## ppea2025013 ## Source details **Canonical URL:** [ppea2025013](https://www.imf.org/-/media/files/publications/pp/2025/english/ppea2025013.pdf) ## Other formats - [Markdown version](/-/media/files/publications/pp/2025/english/ppea2025013.pdf.md) - [Structured JSON version](/-/media/files/publications/pp/2025/english/ppea2025013.pdf.json) --- ### FCL — Key operational characteristics (overview) - Objective and nature: - Designed for members with very strong economic fundamentals and institutional policy frameworks and a sustained track record of implementing very strong policies. - Drawings are not tied to ex-post conditionality; an FCL arrangement does not support a “program” of macroeconomic adjustment and reform policies. - Flexibility and terms: - Access is uncapped; funds available upfront; grace period and repayment terms: "3¼–5 years, starting on the date of each purchase". - Successive arrangements are possible; can be used for potential or actual BoP needs. - Approval and documentation: - Confidential request triggers confidential preliminary staff assessment; SPR maintains a database of indicators for timely turnaround. - Management consults promptly with the Board at an informal meeting when appropriate; a concise staff note provided (Annex V). - Formal Board decision follows based on member’s written communication, a staff report (SR), and the Managing Director’s recommendation. - Arrangement length and review: - May be approved for either "one year or two years". - For two-year arrangements: no purchase can be made after one year has elapsed until completion of a Board mid-term review aimed at ascertaining continued adherence to qualification criteria. - Mid-term review preferably completed no earlier than "14 days" before the one-year mark. - Access and phasing: - Uncapped; can be augmented or reduced at member’s request, subject to Board approval and continued qualification. - Exceptional access (EA) policy does not apply to the FCL; outstanding amounts under the FCL count towards access limits if member requests other Fund facilities excluding the SLL (Decision No. 14064–(08/18), ¶2). - Entire requested amount available upon approval; arrangement expires upon earlier of: (i) expiration of approved term; (ii) purchase of full approved access; or (iii) cancellation by the member. - Conditionality and post-financing: - No traditional ex-post conditionality; no prior actions needed. - No ex-post conditionality may be attached to mid-term reviews or approval of successive FCL arrangements. - Post-financing assessment (PFA) conducted if purchases were made and in accordance with PFA policy. - Financial terms and fees: - Purchases subject to same repayment period, charges, and surcharges as SBA arrangements. - Unpurchased amounts subject to standard upward-sloping commitment fee schedule; commitment fee levied upon approval and refunded pro rata if drawings are made. - Thresholds of "200 and 600 percent of quota" will become "135 and 405 percent of quota" for computing charges and refunds upon specified quota-increase timing or "35 days" after general effectiveness conditions for the 16th GRQs are met. - Reserves reporting: - Unpurchased amounts are not counted in gross reserves; space in Reserves Data Template to announce unpurchased credit line resources. - Once purchased, FCL resources increase gross reserve assets and external liabilities and are reported in Sections I and II. - Exit: - State-contingent; expectations to articulate an exit strategy depend on precautionary status, access level, and credit outstanding under previous FCL arrangements. ### FCL request process and initial steps (including first-time requests) - Authorities should approach staff or management confidentially and formally indicate interest. - Staff should strongly encourage confidentiality; failure to qualify could have negative market effects. - After expression of interest, staff initiates assessment of qualification; area departments consult closely with SPR. - A mission is not required; a fact-finding visit may be conducted. - Initial exploratory discussions should cover: - nature of the BoP need; - whether the arrangement is precautionary; - desired level of access; - length of arrangement sought. ### Preliminary assessment of qualification and Board engagement - Country team prepares a confidential preliminary qualification assessment note (Annex V) reviewed by SPR, FIN, LEG, and others as necessary; co-signed by SPR and area department. - Management may consult the Board in an informal (restricted) meeting with a concise, strictly confidential staff note (Annex V). - Coordination with A.IV consultation: - Very positive assessment in most recent A.IV consultation required. - If more than 12 months elapsed since A.IV, recommended that an A.IV consultation take place before an FCL request. - Back-to-back A.IV and informal Board discussions can be held on the same day; for formal FCL request, schedule A.IV 2 to 4 weeks prior to Board meeting where feasible. - Authorities’ written communication should: - Describe macroeconomic conditions and broad policy goals and reasons for requesting assistance. - Specify nature of BoP need and whether precautionary. - If relevant, articulate an exit strategy. - Explain how authorities will remain committed to very strong economic policies. - Not be a Letter of Intent for monitoring policy commitments. ### Political assurances and safeguards when using FCL for budget financing - Staff should seek to delink requests from electoral cycles; if not possible, seek assurances from electoral candidates to maintain very strong policies. - Members requesting FCL are not subject to safeguards assessment policy for Fund arrangements, but if FCL resources used for budget financing, an appropriate framework between central bank and treasury is required. - At formal written request, member must authorize staff to access most recent annual independent audit of central bank and allow discussion of audit findings with staff. - While Fund credit outstanding, member will provide annual audited financial statements and management letters and authorize discussions with external auditors. - Framework agreement (MoU) expected clarifying responsibilities for timely servicing of Fund obligations and deposit of Fund resources in a specific government account at the central bank when used for budget financing. ### Purchases, mid-term review, and modification of access - Purchases: - Two-year arrangement: purchase rights until scheduled mid-term review date. - One-year arrangement: purchase rights for entire period. - FIN must receive official SWIFT communication from fiscal agency specifying amount and representing actual BoP need. - Board should be promptly informed after a drawing; concise note prepared by area department and reviewed by FIN, LEG, SPR. - Press release—reviewed by SPR and COM—expected after purchase. - Mid-term review (two-year arrangements): - Required immediately prior to lapse of first twelve months to reassess qualification. - Staff prepares concise SR updating developments, risks, policy initiatives, and assessment against qualification criteria. - Board approval of review could be on lapse of time basis; mission not normally necessary. - Combined A.IV and mid-term SR meeting encouraged. - Modification of access: - Members may request reduction or augmentation at any time; augmentations subject to Board confirmation of continued qualification. - Streamlined augmentation procedures if request issued no later than six months from approval or completion of mid-term review, including EESI and adverse scenario to justify higher access. - Streamlining does not obviate FIN supplement on impact of higher access on Fund finances and liquidity. ### Exit expectations and exit strategies - Exit is state-contingent; requirement to articulate an exit strategy for FCLs when: - (i) access requested under a new or augmented precautionary FCL arrangement exceeds 200 percent of quota, or - (ii) regardless of access, for non-precautionary FCL arrangements. - Exit strategy should include: - Statement that access would normally decline in a successor FCL or that no successor would be requested when the “right conditions” are in place. - Analysis of external risks informed by the EESI. - Statement on efforts to improve domestic resilience. - Statement on circumstances (the “right conditions”) under which no successor arrangement would be likely, or successor may be requested with lower access. - The 200 percent-of-quota threshold is lowered by any credit outstanding under prior FCL arrangements and restored when member repurchases outstanding credit. - When access is at or below 200 percent of quota for a precautionary FCL, there is no requirement to articulate an exit strategy. ### SLL — Overview, qualification, and operational features - Purpose: - Special facility providing revolving and renewable backstop financing to members with very strong fundamentals and policy track records facing potential short-term BoP needs reflected in capital account pressures. - Qualification and conditionality: - Qualification requirements identical to FCL; no ex-post conditionality. - SLL provided to qualifying members facing short-term BoP difficulties that are potential in nature, result from volatility in international capital markets, and are reasonably expected to be limited in scale and require, at most, fine-tuning of monetary and exchange rate policies (SLL decision, ¶1). - Approval and effectiveness: - Confidential expression of interest triggers preliminary assessment; SPR maintains a cross-country database. - Member has two options: offer and request. - An SLL arrangement can be approved for twelve months; successive arrangements possible. - Access, phasing, and fees: - Access up to 200 percent of quota (cumulative limit for total credit outstanding under the SLL). - Revolving access: member may make one or multiple purchases; repurchases reconstitute purchase rights. - No phasing; entire requested access available upon Board approval (or acceptance of an “offer”). - Special fee structure: an 8 basis-point commitment fee (not refundable) and a 21 basis-point service charge for purchases under the instrument. - Charges and level-based surcharges identical to credit tranche instruments. - Purchases should be repurchased no later than 12 months from drawing; no time-based surcharges. - Reserves reporting: - Unpurchased amounts do not count in gross reserves; space in Reserves Data Template to include unpurchased credit line resources. - Once purchased, SLL resources increase gross reserve assets and external liabilities; undrawn amounts under one-year SLL arrangements included in Section III from approval until expiration. - Request/offer mechanics: - Offer: Board may “offer” an SLL with specified access level conditional on receipt of a satisfactory written communication within two weeks; effectiveness upon receipt of signed written communication. - Request: Member requests SLL via written communication attached to SR; arrangement becomes effective upon Board approval. - For simultaneous SLL and FCL requests, SLL offer option not available; both must be requested. ### SLL governance, safeguards, and publication - Political assurances and electoral timing considerations mirror FCL guidance where relevant. - Central bank safeguards: - At time of written communication, member authorizes staff to access most recent annual independent audit and allow discussion with external auditors. - While Fund credit outstanding, member provides annual audited financial statements and management letters and authorizes auditor discussions. - Circulation and publication: - Normal two-week circulation for formal Board meeting; expedited procedures available. - For offers, SR and authorities’ written communication published no later than fourteen calendar days after arrangement becomes effective. - FIN required authorization to debit member’s SDR account for commitment fee prior to effectiveness. ### Sequential, concurrent, and synchronized use; interaction with other instruments - Sequential and concurrent use: - Successor arrangements for FCL and/or SLL possible prior to scheduled expiration; cancellation of ongoing arrangement required prior to approval of successor. - Transitions between FCL and SLL can be streamlined under timing conditions. - Concurrent use may be relevant to address complementary insurance needs (moderate vs tail risks); combined access should be commensurate with total potential BoP needs in adverse scenario. - Under concurrent use, no expectation to articulate an exit strategy in written communication and SR if FCL access is at or below 200 percent of quota accounting for outstanding prior FCL credit (¶27-28). - Combined costs lowered since SLL has somewhat lower commitment fees than FCL. - Interaction with RSF: - Two-year FCL arrangements can be used concurrently with an RSF subject to eligibility; RSF requires at least 18 months remaining under the accompanying UCT arrangement, so RSF can be requested jointly with a two-year FCL or during the FCL’s first six months. - Interaction with emergency financing: - FCL and SLL can be used concurrently with emergency financing subject to qualification criteria. - A member with an FCL would be expected to draw on the FCL when confronted with an urgent BoP need; augmentation under FCL could be considered. ### Determining qualification — framework, criteria, and indicators - Qualification is judgment-based, requiring that a member: - (a) has very strong economic fundamentals and institutional policy frameworks; - (b) is implementing—and has a sustained track record of implementing—very strong policies; and - (c) remains committed to maintaining such policies. - A very positive assessment in the most recent A.IV consultation is required. - Nine specific criteria (Annex I) with core indicators guide assessment; very strong performance on all criteria is not necessary, but significant shortcomings absent compensating factors generally signal non-qualification. - Core criteria and key core indicators include: - I. External Position and Market Access: - External position assessment in most recent Board document must be in categories from “broadly consistent” to “substantially stronger”; public flows share indicator; track record of sovereign market access (threshold 50 percent of quota to be reduced to 35 percent after 16th GRQs take effect); reserves relative to ARA metric (greater than 100 percent on average over three years and not below 80 percent in any of these three years for precautionary FCLs and all SLLs). - II. Fiscal Policy: - Public debt assessed as sustainable with a high probability; debt sustainability analysis and related fiscal indicators. - III. Monetary Policy: - Single-digit inflation over past five years (annual average each year). - IV. Financial Sector Soundness and Supervision: - Banking sector CAR above regulatory thresholds; recent A.IV did not highlight significant solvency risks; FSAP/A.IV supervisory assessment without substantial concerns; AML/CFT deficiencies considered. - V. Data Adequacy: - SDDS or SDDS Plus subscription or satisfactory progress toward meeting SDDS requirements. - Track record and assessment horizon: - For criteria 1, 5, 7, 8, and 9: assessment guided by performance over five most recent years; for criteria 2, 3, 4, and 6: core indicators already cover track record. - Transparency: - Changes to qualification since previous two assessments should be transparently flagged in SR main text and as a summary table (Annex I). - When a member is judged not to qualify, the Board would not be notified unless management decides access may be appropriate. ### Justification of access, reserve adequacy, and adverse scenarios - General framework for access decisions (¶64): - Based on (i) member’s actual or potential need for Fund resources considering other financing and reserve desirability; (ii) member’s CtR (capacity to repay); (iii) member’s outstanding Fund credit and record. - Annex II guidance for precautionary access: - Staff should construct plausible adverse scenarios to estimate potential financing gap; link access to actual/potential BoP needs including special SLL BoP need and tail risks. - Use global assumptions (WEO downside scenario, GFSR, G-RAM), EESI, evidence from past crises, and country-specific factors. - Reserve adequacy and drawdown (selected points): - Compare reserve levels