSAP)
  - Fiscal Transparency Evaluations
  - Fiscal Safeguards Reviews
  - Governance Assessments (noting poor governance and corruption could hinder UCT-quality program and RSF-supported reforms)
- Authorities’ own diagnostics and plans and costed investment plans: teams should take stock and discuss assumptions with authorities and partners.

### Additional diagnostics and quality control (¶19)
- Teams encouraged to consider additional country-specific information, including feasibility relative to political economy and capacity considerations.
- Minimum quality standards for diagnostics: analytical soundness, objectiveness, realism; grounded in empirical evidence when possible.
- Reputable sources include international organizations, Regional Development Banks, multilateral institutions, peer-reviewed research articles, and comparable quality sources.
- Prefer findings validated by multiple independent diagnostics.

### Support from IMF Functional Departments (¶20)
- Functional Departments (FDs) can support country teams in assessing/supplementing diagnostics; where outside Fund expertise, teams should discuss with the World Bank.
- Specific FD roles:
  - Fiscal Affairs Department (FAD): guidance on identifying alternative climate documents, undertaking diagnostics, brief country-specific overviews, cross-country comparisons, C-PIMA, tax, and PFM.
  - Monetary and Capital Markets Department (MCM): identify challenges to private green investments and climate-related financial risks; design steps to address them.
  - Legal Department (LEG): support legal framework development with MCM or FAD (central banking, financial sector oversight, PFM, C-PIMA, tax).
  - Statistics Department (STA): support development of climate statistics.
  - Institute for Capacity Development (ICD), Research Department (RES), FAD: assist with modeling macroeconomic implications of climate policies.
- JEEs description: consolidates WHO’s IHR Monitoring and Evaluation Framework with GHSA country assessment; assesses health security preparedness across 19 IHR areas; indicators rated 1 (no capacity) to 5 (sustainable capacity).

### Box 2 — Useful Resources to Inform Climate-Related RSF Design
- CPD (IMF): broad climate policy diagnostic; FAD rolling out to support RSF requests; applies Climate Policy Assessment Tool (CPAT); IMF assessment requires country request and FAD conducts country-specific assessment. Example CPDs completed for Kenya, Jordan, Cabo Verde and Mauritania, among others.
- C-PIMA (IMF): assesses integration of climate considerations into PIM; provides recommendations and prioritized action plan; IMF assessment requires country request and FAD develops the assessment.
- Development partner diagnostics and tools to seek:
  - CCDR (WB, ongoing roll-out across IBRD/IDA countries)
  - Climate Change Institutional Assessment (CCIA) (WB)
  - Climate Public Expenditure and Financial Accountability (Climate PEFA) (WB, EU)
  - Climate Change Knowledge Portal (WB)
- Additional IMF resources:
  - IMF working papers, staff climate notes, staff discussion notes, surveillance country documents, departmental papers, regional and flagship publications; many published on IMF climate change topics website.
  - Community of Practice on Climate Models and Macroframeworks organized by ICD and SPR with FAD and RES (intranet link for IMF staff).
  - Fund’s Climate Change Indicators Dashboard contains climate-related data for macroeconomic and financial stability analysis.

### Assessing Prospective Balance of Payments (BoP) Stability Risks (Section B)
- Difficulty of assessing BoP risks from qualifying longer-term structural challenges; tools include diagnostics listed in Section A, DSA framework, and models like the Debt-Investment-Growth and Natural Disasters (DIGNAD).
- Existing climate strategy or pandemic preparedness-costing exercises may be referenced but should be carefully vetted against staff analysis.
- Program documents should:
  - Discuss the longer-term macroeconomic outlook while acknowledging uncertainties.
  - Strive to (i) illustrate and quantify macro-critical risks to prospective BoP stability associated with qualifying challenges in the macroeconomic framework and the DSA to the extent possible and (ii) provide an illustration of the benefit of the RSF arrangement where feasible (e.g., showing how RSF helps address those challenges to mitigate risks).
  - Quantify, when RSF substitutes for more expensive financing, how much debt service is saved by the cheaper terms of RSF financing compared to alternative sources.
  - Explicitly acknowledge uncertainty in quantifying costs of uncertain long-term events and long-term benefits of proposed RMs (see Box 3 and Annex IV).

### Box 3 — Providing a Macroeconomic Justification for RSF Arrangements
- New IMF tools to quantify macroeconomic impacts of climate change and policies:
  - DIGNAD: quantifies the effect of natural disasters in small open economies and benefits of investing in resilient infrastructure, increasing fiscal buffers, improving public investment efficiency; can substantiate assumptions for macro projections and DSA stress-test parameters.
  - Q-CRAFT: assesses fiscal risks from slow-moving climate change effects.
  - CPAT (jointly developed by IMF and WB): spreadsheet-based model to assess, design, and implement climate mitigation policies; covers carbon pricing (carbon taxes and ETSs), fossil fuel subsidy reform, energy price liberalization, electricity and fuel taxes, methane fees, VAT harmonization, energy efficiency and emission rate regulations, feebates, renewable subsidies and feed-in tariffs, green public investments, and combinations.
  - IMF-ENV: general equilibrium model to simulate emissions and macroeconomic impacts of climate mitigation policies and transition scenarios; use requires support from RES.
- Leveraging Debt Sustainability Frameworks:
  - LIC-DSF and MAC-SRDSF frameworks allow quantifying risks to debt sustainability from qualifying structural challenges.
  - Tailored stress tests for natural disasters can illustrate risks to debt sustainability over the medium-term.
  - Alternative scenarios can show cost of inaction and how climate policies and financing, including RSF-linked financing, impact debt sustainability (e.g., higher investment can raise growth or limit long-term climate costs; RST funds can substitute more expensive financing).
- Presenting a unified macro narrative:
  - Teams should present a consistent macroeconomic narrative describing climate risks, endogenous interactions among policy actions, and debt implications rather than stand-alone model applications.
  - Different models can produce different results; provide appropriate caveats when presenting model outcomes.
- Sample cases demonstrating model use:
  - DIGNAD applied to Bangladesh and Rwanda shows substantial benefits from scaling-up climate-resilient infrastructure and improving public investment efficiency: real GDP and public debt become more resilient to natural disasters.
  - In Bangladesh, DSA showed additional climate investments financed by RSF disbursements would reduce the present value of debt by substituting for more expensive financing.
  - In Kenya, the DSA illustrates the economic and fiscal impact of climate change and how RSF-supported reforms help limit risks to debt sustainability.

### Designing a High-Quality Package of Reforms (Section C)
- Purpose of RSF conditionality:
  - Focus on reforms that help make significant progress towards strengthening prospective BoP stability, not on resolving current BoP problems.
  - RSF conditionality is embodied in Reform Measures (RMs); RMs may be a single policy action or a set of closely related policy actions. All proposed RMs form a package.
- High-quality package characteristics (¶24):
  - Reduces macro-critical risks from qualifying longer-term structural challenges, thereby helping the member make significant progress towards strengthening prospective BoP stability.
  - Consists of RMs that are critical, ambitious, and deep (together characterizing RMs as “strong”).
  - Normally, each individual RM should meet this standard, except in limited and well-justified cases.
  - Annex V: illustrative list of potentially strong climate RMs. Annex VIII: illustrative list of potentially strong pandemic preparedness RMs.
- Linking RMs to risk reduction (¶25):
  - The link between risk reduction and RM implementation should be clearly established, referencing high-quality diagnostics.
  - RMs should support efforts toward achieving or surpassing international commitments (e.g., Nationally Determined Contribution (NDC) goals and National Action Plans for Public Health Security (NAPHS)).
  - Quantification of individual RM impacts may be possible in some cases; teams must present a strong qualitative case for how the set of RMs meets the standard.
- Operational approach and sequencing (¶26):
  - Sequential approach starting with solid diagnostics (¶18-19, Box 2), including benchmarking where feasible.
  - Use diagnostics to determine package scope, reform areas, and steps to achieve authorities’ objectives given country circumstances.
  - Design specific RMs with tailoring and sequencing aligned to country challenges, priorities, implementation capacity, and institutional environment while ensuring evenhandedness across countries.
  - RMs may be interlinked across reform areas; evaluate whole set of RMs as a package against the minimum RSF qualification standard (“high quality”) and potentially higher access levels (“exceptionally high quality”).
- Conflicting policies (¶27):
  - If a member has policies that contradict proposed RMs, staff should not recommend approval of an RSF arrangement until inconsistent policies are resolved (examples: destruction of primary forests, fossil fuel exploration in protected areas).
  - Such conflicting policies may also affect RSF reviews if they diminish the strength of RMs (criticality, ambition, and/or depth) or are judged to undermine the package’s ability to strengthen prospective BoP stability.
  - If introduced after approval, conflicting policies do not automatically preclude Executive Board completion of a review unless they materially diminish RM strength; staff may propose modification of remaining RMs to restore overall package quality and/or resolve inconsistent policies.
  - Staff reports should discuss how contradicting policies impact RM and RSF assessment and justify recommendations.

*Source: ppea2025004 — excerpt from RESILIENCE AND SUSTAINABILITY FACILITY—UPDATED OPERATIONAL GUIDANCE NOTE (sections 18–27, Box 2, Box 3, Section C).*

### 28. Strong RMs should be critical, ambitious, and deep.

### 28. Strong RMs should be critical, ambitious, and deep.

### Criticality
- RSF conditionality should only support reforms that are key (or “critical”) to reducing risks to prospective BoP stability stemming from the qualifying longer-term structural challenges.
- RMs should embody actions to close critical policy, legal, data and institutional gaps in the implementation of the national climate and pandemic preparedness objectives.
- The types of reforms that are critical will depend on country circumstances such as specific climate and pandemic vulnerabilities, income level, or institutional capacity.
- As a further insight into the criticality of Structural Conditions (SCs), consider: (i) the consistency of SCs with program objectives; and (ii) the structural policy gaps identified in surveillance.
- The focus in the RST is on helping to reduce the risks to prospective BoP stability (2018 RoC).

### Ambition
- RMs should be reforms that would be unachievable within the same timelines in the absence of an RSF arrangement.
- The PN/SR should make the case for why RMs are ambitious in terms of reducing prospective BoP stability risks, given a country’s context (including, where possible, through benchmarking against peers).
- Illustrative examples of ambitious RMs:
  - An ambitious carbon pricing reform (i.e., carbon taxes) should include a higher proposed price path (initial price and target price to be reached in X number of years) and/or wider sectoral coverage compared to the country’s baseline and countries facing similar circumstances.
  - Ambitious energy subsidy reform would include a schedule for permanently phasing out subsidies and the implementation of at least the first stages of the phase out.
  - Ambitious climate adaptation measures may include economy-wide reforms or measures to substantially reduce disaster risks, such as flood defense regulations applicable to all relevant areas.
- Country ownership should be preserved while seeking ambition to reduce the risk of reversal.
- If a member meets an RM on paper but adopts policies that undermine its impact, staff may recommend not approving the disbursement associated with that RM, and propose a modification of the RSF-supported reform package.

### Depth
- RMs should pursue high-depth reforms: “reforms that lead to permanent institutional changes, such as by involving legislative changes (parliamentary approval), or conditions with long-lasting impact” (2018 RoC, Appendix II, ¶2).
- Medium-depth reforms that “lead to a significant change but are one-off in nature (e.g., a one-time change in tariff rates as opposed to institutionalizing an automatic tariff adjustment mechanism)” may be assessed as strong if deemed to be critical and sufficiently ambitious.
- Alignment with existing legal frameworks and ongoing or proposed reforms, clear regulations and their effective implementation are important to ensure RMs achieve their intended impact.

### Reforms that should not generally be RMs
- Reforms generally excluded from being RMs (but can be commitments in the MEFP/PS):
  - Developing plans/strategies that are either narrow in focus or lack clear implementation milestones.
  - Conducting research, technical and feasibility studies (except climate smart feasibility studies for public investment projects which can be part of climate-smart PIM-related RSF-supported RMs).
  - Providing training or conducting communication campaigns to facilitate reforms.
- Other considerations, such as co-benefits beyond climate and pandemic preparedness, are not sufficient to justify RMs diverging from the standard but could justify prioritization of certain reforms.

### Design, monitoring, and documentation
- RMs should be designed so they can be independently monitored and verified by IMF staff and assessed by the Executive Board.
- Teams should draft RMs specifically and clearly, identifying:
  - Responsible entities (e.g., Ministry of Finance (MOF), Parliament, energy regulator).
  - Specific actions for RM completion (e.g., enactment of legislation, publication/enactment of regulations, codes, etc.).
  - Targeted completion date (¶61).
- Policy Notes/Staff reports should specify expected outcomes of each RM, outlining the specific changes expected, including metrics or benchmarks where relevant, along with expected timelines.
  - Example: “full phaseout of fossil fuels and compensatory mechanism providing social assistance to the 40 percent most vulnerable population by end-March 2025.”
- Encourage production and sharing of relevant data (including via the MEFP) to support monitoring of RM implementation.
- Where details are too long for the main RM text, they should be described in the Memorandum of Economic and Financial Policies and/or the Technical Memorandum of Understanding (TMU).