across metrics (ARA and others); limited reserve drawdown should be justified. - Adverse scenarios may allow gross reserves to fall below 100 percent of ARA; the 80 percent lower threshold discussed in reviews. - For countries with reserves above adequate, adverse scenario should include use of international reserves to cover part of financing gap. - EESI (Annex III): - EESI constructed as weighted sum of standardized deviations of selected external proxy variables; forward-looking and linked to downside scenarios; empirical relation: higher EESI risks associate with higher access needs. ### Documentation, SR content requirements, and expedited procedures (Annex V & VI) - Staff documentation requirements: - Preliminary qualification note: assessment that member meets very strong fundamentals and policies; statement on recent A.IV; assessment of qualification criteria; streamlining conditions for transitions between FCL and SLL. - Concise staff note for informal Board meeting (FCL): qualification assessment, access indication with scenarios, assessment of Fund liquidity when access > 600 percent of quota or SDR 10 billion, required tables (standard indicators; BoP; gross external financing requirements; CtR). - SR for formal request: macro developments, risks, detailed qualification criteria, debt sustainability, justification of access under adverse scenario, CtR analysis (5-year minimum for CtR table), FIN supplement on impact on Fund finances and liquidity, and authorities’ signed written communication. - Mid-term review SR: concise update on developments, EESI, qualification reassessment, and standard indicators. - Expedited procedures: - Applicable when imminent or ongoing crisis requires fast consideration or to prevent market-sensitive leaks. - Possible expedited timeline examples: documentation to Board at least two hours prior to informal Board meeting; formal Board meeting within 48 to 72 hours following circulation of SR in exceptional circumstances. ### Annex VII — Synchronized approvals and collective procedures - Synchronized approval rationale: when multiple members face the same shock, synchronized approval could strengthen response and minimize first-mover problems. - Each member’s qualification assessed individually; procedures do not modify existing Fund policies. - Confidentiality preserved; early Board consultation and potential expedited approval possible. - Liquidity assessment to be included in staff note when total access across proposed arrangements would exceed SDR 10 billion. ### Annex VIII — Comparison summary (key numeric and operational distinctions) - Repurchase period: - SLL: 12 months - FCL: 3¼-5 years - Access: - SLL: Up to 200 percent of quota; revolving access - FCL: No access limit - Duration: - SLL: 12 months - FCL: 1 or 2 years - Fees and charges: - SLL: Nonrefundable commitment fee 8 bps; service charge 21 bps; normal rate of charge; normal surcharge schedule - FCL: Commitment fee schedule refundable on drawings (15 bps up to 200 percent of quota, 30 bps from 200 to 600 percent of quota, and 60 bps above 600 quota); normal service charge 50 bps; normal rate of charge and surcharge schedule - Budget support: - SLL: Should not be used for budget support - FCL: Can be used for budget support (MoU between ministry of finance and central bank required) - Reviews: - SLL: None - FCL: Annual mid-term review for two-year arrangements *Source: FLEXIBLE CREDIT LINE - OPERATIONAL GUIDANCE NOTE (excerpts provided), ppea2025013, April 11, 2025.* ### EXECUTIVE SUMMARY ### EXECUTIVE SUMMARY ### Purpose and scope - Provides operational guidance on the use of the Flexible Credit Line (FCL) and the Short-Term Liquidity Line (SLL). - Groups operational issues into five areas: - process and specific steps if a member expresses interest in an arrangement; - modalities of concurrent use of the two instruments; - interaction with other instruments; - guidance on determining qualification of a member; and - a how-to guide for determining appropriate access levels. - Intended as an aid to implementation of the policy and its underlying principles; Board policy prevails in case of conflict. Will be revised as needed. ### Administrative details - Date: April 11, 2025 - Approved by: Rishi Goyal (SPR) - Prepared by: Strategy, Policy, and Review Department in consultation with the Legal and Finance Departments. - SPR team: Giulio Lisi, Martha Tesfaye Woldemichael, Mahmoud Harb, Hyunmin Park, Bunyada Laoprapassorn, Anne-Charlotte Paret Onorato; general guidance from Martin Cihak, Alex Culiuc, Faezeh Raei. - LEG team: Qingxiang Li, Gabriela Rosenberg. - FIN team: Bilal Kahn, Kady Keita; general guidance from Greetje Everaert. - Merceditas San Pedro-Pribram and Ryan Tonra (SPR) assisted in production. ### High-level rationale - FCL and SLL were developed under the premise that preventing crises is less costly than resolving them. - FCL introduced in March 2009; SLL established in April 2020 and updated in the 2023 Review. - Together with the Precautionary and Liquidity Line (PLL), the FCL and SLL form part of the Fund’s precautionary lending toolkit. - Both instruments provide insurance against external risks, enable qualifying members to signal commitment to very strong institutional frameworks and macroeconomic and financial policies, enhance market confidence, catalyze financing, and offer cost-effective alternatives to self-insurance via reserve accumulation. ### FCL—Key operational characteristics (overview) - Designed to provide a credit line with potentially large and upfront financing to a member with very strong economic fundamentals and institutional policy frameworks and a sustained track record of implementing very strong policies. - Drawings under the FCL are not tied to ex-post conditionality; an FCL arrangement does not support a “program” of macroeconomic adjustment and reform policies. - FCL is flexible: - access is uncapped and funds are available upfront (i.e., not subject to phasing or ex-post conditionality); - grace period and repayment terms are long: "3¼–5 years, starting on the date of each purchase"; - successive arrangements are possible; - can be used for either potential or actual BoP needs. - Approval process: - Confidential request from a member triggers a confidential, preliminary staff assessment of qualification. - SPR maintains a database of macroeconomic and institutional indicators to ensure timely turnaround. - Management consults promptly with the Board at an informal meeting when appropriate; a concise staff note setting out the basis for a recommendation is provided to the Board for that meeting (Annex V). - Formal Board decision follows based on the member’s written communication, a staff report (SR) assessing qualification and justifying access, and the Managing Director’s recommendation. - Length of arrangement: - An FCL arrangement may be approved for either "one year or two years" with the objective of completion of a mid-term review immediately prior to the lapse of the first twelve months of a two-year arrangement. - For two-year arrangements, no purchase can be made after one year has elapsed until completion of a Board review aimed at ascertaining continued adherence to qualification criteria. - Mid-term review preferably completed no earlier than "14 days" before the one-year mark. - Access: - Access under the FCL is uncapped; can be augmented or reduced at the member’s request, subject to Board approval, continued qualification, BoP needs, external risks, and capacity to repay (CtR). - Exceptional access (EA) policy does not apply to the FCL; outstanding amounts under the FCL will count towards the access limits if a member requests access to Fund resources under another Fund facility excluding the SLL (Decision No. 14064–(08/18), ¶2). - Phasing and use: - Entire amount of requested access is available upon approval and remains available throughout the arrangement period, subject to mid-term review for two-year arrangements. - Arrangement can be requested on a precautionary basis or to address an actual BoP need. - Member may make one or multiple purchases at any time during the term. - Arrangement expires upon the earlier of: (i) expiration of approved term; (ii) purchase of the full amount of approved access; or (iii) cancellation by the member. - Conditionality: - No traditional ex-post conditionality; no prior actions are needed. - No ex-post conditionality may be attached to the mid-term review or approval of successive FCL arrangements. - Once an arrangement has expired, the Fund will conduct a post-financing assessment (PFA) if there have been purchases under the arrangement and in accordance with the PFA policy. - Financial terms: - Purchases under the FCL are subject to the same repayment period, charges, and surcharges as SBA arrangements. - Unpurchased amounts are subject to the standard upward-sloping commitment fee schedule. - Commitment fee is levied upon approval and refunded pro rata if drawings are made; if cancelled without being drawn in full, the commitment fee will be refunded based on available amounts for purchase at the time of cancellation and remaining days in the current period. - Thresholds of "200 and 600 percent of quota" will become "135 and 405 percent of quota" for computing charges and refunds for a member from the first occurring of (i) the effective date of that member’s quota increase under the 16th General Review of Quotas (GRQs), or (ii) "35 days" after the Fund determines that the general effectiveness conditions for the 16th GRQs have been met. - Treatment in reserves: - Unpurchased amounts available under the FCL arrangement are not counted in gross reserves. - There is space in the Reserves Data Template to announce availability of unpurchased credit line resources. - Once purchased, FCL resources increase gross reserve assets and external liabilities and are reported in Sections I and II of the Reserves Data Template. - Guidance on inclusion of undrawn amounts under one-year and two-year FCL arrangements in Section III of the Reserves Data Template is provided. - Exit: - Exit from the FCL instrument is state contingent; expectations to articulate an exit strategy depend on whether the FCL arrangement is precautionary, the access level, and credit outstanding under previous FCL arrangements (see Section II.G). ### FCL request process (initial steps; first-time requests) - Member authorities should approach staff or management confidentially and formally indicate (verbally or in writing) interest in obtaining financing under the FCL arrangement. - Staff should strongly encourage members to do this on a confidential basis because failure to qualify could have negative effects on market sentiment; Fund staff must treat the authorities’ request as confidential and cannot discuss qualification publicly. - After an expression of interest, staff discusses with authorities their interest and initiates an assessment of qualification. Area departments should consult closely with SPR on key elements and process for assessing qualification. - A mission is not required but a fact-finding staff visit may be conducted. - Initial exploratory discussions (which can take place in the context of a concurrent Article IV mission) should cover: - nature of the BoP need; - whether the arrangement is to be treated as precautionary; - desired level of access; and - length of arrangement sought by authorities. *Source: EXECUTIVE SUMMARY, FLEXIBLE CREDIT LINE - OPERATIONAL GUIDANCE NOTE (IMF), April 11, 2025* ### 4. Preliminary assessment of qualification. The country team should then prepare a ### 4. Preliminary assessment of qualification ### Preliminary qualification note and internal review - Country team prepares a confidential preliminary qualification assessment note (Annex V) to seek management’s approval of the member’s qualification under the FCL. - Staff must ensure qualification is assessed thoroughly (Section VI and Annex I) and evenhandedly. - The note is reviewed by SPR, FIN, LEG, and other functional departments as necessary, and co-signed by SPR and the area department. - Area departments should consult early with reviewing departments to seek guidance; a qualification consultation meeting may be held if warranted and the review process reflected in a short cover memo. - Staff may discuss qualification criteria with the member but must make clear that staff’s assessment is preliminary and that the Board makes the final decision. - When transitioning between an FCL and an SLL, the assessment and staff report can be streamlined under certain conditions (Annex V guidance). ### Support from other creditors and RFA consultation (¶5) - The FCL decision requires consultation with key creditors when support from other creditors is likely important for addressing BoP difficulties (FCL decision, ¶¶6(a)(ii)). - Consultations with other creditors may be envisaged when: - (i) there are sizeable remaining financing gaps that need to be filled by other creditors (usually official creditors); or - (ii) the authorities are requesting precautionary support from both the IMF and other providers of financing, such as an RFA. - Such consultations are limited to sharing preliminary technical information while stressing confidentiality and would not include sharing the staff note for the informal Board meeting. - Specified Board documents may be shared with RFAs that are co-financiers pursuant to established Fund policy; when sharing Board documents is warranted, sharing is done via SEC. - Country authorities should be informed and consent in advance of planned contacts with other creditors. ### Informal Board meeting and staff note (¶6) - If management decides access under the FCL is appropriate, it will promptly consult the Board in an informal (restricted) Board meeting. - A concise, strictly confidential staff note should set out the basis on which approval could be recommended (see Annex V). The note is envisaged to be more succinct than the subsequent SR. - The informal Board meeting does not replace the broader discussion at the time of the formal request. - If market-sensitive leaks/misinformation arise after the informal meeting, a press release could be issued indicating the authorities’ interest and management’s intention to recommend Board approval, taking care not to prejudge the Board’s final decision. ### Coordination with A.IV consultation (¶7) - A very positive assessment of the member’s policies in the context of the most recent A.IV consultation is required as part of the qualification assessment (see FCL Decision ¶ 2). - If more than 12 months have elapsed since completion of the most recent A.IV consultation, it is recommended that an A.IV consultation take place before an FCL request. - Where feasible, back-to-back A.IV and informal Board discussions for an FCL request can be held on the same day. - For the formal FCL request, it is recommended to schedule A.IV Board discussions 2 to 4 weeks prior to the formal Board meeting so the Board’s appraisal can be incorporated in the SR. - Mandatory financial stability assessments (legally part of A.IV consultations) and other documents feeding into A.IV (voluntary FSSAs and ROSCs) should ideally be timed to be integrated into the assessment of qualification. ### Preparation of the SR and authorities’ written communication (¶8–9) - Details on SR content are in Annex V; SPR clearance of the SR is normally provided only after the conclusion of the informal Board meeting. - A SR for an FCL request may be streamlined and reference qualification assessment under the previous/ongoing SLL arrangement under limited circumstances (see ¶55) for certain transitions. - The authorities’ written, signed communication requesting an FCL should: - describe macroeconomic conditions and the authorities’ broad policy goals and strategies for the term of the arrangement and reasons for requesting Fund assistance (FCL decision, ¶¶6(a)(iv)); - specify the nature of the BoP need and whether access is intended as precautionary; - if relevant, articulate an exit strategy; - explain how authorities will remain committed to very strong economic policies and respond appropriately to potential shocks. - The written communication is not a Letter of Intent for monitoring policy commitments. - The written communication should be sent to departments for review at the same time as the SR and to management for clearance, but should be dated and signed after management clearance (and after the informal Board, where applicable) and prior to circulating to SEC along with the SR. - Any modifications after issuance to the Board must follow the Fund’s Transparency Policy procedures. ### Political assurances and electoral timing (¶10) - Country teams should be mindful of the electoral cycle and, where possible, seek to delink the timing of a request for a new arrangement from the electoral cycle. - If delinking is not possible, staff should (at request time or mid-term FCL review) seek assurances from electoral candidates that the very strong policies and policy frameworks will be maintained—these assurances are an important forward-looking safeguard for the FCL where a member has access to full financing after approval without phasing or ex-post conditionality. ### Central bank safeguards when FCL resources are used for budget financing (¶11) - Members requesting an FCL arrangement are not subject to the policy on safeguards assessment for Fund arrangements; however, where FCL resources will be used for budget financing, the FCL policy requires an appropriate framework between the central bank and the state treasury for the member’s financial obligations to the Fund. - At the time of making a formal written request, the member must provide authorization for Fund staff to access the most recently completed annual independent audit of its central bank’s financial statements, whether or not published, and authorize the central bank authorities and external auditors to discuss audit findings with Fund staff, including written observations on internal control weaknesses (FCL decision, ¶¶6(b)). - While Fund credit is outstanding from an FCL arrangement, the member will provide Fund staff with copies of annual audited financial statements and management letters, together with authorization to discuss audit findings with the external auditor. - Area department teams are encouraged to consult early with FIN on safeguards requirements, including ahead of mid-term reviews. - When FCL resources are used for budget financing: - Central banks and governments are required to establish a framework agreement (typically a Memorandum of Understanding (MoU) between the central bank and finance ministry or State Treasury) clarifying responsibilities for timely servicing related Fund financial obligations; the MoU should include that Fund resources will be deposited in a specific government account at the central bank pending their use. - The requirement applies whether budget support use is envisioned ex-ante (actual BoP need) or not (precautionary request). For an ex-ante case, a commitment to put the framework in place is expected in the written communication and the MoU is expected to be finalized prior to or shortly after the Board meeting approving the FCL (where the case for budget financing will be made). - For precautionary cases, the staff report should include a commitment that authorities would put in place the required framework agreement (MoU) if the FCL were used for budget support. - The MoU should be reviewed by FIN and would normally be in place before FCL resources are drawn for budget financing. - FIN Operational Guidelines for Safeguards Assessments (March 2024) and prior Safeguards Policy reviews inform these requirements. ### Review, circulation periods, expedited procedures, and Board actions (¶12–15) - Normal review procedures and circulation periods apply to the FCL: - Current circulation period is two weeks for the formal Board meeting. - Recent practice for the informal Board meeting has been to allow for one-week circulation. - The circulation period for informal Board meetings is thereby similar to that for informal Board discussions on Exceptional Access cases. - Where needed (e.g., urgent actual BoP need or market-destabilizing leaks), FCL-specific expedited procedures can be followed (Annex VI). - Formal Board meeting: The Board considers and may approve an FCL arrangement based on the member’s written request and the SR. Staff will provide a Summing Up (internal) and a Chairman’s Statement, to be published subject to the member’s consent. - Activation of the credit line: The credit line is open on approval of the arrangement. Prior to approval, FIN needs authorization from the authorities to debit the member’s SDR account for payment of the commitment fee, which is due upon approval. - Transparency: The Managing Director will generally not recommend Board approval of an FCL request unless the member consents (ideally in writing) to publication of the associated SR. It is expected that the SR and the authorities’ written communication will be published shortly after Board approval. The Fund’s Transparency Policy applies. ### Successor FCL requests and streamlined process (¶16–17) - Countries with a current FCL arrangement can request a successor FCL arrangement if they continue meeting all necessary conditions and if the successor FCL is justified by external risks and potential BoP need, accounting for other access policy considerations (e.g., CtR). - The process of requesting a successor precautionary FCL can be streamlined, potentially omitting the informal Board meeting if all the following conditions are met: - The documentation (written communication and SR) for the successor arrangement is issued to the Board no later than three months from the date of expiration or cancellation of a prior FCL. - The member has not made any purchases under the prior FCL arrangement, and the mid-term review was completed. - In the Managing Director’s assessment, the member’s economic circumstances (including economic fundamentals and institutional policy frameworks) and external risks have not changed (i.e. deteriorated) significantly since the last review; this assessment would be based on the preliminary qualification note for successor requests. - The overall access requested does not exceed that of the prior FCL arrangement. *Source: FLEXIBLE CREDIT LINE - OPERATIONAL GUIDANCE NOTE (excerpts provided).* ### 18. When these conditions are met, the FCL request process can be modified, so that: (i) no ### FLEXIBLE CREDIT LINE - OPERATIONAL GUIDANCE NOTE ### Purchases - Approval of a two-year arrangement provides the member with purchase rights until the date of the scheduled mid-term review. - In the case of one-year arrangements, the approval of the FCL arrangement provides the member with purchase rights for the entire period of the arrangement. - To purchase under the FCL arrangement, FIN must receive official communication, via SWIFT, from the member’s fiscal agency requesting the purchase, specifying its amount and representing an actual BoP need. - FIN will contact the authorities to determine the earliest possible value date, the currency composition of the purchase, and other operational details in line with established guidelines and procedures. - Members should be encouraged to disclose information about purchases under an FCL arrangement as purchases under Fund arrangements are routinely published on the Fund’s external website. - When a member draws under an FCL arrangement: - The Board should be promptly informed. - Information would ideally be provided in a concise note written by the area department and reviewed by FIN, LEG, and SPR. - The note can be sent to the Board for information or as background for an informal briefing to the Board after the drawing, as necessary. - The note should be reviewed by SPR and cleared by Management prior to Board transmittal. - Following the purchase, a press release—reviewed by SPR and COM—is expected to be published on the IMF website. - A separate follow-up briefing to the Board would normally precede the next request (including for an augmentation) or mid-term review; the briefing should discuss macroeconomic circumstances leading to the actual BoP need and be reviewed by SPR, FIN, and LEG, and cleared by Management. ### Mid-term Review (two-year arrangements) - A mid-term review immediately prior to the lapse of the first twelve months of the arrangement is required to assess whether the country still meets the qualification criteria for the FCL. - The review should be scheduled with the objective of completion by the Board immediately prior to the lapse of the one-year period; otherwise the member could temporarily lose automatic access to Fund resources. - Staff should prepare a concise SR to inform the Board about recent developments, the expected evolution of risks over the remainder of the arrangement, policy initiatives, and a brief update assessing the country against the qualification criteria, including changes to qualification relative to previous assessments. - Procedural and substantive points: - Whenever the latest published external audit report on the central bank’s financial statements points to the emergence of significant safeguards issues, staff should raise and discuss these in the mid-term review and consult with FIN promptly. - Board approval of the review could be on a lapse of time basis. - A mission will not normally be necessary to conduct a mid-term review, although recent routine staff visits or A.IV consultation missions can inform the assessment. - If there have been substantial changes in policy strategies or goals, a new letter from the member setting out their new strategies and goals should be attached and discussed in the SR. - The SR would be subject to the standard review process (with no Policy Note (PN) or Policy Consultation Meeting required) and should be circulated according to normal circulation procedures—unless there is a case for expedited procedures. - Staff will provide a Summing Up (for internal use) and a Chair’s Statement, which will be published subject to the member’s consent. - A single Board meeting based on a combined SR for the A.IV consultation and the FCL mid-term review is encouraged to streamline procedures; the combined SR must clearly separate A.IV surveillance discussions and FCL-related discussions. - Where a combined meeting is not possible, area department teams are encouraged to time the A.IV Board discussions sufficiently early (e.g., 2 to 4 weeks prior to the formal Board meeting) to ensure incorporation of the Board’s appraisal into the SR. ### Modification of Access - Members may request at any time a reduction or augmentation of access within an existing FCL arrangement; requests can be at the mid-term review or on a stand-alone basis. - All requests for access changes should refer to changes in the member’s BoP needs and provide a justification. - Approval of an augmentation is subject to confirmation by the Board that the member still meets the qualification criteria for the FCL. - Streamlined augmentation procedures apply if the request is issued to the Board for consideration no later than six months from the approval of the FCL arrangement or completion of the mid-term review: - Streamlined procedures entail more concise SRs that, in discussing qualification, cross-reference the analysis in the most recent Board document (if applicable). - The streamlined SR should provide an updated External Economic Stress Index (EESI) supportive of increased external risks, an adverse scenario to demonstrate increased BoP needs, the case for the higher access, a CtR analysis, and a staff assessment that the analysis of the member’s qualification as discussed in a previous SR remains unchanged. - Streamlining does not obviate the need for a supplement, produced by FIN, on the impact of the higher access on the Fund’s finances and liquidity. - The Board confirmation under streamlined procedures will not change the date set for completion of the mid-term review. ### Board Briefing - The Board should be briefed on the member’s macroeconomic developments after significant economic policy changes—such as but not limited to those following the installment of a new government—in countries with an ongoing FCL arrangement. - Area departments are encouraged to consult with SPR early to determine whether a given event warrants a Board briefing. - The modality of the briefing may be informal (e.g., part of a country matters meeting) or formal in the A.IV SR; the briefing should provide an overview of the significant economic policy changes and an update on subsequent key macroeconomic developments such as indicators of market access and sovereign creditworthiness. - The briefing memo (or material for the country matters meeting) should be reviewed by SPR and FIN, and cleared by Management prior to Board transmittal. - Staff is also expected to brief the Board following FCL purchases. ### Exit Expectations — General - Exit from the FCL instrument is state contingent; the expectation to articulate an exit strategy depends on (i) whether the FCL arrangement is precautionary and (ii) the access level under the arrangement and credit outstanding under previous FCL arrangements. ### FCLs with Exit Expectations - An exit strategy must be articulated in the written communication and discussed in the SR when: - (i) access requested under a new or augmented precautionary FCL arrangement exceeds 200 percent of quota, or - (ii) regardless of access requested, in non-precautionary FCL arrangements. - The exit strategy should include: - A statement that access would normally decline in a successor FCL arrangement—should one be requested—or that no successor FCL would be requested when the “right conditions” are in place. - An analysis of external risks facing the country, as informed by the EESI. - A statement regarding any efforts the authorities intend to take to improve domestic resilience, where relevant. - A statement on circumstances (the “right conditions”) under which no successor arrangement would be likely, or under which a successor arrangement may be requested with lower access. - The 200 percent-of-quota threshold is lowered by any credit outstanding under prior FCL arrangements and is restored when the member repurchases outstanding credit. - In the event of credit outstanding under prior FCL arrangements, the exit strategy should discuss the amount of credit outstanding and expected repayment schedule, and state that the amount of credit outstanding will decline with its expected repayment schedule. - Other IMF outstanding credit (including non-FCL GRA, PRGT, and RST) is not considered for this purpose. - For two-year precautionary FCL arrangements, the mid-term review SR should include an updated assessment of the anticipated evolution of risks over the rest of the arrangement period, informed by an updated EESI; where relevant, developments regarding official and private financing prospects and efforts to improve domestic resilience should also be indicated. - The SR for the mid-term review could, but is not required to, include the authorities’ intention to reduce access conditional on external risks abating and, where relevant, on domestic resilience and/or external financing prospects improving. - The purpose of articulating an exit strategy in the written communication and SR is to guide market expectations and minimize risks of market surprises; discussion should preserve judgment while avoiding adverse market reaction and help inform Board discussion if a successor arrangement is considered. ### FCL Without Exit Expectations - When access under a new or augmented precautionary arrangement is at or below 200 percent of quota, there is no requirement to articulate an exit strategy in the written communication, nor discuss it in the SR. - Exit expectation-free arrangements aim to reduce incentives for accumulating costly excessive reserves while signaling commitment to strong policies and institutional frameworks and to offer more predictable insurance in a shock-prone world; they could also provide positive externalities by helping contain spillovers and systemic risks. - For assessing whether an exit strategy should be articulated, the 200 percent-of-quota threshold should be lowered for any credit outstanding under prior FCL arrangements. *FLEXIBLE CREDIT LINE - OPERATIONAL GUIDANCE NOTE — excerpt.