### Assembling a high-quality reform package
- Reform packages should be tailored to country circumstances and aligned with the member’s implementation capacity, taking into account institutional environment and sequencing of reforms.
- In Fragile and Conflict-Affected States (FCS), Small Developing States (SDS), and Low-Income and Developing Countries (LIDCs), a more gradual approach may be needed and RSF design should allow sufficient time for IMF and partners to provide Capacity Development (CD) during the arrangement.
- All RMs in a high-quality package should be critical, with no exceptions.
- Exceptions to ambition and depth should be very limited and well justified; there can be no exception to the ‘criticality’ standard.
- In certain well-justified circumstances, some less ambitious or low-depth reforms could be included as RMs if necessary to support other deep and ambitious RMs (e.g., where CD is required first, political economy constraints suggest a step-wise approach, or capacity strengthening is needed).
  - If less ambitious/low-depth RMs contribute to a broader reform, expectation is full implementation or broad rollout during the RSF arrangement.
  - Program documentation should explain: (i) why an individual RM that is not “strong” is instrumental when assessed together with related RMs; and (ii) how the RMs together render the overall package high-quality.
- Inclusion of less ambitious or deep RMs would impact access level discussions (¶43).

### Reform packages addressing more than one qualifying challenge
- Packages can address more than one qualifying challenge, but the quality of the package will be assessed against its contribution to addressing both challenges.
- Both components (e.g., climate change and pandemic preparedness) must be high-quality; a mixed-quality package (high in one area, low in another) is not acceptable.

### RSF conditionality for FCS and SDS (Box 4 summary)
- FCS and SDS face disproportionate climate and pandemic vulnerabilities, limited capacity, and larger economic costs from these challenges.
- Particular attention to RM design is needed given capacity constraints; parsimonious conditionality and careful prioritization of reforms is essential.
- Solid preparation, close coordination with stakeholders, and comprehensive diagnostics are especially important.
- Intermediate steps (often requiring CD) may be formulated as RMs if properly sequenced, tailored, and aligned to a broader engagement strategy, but inclusion of weak reforms will inform access discussions.
- The climate annex should include greater detail to help prioritize and sequence reforms.
- Access may be carefully calibrated (e.g., backloaded) to reflect additional time needed for full reform completion; CD needs should be reflected in tentative timelines.
- RSF financing is contingent on implementation of completed reforms, not mere steps toward reforms. Incremental steps of complex reforms could be justifiable as RMs in FCS or SDS with limited capacity but would be considered low-depth and should be part of a package of stronger RMs.

### Synergies with the UCT-quality instrument and other institutions
- RMs will be distinct from conditionality under the concurrent UCT-quality instrument; reforms targeting macroeconomic stabilization should generally be part of UCT-quality conditionality even if they also impact longer-term structural challenges.
- RSF-supported RMs should focus on reforms that primarily target the structural challenge(s) to be addressed by the RSF arrangement.
- Conditionality under the UCT-quality instrument and RSF-supported reforms should be closely aligned to leverage synergies. Examples:
  - One-off administered price changes to reduce fuel subsidies could be UCT-quality conditionality, while an RSF RM could build a durable reduction in GHG emissions.
  - Reforms that deepen local capital markets in a UCT-quality program can increase availability of private capital for climate-related investments.
  - Measures to address structural governance weaknesses and corruption vulnerabilities are generally best placed in the UCT-quality program, but RSF-supported RMs could include governance measures if specific and critical to RSF objectives (Annex VII).
- RSF reform packages should emphasize measures in core areas of Fund expertise (Annex V); reform design and monitoring are more challenging in non-core areas.
- For climate-related RMs, in-house Fund expertise has been growing; the CPD report, when available, will help determine which reforms require external support.
- For pandemic preparedness RMs, PFM is likely the only core area of IMF expertise (Annex VIII).
- Teams should coordinate with multilateral institutions and development partners to explore synergies and use their expertise and comparative advantage, while keeping RMs within the Fund’s expertise.
- Other institutions can provide CD to authorities in support of RM implementation provided IMF staff can independently assess eventual implementation (no cross-conditionality; ¶56).

*RESILIENCE AND SUSTAINABILITY FACILITY—UPDATED OPERATIONAL GUIDANCE NOTE; INTERNATIONAL MONETARY FUND*

### 38. RSF arrangement design should ensure policy additionality. RMs should: (i) spur

### 38. RSF arrangement design should ensure policy additionality. RMs should: (i) spur

### Design principles and eligibility of RMs
- RMs should spur additional reform efforts by the authorities compared to a no-RSF scenario (¶13-14).
- RMs should mitigate the risk of facility shopping by a focus that is distinct from GRA and PRGT arrangements (¶13-14).
- RMs should avoid duplication of conditionality with other development partners.
- In exceptional cases, reforms already planned by the authorities but facing implementation issues or long timelines can be considered as RMs if the RSF conditionality will result in significant acceleration of reform implementation.
  - Such cases should be rare and carry a significant burden of proof: teams must demonstrate that the reform will be accelerated significantly as a result of RSF conditionality, that it is a necessary part of a high quality reform package (e.g., a pre-condition for other identified reforms), and that it is key for successful achievement of RSF objectives.

### Parsimony and quality of RM packages
- RM packages should be parsimonious; the quality is not measured by the number of RMs (¶28).
- Focus should be on a few critical reforms with high ambition and depth.
- High-quality reform packages would normally not target a single policy reform area unless supported by well-documented country circumstances and diagnostics vetted by functional departments (e.g., an exclusive focus on PFM reforms would typically not be considered high-quality).

### Linking RMs to diagnostics, partners, and documentation requirements
- PNs and SRs should connect longer-term structural challenges to specific RMs and summarize available diagnostics and partners’ involvement.
- Climate-related RSF arrangements require a climate Annex in PNs and SRs describing climate challenges/vulnerabilities, authorities’ plans and initiatives, key past or ongoing policy reforms, and ongoing major projects.
- A short note summarizing the main challenges and reform areas relevant for pandemic preparedness should be annexed to PNs and SRs when pandemic preparedness-related RMs are proposed.
- A reform matrix (Table 1) should:
  - Associate each RM with a diagnostic (e.g., CCDR, CPD, C-PIMA for climate; JEE, NAPHS and others for pandemic preparedness).
  - Describe whether and how CD will be delivered.
  - Describe the expected outcome of the RM once implemented.
  - Outline the role of development partners.
- A separate Table (Table 2) should summarize development partner involvement in key areas not covered by RSF-supported reforms to illustrate synergies and complementarities; it is not exhaustive and should highlight only a few key partner initiatives.

### Illustrative RM matrix examples and outcomes (as presented)
- Example RM outcomes and dates (verbatim):
  - RM1: Government enacts legislation introducing a fuel pricing formula that gradually aligns domestic to international prices over three years — July 1, 2024 — Expected to reduce road transport emissions by about 6% per year.
  - RM2: Parliament approves legislation that introduces a vehicle feebate policy encouraging a shift in the vehicle fleet towards zero and low-emissions vehicles — July 1, 2024 — Encourage increase in the share of electric vehicles and low emissions vehicles.
  - RM3: Ministry of Finance establishes and implements a budgetary program to rapidly reallocate federal funds to the rehabilitation of public infrastructure in the event of shocks — February 1, 2025 — Expected to jumpstart the recovery effort and support GDP growth.
  - RM4: Water Authority approves regulation for more efficient water management, reforming governance of the sector, improving infrastructure management and reforming water pricing — February 1, 2025 — Increase in available surface and/or ground water resources; increased use of drip irrigation in agriculture; reduced likelihood/severity of drought episodes.

### Determining access levels and criteria
- Access to the RST is guided by the norm of 75 percent of quota and is capped at the lower of 150 percent of quota or Special Drawing Rights (SDR) 1 billion (¶46 and 47, RST Board paper).
  - The norm is neither a floor nor a cap but an operational anchor; access at the norm would be expected for reform packages considered to be of “high-quality” (¶24).
- Factors to consider for deviations from access at the norm (¶47, RST Board paper):
  - The country’s CtR: CtR must be assessed to be at least “adequate” for the proposed level of access, taking into account debt sustainability, debt carrying capacity, and composition of debt (including prevalence of de facto senior obligations).
    - Access is expected not to exceed (and could be below) the norm if assessment indicates heightened CtR risks.
  - The strength and ambition of the reform package: Access above the norm requires an exceptionally high-quality reform package characterized by deep and highly ambitious RMs (Section B).
    - Higher ambition could mean addressing a wider set of identified risks, fully closing one or more critical policy gaps within the RSF duration, or making much more progress in addressing key prospective BoP stability risks.
    - Where feasible, quantifying the expected impact of key RMs is helpful.
    - Provided CtR is adequate, an exceptionally high-quality reform package can qualify for access above the norm without checking other criteria.
  - BoP financing needs directly associated with the RMs: Access above the norm may be possible in rare cases where there are current BoP needs triggered by RMs’ costs, provided CtR is met and the reform package is high-quality.
    - These costs must be measurable, discrete, incurred during the RSF arrangement period, and included in macroeconomic projections—keeping in mind RSF arrangements cannot earmark financing for specific projects (¶9 and Annex II).
    - Practical examples include additional imports related to expansion of solar/wind capacity (mitigation), costs for climate-resilient infrastructure (adaptation), or increased spending to enhance the social safety net (e.g., with targeted cash transfers).
    - Costs that are not clearly defined, are uncertain, or are expected to be covered by other sources (e.g., a parallel WB lending operation or private sector) do not strengthen the case for access above the norm.

- Practical expectations and limits:
  - Many access requests are expected to be at the norm; deviations above or below must be assessed on merit considering the above criteria (¶43).
  - For exceptionally high-quality reform packages, access could be proposed above the norm, up to 150 percent of quota (or SDR 1 billion, whichever is lower).
  - Teams should provide sound justification for access levels, especially if outside the norm.
  - Countries may request a successor RSF arrangement for any amount remaining under the cap.

### Augmentation and successive RSF arrangements
- Augmentation of access or repeated access under successor RSF arrangements are permitted, subject to the maximum access cap.
- Augmentations may be approved where the reform package is enhanced (e.g., new diagnostics, new political impetus, inclusion of reforms related to an additional long-term challenge).
- Augmentations should always consider the member’s capacity to repay, debt sustainability, debt carrying capacity, and debt composition.
- In some cases, two or more successive RSF arrangements may better support implementation where capacity constraints exist—subsequent requests can complete the reform agenda building on initial RSF reforms.
- Augmentations are expected to normally bring access to the norm (for arrangements originally below the norm) or to the cap (for arrangements originally at or above the norm).
- A CtR dashboard is required for RSF augmentations (footnote).

### Catalytic role: mobilizing official and private finance
- RSF-supported reform packages would typically have a catalytic effect (¶46-52).
- RMs should help lift barriers to official and private climate- and pandemic preparedness-related investment, including through specific RMs where applicable.
- Most climate and pandemic preparedness objectives are not attainable without mobilizing significant private finance.
- Well-designed RMs can attract private investors, considering countries’ level of financial development and market size (Annex V).
- Challenges to attracting private capital in EMDEs include:
  - Perceived risk-return profiles not aligned with investors’ tolerance due to elevated macroeconomic, regulatory, and policy uncertainty; weak governance and corruption; limited technical capacity.
  - Lack of high-quality comparable data for investment decisions.
  - Lack of standardized ESG products.
  - Absence of robust pipelines for investable projects.
- The concurrent UCT-quality instrument provides a critical anchor for development partners and private investors by buttressing macroeconomic and financial stability (¶47).
  - UCT-quality reforms can include measures to strengthen financial institutions, deepen domestic financial markets, and improve predictability of legal and regulatory environments to attract longer-term private investments.
- RSF can play a catalytic role through policy reforms, capacity development, and financing (¶48).
  - Staff should discuss authorities’ plans to attract private finance and how to boost the signaling effect of the RSF arrangement; anchor discussions on a clear, specific broader climate or pandemic preparedness strategy including longer-term investment plans.
- Channels through which RSF-supported reforms could attract additional climate finance:
  - Integrating climate considerations in policy frameworks: integrating climate issues into PFM, PIM, and public procurement; PIM to create a pipeline of investable projects; climate budget tagging to increase transparency and accountability of climate spending; incorporating climate risks into financial stability frameworks and banking sector risk assessments.
  - Realigning relative prices: reducing energy subsidies, carbon pricing, and/or feebates to attract additional climate finance.
  - Non-price measures: establishing strong PPP frameworks; introducing frameworks for green-bond issuance and trading; legal, regulatory and institutional reforms to improve data collection, coordination, permitting, project review processes, risk management practices, and governance.