* ### 32. The documents should still help guide market expectations. The written communication ### ppea2025013 - 32. The documents should still help guide market expectations. The written communication ### H. Expiration and Cancellation - Authorities can cancel an FCL arrangement at any time; cancellation should be communicated to IMF management in a written notification, preferably a formal letter signed by the authorities. - The cancellation letter must clearly specify the effective date of cancellation, which should not be earlier than the date of receipt of the letter by the Fund. - Staff or management could issue a factual press statement at the member’s request noting the successful conclusion of the FCL arrangement when nearing expiration, or when an arrangement is cancelled prior to expiration. - Press statements should: - Highlight the member’s recent performance and the supporting role played by the FCL arrangement. - Be coordinated with, and reviewed by, COM and SPR to ensure communication impact across members under FCL arrangements is taken into account. - Not include any assessment of potential qualification for a successor FCL arrangement. - Confidentiality and process for successor interest: - A member’s expression of interest in a successor FCL arrangement is subject to the same confidentiality requirement as the initial request and should follow the same process set out in this guidance note and in GRA Lending Toolkit and Conditionality—Reform Proposals, III(B), ¶15 and FCL Decision, ¶6(a). - If a member is likely not to continue to qualify for an FCL, staff should begin discussions with authorities well ahead of time when material concerns arise, typically during a regular staff visit or A.IV consultation mission, to incentivize policy adjustment or provide time to prepare for exit. - At expiration or early cancellation, staff would, as a courtesy and to the extent possible, update the Board through SEC before commencing standard public communication strategy. ### I. Communication Strategy (FCL) - A sound communication strategy is critical for a smooth exit from an FCL arrangement and to guide market participants about the authorities’ use of the FCL. - The communication strategy should be developed with country authorities and encompass essential details of the instrument, such as duration, the rationale for its usage—including its state-contingent nature. - For two-year precautionary FCL arrangements, the SR for the mid-term review should provide an updated assessment of the anticipated evolution of risks over the rest of the arrangement period, informed by an updated EESI (see Annex V). - The staff report for the mid-term review is not expected to comment on the exit strategy if it has not changed since the FCL approval. ### SECTION III. SHORT-TERM LIQUIDITY LINE (SLL) — Overview - Purpose and scope: - The SLL is a special facility in the GRA designed to provide revolving and renewable backstop financing to members with very strong fundamentals and policy track records. - The SLL provides liquidity support to qualifying members facing potential short-term BoP needs arising from external developments and reflected in pressures in the member’s capital account. - Qualification and conditionality: - Qualification requirements are identical to those for an FCL and there is no ex-post conditionality (i.e., an SLL is not for “program” support). - Per the SLL decision, ¶1, an SLL can be provided to qualifying members that face short-term BoP difficulties that: (i) are only of a potential nature, reflected in pressure on the capital account and the member’s reserves; (ii) are resulting from volatility in international capital markets; and (iii) are reasonably expected to be limited in scale and to require, at most, fine-tuning of monetary and exchange rate policies. - Approval process: - Approval follows a confidential expression of interest from a member; staff assess in a confidential and preliminary way whether the country might qualify. SPR maintains a cross-country database of relevant macroeconomic and institutional indicators to ensure timely turnaround. - When assessment is complete, management decides if access to the SLL is appropriate and staff prepares the SR setting out the basis for Board approval, including: (i) the assessment of qualification; and (ii) the assessment of the potential BoP need, level of access, and repayment capacity (Annex V). - The member has two options of availing itself of the SLL: offer and request (Section III.B). - Length: - An SLL arrangement can be approved for a period of twelve months. Successive arrangements can be approved provided qualification criteria continue to be met and the member faces a special BoP need. - Access level: - Access under SLL arrangements may be approved in an amount of up to 200 percent of the member’s quota (SLL decision, ¶ 4), which constitutes the cumulative limit for total credit outstanding under the SLL. - A member can purchase at any given time up to the amount of approved access under the SLL, minus outstanding purchases under the current or any previous SLL arrangement. - The EA policy does not apply to the SLL; access under the SLL above the overall annual and cumulative access limits does not trigger the exceptional access policy. However, outstanding amounts under the SLL will count towards the access limits if a member requests access to Fund resources under another Fund facility excluding the FCL (decision no 14064-(08/18), ¶ 2). - Revolving access and phasing: - The member may make one or multiple purchases at any time during the term of the arrangement; repurchases reconstitute the member’s right to purchase up to the amount approved under the SLL arrangement in effect. - Full drawing of access under an SLL arrangement would not terminate the arrangement. - There is no phasing under SLL arrangements; the entire requested access is available upon Board approval (or acceptance of an “offer”) and remains available throughout the arrangement period. - Conditionality and successor arrangements: - There is no ex-post conditionality for the SLL, including successor SLL arrangements; prior actions are not needed. - There is no expectation that members would exit the facility when their current arrangement expires and there are no restrictions on approval of successor SLL arrangements provided the member continues to meet qualification criteria and has a special BoP need. - Financial terms: - A special fee structure applies: an 8 basis-point commitment fee (not refundable) and a 21 basis-point service charge for purchases under the instrument. - Charges and level-based surcharges are identical to instruments in the credit tranches. - Amounts purchased under an SLL should be repurchased no later than 12 months from the drawing. - Purchases under the SLL are not subject to time-based surcharges given the short-term repayment obligations. - Treatment in reserves reporting: - Unpurchased amounts under the SLL arrangement do not count in gross reserves (as they are not yet created as an asset). - There is space in the Reserves Data Template filed by subscribing countries to include these resources as unpurchased credit line resources. - Once purchased, SLL resources give rise to an increase in gross reserve assets and external liabilities (with maturities corresponding to the timing of repurchases), which are to be reported in Sections I and II of the Reserves Data Template. - The undrawn amounts under one-year SLL arrangements should be included in Section III from the time of approval until the arrangement expires. ### B. SLL Request/Offer — Processes and Requirements - Applicability: - The section refers to standalone SLL scenarios; special provisions for transitions from, or concurrent use with, an FCL are discussed in section IV. - Initial steps: - Authorities should approach staff or management confidentially, indicating interest in an SLL arrangement verbally or in writing; staff should strongly encourage confidentiality. - Staff must treat the authorities’ request as confidential. - Staff should discuss the intended use of the SLL and initiate an assessment of qualification; a fact-finding staff visit may be conducted but a mission is not required. - Once an expression of interest is received, area departments should consult closely with SPR on key elements and process for assessing qualification. - Preliminary assessment of qualification: - The country team begins a confidential preliminary assessment of qualification and the level of access warranted based on the latest information. - The note will be reviewed by SPR, FIN, LEG, and other functional departments as necessary, and co-signed by SPR. - Area department teams should consult early with reviewing departments; a qualification consultation meeting may be held before finalizing the note. - Staff must make clear to authorities that any qualification by staff is only preliminary and that final decision on qualification and access level is made by management/Board. - The preliminary assessment note to management may be streamlined (Annex V) and cross-reference prior FCL/SLL assessments where appropriate in two cases: - A member transitioning from an FCL to an SLL arrangement no later than six months from entering into effect (or mid-term review completion) of the FCL arrangement to be cancelled (Section IV); or - A member with an ongoing FCL arrangement opts to use concurrently the FCL and SLL and documentation on the request for the new SLL is issued to the Board within six months from the approval of the standalone FCL arrangement or the completion of the mid-term review (¶58). - Coordination with A.IV consultations: - A very positive assessment of the member’s policies in the context of the most recent A.IV consultations is part of the SLL qualification framework (SLL decision, ¶ 2(c)). - If more than 12 months have elapsed since the completion of the most recent A.IV consultation, it is recommended that an A.IV consultation take place before an SLL request. - Area department teams are encouraged to hold A.IV discussions 2 to 4 weeks prior to a formal Board meeting to consider an SLL extension of an offer or request, to ensure the Board’s appraisal can be incorporated in the SR. - Mandatory financial stability assessments, which are legally part of A.IV consultations, and other documents such as FSSAs and ROSCs should ideally be timed sufficiently early to be integrated into the qualification assessment. - Staff Report (SR): - Annex V sets out the content of the SR; the SR is expected to assess qualification, the potential BoP need, appropriateness of the proposed level of access, and the member’s CtR, and would be reviewed by SPR, FIN, LEG, and other functional departments. - A full-fledged adverse scenario is not required to determine access under a standalone SLL (Annex II). - Given the short repayment periods and use as a liquidity instrument with relatively low access levels, the CtR analysis can be streamlined (see Annex V). - An SR for an SLL request may be streamlined and reference qualification assessment in a previous Board document if transitioning from an FCL to an SLL or from a standalone FCL to concurrent FCL-SLL arrangements (Section IV.B). - Request vs. Offer: - Offer: - Following a member’s expression of interest, the Board decides whether the member qualifies and whether to “offer” an SLL with a specified access level based on the SR and the Managing Director’s recommendation. - The Board decision to extend an “offer” constitutes approval of an SLL arrangement conditional on receipt of a satisfactory written communication from the member confirming it wishes to avail of the SLL arrangement (the authorities’ “acceptance”). - A written communication is not circulated to the Board with the SR in the offer case. - Authorities will be notified of the SLL offer by a letter signed and sent by the Managing Director no later than the end of the business day following the Board meeting. - The authorities’ written communication shall be submitted no later than two weeks from the date of the conditional approval by the Board. - The SLL arrangement becomes effective once the Fund confirms receipt of the member’s signed written communication, including acceptance of the “offer” and the policy commitments described below; staff will then issue the communication to the Board for information. - A new Board meeting is not required as the Board had already approved the extension of an offer. - Request: - The SLL arrangement can be requested by the member through a formal written communication attached to the SR; both are issued to the Board for consideration. - The SLL arrangement becomes effective upon Board approval of the request. - A member must use a written communication to request an SLL arrangement if seeking concurrent approval of SLL and FCL arrangements. - A written communication is also the preferred option for a member with an ongoing FCL arrangement that, at FCL mid-term review, seeks approval of a concurrent SLL arrangement (Section IV). - The authorities’ written communication: - The communication must outline reasons for requesting Fund assistance under the SLL, including the specific BoP need expected to be addressed. - It must outline that the member will maintain very strong policies, commit to take adequate corrective measures to deal with shocks, and consent to publication of the staff report. - For an “offer”, the text should include the authorities’ confirmation that the member wishes to avail itself of the SLL arrangement. - The draft written communication should be sent to departments for review at the same time as the SR; following departments’ review, both documents should be sent to management for clearance. - Signing and dating differ by case: - For an offer: the communication, in the form of a signed letter from the authorities to the Managing Director, should not be dated and signed until after the formal Board meeting that conditionally approves the SLL arrangement, and no later than two weeks after the “offer” has been extended. - For a request: the communication should be dated and signed after management clearance and prior to issuance to the Board along with the SR. - Any modifications to the written communication after issuance to the Board must follow procedure in accordance with the Fund’s Transparency Policy. *International Monetary Fund — FLEXIBLE CREDIT LINE - OPERATIONAL GUIDANCE NOTE (excerpts).* ### 44. Political assurances. Country teams should be mindful of the electoral cycle and, where ### 44. Political assurances. ### Political assurances and electoral cycle - Country teams should be mindful of the electoral cycle and, where possible, seek to delink the timing of a request for a new arrangement from the electoral cycle. - Where it is not possible to delink the request, staff should (at the time of the request) seek assurances from electoral candidates that the very strong policies and policy frameworks will be maintained. - Such assurances are an important forward-looking safeguard for the SLL, where all the approved access is made available upfront without phasing or ex-post conditionality. ### Central bank safeguards (SLL-specific) - A member requesting or accepting an SLL arrangement would not be subject to the Fund’s policy on safeguards assessments for Fund arrangements (SLL decision, ¶ 6(b)). - At the time of making a written communication that it wishes to avail itself of an SLL arrangement, or when making a formal written request, the member will provide authorization for IMF staff to access the most recent annual independent audit of its central bank’s financial statements, whether or not the audit is published. - Authorization will include allowing the central bank and its external auditors to discuss the audit findings with IMF staff, including any written observations by the external auditors on weaknesses observed in internal controls. - As long as Fund credit is outstanding from purchases under an SLL arrangement, the member will provide Fund staff with copies of annual audited financial statements and management letters, together with an authorization to discuss audit findings with the external auditor. - Staff will raise and discuss the emergence of any significant safeguards’ issues from the latest published external audit report on the central bank’s financial statements in the context of the SR. - Area department teams are encouraged to consult early with FIN staff on safeguards requirements. - Reference: See FIN Operational Guidelines for Safeguards Assessments (March 2024) for FLC/SLL safeguards requirements. ### Interdepartmental review, circulation, and Board procedures - Normal interdepartmental review procedures and circulation periods apply to the SLL SR and written communication. The current circulation period is two weeks for the formal Board meeting. - Expedited procedures can be envisaged if quick consideration of an SLL arrangement is warranted, or if there are serious concerns about possible leaks if the qualification process is protracted. - For a member requesting an SLL arrangement, the Board considers and may approve an SLL arrangement based on the member’s written request, the SR, and management recommendation. - As with other Board meetings on UFR, staff will provide a Summing Up (for internal use) and a Chairman’s Statement, which will be published subject to the member’s consent. - If the member chooses to have the Fund extend an SLL “offer”, the Board may conditionally approve the arrangement. Such conditional approval, with a specified access level, should be communicated to the member no later than the end of the business day following the Board meeting and is conditional on the receipt within two weeks of a satisfactory communication confirming that the member wishes to avail itself of the SLL. - If after the Board meeting there are concerns about market-sensitive leaks regarding the offer, the member could request that the Fund issues a press release indicating the Board’s conditional approval of an arrangement; the press release should not prejudge the authorities’ decision. ### Activation of the credit line and fees - The credit line is open on effectiveness of the SLL arrangement. - Prior to effectiveness of the SLL arrangement, FIN will need to receive authorization from the authorities to debit the member’s SDR account for payment of the commitment fee, which is due upon the effectiveness of the SLL arrangement. ### Transparency and publication - For a member who is “offered” an SLL arrangement, the effectiveness of the arrangement is conditioned on the member’s consent to publish the associated SR when it confirms that it wishes to avail of the SLL arrangement. - For a member requesting approval in a written communication, the Managing Director will not recommend Board approval unless the member consents to publication of the associated SR. - The SR and the authorities’ written communication would be published by the Fund no later than fourteen calendar days after the SLL arrangement becomes effective. - The Fund’s Transparency Policy applies. ### Purchases under the SLL - Staff would promptly inform the Board in the event of a purchase under the SLL arrangement. The brief communication would include the purchasing member, amount in SDR terms and date of the SLL purchase. - To carry out the payment, FIN would need to receive official communication via SWIFT from the fiscal agency of the member requesting a purchase, specifying its amount and representing an actual BoP need—a standard requirement for GRA purchases. - FIN would immediately contact the authorities to determine the earliest possible transaction date, the currency composition of the purchase, and other operational details. - The member should be encouraged to disclose information about any purchases under an SLL arrangement, as information on purchases under Fund arrangements is routinely displayed on the Fund’s external website. ### Expiration, cancellation, and staff engagement - An SLL arrangement expires upon the earlier of: (i) the expiration of its approved period; or (ii) its cancellation by the member. - At expiration or cancellation, staff would, as a courtesy and to the extent possible, update the Board through SEC before commencing standard public communication strategy. - With the nearing of expiration, staff or management could issue a factual press statement at the member’s request noting the successful conclusion of the SLL arrangement; such press statements should be coordinated with COM and SPR and should not include any assessment of potential qualification for a successor SLL arrangement. - The authorities can cancel an SLL arrangement at any time; a member should send a written notification to management, preferably a formal letter signed by the authorities, specifying the effective date of cancellation, which should not be earlier than the date of receipt of the letter by the Fund. - Staff should proactively engage with the authorities when renewal of the SLL comes under threat of non-qualification, initiating discussions well ahead of the time when material concerns start arising (e.g., during a regular staff visit or A.IV consultation mission). ### Communication strategy - Careful communication is an essential element of any SLL arrangement. - A communication strategy should be developed with country authorities and should provide guidance to market participants about the authorities’ future use of the SLL and encompass the essential details of the instrument and the rationale for its usage. ### Sequential and concurrent use (FCL and SLL) - Members with an existing FCL and/or SLL arrangement that continue meeting all necessary conditions can request a successor arrangement(s) prior to scheduled expiration. - To avoid overlap, the formal Board meeting for approval of the successor arrangement(s) can be scheduled before the scheduled expiration of the previous arrangement(s) when the member cancels the latter; the ongoing arrangement would need to be cancelled prior to its scheduled expiration and to the approval of the successor arrangement. - Transitions between FCL and SLL can be streamlined under certain conditions; a transition involves a request for the new arrangement combined with simultaneous cancellation of the previous one, effective on the date of approval of the new arrangement. - Concurrent use of the FCL and SLL: - May be used concurrently for complementary insurance against moderate and tail risks. - Could be relevant for qualifying countries facing external risks of different nature and with uncertain likelihood of materialization and duration. - Under concurrent use, qualifying countries can deploy the appropriate instrument to respond to a mix of shocks while minimizing UFR in the medium-term given the SLL’s shorter repurchase period. - Illustrative scenarios where concurrent use could be relevant: - Shocks of a limited scale and uncertain duration: draw on SLL for an initial short-lived shock; if it persists, draw on FCL and repurchase the SLL. - Longer-term shocks with a short-term capital account component: draw on both instruments simultaneously, with FCL providing breathing room for policy adjustment and SLL addressing moderate capital account volatility. - Procedures for concurrent use: - Prerequisites: country should meet qualification criteria, demonstrate the BoP problem addressed under each instrument (including SLL’s special BoP need), and face external risks warranting concurrent use. - Access: combined access under both instruments should be commensurate with total potential BoP needs as illustrated by external risks in the adverse scenario. The CtR analysis for FCL and SLL should discuss CtR in the case of combined full drawing. - Approval: a qualifying country could avail itself of an SLL (FCL) arrangement when already in an FCL (SLL) arrangement, or avail of both simultaneously. The SLL arrangement may be requested simultaneously with the FCL request or mid-term review, with both arrangements discussed in the same Board meeting based on a single document. For simultaneous requests, both arrangements must be requested (the offer option for the SLL would not be available). - Transition from standalone to concurrent use: the SR for the new additional arrangement could be streamlined under certain conditions. - Exit: under concurrent use there is no expectation to articulate an exit strategy in the written communication and SR if the FCL is at or below 200 percent of quota, accounting for outstanding credit under previous FCL arrangements (¶27-28). Concurrent drawings would generally be expected only when the country faces a combined shock. If hit by a persistent shock requiring Fund support above 200 percent of quota, the country could request an FCL augmentation rather than drawing on the two instruments together, since the SLL's 12-month maturity may be too short for longer-duration shocks. - Note: Combined costs under concurrent use would be lowered, since the SLL is a special facility that has somewhat lower commitment fees than the FCL. ### Interaction with other instruments - Two-year FCL arrangements can be used concurrently with an RSF arrangement, subject to the member meeting relevant eligibility and qualification criteria. - Because RSF approval requires, inter alia, at least 18 months remaining under the UCT arrangement it accompanies, the RSF can only be requested jointly with a two-year FCL arrangement or during the FCL’s first six months. One-year FCLs and standalone SLL arrangements do not qualify given their short duration. - It is expected that one review of the RSF shall take place concurrently with the mid-term FCL review and the remainder be standalone reviews. - PNs and SRs for standalone RSF requests and reviews should not comment on FCL qualification but indicate that the qualification assessment from the FCL request (or mid-term review) remains valid through the mid-term review (or end of the FCL arrangement). - An RSF arrangement can continue and need not terminate automatically when the member switches from FCL to another qualifying UCT-quality instrument, provided certain criteria are met, including maintaining uninterrupted coverage under the FCL or transitioning without interruption to another qualifying UCT-quality instrument, with the new qualifying instrument approved within 12 months of the approval of the FCL arrangement or the completion of its mid-term review. ### Interaction with emergency financing - FCL and SLL arrangements can, in principle, be used concurrently with emergency financing subject to meeting relevant qualification criteria. - Outright purchases under the RFI (and RCF, in the case of presumed GRA-PRGT blenders) could be considered if the member experiences an urgent BoP need that is transitory and limited in nature. - In practice, a member with an FCL arrangement in place would be expected to draw on the FCL when confronted with an urgent BoP need—an augmentation under the FCL arrangement could be considered where justified—while countries with a standalone SLL could request instead an FCL arrangement to be used concurrently with the SLL to respond to the actual BoP need. ### Determining qualification - Determining qualification is not a tick-the-box exercise; staff should make a judgment based on all of the following: - An assessment of whether the member (a) has very strong economic fundamentals and institutional policy frameworks; (b) is implementing—and has a sustained track record of implementing—very strong policies; and (c) remains committed to maintaining such policies in the future, all of which give confidence that the member will respond appropriately to the BoP difficulties that it is encountering or could encounter (FCL and SLL decisions, ¶ 2). - Staff should make clear that a very positive assessment of the member’s policies was given in the context of the most recent A.IV consultations (FCL and SLL decisions, ¶2; and ¶22 above). - The relevant qualification criteria (Annex I) should be assessed by staff in the initial concise staff note to the Board and the SR on the FCL/SLL arrangement request. - Qualification criteria and related indicators need to take into account the variety of members’ circumstances and uncertainties surrounding economic projections. - Strong performance against all relevant criteria would not be necessary to secure qualification under the FCL/SLL. However, significant shortcomings on one or more of these criteria—unless there are compensating factors, including corrective policy measures underway—would signal that the member is not among the very strong performers for whom the FCL/SLL is intended. *Source: Excerpt from FLEXIBLE CREDIT LINE––OPERATIONAL GUIDANCE NOTE (IMF) — content unit ppea2025013 - 44.* ### 62. Changes to the qualification assessment since the previous two assessments should be ### ppea2025013 - 62. Changes to the qualification assessment since the previous two assessments should be ### Changes to qualification reporting and Board notification - Paragraph 62: Changes to the qualification assessment since the previous two assessments should be transparently flagged, both in the main text of the SR and as a summary table (Annex I). - Paragraph 63: When a member is assessed and judged not to qualify for the FCL/SLL, the Board would not be notified of such request. The only situation where the Board would be notified is when management decides that access under the FCL/SLL may be appropriate. ### SECTION VII. JUSTIFICATION OF ACCESS — General framework for access decisions - Paragraph 64: General Fund policy bases access decisions on: - (i) the member’s actual or potential need for Fund resources taking into account other sources of financing and the desirability of maintaining a reasonable level of reserves; - (ii) the member’s CtR, which takes into account the strength of its adjustment program, including the extent to which it will lead to a strengthening of the member’s BoP by the time that repurchases begin to fall due; and - (iii) the amount of the member’s outstanding Fund credit and its record in using Fund resources in the past. - Paragraph 65: Annexes II–IV provide tools for developing an access scenario for precautionary purposes; justification under actual BoP need follows normal program guidelines. SPR reviewers and the Non-Concessional Lending Policy Division in SPR can provide guidance. Mexico 2023 FCL request cited as an example of good practice for a precautionary request. - Annex II: general framework for staff when considering access in a precautionary setting. - Annex III: methodology to calculate the EESI to show evolution of the external environment and guide access/exit discussions. - Annex IV: empirical method for comparing access assumptions across FCL cases and with historical experience. ### Annex I — Purpose and provenance - Annex I: Provides key considerations for assessing qualification to access financing under the FCL and the SLL to promote a predictable and evenhanded qualification process. - Notes: - The FCL and the SLL share the same qualification framework, following criteria endorsed by the Board in 2014 (FCL) and 2020 (SLL). - 2017 Review identified a core set of indicators for FCL qualification with thresholds based on established analytical frameworks; criteria further developed in the 2023 Review. - Core indicators are drawn from indicators endorsed in 2014 but do not obviate judgment. ### Qualification framework — general principles - Paragraph 2: Core of qualification is assessment that the member’s economic fundamentals, institutional policy framework, and policies are very strong, with a sustained track record of very strong policy implementation. Member’s policies must have been assessed very positively by the Board in the most recent A.IV consultations. - Paragraph 3: Qualification is based on nine specific criteria. Any assessment involves judgment; very strong performance on all criteria is not necessary, but significant shortcomings on one or more criteria—absent compensating factors—would generally signal non-qualification. ### A. Qualification Criteria — overview and core indicators - Paragraph 4: Staff rely primarily on nine qualification criteria with relevant core indicators. Bottom-line assessment on each criterion remains a judgment guided by the relevant indicator. Core indicators and thresholds are key but other sources (including broader Board-approved indicators) should be consulted. - I. External Position and Market Access — core indicator elements: - A sustainable external position: - Requires the member’s external position to have been assessed in the most recent Board document (A.IV or ESR) as “broadly consistent”, “moderately stronger (weaker)”, “stronger”, or “substantially stronger” than implied by fundamentals and desirable policies. Members with “weaker” or “substantially weaker external positions” would not meet the criterion. - Other relevant indicators: debt-stabilizing noninterest current account balance; level and composition of external debt; level of net international reserves; level and composition of private sector external assets. - A capital account position dominated by private flows: - Core indicator requires public flows to account for less than half of a member’s direct, portfolio, and other asset and liability flows, on average