*Resilience and Sustainability Facility—Updated Operational Guidance Note (excerpt).*

### 50. Staff should also consult with development partners, private investors, and other

### ppea2025004 - 50. Staff should also consult with development partners, private investors, and other

### Consultation and stakeholder engagement
- Staff should consult with development partners, private investors, and other stakeholders to identify reform measures that can reduce barriers to climate finance.
- Engagement should occur early in the diagnostic phase with International Financial Institutions (IFIs), including the WBG and regional development banks, as well as other important stakeholders.61
- Strong public-private sector coordination is essential for identifying policy hurdles and effective measures to alleviate constraints on scaling up private climate finance.

### Pilot cases and mechanisms to crowd in private finance
- In several pilot cases (e.g., Barbados, Rwanda, Costa Rica, Jamaica and Bangladesh62), authorities explored options to crowd in private investments and/or reduce risk using:
  - public resources to directly incentivize additional climate investments;
  - risk-sharing, blended finance, and other financial tools.63
  - debt-for-climate swaps, which have become increasingly popular.64
- Authorities retain prerogative on use of fiscal space created through RSF financing, provided use is consistent with RST objectives and priorities in the MEFP.65
- Country teams should flag contingent fiscal liabilities tied to public provision of credit enhancements for private investments and advise authorities to weigh benefits and risks.
- Any initiatives using public resources should include appropriate governance structures; project selection, impact reporting, monitoring, and verification should follow best practices.

### Examples: Rwanda and Barbados (Box 5)
- Rwanda:
  - Adopted programmatic approach via green investment facility, Ireme Invest, set up by the Rwanda Green Fund and the Development Bank of Rwanda.
  - Development partners, including AFD and EIB, committed to scale up climate financing with budget support, technical assistance, and long-term low-cost loans in weeks following the RSF arrangement.
  - Initiative expected to fund a pipeline of projects estimated at EUR 400 million, including EUR 130 million in equity contributions from private investors.
  - Government prepared to scale up equity of the Development Bank as pipeline expands.
- Barbados:
  - Used part of fiscal space from the RSF to provide equity capital for a new Blue Green Bank to lend to the private sector for investments including affordable green homes, hurricane-resilient roofs, and electrification of transport.
  - Blue Green Bank supported by additional capital from the Green Climate Fund.
  - Completed a debt-for-climate swap to replace costly outstanding debt with more affordable financing for climate resilience projects related to water resource management and water and food security.
  - Low-cost, long-term financing instruments and grants from development partners will support public investment in water, sanitation, and flood and coastal protection.
  - Development partners will help increase authorities' capacity and expertise in Public Private Partnerships (PPP) to attract private investment for resilient infrastructure.

### IMF role, scope, and limitations
- The RSF-supported RMs can help authorities adopt effective climate policies and strengthen governance, PFM, and accountability frameworks.
- The Fund provides capacity development, including advice on reducing barriers to private investment, and can help convene stakeholders and facilitate climate finance roundtables (Box 6).
- IMF teams should report on any additional financing catalyzed, when data is available, in program documents.
- Limitations:
  - The Fund cannot seek to mobilize climate financing by development banks or investors on behalf of the member, act as a financial advisor, be involved in management or oversight, nor vouch for the bona fides or success of any climate finance vehicle, fund, or project.
  - The Fund's focus is providing policy advice to support an enabling environment for productive investments.

### Climate finance roundtables (Box 6)
- Informal, voluntary discussions led by country authorities, with potential Fund support at authorities’ request to facilitate and provide technical assistance.
- Objectives:
  - Identify (i) main barriers to increased climate financing; (ii) complementary reforms, capacity development needs, and comparative expertise; and (iii) programmatic approaches (e.g., frameworks for developing financing vehicles) for crowding in additional financing.
- The Fund can place discussions within a coherent macroeconomic framework and use them to identify RSF-supported policy reforms and capacity development needs.
- Roundtables should be coordinated with the World Bank and other regional MDBs; in countries with systematic coordination, roundtables can evolve into country-led climate platforms (examples: Bangladesh Climate and Development Platform; Rwanda Climate Finance Partnership).

### Coordination with WBG, WHO, MDBs, and other partners
- Coordination with the WBG and other external expert stakeholders is crucial throughout RSF arrangement design and implementation.53
- IMF teams preparing RSF arrangements are encouraged to coordinate with the WBG and reputable external partners, leveraging outside technical and sectoral expertise while ensuring complementarity with development partners.
- Compliance with Fund policies is required at all times, including confidentiality protections (Annex IX of the 2014 Guidance Note on the Fund’s Transparency Policy). Mission chiefs should ensure confidentiality of IMF-member discussions, consulting with LEG and SPR as needed.
- The IMF–WBG coordination framework addresses climate challenges and focuses on cooperation in diagnostics, reform design, and assessment of climate policies.54 Engagement should be close at all stages; mission chiefs should first contact the Country Director to coordinate sectoral work.
- The Enhanced IMF-World Bank Framework to Scale-up Climate Action is being piloted in selected countries (Annex VI) and aims to support implementation and financing of country climate strategies through integrated, country-led approaches.
  - Key additions under the Enhanced Framework include joint identification of climate priorities ahead of PCMs and preparation of a joint engagement matrix and timeline (which replace certain RSF tables under the non-enhanced framework).
  - Each RSF review would report on intervening changes in WBG operations and pipeline.
- Similar coordination frameworks exist for pandemic preparedness with WHO and the WBG; Principles for Stepped-up Cooperation with the World Bank Group and the World Health Organization on Pandemic Preparedness were agreed in October 2024.55
- Engagement with other development partners and outside experts is strongly encouraged; staff should always seek the authorities’ consent for participation of external experts and protect confidentiality of discussions.
  - Other MDBs: broadly similar approach as with the World Bank; principles and good practices apply even without formal agreements.71
  - Other official agencies (e.g., UN, EU, national DFIs): collaboration likely targeted and ad hoc; seek authorities’ consent.
  - Non-official agencies (NGOs, academic institutions, think-tanks): collaboration limited to specific aspects (e.g., RM design); authorities’ consent required.

### Conditionality, assessment letters, and verification
- Avoiding cross-conditionality:
  - Staff and the Executive Board can use WBG/WHO advice, but policy measures can be included as RMs only if IMF staff can monitor and verify their implementation independently and the Executive Board can assess implementation regardless of other institutions’ conclusions.70
  - Conditionality related to the same reform area across IMF and WBG or other development partner financing is possible where it yields additionality; different policy actions by the same implementing agency may be supported by different institutions according to comparative advantage.
  - The IMF remains solely responsible for establishing and assessing completion of RMs under an RSF arrangement.
- Assessment Letters (ALs):
  - The WBG provides an AL on authorities’ broader climate and/or pandemic preparedness policies ahead of RSF approval or review.
  - When requesting an AL, IMF country teams should share available information on likely reform areas seeking RSF support; for reviews assessing RM implementation, ALs can be streamlined updates.

### RSF arrangement modalities: Phasing and reviews
- Reviews under RSF arrangements are synchronized with, and completion is conditional on, the completion of, the review under the concurrent UCT-quality instrument (¶58, RST Board paper).72
- RSF disbursements can only occur in the context of an on-track UCT-quality instrument and cannot substitute for Fund-supported program financing.
- All RMs must be implemented before the last review date under the UCT-quality instrument; if an RM is not implemented in time for a review, it will be assessed at the next RSF review.
- Parliamentary authorization, if needed, should be secured before an RSF request is approved.
- Phasing of disbursements is linked to RM implementation:
  - Each RM specifies a tentative implementation date (“target date”) and the earliest Board review date for the RM and associated disbursement (“availability date”).
  - Teams are encouraged to provide a buffer between the target date and availability date to allow time to assess RM completion; buffers should account for data availability and assessment time.
  - RSF availability dates normally mirror those under the accompanying UCT arrangement, but later dates are possible if justified.73
  - For UCT-quality instruments without availability dates (e.g., PCI, PLL, and FCL), RSF availability dates will be set independently, considering target dates and necessary buffers.

*Italic line: Resilience and Sustainability Facility—Updated Operational Guidance Note (excerpt provided in source content).*

### 62. Teams must specify the proposed phasing of disbursements under the RSF

### 62. Teams must specify the proposed phasing of disbursements under the RSF arrangement in the SR at the time of the request for RSF financing

### Phasing and disbursement caps
- Teams must specify the proposed phasing of disbursements under the RSF arrangement in the SR at the time of the request for RSF financing.
- Normally, phasing would be even across RMs.
- One or more RMs and disbursements could be linked to a single review, but when originally phased, RSF disbursements available upon completion of a single review should not exceed 50 percent of quota.
- No RSF disbursement is available upon approval of an RSF arrangement.
- If any proposed measures have already been implemented before the Board approval of an RSF arrangement, they cannot be part of the RSF arrangement.

### Assessment, timing, reporting, and capacity-to-repay (CtR)
- Substantive assessment:
  - The RM must be implemented in its entirety to be assessed as met. No waiver of non-observance is possible under an RSF arrangement.
  - Minor deviations relative to the Board-approved design of an RM could be acceptable if the reform is substantively implemented and the objective of the reform measure is met. Other changes would not be considered “minor.”
- Capacity to repay:
  - SRs for reviews under RSF arrangements require the inclusion of a paragraph with a bottom-line CtR assessment informed by a CtR table covering the RSF repayment period.
  - The CtR dashboard is optional unless there are substantial changes to the macroeconomic framework.
- Timing of RM implementation, reporting, and disbursement:
  - RMs need to be implemented in time for staff to make an assessment and reflect it in the SR so that Executive Directors have enough time to form their own view on implementation.
  - An RM implemented after issuance of the SR would normally be assessed at the following review.
  - If authorities wish to seek disbursement for an RM completed after issuance of the SR, staff would need to issue a supplement to the SR to reflect RM implementation after the SR has been issued to the Board. The supplement must include:
    - (i) all relevant information regarding implementation of the RM after issuance of the SR, including revised tables reflecting the disbursement associated with the relevant RMs (e.g., BoP, fiscal, capacity to repay, and RM tables);
    - (ii) a supplementary LOI from the authorities, reporting on RM implementation and requesting the disbursement;
    - (iii) a revised Proposed Decision prepared by the Legal Department; and
    - (iv) sufficient time to assess that information—typically at least 5 business days.
  - RSF disbursements must be requested within 30 days of the completion of the Board review. Teams should remind authorities of this requirement.
  - If a member does not request the disbursement within 30 days of completion of the review, the disbursement of such resources may only be requested upon completion of the next review.

### Delays in RM implementation and implications
- If an RM is implemented later than the tentative target date but in time for staff assessment and before SR circulation to the Board, the RM could be assessed as implemented by the Executive Board and the disbursement would take place upon completion of the relevant review.
- If delays prevent timely assessment ahead of an upcoming Board meeting, the RM would be assessed at the next review to unlock the associated disbursement then.
- The target date for RM implementation is only indicative; delays do not require rephasing, though authorities may request rephasing.
- Regardless of rephasing, the profile of Fund debt service could change if RMs are completed in a different year from the original plan; teams must ensure the latest numbers are reflected in the macroframework and tables informing the Board discussion, if needed by issuing a staff supplement.

### Modification of reform package and effects on access
- RMs can be modified, dropped or added by the Executive Board, but only in the context of reviews.
- Dropping one RM will make the associated disbursement unavailable, reducing total RSF access by a corresponding amount unless replaced by another RM.
- The updated reform package must at a minimum be in line with the standard for a high-quality reform package (¶24).
- Modifications can entail different target implementation and availability dates; in such cases access would be rephased.
- Modifications and rephasing are forward-looking; RMs should be reset for a future date and modifications cannot be retrospective, except for rephasing only in the case of early RM completion.

### Rephasing modalities
- Rephasing (adjusting dates on which RST financing becomes available) can take place to realign the RSF arrangement with modifications or delays in reform implementation, or with any rephasing under the UCT-quality instrument.
- Rephasing should be requested by the authorities in the LOI and supported by staff in the SR, then approved by the Board.
- Rules and scenarios:
  - Regardless of the target date, an RM will be assessed at the UCT-quality instrument review following (i) implementation of the RM, and (ii) after the relevant availability date has passed.
  - Rephasing of access to later reviews is possible if deemed appropriate by authorities and staff and approved by the Executive Board. Access associated with the delayed RM would not count towards the 50 percent of quota access limit per review.
  - Rephasing to account for earlier implementation of RMs is possible under two scenarios:
    - First, at the time of a review, early rephasing and disbursement to the date of completion of such review can be requested for up to one RM completed ahead of schedule, provided:
      - (i) there is sufficient time to evaluate its completion ahead of the Board date;
      - (ii) there remains more than one RM to be implemented under the RSF arrangement;
      - (iii) access associated with the early implementation of an RM is within the 50 percent of quota access limit per review; and
      - (iv) the quality of the remaining reform package is not diminished and phasing remains appropriate, including considering concurrent requests for rephasing for reasons other than early RM completion.
    - Second, for future reviews under the RSF arrangement, RMs can be brought forward (and modified, if appropriate) if authorities are confident they can implement them earlier than envisaged.
  - Staff should be cautious supporting advancement of RM implementation due to risks of undue pressure for early CD scheduling or weaker implementation.
  - Staff reports should show that additional financing from earlier RSF disbursement is not intended to cover any UCT-quality instrument financing gap.

### Changes at time of scheduled review
- Modifications or additions to RMs cannot be made at the time of the related review (i.e., the Board cannot modify and assess a RM at the same time), except for rephasing only in the case of early implementation of RMs originally targeted for future reviews.

### Phasing and reviews when PLL, FCL, or PCI is concurrent UCT-quality instrument
- For an RSF arrangement with an accompanying two-year FCL arrangement:
  - The single mid-term FCL review would be a combined review under the FCL/RSF arrangements, with standalone RSF arrangement reviews for residual RSF disbursements.
  - All RSF reviews should be completed prior to the expiration of the FCL arrangement, and RSF disbursements must be made within the period of the RSF arrangement, unless the RSF arrangement continues under the conditions outlined in ¶12.
- For PLL/RSF requests:
  - Only PLLs with a residual duration of at least 18 months would meet the length requirement of a qualifying UCT-quality instrument for an RSF arrangement.
  - RSF reviews and disbursements would generally take place concurrently with PLL reviews, with the availability dates under the RSF arrangement scheduled prior to the PLL review date to allow assessment of relevant RM(s) at the Board meeting.
  - PLL arrangements provide for reviews at six-month intervals; therefore the final RSF disbursement/review would need to be linked to the last PLL review.
- For parallel PCI and FCLs that do not have scheduled disbursements, the RSF arrangement would identify availability dates linked to scheduled reviews or stand-alone RSF arrangement reviews.

### Lapse-of-Time (LOT) procedures
- A review under an RSF arrangement is eligible for completion on a LOT basis where the review under the underlying UCT-quality arrangement or instrument meets the criteria for LOT completion of program reviews and the relevant reform measures have been met.
- LOT procedures may be considered where one or more RMs are delayed past their expected implementation date, provided delays are not repeated or egregious and staff judge that delays do not impact overall performance and objectives under the RSF arrangement.
- Minor RM modifications may be proposed under a review completed under LOT procedures, but material changes should be brought to the Board for discussion.
- Significant rephasing of access under the RSF arrangement would typically require a Board discussion.
- Requests for rephasing to take into account earlier implementation of RMs could be proposed on a LOT basis.
- LOT procedures should not be proposed when the Board is scheduled to discuss the last review under an RSF arrangement.

### Safeguards, post-financing assessments (PFA), and monitoring
- Safeguards:
  - A safeguards assessment is required under the concurrent UCT-quality instrument, including the PCI, but no separate safeguards assessment is required for RSF financing.
- Post-Financing Assessments (PFA) and Article IV consultations:
  - PFA and Article IV consultations will monitor developments following the end of an RSF arrangement and UCT-quality instrument.
  - Under the PFA policy, an assessment is expected for members that are not in a Fund arrangement (or PCI or SMP) and where GRA, PRGT, or RST credit outstanding or a combination thereof exceeds 200 percent of quota.
  - A nominal threshold—set at SDR 0.38 billion credit outstanding to the RST—also triggers the need for PFA.
  - Even where credit outstanding is below the threshold, the PFA policy provides the Managing Director with discretion to recommend PFA if developments suggest the need for closer monitoring of the member's capacity to repay, particularly where developments call into question progress toward external viability. This recommendation is typically made at the last review and captured in a Board decision.
- Monitoring long-term RM impact:
  - Where PFA is triggered, evolution and impact of reform measures on the member’s capacity to make repayments to the RST would be covered as part of the PFA, possibly including a brief overview of reform areas and outstanding challenges following RM implementation that may pose risks to long-term CtR if unaddressed.
  - Article IVs are the main vehicle for covering macro-critical issues raised by RSF arrangements that remain beyond the program end, including deviations or regressions in RSF-supported reform implementation, consistent with the macro-criticality criterion of the Integrated Surveillance Decision (ISD).
  - If residual BoP needs persist or a new BoP gap emerges, any follow-up UCT-quality instrument would be expected to account for RSF repayments in assessments of debt sustainability and CtR.

### Misreporting framework and remedies
- Misreporting under an RSF arrangement occurs either:
  - when the member has received a noncomplying disbursement under an RSF arrangement as a result of inaccurate information provided to the Fund leading to an incorrect assessment that (a) an RM has been implemented when it has not or (b) that a deviation was minor when it was not; or
  - there is an Executive Board finding of misreporting at a concurrent review under one or more accompanying UCT-quality instrument(s) which was not assessed as “de minimis” or waived by the Executive Board; in such cases the RSF disbursement at that concurrent review will also be tainted.
- Where evidence suggests a noncomplying disbursement under ¶73(i):
  - The Managing Director (MD) will inform the member promptly.
  - After consultation, if a determination is made that a member received a noncomplying disbursement, the MD will notify the member and submit a report to the Executive Board.
  - If the noncomplying disbursement was made no more than four years prior to the date on which the MD informed the member, the Board may decide either:
    - (a) that the member should make an early repayment of the disbursed amount, or
    - (b) no early repayment is required based on a determination that the objectives of the reform measure have been achieved because the deviation in policy implementation is minor.
  - If the Board calls for early repayment, the member will be expected to repay an amount equivalent to the noncomplying disbursement, together with any interest accrued thereon, normally within a period of 30 days from the date of the Executive Board decision.

*Source: ppea2025004 - 62. Teams must specify the proposed phasing of disbursements under the RSF arrangement in the SR at the time of the request for RSF financing*

### 75. With respect to cases of misreporting under ¶73(ii) above, the misreporting

### ppea2025004 - 75. With respect to cases of misreporting under ¶73(ii) above, the misreporting

### Misreporting framework and disclosure
- Misreporting under an RSF disbursement that is non-complying solely because of a finding of misreporting under the accompanying UCT-quality instrument follows the misreporting framework applicable to the UCT-quality instrument; no separate or additional RSF steps are required.
- Members are expected to make an early repayment of the non-complying disbursement(s) under the RSF arrangement unless, under the misreporting framework of the UCT-quality instrument, the misreporting is de minimis or a waiver of non-observance is granted by the Executive Board.
- The RST misreporting framework is procedurally analogous to that of the PRGT.
- Relevant misreporting information should be made public by including it in documents published after the Board discussion (e.g., press release containing the Chairman’s Statement or summing up), with prior Board review of the text for publication.
- Whenever the Executive Board grants a waiver for nonobservance under the UCT-quality instrument or determines that the objectives of the RSF-supported RM have been achieved notwithstanding the misreporting, the discussion of misreporting will be included in the SR, though it will be deleted if the report is published.

### Overdue financial obligations and remedial strategy
- The Managing Director (MD) will not recommend an RSF arrangement for approval by the Executive Board if a member has overdue financial obligations to the Fund.
- If a member is in arrears to the Fund in the GRA, the Special Disbursement Account, the SDR Department, or to the Fund as Trustee (including the PRGT and RST):
  - The MD will not recommend, and the Board will not approve, financing (including an RSF arrangement), completion of a review under an RSF arrangement, nor continuation of an RSF arrangement under paragraph 11.
  - Any pending disbursements under an existing arrangement will be suspended until the arrears are cleared.
  - If a member incurs overdue financial obligations to the RST, that member’s access to the GRA and PRGT would also be suspended.
- The Fund’s strategy to prevent and remediate overdue financial obligations applies to the RST and consists of three elements: prevention, intensified collaboration, and remedial measures.
- Overdue obligations (i.e., repayments of principal or payment of interest) to the RST accrue interest at an interest rate equal to the applicable interest rate under the relevant tier structure to compensate the Trust for the opportunity cost of arrears, subject to a minimum interest rate charge of the SDR.
- In cases of protracted overdue obligations, remedial measures may include:
  - Executive Board consideration of removing the member from the list of RST-eligible countries 6 months after emergence of arrears.
  - Declaration of noncooperation with the Trust 12 months after emergence of arrears.
  - Upon a declaration of noncooperation, the Fund could decide to suspend the provision of technical assistance to the member.
- The RST framework encourages prioritization of GRA repurchases and PRGT repayments (arrears clearance or periodic partial/small payments) given their unique “lender-of-last resort” function.

### RSF lending terms (key specifications)
- RSF loans maximum maturity and repayment schedule:
  - Maximum maturity: 20 years.
  - Grace period: 10½ years.
  - Principal repayments: 20 equal semi-annual installments beginning 10½ years after each RSF disbursement.
- RSF interest margin structure (margin over 3-month SDR interest rate (SDRi)) and service charges:
  - Group A:
    - Margin: 55 basis points above the SDRi up to a cap of 2¼ percent.
    - Service charges: exempt from any service charges on RSF loan disbursements.
    - Composition: all PRGT-eligible countries that are not presumed blenders.
  - Group B:
    - Margin: 75 basis points above SDRi.
    - Upfront one-time service charge: 25 basis points on each RSF disbursement.
    - Composition: all “presumed blenders” (of PRGT and GRA resources) and all small states (below 1.5 million inhabitants) with per capita GNI below ten times the IDA operational income cutoff.
  - Group C:
    - Margin: 95 basis points above SDRi.
    - Upfront one-time service charge: 50 basis points for each RSF disbursement.
    - Composition: all other RST-eligible countries, i.e., all eligible (non-small) Middle Income Countries (MICs) and all small states with income above ten times the IDA operational income cutoff.
- Margin structure and service charges are subject to Board reviews and adjustments as the Board considers appropriate; the Board will review interest rates during each regular RST policy review and can conduct earlier/ad hoc reviews if needed.

### Operational considerations — pre-mission and engagement timelines
- Preparations for an RSF request:
  - Should generally begin at least six months before the PCM.
  - Should have at least 24 to 26 months remaining in the concurrent UCT-quality instrument.
  - Engagement with the WBG through the Country Director should start early to distill diagnostics and identify diagnostic gaps.
  - Teams should request an AL and communicate timeline for the PN, invite the WBG to the PCM, and may consider staff visits to gather long-term reform information.
  - Preparation periods may be shortened where RMs were previously discussed with review departments or as the Fund gains experience.
- Country team-led preliminary discussion should cover:
  - The climate or pandemic preparedness policy landscape.
  - Relevant work already undertaken or planned and other support/CD or key projects from the WBG and development partners.
  - Broad reform areas under consideration and related capacity development needs.
  - Potential cross-institutional synergies and the potential for the RSF to help attract additional climate finance.
- Functional department (FD) support examples:
  - FDs can share climate-related areas/questions for country teams to explore.
  - FADCP can provide guidance or an “information note” if major climate products are not available or planned.
  - FAD can provide a brief country-specific overview of key climate issues and cross-country comparisons.
  - MCM, ICD, RES, STA can provide technical discussions on scaling up climate finance, macroeconomic impact models, and climate data issues respectively.
  - FAD can provide support on pandemic preparedness assessments and exchanges with WHO and WBG.
- Timing for FD support:
  - Determination of FD support scope and timing should ideally start 6 months before the PCM to allow resource planning.
  - CD diagnostic missions (if needed) should take place 2-3 months prior to the negotiation mission.
- Early engagement with authorities:
  - Understand climate strategy and latest NDCs, or pandemic preparedness strategies and plans, and identify key agencies.
  - Staff visits preceding negotiation missions can present early overviews of reform areas.
- Informal FD discussions prior to PCM:
  - Two months before PCM: present key challenges, plans, work undertaken, and initial reform strategy to relevant FDs.
  - One month before PCM: compile potential RMs and MEFP commitments for early feedback; format may vary.
  - Optionally share Climate Annex / pandemic preparedness note with relevant FDs for informal comments a couple of weeks prior to PN circulation.
- Once RMs are agreed:
  - Work with authorities to develop a clear path to reform implementation, including prerequisite steps, timelines, and encapsulation in the MEFP/TMU to minimize risks and clarify assessment.
  - FDs can assist country teams and expected future FD support needs should be discussed early.
- Supporting implementation (Box 8 highlights):
  - Authorities could prepare a detailed work program monitoring implementation of each RM with interim steps and clear allocation of roles and responsibilities.
  - Country teams, with FD support, could share a basic progress management tool for authorities to populate and use as a coordination tool.