in the past three years for which data are available. - Assessment of the International Investment Position is also relevant. - A track record of steady sovereign access to capital markets at favorable terms: - Core indicator requires public sector issuance or guaranteeing of external bonds or disbursements of public and publicly-guaranteed external commercial loans in international markets during at least three of the last five years for which data are available, in a cumulative amount over that period equivalent to at least 50 percent of the country’s Fund quota at the time of the assessment. - Indicator also requires that the member did not, in staff’s assessment, lose market access at any point in the last 12 months. - Note: Threshold will be reduced from 50 to 35 percent of quota after the quota increases under the 16th General Review of Quotas take effect. - A reserve position that remains relatively comfortable: - For FCL arrangements requested on a precautionary basis and all SLL requests, the core indicator requires reserves to have been greater than 100 percent of the unadjusted Assessing Reserve Adequacy (ARA) metric on average over three (the current and the two previous) years, and not below 80 percent in any of these three years. - Exchange rate regime classification should be based on the contemporaneous AREAER. Where doubts exist about classification, Area Department should consult MCM and SPR. - Other relevant indicators: imports, short-term debt, monetary base, augmented ARA metrics; alternative metrics may be used if unadjusted ARA deemed inadequate. - Assessment should generally be reflected in recent A.IV reports. - II. Fiscal Policy: - Sound public finances and sustainable public debt determined by rigorous and systematic debt sustainability analysis. - Core indicator requires public debt to be assessed as sustainable with a high probability, taking into account risks not immediately visible in current projections. - Discussions to cover evolution of debt, rollover and financing requirements under alternative scenarios, contingent liabilities where appropriate, stress tests, recent fiscal balances relative to cyclical position, quality of adjustment measures, medium-term plans, and institutional budgetary framework. - III. Monetary Policy: - Low and stable inflation in the context of a sound monetary and exchange rate policy framework. - Core indicator requires single-digit inflation over the past five years (the latest year for which data is available, and the four years before), measured by the annual average inflation rate in each year. - Bottom-line assessment considers whether low inflation reflects favorable external conditions and questions about ability to maintain low inflation, persistent deviations from targets, sustained deflation, core inflation, inflation expectations, adequacy of monetary policy instruments, and policy transparency/communication. - IV. Financial Sector Soundness and Supervision: - Sound financial system and absence of solvency problems that may threaten systemic stability: - Core indicator requires average capital adequacy ratio for the banking sector (latest available data point) to be above regulatory thresholds, and the most recent A.IV did not highlight significant solvency risks or recapitalization needs. - Other indicators: profitability, asset quality, stress tests, FSAPs, risks in large/systemic banks that may be masked by averages. - Effective financial sector supervision: - Core indicator requires that the most recent FSAP or A.IV report did not raise substantial concerns regarding the supervisory framework. - Assessment to consider legal and institutional framework, operational capacity for bank interventions and resolution, and emergency liquidity assistance. - 2023 Review specifies AML/CFT deficiencies, including FATF “grey listings”, should be considered. Assessment looks at depth and persistence of AML/CFT supervision deficiencies and substantive aspects of FATF listing and country action plan. - In the event of FATF grey listing, member would be unlikely to qualify if staff assesses deficiencies undermine this criterion. Assessment should use FSAP and A.IV reports and be guided by FATF standard and methodology; assessment cannot be solely based on FATF determinations to avoid cross-conditionality. - V. Data Adequacy: - Data transparency and integrity: - Core indicator requires the member is an SDDS or SDDS Plus subscriber or has made satisfactory progress toward meeting SDDS requirements. ### Track record and assessment horizon - Paragraph 5: Assessment of policy track record anchored in same set of core indicators. - For qualification criteria 2, 3, 4, and 6, core indicators at time of assessment already cover track record. - For criteria 1, 5, 7, 8, and 9, determination guided by assessment of qualification criteria in each of the five most recent years (the latest year for which data are available, and the four years prior). - Bottom-line assessments follow same approach as for the current year and draw on additional information such as policy responses to past capital flow volatility. ### Transparency on changes in qualification over time - Paragraph 6: Changes in qualification should be transparently reported and discussed in country documents. - SRs accompanying FCL and SLL arrangement requests for successor arrangements, FCL mid-term reviews, or augmentation requests are expected to flag changes in the nine core criteria as well as the policy and institutional framework relative to the previous assessment. - SRs expected to include a table comparing core indicators for each criterion with core indicators in previous SRs, as applicable. - Where possible, such a table should consider assessments provided in at least two previous staff reports. ### B. Indicators of Institutional Strength - Paragraph 7: Eligible member should be assessed to have a very strong institutional policy framework. Indicators to consider: - Policy cyclicality: - Fiscal policy indicator: moving correlation between cyclically-adjusted fiscal balance or government spending and cyclically-adjusted GDP. - Monetary policy indicator: moving correlation between cyclically-adjusted real short-term policy rate and cyclically-adjusted GDP. - In countries with rigid exchange rate regimes, consider cyclicality of cash reserve requirements. - Effective response to shocks: - Assessment based on staff’s coverage of governance weaknesses and corruption vulnerabilities in A.IV consultation SRs along six state functions identified by the 2018 Framework for Enhanced Fund Engagement on Governance: (i) fiscal governance; (ii) financial sector oversight; (iii) central bank governance and operations; (iv) market regulation; (v) rule of law; and (vi) AML/CFT. - Coverage in A.IV SR based on centralized assessment established under the 2018 Governance Framework, including quantitative inputs (e.g., World Bank World Governance Indicators) and qualitative inputs. - A member would likely not be considered a strong performer for FCL/SLL qualification if governance and corruption vulnerabilities hamper ability to respond to shocks. - If A.IV consultation has not covered relevant vulnerabilities identified by the centralized assessment and a new FCL/SLL request or mid-term review is expected, staff should discuss these issues with authorities as part of qualification consideration. *FLEXIBLE CREDIT LINE––OPERATIONAL GUIDANCE NOTE* ### Annex I. Table 1. Summary of Broad Indicators for FCL and SLL Qualification Criteria ### Annex I. Table 1. Summary of Broad Indicators for FCL and SLL Qualification Criteria ### Broad indicators (Table 1) - Criterion 1 — Sustainable external position - Gross external debt/GDP; including DSA assessment; debt-stabilizing noninterest current account deficit; net external debt/GDP; short-term gross external debt/GDP; share of bank, nonbank and public sector gross external debt. - Criterion 2 — Capital account position dominated by private flows - FDI plus portfolio inflows as a share of total capital inflows; ratio of private holdings of external debt to gross external debt; and private foreign holdings of domestic debt/total domestic debt. - Criterion 3 — Track record of steady sovereign access to capital markets at favorable terms - EMBI spread; spread between country EMBI and EMBI overall index (using latest observation and averages over previous five years); current yield on benchmark bonds; credit ratings; and last external issuance (details on amount issued/ original yield/maturity). - Criterion 4 — Reserve position which—notwithstanding potential BoP pressures that justify Fund assistance—remains relatively comfortable (precautionary requests) - Ratio of reserves to: ARA metric, short-term debt (remaining maturity basis); short- term debt (remaining maturity basis) plus current account deficit; imports; and broad money. - Criterion 5 — Sound public finances, including a sustainable public debt position determined by a rigorous and systematic debt sustainability analysis - Public sector debt-to-GDP ratio, and debt sustainability assessment; primary and overall fiscal balance (average for the last 3 to 5 years); structural fiscal balances and debt-stabilizing primary balance. - Assessment of medium-term plans anchoring fiscal policy outcomes; and overall sound institutional budgetary framework as informed by recent fiscal ROSCs, where available. - Criterion 6 — Low and stable inflation, in the context of a sound monetary and exchange rate policy - Evolution of core and headline inflation (average year-on-year inflation rate) over the past 5 years, and inflation expectations. Past and announced policy responses to inflationary shocks. Adequacy of monetary policy instruments to conduct monetary policy. - Accountability, transparency, and communication regarding policy objectives and policy responses. - Criterion 7 — Sound financial system and the absence of solvency problems that may threaten systemic stability - Capital adequacy and profitability: CAR (overall banking system and individual banks); and return on equity (overall banking system and individual banks). - Liquidity and funding risks: liquid assets to total liabilities; liquid assets to short-term liabilities; loan-to-deposit ratio; and share of external funding in total liabilities. - Asset quality: Credit to the private sector (real growth rate and share of GDP); and nonperforming loan ratios (overall banking system and individual banks). - Criterion 8 — Effective financial sector supervision - Assessment of supervisory standards and practices based on FSAP findings and AML/CFT weaknesses. Assessment of legal and institutional framework and operational capacity for prompt corrective actions and emergency liquidity assistance. - Criterion 9 — Data transparency and integrity - Subscription to the SDSS or a judgment that satisfactory progress is being made toward meeting its requirements. Routine assessments (A.IV consultations) of data quality and integrity, informed by data ROSCs, where available. ### Core indicators (Table 2) - Criterion 1 — Sustainable External Position - Requires the member’s external position to have been assessed, in the most recent Board document (A.IV or ESR), as “broadly consistent”, “moderately stronger (weaker)”, “stronger”, or “substantially stronger” than implied by fundamentals and desirable policies. - This assessment implies that members with “weaker” or “substantially weaker external positions” would not meet the criterion. The asymmetry in the assessment follows the reasoning that “weaker” or “substantially weaker” external positions (e.g., high current account deficit or net foreign liabilities, overvalued exchange rate, etc.) constitute early warning indicators for impending BOP crises. - Criterion 2 — Capital account position dominated by private flows - Requires public flows to account for less than half of a member’s direct, portfolio, and other asset and liability flows, on average in the past three years. - Criterion 3 — Track record of steady sovereign access to capital markets at favorable terms - Requires public sector issuance or guaranteeing of external bonds or disbursements of public and publicly-guaranteed external commercial loans in international markets during at least three of the last five years for which data are available, in a cumulative amount over that period equivalent to at least 50 percent of the country’s Fund quota at the time of the assessment. - The indicator also requires that the member did not, in staff’s assessment, lose market access at any point in the last 12 months. Deteriorating funding conditions and adverse changes in issuance patterns (volume, maturity, and frequency of issuance) that cannot be explained by funding needs would be indications that the member has indeed lost market access. - Criterion 4 — Reserve position which—notwithstanding potential BoP pressures that justify Fund assistance—remains relatively comfortable (precautionary requests) - Requires reserves to have been greater than 100 percent of the ARA metric on average over three (the current and the two previous) years, and not below 80 percent in any of these three years. - By including a lower—but not an upper—threshold for reserves, the assessment follows the reasoning that excess reserve holdings, while possibly undesirable from a systemic perspective, do not constitute a vulnerability for the member. - Criterion 5 — Sound public finances, including a sustainable public debt position determined by a rigorous and systematic debt sustainability analysis - Requires the member’s public debt to be assessed as sustainable with a high probability. The high probability assessment would explicitly take into account risks to public finances not immediately visible in current public debt projections. - Criterion 6 — Low and stable inflation, in the context of a sound monetary and exchange rate policy - Requires the member to have maintained single-digit, year-on-year annual average inflation over the past five years. - The bottom-line assessment would consider if the member’s performance is seen to reflect favorable external conditions and there are grounds to question the ability of its policy framework to maintain low inflation under normal circumstances. It would also consider persistent deviations from stated inflation targets, as well as sustained deflation, to the extent that it reflects deficiencies in the monetary policy framework. - Criterion 7 — Sound financial system and the absence of solvency problems that may threaten systemic stability - Requires the average capital adequacy ratio for the banking sector to be above regulatory thresholds, and that the most recent A.IV did not highlight significant solvency risks or recapitalization needs. - The bottom-line assessment would consider other financial soundness indicators, as well as any relevant stress tests conducted by staff, to provide a forward-looking perspective. It would also reflect potential problems in large and systemic banks that may be masked by system-wide averages. - Criterion 8 — Effective financial sector supervision - Requires that the most recent FSAP or A.IV report did not raise substantial concerns regarding the supervisory framework, including on AML/CFT issues. - The bottom-line assessment would consider any significant changes in conditions since the latest FSAP. Considerations related to AML/CFT issues, including FATF grey listings, should be considered for this criterion. In the event of FATF grey listing, the member would be unlikely to qualify for FCL/SLL if staff assesses that deficiencies underpinning the listing indicate that the criterion is not met. - Criterion 9 — Data transparency and integrity - Requires that the member is an SDDS or SDDS Plus subscriber or has made satisfactory progress toward meeting the SDDS requirements. - Additional methodological and interpretive notes (selected) - For qualification criteria 2, 3, 4, and 6, the core indicators already cover the track record. For criteria 1, 5, 7, 8, and 9, determination of whether a member meets the track record requirement is guided by the assessment of the qualification criteria in each of the five most recent years. - The assessment of a member’s external position in surveillance takes into account five key areas: current account (CA), real exchange rate, foreign exchange intervention and reserves, foreign assets and liabilities, and capital and financial account. The bottom