### RSF arrangement reviews and missions
- Purpose of RSF review:
  - Assess member performance on RMs and confirm debt sustainability and capacity to repay.
  - Monitor implementation of past RMs and update RSF program design (content of future RMs or phasing) as needed.
  - Changes in RSF design are expected to be less frequent than in UCT-quality instruments; teams should consult FDs early if changes are needed.
- PN review and PCM:
  - Allow extra time for PN review to assess RMs’ feasibility, consistency with climate/pandemic plans, and synergies with other reforms.
  - Invite WB/WHO to comment on relevant PN sections; plan longer or separate PCMs to allow in-depth RM discussions and invite WB to the RSF part of the PCM.
- Proposed word count limits for RSF Requests/Reviews (Table 4):
  - Joint RSF request/UCT/A4: PN 5,100; SR 10,500
  - Joint RSF request/UCT: PN 4,600; SR 10,100
  - Joint RSF review/UCT/A4: PN 3,600; SR 9,500
  - Joint RSF review/UCT: PN 3,600; SR 9,500
- Mission objectives for RSF arrangement request missions include:
  - Confirming understanding of key policy gaps and government objectives, current policies/projects, and planned development partner support.
  - Agreeing with authorities on an RSF RM matrix (content, timeline, responsible entities, CD and partner support).
  - Finalizing integration of RSF RMs and financing in the macro framework, particularly where RMs create short- to medium-term BoP needs.
- Mission objectives for RSF arrangement review missions include:
  - Confirming completion of RSF RMs (including weblinks to published documents).
  - Discussing intermediary steps and additional CD necessary to ensure timely completion of remaining RMs.
  - Discussing other climate or pandemic preparedness policy gaps and deciding on whether program modification/augmentation is warranted.

*Source: ppea2025004 - 75. With respect to cases of misreporting under ¶73(ii) above, the misreporting*

### 93. Country teams are encouraged to leverage expertise from outside experts, especially

### ppea2025004 - 93. Country teams are encouraged to leverage expertise from outside experts, especially

### Mission leadership, use of external expertise, and meeting participation
- Country teams are encouraged to leverage expertise from outside experts, especially from the WB and from other partner institutions (for both RSF arrangement requests and reviews).
- All meetings should be led by staff; mission chiefs are encouraged to involve the WB and WHO in meetings but should be cautious in inviting other outside experts to join RSF negotiations (¶58).

### Mission timing, scope, and counterparts
- Country teams are encouraged to allow enough mission time to cover all key RSF-related issues.
- For both RSF arrangement request and reviews, country teams could consider:
  - (i) dedicated mission days focused on the RSF arrangement; and
  - (ii) an introductory meeting in which the team presents to the authorities the mechanics of the RSF arrangement and discusses key climate or pandemic preparedness challenges that could be tackled by the RSF arrangement.
- Compared to stand-alone UCT-quality instrument missions, RSF arrangement missions should aim to broaden the range of counterparts to include:
  - government entities responsible for coordinating and implementing climate policy or pandemic preparedness;
  - Ministries responsible for environment, infrastructure, energy, agriculture, transport, health, social protection;
  - relevant sectoral experts from the WB and other development partners.

### Sequencing and Staff Level Agreements (SLAs)
- Generally, joint UCT instrument and RSF arrangement missions will conclude with the announcement of a joint Staff Level Agreement (SLA).
- If more time is needed to reach understanding on RSF-supported reforms and/or RSF arrangement modalities, SLAs for the RSF arrangement can be reached after that for the UCT instrument.
- The RSF SLA cannot precede that of the UCT instrument, as RSF arrangements cannot be approved on a standalone basis and any changes to the UCT instrument might impact the timing and implementation of RSF-supported RMs.

### Post-mission work: Back-To-Office (BTO) and SR review streamlining
- Post-mission work broadly follows that of a UCT-quality instrument, with specific attention to any changes to RSF arrangement modalities.
- After the mission (for RSF arrangement requests and reviews), the mission chief should send a Back-To-Office (BTO) to Management, covering RSF arrangement and UCT-quality instrument-related issues.
- To streamline the SR review and clearance process, the BTO should include:
  - (i) any changes in the RSF arrangement;
  - (ii) any important developments in climate and pandemic-related policies; and
  - (iii) a table mapping RMs included in the PN and those agreed during the mission.

### Documentation requirements for PNs and SRs (RSF requests and reviews)
- Executive summary:
  - (i) The context section should reference the structural challenges the RSF request aims to address; and
  - (ii) the program modalities section should include a separate paragraph introducing the RSF arrangement, including any BoP need justification, RSF financing amount, RSF reform priorities, and specify if the authorities requested benefitting from the enhanced collaboration framework with the WBG.
- Context: Highlight the longer-term structural challenge the RSF request aims to address, including the BoP link, and a concise discussion of government objectives and plans.
- Policy discussion: Include a section discussing:
  - (i) the structural challenge the RSF request aims to address; and
  - (ii) the country’s current and planned policies to tackle the challenge, where RSF RMs should be highlighted.
- RSF arrangement modalities: Include a paragraph on the RSF. For requests and augmentation, the paragraph should highlight:
  - (i) eligibility/qualification for the RSF request;
  - (ii) justification of the access level;
  - (iii) how the RSF financing is integrated in the macroeconomic framework and what risks to BoP stability it addresses.
  - Include an additional paragraph on how the RSF catalyzes other climate financing, if applicable.
- RM matrix and development partners engagement table:
  - The RM matrix table links RMs to key challenges, diagnostics, CD and outcomes (Table 1).
  - RSF requests should also include the mapping of the climate and pandemic-preparedness policy space, including outlining existing policy actions taken by the authorities, and the role of other development partners in supporting other reforms (Table 2).
- Climate Annex and/or Note on Pandemic Preparedness (for RSF requests only):
  - More details on the structural challenges the RSF aims to address, the government’s overall reform program, an overview of other support by development partners;
  - Could be augmented with a box outlining CD needs and a CD strategy for reform implementation, including over the review stages (regardless of whether the CD is provided by the Fund or other institutions).
- DSA:
  - The DSA write-up should explain how (i) the structural challenges targeted by the RSF and (ii) the accompanying policy/investment response measures are reflected in the macroeconomic framework underlying the DSA.
  - Under the MAC DSA framework, teams are required to run the LT climate stress test module in case of climate-related RSF requests.
  - Teams are encouraged to include customized stress tests reflecting risks linked to the size of the structural challenge tackled by the RSF (Annex IV).
- Program tables:
  - Ensure fiscal, BoP and external financing tables clearly show that the pre-RSF financing gap is closed by the UCT arrangements.
  - RSF financing is additional to:
    - (i) build foreign exchange reserves towards future prospective balance of payment needs;
    - (ii) replace alternative financing with less advantageous terms; and/or
    - (iii) to cover additional financing needs from the RSF reforms themselves (Annex II).
- Additional RSF-specific tables:
  - In addition to the standard UCT-UFR tables, and Tables 1 and 2 described above, teams should include in the SR:
    - a RM timeline organized by broad reform areas; and
    - a RSF phasing table.
- Other: Stand-alone RSF SRs (e.g., in the case of a concurrent FCL arrangement) should provide a brief overview of macroeconomic and policy developments, and, where applicable, illustrate how the UCT-quality instrument qualifications are still verified.

### Assessment Letters, reporting on cooperation with expert stakeholders, and publication
- For both RSF arrangement requests and reviews, Assessment Letters (ALs) should be included as a supplement of the SR and in the bundle for publication.
- For reviews, the AL can take the form of a streamlined update of the previous AL.
- For both RSF arrangement requests and reviews, the SR and MEFP (or Program/Written Statement) should document coordination with the WB/WHO, including:
  - a brief description of their engagement in the sector and/or any technical assistance related to RST-supported reforms they provide;
  - acknowledgment of WB/WHO staff’s inputs;
  - description of parallel financing arrangements; and
  - complementary/synergic policy and financial operations when relevant.

### LOI, MEFP/Program Statements and TMU
- Following standard lending policies and practices, the joint UCT-quality instrument/RSF arrangement LOI and MEFP should reflect:
  - the request for RSF financing and disbursements during a review; and
  - adjustments in phasing or substance of RMs, as needed.
- The MEFP should describe the authorities’ plans to address the qualifying longer-term challenge(s) and, if applicable, any related financing plans; and should explain how RMs would contribute to those plans.
- Where appropriate, detailed specifications on how RMs should be implemented and assessed can be included in the TMU.

### Final RSF arrangement review and follow-up monitoring
- At the final RSF arrangement review, country teams are encouraged to take stock of the progress made under the RSF arrangement.
- Teams may provide a summary in the staff report of the reform effort, report on the initial implementation experience, and discuss how they expect the authorities to take the reform agenda forward (including timelines, as applicable).
- Further monitoring will be covered as part of ongoing surveillance and lending.
- Following the end of an RSF arrangement, Article IV consultations will be the main vehicle for teams to follow-up on the longer-term structural challenges addressed by the RSF, including assessing the implementation of RMs. This can also be done through the PFA, where applicable (¶71).
- Follow-up reforms, if macro-critical, could also be considered as part of a future UCT-quality instrument. Any follow-up UCT-quality instrument would be expected to account for RSF repayments in debt sustainability and capacity to repay considerations.

### Annex I (RST-Eligible Countries) — structure and classification
- Annex I lists RST-Eligible Countries with columns labelled Country, PRGT, Small State Group and classifies many countries with PRGT indicator values of 1 or 0 and Small State Group codes A, B, or C (examples in the Annex include Afghanistan 1 0 A; St. Lucia 1 1 A; Bangladesh 1 0 B; Malta 0 0 C; Mexico 0 0 C).
- The Annex provides country-level eligibility coding but does not change operational guidance above.

### Annex II (RSF Financing Presentation in Program Tables) — key guidance and illustrative example
- RSF financing should not contribute to closing external/fiscal financing gaps, unless the RMs generate direct, identifiable, and short-term BoP/fiscal costs not covered by other development sources.
- RSF disbursements should be recorded below the line, along with other reserve and closely related items.
- Illustrative example (Country X requests a 3-year RSF used for budget support) highlights different uses across years:
  - Year identifiers used in the illustrative tables: 2023, 2024, 2025.
  - Example program table entries (Table A.II.1) include exact figures:
    - Total revenue and grants 2500 2500 2500
    - Total expenditure and net lending 4950 4950 4900
    - Current expenditure 3950 3900 3900
    - Capital expenditure 1000 1050 1000
    - Fiscal balance -2450 -2450 -2400
    - Domestic financing 1500 1500 1450
    - External financing 1000 1000 950
    - Budgetary assistance 200 200 200
    - Eurobond issuance 750 700 700
    - RSF disbursement (total) 50 100 50
    - Increase in government assets 50 500
    - of which RSF (not linked to RM fiscal costs) 50 500
    - Memorandum items: Fiscal balance excluding RSF spending -2450 -2400 -2400; Financing excluding RSF disbursement 2450 2400 2400; Domestic financing without RSF 1500 1500 1500; Domestics financing with RSF 1500 1500 1450
  - Gross Financing Needs Table (Panel A) example figures:
    - Gross Financing Needs (1+2) 1050 1050 1000
    - Current account deficit 1000 1050 1000
    - of which RSF reform costs 0 50 0
    - Reserve accumulation (without RSF) 50 0 0
    - Gross Financing Sources 750 700 700
    - Financing Gap (B-A) -300 -350 -300
    - Prospective Financing (3+4+5) 300 350 300
    - IMF ECF/EFF 100 100 100
    - Budget support (multilateral excl. IMF) 200 200 200
    - RSF disbursement (RM BoP costs) 0 50 0
    - Exceptional Financing/Residual Gap (C+D) 0 0 0
    - RSF disbursement (not linked to RM costs) 50 50 50
    - Reserve accumulation (with RSF) (2+6) 100 50 50
    - Memorandum: Total RSF disbursements 50 100 50
  - BoP Table (Panel B) example figures:
    - Current Account [A] -1000 -1050 -1000
    - Goods and services -300 -350 -300
    - of which, identifiable RM BoP costs 0 -500
    - Primary and secondary income -700 -700 -700
    - Capital and Financial Account [B] 750 700 700
    - Overall Balance [A]-[B] -250 -350 -300
    - Financing 150 250 200
    - Change in reserves (- = increase, without RSF) -50 0 0
    - Prospective budget support 200 200 200
    - RSF disbursement (identifiable RM BoP costs) 0 50 0
    - Financing Gap 100 100 100
    - Use of Fund credit: ECF/EFF 100 100 100
    - Residual Gap 0 0 0
    - RSF disbursement (not linked to RM BoP costs) 50 50 50
    - Memorandum items: Gross reserves (with RSF) 1000 1050 1100; Gross reserves (without RSF) 950 950 950; Total RSF disbursements 50 100 50
  - Fiscal Table (Panel C) illustrative assumptions include an exchange rate peg: 1 USD=1 LCU.

- Guidance on presentation:
  - If RMs do not generate identifiable BoP costs (e.g., 2023 and 2025 in the illustrative Table A1), the financing gap should be closed excluding RSF financing; RSF is presented after the exceptional financing/residual gap.
  - If RMs generate identifiable BoP costs (e.g., 2024 in Table A1), the portion of RSF dedicated to these RMs should be presented under prospective financing, separately from other IMF financing and budget support; the remainder presented after the exceptional financing/residual gap.
  - In BoP tables, show gross reserves with and without the RSF in memorandum items to disentangle the RSF impact.
  - In fiscal tables, RSF financing is usually recorded under external financing below the line, though in some cases it may be recorded under domestic financing if the disbursement is lent domestically; where RMs generate fiscal costs, a portion of RSF may be presented as financing a higher fiscal deficit driven by RM costs.

### Annex III (Assessment of Capacity to Repay the Fund in RSF Arrangements)
- For new RSF arrangements and augmentation requests, a country’s Fund credit exposure is benchmarked against a comparator group, and exposure metrics are presented in a CtR dashboard (a set of standardized charts) in program documents.
- The CtR dashboard includes key economic metrics for the country and a relevant comparator group to detect cases of elevated risk.
- This CtR dashboard must be included in the PN and SR of the RSF request or the request for augmentation.

*International Monetary Fund — RESILIENCE AND SUSTAINABILITY FACILITY—UPDATED OPERATIONAL GUIDANCE NOTE (selected excerpts)*

### 2. The CtR dashboard should present eight metrics. These metrics, which are reflected in

### 2. The CtR dashboard should present eight metrics. These metrics, which are reflected in

### Dashboard design and metrics
- The CtR dashboard presents eight metrics organized as standardized panel charts illustrating projected Fund credit and debt service to the Fund for the country and a comparator group.
- Structure:
  - Six time-series charts with projections starting the year of the RSF arrangement request or augmentation and ending when credit outstanding is repaid (i.e., 20 years from the last disbursement):
    - Three stock indicators: projected stock of Fund credit outstanding relative to (i) GDP, (ii) gross international reserves (GIR), and (iii) public and publicly guaranteed (PPG) external debt (for LIC DSF users) or public external debt (for MAC SDRSF users).
    - Three flow indicators: projected annual debt service to the Fund relative to (i) fiscal revenues (excluding grants for countries using the LIC DSF), (ii) exports of goods and services, and (iii) PPG external debt service (for LIC DSF users) or public external debt service (for MAC SDRSF users).
  - Two cross-section charts: focus on the highest peak credit indicators for the above metrics (i.e., the two most elevated of the six metrics) and compare these indicators to a subset of past financing programs with top exposures.
- Flexibility note:
  - If a country team believes other metrics are more relevant, the dashboard can be adjusted. Nevertheless the eight metrics listed here should be retained, and the alternative metrics should draw from the indicators already embedded in FIN’s dashboard.
- For members of currency unions, GIR could be based on imputed reserves.
- The control group of countries with top exposure levels consists of the top quartile of past exposures.

### Comparator groups and statistical presentation
- Baseline comparator group:
  - Based on all approved UCT-quality disbursing programs supported by GRA or PRGT arrangements over the most recent decade.
  - This sample period captures a sufficiently large number of Fund arrangements and shifts in Fund financing, including recent years’ rising trend in Fund exposure.
  - Approved RSF arrangements will be included in the future as the database is updated.
- Dashboards display median and interquartile ranges for the control group.
- Elevated exposure interpretation:
  - CtR risks would be deemed at acceptable levels if projections for all CtR indicators lie below the 75th percentile of the respective metric.
  - Levels above the 75th percentile would require deeper analysis.
  - Dashboards should inform judgment and not be interpreted mechanistically; high access under the GRA may be associated with exceptional access and additional scrutiny.
- Additional comparator groups (e.g., fragile and conflict-affected states (FCS) and presumed blenders) could be considered rarely and must be communicated to FIN when teams share data and justified in program documents.

### Use of judgment, complementarities, and caveats
- Staff judgment should combine dashboard comparisons with the macroeconomic framework, DSA, risk matrix, and other relevant analysis.
- Country teams should complement tool outputs with country-specific knowledge and judgment:
  - Small and/or temporary deviations above triggers do not necessarily indicate elevated CtR risks.
  - Absence of metrics exceeding the 75th percentile does not imply absence of elevated risks, especially when outlook is highly uncertain or risks are tilted to the downside, or when small Fund ratios are by-products of very high total debt and debt service.
  - Judgment is particularly useful when CtR metrics convey mixed signals, borderline cases, or programs requiring debt restructuring.

### Expanded CtR analysis and write-up requirements
- When elevated metrics combined with staff judgment indicate high CtR risks, the SR should:
  - Discuss severity of risks and explain how RSF and concurrent UCT instrument design seek to mitigate them.
  - Draw from the CtR dashboard and the standard CtR Table.
  - Focus on indicators pointing to elevated Fund exposure, including drivers of elevated CtR ratios, size and duration of elevations above the 75th percentile, and economic significance of identified risks.
  - Address risks associated with authorities’ willingness and ability to implement reforms needed to strengthen CtR.
- Mitigation discussion should include:
  - Access and Strength of Reforms: whether proposed access keeps Fund exposure manageable and whether reform strength is commensurate with access.
  - Phasing: whether phasing of reforms under the UCT instrument is commensurate with disbursement phasing or whether disbursements are frontloaded while reforms are not.
  - UCT program prospects: whether program targets and policies are likely to be achieved to reduce elevated CtR ratios.
  - Country-specific factors: size of contingent liabilities, prospects for growth (or depletion) of natural resource revenues, burden-sharing with other official creditors, prior calls on foreign exchange (earmarked revenue, export proceeds, escrow accounts, collateral) and adjustments to economic metrics to reflect unencumbered values.
- CtR paragraph in program documents:
  - Must include a bottom-line assessment of a country’s capacity to repay the Fund and be referenced in topic sentences.
  - For a program request to move forward, CtR must be assessed to be at least “adequate.”
  - In cases of elevated but manageable CtR risks, the bottom-line assessment should be conditional on the balance of risks (e.g., “CtR is adequate but subject to significant downside risks.”).
  - If CtR is deemed weak, a Fund-supported program should not move forward unless the program includes clear measures that would restore CtR to at least adequate.

### Scenario use, revisions, and data sharing
- Scenario basis:
  - The CtR dashboard should typically be based on the baseline macroeconomic scenario but should include downside scenarios where applicable, including in precautionary settings.
  - For all precautionary arrangements, the CtR dashboard and the standard CtR table should be based on a downside macroeconomic scenario.
- Revisions:
  - Revisions to the macroeconomic framework during internal review that change the macro-framework, access level, or phasing necessitate revised CtR dashboard, standard CtR table, and CtR assessment reflected in revised program documents.
- Data sharing:
  - Country teams, in collaboration with FIN, prepare CtR dashboards using data provided by country teams.
  - Data should be shared with FIN as soon as the framework is finalized (at a minimum one day before program documents are posted on eReview) using an automated data transmission system within the Common Surveillance Database (CSD) platform.
  - If projections are revised, data should be shared via CSD during internal review and teams should allow at least one day for FIN to reproduce the revised dashboard.
  - For guidance, teams can contact FIN-CTR@imf.org.
  - The data underpinning samples of control groups will be updated annually by FIN to incorporate respective UCT programs (GRA, PRGT, RST) approved in the previous calendar year.

### Illustrative CtR examples and key numeric observations
- PRGT borrower example:
  - Total Fund Credit Outstanding peaks in 2026 at SDR 3.6 billion, equivalent to 0.8 percent of GDP.
  - This peak equals 6.0 percent of exports of goods and services and about 10.0 percent of gross Foreign Exchange (FX) reserves.
  - Total obligations to the Fund peak at 0.1 percent of GDP, 0.5 percent of exports of goods and services, or 1.0 percent of gross FX reserves in 2024.
  - The risk of debt distress is assessed to be low and the debt outlook is expected to remain sustainable.
- GRA borrower example, precautionary arrangement:
  - Credit outstanding in a purchase scenario would reach around 520 percent of quota (320 percent of quota excluding the RSF) or 3.3 percent of GDP in 2024.
  - Debt service to the Fund, including resources drawn under the RSF, would peak at SDR 264.2 million (about 0.5 percent of GDP).
  - The largest peaks for credit outstanding (percent of GDP) and debt service with RST resources are [at/above] the [75th] percentile of comparators in the example.

### DSAs in Joint RSF-UCT programs and climate considerations
- Eligibility:
  - RSF arrangements can only be approved if debt is assessed as sustainable under the applicable debt framework: LIC-DSF (non-market access countries) or MAC-SRDSF (the Sovereign Risk and Debt Sustainability Framework for Market Access Countries).
- Longer-term and climate-related debt risks:
  - DSA write-ups for RSFs require discussion of longer-term risks to debt sustainability, focusing on country-specific climate-related risks and policy action.
  - Analyses should consider: (i) risks of climate-related natural disasters and slow-moving long-term shifts in climate; and (ii) impacts of climate-related spending on adaptation and/or mitigation and other climate policies, including long-term growth and the primary balance, as well as their financing mix (e.g., DRM, grants, domestic/external loans).
  - DSAs should be internally consistent, specifying assumptions and adjustments, and indicate if baseline assumptions align with authorities’ climate-related investment plans or if staff adjusted them.
  - Climate change risks included in the baseline could affect the mechanical risk rating in the LIC-DSF.
- Scenario analysis:
  - Alternative scenarios are encouraged (though not required) to assess longer-term debt sustainability, typically showing the full 20- or 30-year horizon and reflecting costs and risks from climate-related natural disasters, climate change, and effects of adaptation and mitigation investments and policies.
  - Teams may use stand-alone climate-change macro models, benchmark parameters to similar countries, and tailor stress tests for natural disasters provided in the MAC-SRDSF and LIC-DSF guidance.

*Source: RESILIENCE AND SUSTAINABILITY FACILITY—UPDATED OPERATIONAL GUIDANCE NOTE (excerpt).*

### 4. For market access countries, the long-term modules provided with the MAC-SRDSF

### 4. For market access countries, the long-term modules provided with the MAC-SRDSF

### Applicability and required modules
- The long-term modules provided with the MAC-SRDSF (IMF, 2022) are required for market access countries.
- Under the new MAC-SRDSF, the modules on climate change, large amortizations, and demographics are required for program documents with a concurrent RSF arrangement.
- The natural resource scale-up/depletion module remains optional.
- (Details are found in the MAC SRDSF Guidance Note.)

### SRDSF Climate Change module — structure and objectives
- The Climate Change module consists of two sub-modules:
  - Adaptation sub-module: assesses the impact on debt sustainability of public investment in adaptation, involving the costs of building resilience to the effects of climate change and the benefits to growth from such resilience.
  - Mitigation sub-module: involves the impact of public investment required to meet the government’s targets on greenhouse gas emissions to limit increases in temperatures.
- Objective: inform judgement on debt-related risks arising from the long-term impact of climate change and the policy commitments (or recommendations) to address it.

### Scenario design and use
- Users are encouraged to design a customized scenario to complement the standardized scenario already available.
  - Customized scenarios allow teams to adjust assumptions to country-specific characteristics.
  - They can show how alternative climate policies (including agreed RMs) can impact debt sustainability, including through their impact on growth and the primary balance.
- The use of alternative scenarios is encouraged, though not required.

### Key outputs and uncertainty
- Key outputs from both sub-modules:
  - Extended projections for debt-to-GDP.
  - Extended projections for Gross Financing Needs (GFN)-to-GDP.
- These outputs can be used to inform the long-term risk assessment.
- Assessment characteristics:
  - Because of substantial uncertainty about the future evolution of climate change and its impact on sovereign risks, this assessment would be qualitative (as with the other long-term modules).
  - Teams are encouraged to leverage relevant analysis from the IMF’s CPD, WB’s CCDR, or other country-specific work when designing scenarios and drawing out long-term implications for debt.