line assessment falls into one of seven categories, guided by staff-assessed CA gaps (in percent of GDP): (i) substantially stronger (CA gaps more than 4 percent); (ii) stronger (CA gaps between 2 and 4 percent); (iii) moderately stronger (CA gaps between 1 and 2 percent); (iv) broadly consistent (CA gaps between -1 and 1 percent); (v) moderately weaker (CA gaps between -2 and -1 percent); (vi) weaker (CA gaps between -4 and -2 percent); and (vii) substantially weaker (CA gaps less than -4 percent). - Public flows are defined as the sum of the absolute values of reserve assets flows, and general government and central bank portfolio and other debt liability flows. In the absence of data for a large sample of countries, other official asset and liability flows of the public sector are assumed to be zero. - The 50 percent of quota threshold for public sector debt issuances will be reduced to 35 percent of quota, once the quota increases under the 16th General Review of Quotas take effect. - See Annex II for an empirical justification of the 80 percent threshold. The overall assessment could consider other reserve metrics if the ARA metric is deemed inadequate for judging the member’s reserve position. This assessment should generally be reflected in recent A.IV reports and based on the prevailing exchange rate classification reported in the AREAER. ### Annex II — Determining Access on a Precautionary Basis (key points from paragraphs 1–9) - Purpose and approach - Aim: ensure Board papers include a rigorous analysis of the determination of access levels based on a consistent framework while allowing country-specific flexibility and recognizing judgment in estimating a potential financing gap. - Staff should show that access looks reasonable when compared with a range of metrics and indicators; underlying assumptions should be clearly spelt out in Board reports. - Key criteria for access (paragraph 2) - (i) the member’s actual or potential need for Fund resources, taking into account other sources of financing and the desirability of maintaining a reasonable level of reserves (Fund policy establishes that in no circumstances can access be greater than this need); - (ii) the member’s CtR (including the strength of the member’s adjustment program); - (iii) the member’s outstanding Fund credit and its track record of using Fund resources. - Framework for access decisions (paragraphs 3–4) - Staff should construct a plausible adverse scenario to estimate a potential financing gap and appropriate level of access. - Staff should: (i) link access to actual or potential BoP needs, including special BoP need for SLL qualification and tail risks addressed by precautionary FCL arrangements; (ii) allow comparability in choice of adverse shocks while considering country-specific factors; (iii) cross-check programmed reserves against standard adequacy metrics. - Adverse scenario construction should consider whether an orderly exchange rate adjustment is appropriate and the implied impact on financing needs; alternative reserve drawdown scenarios and pace of drawdown should be considered. - Elements informing the adverse scenario (paragraphs 5–9) - Global assumptions: draw from latest WEO downside scenario, GFSR, or G-RAM as relevant; GFSR is main source for financing conditions. - External Economic Stress Index: develop an index of external economic stress (mechanics in Annex III) to indicate evolution of external risk and guide access discussions. - Evidence from past/current crises and economic literature: inform expected shock sizes on BoP components (suggested approach in Annex IV). - Country-specific factors: focus on structure and volatility of capital flows and specific items (derivatives, intra-group lending, private foreign assets holdings); staff must defend scale and likelihood of shocks and justify any additional access cushions. - Market-sensitive information on access determination can be deleted from SRs before publication under the Fund’s Transparency Policy where warranted. *International Monetary Fund — Annex I. Table 1. Summary of Broad Indicators for FCL and SLL Qualification Criteria (extract).* ### 10. Additional considerations and reserve adequacy. An assessment of reserve adequacy and ### 10. Additional considerations and reserve adequacy. An assessment of reserve adequacy and how this would be affected if the adverse scenario materializes is also necessary ### Reserve adequacy assessment and reserve drawdown - Staff should compare reserve levels according to different metrics relevant for given country-specific vulnerabilities and relevant for the exchange rate regime (e.g., the Fund’s ARA metric as well as other standard metrics). - With reserve drawdown a key element in determining access levels: - Limited reserve drawdown should be clearly justified. - Reserve adequacy ratios well into the adequacy range in the adverse scenario should be generally avoided. - It would normally be expected that assumed levels of gross reserves are allowed to fall below 100 percent of the ARA in the adverse scenario (since this is an extreme stress event). - The 2014 Review of the FCL, the PLL, and the RFI discussed a lower threshold level of 80 percent of the Fund’s ARA metric. - The pace of the drawdown should also be considered to avoid adverse market reactions. - For countries with reserve levels above adequate, the adverse scenario should include the use of international reserves to cover part of the financing gap, implying not all potential financing need is met through Fund resources. - Where reserve levels need to rise over the course of the FCL arrangement to maintain adequacy, staff may build in an increase in reserve levels in the baseline projection. - Staff should consider whether an orderly exchange rate adjustment might be necessary if the adverse scenario unfolds, and clearly spell out assumptions regarding the exchange rate and any implied impact on financing needs. ### Concurrent use of FCL and SLL - When FCL and SLL arrangements are requested or used simultaneously: - The SR should clearly state the member faces a BoP need which is addressed by both instruments (combined access should not exceed the total need illustrated by the scenario, see ¶ 59). - Typical circumstance: a large medium-term shock (addressed by the FCL) followed by short-term capital account instability (addressed by the SLL). - The principles for constructing the adverse scenario (use of global assumptions, the index of external economic stress, and past or current crisis episodes) apply under concurrent FCL/SLL use. - Staff can draw on country-specific factors, including—if appropriate—reserve interventions to counter disorderly market conditions in line with Fund policy. ### Access levels and treatment of potential BoP needs - Access levels should always be presented based on the potential BoP need, irrespective of the specific UFR by the member (budgetary support, reserve build up, bank restructuring costs). - Access to Fund resources can be granted to finance potential budgetary needs as long as the public sector deficit in the saving-investment (S-I) balance is mirrored by a BoP need. - Example: a BoP need could arise during an economic contraction if stimulative policies (including fiscal) would lead to a worsening of the current account—i.e., the deterioration of the public sector S-I balance is not offset by an improvement in the private sector S-I balance (crowding out). - In the absence of external financing, use of Fund resources to prevent a maladjustment of the BoP (excessive current account contraction) would be warranted. - Operationally, proposed access levels should be commensurate with the projected BoP need shown in SRs. ### Precautionary BoP needs and rolling-window approach - Estimates of precautionary BoP needs and thus corresponding access levels can be appropriately based over a rolling 12-month window, even for longer-duration arrangements, in line with evidence from past crisis cases. - Staff should check that access is appropriate not only with respect to financing gap estimates but also against a wider range of indicators related to CtR and quota; the PN and SR should include a comparison of high access cases indicators table. ### Annex II — Illustrative BoP shocks in adverse scenarios (categories) - A. Current Account - Potential shocks: foreign demand, commodity prices, remittances - External sources: WEO alternative scenario, G-RAM - Evidence: impact of advanced economies’ downturn on EMs - Country factors: exports/imports composition and elasticities; current account norm and debt-stabilizing level - B. FDI - External sources: Early Warning Exercise (EWE), GFSR/Vulnerabilities Exercise (VE), GRAM - Evidence: FDI decline in representative cases; historical volatility vis-à-vis other capital flows; foreign bank takeovers; investments in nontradable sector; greenfield investments; retained earnings - C. Equities and debt securities - External source: VE/GRAM - Evidence: nonresident holdings and outflows from domestic equity and bonds; need to account for valuation effects and secondary market liquidity - D. Debt rollover (MLT/ST; sovereign/bank/nonbank; official/private) - External source: MCM survey of market analysts’ expectations as per VE; GRAM - Evidence: rollover rates; debt composition; trade credits; intra-group lending; private sector involvement - E. Other Investment (currency and deposits; secondary market; derivatives; other) - External sources: GFSR/VE/GRAM - Evidence: stock and flows of nonresident deposits; resident deposits outflows; nonresident holdings of domestic debt; hedged derivatives positions; degree of dollarization - F. Gross International Reserves and Private Foreign Assets - External metrics: Greenspan-Guidotti rule, Jeanne-Ranciere Reserve rule, other indicators mentioned in Annex I - Evidence from programs; metrics selected on the basis of relevant vulnerabilities; availability of liquid foreign assets by private sector ### Annex III — External Economic Stress Index (EESI): methodology and use - Purpose and usage - The EESI is an indicator of the evolution of the external environment as it pertains to a member; it aims to inform discussions of access and exit prospects for FCL and PLL arrangements. - The index is developed by country teams as part of SR preparation, after discussion with authorities; once decided, the type of risks, variables, and weights would be expected to remain set within and across successor arrangements absent a compelling economic reason. - Three main choices in constructing the index: 1. Selection of the key external risks facing the country (e.g., portfolio and cross-border bank flows, exports to key trading partners, workers’ remittances, commodity price changes). 2. Selection of proxy variables capturing these risks (e.g., euro area growth for exports to the euro area; U.S. treasury yields for portfolio debt liability risks; volatility in EMs for equity portfolio investment). 3. Choice of weights to apply to each proxy variable. - Weighting methods: - Data-based weights: determined by the economic size of the respective BoP vulnerability relative to the overall size of the economy (e.g., long-term average size of exports as a share of output). - Model-based weights: e.g., using the IMF’s Flexible System of Global Models (FSGM) to estimate model-based weights (see Morocco’s 2023 FCL request SR example). - Construction details: - The index is a weighted sum of standardized deviations of the external proxy variables from their means. - To make deviations comparable across proxy variables, the index divides differences by the long-run standard deviation of each proxy variable. - Forward-looking and scenario linkage: - The EESI should capture recent changes and be forward-looking; a downside risk scenario should be modeled drawing on flagship reports (WEO downside scenario, GFSR, spillover reports) or G-RAM. - The selected downside risk scenario should inform the adverse financing needs scenario; while not required to be identical, the source of the shock and direction of risks should be consistent. - Empirical relation: - Evidence shows improvements in the EESI and/or declines in the impact of tail risks—as captured by the difference between the EESI under the adverse and baseline scenarios—are associated with reductions in access, consistent with progressive exit from the FCL; increased risks correlate with higher or unchanged access levels. - Illustrative indices and components: - Annex III Table 1 reports key risks, proxy variables and weights underpinning the EESI for FCL arrangements (examples include country-specific component weights such as 0.35, 0.26, 0.24, -0.25, -0.14, -0.22, -0.35, 0.23, 0.08, 0.02, 0.50, 0.15, 0.69, and others as specified for country cases like Morocco 2023, Peru 2022, Chile 2022, Colombia 2022, Mexico 2023). - The EESI examples draw on deviations from long-run means of proxy variables and use standardized weights to make components additive. ### Annex IV — Framework for comparing access assumptions - Step 1: Identify exogenous shock periods - Episodes considered: declines in domestic demand and elevated financial stress in advanced market trading partners in 1991, 2001, and 2009. - Step 2: Measure moves in key external variables across EMs during identified crisis periods - Sample: 49 EMs (broadly consistent with the Fund’s Vulnerability Exercise for Emerging Markets), focusing on medium-sized EMs with market access and private inflows via FDI, portfolio flows, and loans. - Variables: eight external variables in current and financial accounts used for downside risk assumptions in past FCL access decisions—exports; FDI; fuel- and non-fuel commodity prices; portfolio and other investments; short- and MLT public and private rollover rates. - Density distributions - Identify density distributions for behavior of external variables during past exogenous stress episodes for EMs. - For each variable, values for countries i : 1, ..., I in the event years are stacked in a vector x and used to estimate univariate kernel densities. - Kernel density estimators approximate the density f(x) from observations on x; the data are divided into non-overlapping intervals and counts made of the number of data points within each interval so FCL assumptions can be presented on these distributions with precision. - Time period and baseline choices - For FDI and exports, averages spanning the three years prior to the crisis year are used as a baseline; crisis year deviations from these baselines are used as the shock scenario. - For private and public rollover rates, episode year values are used to estimate densities. - For commodity and fuel prices, time series values for the 1991–2011 period are pooled to estimate densities. - FCL and PLL cases are placed on these densities based on the shock scenarios described in country case studies. *Flexible Credit Line—Operational Guidance Note, International Monetary Fund* ### 5. To compare the implicit assumptions on tail risks across current and past FCL cases, ### ppea2025013 - 5. To compare the implicit assumptions on tail risks across current and past FCL cases, ### Empirical comparison of implicit tail-risk assumptions - Past FCL-PLL cases’ implicit assumptions are placed in empirical distributions of key EM access parameters for variables described in the source (see Annex Figure 1). - In the empirical distributions, “shocks” are defined as: - countries’ actual experiences during the crisis year (for all four types of debt rollover rates), or - countries’ experiences during the crisis year relative to proceeding 3-year average (for exports and FDI). - Note on definition alignment: - This empirical definition can differ from definitions in FCL/PLL SRs, which often define shocks as deviations in the adverse scenario from the baseline projection. - Staff recalculates FCL/PLL shock assumptions so that their shock definition aligns with the empirical distributions. ### Annex IV. Figure 1 — Empirical Adverse Shock Distribution (in Crisis Year) - Figure contents (categories represented in the empirical distributions): - Exports: shocks relative to proceeding 3-year average. - FDI: shocks relative to proceeding 3-year average. - Rollover rates: Private MLT Rollover, Private ST Rollover, Public MLT Rollover, Public ST Rollover. - Commodity price shocks: Fuel price growth rate %, Non-fuel commodity price growth rate %. - Empirical presentation highlights (labels