### Non-market access countries — LIC-DSF interaction
- The LIC Debt Sustainability Framework (LIC-DSF) requires a macroeconomic framework for a 20-year projection period (elaborated in the LIC DSF Guidance Note (IMF, 2018)), providing debt and debt service projections for the full repayment horizon of RST financing.
- The 2024 Supplement to 2018 Guidance Note on the Bank-Fund LIC DSA (IMF, 2024) provides guidance and examples on accounting for the impact of climate change, and for climate-related investments and policies in the debt risk assessment.
- DSAs accompanying RSF reports should elaborate how climate effects are incorporated, including:
  - How slow-moving, long-term shifts in climate and changes to the frequency and intensity of extreme weather events affect the baseline, including:
    - (i) whether positive effects from climate-related investments on resilience and growth are part of the baseline, and
    - (ii) whether baseline assumptions are aligned with authorities’ declared climate plans or adjusted because of staff views on the realism of these plans.
  - Whether and how the impact of extreme weather events on the volatility around the baseline debt sustainability scenario is reflected (informed by tailored natural disaster stress test and/or customized stress tests on external and overall public debt).

### How climate risks and policies are reflected in the DSA
- Climate change risks and policies are reflected either by:
  - Triggering mechanical risk signals in the baseline or in stress scenarios, or
  - Through the use of judgment (directly or indirectly).
- Judgment can be applied by extending the relevant time horizon of the risk assessment from 10 to 20 years to allow more time for baseline threshold breaches to manifest.
- Consideration for changing the debt risk rating when breaches occur in years 11-20:
  - Change can be considered when (i) breaches are expected to be large, persistent, and result in significant differences relative to historical averages; and (ii) occur with a high probability despite occurring in the distant future.
  - The DSA should clearly explain a rating change informed by such a breach, discussing why the breach can be expected to be large and persistent, and occur with high probability.
- DSA figures can show the 20-year horizon in addition to discussing longer-term implications of climate measures.
- DSA tables already report debt indicators in the 11th and 20th years, giving an indication of the trajectory of debt and debt service indicators.

### Annex V — Examples of strong reform measures (RMs) for climate
- Climate Mitigation and Transition Policy:
  - Putting a price on carbon:
    - Explicit carbon pricing (carbon taxes and ETSs) is widely considered the most effective instrument for reducing emissions.
    - To date, 49 carbon pricing schemes have been put in place at regional, national, and sub-national levels.
    - Carbon pricing can take different forms, including carbon taxes, emissions trading systems, feebates, environmental fiscal reform, and excises on fossil fuels.
    - Revenue recycling mechanisms could be considered to minimize adverse social and economic impacts (e.g., strengthening the social welfare system, reducing distortionary taxes, and productive investments).
  - Fossil fuel subsidies reform:
    - Phasing out government support to fossil fuels; RMs can include automatic fuel price and electricity tariff adjustments.
    - Reforms should account for energy sector financial sustainability, energy/electricity affordability, distributional effects, and be accompanied by targeted social assistance and public transport subsidies when needed.
  - Sectoral mitigation policy:
    - Feebates and tradable performance standards; incentives for renewable energy investment (feed-in-tariffs, net-metering/billing, gross metering, investment and production tax credits, renewable portfolio standards, regulatory changes for distributed generation); standards to support energy efficiency in buildings, industry, and transport; regulatory reform to promote electric vehicles and charging stations; coal decommissioning or phase-out with social transition measures; incentives to reduce emissions in agriculture, land-use, forestry, and waste sectors.

- Climate Adaptation Policy:
  - Adaptation RMs should aim to enable large-scale climate-resilient investment, promote efficient private adaptation, and strengthen social safety nets.
  - Potential measures: natural resource/water pricing, establishment of water markets, tax incentives to promote adaptation (if well-targeted and periodically reviewed), removal of implicit and explicit subsidies to private risk taking (e.g., subsidized flood insurance), payment for environmental protection services, social programs targeting the most vulnerable.
  - Adaptation reforms can overlap with clean water, sanitation, agriculture, and infrastructure agendas and strengthen public investment management and infrastructure governance.
  - Risk management measures: provision of fiscal/financial buffers, contingent financing, insurance for public assets, catastrophe insurance, weather insurance; implementation of tools/frameworks for quantifying fiscal risks from climate change; establishment of data repository on infrastructure assets at risk; operationalization of an early warning system; development of data infrastructure and decision-support tools to disseminate weather/climate data and information on vulnerabilities.

- Enabling Institutions:
  - Making infrastructure green and resilient:
    - Integrate climate considerations in the public investment management process and infrastructure investment cycle.
    - The C-PIMA is cited as the Fund’s main diagnostic tool for assessing a country’s progress and has been used in several RSF programs to inform RM design.
    - C-PIMA-based RMs include aligning public investment plans with the NDC goals, integrating climate-related risks in land-use and urban regulations, incorporating climate adaptation and mitigation in project appraisal and selection, making PPP frameworks climate-responsive, and reflecting climate risks in asset management and project implementation.
  - Incorporating climate in fiscal and budget frameworks:
    - Include climate considerations in the macro-fiscal framework and budget processes (including public investment planning).
    - An FAD Climate Note on Green PFM provides guidance on effective reforms.
    - Examples of RMs: integration of climate elements in medium and long-term macroeconomic frameworks, climate budget tagging systems, frameworks for green public procurement.

- Financial Sector Reforms:
  - Better understanding and management of climate-related risks will enhance financial sector resilience and help scale up private climate finance.
  - Potential RMs:
    - Conduct a diagnostic exercise to establish a climate change Risk Assessment Matrix (C-RAM).
    - Implement a green bond/green taxonomy framework.
    - Establish sustainability-linked bonds frameworks and associated key performance indicators frameworks.
    - Implement climate risk disclosure.
    - Establish a data repository on physical risk, transition risk, and bank exposures to these risks.
    - Integrate climate change into corporate governance of banks (fiduciary duties and accountability for board members and senior managers).
  - Climate risk stress testing for financial institutions and systems could be considered once gaps on climate and bank exposure data have been addressed and a standard stress testing framework is in place.
  - RMs should be formulated in accordance with international standards (e.g., Basel Committee on Banking Supervision; International Association of Insurance Supervisors; International Organization of Securities Commissions; International Sustainability Standards Board).

### Catalytic potential of strong reforms
- Mitigation and transition reforms:
  - Carbon taxes and fossil fuel subsidy reforms can redirect private investments from fossil fuels to clean energy and accelerate private financing in other sectors (e.g., electric vehicles).
  - Directing budgetary savings from fossil fuel subsidies reform to support an enabling environment for renewable energy investments can accelerate private climate-related financing flows.
  - Sectoral measures can reduce regulatory frictions, improve risk-return profiles, and create a more consistent pipeline of projects to broaden the investor base for EMDEs.
- Adaptation reforms:
  - Water pricing, water market reforms, and fiscal incentives are expected to promote private sector adaptation investments (e.g., water-efficient technologies, climate-resilient buildings).
  - Better risk management and use of risk-sharing facilities and guarantees can mobilize private capital for adaptation and post-disaster response.
- Institutional reforms:
  - Provide institutional foundation enabling climate-smart infrastructure investment across public and private sources.
  - Climate-responsive fiscal and budget frameworks improve access to international climate finance and facilitate mobilization of private sector finance.
  - PPP approaches can be used to leverage climate/green private finance where appropriate, while noting PPPs entail higher financing costs and significant fiscal risks requiring careful fiscal risk management.
- Financial sector reforms:
  - Addressing climate data gaps, reporting exposures, and diagnostics support banks in managing physical and transition risks and help steer private investment toward risk-adjusted climate investments.
  - High-quality, reliable, internationally comparable data and adoption of green taxonomies improve investors’ ability to identify sustainable assets and mobilize private climate finance.

*Source: RESILIENCE AND SUSTAINABILITY FACILITY—UPDATED OPERATIONAL GUIDANCE NOTE (excerpt).*

### Annex VI. The Enhanced IMF-World Bank Group Cooperation

### Annex VI. The Enhanced IMF-World Bank Group Cooperation Framework for Scaled-Up Climate Action

### Overview
- Purpose: Leverage IMF and World Bank Group (WBG) analytics, technical assistance, financing, and policy expertise through coordinated engagement and an integrated country-led approach based on the comparative advantage of each institution, with an initial focus on climate financing operations and Technical Assistance and Capacity Development.
- Intent: Provide additional operational guidance to WBG and IMF teams when a country expresses interest in a Resilience and Sustainability Facility (RSF) arrangement or a WBG climate financing operation.
- Discretion: Requests to consider operations under the Enhanced Cooperation Framework are at the discretion of country authorities.
- Pilot approach: The Framework will be initially piloted in a limited set of country cases where both the Bank and the Fund are involved, with the consent of the authorities.

### Knowledge — joint diagnostics and country ownership
- Joint identification:
  - Country authorities, the WBG and the IMF should jointly identify key climate challenges and key climate objectives/reform areas supporting the country’s climate strategies.
  - Country ownership is emphasized: engagement should start as soon as feasible and well ahead of any expected climate financing operation.
- Documentation:
  - A Table summarizing the joint IMF-WBG-country authorities’ assessment of climate priorities and policy reform objectives should be included in Policy Notes (PNs) and Staff Reports (SRs) of the RSF arrangement request (Annex VI. Table 1).
  - Illustrative example provided as Table A.VI.1 (jointly identified challenges and reform objectives).
- Diagnostic responsibilities and information flow:
  - Each institution retains and administers its own diagnostic tools; close dialogue is key.
  - Country diagnostics should be prepared consistently with each institution’s internal policies and informed by available documents and direct in-country expertise.
  - When timelines for diagnostics are not aligned or diagnostics are incomplete/absent, ensure flow of preliminary information on climate policy assessments or options/recommendations across institutions.
  - A matrix of key topics and relevant counterparts will be regularly updated by both IMF and WB sides.
- Handling differing assessments:
  - Differing conclusions or policy recommendations across institutional diagnostics should be duly noted.
  - Authorities decide the most suitable avenue and support for reform implementation based on full information from both institutions.
  - Authorities and country teams should consider potential impacts on sequencing of jointly agreed reforms.

### Design and articulation of operations
- Required elements for Enhanced Cooperation Framework:
  - Systematic engagement with WBG with strong ownership of reforms by country authorities; engagement should start well before expected climate financing operations.
  - A Joint Timeline of Proposed Reforms and Synergies (Joint engagement matrix) prepared by IMF and WBG country teams in close engagement with authorities.
    - The joint engagement matrix should identify, for each reform area: financial support, technical assistance needed, other development partners’ involvement, and a joint timeline of proposed reforms.
    - This table will replace Tables 1 and 2 currently part of RSF documentation requirements per ¶41 of the RSF Guidance Note.
  - Illustrative Timeline provided as Table A.VI.2 (REFORM AREA 1: ENERGY) with:
    - Authorities’ priorities: Fossil fuel subsidies reform; Power sector reform; Fiscal policy to support decarbonization; Scaling up renewable energy/finance; Energy efficiency measures.
    - Tentative timeline entries: 2024 2024 2025 2025 2026.
    - Ongoing and planned WBG support example: WB DPO; Based on CPF, potential new IPF on solar; P4R.
    - IMF RSF SUPPORT example: RM1   RM2, RM3.
    - Other development partners support example: AfDB, EIB.
    - Supporting TA/CD example: IMF EU WBG.

### Operational implications and coordination mechanics
- Responsibility and updates:
  - Each institution remains responsible for updating the collaboration matrix when needed for Board submissions.
  - Institutions should seek inputs from the other on latest plans or recently approved operations to inform updates.
  - The matrix/framework can be updated formally and independently at successive Board meetings (or other relevant decision points) of each institution.
  - The SR for RSF approval does not bind the WBG to pre-commit to any operations.
  - Any WBG Board decision may circulate a joint timeline but would not pre-commit the IMF to support reform measures under the RSF exactly as formulated.
  - The SR would include a brief update on implementation of the enhanced framework in the country.
- Communication and notice:
  - Recommended that each institution gives fair warning to the other in case of any expected changes to their engagement to allow sufficient time for coordination with authorities and Board preparation.
  - Any relevant change to supported reforms from either side will be communicated to staff of the other institution, copying IMF/SPR and WB/OPCS.
  - Each review under an RSF arrangement would report on any relevant change in WBG operations and pipeline since the last RSF review that have implications for implementation of reform measures (RM).

### Annex VII — Applying the 2018 Framework for Enhanced Engagement on Governance in RSF Context

- Purpose: Describe how country teams can promote improved design and implementation of RSF-supported reforms by considering governance and corruption issues, guided by the 2018 Framework for Enhanced Fund Engagement on Governance.
- Conditionality rationale:
  - If governance weaknesses and corruption vulnerabilities exacerbate risks associated with qualifying structural challenges—including undermining the RSF’s catalytic role for private climate finance—teams could consider inclusion of governance-related conditionality.
  - Structural governance issues are best addressed in concurrent UCT-quality instruments.
  - Governance and corruption measures that are specific and critical to reduce risks to prospective BoP stability stemming from qualifying longer-term challenges could become part of the RSF reform package.