and percentiles included in figure): - Multiple country-case labels (e.g., MEX1, MEX2, POL1, COL1, MKD, MAR) appear plotted against probability density and relative-change axes. - The 25th-pct is indicated for each distribution shown. ### Staff documentation requirements and procedural guidance (Annex V) - A. Preliminary Qualification Assessment Note — content requirements: - Preliminary assessment that the member: - (a) has very strong economic fundamentals and institutional policy frameworks; - (b) is implementing—and has a sustained track record of implementing—very strong policies; and - (c) remains committed to maintaining such policies in the future. - Statement on whether the most recent A.IV consultations included very positive assessments of the member’s policies. - Preliminary assessment of qualification criteria in Annex I, with references to aspects requiring more information. - Streamlined procedures may apply when transitioning between FCL and SLL under specified timing conditions (no later than six months from specified events). - For a precautionary FCL requesting a successor where an informal Board meeting is not held: - Include preliminary considerations on access underpinned by an adverse scenario; if access cannot be certain, include a range (upper end cannot exceed that of the previous FCL arrangement). - Include a preliminary assessment of the member’s CtR, based on the upper end of the access range. - B. Concise Staff Note for the Informal Board Meeting (FCL) — required content: - Qualification assessment per criteria listed above, including evolution of qualification indicators for successor arrangements when streamlined procedures are not used. - Access: indication of appropriate access level based on rigorous assessment of need and repayment capacity, considering risks to current and capital accounts; include one or more scenarios based on alternative assumptions about key parameters (external debt rollover rates, magnitude of portfolio outflows, etc.). - Assessment of impact on Fund liquidity when requested access would exceed 600 percent of quota or SDR 10 billion, whichever is lower, and assessment of associated enterprise risks. - Required tables: standard economic indicators; BoP with projections for current year and following year; gross external financing requirements; CtR. For precautionary requests, financing requirement and CtR tables should cover both baseline and adverse (drawing) scenarios. - Include a table comparing access metrics across various cases (compared with previous FCL/SLL and exceptional access cases). - C. SR for the Formal Request for an FCL or SLL Arrangement, or SLL Offer — required content: - Discussion of recent macroeconomic developments and policies, outlook, expected evolution of risks over arrangement period, and authorities’ forward-looking policy plans including exit expectations. - Discussion of potential or actual sources of BoP pressures and assessment of special BoP problem for SLL. - Detailed assessment of qualification criteria; for successor arrangements include discussion of evolution of qualification indicators with a table covering current request and previous 2-3 years. - Debt sustainability analysis including evolution of debt, rollover and financing requirements under alternative scenarios, and stress tests. - Discussion and justification of proposed access level underpinned by an adverse scenario (for FCL and concurrent FCL+SLL) and EESI. - For concurrent use of FCL and SLL: include discussion of total BoP need showing combined access is commensurate to potential BoP gap in adverse scenario; include updated EESI and the member’s CtR. - For standalone SLL: may draw on historical episodes of capital account volatility to show how SLL resources reinforce liquidity buffers. - Discussion of member’s CtR in event of purchases under FCL and/or SLL; for standalone SLL, focus on short-term financing considerations and peak Fund exposure following a full drawing during the 12 months of the arrangement. - Assessment of enterprise risks. - Staff appraisal. - Selected economic indicators including projections for the current year and following years to cover arrangement length; BoP table (expected to include projections for a five-year time span); tables on external financing requirements and sources and fiscal projections; debt sustainability tables (external and public); CtR table (under drawing scenario) with minimum duration of 5 years; table illustrating alternative metrics for access. - Draft proposed decision and text of the arrangement (prepared by LEG). - FIN-prepared assessment on impact of proposed FCL arrangement on Fund’s finances and liquidity position (supplement to SR). - The authorities’ signed written communication. In concurrent approval of SLL and FCL, both arrangements must be requested in a single written communication to ensure synchronized start dates. - Streamlined SR procedures conditions: - Can cross-reference analysis in most recent Board document for qualification if transition occurs no later than six months from (i) entry into effect of arrangement to be cancelled; or (ii) date of completion of mid-term review under FCL to be cancelled. - Staff must include assessment that cross-referenced qualification has not changed; SR must update on member’s BoP problems and demonstrate special BoP problem for SLL. - D. Staff Report for the Mid-term Review of an FCL Arrangement — required content: - Concise report sections: recent economic developments (including role of FCL in dissipating tail risks and expected evolution of risks based on latest WEO and GFSR), brief review of qualification criteria, staff appraisal. - Standard indicators: current-year and following-years projections to cover arrangement length; BoP table (ideally projections for a five-year time span); external financing requirements and sources; fiscal projections for current and following year; debt sustainability tables (external and public); CtR table. - For successor arrangements, external financing needs table should make clear how current adverse shock assumptions compare to those under previous arrangement. - Proposed decision to complete the review prepared by LEG. - If very substantial changes in policy strategies or goals, attach and discuss a new signed letter from the member. - E. Concise Notes after a Purchase under a Precautionary FCL Arrangement — immediate briefing memo contents: - Discussion of recent macroeconomic developments leading to actual BoP need and purchase. - Discussion of the economic outlook. - Updated SEI table. - Updated financing needs and sources table, presenting BoP need projections for remainder of arrangement period. - Updated CtR table. - Additional briefing memo (normally preceding mid-term review or next request) should include discussion of macroeconomic circumstances that led to purchase, member’s policy responses, developments in policy frameworks pertinent to FCL qualification, and evolution of member’s ability to access international capital markets. ### Expedited procedures (Annex VI) - EFM procedures do not apply to FCL or SLL requests. FCL and SLL Decisions set out expedited procedures to follow when necessary. - Circumstances for expedited procedures include imminent or ongoing crisis requiring fast disbursement, or non-imminent crises where protracted qualification/access determination could leak and worsen conditions. - Possible expedited timetable examples: - Staff and management provide documentation to the Board at least two hours prior to the informal Board meeting “to engage.” - Directors consulted during informal Board meeting on possible issuance of a press release indicating authorities’ interest and management’s intention to recommend Board approval; press release must take care not to prejudge the Board’s final decision. - A formal Board meeting could consider the member’s request within 48 to 72 hours following circulation of the SRs to the Board. *Source: ppea2025013 - 5. To compare the implicit assumptions on tail risks across current and past FCL cases (Flexible Credit Line—Operational Guidance Note, Annexes IV–VI).* ### Annex VII. Synchronized Approval of Flexible Credit Lines or ### Annex VII. Synchronized Approval of Flexible Credit Lines or Short-Term Liquidity Lines, or Augmentation of Flexible Credit Lines for Multiple Countries ### Overview - Purpose: Sketches procedures under which synchronized approval of FCL or SLL arrangements, or augmentation of FCL arrangements, for multiple countries could be undertaken under existing Fund policies. - Rationale: When multiple members face the same shock, synchronized approval could strengthen the effectiveness of the response to the common shock and minimize first-mover problems. - Policy scope: This annex neither modifies existing Fund policies, nor establishes a new financing instrument. ### Procedures for synchronized FCLs or SLLs - Member interest: - Members may approach the Fund jointly to request/augment Fund financial assistance, though potential interest would most likely be conveyed bilaterally. - Each member’s qualification is assessed individually and only after the member has affirmatively expressed interest in an FCL or SLL. - Policy consistency: - FCL or SLL arrangements requested or approved/augmented on a synchronized basis are not different from other FCL and SLL arrangements and are subject to all requirements applicable under Fund policies. - SLL-specific note: - Under such circumstances, it is preferable for the SLL arrangements to be "requested" by country authorities rather than "offered." The "offer" option under the SLL policy will continue to be available. ### Confidentiality - Confidentiality requirement: - Confidentiality must be preserved when discussing potential use of, and qualification for, the FCL or SLL. - Only the Board has the authority to determine qualification, approve FCL or SLL arrangements, or approve augmentation of existing FCL arrangements as recommended by management. - Informal discussions limitations: - In informal discussions with members, Fund staff and management would not confirm that any particular member would qualify for an FCL or SLL arrangement. - Staff and management would not reveal that any other member has expressed interest unless the member(s) that has already expressed interest has agreed that such information can be shared. ### Synchronized procedures and Board involvement - Initial Board consultation: - If a number of members express interest and Fund management decides access may be appropriate for each member, the Board will be promptly consulted in an informal meeting. - Expedited approval: - Expedited approval procedures could be followed consistent with the FCL or SLL Decision. - Synchronized consideration and approval are governed by the same policies and requirements currently in place under the FCL Decision and by standard procedures for issuance of Board documents and conduct of Board meetings. - Timing and documentation: - The FCL Decision (¶6 (a)) and the SLL decision (¶6 (a)) state that the minimum periods applicable to the circulation of staff reports to the Board shall apply to FCL/SLL arrangement requests, provided that the Board will generally be prepared to consider a request within 48 to 72 hours after the circulation of the documentation in exceptional circumstances, such as an urgent actual BoP need. ### External communications - Market-sensitive information: - If there are concerns about a market-sensitive leak or misinformation about the requests, management could issue a short press statement following the initial informal Board meeting (in the case of synchronized requests) indicating the concurrent request of FCL or SLL arrangements, provided the relevant members agree. - The press statement will take special care not to prejudge the Board’s responsibility to take the final Decision on FCL arrangements. ### Access and assessment - Access determination: - General Fund policies for duration and access under FCL and SLL arrangements will be followed when synchronized procedures are used. - For the FCL, proposed access levels would be based on a rigorous assessment of each member’s actual or potential BoP need and CtR, and would take into account the individual and cumulative impact of the access requests on Fund resources (see ¶6(a)(iii)(I) and (II) of the FCL Decision). ### Safeguards and liquidity considerations - Resource and liquidity implications: - Concurrently approved/augmented FCL or SLL arrangements could have important implications for Fund resources and liquidity management depending on the individual and collective size of the arrangements. - Early Board involvement: - Strengthened procedural requirements for early Board involvement are intended to assess contemplated access and the impact on Fund liquidity in the context of other potential demand for Fund resources. - Added safeguard: - Staff intends to include a liquidity assessment in the staff note (or notes) for the initial informal Board meeting whenever total access across the proposed arrangements would exceed SDR 10 billion, even if no individual arrangement contemplates access above this threshold. --- ### Key Features of the FCL and the SLL (Annex VIII — comparison summary) - Facility: - SLL: Special facility - FCL: Credit tranches - Objective: - SLL: Provide liquidity support for special BoP needs to members with very strong economic fundamentals, institutional policy framework, and policies - FCL: Allow members with very strong economic fundamentals, institutional policy framework, and policies to deal with any type of BoP needs - BoP need: - SLL: Potential, moderate short-term BoP difficulties reflected in capital account pressures, resulting from volatility in international capital markets - FCL: Any - Qualification: - Both: Based on an assessment of (i) very strong fundamentals and institutional policy frameworks (ii) very strong policies (in the past, currently, and commitment to maintaining them). - Repurchase period: - SLL: 12 months - FCL: 3¼-5 years - Access: - SLL: Up to 200 percent of quota; revolving access - FCL: No access limit - Duration: - SLL: 12 months - FCL: 1 or 2 years - Charges and fees: - SLL: - Nonrefundable commitment fee (8bps) - Service charge (21bps) - Normal rate of charge - Normal surcharge schedule - FCL: - Normal schedule for commitment fees that are refundable on drawings (15 bps up to 200 percent of quota, 30 bps from 200 to 600 percent of quota, and 60 bps above 600 quota) - Normal service charge (50 bps) - Normal rate of charge and surcharge schedule - Activation: - SLL: Member can choose to have the Board approve the “extension of an offer”—in which case the arrangement enters into effect upon the Fund confirming receipt of the written communication —or to request the arrangement, in which case the arrangement enters into effect upon Board approval. No prior informal Board meeting required - FCL: Upon Board approval of the request for the arrangement; prior informal Board meeting required (unless request is for successor FCL under limited circumstances). - Signatory: - SLL: Given the more limited anticipated adjustment (if needed), sole central bank signatory of the written communication possible in certain cases - FCL: Both the central bank and the government generally sign the written communication given the broad nature of BoP needs that can be addressed under the FCL - Budget support: - SLL: Should not be used for budget support - FCL: Can be used for budget support (an MoU between the ministry of finance and the central bank is required). - Conditionality: - Both: No ex-post conditionality (ex-ante conditionality in the form of qualification criteria). - Reviews: - SLL: None - FCL: Annual mid-term review for two-year arrangements - Successor arrangements and exit: - SLL: No restrictions, upon Board assessment of continued qualification of potential BoP need - FCL: Exit expected as external risk declines; articulation of exit not required for access below 200 percent of quota (for a precautionary FCL) - Concurrent use with RSF: - SLL: Cannot act as an accompanying UCT arrangement for an RSF - FCL: A two-year FCL can act as an accompanying UCT arrangement for an RSF *Annex VII. Synchronized Approval of Flexible Credit Lines or Short-Term Liquidity Lines, or Augmentation of Flexible Credit Lines for Multiple Countries* --- _Source: https://www.imf.org/-/media/files/publications/pp/2025/english/ppea2025013.pdf_