- Identifying governance and corruption issues:
  - The 2018 Enhanced Governance Framework guides identification; a centralized process systematically identifies governance weaknesses and corruption vulnerabilities for every member country.
  - Country teams are expected to substantively discuss governance and corruption vulnerabilities that are sufficiently severe within a medium-term surveillance cycle (normally within three years).
  - Available resources to identify country-specific governance issues:
    - Centralized Governance Assessment: identifies critical governance weaknesses across six core state functions: (i) fiscal governance; (ii) financial sector oversight; (iii) central bank governance and operations; (iv) market regulation; (v) rule of law; and (vi) AML/CFT. The severity of corruption is also identified.
    - Brainstorming Sessions: IMF country teams can request governance brainstorming sessions with experts from functional departments and other specialized organizations such as the WB; sessions can be requested ahead of policy note preparation and results may be documented in a note.
    - Governance Diagnostics: Authorities can request governance diagnostic assessments (co-led by FAD and LEG), subject to resource availability; they include staff from other Functional Departments (e.g., MCM and FIN) and provide prioritized, sequenced measures. Most are published.
    - Country Engagement Strategies (CES): The 2022 Strategy for FCS requires CES in all FCS, with careful consideration for corruption as a driver of fragility and in design of engagements and reforms.
    - Climate-related CD Reports: Governance vulnerabilities specific to climate measures can be derived from CD reports including CPD, C-PIMA, Green PFM, and other CD reports on carbon pricing, fossil fuel subsidies, or green tax reforms.
    - SRs including TA Reports: Leverage Article IV reports, program requests and reviews, and TA reports such as the most recent FSAP, FSSR, PIMA, etc.

- How governance and corruption vulnerabilities can hamper climate policies:
  - Longer-term climate measures are particularly vulnerable to governance issues: vested interests, incomplete or non-functional accountability systems, institutional weaknesses, and lack of ownership.
  - Climate adaptation measures often involve significant public expenditures and project financing, making them vulnerable to public investment management weaknesses leading to inefficiencies and corruption.
  - Limited institutional competencies, lack of transparency, governance rigidities, elite capture, and excessive influence of vested interests undermine policy effectiveness and implementation of high-value investments.
  - Management and utilization of natural resources (e.g., mining, oil and gas, forestry, fishing) have environmental implications and significant governance and corruption concerns.

- Addressing governance and corruption issues in the RSF context:
  - UCT-quality instruments should include governance and anti-corruption conditionality when critical to achieving program objectives; per the 2018 Framework, addressing governance vulnerabilities should be a condition for use of Fund resources if assessed as critical for achieving program objectives.
  - The 1997 Governance Policy permits suspension or delay of a new program or reviews on account of poor governance if it threatens program implementation.
  - Governance issues are covered in areas related to procurement, public investment management, and natural resource management; design of specific measures should draw on diagnostics, be sequenced, and follow the principle of parsimony in conditionality.
  - Two-step approach for teams:
    - (i) Identify governance and corruption issues that can undermine RSF RMs or contribute to macro-critical risks related to qualifying longer-term structural challenges.
    - (ii) Proactively engage with LEG and FAD on design of appropriate governance and corruption measures.
  - Placement of measures:
    - Broad, cross-cutting governance-related conditionality fits in the UCT-quality instrument accompanying the RSF arrangement.
    - Governance measures that are specific and critical to achieving RSF purposes could be part of the RSF reform package (e.g., focus on Supreme Audit Institutions (SAIs) to support accountability regarding climate investments and climate-related spending where corruption is severe and implementation capacity low).
  - Country context: Governance-related conditionality must account for context (e.g., fragile and conflict-affected states require consistent engagement over many years); refer to FCS GN (2022), Annex II for details.
  - Capacity Development (CD): Well-sequenced CD to support implementation of governance measures can be critical; address via integration in member’s CD priorities, coordination with other CD providers, or within the program context.

### Annex VIII — Pandemic preparedness coordination (introductory note)
- Context: Broad Principles for Bank-Fund-World Health Organization Coordination in RSF Arrangements on Pandemic Preparedness provide a high-level operational cooperation framework when eligible member countries request an RSF arrangement supporting pandemic preparedness and response (PPR).
- Purpose of Principles: Overview of main areas of cooperation, clarify engagement modalities, and explain reporting requirements to the IMF Board.
- Guidance: The Technical Note further details operational guidance for Fund, WBG and WHO teams; the guidance may be updated as teams learn from early discussions with WBG, WHO, and country authorities.

*Annex VI. The Enhanced IMF-World Bank Group Cooperation Framework for Scaled-Up Climate Action — ppea2025004 (Annex VI).*

### 2. Operationally, cooperation should start with diagnostics, analytics and data. Fund staff

### 2. Operationally, cooperation should start with diagnostics, analytics and data. Fund staff

### Diagnostics, analytics, and initial assessment
- Fund staff will draw on existing country diagnostics, analytics and data, and on the operational experience of the WHO and the WBG, informed by the International Health Regulations (IHR 2005) Monitoring and Evaluation Framework, inclusive of the States Parties Annual Reporting (SPAR), the Joint External Evaluation (JEE) as well as the National Action Plan for Public Health Security (NAPHS), to assess critical vulnerabilities and challenges to prospective BoP stability that reforms focusing on pandemic preparedness could address, supported by an RSF arrangement.
- Ideally, a recently completed (post-pandemic) comprehensive diagnosis of PPR will have been undertaken by the WHO or the WBG; no specific document is a prerequisite and teams may draw on a range of other reputable sources (see ¶18 in the main guidance note).
- When adequate diagnostics are not available, teams could use Annex VIII. Table 1, Panel A to guide discussions with WBG and WHO counterparts and agree on an early assessment of critical vulnerabilities and reform priorities.
- The assessment could be summarized in a short note prepared by the IMF country team ahead of the Policy Consultation Meeting (PCM) for the RSF arrangement request, to be annexed to the PN and to the SR.
- Key checklist items (from Table A.VIII.1, Panel A):
  - Has diagnosis of pandemic preparedness been undertaken in the past 4 years?
  - What are the key issues and vulnerabilities identified in the diagnosis?
  - What are recent, ongoing and planned WHO and WB operations in the reform areas?
  - Conclusion: Assessment of country needs, readiness, and technical assistance needs.

### Design principles for pandemic-preparedness-related reform measures (RMs)
- RMs should be guided by the GN principles and based on adequate analytical underpinnings; potential measures in key reform areas should be identified ahead of RSF design.
- The RSF arrangement should focus on implementing reforms rather than completing diagnostics or developing plans for reforms.
- RMs related to pandemic preparedness should be strong: critical, ambitious and deep, with limited, well-justified exceptions to depth and ambition criteria (see ¶29).
- Reforms supported should be directly related to the qualifying longer-term challenge—pandemic preparedness—and have a clear, direct impact on the member’s preparedness and prospective BoP stability.
- Given the Fund’s limited expertise on pandemics, sectoral RMs should be extremely limited and well justified.
- Where assessment priorities differ among IMF, WBG and WHO, differences should be noted in the Policy Note (PN); Fund staff retain ultimate responsibility for setting RSF conditionality.

### Practical guidance for coordination with WHO and WBG
- Modalities/process of engagement mirror climate-related RSFs (see GN ¶53-58).
- Mission Chiefs should commence engagement with the WBG Country Director and WHO as soon as authorities express interest in an RSF arrangement, including copying IMF coordinators.
- Teams should request an Assessment Letter to the WBG and communicate timeline for the Policy Note, mission, and expected Board discussion.
- Fund staff should seek full coordination and constant exchange of information with WHO and WBG staff, complying with each institution’s internal policies and confidentiality limitations.
- Fund staff will keep WBG and WHO staff abreast of developments and may invite them to Fund-led policy discussions, conditional on authorities’ agreement.
- Fund staff will discuss the parts of the Policy Note related to pandemic preparedness with WBG and WHO, providing no less than five business days for WHO feedback when needed.
- Bank staff, Fund staff, and WHO staff should aim to agree on a specific timeline early in the process, factoring in at least five business days for WHO’s contributions and comments, when these are needed.

### PFM-focused potential RMs that could be part of RSF conditionality (Table A.VIII.2)
- General note: Potential RMs align with IHR Area 1 (“Health emergency public financial management and Health emergency financing”) and Area 2 (“Emergency Coordination and Governance”); focus is on PFM-specific reforms due to IMF capacity in PFM.
- Three broad PFM reform areas and example measures:

  1) Funding Allocation
  - Update activation protocols for emergency/contingency funding mechanisms to ensure effectiveness in fund allocation and disbursement.
  - Refine health budget structure and associated virement rules to facilitate reprogramming of budget funds in case of health emergencies.
  - Set up procedures to ensure coordination and transparency in cross-sectoral funding allocation and disbursement (involving multiple health and non-health entities) for emergency response financing.

  2) Funding Disbursement
  - Review and streamline emergency spending protocols and ensure readiness for adherence across administrative levels.
  - Develop or update emergency procurement protocols with a specific focus on the purchase, including import regulations and tax rules, of health products and commodities.
  - Ensure budget transfer modalities to subnational entities and service purchasers are effective to facilitate timely access to funding for the frontlines.
  - Refine PFM regulatory frameworks to enable contracting with private service providers and streamline the hiring process for surge capacities (e.g., to support diagnostics, contact tracing, immunization campaigns).

  3) Expenditure Tracking and Accountability
  - Incorporate an emergency spending tagging mechanism into existing Financial Management Information System (FMIS) processes or similar systems (consolidating reporting of emergency-related expenditure from various funding streams).
  - Develop online, user-friendly platforms to ensure transparency and accountability in emergency/pandemic response spending for the general population.
  - Set up procedures for real-time tracking and auditing for emergency and reprioritized resources to reduce risks of funds misuse and fraud.

- Additional admissible RMs tailored to country needs (IHR Area 1 examples):
  - Establishing Emergency Response Financing Mechanisms: Set up contingency funds at the national level to be rapidly mobilized for procurement of medical countermeasures, strengthening surveillance and laboratory capacity, improving emergency coordination mechanisms, protecting communities, and scaling healthcare services.
  - Integrating Health Security Budgeting: Incorporate pandemic preparedness into national budgets with clearly defined allocations for public health infrastructure, stockpiles, and emergency response capacities; develop fiscal policies enabling rapid scaling of funds during pandemics, including use of social bonds, insurance mechanisms, and multilateral funding windows.

### Limited additional admissible RMs (case-by-case, subject to conditions)
- Conditions for inclusion: (1) clearly identified in diagnosis or other documents as a critical priority to strengthen pandemic preparedness; (2) implementation support is available from IMF, WBG, and/or WHO; (3) RM can be independently assessed by IMF.
- Potential examples (IHR Area 2 and related areas):
  - Strengthening Governance for Health Emergencies: Create/reform governance responsible for overseeing health emergency PPR, facilitate multi-sectoral collaboration, align with international agreements, maintain accountability.
  - Establishing and Strengthening Emergency Operations Centers (EOCs): Establish or enhance national EOCs with real-time data capabilities for coordinating response efforts.
  - Strengthening Incident Management and Coordination Systems: Improve incident management systems at national and sub-national levels with standardized communication protocols and clearly defined decision-making roles.
  - Strengthening Regulatory Pathways for Medical Countermeasures: Establish or strengthen a National Regulatory Authority (NRA) to streamline approval processes for medical countermeasures during health emergencies.
  - Establish or strengthen national public health institutions: Introduce appropriate legislative frameworks or equivalent administrative measures to establish or strengthen national public health institutions or similar capacities.

### Scope limits, monitoring, and documentation
- Reforms not explicitly listed in the guidance and Table 2 should generally not be part of RSF arrangements; general health system strengthening is outside the RST scope.
- PPR measures requiring detailed health-sector capacity are typically more suited to project-based financing or may not meet ambition/criticality required for RSF.
- Such broader PPR and health systems reforms should be referenced in MEFP/PS/Written Communications to demonstrate the member’s broader policies and commitment to RST objectives.
- No cross-conditionality: RSF arrangements should not be conditional on WBG or WHO producing just-in-time technical assistance or new analytics; where authorities have requested such assistance, IMF staff can factor it into assessment of authorities’ ability to deliver on RSF-supported reforms.
- IMF Board documentation will record staff-level coordination and complementarities with relevant international institutions, including descriptions of their sector engagement and technical assistance where applicable.

*Source: ppea2025004 - 2. Operationally, cooperation should start with diagnostics, analytics and data. Fund staff*

---


_Source: https://www.imf.org/-/media/files/publications/pp/2025/english/ppea2025004.pdf_